PROJECT REPORT ON

BUDGETING SYSTEM OF INDRAPRASTHA GAS LIMITED

PREPARED BY

VISHWAROOP SINGHAL A1802010240 Sec-E MBA-IB (2010-12)

AT

NEW DELHI

UNDER THE ABLE GUIDANCE OF

INDUSTRY GUIDE: MR. SAIBAL BISWAS Dy. GENERAL MANAGER (FINANCE)

FACULTY GUIDE: Ms. PAYAL SINGH FINANCE FACULTY

TO WHOM IT MAY CONCERN

This is to certify that Vishwaroop Singhal, a student of Amity International Business School, Noida, undertook a project on Budgeting System of IGL at Indraprastha Gas Ltd. From 16th May2011 to 10th July 2011.

Mr. Vishwaroop Singhal has successfully completed the project under the guidance of Mr. Saibal Biswas, Dy. General Manager (Finance). He is a sincere and hard-working student with pleasant manners.

We wish all success in him future endeavors.

Signature with date Saibal Biswas Dy. General Manager Indraprastha Gas Ltd.

CERTIFICATE OF ORIGIN

This is to certify that Mr. Vishwaroop Singhal, a student of Post Graduate Degree in MBAIB, Amity International Business School, Noida has worked in Indraprastha Gas Ltd, under the able guidance and supervision of Mr. Saibal Biswas, Dy. General Manager.

The period for which he was on training was for 7 weeks, starting from 16th May 2011 to 10th July 2011. This Summer Internship report has the requisite standard for the partial fulfillment the Post Graduate Degree in International Business. To the best of our knowledge no part of this report has been reproduced from any other report and the contents are based on original research.

Ms. Payal Singh (Faculty Guide)

Vishwaroop Singhal (Student)

ACKNOWLEDGEMENT

I express my sincere gratitude to my industry guide Mr.Saibal Biswas, Dy. General Manager of Indraprastha Gas Ltd., for his able guidance, continuous support and cooperation throughout my project, without which the present work would not have been possible.

I would also like to thank the entire team of Indraprastha Gas Ltd, for the constant support and help in the successful completion of my project.

Also, I am thankful to my faculty guide Ms. Payal Singh of my institute, for his/her continued guidance and invaluable encouragement.

Vishwaroop Singhal (Student)

TABLE OF CONTENTS

Chapter No.

Subject

Page No.

1.0 2.0 3.0

Executive Summary Objectives of the study Industry Profile a. Review of literature on the industry b. Major Players c. Future Projections of Demand of Natural Gas d. SWOT

4.0

Company Profile a. Review of literature on the company b. Present Status of IGL c. Organization Structure d. Competitors e. Factors Consider Before Setting up Business f. SWOT etc.

5.0

Overview of budgeting system a) About budget b) Procedure of budgeting in IGL

6.0 7.0

Research design and methodology Reflections on what has been learned during the placement experience

8.0 9.0 10.0 11.0 12.0 13.0

Conclusion Recommendations Bibliography Annexure Case Study Synopsis of the project

EXECUTIVE SUMMARY
The present report showcases about the share prices of Indraprastha Gas Limited (IGL) and comparison of its share prices with respect to one of its competitor GGCL IGL was incorporated in 23rd December 1998, to implement the mandate issued by Supreme Court for the implementation of CNG as the non-pollution gas fuel for domestic, transport, and commercial sectors in Delhi. It is a joint venture of Gas (India) Ltd. (GAIL), Bharat Petroleum Corporation Limited (BPCL) and Govt. of NCT (National Capital Territory) of Delhi where the major promoters are GAIL and BPCL who together hold 45percent of the total shares of the company. The principal business activities of the company are production, marketing and distribution of CNG and marketing and distribution of CNG. IGL is buying natural gas from GAIL which is extracted by ONGC at Bombay High. GAIL purifies and processes the gas and finally it is sent through the HBJ pipeline (Hazira-Bijapur-Jagdishpur) to Delhi. To cater to the CNG and PNG requirements, IGL procure natural gas from different sources out of which the major supply is of APM gas of 2.7 MMSCMD in Delhi and NCR region. The study focuses on the depth understanding of the current budgeting system of IGL, to study the efficient utilization and management of funds, to study the different budgeting system for product and departments and to study the pattern of revising, altering and preparation of budget. The study also includes the projected financial analysis of the company over the years and the projected P&L account, projected Balance sheet and projected Cash flow. Project also contains some points related to procedure of the companys budgeting process. It shows how it plans, prepares, approved, implement and control its budget. The recommendations of the study have put emphasis on how the company can improve its current budgeting system and how its shows better financial results in future. Indraprastha Gas ltd. has imparted me a great deal of knowledge during my tenure of six weeks. Collection of information from employees of IGL in different departments has helped me in gaining adequate knowledge, it was very interesting and overall a great learning experience.

OBJECTIVES OF THE STUDY

The study has mainly been conduct: To study the current budgeting system of IGL To study the procedure used by IGL in preparation of budget. To study the factors taken into consideration by IGL while preparing and revising of budget. To study the pattern of altering and controlling of budget.

INDUSTRY PROFILE
Review of literature of Industry Natural Gas, containing mainly methane, is a colourless and odourless fuel that is lighter than air and burns cleaner than most traditional fossil fuels like petrol and diesel. It is increasingly becoming one of the popular forms of energy because of its efficiency and environmental friendly nature. It has found use in heating, cooling, electricity generation, etc. Natural Gas is recovered either as associated i.e. with crude oil or free i.e. alone from reservoirs beneath the earths surface. Natural gas can be transported both in gaseous and liquid form.The share of Natural gas in total primary energy consumption in the world was 26.4 % in 2009 whereas, it was approximately 9.4% in 2009 for India (Source BP Statistical Review, 2009).

AVAILABILITY & UTILISATION OF NATURAL GAS 1. Natural gas has emerged as the most preferred fuel due to its inherent environmentally benign nature, greater efficiency and cost effectiveness. The demand of natural gas has sharply increased in the last two decades at the global level. In India too, the natural gas sector has gained importance, particularly over the last decade, and is being termed as the Fuel of the 21st Century. 2. Production of natural gas, which was almost negligible at the time of independence, is at present at the level of around 87 million standard cubic meters per day (MMSCMD). The main producers of natural gas are Oil & Natural Gas Corporation Ltd. (ONGC), Oil India Limited (OIL) and JVs of Tapti, Panna-Mukta and Ravva. Under the Production Sharing Contracts, private parties from some of the fields are also producing gas. Government have also offered blocks under New Exploration Licensing Policy (NELP) to private and public sector companies with the right to market gas at market determined prices. 3. Out of the total production of around 87 MMSCMD, after internal consumption, extraction of LPG and unavoidable flaring, around 74 MMSCMD is available for sale to various consumers.

4. Most of the production of gas comes from the Western offshore area. The on-shore fields in Assam, Andhra Pradesh and Gujarat States are other major producers of gas. Smaller quantities of gas are also produced in Tripura, Tamil Nadu and Rajasthan States. OIL is operating in Assam and Rajasthan States, whereas ONGC is operating in the Western offshore fields and in other states. The gas produced by ONGC and a part of gas produced by the JV consortiums is marketed by the GAIL (India) Ltd. The gas produced by OIL is marketed by OIL itself except in Rajasthan where GAIL is marketing its gas. Gas produced by Cairn Energy from Lakshmi fields and Gujarat State Petroleum Corporation Ltd. (GSPCL) from Hazira fields is being sold directly by them at market determined prices. 5. Natural gas has been utilised in Assam and Gujarat since the sixties. There was a major increase in the production & utilisation of natural gas in the late seventies with the development of the Bombay High fields and again in the late eighties when the South Bassein field in the Western Offshore was brought to production.

Natural Gas Production in India A large proportion of production of Natural gas in India is accounted for by ONGC and Oil India Limited. In the last few years, a number of private players have also been active in the exploration and production of Natural gas in India. These private players, independently or in joint ventures, accounted for approximately 13% of Indias Natural Gas production in FY2009(Source: Ministry of Petroleum and Natural Gas). India's Natural gas production reached a level of 28.4 BCM in 2009. Some large Natural Gas finds have been recently reported which significantly increase Indias proven reserves of Natural Gas. The supply from these new finds are expected to be available for use in a two to three year timeframe. In last ten years, Indias Natural gas production has increased at a growth rate of 6.4% p.a.

India Natural Gas Sector

SOURCE: www.naturalgas.org/business/industry.asp

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Demand for Natural Gas in India Natural Gas is used in a variety of applications in fertilizer and power sectors, industrial factories, automobiles, homes, etc. Given the limited Natural Gas reserves in India, the fertilizer and the power sectors have been the principal consuming sectors. Natural Gas allocations for the market, so far are made by an inter-ministerial Gas Linkage Committee based on inter-sect oral priorities. The gas pricing mechanism has existed in India since 1997.

Consumption Trends

SOURCE: www.naturalgas.org/business/industry.asp

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Legal Framework of the Oil and Gas Industry in India The legal framework for exploration and production of oil and gas is provided mainly in the following laws: 1. The Oilfields (Regulation and Development) Act, 1948 ("Oilfields Act") provides, inter alia, for regulation of oilfields and for the development of mineral oil resources. The Oilfields Act was amended in 1999 to provide for a New Exploration Licensing Policy ("NELP") 2. The Petroleum and Natural Gas Rules, 1959 amended by the Petroleum and Natural Gas (Amendment) Rules, which provide, inter alia, that no person shall prospect for petroleum unless it has been granted a petroleum exploration license and no person shall mine for petroleum unless it has a petroleum mining lease granted pursuant to these rules. 3. The Petroleum Act, 1934 ("Petroleum Act"), which provides, inter alia, that no person shall produce, refine or blend petroleum unless in accordance with the rules prescribed by the Central Government and that no person shall store or transport petroleum unless permitted by the Central Government to do so. 4. The Petroleum Rules, 2002 ("Petroleum Rules"), which provide, inter alia, for permission of The Chief Controller of Explosives which is required if a person intends to refine, crack, reform or blend petroleum. The MOPNG oversees the entire chain of activities in the oil industry: exploration and production of crude oil and Natural Gas; refining, distribution, and marketing of petroleum products and Natural Gas; and exports and imports of crude oil and petroleum products. The DGH (Directorate General of Hydrocarbons) was set up in 1993 under the administrative control of the MOPNG, with the objective of ensuring correct reservoir management practices, reviewing and monitoring exploratory programmes, development plans for national oil companies and private companies, and monitoring production and optimum utilization of gas fields. Other organizations in the Indian petroleum and Natural Gas sector include the Oil Industry Safety Directorate, which develops standards and codes for safety and fire fighting, training programmes, information dissemination, etc; the Oil Industry Development Board, which provides financial and other assistance for conducive development of the oil industry;

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The Petroleum Regulatory Board Bill, 2002 was introduced in the Lok Sabha (Lower House of the Parliament) on May 6, 2002. This Bill seeks the establishment of the Petroleum Regulatory Board to regulate the refining, processing, storage, transportation, distribution, marketing and sale of petroleum and petroleum products (excluding production of crude oil and Natural Gas) so as to: protect the interests of consumers and entities engaged in specified activities relating to petroleum and petroleum products,

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NATURAL GAS COMPANIES (MAJOR PLAYERS)

Reliance The Reliance Group was founded by Dhirubhai H. Ambani (1932-2002). The group's annual revenues are in excess of US$ 34 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is the largest private sector company in India. The Company's operations can be classified into four segments namely:

Petroleum Refining and Marketing business Petrochemicals business Oil and Gas Exploration & Production business Others

Cairn Energy Cairn is an Edinburgh-based oil and gas exploration and production company listed on the London Stock Exchange since 1988. There are two arms to the business: Cairn IndiaIndia is an autonomous business listed on the Bombay Stock Exchange and the National Stock Exchange of India and has interests in a total of 14 blocks in India and Sri Lanka.

Oil India Limited Oil India Limited (OIL) is a premier National oil company, engaged in the business of exploration, production and transportation of crude oil and natural gas. Oil India Limited is a "Schedule A" company under the Ministry of Petroleum and Natural Gas, Government of India.

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Indian Oil Corporation Limited Indian Oil Corporation Ltd. 18th largest petroleum company in the world and has a current turnover of Rs. 247,479 crore (US $59.22 billion), and profit of Rs. 6963 crore (US $ 1.67 billion) for fiscal 2007. The IndianOil Group of companies owns and operates 10 of India's 19 refineries with a combined refining capacity of 60.2 million metric tonnes per annum (MMTPA, .i.e. 1.2 million barrels per day). These include two refineries of subsidiary Chennai Petroleum Corporation Ltd. (CPCL) and one of Bongaigaon Refinery and Petrochemical limited (BRPL).

ONGC Oil and Natural Gas Corporation Ltd. (ONGC) is engaged in E&P activities both in Onshore and Offshore. The Corporation is now venturing out to new areas i.e. deepwater exploration and drilling, exploration in frontier basins, marginal field development, optimization of field development plan field recovery and other allied areas of service sector.

HPCL HPCL is a Fortune 500 company, with an annual turnover of over Rs 1,03,837 Crores ($ 25,142 Millions) during FY 2007-08, 16% Refining & Marketing share in India and a strong market infrastructure. Corresponding figures for FY 2006-07 are: Rs 91,448 crores ($20,892 Million). The Corporation operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai5.5 MMTPA capacity and the other in Vishakapatnam, (East Coast) with a capacity of 7.5 MMTPA.

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Engineers India Limited Engineers India Limited was established in 1965 to provide engineering and related technical services for petroleum refineries and other industrial projects. In addition to petroleum refineries, with which EIL started initially, it has diversified into and excelled in other fields such as pipelines, petrochemicals, oil and gas processing, offshore structures and platforms, fertilizers, metallurgy and power. EIL now provides a range of project services in these fields and has emerged as Asia's leading design and engineering Company.

BPCL Bharat Petroleum Corporation Limited engages in refining, storing, marketing, and distributing petroleum products in India. It also involves in the exploration and production of hydrocarbons. The company offers various products, including liquefied petroleum gas (LPG), naphtha, motor spirit, special boiling point spirit/hexane, benzene, toluene, polypropylene feedstock and more.

GAIL (India) Limited GAIL (India) Limited operates as a natural gas company in India and internationally. The company involves in the exploration, production, processing, transmission, distribution, and marketing of natural gas. It also offers LPG and other liquid hydrocarbons, and petrochemicals. The company owns approximately 5,800 kilometers of natural gas high pressure trunk pipeline.

16

Premier Oil Premier Oil plc engages in the exploration, development, and production of oil and gas properties. It has oil and gas producing interests principally in Asia, Middle East and Pakistan, the North Sea, and west Africa. As of December 31, 2006, the company had proved plus probable reserves of 722 billion cubic feet of gas and 152.1 million barrels of oil equivalents of oil.

Adani Group Adani Group has forayed into the Oil & Gas sector and has been awarded two oil & gas blocks in Gujarat and Assam Gujarat and another block with an area of 95 sq. kms. Is situated in Assam. under the recently concluded NELP VI and also plans to participate in the upcoming NELP VII bids and is actively looking at oil and gas blocks overseas. One Block with an area of 75 sq. kms is situated in Cambay.

Simon Carves In Simon Carves as a part of its offshore development, projects have been carried out in India and Indonesia in providing oil and natural gas development facilities. In gas processing they have carried out projects in Singapore, Indonesia and India in providing natural gas processing facilities and gas field developments. A key part of many of these projects is the provision of pipeline and tanks where in conjunction with Punj Lloyd they have considerable expertise in the design and construction of these facilities in often very difficult environments.

Petronet LNG Limited Petronet LNG Ltd, one of the fast growing companies in the Indian energy sector, has set up the country's s first LNG receiving and degasification terminal at Dahej , Gujarat, and is in the process of building another terminal at Kochi, Kerala. The Dahej terminal has a nominal

17

capacity of 5 million metric tones per annum (MMTPA) [equivalent to 20 million standard cubic meters per day (MMSCMD) of natural gas], the Kochi terminal will have a capacity of 2.5 MMTPA (equivalent to 10 MMSCMD of natural gas)

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FUTURE PROJECTIONS OF DEMAND India is witnessing a high GDP growth rate. Because of this, we can see rapidly growing vehicle population which will demand better road infrastructure & thus will drive more consumption of petroleum products. The industry is expected to grow at a CAGR of about 8% to 10%. Over 190 MMT of refining capacity is projected by 2010. Moreover, 120 MMSCMD of additional demand for Natural Gas is expected in the next five years. Recent gas finds and increased use of gas for power generation, petrochemicals, fertilizers and city gas distribution has forced us to increase the production of natural gas as it will surely change the energy requirements scene of the whole nation. According to India Hydrocarbon Vision 2025 report, demand for natural gas is expected to show a sharp rise in the future with the demand reaching to 391 MMSCMD by 2024-25. The report also expects that the share of natural gas in total energy mix to go up to 20 percent. The demand for natural gas is expected to grow at a CAGR of more than 7 percent by 200708. The major force behind this demand growth will be investments in power sector. Government is planning to add power generation capacity of 41,110 MW under the Tenth Plan and over 60,000 MW in the Eleventh Plan. Fertilizer sector will fuel this demand further as major players switch from naphtha to gas as feedstock. Petroleum & Natural Gas constitutes over 16% of GDP and includes transportation, refining and marketing of petroleum products and gas. There was $90 billion revenue generated in FY 05. India has a crude oil refining capacity of about 127 MMT. Natural gas demand was about 150 MMSCMD (2004) with only 54% being met through domestic sources. Production of petroleum products has grown at 6.5% p.a. during the last 3 years.

The last thirty years have seen a shift in the global energy fuel mix towards an increased role for natural gas. Attractive for its cleaner and more efficient combustion relative to other fossil fuels, gas has assumed a significant role in power generation, industrial applications, residential heating and in some cases as a transport fuel as well.

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SHARE OF GAS LIKELY TO RISE TO 18% BY FY2015

The High Gas scenario assumes stringent sulphur constraints in the power sector, protectionist constraints on fertilizer imports, and high economic growth driving industrial gas use.

The Low Gas scenario assumes vigorous coal sector reforms, liberalized fertilizer imports, and low economic growth slowing industrial gas demand.

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SWOT ANALYSIS OF NATURAL GAS INDUSTRY

STRENGTHS

WEAKNESS

Natural gas is: environmentally clean Natural gas is: economical and efficient. Natural gas: has an enviable safety record

High Gas prices make it inefficient to compete directly with coal. Delay in gas production in domestic field can slow the growth. Slow role out of pipe line

infrastructure

OPPORTUNITIES

THREATS

Failure to reform crude oil could expand the window of opportunity for natural gas. For industrial users it competes with liquid (oil based) and solid (coal based) fuels. Thus firms are finding it cost effective. Major players in fertilizers sector can switch from naphtha to gas as feedstock.

Delay in gas production can help sustain the demand at higher prices. Absence of Exclusive on city gas projects can negatively affect the incumbent.

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COMPANY PROFILE
Review of literature Incorporated in 1998, IGL took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited). The project was started to lay the network for the distribution of natural gas in the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. With the backing of strong promoters GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) IGL plans to provide natural gas in the entire capital region.

Initial Objectives The two main business objectives of the company are: To provide safe, convenient and reliable natural gas supply to its customers in the domestic and commercial sectors; and To provide a cleaner, environment-friendly alternative as auto fuel to Delhis residents. This will considerably bring down the alarmingly high levels of pollution. The transport sector uses natural gas as Compressed Natural Gas (CNG), while the domestic and commercial sectors use it as Piped Natural Gas (PNG).

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Growth and Development of The Organization

Milestones Achieved Incorporated in 1998 Started with 9 CNG stations & 1000 PNG consumers Crossed 100 stations in 2003 Maiden dividend in FY 2002-03 Completed 12 steel pipeline in December 2002 IPO listing on 26th December 2003 Two stations commissioned in Noida in December 2004

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PRESENT STATUS OF THE ORGANISATION The management accepts the responsibility for the health, Safety and environment management of company. The subject being a line responsibility, every employee has been responsible and accountable for the protection of health, Safety and environment. The policy of company is as follows:

To give top most priority to health and safety of all the personnel and property. To follow all applicable codes, Standards and Safety practices in design, operation, maintenance and modifications.

All planning, decisions and action confirm our commitment towards Health, Safety and Environment protection aspects.

Safety audit is carried out yearly and the findings are documented for follow up actions so as to restore safe condition.

Each employee is fully informed strict compliance of safety order/rules issued by the Management.

Health checks of each employee are done annually. To train all employees in their respective areas of training. Engineer-in-charge for contacts ensures compliance of safety order/rules and statutory requirements by contactor, transporters, visitors and other agencies related to contracts.

Emergency drills are conducted every six months. Each employee is to abstain from unsafe acts and prevent unsafe conditions. It is compulsory for all the employees to take active part on safety and health related activities on and off the job. Compliance of safety observations is done in most effective manner.

To ensure compliance of Work-Permit System. Use of personnel protective equipments is compulsory while at work. Quality maintenance in all areas of activities. To adopt such system and methods so as to ensure continual improvement.

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FUNCTIONAL DEPARTMENTS OF THE ORGANISATION Finance department Human resource department Corporate secretary and legal department Electrical department Instrumentation department Fire and safety department Contract and procedure department Planning department PNG project department CNG project department CNG O & M Operations PNG O & M city gas CNG marketing department PNG marketing department Civil department Mechanical department Company secretary department DC cell Information technology MD cell Optical fiber cable department Stores department Business promotion department

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ORGANIZATION STRUCTURE The organizational hierarchy of the IGL is as depicted below:

DIRECTOR MD/DC

CGM (FINANCE)

CGM (MKTG)

CGM (PROJECT)

DGM MANAGER

CHIEF MGR

ADDITIONAL MANAGER

DEPUTY MANAGER

SUPRITENT

SENIOR OFFICE ASSITANT

OFFICE ASSITANT

OFFICE ATTANDANT

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COMPETITORS

I.

GUJARAT GAS COMPANY LIMITED (GGCL) In 1988, Gujarat Gas Company Limited (GGCL) pioneered the private distribution of Natural Gas in India, through the establishment of an independent network of pipelines in South Gujarat. Today, GGCL pipeline network spans more than 2700 kilometers. GGCL has established its base in one of the most industrialized belts of the country - the Golden Corridor of Gujarat. Specifically, the three cities of Surat, Bharuch, and Ankleshwar form the nucleus of its current operations. GGCL has also extended the network to Jhagadia. The potential for growth derives from the ever-increasing energy demand-supply gap in this economically vibrant area. At present, GGCL is establishing pipeline network in Vapi G.I.D.C. area. GGCL is sourcing gas from multiple suppliers. Some of the major suppliers include GAIL A Central Government Organization, GSPC Gujarat State owned organization, BG EPIL (from its PMT source - a JV organization of ONGC, Reliance and BG Group), Cairn Energy... The gas is received at various receiving stations of GGCL. The same is subjected to the process of filtration, addition of odorant as well as change of pressure before being supplied into the network for distribution. Distribution operation is grouped into two lines of business o PNG - Piped Natural Gas (for residential, commercial and Industrial customers for heating and other purpose) o CNG - Compressed Natural Gas (as fuel for vehicles) Gas is supplied to various categories of customers for multi-purpose usage such as o Residential for cooking and water heating o Commercial for cooking, water heating, Jet dying, Yarn heating etc. o Industrial customer for heating, boilers etc. o CNG for running vehicles GGCL is committed to bringing the benefits of Natural Gas to people in various forms. In the past, it has introduced multiple specialized gas based applications like Air-conditioning Unit, Jet Dyeing Machine, Gas driven engine coupled to Air Compressor, COGEN etc. assures the

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users of energy supplies using natural gas. Besides the natural advantages of NG like proenvironment, economic viability etc. company has ensured consistent supply of gas to its customers.

II.

MAHANAGAR GAS LIMITED (MGL) MUMBAI, which is a financial capital of India houses more than 16 million people. Mumbai is a city of seven islands having approximate 450 sq per meter area. NGV movement is started by GAIL in the year 1992 as pilot project. After successful commissioning, the operations where transferred to newly formed organization- Mahanagar Gas Limited. From a modest background of supply gas to the suburbs of Mumbai, MGL has today become a leading gas friendly company with a customer tally of 3.88 lakhs connected PNG users. Mahanagar Gas Limited (MGL), a pioneering initiative to bring clean, safe efficient and affordable Piped Natural Gas, direct to over 6,00,000 homes in Mumbai. Presently MGL has connected more than 3.88 lakh households in and around Mumbai. The MGL project, which started in 1995 from Chembur, has covered major parts of Mumbai through its distribution network i.e. from South Mumbai to Mira road and from Sion to Mulund. MGL has already started work in South Mumbai areas like Prabhadevi, Worli, Colaba etc. From cooking stoves to geysers and air-conditioners, this versatile gas has today become the preferred choice for the residents of Mumbai. Fulfilling the promise of a Clean Mumbai, MGL's Compressed Natural Gas (CNG) powers over 56,000 taxis/cars, more than 1.30 lakh auto rickshaws, 1161 BEST buses,50 TMT Buses, 293 Private Buses and 46 Mini Buses across the city through it's network of 136 CNG stations having 683 dispensing points, thus contributing to more than 800 tonnes reduction of pollutants every day. MGL has always emphasized on Health, Safety, Security and Environment (HSS&E). In this endeavor they have in place systems and processes that match up with the best in the world. Besides monitoring our system on a daily basis they also have a Customer Service Cell with a 24 X 7 customer care number 1917, to give access to customers at all times to answer all your queries, thereby providing greater convenience and better services to Mumbaikars.

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MARKET PROFILE OF THE ORGANISATION The GM (marketing) spearheads the sales and marketing efforts for CNG as well as PNG. For the purpose of marketing of CNG, NCT of Delhi has been divided into five zones- north, south, east, west and central. Each zone is headed by marketing officer. And for the purpose of marketing of PNG and acquiring new connections we have divided NCT of Delhi into four zones, each zone looked after by marketing officer who is responsible for marketing to domestic, small and large commercial consumer in his/ her zone. Market structure of IGL consist of three major segments i.e. CNG, PNG, R-LNG.

Flow Chart Depicting Market Segment of IGL:

MARKET SEGMENT CNG PNG DOMESTIC CUST SMALL CUST R-LNG INDUSTRIAL CUST

BUSES

TAXIES AUTO RIKSHAWS LCVS

LARGE CUST INDUSTRIAL CUST

CARS

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FACTORS CONSIDERED BEFORE SETTING UP A BUSINESS

Diagram representing percentage of quantity sold in CNG and PNG.

% OF QUANTITY SOLD

8%

CNG PNG

92%

COMPRESSED NATURAL GAS (CNG) Identify the area where no CNG station is located. Vehicular population of CNG around that area. Analysis of demand. Deciding about station size according to the required location. Research team analyzes various parameters (like requirement of stations is small and large). No of compressors required according to traffic size. Taking permission from various legal authority like MCD, CPWD etc. To facilitate the various services such as water and electricity etc Getting available the various services such as fire protection services. Establishment of the stations.

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Diagram representing percentage of quantity sold in CNG

% QUANTITY CONSUMED

4% 21%

0% BUSES 39% CARS TAXIES MINI BUSES LGV'S RAILWAYS

5%

31%

IGL envisages a long lasting friendship between CNG and its consumers. And while every friendship in itself is to be desired, it is said the initial cause of friendship is from its advantages. Furthermore, when one is apprised of the advantages of using CNG, this friendship is certain to leap from being strong to stronger. The advantages of using CNG are varied and distinct. The first and most important benefit of using CNG is that its a green fuel. Presented below is an outline of the benefits that CNG offers Green fuel: Commonly referred to as the green fuel because of its lead and sulphur free character, CNG reduces harmful emissions. Being non-corrosive, it enhances the longevity of spark plugs. Due to the absence of any lead or benzene content in CNG, the lead fouling of spark plugs, and lead or benzene pollution are eliminated. Increased life of oils: Another practical advantage observed is the increased life of lubricating oils, as CNG does not contaminate and dilute the crankcase oil. Mixes evenly in air: Being a gaseous fuel CNG mixes in the air easily and evenly. Safety: CNG is less likely to auto-ignite on hot surfaces, since it has a high autoignition temperature (540 degrees centigrade) and a narrow range (5%-15%) of

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inflammability. It means that if CNG concentration in the air is below 5% or above 15%, it will not burn. This high ignition temperature and limited flammability range makes accidental ignition or combustion very unlikely.

Properties Relative density Relative density Auto-ignition Temperature Flammability Range Flame Temperature Octane Number

Unit Water = 1 Air =1

Petrol 0.74 -

Diesel 0.84 -

LPG 0.55 1.285

CNG 0.64

Degree C % in Air Degree C -

360 1-8 2,030 87

280 0.6-5.5 1,780 -

374 2.2-9.0 1,983 93

540 5-15 1,900 127

PIPED NATURAL GAS (PNG) Founding area where no PNG lines are located. Average consumption according to various categories of PNG business. Analysis of demand of pipe lines in particular area. Identify area where the need to establish the pipe line. Research team analyzes various parameters (like requirement of pipe line in small and large area). Preparing map of pipe line where they exactly goes out. Taking permission from various legal authorities like MCD, CPWD etc. To facilitate the various services such as water and electricity etc Getting available the various services such as fire protection services. Establishment of the stations.

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Diagram representing percentage of quantity sold in PNG

% OF TOTAL PNG SALES

8% 38%

DOMESTIC CUSTOMERS SMALL CUSTOMERS LARGE CUSTOMERS

47% 7% INDUSTRIAL CUSTOMERS

Knowing full well that Piped Natural Gas is the obvious choice for one to make, it would be just if one called PNG Positively Natural Gas!! PNG has several distinctions to its credit- of being a pollution-free fuel, easily accessible minus storage troubles, and being available at very competitive rates, are just a few of them. When one chooses PNG, one is making a wise decision. Why not enhance your comfort and improve your lifestyle for the years to come? Experience the versatility and performance of this reliable energy source. With PNG you don't need to make any choices, for its characteristics make it the best option for domestic and commercial purposes. Uninterrupted supply: The source of PNG supply in Delhi is the famous HaziraBijaipur-Jagdishpur (HBJ) pipeline of GAIL (India) Limited. PNG offers the convenience of ensuring continuous and adequate supply of PNG at all times, without any problems of storing gas in cylinders. Unmatched convenience: The domestic consumers have to take upon themselves the trying task of booking an LPG cylinder refill, time and again. And then starts the wait for the deliveryman to deliver the cylinder. Switching over to PNG renders this entire exercise unnecessary. PNG also eliminates the tedious routine of checking LPG refill

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cylinder for any suspected leakage, or it being underweight, at the time of delivery. Moreover, the user is spared the inconvenience of connecting and disconnecting the LPG cylinder when out of gas. Precious space, occupied by LPG cylinders is also saved. Safety: The combustible mixture of natural gas and air does not ignite if the mixture is leaner than 5% and richer than 15% of the air-fuel ratio required for ignition. This narrow inflammability range makes PNG one of the safest fuels in the world. Safety Tips Natural gas is lighter than air. Therefore, in case of a leak, it just rises and disperses into thin air given adequate ventilation. But LPG being heavier will settle at the bottom near the floor surface. A large quantity of LPG is stored in liquefied form in a cylinder. With PNG, it is safer since PNG installation inside your premises contains only a limited quantity of natural gas at low pressure i.e. 21 milibar (mbar). On leakage, LPG expands 250 times, which is not the case with PNG. Supply in PNG can be switched off through appliance valve (inside the kitchen) and isolation valve (outside kitchen premises), which fully cuts off the gas supply. Economy with PNG PNG has been positioned to be cheaper than alternative fuels being used via domestic LPG in case of House Hold, commercial LPG in case of Small Commercial and LPG Bulk & LDO in case of Large Commercial. This is besides the amount you save by avoiding underweight cylinders delivered to you.

Billing: The user is charged only for the amount of PNG used, and no pilferage is possible with PNG as the billing is done according to the meter. A unique feature is that the user gets to pay only after consumption of gas. The domestic consumer pays the PNG bill only once in two months. The user pays the gas consumption charges based on the exact consumption reading provided by the meter installed at his premises. The bill is delivered at the users doorstep. List of collection centers/drop boxes.

Customer support: Round-the-clock customer support is assured through 24 hrs toll free number 1800112535 and 64543592 backed by control rooms, which are manned by engineers and trained technicians. Thus complaints, if any, are promptly redressed.

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A versatile fuel: Natural gas is being used predominantly as a versatile fuel in many major cities catering to domestic and commercial applications, as a cooking fuel, for water heating, space heating, air conditioning, etc.

Environment friendly: Natural gas is one of the cleanest burning fossil fuels, and helps improve the quality of air, especially when used in place of other more polluting energy sources. Its combustion results in virtually no atmospheric emissions of sulphurdioxide (SO2), and far lower emissions of carbon monoxide (CO), reactive hydrocarbons and carbon dioxide, than combustion of other fossil fuels. In fact, when natural gas burns completely, it gives out carbon dioxide and water vapor. These are the very components that we give out while breathing!

Additional Benefits of PNG that the commercial consumers can avail No storage problems and stock accounting: PNG does not require any storage tank or storage space since it is supplied to you through pipelines. Also, the manpower and time that was earlier being used for ensuring minimum stock levels of LPG, HSD and LDO, can be used elsewhere. The other functions that accompany storing these fuels monitoring stock levels, checking the quality and quantity of fuels received have also been rendered unnecessary. Economy with PNG: PNG has been presently positioned to be cheaper than alternative fuels. For small commercials the pricing is indexed to 19 Kg LPG cylinders after adjusting for heat values. For Large Commercials, pricing is indexed to 90% LDO and 10% Bulk LPG again after adjusting for heat values. These savings are in addition to the amount you save by avoiding spillage & pilferage of alternative fuels. No daily liaisoning: The consumer is spared the task of liasioning with oil companies and coordinating with them for ensuring the daily supply of fuel, because PNG is supplied directly through pipes. The daily bills, settlements and reconciliation are also avoided as the consumer is billed once a month, and that too as per the meter reading. No spillage and pilferage: In case of spillage of fuels like HSD and LDO, there are liable to be immense product losses. Also, there are considerable chances of pilferage

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of these fuels. In case of PNG these losses are invariably done away with, for PNG is supplied through pipes. Billing - No up-front payment: The user is charged only for the amount of PNG used, and no pilferage is possible with PNG as the billing is done according to the meter. The commercial consumer pays on a monthly basis. Moreover, there are no minimum consumption charges, i.e., if there hasnt been any consumption, there shall not be any bill. The user pays the gas consumption charges based on the exact consumption reading provided by the meter installed at his premises. The bill is delivered at the users doorstep. Lower maintenance cost: With PNG, soot or ash accumulation and greasy spillages are absent from your appliance. Maintenance costs are, thus, driven down.

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SWOT ANALYSIS OF IGL

Strengths: The Company has been given marketing exclusivity in NCT of Delhi for three years w.e.f. January 1, 2009. Dominant market position and first moves advantage in NCT of Delhi. Experienced sector leader as promoters. As per the Petroleum and Natural Gas Regulatory Board (PNGRB) regulations, IGL has network exclusivity up to December 2025 in the NCT area. IGL has continuously adopted the latest technology as a result of which the quality of its products has also improved.

Lower debt in the books along with healthy return ratios gives confidence in the companys ability to raise debt for future expansion Another major strength of company can be that it helps in controlling pollution and hence supported by government.

Opportunities: CNG is replacing traditional fuels like petrol & diesel. CNG is about 33 Rs cheaper than Petrol and about 11 Rs cheaper than diesel. Introduction of Radio Taxis and high capacity buses running on CNG in Delhi along with increase in number of CNG variant models by car manufacturers presents a significant opportunity for the company Shift towards usage of PNG by industrial and commercial segment.

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Weaknesses: Future expansion activities would be dependent on ability to secure additional gas supplies Competition from alternative fuel. Regulatory and economic changes. Dependence on single or few supplier/ customer

Threats: Competition from other players is possible after December 2011 as the companys marketing exclusivity is valid till December 2011 only. Alternative modes of transport like metro rail pose a threat. GAIL being one of the promoters of the company, IGL doesnt arising from dispute with them over supply of natural gas. Due to the recent growth in CNG vehicles, especially private cars, there is a need to add more CNG stations for which the timely availability of land from land owning agencies is a matter of concern. foresee any risk

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OVERVIEW OF BUDGETING SYSYTM OF IGL

Budget Definition Budget a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time. Purposes of budgeting systems: Planning Facilitating Communication and Coordination Allocating Resources Controlling Profit and Operations Evaluating Performance and Providing Incentives Using a budgeting system companies can: Improve cash flow; Optimize product portfolio; Minimize salary adjournment; Increase the operational level; Eliminate breaks in production process; Stabilize debts level; Precisely determine the real financing needs.

Types of Budgets Long-Range Budgets Capital budgets dealing with the acquisition of building and equipment normally cover several years. A budget with a term usually longer than one year. A long-range budget involves more uncertainty than a short-term budget because, typically, market movements and the business cycle are more easily predictable in the short term. On the other hand, planning for the long-term is necessary in order to ensure sustainable profitability. Thus, while planning for the long term is necessary, one's plan must be flexible to account for the uncertainty inherent to it.

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Continuous or Rolling Budget This budget is usually a twelve-month budget that rolls forward one month as the current month is completed. Rolling budget is a budget prepared with a fixed planning horizon. To achieve this, the budget is constantly being added to at the same rate as time is passing. Its very useful for companies experiencing rapid change, as they require forecasting for much shorter time periods. A rolling budget could use 3-month periods or quarters instead of months. Also, a company might have a 5-year rolling budget for capital expenditures. In this case a full year will be added to replace the year that has just ended. This 5-year rolling budget means that management will always have a 5-year planning horizon.

Operating Budget the annual operating budget may be divided into quarterly or monthly budgets. A detailed projection of all estimated income and expenses based on forecasted sales revenue during a given period(usually one year). It generally consists of several sub-budgets, the most important one being the sales budget, which is prepared first. Since an operating budget is a short budget, capital outlays are excluded because they are longterm costs. An operating budget is the annual budget of an activity stated in terms of Budget Classification Code, functional/sub functional categories and cost accounts. It contains estimates of the total value of resources required for the performance of the operation including reimbursable work or services for others. It also includes estimates of workload in terms of total work units identified by cost accounts.

Budgeting system used in IGL From the above type of budget system IGL follows the operating budget system because it revised its budget after every six month and follows its budget after each quarter.

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IGL Budgeting comprises 2 components: Operational Component

- Sales Budget: A sales budget is a detailed schedule showing the expected sales for the budget period; typically, it is expressed in both dollars and units of production. An accurate sales budget is the key to the entire budgeting in some way. If the sales budget is sloppily done then the rest of the budgeting process is largely a waste of time. The sales budget will help determine how many units will have to be produced. Thus, the production budget is prepared after the sales budget. The production budget in turn is used to determine the budgets for manufacturing costs including the direct materials budget, thedirect labor budget, and the manufacturing overhead budget. These budgets are then combined with data from the sales budget and the selling and administrative expenses budget to determine the cash budget. In essence, the sales budget triggers a chain reaction that leads to the development of the other budgets. The selling and administrative expenses budget is both dependent on and a determinant of the sales budget. This reciprocal relationship arises because sales will in part be determined by the funds committed for advertising and sales promotion. The sales budget is the starting point in preparing the master budget. All other items in the master budget including production, purchase, inventories, and expenses, depend on it in some way. The sales budget is constructed by multiplying the budgeted sales in units by the selling price. - Production Budget The production budget is prepared after the sales budget.

The production budget lists the number of units that must be produced during each budget period to meet sales needs and to provide for the desired ending inventory. Production needs can be determined as follows.

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Budgeted

sales

in

units------------------- XXXX XXXX -------XXXX XXXX -------XXXX =====

Add desired ending inventory-----------Total need---------------------------------------

less beginning inventory-------------------Required production--------------------------

Production requirements for a period are influenced by the desired level of ending inventory. Inventories should be carefully planned. Excessive inventories tie up funds and create storage problems. Insufficient inventories can lead to lost sales or crash production efforts in the following period. - Inventory Budget-Inventory and purchase budget represents what a business plans to buy and how much inventory it intends to hold over a given timeframe, is based on three factors: a business' desired ending inventory, cost of goods sold, and beginning inventory. A business's desired ending inventory will drive that business' budgeted purchases over a given period of time. A larger desired ending inventory will typically lead to a larger Purchases Budget and vice-versa. While the Purchases Budget, a component of the Inventory and Purchases Budget, represents an estimate of future purchases, this is an accrual-based accounting figure, and it is the Disbursements for Purchases Budget (another component of the Inventory and Purchases Budget) that drives a company's cash flows. - Materials Budget -The direct materials budget calculates the materials that must be purchased, by time period, in order to fulfill the requirements of the production budget, and is typically presented in either a monthly or quarterly format. - Labor Budget- Expected labor cost is dependent upon expected production volume (production budget). Labor requirements are based on production volume multiplied by direct labor-hours per unit. Direct labor-hours needed for production are then multiplied by direct labor cost per hour to derive budgeted direct labor costs. For example, assume budgeted production of 790 units, direct labor-hours per unit of 5, and direct labor cost per hour of $5

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- Overheads Budget- It shows the expected cost of all production costs other than direct materials and direct labor. Budgeted variable overhead costs are based on a budgeted variable overhead rate multiplied by budgeted activity. Budgeted fixed overhead costs remain unchanged as the activity level changes within the relevant range.

Financial Component

- Investment Budget-An investment budget consists of planned investments and disinvestments over a period of time (the planning period). Depending on the type of asset there are various depreciation schedules that can be used to depreciate the asset. - Balance Sheet

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- Cash Flow Statement

Principles to be taken into consideration by IGL when developing a Budget There are realistic objectives There is a profitable business There is a financial diagnosis as base for determining trends There is integrity with Management Informational System You can use what-if analysis

Normally it is figured monthly for the first year of activity, quarterly for the second year and annually for the rest of the years. Typically, the budget cycles occurs in four phases. The first requires policy planning and resource analysis and includes revenue estimation. The second phase is referred to as policy formulation and includes the negotiation and planning of the budget formation. The third phase is policy execution which follows budget adoption is budget executionthe implementation and revision of budgeted policy. The fourth phase encompasses the entire budget process, but is considered its fourth phase. This phase is auditing and evaluating the entire process and system.

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PROCEDURE OF IGL BUDGETING SYSTEM

STEP 1: Planning of Budget IGL entails identifying the sources of income and taking into account all current and future expenses, with an aim to meet an individuals financial goals. The primary aim of IGLs budget planner is to ensure savings after the allocation for spending. Factors Considered by IGL before making Budget:The budget estimates include: Projected Capital Expenditure Demand projections Sales quantity projections Revenue Cost of natural gas purchase Operating expenses Funding Projected profit Proposed dividend Resource mobilization of capital expenditure Projected Profit & Loss Statement Projected Cash Flow Projected Balance Sheet

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For instance, Factors Considered by IGL before making budget of year 2010-11: Capital Expenditure Budget

IGL foresees rapid growth in CNG business in the next years primarily due to factors like: Approaching Commonwealth Games in Year 2010 Increase in CNG conversion in private car segment Introduction of CNG Variants by automobile manufacturers Addition/replacement of CNG Buses planned by DTC Recent agreement between the Governments of Delhi, Haryana, Uttar Pradesh and Rajasthan in respect of free movement of public transport vehicles across the interstate borders Augmentation of fleet of CNG buses by neighboring states Growth in CNG demand in satellite towns of Delhi

Therefore, it is necessary for IGL to go for aggressive expansion and augmentation of CGD infrastructure in NCT and NCR Region.

NCT

In addition to above reasons, there is one more reason for IGL to aggressively build infrastructure in NCT of Delhi. As per the authorization letter issued by the PNGRB to IGL for CGD operations in NCT of Delhi, only three years marketing exclusivity has been given to IGL and during this period, IGL is required to lay infrastructure in all the charge areas covering entire Delhi. Hence, IGL need to have such a robust infrastructure by that time which should not only meet the requirements laid by PNGRB but also act as an entry barrier for new players after the exclusivity period is over after three years. Accordingly, an aggressive capex plan has been prepared to meet this objective for the financial year 2009-10.

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1. CNG Project The company plans to incur a total Capital Expenditure of Rs.7233 lakhs on CNG project during the financial year 2010-11 which will create an additional compression capacity of 4.90 lakhs kgs per day. With this addition, the total compression capacity is estimated to be 41.05 lakhs kg per day by the end of FY 2010-11. At this compression capacity, average sale of 15.78 lakhs kgs per day is expected to be achieved during 2010-11 against the expected average sale of 13.75 lakhs kg per day in 2009-10.

It is proposed to add 20 CNG stations during the year 2010-11 increasing the total number of CNG stations to 237 by the end of March 2011. The above capex includes the cost of 15 new compressors of 1200 SCMH and 29 new compressors of 600 SCMH which will be used in the new stations and also for up gradation of the existing stations.

2. PROJECTED PIPELINE Steel Pipeline During the FY 2009-10, it is planned to invest Rs. 5653 lakhs on steel pipeline network. More than 63 kms of steel pipeline will be added to the existing network in the budget period. This is required to connect new stations and conversion of some of the existing daughter stations to online stations. MDPE/HDPE Pipeline

It is planned to incur a capital expenditure of Rs. 19445 lakhs on MDPE/HDPE Pipeline and other related activity during FY 2010-11.

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Other Capex

During the financial year 2010-11, it is planned to incur an expenditure of Rs. 2658 lakhs on other capex like construction of new stores/control rooms, DFR, IT infrastructure etc.

NCR Region

Budget for the year 2010-11 has been prepared for Noida, Greater Noida Ghaziabad, Gurgaon and Faridabad cities in NCR Region.

1) CNG Project The Company has already started the expansion project in Greater Noida, Noida and Ghaziabad. The company is expected to have 5 stations in Noida, 3 stations in Greater Noida and 2 stations in Ghaziabad by the end of 2009-10. The company plans to add 4 stations in Noida, 5 stations in Greater Noida, 11 stations in Ghaziabad, 5 stations in Gurgaon and 5 stations in Faridabad during the year 2010-11. With the above additions the total number of CNG stations in these cities will be 45 by the end of 2010-11. The company plans to incur a total capital expenditure of Rs. 13301 lakhs in the financial year 2010-11 . The compression capacity to be added through this capex shall be approximately 7.06 lakhs kg/day.

2) Pipeline Network

During the financial year 2010-11, it is planned to incur a capital expenditure of Rs.7825 lakhs on steel pipeline. Another 16933 lakhs is estimated to be invested in MDPE/HDPE pipeline during the year.

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Consolidated Capital Expenditure Budget: Total Project 2009-10

NCT CNG Pipeline Other TOTAL NCT NCR CNG Pipeline Others TOTAL NCR TOTAL 5308 14416 600 20324 54610 14587 18496 1203 34286

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Demand projections

NCT

1. CNG During 2010-11, average annual sale of CNG is expected to be 15.78 lakhs kgs per day against the expected average per day sale of 13.75 lakhs kgs in 2009-10 showing a growth of 15% over last year. Growth during 2009-10 is expected to be 20%. 2. PNG During FY 2010-11, 80000 new PNG-Domestic customers are expected to be enrolled increasing the total number of PNG-Domestic customers to 255000 by the end of March2011. During FY 2010-11, average annual sale of PNG is expected to be 1.05 lakhs SCM per day against the expected average per day sale of 0.68 lakhs SCM in 2009-10 showing a growth of 54% over 2009-10.

NCR Region

a) CNG

IGL foresees substantial growth of CNG business in the satellite cities of Delhi due to factors like: Increase in CNG conversion in private car segment , Recent agreement between the Governments of Delhi, Haryana, Uttar Pradesh and Rajasthan in respect of free movement of public transport vehicles across the interstate borders. Augmentation of fleet of CNG buses in these cities.

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During the FY 2010-11 the projected sale of CNG in Noida, Greater Noida Ghaziabad, Gurgaon and Faridabad is estimated at 2.5 lakh kgs per day.

b) PNG

During the FY 2010-11, IGL projects around 36000 domestic households will convert to PNG in Noida, Greater Noida, Ghaziabad, Gurgaon and Faridabad. IGL also foresees substantial demand for PNG from commercial and industrial sector and expects to add approximately 50 Commercials and industrial customers in 2010-11.

During the FY 2010-11 the projected sale of PNG in Noida, Greater Noida and Ghaziabad is estimated at 0.46 lakh scm per day.

Projected Sales Quantity

The sales volumes of both NCT and NCR Region are expected to be as under during 2010-11:

Particulars

Total 2010-11

NCT CNG (lakhs Kgs.) PNG (lakhs SCM) NCR CNG (lakhs Kgs.) PNG (lakhs SCM) 365 169 5561 625

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On an overall basis, growth in CNG and PNG is expected to be 28% and 47% respectively during 2010-11. The combined growth in sales volumes taking CNG, PNG together is expected to be 29%.

NCT

Revenue

A. CNG The existing selling price of CNG is Rs. 18.90 per KG and the same rate has been considered for the first quarter and Rs.20.80 per kg has been considered thereafter. The need for increase in CNG price has arisen due to the fact that IGL will have to purchase KG Basin gas to feed the additional demand of CNG over and above the allotted quota of 2 mmscmd of APM gas. The price difference between APM and KG basin gas is more than Rs.6.25 per scm.

B. PNG The consumer prices considered in the financial year 2010-11 are as under: Domestic Commercial Industrial Rs. 14.50 per SCM Rs. 27.00 per SCM

Rs. 23.00 per SCM

The revenue of the Company on account of CNG and PNG is expected to be Rs. 124927 lakhs during the financial year 2010-11 showing a growth of about 29% over projected sales income of 2008-09.

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NCR Sales Income

The revenue of the company on account of CNG and PNG is expected to be Rs.10983 lakhs. The consolidated sales income of both NCT and NCR Region is summarized as follows: Rs. in Lakhs Total 2010-11 NCT CNG PNG Total NCT NCR CNG PNG Total NCR Grand Total 7583 3400 10983 135910 112272 12655 124927

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Cost of Natural Gas Purchase

NCT Total purchase cost of natural gas for the financial year 2009-2010 is expected to be Rs. 54824 lakhs. As mentioned earlier, IGL will have to purchase KG Basin gas to feed the additional demand of CNG and PNG-Domestic over and above the allotted quota of 2 mmscmd of APM gas. The price difference between APM and KG basin gas is more than Rs.6.25 per scm. For supply to Industrial customers, IGL need to buy RLNG gas through GAIL/BPC. The breakup of gas cost considered based on above is as follows:

APM Gas from GAIL: KG Basin Gas R-LNG : :

Rs. 39317 lakhs Rs. 9682 lakhs Rs. 5825 lakhs

-------------------Rs. 54824 lakhs ----------------------

NCR Total purchase cost of natural gas for the FY 2010-11 is expected to be Rs.6424 lakhs. While IGL has allocation of 0.2 mmscmd of APM gas for CNG and PNG-Domestic demand for the cities of Noida & Greater Noida, the gas required for Commercial & Industrial customers has to be met from RLNG gas. In case of Ghaziabad, requirement of gas for CNG and PNG

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Domestic has to be met by purchasing KG Basin gas and PNG-Commercial & Industrial demand has to be met by purchasing RLNG.

The breakup of gas cost considered based on above is as follows:

APM Gas from GAIL KG Basin Gas R-LNG

: Rs. 2453 lakhs : Rs. 1554 lakhs : Rs. 2417 lakhs -------------------Rs. 6424 lakhs ----------------------

The effect of cost of natural gas being used for running compressors at 5.5% and the reconciliation difference at 2.5% has been considered in the above gas cost.

Operating expenses

NCT

The total operating expenses are expected to be Rs. 19100 lakhs (excluding discount to DTC) during the financial year 2010-11. The increase in operating expenses during the year is attributed mainly to the following reasons Repair & Maintenance expenses (Rs.1356 lakhs) Mainly due to, increase in number of manpower at PNG control rooms due to expanded area/number of PNG connections and increase in AMC cost of new

compressors/Dispensers. It may be mentioned that earlier IGL used to take AMC of new compressors/Dispensers for one year, and thereafter these units

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used to be maintained in house. However, now AMC is taken for two years in view of manpower constraints and to save associated cost of spares required for maintenance.

Operators expenses (Rs.715 lakhs) - Due to increase in wages of DSMs/Technicians and increase in remuneration of Operators w.e.f. 01.01.2009. The other reason is increase in manpower at stations as a result of increase in sales and increase in number of stations. It may be mentioned that due to increase in number of cars converted on CNG, more manpower is required at stations to service this segment of customers as the quantity of CNG taken by them at a time is much smaller.

Power & Fuel (Rs.941 lakhs) - Due to increase in sales/number of stations and load enhancement for running motor driven compressors. However, there is a corresponding savings in Gas cost which otherwise would have been used in running Gas driven compressors.

Hire Charges (Rs.475 lakhs) - Due to revision in LCV charges and increase in sales.

Employees cost (Rs.555 lakhs) - On account of provision for increase in salaries, annual increase in salaries and increase in manpower.

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 NCR

The total operating expenses are expected to be Rs. 421 lakhs in Noida, Rs.377 lakhs in Greater Noida and Rs.306 lakhs in Ghaziabad during the financial year 2010-11.

Funding

Present surplus funds of approximately Rs. 260 crores and the internal accruals of 201011 will be sufficient to meet the fund requirement during 2010-11 to finance the projected capital expenditure. Any surplus fund during the year after meeting the revenue and capital expenses shall be invested during the year as per the Treasury Policy of the company. The income from such investment is expected to be Rs. 1077 lakhs during the financial year 2010-11.

Projected Profit

NCT Based on above, the projected Profit & Loss Account with quarterly breakup for the financial year 2010-11 has been prepared. During the year the Profit after Tax is expected to be Rs. 19833 lakhs.

NCR During the year the consolidated profit after tax for Noida, Greater Noida and Ghaziabad is expected to be Rs.1298 lakhs.

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Consolidated Profit and Loss Account for NCR and NCT region taken together and details are summarized as follows:

Projected Profit & Loss Account for the year 2010-11 Amount Rs. In Lakhs Income (A) Expenditure (B) Cost of Gas Excise Duty Gross Margin (C= A-B) Other Income (D) Operating Expenses (E) PBDIT F = (C+D-E) Depreciation (G) Profit Before Tax [ H= F-G ] Tax (I) Profit After Tax ( J = H-I ) 61248 15239 59423 1077 20204 40296 8639 31657 10526 21131 135910

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Proposed dividend

Subject to the approval of the Board and members of the Company in ensuing Annual General Meeting, proposed dividend @ 40% amounting to Rs.6234 lakhs (including dividend tax) has been considered in the cash flow. This is equivalent to around 31% payout.

Resource mobilization of capital expenditure As explained above, the company plans to incur total capital expenditure of Rs. 54610 lakhs (consolidated CAPEX for NCT and NCR) during the financial year 2010-11 and finance the same from internal accruals.

Projected Balance Sheet and cash flow (for the Financial Year 2009-10)

The projected balance sheet and cash flow for the year 2009-10 is shown in annexure below.

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STEP 2: Budget Preparation Preparation of Sales Budget: - A sales budget is a detailed schedule showing the expected sales for the budget period; typically, it is expressed in both dollars and units of production. An accurate sales budget is the key to the entire budgeting in some way. If the sales budget is sloppily done then the rest of the budgeting process is largely a waste of time. The sales budget will help determine how many units will have to be produced. Thus, the production budget is prepared after the sales budget. The production budget in turn is used to determine the budgets for manufacturing costs including the direct materials budget, the direct labor budget, and the manufacturing overhead budget. These budgets are then combined with data from the sales budget and the selling and administrative expenses budget to determine the cash budget. In essence, the sales budget triggers a chain reaction that leads to the development of the other budgets. The selling and administrative expenses budget is both dependent on and a determinant of the sales budget. This reciprocal relationship arises because sales will in part be determined by the funds committed for advertising and sales promotion. The sales budget is the starting point in preparing the master budget. All other items in the master budget including production, purchase, inventories, and expenses, depend on it in some way. The sales budget is constructed by multiplying the budgeted sales in units by the selling price. Preparation of expense Budget: - Selling and administrative expense budget lists the budgeted expenses for areas other than manufacturing. In large organizations this budget would be a compilation of many smaller, individual budgets submitted by department heads and other persons responsible for selling and administrative expenses. For example, the marketing manager in a large organization would submit a budget detailing the advertising expenses for each budget period.

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Preparing a Purchases Budget Calculate the ending inventory for each quarter. Enter projected unit sales for the quarter from the sales budget schedule. Add ending inventory units and projected sales units to determine total units needed per quarter. Enter beginning inventory, which is the same as ending inventory for the preceding quarter. Subtract beginning inventory from total units needed to determine total unit purchases for the quarter. Enter the unit cost for each quarter.

Step 3:- Approval of Budget In IGL, after the preparation of budget for each department, it need to be approved by the budgeting committee which consists of four directors from each department. They review the budget in all aspects and then if they find it up to the mark, then they show their consent for the same and budget gets approved. If in between of the budgeting year, any deviation in any department is noticed then also the approval of this budget committee is required to make any changes(increase in budget amount, in case the actual amount exceeds). The Budget Committee is requested to consider and approve the following:

NCT a) Capital Budget for financial year 2010-11 : Rs. 14587 Lakhs for CNG Rs. 18496 Lakhs on Pipeline Rs. 1203 Lakhs for Corporate and others

b) Revenue Budget for the financial year 2010-11.

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NCR a) Capital Budget for financial year 2010-11 : Rs. 5308 Lakhs for CNG

Rs. 14416 Lakhs on Pipeline Rs. 600 Lakhs for Corporate and others

b) Revenue Budget for the financial year 2010-11.

Step 4:- Implementation of Budget:This includes the dissemination of approved budget to different departments as well as updates the same approved budget in the software SAP used by company. A sound foundation is necessary to compete and win in the global marketplace. The SAP ERP application supports the essential functions of the business processes and operations efficiently and is tailored to specific needs of company. IGL while using SAP perform two functions: Data storage: after the preparation and approval of budget for each department, company used to update the budgeted information in the software SAP under each department head. Data analysis: once the budgeted data has been entered in the SAP, it is then analyzed to review that whether the budgeted amount is exceeding the amount limited by the company for each department or not. If yes, then the software will automatically reject the data and it will then send for correction.

Step 5:- control and evaluation:After the budget has been prepared, approved and implemented, the process of control is been taken place. Under the controlling process the expected budget is being matched with the actual figures after every 3 months. If any deviations are recorded i.e if the actual

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figure exceeds the expected figure then there is a need to change the expected budget figure in accordance with the actual. This process of make changes in expected budget is done in every 6th month. This change in expected budget which is prepared in every 6th month is known as revised budget. A Revised Estimate for the FY 2009-10 has been prepared considering the provisional unaudited results upto September 2009 and actual performance during October & November 2009

Revised Revenue Estimate for Financial Year 2009-10

Sales Quantity

NCT I. CNG

During the period April-September 2009, the company has sold 2425 lakhs kgs, at an average of 13.25 lakhs kgs per day, of CNG as against budget of 2600 lakhs kgs, at an average of 14.21 lakhs kgs per day. Considering the actual sale of CNG during first half year ended 30th September 2009, the sale for the second half-year ended 31st March 2010 has been revised to 2641 lakhs kgs , at an average of 14.51 lakhs kgs per day against the original budget of 2960 lakhs kgs, at an average of 16.26 lakhs kgs per day. The company thus expects to achieve sale of 5066 lakhs kgs of CNG at an average of 13.88 lakhs kgs per day during the current year 2009-10 against the budgeted quantity of 5561 lakhs kgs at an average of 15.23 lakhs kgs per day.

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The major reasons for projected sales being less than what was envisaged in Budget are:

1. Delay in the addition of new buses in the DTC fleet. Earlier it was expected that around 1050 new buses would be added by the end if Oct 2009 against which only 110 buses were added. 2. Reduction in the number of blue line buses as a part of Delhi Govts plan to phase out these buses before Commonwealth Games (More than 1000 blue line buses had been taken off the road ) 3. Deferring of Delhi Govts plan for corporatizsation of private buses.( replacing blue line buses)

4. Extension in the deadline to make around 10000 diesel operated LGVs CNG powered from June 30, 2009 to Sep 2009 and then further extending it to end of March 2010.However, it is expected that since the Govt has fixed the last date for booking of CNG vehicles as 31st December 2009,it is expected that the conversion process may pick up some pace in Jan 2010 onwards

II.

PNG The company achieved sale of 314 lakhs SCM of piped natural gas against the budgeted quantity of 295 lakhs SCM during the period April-September 2009. During the current financial year, the company expects to achieve sale of 656 lakhs SCM of piped natural gas as against the budgeted quantity of 625 lakhs SCM. The major reasons for projected sales being less than what was envisaged in Budget are: 1. Delay in availability of municipal permissions. 2. Earlier both GAIL & BPCL had indicated that the additional R-LNG quantity (on long term basis) may be available from Oct09 onwards. As per the latest understanding given, this additional R-LNG quantity is now likely to start by Jan2010

64

3. Necessary infrastructure (including laying of pipelines) to supply gas to targeted industrial customers in NCR towns is still in progress.

The details of sales quantities of NCT are summarized below

Sales Quantity Product Unit Budgeted 2008-09 Revised Estimates 2008-08 5066.02 656.13 7292.62 (494.51) 31.25 (616.55) Volume Variance Increase/ (Decrease)

CNG PNG Total

Lakhs kg Lakhs scm Lakhs scm

5560.53 624.88 7909.17

Note: 1. PNG includes sale to industrial customers 2. Total sales excludes sale of natural gas. NCR

1. CNG The expected CNG sales in Noida and Greater Noida are being revised to 245 Lakhs Kgs against the Budgeted volume of 365 Lakhs kgs. Reason for downward revision of sales target are : 1. CNG sales in Ghaziabad could commence from August 2009.

2. Noida DTC Depot was non operational from April end to Oct 09 and additional buses have also not arrived as per the expected schedule

65

3. The transport department has started to phase out around 250 Blue line buses plying across Noida region w.e.f Dec 2009, which shall be affecting CNG sales in Noida and G.Noida region.

4. In case of UPSRTC as well, additional buses have not been added to the existing fleet in Noida & Greater Noida.Also, Its Depot in Greater Noida is yet not ready for operations

2. PNG It was anticipated in the original budget that around 20000 Domestic connections, 30 Commercial customers and 17 Industrial customers would be added by the end of FY 09-10 in NCR (Noida, Greater Noida & Ghaziabad) and accordingly PNG sale of 169 lakhs SCM was budgeted. However, due to the reasons as mentioned above, the expected number of connection is now being revised to 4627 Domestic connections, 30 Commercial customers and 17 Industrial customers in Noida and Greater Noida. Accordingly, projected sales during the year will be 53 lakhs SCM, approximately.

66

The details of sales quantities of NCR are summarized below: Sales Quantity

Product

Unit

Budgeted 2008-09

Revised Estimates 2008-09

Volume Variance Increase/(Decrease)

CNG PNG Total

Lakhs kg Lakhs scm Lakhs scm

365.00 168.93 647.08

244.83 52.83 373.55

(120.17) (116.10) (273.53)

Note: 1. PNG includes sale to industrial customers 2. Total sales excludes sale of natural gas

SALES VALUE During the period April to September 2009, the company achieved sales income of Rs. 56878 lakhs against the budgeted figure of Rs.60518 lakhs (sale value is net of discount to DTC). Further, during the financial year 2009-10, the company is expected to achieve a sale income of Rs.124076 lakhs against budgeted figure of Rs.135909 lakhs. (Sales value is net of discount to DTC).

67

The consolidated details are summarized below:

Sales Income Product Budget till Actual till Budget 2009-10

Rs. Lakhs Revised Estimate 2009-10 Variance Increase/ (Decrease)

30.09.2009

30.09.2009

CNG PNG NG Total

53508.18 7009.71

50019.87 6105.07 753.08

119855.39 16053.94

108650.84 13652.61 1772.96

(11204.56) (2401.34) 1772.96 (11832.93)

60517.89

56878.01

135909.33

124076.41

Details in respect of NCT and NCR are given in Annexure-I (B) & I (C) respectively.

Cost of Gas The cost of gas has been revised downward to Rs.50379 lakhs against the budgeted figure of Rs.61248 lakhs. This decrease is due to primarily due to decrease in sales volume by 890 lacs SCM . Also the projected average cost of natural gas is lower than the estimates made in Budget.

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Operating Expenses

During the period April-September 2009, the total operating expenses were Rs.9248 lakhs against the budget of Rs.9371 lakhs for the corresponding period. Accordingly, the projected operating expenses have been revised downward to Rs.20050 lakhs against the budget of Rs.20204 lakhs.

REASONS FOR VARIANCE Overall Projected operating expenses for the year will be less than the estimates made in Budget. Increase in certain heads of operating expenses is attributed mainly to the following reasons Operators expenses (Rs.281 lakhs) Due to increase in operators manpower as a result of increase in number of stations. Employees cost (Rs.189 lakhs) employees inducted. Legal & Professional Charges (Rs.357 laksh) On account of Consultancy charges to A T Kearney which was not forseen at the time of budget. Other Operating expenses (Rs 73 lacs)- Due to increase in direct and indirect manpower and increase in sales Volume. The operating expenses for half year ended Mar10 have been reviewed and is projected to be Rs.10803 lakhs against a budget of Rs 10833 lakhs for the period. On account of increase in number of

69

 Other Income During the period April-September 2009, the company earned other income of Rs.1136 lakhs mainly on account of the short-term investment of surplus funds in mutual fund/fixed deposit with banks, sale of tenders, insurance claims received, excess liabilities written back etc. against the budget of Rs.504 lakhs. It is expected that the company will earn other income of Rs.1549 lakhs during the year 2009-10 against the budget of Rs.1077 lakhs. The increase is mainly due to increase in income from mutual fund investments/Fixed deposits with banks being made out of surplus funds available with the company.

Profit for the Year Based on the above, the projected Net Profit for the financial year 2009-10 is now estimated to be Rs.21881 lakhs against the budget of Rs.21131 lakhs. The details of profitability have been prepared and the same is summarized as under:

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Details of Profit and Loss

5.40372

( Rs. In lacs) BudgetRev.EstFY09

ITEMS Sales Quantity CNG (lacs Kgs) PNG (lacs SCM) NG (lacs SCM)

BGT-H1

ACT-H1

BGT-H2

RE-H2

FY09

2709.84 345.47

2509.43 314.59 83.54 3685.48

3215.69 448.33

2801.42 394.37 124.92

5925.53 793.81

5310.85 708.96 208.46

Total Quantity (lacs SCM) 3895.37 INCOME TOTAL SALES EXPENDITURE Total Material Consumed 26049.54 Excise Duty (CNG) Total Gross Margin Total OperatingExpenses Other Income PBDIT Depreciation 6804.94 27663.41 9370.51 504.03 18796.93 3939.08 60517.89

4660.88

4189.15

8556.25

7874.63

56878.01

75391.44

67198.39

135909.33 124076.41

22829.80 6308.02 27740.20 9247.97 1135.94 19628.17 3794.58 15833.59

35198.18 8434.48 31758.79 10833.40 573.03 21498.41 4699.46 16798.95

27549.54 7389.08 32259.77 10802.51 413.08 21870.34 4853.60 17016.74

61247.71 15239.43 59422.20 20203.91 1077.05 40295.35 8638.54 31656.81

50379.34 13697.10 59999.97 20050.48 1549.02 41498.51 8648.18 32850.33

PROFIT BEFORE TAX 14857.86 (PBT) Taxation Profit After Tax (PAT) 4935.69 9922.16

5325.86 10507.73

5590.48 11208.47

5643.58 11373.15

10526.18 21130.63

10969.44 21880.89

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Revised Capital Budget for Financial Year 2009-10

CNG Project

At the time of formulation of budget, it was planned to add 53 new CNG stations (33 IGL stations, 8 DTC Stations and 12 OMC stations) during the FY 2009-10 thereby increasing the number from 181 to 234. In spite of abnormal delays in allotment of land by DDA & L&DO , it is being proposed to add 96 new CNG stations by the end of FY 2009-10 Detailed break-up of 90 stations which are to be added during Oct09 to Mar10 are as follows: D' Mother/ Online IGL./DTC OMC Booster/

Daughter OMC

NCT Noida Greater Noida Ghaziabad Gurgaon Faridabad 2 2

24

26 1

3 1

14 7 10

28

27

35

Accordingly, the capital expenditure estimates have been revised from Rs.19905 lakhs to Rs.22152 lakhs. Estimates also include the cost of augmentation of the facilities at existing stations , which is an ongoing effort to reduce the long queue at CNG Stations.

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 PNG Project As per the budget Rs.24275 lakhs were to be spent on the Piped Natural Gas project during the financial year 2009-10 against which the revised estimates have been kept at Rs.20521. Although the capital expenditure have been reduced, connections the projected no. of PNG

are expected to surpass the Budgeted numbers.

Steel pipeline As per the budget Rs 8637 lacs were to be spent on steel pipeline and related capex during the FY 2009-10 against which the revised estimate is Rs 6840 lacs.

Corporate The budget for the financial year 2009-10 included Rs.1803 lakhs on account of corporate related expenditure. This included amounts to be spent on the IT related activities, furniture / fixtures/stores building etc. The budget estimates for the financial year 2009-10 have been revised from Rs.1803 lakhs to Rs. 1500 lakhs.

Capacity Expansion With the projected number of stations to be added, the CNG compression capacity is expected to be 40.62 lacs kgs/day by the end of this financial year which is marginally less the budgeted estimate of 41.78 lacs kgs/ day.

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The details of capital expenditure are summarized below:-

Budget PARTICULARS NCT CNG PNG STEEL P/L Total NCT-A NCR CNG PNG STEEL P/L Total NCR-B Corp. Capex-C Total Capex (A+B+C) 5,317 11,027 3,389 19,734 1,803 54,620 14,587 13,248 5,247 33,083 FY 09-10

RE FY 09-10

17,966 11,126 2,400 31,492

4,185 9,396 4,440 18,021 1,500 51,013

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Operating and other revenue expenses for the year 2009-10

S.N O PARTICULARS Operating 1 Stations Dealers' Commission Stores and Spares Consumed 2 3 Power & Fuel Rent Hire Charges Rates & taxes Repair & Maintenance Employee cost 6 Insurance Legal and Professional charges Advertisement Security Expenses Other Operating Expenses Financial Charges TOTAL Expenses at CNG

BGTQ1

BGTQ2

BGTH1

ACTQ1

651.91 247.66 545.37 617.02 177.05 316.73 8.80 722.98 705.55 24.63 57.37 46.88 134.33 189.81 58.88 4504.97

712.09 271.31 589.85 671.66 197.03 345.47 10.79 786.25 712.29 26.76 60.07 51.76 150.59 215.22 64.39 4865.53

1364.00 518.98 1135.22 1288.68 374.08 662.20 19.59 1509.23 1417.84 51.38 117.45 98.64 284.92 405.03 123.27 9370.51

761.48 231.58 512.84 640.99 185.82 295.47 6.10 544.20 624.57 22.75 93.76 17.60 107.30 253.96 60.76 4359.19

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ACT-Q2 789.94 259.16 593.83 648.36 189.31 309.85 22.51 712.79 698.00 19.45 184.58 40.39 116.06 225.27 79.29 4888.79 4938.63

ACT-H1 1551.42 490.74 1106.67 1289.36 375.13 605.32 28.62 1256.98 1322.56 42.20 278.34 57.99 223.36 479.24 140.04 9247.97

BGT-Q3 786.82 300.47 646.66 740.14 220.86 381.30 12.97 866.98 719.03 28.89 62.77 56.63 169.97 244.98 71.31 5309.77

BGT-Q4 819.96 313.88 668.25 769.09 233.66 396.88 14.69 903.60 725.77 31.02 65.47 61.50 181.46 263.74 74.66 5523.62

BGT-H2 1606.78 614.35 1314.90 1509.23 454.52 778.17 27.66 1770.58 1444.80 59.91 128.25 118.13 351.43 508.72 145.97 10833.40

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Budget RE-Q3 849.94 279.89 593.83 713.20 209.31 340.83 9.10 784.06 851.56 25.75 184.58 40.39 133.47 253.96 60.76 5330.64 RE-Q4 849.94 299.49 617.58 734.60 233.66 357.87 9.10 823.27 877.10 27.75 139.58 40.39 146.82 253.96 60.76 5471.87 RE-H2 1699.88 579.38 1211.41 1447.80 442.97 698.70 18.21 1607.33 1728.66 53.51 324.16 80.78 280.28 507.93 121.51 10802.51 FY10 2970.78 1133.32 2450.13 2797.91 828.60 1440.38 47.25 3279.80 2862.64 111.30 245.70 216.77 636.35 913.75 269.23 20203.91 RE-FY10 3251.30 1070.12 2318.08 2737.15 818.10 1304.02 46.83 2864.31 3051.22 95.71 602.50 138.77 503.64 987.17 261.56 20050.48 % incr/(decr.) 9% -6% -5% -2% -1% -9% -1% -13% 7% -14% 145% -36% -21% 8% -3% -1%

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RESEARCH DESIGN AND METHEDOLOGY

Methodology is the bone of a project. It has also an important aspect as regards to IGL (Indraprastha Gas limited) concerning with regulation of Ministry of Petroleum and Natural Gas. I have gone very deeply in preparing the project & I devoted my full attention to get the accurate & real data collection. For this purpose I became in close contact with sources of data collection by personally & through Internet. Hence my research design is experience based and method of data collection is basically secondary. The Methodology contains the following things: Sources of Data:- Sources of collection of data for a project report has a very important role. So, the sources must be very reliable. For this purpose I did my best efforts to get proper & correct information. (A) I have taken the figures, information & data in connection with Profit & Loss A/c, Balance Sheet, from the annual report of the company through website of the company. (B) With the help of Internet I have got the information, data & figures about Natural Gas industry, beginning of Natural Gas industry in India, Recent Developments of Natural Gas Industry, history of Natural Gas Industry, global & Indian scenario of Natural Gas industry. (C) I have collected the information from the website of Ministry of Petroleum and Natural Gas, regarding norms, objective, eligibility etc. (D) I have collected the data, information & figures from the printed annual report of Indraprastha Gas Limited (IGL) for the purpose preparing of charts of Gross Sales, Net Profit, EPS etc. (E) I have also get the figures, information & data from the chief manager (Finance) & other staff of the company with the discussion personally.

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Methods of Data Collection:- For a project report methods of data collection has also an important role in connection with accuracy & exact information. So, I adopted both the methods primary as well as secondary method of data collection.

(A)

Primary Data:- Throughout the preparation of project report I was in the contact of Chief Manager (Finance) & staff of finance department to get the information.

(B)

Secondary Data:- I collected the information figures & data in connection the preparation of project report from Balance-sheet & Profit and loss a/c of Indraprastha Gas Limited (IGL). I have also collected the information, data & figures from annual report of Indraprastha Gas Limited (IGL). I have collected the information from the Internet in connection with the where about Natural Gas Industry.

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REFLECTION OF LEARNING DURING THE PLACEMENT

I was working in Finance department, during my training period for 7 weeks, where I was taught the basic training consisted of two phase. It includes the practical and theoretical knowledge. The main sources of theoretical knowledge were insights of my project guide respected Mr. Saibal Biswas, practical knowledge induced me in live working project. It was a project of Trend analysis of share prices of IGL with respect to its competitor (GGCL). The basic work to be done was the analysis of firm on various parameters like financial parameters, business performance, management activity, etc. according to latest changes made by MOPNG. The project provided me platform to use my analytical and management skills to calculate various ratios and needed information. The basic source of data was the information provided by the firm itself, hence validity and authenticity of data also needed to be taken into consideration. The Responsibility assign to me to collect all information regarding project and prepare project using updated data available from finance department of IGL. Learning about how they feed and maintaining general business transactions in SAP (Systematic Analysis Process) while preparing budget. Understanding the procedure of rectifying the entry that was wrongly passed in operating system. Understanding the transactions passed in accounts record in respect of the entry forward by C & P department to Finance department. Getting an insight into the various criteria describe by MOPNG. Collecting information and data relating to the various important aspects of share market and keep an close eye in changes occurred in the share prices of IGL

80

CONCLUSION
From the above analysis over the budgeting system of the IGL, I conclude the following: IGL follows the operating budget system because it revised its budget after every six month and follows its budget after each quarter.

Procedure of IGL budgeting system includes the following: Planning of Budget, preparation of budget, approval of budget, implementation and control & evaluation.

Factors Considered by IGL before making Budget:- The budget estimates include: Projected Capital Expenditure Demand projections Sales quantity projections Revenue Cost of natural gas purchase Operating expenses Funding Projected profit Proposed dividend Resource mobilization of capital expenditure Projected Profit & Loss Statement Projected Cash Flow Projected Balance Sheet

Under the controlling process the expected budget is being matched with the actual figures after every 3 months. If any deviations are recorded i.e if the actual figure exceeds the expected figure then there is a need to change the expected budget figure in accordance with the actual. This process of make changes in expected budget is done in every 6th month. This change in expected budget which is prepared in every 6th month is known as revised budget.

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Company is a debt free company. This is because of their well and good budgeting system as they used to revised their budget after every 6 months and they can make required changes within time.

If there is any deviation recorded in the actual figure while making comparison with its budgeted figure then they used to exceed it with the required amount in their revising budget and the next years budget is then adjusted with that same amount.

They are good at controlling their budget as compared to other organizations in a way that: Generally other companies used to prepare their budget by taking the figures either 5% more or 5% less than the actual. While on the other hand IGL used to take the exact figures into account while preparing the budget and make changes in it as and when required. This makes their budgeted system more consistent and reliable for all the departments.

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RECOMMENDATIONS
Company should involve employees ideas while preparing the budget. Company should delegate authority to each department of making changes in the budgetary figures as and when required so as to: Save time. For efficient decision making regarding budget. The departments are more aware of the concerned problem so they can solve it in better way than any other authority. Every department should have power to prepare their own budget according to their need and then take approval from higher authority. This will help in improving accountability in different department for their budget. An inspection committee should be made to check the estimated budget proposal come from different department before making the approval of that budget.

A budgeting suggestion box should be made in order take opinion of employees on budget so that every member of organization can show their involvement in budgeting process. Provide the investors and other interested outsiders with better information so that they can take their decision efficiently.

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BIBLIOGRAPHY

BOOK REFERRED I. M. Pandey S.P. Gupta R. P. Rastogi

WEBSITES REFRENCES: http://www.google.com http://www.bseindia.com http://www.wekipedia.com http://www.igl.com http://www.gujaratgas.com http://www.petroleum.nic.in/ng.htm http://www.naturalgas.org/business/industry.asp http://equitymaster.com http://moneycontrol.com

NEWSPAPERS & MAGAZINES Economic Times Business standard Outlook Money Business Today

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ANNEXURE

REVISED ESTIMATES OF PROFIT AND LOSS ACCOUNT FOR THE YEAR (2009-10)

(In lacs) Budget ITEMS Sales Quantity CNG (lacs Kgs) PNG SCM) Natural Gas (lacs SCM) Total Quantity 3895.37 3685.48 4660.88 4189.15 8556.25 7874.63 6573.57 83.54 124.92 208.46 7.12 (lacs 345.47 314.59 448.33 394.37 793.81 708.96 535.45 BGT-H1 ACT-H1 BGT-H2 RE-H2 14.81 2709.84 13.71 2509.43 17.67 3215.69 15.39 2801.42 FY09-10 16.23 5925.53 Rev.Est FY09-10 14.55 5310.85 4603.81 Actual FY08-09

(lacs SCM) INCOME TOTAL INCOME EXPENDITURE Total Consumed Excise (CNG) Total Margin Total OperatingExpenses Other Income PBDIT 504.03 1135.94 573.03 413.08 1077.05 1549.02 41498.51 2622.04 32629.38 9370.51 9247.97 10833.40 10802.51 20203.91 20050.48 14193.05 Gross 27663.41 27740.20 31758.79 32259.77 59422.20 59999.97 44200.38 Duty 6804.94 6308.02 8434.48 7389.08 15239.43 13697.10 10936.66 Material 26049.54 22829.80 35198.18 27549.54 61247.71 50379.34 41076.68 SALES 60517.89 56878.01 75391.44 67198.39 135909.33 124076.41 96213.73

18796.93 19628.17 21498.41 21870.34 40295.35

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Depreciation PROFIT BEFORE (PBT) Taxation TAX

3939.08

3794.58

4699.46

4700.28

8638.54

8494.85 33003.65

6743.36 25886.02

14857.86 15833.59 16798.95 17170.06 31656.81

4935.69

5325.86

5590.48

5695.70

10526.18

11021.55 21982.10

8638.59 17247.43

Profit After Tax 9922.16 (PAT)

10507.73 11208.47 11474.36 21130.63

PROJECTED CASH FLOW STATEMENT FOR THE YEAR OCTOBER 1, 2009 TO MARCH 31, 2010 (Rs In Lacs) PARTICULARS SOURCES OF FUNDS Profit After Tax (PAT) Add: Depreciation security deposit - PNG customers Total Sources of Funds APPLICATION OF FUNDS Payment for Purchase of Fixed Assets Dividend Payment Investments/Redemption of investments Defered Tax Increase/(decrease) in working capital Total Application of Funds 1000 325 (1215) 9500 (13666) 368 (5864) 9150 9391 28312 37703 0 (12666) 693 -7080 18650 5719 2205 1576 9501 5755 2495 900 9150 11474 4700 2476 18651 Q3 Q4 Total

Opening Cash and Bank Balance Opening Balance in Mutual Funds

17143 6666

18000 6810

17143 6666

Closing Cash and Cash Eq.

24810

11144

11144

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PROJECTED BALANCE SHEET (FOR THE FINANCIAL YEAR( 2009-10)

As on March 31, As on Sept 30, As on March 31, Particulars 2010 Budgeted Sources of Funds Share Capital General Reserve Loan Funds Deposit from customers Deferred Tax Liability Sources of Funds Application Funds Fixed Assets Gross Block Depreciation Net Block CWIP Investment Current Assets Inventories Sundry Debtors Cash & Cash Equivalent Other Current Assets Loans & Advances Total Current Assets Less: Current Liab. and Provn. Less: Proposed Dividend Net Current Assets Application of Funds 12555 6564 -4774 93048 18221 84674 98135 9619 10500 6552 2844 4718 2543 200 4039 14345 2509 4041 17143 209 3937 27840 2800 4009 17143 219 4022 28194 131143 46364 84778 13044 0 88647 41557 47090 12697 6666 -6000 139250 46258 92993 14000 69944 0 6822 2283 93049 14000 64849 0 3909 1915 84674 14000 69772 0 6385 7978 98135 2009 Audited 2010 Unaudited

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CASE STUDY
New Delhi A Case Study of the CNG revolution Not very long ago in 1993, during the English cricket tour of India, when the visitors lost a match, they attributed part of their loss to the air pollution in Delhi the capital city of India [8]. Perhaps they were bad losers, but we must admit that the pollution levels were dangerously high enough for it to be listed amongst the worlds most polluted cities. Vehicular emissions, which accounted for 70% of the air pollution, would morph into deadly smog during the foggy winters resulting in an increase in respiratory illnesses, with children and senior citizens being the worst affected. With the economy shifting gears around the same time amidst increasing middle class aspirations, with about 500 new vehicles being added every day, a turnaround seemed highly improbable. Ever since then, Delhi has won the US Department of Energys first Clean Cities International Partner of the Year award in 2003 for bold efforts to curb air pollution and support alternative fuel initiatives [7]. In a unique display of judicial activism, the Supreme Court of India ordered the responsible government to switch its public-transit system to a cleaner-burning fuel in response to citizens concerns about air pollution. Buoyed by the public pressure, the government of New Delhi reluctantly as is typical of a developing nation, complied and enforced regulations to convert its entire fleet of diesel and gasoline dependent public transport system to Compressed Natural Gas (CNG) by 2002. Its funny to note that the court actually slapped a fine of about $450 on the Union government, for repeatedly seeking a modification in the order [4]. To its credit, once the government set about preparing a comprehensive action plan by passing the desired legislation and setting up the infrastructure necessary for such a transition, it earned the recognition of drafting one amongst the top 12 best policies in the world, as per a study conducted by the World Wide Fund for Nature (WWF) and E3G [1]. Between 2000 and 2008, the Carbon emissions plummeted by 72%, while the SO2 emissions decreased by 57% on account of 3500 CNG buses, 12000 taxis, 65000 auto rickshaws (tuktuks) and 5000 mini buses plying on CNG [1]. CNG is mainly comprised of methane, which upon combustion mainly emits CO2 and H2O and being lighter disperses very quickly, whereas gasoline and diesel being more complex, emit more harmful emissions such as NOX and SOX. Owing to the recent volatility in the oil prices and continued patronage of CNG by

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the government by way of subsidies, the general public has begun to increasingly incorporate CNG kits in their private vehicles, which facilitates them to run on dual fuel mode. Encouraged by the public response, the Ministry of Petroleum and Natural Gas has set about an ambition plan of bringing 200 cities under the supply network of CNG and Piped Natural Gas (PNG) by 2015 [5]. For a country which depends on 70% of oil imports, the recent indigenous gas discoveries in the K.G Basin and elsewhere have only brightened our outlook for lesser dependence on foreign oil, enabling us to save valuable foreign exchange. In view of growing awareness for cleaner air and climate change, theres many a lesson to be learnt from Delhis resurgence.

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SYNOPSIS OF THE PROJECT

ABOUT THE COMPANY Incorporated in 1998, IGL took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited). The project was started to lay the network for the distribution of natural gas in the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. With the backing of strong promoters GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) IGL plans to provide natural gas in the entire capital region. The two main business objectives of the company are

To provide safe, convenient and reliable natural gas supply to its customers in the domestic and commercial sectors. To provide a cleaner, environment-friendly alternative as auto fuel to Delhis residents. This will considerably bring down the alarmingly high levels of pollution.

The transport sector uses natural gas as Compressed Natural Gas (CNG), the domestic and commercial sectors use it as Piped Natural Gas (PNG) and R-LNG is being supplied to industrial establishments.

OBJECTIVES OF THE PROJECT To study the current budgeting system of IGL To study the procedure used by IGL in preparation of budget. To study the factors taken into consideration by IGL while preparing and revising of budget. To study the pattern of altering and controlling of budget.

90