Kribhco

A
PROJECT REPORT
ON
INVENTORY MANAGEMENT AT
KRISHAK BHARTI CO-OPERATIVE

LIMITED
SUBMITTED TO:
SUBMITTED BY: Rahul N. Prajapati
Anand Institute of Business Studies

(Managed by Shri Ramkrishna Seva Mandal)
Anand: 388 001
2008-2009
SUMMER TRAINING (JUNE-JULY '2009)
Anand Institute of Business
2008-2009 Studies
(Managed by Shri Ramkrishna Seva Mandal)
Anand: 388 001
2008-2009
1 Anand'2009)
SUMMER TRAINING (JUNE-JULY Institute of Business Study
2008-2009
PREFACE
This project is prepared during the vocational training under taken at “KRIBHCO”,
SURAT. On partial fulfillment of the degree in “Master of Electronic Business.”
Hence, this report is designed with the objective to gain practical knowledge and is
undertaken on a chemical fertilizer manufacturing industry. According to an old saying there
is a huge difference between to say and to do. To take theoretical knowledge is important but
it becomes more valuable when we apply it in the practice. So there is a huge gape between
theory and practice. So, for fulfilling this requirement, training in the KRIBHCO was very
practical exposure for us. This training provides golden opportunity for all students,
especially when the management student does not have perfect understanding of the working
of a unit.
Hence, this report is designed with the objective to gain practical knowledge & is
undertaken on a fertilizer manufacturing industry.
2 Anand Institute of Business Study

Acknowledgement
Sharing our experience is one of the biggest honors, which every one cannot experience. To
share our experience at KRIBHCO as management student is a matter grate honor and pride.
We are grateful to KRIBHCO for letting us to do this project. We express our gratitude to
Mr.N.K.Sahoo (P&A Manager), Mr.K.Ashokan & Mr.Sampat (store department),
Mr.Thomas T.S. (F & A Deptt), Mr.J.Naik (Purchase department), Mr.Tondon
(Transportation department), Mr.M.N.Patel & Mr.Purbia (H.R.D department), Mr.M.S.Desai
(Marketing department).
We are really thankful to employees of KRIBHCO who have been guiding us in this path
Step by step and have made our path really simple to get through .we will use this experience
through out our career and will make our future bright. So once again we thank all of them.
In regard to this programmed, we would like to acknowledge our gratitude and

Thanks to coordinator,
“Anand Institute of Business Studies,

Sardar Patel University”
for catering us the opportunity of training. We also forward our special thanks to our All
Faculty Member for guiding us in training Programme. The valuable suggestion of our
faculty members during the course our Project work and giving us inspiration to achieve our
goal. The shape that project has been taken is due to our faculty member’s help, judicious
guideline and encouragement.
And the most precious part of our life, our parents who have showered their love and support
which can be never repaid in any form but can be commemorated without them this
achievement could not have been achievement.

Declaration
I the undersigned RAHUL N.PRAJAPATI this financial training report with

“KRISHAK BHARTI CO-OPERETIVE LTD” is the result of our study which carried
out during 1 June to 31 July, 2009 and has not been previously submitted to any
other university or institute for any other examination and for any other purpose by
any other person.
Place: Surat
Date: 31/07/2009
EXECUTIVE SUMMARY

Today the significance of project work has greater importance in business world. Practical
knowledge is as important as theory so that one thing is said, “Practice makes a men Perfect “
I have made my project in “KRISHAK BHARTI CO-OPERETIVE LTD” which is basically

pharmaceutical company. I have made the report depicting the companies working
mechanism and the overview of its entire department. The companies mainly comprises of
following department:
- Production department
-Marketing department
-Finance department
-Human Resource Development
-Purchase & Store department
In the purview of Production department the process has been studied separately for 3
departments of the company (i.e) Bulk Packaging, Medium Packaging & Injection molding
Department, in production department we also describe the process of various products like
Ammonia, Urea, and Power plant. In order to understand the mechanism of Human Resource
department we took all relevant information of the functional field. The responses were
analyzed and suggestion was provided in order to make their entire working mechanism to
increase its efficiency considering the human perspective. In marketing department we study
the strategy which will be selected or adopted by KRIBHCO. In finance department I studied
capitalization, working capital management etc. In purchase & store department the activity
done by this department is covered under this report.
As a part of the project report a special topic was selected for studying and analyzing in detail
the entire working of the Company. I have done report on production planning & Control to
learn the entire production process of the company and basic operation of entire production
planning and control. The Process chart was used depicting the entire production process and
step-by-step planning of the process.
The topic of my project is Inventory Management. In next part of the project contain the data
regarding Inventory Management. In this the Process of Inventory Management means how
inventory should be maintain and the various techniques adopted by KRIBHCO for Inventory
management should be studied under it.
INDEX

SR NO. SUBJECT PAGE NO.
1 PART 1: GENERAL INFORMATION ABOUT

VARIOUS DEPARTMENT
2 INTRODUCTION 08
3 GLOBAL SCENARIO OF FERTILIZER INDUSTRY 10
4 INTRODUCTION OF KRIBHCO 13
5 ORGANIZATIONAL CHART OF KRIBHCO 23
6 HUMAN RESOURCE DEPARTMENT 25
7 MARKETING DEPARTMENT 37
8 TRANSPORTATION DEPARTMENT 45
9 PRODUCTION DEPARTMENT 47
10 MATERIAL DEPARTMENT 52
11 PURCHASE DEPARTMENT 53
12 STORE DEPARTMENT 56
13 FINANCE DEPARTMENT 59
14 PART 2: INVENTORY MANAGEMENT
15 METHODOLOGY 66
16 INTRODUCTION OF INVENTORY MANAGEMENT 67
17 INVENTORY MANAGEMENT IN KRIBHCO 70
18 CLASSIFICATION OF INVENTORY 82
MANAGEMENT
19 EOQ 86
20 COMPOSITION OF TOTAL INVENTORY 90
21 SUGGESTION 91
22 SWOT ANALYSIS 92
23 RECOMMENDATION 94
24 CONCLUSION 95

25 BIBLIOGRAPHY 96
India lives in villages” said Mahatma

Gandhi decades ago. It is true even today.
Like every developing economy, the economy
of India is also agro-based. Agriculture

accounts for nearly 1/4th of India's GDP and more importantly, about 2/3 rd of the
country's population is dependent on agriculture and allied activities for their
livelihood. As per statistics nearly 175 lakh MT of fertilizer nutrients are required every
year in this country. The demand of fertilizers was so high that India had to import
almost 30% of its requirement from other countries. Therefore, to achieve the economic
growth, agriculture base of the country must be strengthened. To attain this objective,
agriculture practices have to be improved from their traditional pattern to a higher
technological track involving better irrigation and use of better quality seeds, fertilizers,
insecticides & pesticides. Therefore, chemical fertilizers are key player in this process
and fertilizer industries plays quite a major role in increasing food production in the
country and also helps to modernize the out look of the common farmers and make
them innovative and respective to the new technology change.
A fertilizer is any material, organic, inorganic, natural or synthetic, that is placed

on or incorporated into the soil to supply plants with one or more of the chemicals
elements necessary for normal growth. Fertilizer is the material, which supplies the
chemicals elements required for plant growth. Primary nutrients like nitrogen,
phosphates and potassium (required for fertilizer land) are supplied through chemical
fertilizer. Fertilizer response studies have proved that one kg. of fertilizer nutrient
application can the food grain production by 8-10 kg.
Fertilizer production is of permanent importance for this country because

fertilizer increases agriculture productivity. One hand population increasing but on the
other the supply of land is totally fixed. So we have to produce more without any
increase in arable land area. This can be done if productivity goes up. And fertilizer
plays a major role in productivity escalation.
As this is a vital commodity it is in the interest of nation that farmers get

fertilizers at reasonable rate and in adequate quantity. Looking to the poor economic
condition of Indian farmers Government of India framed fertilizer policy in 1977 based
on Maratha committee report. The purpose behind introducing this policy was to
supply fertilizer to resource poor at a price they could afford, so as to increase the
consumption of fertilizer, to increase food production, and ensure fair return to
fertilizer producers.
With this twin objective, Retention Price Scheme (RPS) for fertilizers came into
picture. In this scheme government has brought the fertilizer under the preview of
Essential Commodities Act (ECA) in which the retail price of fertilizer to the farmer is
notified by the Government of India from time to time. This retail price to the farmer is

uniform throughout the country and is subject to local taxes applicable under the
respective States.
Further under ECA, the government also operates a system of distribution

control in which the manufacturers including the handling agents for the imported
fertilizers are directed to sell specified quantities of fertilizers in given states/union
territories. While doing so, the logistics of fertilizer distribution including storage,
transportation, handling etc. are also suitably regulated conforming to overall supply
plans of the government to meet the requirement in all the parts of the Country.
Now manufacturers also should get reasonable rate of return as all incentive for
producing fertilizers. Manufacturers should get at least that much, which call enable
them to remain in the industry.
Government of India fixes the price of fertilizers in such a way that

manufacturer's cost of production including cost of marketing is covered and the
manufacturer gets a 12% post tax return on net worth of the unit at a pre-defined
capacity utilization. Norms are fixed for consumption of raw material, utilities, services,
capacity utilization, depreciation etc. The price so fixed is called Retention Price (RP).
This price is reviewed every three years.
In a nutshell fertilizers can not be sold in open markets and producing unit has
almost nil say in fixing fertilizer price. Then how to increase profits? By operating plant
efficiently only.
3. GLOBAL SCENARIO OF FERTILIZER INDUSTRY
The United Nations projection indicate the world population has been increasing at very
fast rate while the nature resource such as land remain the same so, to recover
increasing demand for the food grain the productivity of the crop can be increased by
using fertilizer.

Today 35% of the world fertilizer/production from developing countries. But
their consumption’s being 50% of the total global fertilizer consumption’s; the
developing countries are the net importer of the fertilizers. This is natural because they
are essential agro based economics. While Canada and U.S.A. are top exporters of
fertilizer in the developing countries. India and china are also develop/ping their
scenario in the world market.

-:: INDIA SCENARIO ::-
By fiscal year 1995, the fertilizer consumption in India touched 13.56 million
tons. In the same year, the total supply was 10.43 Million tons. With that become the
third largest producer after U.S.A. and china. To bridge the demand and supply gap
India has to import necessary fertilizer.
-:: WORTH OF FERTILIZER INDUSTRY ::-

1. Pro Green Revolution Period
2. Green Revolution Period
3. Post Green Revolution Period
● Pro Green Revolution :

The period is described in 1952-1953 era where increased growth of food grains
took place however this increased production in food grains took place due to increased
irrigation method. In this phase the land under agriculture was made more during this
period about 80%of the company’s population was involved in agriculture either
directly orindiretly.
● Green revolution Period :

During this phase government stated the programmer aimed at marking our
country self sufficient in food product this was the period between the year 1959-1960
this plan laid the emphasis on production of high yielding varieties. To make this plan a
success there was a high need to make sail fertile by providing it with nutrients like
phosphorus nitrogen and potassium.
● Post Green Revolution Period :
The words population along with Indian population has kept on growing at an
alarming rate the fertilizer companies all over India are trying to expand their scale of
operation in order to increase the production rate. The demand for fertilizer per year is
increasing. The current demand of fertilizer in India is 18 million tones.

4. INTRODUCTION OF KRIBHCO
Krishak Bharti Co-operative Limited
“KRIBHCO” the world’s premier fertilizer producing co-operative has an

outstanding track record to its credit in all spheres of its activities. Since 17th April 1980
as a national level co-operative society promoted by Government of India authorized to
manufacturing and distribution of fertilizers. Chemical fertilizer and allied farm
imputes “KRIBHCO” imbibed the co-operative philosophy fulfilling its commitment to
strengthening and promoting the cause of agriculture development and co-operative
movements in the country.
Krishak Bharti co-operative limited popularly known as “KRIBHCO”

has been registered as national level co-operative society under the provision of the
multi-state co-operative societies act, 1984.
The”KRIBHCO” hazira unit is located around 15 kms, west of Surat and

lies on the north of river Tapti. An all weather road from Surat to hazira connects the
plant site with the city. The cannel belonging to irrigation department is running on the
plant site and is feeding water from ukai. A railway feeder line apporx. 55 kms. Long
has connected the site with Bombay –Ahmedabad main line.
KRIBHCO multiunit co-operative societies were promoted jointly by

IFFCO and the agricultural co-operative all over the country.

KRIBHCO PLANT AT HAZIRA
Plant is based on Natural Gas from BOMBAY HIGH SOUTH BASSEIN. The
society massive Ammonia, Urea complex is situated at HAZIRA near SURAT in
GUJARAT.
KRIBHCO plant is one of the largest and most modern fertilizer compels in the co-
operative sector in the world. It has two phases on UREA plants consisting of two
streams of 1520 MTPP with an annual capacity to produce 14.52lakh.MT of urea
equipment to 6.68 lakhs MT interns of nutrient nitrogen.
KRIBHCO aims to fulfill the ever-growing fertilizer needs of the country. The
HAZIRA project with project zero date of 31st March, 1985. The estimated project cost
was Rs.957.71 crore However, the final project cost was Rs.885 crore resulting in hot
saving at Rs. 72.71 crore.

MEMBERSHIP: -
Kribhco Membership
6200 6044
6000
5732 5790
5800
5624
5600
5400
5188
5200
5000
4800
4600
2003-04 2004-05 2005-06 2006-07 2007-08
Years
A cooperative thrives on the trust of, its members. Membership of

“KRIBHCO” is open to government of India, national state and district and village
level cooperative society. At the initial stage, way back in June, 1981 the total
membership in ”KRIBHCO” was only 221 cooperative societies which rose
significantly to 6044 cooperative societies as on march 31,2008 as against 5790 as on
march 31 2007. Phenomenal progress made by the society becomes a testimony to
the ever-increasing membership over the years.
The total paid up share capital as on March 31, 2008 was rs.39, 354.15 lakh as
against rs.49, 170.72lakh in the previous year. During the current financial year, the
society has refunded share capital of rs.9700 lakh to “IFFCO” and government of
India respectively .the state –wise membership with share capital contribution as on
March 31, 2008 vis-à-vis march 31 2007.
MISSION: -
A) To contribute to agriculture &rural development in the regins.
B) Services to members of cooperatives society by selecting financing
C) Managing society desirable and commercial profitable investment
opportunity preferable at multiple locations.

VISION:-
They want to be a world class organization that represents the farmer

community and maximizes returns to them through specialization in agricultural
inputs and products and other diversified businesses that maximize
stakeholder value.
OBJECTIVES: -
a) To undertake the activities for he rural upliftment and agriculture development.
b) To promote economic interest of its members by undertaking manufacturing of

chemical fertilizer & allied product.

In furtherance of these objectives “KRIBHCO” may undertake one or more of the
following activities: -
(I) To undertake production processing, manufacture, sale distribution, marketing,

import export and to otherwise deal in agriculture production requisites.
(II) To set up storage units for storing fertilizer and other goods by itself or in
collaboration with other agency.
(III) To act as warehousing agency under the warehousing act and own go downs or
hire go downs for the storage of fertilizers and other goods.
AWARDS: -
The excellence performance of the society has brought a number of laurels from various
organizations .The awards received during year were as follows: -
(I) National productivity council has awarded productivity award the society for
bio fertilizer product for the year 1999-2000, 2001-2002 in the year 2003-
2004.
(II) Hazira ammonia extension project (HAEP) rotating shield winner and
certificate for lowest disabling injury index in group-c industries.
(III) Sardar Vallabhbhai Patel Agriculture and Technical University, Meerut – All
India Farmers Fair And agro Industrial Exhibition – First Prize To Kribhco on
10-03-2005.
(IV) Kribhco has won first prize for Bio-Fertilizer Production, Marketing And
Promotion Award For the year 2003 And 2004 by National Productivity
Council (NPC). Award Has been given formal function held on 10th May,.2005
by Honble Minister For Agriculture Shri Shard Pawar Ji.
(V) Special Participation Award in Corporate Sector Event “ Vyapar 2005” Event
Organized By Southern Gujarat Chamber OF Commerce And Industries From
February 11 – 16, 2005, the theme of pavilion was “ Development OF Bio-
Technology In Kribhco

KRIBHCO HAS WON ENTERPRISE EXCELLENCE AWARD
Managing Director Shri V.N. Rai is holding the Gold Plaque
KRIBHCO has won the Enterprise Excellence Award for the year 2003-2004 in thefertilizer sector from
the Indian Institute of Industrial Engineering (IIIE) ,forfinancial and operational strength of the Society. The
Award consisted of a gold plaque with certificate of Excellence was presented by Dr. T.S Vijayaraghavan,
IAS (Retd), former secretary, Petroleum, Govt of India, at the 8th CEOs Conference at Kodaikanal.

The Prime Minister Shri Ataal Bihari Vajpayee is presented a dividend cheque by the
Managing Director, KRIBHCO Shri V.N Rai in New Delhi on september 12, 2003 (Friday).
HISTORY OF KRIBHCO: -

Encourage with the successful operation of fertilizer plant of kalul, kandla and
phulpur in the co-operative Limited. (IFFCO) higher to the one and the only co-
operative in the fertilizer industry has promoted another co-operative namely
“KRIBHCO” Ltd to made the new giant plant of hazira.
MILE STONES: -
(I) Project zero Date : 31/03/1981
(II) Foundation stone laid by Smt. Indira Gandhi: 5/02/1982
(III) Project completion : 31/03/1985
(IV) Plan completion : 26/11/1985
(V) Commercial production : 1/3/1986
(VI)Percent capacity utilization : Urea 99%
Ammonia95%
(VII) Plant ready of production : January/September,1985
(VIII) Gas available by ONGC : PHASE 1 & PHASE 2
18-9-85 6-11-85
(IX) Trial production Ammonia : PHASE 1 & PHASE 2
14-11-85 30-11-85
Urea (stream 11/31) 26-11-85 13-12-85
Ammonia (stream 21/41) 31-12-85 01-12-85
(X) ISO certificate (I) KRIBHCO plant

ISO 9001-2000
(II) KRIBHCO plant
ISO 14001
(III) KRIBHCO Mktg office
ISO 9001-2000

DEPARTMENT AND MANPOWERS AT “KRIBHCO”
Financing & Accounting 62

Personnel & administration 82
HRD 09
Security 101
Material 55
Medical 32
Mechanical 210
Transportation 29
Fire safety 45
Purchase & store 56
Instrument 90
Electrical & civil 101
Laboratory 54
Production (HEAP Plant) 440
Total 1379
Contract labor 1600
Total manpower 2979

PERFORMANCE HIGHLIGHT:-
RECORDS 2007-08
Highest monthly urea dispatches from Plant Oct. 1.98 Lacs MT

06 since inception 1.94 Lacs MT
Earlier Record (Dec. 87)
Highest monthly Urea Sales July 06 since inception 4.11 Lacs MT
Earlier Records (June 87) 3.84 Lacs MT
Highest Total Annual Urea Sale 2006-07 since 34.6 Lacs MT

inception 28.2 Lacs MT
Earlier Record (2005-06)
Highest Daily Bio Fertilizer Production from 3000 Kg
Hazira Unit ( 01-14.11.2006) 2660 Kg
Earlier Record
Highest Total Monthly Bio Fertilizer Production 97.5 MT
Oct 06 Since Inception 94.4 MT
Earlier Record (Oct 06)
Highest Monthly Bio Fertilizer Production from 80.1 MT
Hazira Unit Nov 06 since Inception 71.8 MT
Earlier Period
Highest Annual Bio-Fertilizer Sales 2006-07 784.4 MT
Earlier Record (2006-07) 714.4 MT
Highest Annual Total Bio Fertilizers Dispatches 843.3 MT

2006-07 716.4 MT
Highest Annual Bio-Fertilizers dispatch from 638.8 MT
Hazira Unit 2006-07 491.4 MT
Highest Sales Productivity 5388 MT/ EMP
Earlier Record (2006-07) 4315 MT/ EMP

5. ORGANIZATIONAL CHART OF KRIBHCO
Government of India
Ministry of Agriculture
Department of fertilizer
& Chemical
Chairman
Board of Directors
Managing Director
Operational Director
CM
GM GM GM GM GM GM (MIS)
(P) (Material) (F&A) (P&A) (Tech) (Mai.)
JGM JGM JGM JGM JGM JGM

(P) (Material) (F&A) (P&A) (Tech) (Maintain)
CM CM CM CM CM CM
(P) (Material) (F&A) (P&A) (Tech) (Maintain)
Instrument
Ammonia Process
Electrical
Urea Purchase Project
Power F&S Mechanic
Store
PHP Civil
Laboratory
Transportation

QUALITY POLICY
Management of KRIBHCO, Hazira plant is committed to operate and maintain its fertilizer
manufacturing complex through quality assurance, environmental protection and to the
satisfaction of customers.
KRIBHCO, Hazira plant shall achieve this quality policy through following objectives:
1. Continually upgrading technology to improve plant efficiency & reliability.
2. Maintaining & improving the safety & environmental performance.
3. Improving the skills & knowledge of personnel.
4. Continuously improving the quality Management system.
FUTURE PLANS
A joint venture fertilizer project in Oman:

Society has invested US$ 80 million as equity in Oman India Fertilizer plant
which has achieved commercial production on 14th July 2005. The Project has annual
capacity of 16.52 lakhs MT Urea and 2.50 lakhs MT surplus ammonia and has been built at a
cost of US$ 969 million. Marketing of Urea produced by this plant has since been
commenced by the society.
Hazira Phase-II
Society is in the process of setting up a state of the art mega size ammonia plant of
capacity of 1850 MTDP and urea plant of capacity of 3250 MTDP at existing fertilizer
complex at Hazira. Existing infrastructure facilities will be utilized resulting in saving of cost.
Plant will be based on natural gas and we have energy consumption.
Gujarat state energy generation limited (GSEG)
Society has diversified to power sector and has invested Rs. 48.75 crores being 30%
equity in Gujarat State Energy Generation Limited, a joint venture company promoted by
government of Gujarat, GSEG is operating 156 MW Power Plant at Mora, District Surat.
.KRIBHCO’s Hazira plant is also going to be expanded. The society is also exploring
the possibilities to set up a 200 MW liquid fuel based power project at Jhunjhunu, Rajasthan.
Society has deposited a development security of Rs.25 lakhs with Rajasthan State Electricity
Board (RSEB). Minister of power has given No Objection Certificate (NOC).

6. HUMAN RESOURCE MANAGEMENT
Human Resource Management is that part of management which is concerned

with people at work & their relationship within the organization. The term Human Resource
Management refers to the management of personnel in the organization of any company to
achieve the predetermined goals. The duty of the personnel manager is to look after the
personnel department and various functions of the personnel like recruitment, selection,
promotion, transfer, etc.
In KRIBHCO, there is Personnel & Administration Department to carryout the

functions of Human Resource Management. Here, the term Personnel & Administrations
refers to the administration of personnel.
The objective of this department is as below:
(1) To ensure satisfaction to the workers so that they are freely ready to work.
(2) To attain maximum individual development.
(3) To improve efficiency of the human resources.
Realizing that employees are its greatest assets, KRIBHCO from its very inception
has been striving to build up a sound & transparent organizational culture to inclusive to
sense of belonging among its employees.
Personnel & Administration department mainly deal with:
• Manpower Need – Why? Where? How? And When?

• Recruitment & Establishment functions
• Performance Appraisal
• Welfare & other services

• Loans & Claims
Human Resource Department
‘KRIBHCO’ considers its human resources as a the greatest assets. It invests

time and money to develop its employees through various HRD mechanisms. Regular in-
house training programs sponsorship to outside training institution, brainstorming, problem
solving workshops etc. are conducted for employees at all level.
Structure:-
Chief Manager (N.Bhatta)
Senior Manager (D.K Mandal)
Manager (H.D Desai)
Deputy Manager (P.T Solanki)
Sr. Assistant Manager (S.N Purabia)
Assistant Manager (M.N Patel)
Junior Manager (K.S Mohanan)
Average Employee Turnover rate--- NIL

Average Employee Absenteeism rate---NIL

• Performance
Training and Development appraisal
Mechanism • Proper
Feedback and counseling
communicatio
Educational opportunities n
Rewards and encouragement • In house
journals
H
R Induction training on the Orientation
D Methodology job training refresher program
In house training
courses
Evaluation and
feedback
Process simulator
information
Facilities
Gallery conference room
audio – visual aids Technical library
Lecture hall
auditorium
HR Planning:-
HR planning includes estimation of how many qualified people are necessary to

carry out the assigned activities, how many people will be available and what if anything,
must be done to ensure that personnel supply equals personnel demand at appropriate point in
future. It is the foundation for all personnel functions.
In KRIBHCO, forecast of manpower is based on expected promotion and

retirement. In KRIBHCO, “bottom-up” approach is used i.e. manager or department head
submit their departmental proposal to Establishment Section, which is forwarded to corporate
office.

Objectives of HRD at KRIBHCO:-
• Maximize department contribution to KRIBHCO.

• To increase KRIBHCO` s foundation through increasing in employees contribution.
• Provide an opening of self- expression and self-development in congruence with
organization.
• Provide need-based training to all employees of the organization.
• Plan the right working condition for employee’s progress.
• Plan and design appropriate training strategies to build competencies of employees
• Ensure growth and development for all.
Personnel & Administration:-
Personnel Department is that part of management, which is concerned with

people at work 7 their relationship within the organization. The term personnel
management refers to the management of personnel in the organization of any company
to achieve the predetermined goals. The duty of the personnel manager is to look after the
personnel department and various functions of the personnel like recruitment, selection,
promotion, transfer, etc.
As there is so much important of the heart in the human being so much as

there is also importance of person in any organization. Person working in the organization
are considered as the blood and heart of the organization. The success of unit mainly
depends upon the personnel function in any organization. As in the organization there
must be maintain good relation between personnel of different department. Personnel
manager plays very important role between employers and employees.
The objective of this department is as below:
1) To ensure satisfaction to the workers so that they are freely ready to work.
2) To attain maximum individual development.
3) To improve efficiency of the human resources.
Personnel & Administration department is divided into two major departments.

1) Personnel Department
2) Administration Department

The personnel department is further sub divided into four sub-division:
a) Recruitment and Establishment cell
b) Tine office and Wage & Salary Administration cell
c) Industrial Relations cell
d) Contract cell
The Administration Department look after the following matters:
a) Canteen
b) Transportation
c) Township
d) Horticulture
e) Guest house/ temple/ garden maintenance etc
Grade system in KRIBHCO plant site HAZIRA
A Managing Director
B Director [Operations/ Marketing/ finance]
B1 Executive Director
C senior general manager/ General Manager
D Joint general manager / Chief Manager
E senior manager/ CMO
F Manager
F1 Deputy Manager/ senior M.O.

G Sr. Assistant manager/ Sr. area manager/ Sr. engineer/ foreman
G1 Assistant manager/ Engineer/ Assistant foreman

G2 Assistant Engineer/ Assistant manager
H Joint manager/ P.S.

Function of Personnel & Administration Department
TIME OFFICE : Time office Management, Attendance & Leave,

Wage Administration, Leaves travel Concession,
Marketing Bus Coupons.
LOANS & CLAMS : HBL, Conveyance Loan, Salary Advance, Medical
Bills, Accident Insurance Claims.
ESTABLISHMENT : Recruitment, Placement, Confirmation, Appraisal
Report, DPC, Personnel Records, Employment
Returns, Data Bank.
TRAINING & : Nominating In-House/Outside raining, Learning
DEVELOPMENT Group, Vocational Trainees.
PLANT : Horticulture work in KRIBHCO & HAEP Plants

HORTICULTURE
FURNITURE BUDGET : Procurement & Maintenance of office furniture &
INTERNAL AUDIT Equipment, Physical Verification of Furniture.
BUDGET & INTERNAL : Preparation of Budget and matters related to it,
AUDIT, VIGILANCE Internal Audit coordination & replies, Vigilance
MATTERS matters.
RURAL DVELOPMENT : RURAL Development, Release of Advertisement &
PUBLIC RELATIPON Processing of Bills, Publishing of KRIBHCO
DARPAN/ Kribhco Today Publicity/ Liaison with
Press, Photography & Videography, Periodicals &
Newspapers.
HOUSE KEEPING & : House keeping and upkeep of Administrative
DESPATCH Block, Dispatch Section, Courier Service,
Attendant Service to various Sections.
INDUSTRIAL : Industrial Relation, Union & Association matters,
RELATIONS Collective Bargaining, Management of Industrial
canteen, Review of Personnel policies, Wage
Revision matters, Incentive payment, Sport &
Games, Cooperative Stores, Unit Level Class,
Management of Class, Management of Schools,
Welfare matters.
IMPLEMENTATION OF : Office Language Implementation
HINDI
GUEST HOUSE : Management of Guest House-I & GH-II, training
LIVERIES LOCAL Hostel, Procurement of liveries, Gift &
PURCHSE LAN complimentary, local Purchase, Department Imp
PRINTING OF rest, Printing of Stationary & Visiting Cards etc.
STATIONERY
TRANSPORTATION : Hiring of Cars/ uses, staff Cars/ Buses, excursion
trips, Rail/Air Booking, Duplication Section.
ESTABLISHMENT : Township Horticulture, Maintenance of Public
Building, House-keeping of Township House,
Community Hall, Ladies Club, Celebration of
Festivals, Township House & Shop Allotment,
Hospital & security Administration, Fish culture,
Horticulture of township

CONTRACT CELL : Compliance of labour laws & contract Labour
LEGAL CELL [R&A] Act, Verification & Witnessing
Disbursement of Wages to Contract Labour,
Matters related to HAIA, SUDA& Payment Legal
Cases, Disciplinary matters.
PF & TERMINAL : DBF & terminal Benefits, Joint Management

BENEFITS JMC Council, Post Retirement Medical Assistance, Pf
trust, Suggestion Scheme.
COMPUTERIZATION – : LAN Implementation in P&A Department,
NODAL OFFOCER computerization & other matters related to
Computer.
HAEP : Day to Day Administration matters of HAEP
ADMINISTRATION
HOSPITAL : Day to Day Administration matters of Hospital
ADMINISTRATION
ESTABHLISHMENT
Organizations are dynamic, organic ongoing systems consisting of many

individual. A successful management focuses on the individual and then attempts to relate the
individual to the group and different groups to the organization. Individuals join organization
to fulfill their goal and aspirations within the framework of the organization. It is one of the
major functions of management to convert the goals and aspirations of the individuals into the
goals of the organization.
KRIBHCO in the formative stages inherited miles and practices from IFFCO.
Subsequently, need was felt to streamline and standardized the existing practices and to
envolve R&P guidelines for KRIBHCO.
In line with the above, R&P guideline were formed and revised from time to
time. There are only guideline for the management and do not contain the detailed procedure
to implement the same.
Salient feature of the guidelines are given below:
General:-
Vacant position in organization chart shall not automatically be treated as
operative to be filled by recruitment or promotion. The positions shown in the chart are
estimated, keeping in view current and future requirement and are to be operated only when it
becomes necessary to operate them with the approval of competent authority.
Recruitment from outside agencies shall be made when , in the opinion of the
management suitable persons are not available within the organization.

INCREMENT
Employees shall be entitled to annual increment in accordance with the
increment rates specified in various pay scales.
The first increment shall be awarded to KRIBHCO employees on initial
appointment subject to satisfactory completion of probation period in the following manner:
FOR EMPLOYEES JOINING BETWEEN DATE OF INCREMENT

a) 1st January to 30th June 1st January
b) 1st July to 31st December 1st July
In case of promotion to the next higher grade, the date of increment of an employee
arrived at on his initial appointment in KRIBHCO shall remain unaltered throughout his
service career in KRIBHCO unless otherwise specifically ordered by the Management to take
care of the anomaly in pay fixation and Leave Without Pay/ Absence from Duty.
If an employee remain absent from duty on account of leave Without Pay,
Unauthorized Absence, the date of award of next annual increment shall be postponed by the
corresponding period for which he remained on LWP/ unauthorized absence.
PROMOTION
Promotion means an improvement in pay, prestige, position and
responsibilities of an employee within organization.
In KRIBHCO, promotion is based on seniority cum merit basis. The
Establishment Section prepares the Eligibility List of employees for promotion twice in a
year on May 0 and November o1 of each year. Up to H/ H1 grade, promotion are done at
plant level by constituting committee which conducts personal interview to assess the
suitability of the candidate.
1. Preparation of list of eligible employees for promotion as per R&B Guidelines.
2. Annual Appraisal report of eligible employees to be got filled by the concerned
officers.
3. Competent Authority’s approval for constitution of the Department Promotion.
4. Bio-data of the eligible for constitution of the Department promotion Committee.
5. Bio-data of the eligible employees to be prepared for the DPC.

6. Communication to the Chairman of the committee for fixing the date of DPC.
Communication to the employees for attending the DPC.
7. Making physical arrangements to the interview.
8. Preparation of selection proceedings.
9. Approval of the competent authority to be obtained for the selection proceedings.
10. Vigilance clearance to be obtained giving the promotion order.
11. Promotion ordered.
For promotion of G grade and above, Establishment Section put before the
Committee the Bio-data of eligible employee, annual appraisal report with rating and
signature of each member of the committee and forwards it to Managing Directors’ approval.
WAGE & SALARY ADMINISTRATION

Wage & Salary Administration refers to the establishment and implementation
of sound policies and practices of employee compensation. Generally, the remuneration paid
to the workers known as wage while the payment made to office staff known as salary.
Wage is the remuneration paid for service of labour in production, skilled and
unskilled person or employer, worker technicians. Salary refers to the monthly paid to clerical
administrative and professional employees.
A sound wage & salary administration tries to achieve these objectives:
a) For employees:
• Employees are paid according to requirement of their job. This eliminates
inequalities.
• The changes of favoritism are greatly minimized.
• Employee’s morale & motivation are increased because wage program can be
explained & based upon facts.
b) To Employer:
• A wage & salary Administration reduces the likelihood of friction &
grievance over wage inequities.
• It enhances an employee’s morale & motivation because adequate and
fairly administered wage are basic to his wants and needs.
• It attracts qualified employees ensuring an adequate payment for all the
jobs.

The information about employees, presentation and absence provided by the
tine keeping system is directly linked with computer section. Then after pay slip is preferred
with the Master-Date. Finally after all additions and deductions, pay is paid to the employees.
The productivity linked bonus and incentive schemes also introduced by the KRIBHCO. The
employees of KRIBHCO have been paid bonus linked with productivity i.e. annual capacity
utilization of the plant and materials.
In KRIBHCO calculation of wage and salary is done by establishment section
in Finance & Account Department. In this section, wage and salary is calculated on
computers. It is the responsibility of personnel department which has to handle wages and
salary distribution together with account department.
Salary are payable on the last but on working day of every month. In this
organization for the wage and salary administration, first prepared the Master-Date under the
personnel department. In this Master-Date there are various column like grade, employee
number, pay scale, code, P.P. Account, number, name, basic-pay, living-pay, house rent,
over-time pay, medical allowance and other facilities rate etc.
Demotion:-
Demotion in any organization is very rare. The same is the case in KRIBHCO.
Demotion in the company occurs only in case of major indiscipline. This action is taken after
much inspection of the fault made. A special committee is formed for the inspection of the
whole matter and then finally a report in generated whether the employee is found guilty or
innocent. It even involves legal and police formalities many times. Provisions of this
indiscipline are available under certified standing order. Some of the ‘Major Indiscipline’ is
as follows:
1. Breach or habitual breach of the provisions provided in the service rules framed or
instructions or orders issued by the management from time to time and in force.
2. Insubordination or refusal to obey.
3. Violation of any condition or term contract or employment.
4. Any big loss suffered by the company due to any employee’s disregard of operation or
carelessness in operation or maintenance.
5. Acting in a manner prejudicial to the interest or reputation of the organization.
6. International non-submission/ late submission of immovable property return in the
manner prescribe rules of complete account of movable or immovable properties

acquired by the employee or concealment of any material fact relating to acquisition
of such properties.
Discipline & conduct:-
1. An employee shall, at all times, conduct himself soberly and temperately and show
proper respect and civility to his superior and persons having any official dealings
with KROBHCO.
2. An employee shall serve honestly and faithfully and shall use his utmost endeavors to
promote the interest of the organization.
3. All employees shall be full time employees of KRIBHCO and will devote themselves
exclusively to the duties assigned to them from time to time when required to do.
4. During the period of employment with Kribhco, no employee shall hold any office of
profit outside the organization or engage himself in any other service, business and
trade.
5. No employee shall take with him for his own personal use, any photograph, sketches,
etc. regarding any business or activity of the organization, building, plant process,
work etc.
6. No employee shall use organization’s name or properties etc. for his personal use or
benefits.
7. An employee shall keep himself up to date with the knowledge, skill, information,
ability etc.
WELFARE FACILITIES IN KRIBHCO:-
(I) Housing:-
Townships facility to the extend of 99% of requirement of employees is
provided by KRIBHCO. KRIBHCO provided semi furnished accommodation with proper
housekeeping, security arrangements, repair and maintenance of houses in Township, cable
connection, electrical maintenance in the township for its employees. Park facilities with
equipments for playing of children, sitting arrangement in the garden, lawn maintenance,
plantation and maintenance of trees, maintenance of flower plants for beautification are also
being provided. Shopping canters in the township are provided to cater to the need and

requirement of residents of the township. Post Office, Bank and PCO facility are provided in
the township. Township of KRIBHCO, in overall provides facilities for modern life.
(II) Educational Facilities:-

KRIBHCO has provided two schools namely Sunflower School in Gujarati
Medium and Central School in Hindi / English medium. Theses two school are situated inside
the township and are having facilities up to 12th standard. Both pre-primary and pre-nursery
educational facilities are also provided in township. Apart from this, KRIBHCO provides
transport facilities and arrangement for the children of township to avail educational facilities
available outside township i.e. in Surat city or in other nearby areas. Coaching classes and
Entrance examination preparatory classes are also run by KRIBHCO provides grants to
Officers Club and Staff Club to maintain Library and Reading Room in the township.
Officers Club and Staff Club arrange Computer-learning classes.
(III) Medical Facilities:-

KRIBHCO provides free medical facilities to its employees, their spouses,
dependent members of his family, be eligible for reimbursement of:
1. Fees paid by him to an authorized medical attendant for consultation whether at is

cleaning or at he employee’s residence.
2. Fees paid for injection, dressing or minor surgery,
3. Fees paid for X-ray and pathological test etc.
4. Expenses of treatment for chronic or any specialized treatment or incase of
hospitalization, at actual.
5. Reimbursement of medical expenses for routine treatment Rs. 4500/- per annum
(2250/- for Township Residents)
In addition to above KRIBHCO is having its own hospital having both in-
patient and outpatient facility. Specialists from Reputed hospitals / practitioner visit
KRIBHCO visit KRIBHCO Hospital for Township Residents. In case of specialized and
chronic diseases cases are referred from KRIBHCO hospital to Empanelled Doctor/Hospital
in Surat or outside Surat.
(V) Other welfare Facilities:-

a. Employees Cooperative Society is there which is managing distribution of
Milk, LPG Gas, dealership, Provision Stores and credit facilities.
b. “Ashirvad” – Old age home for Township residents.
c. Workers Education Scheme is prevalent in KRIBHCO.
7. Marketing Department
Introduction: -
Marketing is the process of planning & executing the conception, pricing,
promotion and distribution of ideas, goods and services to create exchanges that satisfy
individual and organization goals.
In simple sense marketing is concerned with selling. But now a days the
concept has enlarged its meaning. We know that a product is provided with the aim of sale.
Marketing management covers marketing research, new product development and so many
other important functions.
The important responsibilities of the marketing departments are: -
• Volume sales: - total production to be sold in each season.
• Price realization: - selling price at level to the consumer (farmer) at
MRP.
• Cost of marketing: - discounts, credit, distribution expenses, traveling
and communication &warehousing expenses, advertising& sales
promotion expenses, etc should be minimal.
In KRIBHCO marketing management has the task of regulation of level,
liming and character of demand in a way that will help the organization to achieve its

objectives. The aims of producer totally depend on marketing, without marketing not a single
unit can run.
“KRIBHCO” marketing philosophy aims not to sell fertilizer but to help
farmers by education them the modern farming technology and the use of fertilizer for
optimum crop out. KRIBHCO sold urea mainly through co-operative societies. KRIBHCO
has been making celebrate arrangements for dispatch of urea from plant site to various
destinations as per requirement by optimum use of rail & road.
In KRIBHCO marketing is done by head office at Delhi. KRIBHCO has
nationwide marketing network and has covered all major stated in the countries. Presently it
is operating in the Uttar Pradesh, Himachal Pradesh, Delhi, Madhya Pradesh, Maharastra,
Karnataka, Tamilnadu, Punjab, Haryana, Gujarat, Rajasthan, Andhra Pradesh, West Bengal
and Bihar. (Chart) &marketing act ivies.
KRIBHCO Head offices
Central marketing offices co-operatives offices
State mkting offices state mkting offices state mkting offices
Area mkting offices Area mkting offices Area mkting offices
Field representative field representative field representative
Marketing Activities: -
1. Farmers Benefits programmes.

2. Sanket Haran bima yojana.
3. Marketing of BVFCL urea,

4. ISO 90001-2000
5. Seed multiplication programme
6. Gramin vikas trust. (Rural Development Trust)
Product mix: -
KRIBHCO, manufacturing nitrogenous fertilizer and allied product viz. urea,

Ammonia, Bio-fertilizer, 30 mega watt power plant operation & maintained of heavy water
plant of department of atomic energy, But KRIBHCO is having urea as its main product.
They use Ammonia as raw material &main input of urea& sale the excess production to other
non-fertilizer industries.
Product mix of KRIBHCO
Urea Bio-fertilizer Seeds
-Wheat
I Azotobacter -Paddy
II Azospirillum -Pulses
III Rhizobium 1. Gram
IV phosphorus solubilising 2. Pea
Miro-o rganism (P S M) 3. Arthan
4. Urd
5. Lentils
6. Moog-
Oil- seeds
1. Mustand
2. Soya bean
3. Castors

Kribhco urea production and sales
Year Production (Lack MT) Sales (Lack MT)

2003-04 16.31 15.72
2004-05 16.94 17.21
2005-06 16.03 16.38
2006-07 17.73 18.37
2007-08 18.06 17.37
KRIBHCO UREA PRODUCTION & SALES
19
18.5
18
17.5
LACK MT
17
Production
16.5
Sales
16
15.5
15
14.5
14
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS
Kribhco bio-fertilizer production and sales
Production
Year (MT) sales(MT)
2003-04 384 354
2004-05 389 373
2005-06 296 351
2006-07 603 516
2007-08 560 611

KRIBHCOBio fertilizer Production&Sales
700
600
500
400 Production (MT)
300 sales(MT)
200
100
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS
Kribhco ammonia production
2003-04 9.63
2004-05 9.9
2005-06 9.92
2006-07 11.17
2007-08 10.92
KRIBHCO Ammonia Production
11.5
11
10.5
10
9.5 Production
9
8.5
2003-04 2004-05 2005-06 2006-07 2007-08
Years
Kribhco seeds production and sales

Production (Lack
Year -Qtls) Sales (Lack Qtls)
2003-04 1.04 0.76
2004-05 0.84 1.1
2005-06 1.08 1.06
2006-07 1.21 1.11
2007-08 1.54 1.49

KRIBHCO Seeds Production & Sales
1.6
1.4
1.2
1
0.8
Production (Lack -Qtls)
0.6
Sales (Lack Qtls)
0.4
0.2
0
2003-04 2004-05 2005-06 2006-07 2007-08
Years
Mode of Distribution: -
Proper planning and close monitoring enabled the society to dispatch it urea as per
ECA allocation from plant site to various destinations by optimal use of rail and road mix.
1. Railway: - major part of fertilizer almost 79% is transported through railway line to
the states like Maharastra, Madhya Pradesh, Punjab, Haryana and Uttar Pradesh.
2. Roadways: - the dispatch of fertilizer through roadway is limited to the state
like Gujarat, Rajasthan, Madhya Pradesh, and many other states
is round around 21%.
Road
19%
Rail
81%
Rail Road
Details of competitors
KRIBHCO generally dose not face any stiff competition as the government
decides the major parts of its marketing activities. Chemicals and fertilizer ministry of India
decides the ratio of sales of fertilizer and chemical in the industry. Generally competition
exists in free trade. Some of the competitors of KRIBHCO are:

Sr. no Name Name
1 GNFC Gujarat Narmada
Fertilizer Corporation
2 GSFC Gujarat State Fertilizer
Corporation
3 IFFCO Indian farmer Fertilizer
Corporation
4 RCF Rashtriya Chemical
Fertilizer
5 NFL National fertilizer Ltd
6 HFC Hindustan Fertilizer
Corporation
7 FCL Fertilizer Corporation of
India
8 Nagarjuna -
9 Chambal -
Sales promotions: -
In modern world there is very strict competition so for stand in the market,
strongly sales promotion program is very important. The main aim of sales promotion is to
increase the sales and increase the number of customer. KRIBHCO’ s promotional Programs
are carried to farmers field through technically qualified and trained field force under the
highly qualified agronomists and managers the major promotional activities consists of the
following.
1. Block Demonstration
2. Co-operative conference
3. Krishak Bharti Seva Kendra
4. Crop seminars
5. RGB Members visits
6. Farmer benefits programs.
1. Block Demonstration:-
In these demonstrations, latest agricultural production technology was
demonstrated visa-a visa local practice. The review demonstration were organized on
different crops on approximately 100 hectares of land and a large number of farmers
visited this plots various other field Programme like farmers meetings etc were organized
at the site of these demonstration. Block demonstration was conducted in the state of U.P,
M.P, Haryana, Punjab & Gujarat.

1. Co-operative Conference:-
All the product of KRIBHCO marketed by the co-operative societies, so their
mangers and salesmen are trained on better business, fertilizer and other agro- input
storage, soil testing etc. A group of 100 participants is trained in each co-operative
conference sufficient quality of crop folders and other technical material, provided to each
participant for further distribution to farmers through co-operative societies.
2. Krishak Bharti Seva Kendra
The society has established 10 Kendra in the state Haryana and Punjab. These
are successfully in operation and through these centers a package of inputs and services is
being provided to farmer’s right at their doorsteps. The society is already in process of
establishing 27 more seva Kendra’s in state of U.P, M.P, Rajasthan, Punjab, and
Maharastra.
4. Crops seminars
The society organized one crop seminar with collaboration of IIFCO in state
of Maharastra. In the seminar, experts I the field of agriculture were invited for expressing
their view points.
1. RGB members visit

Representative General Body (RGB) delegates are the representatives of
Kribhco member society. They act as KRIBHCO spokesperson art various platforms
throughout the country. It is in the interest of KRIBHCO to provide maximum
information about its programmes to its members. Short study visit of 1-3 days duration
in each term are arranged for these RGB members at Hazira plant or other project site.
Advertisement
Consumer is the king in the modern market. Without consumer the task of
business is incomplete. So consumer must know about the product of company. Now a
day, advertisement is the best way to introduce the product to consumer.
KRIBHCO’s advertising mainly depends upon its customer & their
customers are farmers and they are mostly illiterate. So, media gives advertisement in
regional language, but in present time farmers are also develop so advertising strategy
also taken into consideration. Company gives its advertisement in local newspapers also

like Gujarat samachar, loksata, and jansatta, sandesh etc T.V; Radio magazines are also
taken as a media for these purpose.
Different language like Hindi, Punjabi, Marathi and Gujarati over various
stations of all over India radio. For the popularity of KRIBHCO large no. Of holdings &
roadside boards are installed on highway, bus pan ness, wall paintings and glow sing at
airports have also been installed for above purposes. Advertisements have been realized
from time to time in the dealing newspapers, and other periodical, special supplements
were brought in English, Hindi and regional languages.
8. TRANSPORTATION DEPARTMENT

Transportation
Thus, customers are the aim of any business. The most important task of any
business unit or organization is to fulfill customers’ needs by providing them product or
service on right time, price and place. Customer satisfaction is the success of any
organization. For that material should be, reach on it is desired Place on right time and this is
possible only by any Transportation facility. Transportation is link between customer &
organization. Transportation is a most important function of any organization.
In KRIBHCO, Transportation alone accounts approximately 80% of the total

marketing cost. Hence, it requires utmost attention, careful planning and judicious approach
in finalization of transport contracts. In order to bring down the marketing expanses,
KRIBHCO is transporting its products (urea) by rail and road. Rail dispatches on an average
contributes 75% while road dispatches are 25% of the total urea produced and dispatched
from plant.

The Road Transportation from plant is presently undertaken for the states of
Gujarat, Maharashtra, and M.P & Rajasthan. These states fall in economy zone where road
transportation is cheaper as compared to rail. Dispatch instructions (DI’s) are given only to
such destinations where transportation by road is comparatively cheaper than rail. Hence,
annual contracts for road transportation for above states are performed.
The cheapest transportation mode is selected for dispatching the material to

the respective places. The production of the plant is more than 100%. For commercial sale the
price is Rs.7200 per metric ton, and for agricultural purposes its Rs.4800 which is subsidized
and sales tax free rate. There are 2 Silo’s where the materials can be stocked for 1 month. In
Gujarat on average, an everyday 80-ton is dispatched. The economic zones are Maharashtra,
MP, and Rajasthan, which touch the boundary of Gujarat. The documentation should reach
the consignee before the consignment reaches the consignee. The document which is of prior
importance is RR (railway receipt-railway), BL (bill of lading-Ship), AB (Airway bill-Air),
and LR (Lorry receipt-Road).
The product is sold at fixes rate throughout India. There are two types
of transportation subsidy and the other one is gives by FICC. Government fixes the retention
price, which is cost of production given by the government. The production is controlled
according to FCO standards that are fertilizer control order.
Major players in Fertilizer Industry in Gujarat
1) KRIBHCO
2) IFFCO (KALOL)
3) IFFCO (KANDLA)
4) GUJARAT NARMADA FERTILIZERS CO. LTD, (BHARUCH)
5) GUJARAT STATE FERTILIZER CO. LTD., (VADODARA)
9. PRODUCTION DEPARTMENT

Production Department
Production is the process by which, raw materials and other inputs are converted into
finished products. It involves many functions such as manufacturing process, product and
process design, plant layout, inventory control, plant maintenance, etc. KRIBHCO has the
Production Department in the Plant Premises and it works in harmony with the Marketing
Department and Transportation Department as well as all other departments. It also includes
Stores and Purchase Department which take care of all the materials used in the production
process.

Production Performance:-
Ammonia Urea
Year Qty Year Qty
(in lac MT) (in lac
MT)
1998-1999 10.50 1998-1999 17.22
1999-2000 9.86 1999-2000 15.40
2000-2001 10.80 2000-2001 17.72
2001-2002 9.39 2001-2002 15.17
2002-2003 9.47 2002-2003 15.57
2003-2004 9.63 2003-2004 16.31
2004-2005 9.90 2004-2005 16.94
2005-2006 9.92 2005-2006 16.03
2006-2007 11.17 2006-2007 17.73
2007-2008 10.92 2007-2008 18.06
PLANT DETAIL:-

Plant-1 Plant-2
Ammonia 1520 MTPD 3040 MTPD
Urea 1310 MTPD 5240 MTPD
Bio-fertilizer - - 250 MTPA
(Per annum)
STEAM & POWER GENERATION

The steam generation plant supplied by FOSTER WHEEL POWER, UK
consist of 3 boilers (2 running & 1 stand by) capable of producing 275 MT steam per boiler
per hour at 105 ata pressure and 510°C to supply steam to the process plant and power
generation. The boilers are of single drum Monowall Balanced draft type, complete with all
accessories and mountings. The boilers can fired to 100% MCR with gas. All three boilers are
connected to a single common header and from their distribution of steam to different use
points.
In power plant with help of boiler, heater, deaerator and other instrument steam
is generated. From this steam about 65% is used in production plant and about 35% is used
for power generation. Power is generated with the help of two turbo generators.
The power plant consists of two extractions cum condensing type T.G. sets
each of 15 MW capacities, supplied by BHEL. Out of this KRIBHCO require 25 MW power
and remaining supplied to G.E.B.
OFF SIDE PLANT

“OFFSITES” is the “Off the Site” plant. All those plants, which are not within battery
limit of main process plants, are called Offsites facilities. All the supporting plants of Urea &
Ammonia plants are called offsites plants.
The major offsite plants at KIBHCO Hazira Complex are:
1. Raw Water Canal, Kakarapar Pump House & Reservoirs

2. Water Pretreatment Plant
3. D. M. Plant
4. Cooling Towers
5. Inert Gas Plant
6. Air Compressor House
7. Ammonia Storage & Handling
8. Effluent Treatment & Disposal System
9. Drinking Water Supply System
10. Sewage Treatment Plant
11. Emergency Power Generator Sets
12. Centralized Chemical Storage & Handling
10. MATERIAL DEPARTMENT

MATERIAL DEPARTMENT
PURCHASE STORES
RECEIPT SECTION CUSTODY SECTION DISPOSAL SECTION
Spare Section Scrap Section
11. Purchase Department
Purchasing is one of the basic functions of Inventory Management and forms a major
part of it. W hat to buy, when to buy, where it buy, how much to buy, how much to pay and how much
to stock are the fundamental of the Inventory control. It also involves creative functions such as
development of new resources, introducing new materials and sources in the undertaking etc. It needs
considerable expertise not only negotiating but also in the techniques of competition and studying of
economic trends in respect of materials to be purchased in large quantity. Every rupee saved by the
. at all
good purchasing goes directly in to the profit for the simple reason is that it is not spent
Objectives of Purchasing:-

The objective of Inventory purchasing can be enumerated as follows:
o To Maintain Continuity of production,

o To contribute to the competitiveness of the end product,
o To contribute towards higher productivity,
o To buy for the best ultimate value not necessarily at the lowest initial price,
o To contribute towards standardization, variety reduction and value analysis programs,
o To increase profits through effectiveness in purchase contract.
Existing Purchase Procedure in KRIBHCO:-

To study the existing purchase system, the purchase procedure followed by the purchase
department have been analyzed and evaluated on the basis of observation and discussions with
concerned personnel of KRIBHCO is as follows:
1. Responsibilities of the purchase functions are,

The purchase department issues the material manager purchase orders/ contract after the
approval of the competent authority. The purchase function in other offices (like head office at NEW
DELHI and its various branch offices) is headed by the single officer designated for that purpose. The
indenters from various departments are issuing inquiries, inviting bids, entering into correspondence
or negotiation with vendors / contractors. All requisition for purpose is duly processed in accordance
with procedure laid down, which is forwarded to purchase department for necessary action.
2. Registration / Selection of Suitable Vender:

Purchase department is responsible for developing a list of approved vendors for various
types of materials and service as per procedure. An advertisement is issued in all the leading news
papers inviting applications in the prescribed Performa for registration of suppliers and contractors
for listing out of various types of purchase and service that are likely to be made during the next three
to five years. The application received are scrutinized by a committee consisting of a representative
from technical, finance and purchase department nominated by General Manager and ascertained the
resources, capacity and quality of workmanship of the vendor. The committee also calls the vendors
and contractors for personnel discussion and clarifies the applications and obtains such other
information as may be considered necessary by the committee.

The list of approved vendors and contractors as to be up dated at leastfive
every
years by
issuing a press advertisement.
3. Requisition to Purchase:-
The indenters from various departments are raising a requisition called the Material Purchase
Requisition (MPR) for purchase in the prescribed Performa. It should be ensured that the requisition
for purchase is completed in all respect with regard to.
(a) Description of the material / equipment / scope of work.
(b) Material of construction / specification.
(c) Temperature / pressure / standard if anywhere applicable.
(d) Quality and chit of measurement.
(e) Date when delivery of material / service is required.
(f) Estimated value and budget head.
(g) W hether item is a stock item / non - stock item and fast moving / slow moving.
The requisition for purchase of stock items is raised by the stores department after the quality
in stock-.has reached the re-order level as determined for the respective items. Such requisition
amongst other-particular also indicates the minimum, maximum and reorder level, the date on which
last supply was received and average consumption per month since last purchase.
4. Purchase Function after Receipt of M PR:-

To enter requisition in indent register, the requisitions are checked for specification, quality,
code numbers, budget heads etc. This number is entered on all the four copies of indent, one copy is
for action by purchase department, second copy is sent to Finance department, third copy is returned
to indenter, and fourth copy is retained in the purchase department's master file.
5. Floating Inquiries:
Purchase department issue inquires to approved vendor or press advertisement depending

upon value of purchase which is followed as per the following guideline.

Estimated value of purchase Minimum of vendors to whomMinimum No. of bids
order / work order/contract inquiry to be issued to be obtained.
UptoRs.20,00,000/- 5 3
Exceeding Rs 20 ,00,000/` All suppliers on the approved 3
list
6. Purchase Order / Work Order:-

The recommendation of the tender committee is routed though the finance department to
enable them to record the value of commitment in the budget records confirms availability of funds
under the approved budget and also record financial concurrence.
As soon as the recommendation of tender committee is approved by competent authority, the

purchase department issues purchase/work order to the recommended successful bidder.
The purchase department is responsible for following up of the purchase order/contracts with
vendors and transporters until the material is reached and accepted at the plant/stores.
On receipt of materials at plant site/stores, the stores department will fill up the store receipt
voucher and arrange the inspection from the inspection department or indenters, as the case may be
necessary.
12. STORE DEPARTMENT

OBJECTIVE:-
To render materials service to the organization by receiving, issuing the

materials, preserving the materials which in custody, disposing the scrap/surplus materials.

FUNCTION:
• To receive all types (i.e. stock & non stock) materials, to arrange inspection of
materials.
• To keep materials safe custody, issue of the materials to user department.
• To initiate action for procurement of stock items, custody & issue to user
departments.
• Raising indent for hiring services of contractor for material handling,

transportation, grass cutting etc.
STORE DEPARTMENT IS ALSO DIVIDED INTO THREE SECTIONS:
• RECEIPT SECTION
• CUSTODY SECTION
• DISPOSALSECTION
The stores have about 64663 Nos. of items out of which about 1800 items are stock
items. Stores initiate the procurement action of stock items. The store is spread over in 02
lakhs sq. Mtr. Of space out of which 12000 sq. Mtr. Is covered area. Normal working hours
of stores is general shift hours. However, in case of shut down, emergency service of stores is
made available as by the user departments.
STORES
FLOW DIAGRAM

RECEIVING RETURN OF “J” FORM FOR
MATERIAL REJECTED CONTRACT OF
FROM MATERIALS MATERIALS
VENDORS & TO VENDORS HANDLING &
OTHER UNITS. & DESPATCH TRANSPORTA
PROV. OF TION TO
INSURANCE MATERIALS PURCHASE
CLAIMS, FOR REPAIR DEPARTMENT
RECEIPT
SECTION
RETURN OF  INSPECTION OF MPR FOR

MATERIAL MATERIALS STOCK
THROUGH  SRV ITEM TO
SRV  ACCEPTED MATERIALS PURCHASE
CUSTODY ISSUE OF
SECTION MATERIALSTO
USER DEPT.
SCRAP FROM PLANT HANDLING OVER

SURPLUS PRESERVATION
MATERIALS FOR OF MATERIALS
DISPOSAL TO
DISPOSAL
DEL. OF MATERIALS
SOLD TO SUCCESSFUL
BIDDERS
(THROUGH MSTC)
PROCEDURE FOR RECONCILIATION OF INVENTORY STATUS
It is a system for identifying the unwanted inventory and the deviation in physical stocks for
reconciliation of the stock and maintaining the accuracy in “management reporting system”
for inventory status.

All items in stocks are to be physically verified once in a year so that necessary
adjustments can be made in stocks after obtaining necessary approvals from competent
authority.
PROCEDURE:-
 Every item will be verified under perpetual type of “inventory verification system”
once in a year.
 The finance or their representative of nominated hired agency will prepare the group
wise list of the items.
 On hand quantity against the individual item will be noted with their respective
location.
 The physical stock is then verified with the representative of stores dep’t.
 The deviation will be checked, scrutinized and sorted out.
 The final list of unsettled item with deviation in quantity will be prepared.
 Management approval for write-off / write on the stock is obtained.
 Stock is adjusted through a voucher- SAV
13. FINANCE DEPARTMENT

INTRODUCTION OF FINANCE:-
Finance is the blood of the business. “Finance Management is that managerial activity
which is concerned with the planning and controlling of the firms financial resources.”
Finance management is the most important activity of the firm and it means that the firm
secures capital, if needs and employees it.
Finance management is mainly concerned with raising fund in the suitable

manner using the funds as profitably as possible, planning future operations and controlling
current performances and future developments through financial accounting, cost accounting,
budgeting and other functions.
Financial Planning
Planning is the design of a desired future state of an entity and of the effective
way of bringing it about. Also it involves the determination of the future causes or action for
accomplishing the objective of the enterprise.
Financial planning is essentially concerned with economical procurement &

profitable use of funds. It is used for determined by realistic investment decisions. Financial
planning should estimate the resources that will be required to carry out the operation of the

firm and determine how for these resources can be generated by the firm itself and how far
they will have to be attained externally.
KRIBHCO has a fixed policy for financial planning and it depends upon the
requirements of the fund whichever they use. Then a report is prepared by the finance
manager including total requirements. He collects the information and prepares the report and
submits it to the Managing Director.
Capitalization:-
Capitalization means total capital of the firm that introduced in business to carryout
commercial activity. Capitalization concerns with the decision regarding the total
requirements of long term funds of the firms. Capitalization means total amount of
company’s capital or total of its capital stock.
In KRIBHCO, the shares are very high and it has large amount of reserves and
surplus.
FINANCING PATTERN
Original Final
Rs. Cr US$ million Rs. Cr US$ million
EQUITY
Government of India 344 202.59 328 193.17
Cooperative Societies 22 12.96 20 11.78
IFFCO 105 61.84 97 57.13
Sub Total 471 277.39 445 262.08
LOAN
Government of India 342.70 201.82 342.50 201.71
Internal Generation 15 8.83 ---- ----
IDBI & Other FInst. 129 75.97 102.50 60.36

Sub Total 486.70 286.62 445 262.07
IFFCO
22%
Cooperative
Societies
4%
Government of
India
74%
Government of India Cooperative Societies IFFCO
FINANCIAL ACHIEVEMENT FROM BEGINNING (RS. IN CORERS)
NET PROFIT:
YEAR Before Prov. For Income After tax
tax tax
2003-2004 210.10 77.00 138.10
2004-2005 248.29 60.97 187.32
2005-2006 40 5.77 34.23
2006-2007 220.45 66.81 153.64
2007-2008 186.43 45.33 141.10
DIVIDEND PAID TO SHARE-HOLDERS:

(Govt. India, IFFCO, Other Society)
Year Amount(Rs. in Dividend %

Crores)
2003-04 58.56 12
2004-05 97.92 20.06
2005-06 34.39 8
2006-07 88.33 20
2007-08 74.50 15

CAPITAL BUDGET
The other major budget is capital budget. The formation of capital budget is on the
same pattern and follows same procedure as revenue budget.
It is important to understand distinction between capital and revenue expenditure. It

benefits of an expenditure are expected to accrue for long time; the expenditure is of capital
nature. Any expenditure whose benefit expires within the accounting year or expenditure that
merely seeks to maintain the business or keep assets in good working condition is revenue
expenditure.
On face of it, this distinction seems easy, but many of times it becomes quite
complicated to differentiate between these two expenditures.
Capital budget involves the planning to acquire worth while projects, together with
the timings of the estimated cost and cash flows of each project. Such projects require large
some of funds and have long term implications for the firm. Capital budgets are difficult to
prepare because estimate of the cash flows over a long period have to be made which involve
a greater degree of uncertainty.
The capital budgets are generally prepared separately from the operating budgets. In
many companies, there is a committee separate from the budget committee. To appropriate
funds for capital investment projects. In the capital budgeting, the profitability of each project
has to be carefully evaluated. Various techniques can be used to determine the profitableness
biases and capable of clearly indicating whether the project should be accepted or not.
REVENUE BUDGET:-
A letter duly signed by Chief Manager (F&A) is sent to all departments asking them
to submit the likely requirements of the year, before specific date (mostly last day of
November). They will also have to send the justification with adequate proof for the sum they
demand. Concerned department while submitting their proposals will also submit the report
containing details of expenditure done under the same head last year.
From all the information thus available, a preliminary budget formation takes place.
Subsequently discussions are held at various levels to check the validity of the budget so
formed and finally after passing through all checks it is presented before the Board of
Directors for final approval.

The above written procedure is not as simple as it seems and takes 4-5 months. The
concerned department also has to ensure that it neither asks for too much or too less amount
for in first case it would be questionable for excess amount lying unutilized, whereas in later
case they would not be given any additional amount to purchase in excess of budget.
Working Capital Management:-
Management of Working Capital refers to the management of current assets as

well as current liabilities. It mainly deals with managing the short term finance, negotiating
favorable credit terms, controlling the movement of cash, administering account receivable,
and monitoring the investment in inventories. Also it is changing with the change in current
assets and current liabilities. We can get the amount of working capital of KRIBHCO from
the following data of the year.
Current Assets - Current Liabilities = Working Capital
193,647.03 - 29,678.63 = 163,968.4
Working Capital Management involves a good deal of time in managing

Inventories, Receivables and Cash and Bank Management.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
MARCH 31, 2008
Particular Year ended 31.03.2008 Year ended 31.03.2007

Income From operation
Sales(Net of discounts) 140,002.80 135,383.39

Excise Duty (1,514.47) (986.29)
Concession from Government of 84,479.12 222,967.45 51,158.77 185,555.87
India
Other Revenue 26,730.12 24,811.70
Accretion in Finished Goods:
Closing Stock 11,020.20 14,696.98
Less: Opening Stock (14,696.98) (3,676.78) (6,376.20) 830.78
246,020.79 218,68835
Less: Cost of operation/other
outgoings
Consumption of Materials &
stores:
Raw materials 65,404.97 47,310.96
Packing materials 4,138.33 3,933.34
Chemicals & Catalysts 724.75 505.57
Power, Fuel & Water 40,848.15 111,116.20 30,793.20 82,453.07
Purchases:
Seeds & Chemicals 2,180.02 1,361.72
Urea, DAP & Other Fertilisers 43,270.05 45,450.07 61,343.31 62,705.53
Employees’ Remuneration & 17,340.21 12,149.55
benefit
Other Expenses on
Manufacturing,
Administration & Distribution 42,160.46 36,220.55
Interest 531.99 147.25
Depreciation / Amortisatio 2,279.20 1,762.54
218,878.13 195,527.99
Net Profit for the Year 27,142.66 23,160.36
Prior Period income 70.88 (6.92)
Profit Before tax 27,213.54 23,153.44

Provision for Taxation-
Current year 6,100.00 4,200.00
Deferred Tax (1,251.78) (570.52)
Fringe Benefit tax 200.00 200.00
Earlier Years 1,245.32 6,293.54 0.00 3,829.48
Profit after Tax 20,920.00 19,323.96
Profit Transferred to :

Capital Repatriation Fund 13.00 13.00
Dividend Equalization Fund 2,500.00 1,500.00
Net Profit As Per The Multi-State
Cooperative
Societies Act (MSCS Act) 18,704.00 17,810.96
Less: Proposed Appropriations:
Resave Fund As Per Bye-Low 4,601.75 4,452.74
58(i) of the Society
Provision for Contingency to 184.07 178.11
Cooperative Education Fund
Reserve Fund for Contingency as 1,840.70 1,781.10
per Bye-Low 58(iii) of the
Society
Reserve for Donation 40.00 25.00
Proposed Dividend 7,920.50 7,891.44
General Reserve 3,819.98 18,407.00 3,482.57 17,810.96
------------- -------------
14. INVENTORY MANAGEMENT
• METHODOLOGY:-
The project was carried out under two heads, namely:
1) STUDY OF INVENTORY MANAGEMENT

2) EVALUATION OF INVENTORY MANAGEMENT
Taking the perspective of student from the finance point of view the
methodology used for study was to answer three questions covering broad area
of Inventory Management are as follows:
1) What is Inventory Management?

2) Why Inventory Management?
3) How the Inventory Management is done?

To obtain answers to the first two questions, the discussions were carried out
with various personnel of M/s. KRIBHCO.
However, to obtain the answer to the third question (i.e. how the
Inventory Management is done?) the existing Inventory control techniques
were studied, a relationship and link was sought between theory & practice
and it was found that many aspects from Theory can be and are being used in
practice and necessary suggestions were made to promote existing Inventory
Management at various level.
Finally at the evaluation store beside the Inventory “Interview technique,

secondary data was collected from trial balance etc. which were rearranged,
regrouped so as to meet the requirement of situation”.
INTRODUCTION TO INVENTORY MANAGEMENT
The dictionary meaning of the word “Inventory” means stock of goods. In the
financial terms, Inventory means the value of raw materials, consumables spares, work in
process, finished goods, and scrap in which company’s funds have been invested.
It can also be identified that Inventory are those goods which are placed, stored and
used for day to day functioning of the organization.
Thus Inventory can be defined “ an ideal resource of any kind having an economic
value.”
 NEED TO HOLD THE INVENTORIES :
There are the four major reasons for holding inventories.

1. TRANSACTION PURPOSE :
This emphasized the need to maintain inventories to smoothen
production and sales operations, which is for the day-to-day use.
2. SAFETY PURPOSE :
Which necessities holding of inventories to guard against the risk of
unpredictable changes in the market.
3. SPECULATIVE PUROSE :
There is a speculative element which influences the decision to increase or

decrease Inventory levels to take advantage of price change.
TYPES OF INVENTORIES:-
Inventories can be classified in terms of its different uses, which will enable one to
appreciate the peculiarities and problems in its uses. Secondly the differentiation based on
uses of inventories will enable one to adopt control techniques to suit the needs.
Inventories are classified according to uses and point of entry in the alteration is as
follows:
o Raw Material
o Stores, Spares and Consumables
o Work in Process Goods and
o Finished Goods
Raw Materials: Raw materials are those basic input materials that are converted into finished
product through manufacturing process. The importance of raw materials can be easily
visualized when any break in its supply will keep the production lines idle. There are two
important factors, which determine the size of raw materials Inventory.

o Consumption rate;
o Importance of item.
Under the head of the raw material maintained in KRIBHCO is Carbon Dioxide and
Ammonia which are obtained from the Natural Gas.
Consumables: There are the materials which act as catalysis in the production process and
are not directly found in the output. This enables the production process to function smoothly.
In KRIBHCO, various chemicals like HCL, NaOH, K2CO3, DEA, V2O5, H2SO4, Alum,
Ferrous Sulphate, etc., fall under this category. It requires different treatment of Inventory
control than raw material.
Spares: Spares form an importance class of inventories by themselves. Their consumption

pattern defers from that of raw materials, consumables and finished goods, consequently the
stocking polices are different necessitating special methods for solving their peculiar
Inventory problems. KRIBHCO is having a huge store of speciality spare parts which can not
be usually available in short time. To avoid break down in plant due to fault in spare parts, the
KRIBHCO is maintaining huge stock of spare parts, from a small circuit board and bearing to
a large engines, since the time of its commence.
Work-in-Process Goods: They represent products that need more work before they become
finished products for sale. Work-in-process goods acts as a buffers within the manufacturing
sub-system, which may consist of group of machines and assembly lines, i.e. work centres.
The raw material passes through the work center for final production. Since KRIBHCO
producing using continues process plant, it having very less work-in-process inventory.
Finished Goods: Finished Goods is the final or stable products which act as a buffer between
the production department and marketing department. The level of inventory depends on the
production and behaviour of the market. Normally these inventories are controlled by the
Marketing Department. Urea is the final product of KRIBHCO. KRIBHCO have two silos
each capacity of 45,000 MT for storing Urea.
The Inventory Control includes controlling while purchasing through implement

proper purchasing policy and a good system of warehousing. This includes controlling
through controlling inventory ordering costs, carrying costs, capital costs, storage space costs,
risk costs, etc. Let us understand purchase procedure of KRIBHCO.
Cost Associated With Inventory:-

Managing inventories to increase net income requires effectively managing costs that fall into
the following five categories:
1. Purchasing Costs:
The cost of goods acquired from suppliers, including incoming freight or
transportation costs. These costs usually make up the largest cost category of
inventories
2. Ordering Costs:
The cost of preparing and issuing purchase orders, receiving and inspecting the items
included in th4e orders and matching invoices received, purchase orders and delivery
records to make payments. Ordering costs include the coast of obtaining purchase
approvals, as well as other special processing costs.
3. Carrying Costs:
These are the costs that arise, while holding inventory. Carrying costs include the
opportunity cost of the investment tied up in inventory and the cost associated with
storage; such as space rental, insurance, obsolescence and spoilage.
4. Stock Out Costs:

These are costs that result when a company runs out of a particular item for which
there is customer demand. A company may respond to a stock out by expediting an
order from a supplier. Expediting costs of a stock out include4e the additional
ordering costs plus any associated transportation coasts. Ort the company may lose
sales due to the stock out. In this case, the opportunity cost of the stock out includes
the lost contribution margin on sales not make due to the items not being in the stock,
plus any contribution margin lost on future sales due to customer ill will caused by the
stock out.
17. INVENTORY MANAGEMENT IN KRIBHCO

The efficiency of any business activity depends upon having materials supplies, and
equipments available in proper quantity with the proper quality, at the proper place and time
at proper cost. Failure ay any of these points adds to the costs and decreases the profit.

Being a chemical processing industry, the inventory pattern in KRIBHCO is very vast and
varied. It is therefore, the purpose to lay down the best practices methods and strategies that
are necessary to enable the materials department to carry out established policies uniformly
which will not only help in reducing the material costs and working capital but also increase
the productivity of the corporation.
Functional Strategies/ Objectives:
a) Evolve and implement a scientific inventory control system to achieve
optimization of inventory levels.
b) Standardize and improve equipment design.
c) Create and sustain computer culture.
d) Bring more common items under centralized procurement system to get better
control.
e) Develop alternate source of supply of materials.
f) Identification and development of vendors.
g) Annual rate contract with the approved vendors for regular supply of material to
reduce the inventory levels of such consumables.
h) Preservation of materials to avoid damages/ deterioration during storage.
i) Improvement in purchase procedure for reduction in procurement lead-time.
To study the inventory management the several of interview techniques
depending on the situations were followed. Discussions were carried out with
various personnel of the company to study the following 3 broad areas.
1. PURCHASE CONTROL
2. STORAGE CONTROL
3. ACCOUNTING CONTROL
A study in KRIBHCO was carried out taking into consideration the concept of
total material control, which significant that efficiency of any organization is
contingent upon having the right material of right quality or right place in the
right quantity at the right time and place.

PURCHASE CONTROL:-
It involves creative functions such as development of new resources, introducing new
materials and sources in the undertaking etc. It needs considerable expertise not only
negotiating but also in the techniques of competition and studying of economic trends in
respect of materials to be purchased in large quantity. Every rupee saved by the good
purchasing goes directly in to the profit for the simple reason is that it is not spent at all.
The scope of purchase in Kribhco includes below items.
a) Capital items – like plants and machinery, office equipment, furniture and
fixture, mobile equipment, electrical equipment, communication

equipment, vehicles etc.
b) Row materials and semi finished goods.
c) Consumables items required for the plant and office like tools, catalysts
chemicals and oil lubricant, office stationary and sanitary items.
d) Spear parts
e) Items required for repairs and maintenance of buildings, plant and
machinery, office equipment.
f) Rate contract for procurement of laboratory glass ware chemicals.
EXISTING PURCHESH PROCEDURE

1. Registration of vendors
An advertisement should be assure in the leading news papers inviting applications in the
prescribed proforma for registration of supplier and contractors listing out various types of
purchase that are likely to be mad during the next three years. The applications received
should be scrutinized by a committee consisting of a representative each from technical,
finance, and purchase department for ascertaining the resources, capacity and quality of
work man ship of the vendor.
The committee can also call the vendors for personal discussions and seek clarification on
the applications and obtain such other information. Wherever, felt necessary committee can
visit vendors work also.
2. Requisition to purchase

The indenters from various departments will raise requisition called the Material Purchase
Request for purchase. It should be insured that the requisition for purchase should be
complete in all respects with regard to,
• Each item of purchase shall have a precise, complete and unambiguous identification.
Indenting department is responsible for identification of items in its indents.
Identification sell include the generic name of the material as recognized commercially
and physical dimensions (weight, size, volume, chemical composition, capacity and
other technical specifications) and code number as relevant.
• Required date of delivery
• Estimated value and approved budget head
• Whether the item is a stock item/non-stock item/capital item
The stores section will raise the requisition for purchase of materials, which have been
declared as stock item, after the quantity in stock has reached the ‘reorder level’ as
determined for the respective items. Such requisition amongst other particulars should also
indicate the ‘maximum’, ’minimum’ and ‘re-order’ level, the date on which last supply was
received and the average consumption per month since last purchase.
The requisition for purchase non-stock items will be invariably routed through the stores
section that will endorse on the requisition the availability/ non-availability. In case the
item is available, the quantity thereof is indicated on the purchase requisition so that the
quantity to be purchased can be adjusted by the head of the purchase dept. in consultation
with the indentors.
The finance & Account dept. would ensure that the purchase requisition must indicate:
a) The budget provision
b) The amount utilized / committed unto the previous requisition
c) The estimated value of the present requisition (by departmental head), and
d) The balance available under the budget head after booking the present requisition.
3. Inquiries/ invitations to bid
On receipt of the requisition from the various indenting departments, enquiries shall be issued
by the purchase dept. as per the procedure detailed.
Inquiries shall be issued in the prescribed proforma(e). The enquiry document should be
suitably modified to conform to the equipments and materials proposed to be procured. It is
important that the inquiry documents should describe in detail the description of the material,
the technical specifications, and preferred delivery time, various general and special terms
and conditions governing the purchase.

Normally, bids shall be asked in two envelops in cash of the single sage bidding as below:
Envelop 1 Earnest Money Deposit
Envelop 2 Base Price Bid as per the Terms and Conditions of ITB and alternate
price bid, if any. Alternate Bids shall be based on the alternative
designs, materials, completion schedule, payment and other terms and
conditions. The alternate bid shall be considered, if not accompanied
with base bid.
However, in case of purchase is in which it may be undesirable or in impracticable to prepare
complete technical specifications in advance or wherever it is deemed necessary, two stage
bidding procedure shall be followed i.e. first inviting technical and un-priced commercial
proposal along with priced bid. These shall be subject to clarifications and adjustments to be
followed by the submission of revised priced bids in the second step, if required.
In this case bids shall be asked in three envelops as below:
Envelop 1 Earnest Money Deposit
Envelop 2 Technical and commercial un-priced bid
Envelop 3 Base Price Bid as per the Terms and Conditions of ITB and alternate
price bid, if any. Alternate Bids shall be based on the alternative designs,
materials, completion schedule, payment and other terms and conditions
a list of deviations should be given separately. The alternate bid shall be
considered, if not accompanied with base bid.
4. Time allowed for submission of bids and EMD to be deposited

Normally three weeks time should be given to the vendors for submitting their bids however,
the time limit for submission of bids may be increased with due consideration of the
particular circumstances with the approval of the competent authority.
(i) For value of purchase up to Rs. 5 lakhs Nil
(ii) For value o f purchase up to Rs. 10 lakhs Nil

for proprietary items
(iii) For value of purchase up to Rs. 5 lakh (10 1% of estimated value or Rs. 1 cror,
lakh`s for proprietary) & up to Rs. 1 cror which ever is less
(iv) For value of purchase above Rs.1 cror & Minimum Rs. 1 lakh, 0.75% of
up to Rs. 5 cror estimated value but limited to
maximum Rs.2 lakh

(v) For value of purchase exceeding Rs. 5 cror 0.5%of estimated value of purchase
limited to Rs. 10 lakh
5. Quotation Comparison Statement (QCS)

After the tender are opened a QCS of all the bids opened, shall be prepared by the purchase
department. the purpose of bid evaluation is to determine the cost of each bid to the society in
a manner that will permit a comparison of bids on the basis of their evaluated cost factor,
which may be taken into consideration, include inter-alia the cost of transportation unto each
unit along with other expenditures incidental to the transportation, the payment schedule, the
delivery or time of completion, the operating cost, the efficiency, the compatibility of
equipment, the availability of spare parts.
The bids conforming to the specifications and lowest in value will be rated in the QCS as
lowest (L-1), second lowest (L-2), and third lowest (L-3) etc.
6. Tender Committee:-
All purchase orders whose individual value does not exceed Rs.10 lakhs, will be finalized on
the basis of the recommendations of the indentor and the purchase dept. after obtaining the
concurrence of the Finance Dept. by circulation of file. However, in case of purchase order,
whose individual value does not exceed Rs.10 lakhs but are proposed to be procured
stipulated hereunder:
The reviews of QCS and selections of successful bidder in respect of all purchase orders,
whose individual value is above Rs.10 lakhs, will be done by a tender committee specifically
constituted for the purpose in each case. The tender committee shall be constituted consisting
members from following departments:
a) Indenting department – department from where the requirement has come up and for
which action is required to be taken.
b) Finance department
c) Purchase department
7. Selection of successful bidder:-

Normally, the lowest bid, which conforms, to the specifications will be accepted. However,
where the lowest bid even though it conforms to the specifications is not accepted, full
justification for accepting other than the lowest bid shall be recorded in writing and approval
of the competent authority will be obtained.

While forwarding the recommendations for award of work, the recommending authority/
tender committee, as the case may be, must ensure the reasonability of the prices on which
the order is proposed to be placed. In case the bid of the successful bidder is far from the
estimated cost, full justification to be given in the recommendation. Particularly for case
where the prices offered are substantial lower than the estimated cost and no proper reasons
could be ascertained, the amount of the performance security may be increased.
EVALUATION OF EXISTING PURCHASE SYSTEM OF KRIBHCO:

The existing purchase procedure gives fair chances of competition to all the vendors. It leaves
no room for malpractices or favoritism of employees i.e. nobody oblige any one out of way. It
is not very rigid. In time of urgency of requirement, competent authority so as to avoid
stoppage of work approves necessary deviations. The procedure is based on democratic way
of working. Good suggestions to improve efficiency are always considered. Various annual
rate contract running contracts are entered for regular consumable items, like oil and
lubricants, stationery, chemicals, medicines, printing job etc. This is reducing the repetitive
job times and money of company.
But there are shortcomings also, which are evaluated taking into consideration the five
essentials of purchase functions are as follows:
(1) Purchase time,
(2) Purchase quantity,
(3) Purchase quality,
(4) Purchase price and
(5) Source of supply
PURCHASE TIME :-
The purchase time indicates the lead-time i.e. time taken to physically receive the material
from the date of its indent.
To find out the lead-time five cases different items have been studied randomly, and analyzed
its fact, which indicates that by following the existing procedure, the administrative lead-time
is very long i.e. 5 to 7 months; while supplier’s lead-time is about 2 to 3 months.

SUGGESTIONS:
(1) Approved vendor list should be maintained so that wastage of time to get vendor list
approved every time could be avoided.
(2) Contract system should be followed to purchase stock items with approved vendors so
that the continuity of supply can be maintained without following such long procedure
and waste of time. It this case the economic order quantity should determined for each
item and a list of order per year with specific time limit should be given to contractors in
advance, fixing the maximum, minimum inventory levels.
(3) For non-stock items, the limits for issuing inquiry should be fixed maximum to seven
days. Similarly time limit for recommendations and concurrence by technical department
and finance department also is fixed. In case of delay beyond this time limit, competent
authority should be informed for necessary instructions.
1. PURCHASE QUANTITY AND QUALITY:
It has been observed that the quantity of material is being purchased considering 6 to 12
months consumption that means no economic order quantity has been fixed for different
types of material. Due to the existing system:
♦ Company is incurring cost of carrying inventory interest of capital rent etc.

♦ Company is also incurring loses due to the depreciation in quantity, deteriorations in
quality and obsolesce of materials during storage.
♦ Company is also incurring avoidable expenditure such as holding and keeping
of surplus material, financial losses due to fall in the price of materials, extra
expenditure on excess of materials required.
It is suggested that before taking final decision economic order quantity should be determined
for each item and order should be placed accordingly. The determination of economic order
quantity techniques has been discussed on succeeding pages.

PURCHASE PRICE
The price of each item is being compared with supplier’s quotations considering the quality
of material to be supplied. Although, purchase department should keep itself informed of the
price trends, with the help of market reports, trade papers and journals, report by purchase
against and sales representative of the suppliers, published catalogue and price list.
SOURCE OF SUPPLY
The selection of a particular supplier is made after inviting tenders from possible source of
supply. There are four types of tenders commonly used, which are
(a) Single tender,
(b) Limited tender,
(c) Open tender and
(d) Global tender
The tender received are opened on the date and time stipulated and compared
STORAGE CONTROL:-
The Store has about 64,663 numbers of items, out of which about 2400 items are ‘ Stock
Items ‘. The procurement action of stock items is initiated by store. The store is spread over
in 2 lakhs sq.mtrs. of space, out of which 12000 sq.mtrs is covered area. Normally working
hours of store is general shift hours. However, in case of shut down, emergency service of
stores is made available as requested by user department.
OBJECTIVE OF STORES
To render materials, services to the organization by receiving issuing the materials,

preserving the materials in custody, disposing the scrap/ surplus materials. The objective is
achieved through following function. Stores function is basically a service function. The main
functions of the stores are:

1) To receive all types (Stock and Non-Stock) materials, to arrange inspection
of materials.
2) To keep materials safe custody, issue of materials to user departments.
3) To initiate action for procurement of stock items, to keep in custody and
issue to user department.
4) Disposal of Non-moving item, surplus item, and scraps item.
5) Implement stores related policies and functions.
6) Coordinating with different sections for preparation of capital/revenue
budget.
7) Coordinating with other departments for stores related activities.
8) Vendor registration and evaluation for disposal.
9) Identification of different training needs of stores personnel.
10) To maintain records/ files of all stores activities, issue vouchers/ internal
stores issue vouchers (ISIV), internal stores receipt vouchers (ISRV), stock
adjustment vouchers (SAV), material exception reports (MER), claims/ dispatch
advice etc.
For convenience in working, the department is divided into three sections
A) Receipt and Inspection Section

B) Custody and Issue Section, and
C) Disposal Section
STORES FLOW DIAGRAM
Receiving of materials Return of rejected materials

from vendors, to vendor & dispatch of
contractors & other units. material for repairing
Receipt Section
Return of material
79through ISRV Anand Institute of Business Study
-Inspection of material.
MPR for stock
-SRV
item to purchase
-Accepted material.
Issue of material to
Custody Section
User Dept.
Handing over surplus

Scrap from material for disposal The preservation
plants to Disposal sec. of material
Disposal Section
Delivery of material sold

to a successful bidder
through MSTC
Accounting Control
Inventories are the assets of a company and such as their valuation get reflected in the balance
sheet and profit and loss account. These can be valued at actual, at the last price paid, on the
basis of an average price, current market price, and so on. A company may adopt a particular
method of inventory valuation, but it is obligatory to follow it for a minimum period of three
years. Any changeover to a new method requires the approval of the board.
Inventories measured by money value usually constitute the major element in the working
capital of manufacturing companies. Only proper stores accounting procedure can
successfully achieve control of inventory.
A good system of stores accounting is found to be necessary for certain other purposes like:
a) Preparation of accurate cost accounts

b) Evaluation of purchase performance
c) Working out important management ratio like sales to inventory, consumption to
inventory, purchase to inventory, inventory turnover etc.
d) Preparation of materials budget
When a material is purchased, received, inspected, and placed in the stores, an entry is
made about the purchase through a Goods Receipt Voucher. The entry for the quantity
received is simple, but the entry for the value of a purchase is a vexed problem because the
value is the sum of a number of items like:
a) Invoice price
b) Sales tax/ octroi
c) Excise duty/ custom duty
d) Insurance
e) Freight, carriage, handling charges etc.
The goods receipt voucher is priced from the appropriate invoice and the material account is
debited in the stores ledger.
• Valuation of the Material Issue
The method of valuation followed KRIBHCO is the weighted average pricing

mechanism. In this method the total quantities and total costs are considered, unlike simple
average method where only total costs are considered. This pricing mechanism is quite
advantageous as the price is fixed for a particular period say for one month and the system
takes care of price fluctuations.
Material requirement planning and vendor rating performance are another two important
techniques used in inventory management and control.
• Preparation of Bin Cards

Bin card is ca quantitative stock ledger. It shows the on-line stock position. Whatever any
basic document relating to movement of stores (SIV, SRV, SAV etc) is punched into system,
automatic-posting goes into Bin-Card.
• Pricing of Receipts (SRV)

The custody section sends SRV to finance for purpose of pricing. Finance prices the SRV on
the basis of terms and conditions of the purchase order and bill of vendor. SRV for which
bills are not received from the vendor are valued provisionally at the month end. Preparing a
SR amendment voucher does adjustments for variation in value.
• Pricing of Issues (SIV)

Issues are valued on monthly weighted average basis. The issue of material or spare will be
valued at monthly weighted average method.
• Preparation of Price Store Ledger (PSL)

The PSL is an item wise stores ledger. It shows both quantity and value.

18. CLASSIFICATION OF INVENTORY:
The universal problem can be solved taking in to consideration its important aspects.
Similarly, in Inventory Management classification is meant for solving the Inventory control
problem from its important angle. The inventories having huge amount of use in the
organization has to be controlled very strictly and low amount of use should be kept low
control. The importance can be due to the cost; it’s criticality, its availability and its
consumption.
EXISTING CLASSIFICATION SYSTEM:
The existing classification system is based on its use, i.e. inventories classified
as stock items and non-stock items.
The list and amounts of stock and non stock items is described in Annexure-
The existing system keeps strict control on the item that are of recurring
nature. It takes in to consideration only the amount use of quantity not in value. While
for non-stock item low control is being kept. This system has following shortcomings.
• The classification gives importance to only those items, which are of recurring
natures. It excludes from the control point of view the items that are high value in
stock.
• It considers the quantity used not the money value of the material used.
• Control kept on stock items a give equal weightage to all items, which neglects the
benefit of selective control technique.
Considering the practical use of classification techniques, two important methods

are suggested as follow.:-
(1) ABC classification and

(2) VED classification

ABC CLASSIFICATION:
ABC classification is a basic analytical Management tools which enables top

Management to direct their effort where the result will be maximum. This technique properly
knocks as “ALWAYS BETTER CONTROL” has universal application in many areas of
human endeavor. The technique tries to analyze the distribution of any characteristic by
money value of importance in orders to determine its priority. In materials Management, this
technique has been applied in areas needing selective control. Such as Inventory critically of
items, obsolence. Stock purchases order, receipt of materials, inspection, storekeeper and
billing verification.
ADVANTAGES OF ABC CLASSIFICATION :-
This approach helps the material manager to exercise selective control and
focus his attention only on a few items. When he is dealing with lacs of store items. ABC
analysis has to be reported to equal extension to A, B and C items will not worth while and
would be very expensive. Concentrating on all items it is likely to have diffused effect
irrespective of the priorities.
It provides a sound basis on which to allocate funds and time of personnel with
respect to their importance of the individual items.
TECHNIQUES OF ABC CLASSIFICATION:-
The techniques of classifying the items into A, B and C categories as described in the
following steps:
(1) Classify the items of inventories, determining the expected use in units and the price per
unit for each item.
(2) Determining the total value of each item by multiplying the expected units by its unit’s
price.
(3) Rank the items in accordance with the total value, giving first rank to the item with
highest total value and so on.
(4) Compute the ratios (percentage) of number of units of each item to total units of all items
and the ratio to total of each item to total value of all items.
(5) Combine items on the basis of their relative value to form three categories A, B and C.

PURPOSE OF ABC CLASSIFICATION:-
The object of carrying out ABC classification is to develop policy guidelines for
selective control.
Normally, once A.B.C.classification has been done the following broad policy
guidelines can be established in respect of each category.
EXHIBIT 1.1
Sr.No. A-ITEMS B-ITEMS C-ITEMS
1. Very strict control Moderate control Low control
2. No safety stock Low safety stock High safety stock
3. Frequent ordering or Once in four months Bulk ordering once in six
weekly deliveries months
4. Weekly control statements Monthly reports Quarterly control reports
5. Maximum follow up and Periodic follow up Follow up and expediting
expediting exceptional cases
6. Strict value analysis Moderate value analysis Minimum value analysis
7. As many sources as Two or more reliable Two reliable sources for
possible for each item sources each items
8. Accounts forecast in Estimate based on past Rough estimate for planning
material planning data on present plan
Minimization of waste Quarterly control over Annual reviews over surplus
9. obsolete and surplus and obsolete and obsolete items
surplus(review every 15 items
days)
10. Individual posting Small group posting Group posting
11. Central purchasing and Combination purchasing Decentralized purchasing
storage
12. Maximum efforts to reduce Moderate Minimum clerical efforts
lead time
Must be handled by senior Can be handled by Can be fully delegated
13. officers middle Management
GRAPHICAL REPRESENTATION OF ABC ANALYSIS

100
90
80
70
60
50 Percentage
of Cost
40
30
20
10
0
0 10 20 30 40 50 60 70 80 90 100
VED CLASSIFICATION :-
The Ved classification is applicable largely to spare parts. Stocking of spare

parts will be based on strategies different from those for raw materials, because their
consumption pattern is different, while the consumption of raw materials depends directly on
the market demand on production the demand for spare parts depends on the performance of
the plant and machinery. Therefore, the method of classification designed for one type of
Inventory will not be compatible for selective control of another type of Inventory to over
come this draw back the VED classification is used.
Spares are classified as vital, essential desirable. This implies that V
classes of spares have to be stocked adequately to ensure the operation of the pant, because
by definition the non-availability of vital spares can cause havoc and stop the wheels of the
organization. Some risk can be taken in the case of ‘E’ class of spares. Stocking of desirable
spares can be even done if the lead-time for their procurement is law. It is essential that this
classification be done by technical department or by those in charge of the maintenance of the
plant. This classification will be very useful to KRIBHCO if it is implemented.
Moreover, ABC and VED classification can be a combined advantage, in
order to control the stocking of spare parts. The control action for the class AV, BE, CD, etc
are given in exhibit No. 2.1
EXHIBIT NO 2.1

CLASSE V ITEM E ITEM D ITEM
S
A Items Constant control & Moderate stock Nil stock
regular follow up
B Items Moderate stock Moderate stock Very low stock
C Items High Stocks Moderate stock Low stock
19. EOQ Model:-
The basic assumptions of EOQ model are following:

1 ) The forecast usage/demand for a given period usually one year, is known.
2 ) The usage/demand is even throughout the period.
3 ) Inventory orders can be replenished immediately, there is no delay in placing and
receiving orders
4 ) There are only two distinguishable costs associated with inventory costs, ordering
costs and carrying costs.
5 ) The cost per order is constant regardless of the size of the order placed.
6 ) The cost of carrying inventory is fixed percentage of the average value of inventory.
Given these assumptions, EOQ model ignores purchasing costs and stock out costs. For
determining the EOQ formula we shall use the following symbols:
A = annual demand/usage,
Q = quantity ordered,
O = cost per order,
C = carrying costs per unit,
Given the above assumptions and symbols, the total costs of ordering and carrying
inventories are equal to
QC AO
TC = +
2 Q
In the equation, the first term on the right hand side is the carrying cost, obtained as the
product of average value of inventory holding and the carrying cost per unit. The
second term on the right hand side is the ordering costs, obtained as the product of the
2AO
Q=
C
number of orders and the cost per order. The total cost of ordering and carrying is
minimized when
The formula may be illustrated with the help of the following data relating to Ace Company.
A = annual demand/usage/sales = 20,000 units
O = ordering cost per order = Rs. 2,000
C = carrying costs per unit = 25% of inventory value
P = purchase price/unit = Rs. 12
Here carrying cost/unit in is = Rs. 12 X 25% = Rs. 3
2AO
EOQ =
C = 2 X 20,000 X 2,000
3
= 5,164 units
 Graphical Approach of EOQ Model

The economic order quantity can also be found graphically. Figure illustrates the EOQ
function. In figure costs –carrying costs and ordering costs and total costs – are plotted on
vertical axis and horizontal axis is used to represent the order size. We note that total carrying
cost increases as the order size increases, because on an average a larger inventory level will
be maintained and ordering costs decline with increase in order size because larger order size
means a less number of orders. The behavior of total costs line is noticeable since it is a sum
of the two types of costs, which behave differently Total
with order
Cost size. The total costs decline in
first instance, but they start rising when the decrease in average ordering cost is more than
C
offset by the increase in carrying costs.
O
S
T
Carrying Costs
Ordering Cost
EOQ
The EOQ occurs at the point Q* where the total cost is minimum. Thus the firm’s operating
profit is maximized at point Q*
It should be noted that the total costs of inventory are fairly intensive to moderate changes in
order size. It may be appropriate to say, therefore, that there is an economic order range, not a
point. To determine this range, the order size may be changed by some percentage and the
impact on total costs may be studied. If the total costs do not change very significantly, the
firm can change EOQ within the range without any loss.
 Quantity Discount & Order Quantity
Many suppliers encourage their customers to place large orders by offering them quantity
discount. With quantity discount, the firm will save on the per unit purchase price. However,
the firm will have to increase its order size more than the EOQ level to avail the quantity
discount. This will reduce the number of orders and increase the average inventory holdings.
Thus, in addition to discount savings, the firm will save on ordering costs, but will incur
additional carrying costs. The net return is the difference between the resultant savings and
additional carrying costs. If the net rerun is positive, the firm’s order size should equal the
quantity necessary to avail the discount; if negative its order size would be equal to EOQ
level.
Let’s assume the following data for a firm:

A = estimated annual demand 1200 units
P = purchasing cost per unit Rs. 50
O = ordering cost per order Rs. 37.50
C = carrying cost per unit Rs. 1

The firm is offered 0.5% (0.0005) or Rs. 0.05 per unit quantity discount on order of
400 units or more.
First we will calculate EOQ, assuming that the quantity discount does not exist
2AO
Q* = 2 X 1,200 X 37.50
C
=
1
= 300 units
Now, the net return should be calculated for deciding whether the order size should be
increased from 300 to 400 units
The net return is given by the flowing equation:
= Discount savings + savings on ordering costs – additional carrying costs
= [d X p X a] + O [A/Q* - A/Q’] – [C/2 (Q’ - Q*)]
= [0.005 X 50 X 1200] + 37.50[1200/300 – 1200/400] – [1/2 (400-300)]
= 300 + 37.50 – 50
= 287.50 Rs.
Since the net return is positive, the firm should have an order quantity of 400
units.
Reorder Point:
Yet the answer should be sought to the second question, when to order? This is a problem of
determining the reorder point. The reorder point is tat inventory level at which an order
should be placed to replenish the inventory. To determine the reorder point under certainty,
we should know:
a) Lead time
b) Average usage and
c) EOQ
Lead time is the time normally taken in replenishing inventory after the order has been
placed. By certainty, we mean that usage and lead time do not fluctuaye. Under such a
situation, reorder point is simply that inventorty level which will be maintained for
consumption during the lead time. That is Reorder point= Lead time X Average usage
Composition of Total Inventory:-

In v e n to ry C o m p o s itio n
o th e r s
0%
G e n e ra l
S to r e s ( 0 1 to
49)
29%
L o o s e T o o ls
M e c h a n ic a l
0%
S p a r e s ( 8 1 to
9 0)
53% S te e l
2%
E le c tr i c a l
S p a re s (5 1 to
In s tru m e n ta ti o6 3 )
n S p a re s (6 4 2 %
to 8 0 )
14%

21. SUGGESTIONS:-
Considering the entire situation discussed above following points should be taken in to
consideration for the effective Inventory Management.
 First taking into consideration the purchase control of KRIBHCO, they
should introduce Vender Performance Rating system for vendor
development and to spot out good reliable source of supply.
 As I have visited the dockyard, where the most of the scrape, wastages,
and obsolete items are being stored, it is necessary for them to reduce the
disposable items and should make cash out of it as soon as possible.
 Their codification system is really good but as far as main group is
concerned. They should modify the system as such that it can
accommodate more main group, if the necessity arises. E.g. main
group101 for newly invented spare part.
 In addition to ABC classification, they should introduce other widely used
classification systems also so as to have greater control over inventories
like VED analysis and FSN analysis.
 The production planning should be done according to the demand so that
there should not be over stock during off-season and stock out during the
season.
 The investment in stores and spare parts Inventory should be kept as law
as possible, considering demand of stores and spare parts.
 Optimum planning should be maintained in transportation to reduce
storage of finished product (Urea), which reduces warehousing cost.
 Reduction in material handling as far as possible.

22. Swot Analysis:-
Strength
 Kribhco is having Sound financial position.

 The Management of Kribhco is very professional.
 Kribhco has larger proportion of reserves and surplus and further it has no
debt capital.
 Kribhco has long standing reputation in the Indian Fertilizer Market.
 Staff of Kribhco is very co-operative and hard working.
 Kribhco is having skilled employees staff.
 Good cooperation between employees.
 Kribhco is having own Training Centre for training of employees as well as
apprentice students of different discipline.
 It is having a full support of the Government of India.
 Kribhco having strong and wide marketing network towards country.
 High Production capacity of Kribhco leads to low production cost.
 Savings in Production cost because Kribhco is having own Nitrogen and
Ammonia Plant.
 Capacity Utilization more than 100%.
 Still the starting of production, Kribhco plant has no major break down in
Plant.
 Kribhco has extra land and fully developed infrastructure facilities so it can
be further developed.
Thus, we can say that the position of Kribhco in the Fertilizer Market is
Satisfactory.

Weaknesses
 Government interference in the management is more comparatively private

units.
 Due to Government’s interference it takes longer time in decision making. So
the decisions delayed and thus sometimes bias decision are also taken.
 Kribhco is having overstaffing.
 Kribhco is having demotivated employees because of job security and safety.
 Kribhco is having no debt capital so the advantage leverage can not be taken.
Thus, we can say that the Kribhco will must be careful regarding its staff
and to government also.
Opportunities
 Investment in Oman Project will raise the profit of Kribhco.

 Expansion of existing plant at Hazira.
 Look for newer Market with diversified product.
 Diversifying the business.
Threats
 The price of the Row material, i.e. Natural Gas, is increasing continuously.
 There is a chance of sharp reduction in Government subsidy in near future.
 Kribhco is having very little market share.
 In the era of Free Trade, the import of fertilizers may affect the business of
the Kribhco.

BALANCE SHEET AS AT MARCH 31, 2008
Particulars Schedule As at 31.03.2008 As at 31.03.2007

SOURCES OF
FUND
Shareholders’ Funds:
Share Capital 1 39,607.93 39,610.68
Reserves & Surplus 2 198,243.15 237,851.08 189,141.73 228,752.41
Secured Loan from 75.63 40.69
bank
Unsecured Loan from 22,396.87 0.00
bank
Deferred Tax 0.00 2,461.18
Liability
Total 260.323.5 231,254.28
8
Application of
funds
Fixed Assets: 3
Gross Block 122,432.34 105,280.89
Less:Depreciation 85,629.8 84,476.5
2 4
Net Block 36,802.52 20,804.35
Capital Work-in- 726.23 6,228.62
progress
Investment 4 87,056.46 80,756.46
Deferred Tax asset 418.38 0.00
Net Current Ast.
Current Ast. , Loans 5 185,178.30 157,699.67
& Advance
Less: C.L. & 6 49,858.31 135,319.99 34,234.82 123,464.85
Provision
Total 260,323.5 231,254.28
8

23. Recommendation
After having completed our general training in Krishak Bharti Co-

operative Limited, Hazira, we have come to know its working and understand various
departments therein. The training makes us able to understand the various aspects of
management.
After having a detailed study of the various departments of KRIBHCO,

we are giving our conclusion.
By looking at various financial ratio of the KRIBHCO, we are able to

conclude that the company is having a sound financial position with a good liquidity but
KRIBHCO is not having long-term debt which is necessary for leverage. In other words
the KRIBHCO is not using it capacity to raise long term debts.
Personnel in the KRIBHCO are treated very well. KRIBHCO is having

proper manpower planning and a good policy of Recruitment & Establishment with
good training opportunities for its employees as well as for students from different
disciplines. It is also running various cultural activities for the total development of its
employees. At last, KRIBHCO is having a very low man power turn over ratio from last
few years.
The company is also having good marketing channels to promote its

products. The KRIBHCO is promoting its products through train the farmers,
launching campaigns, releasing jingles on Radio, TV, etc.
The KRIBHCO is achieving more production capacity than installed. On

an average, the KRIBHCO is running on 108 % capacity utilization. It is having a
skilled staff to running the plant. The KRIBHCO is also implementing the good
Inventory Control Techniques to control the stocks of materials with a good purchasing
policy.
Finally, KRIBHCO is having a professional management to control all the

activities carried out therein. So, we would like to conclude that KRIBHCO is having a
bright future to expand and diversify.
24. CONCLUSION

During our Summer Training in KRIBHCO, We studied various components of the different
department. we observed different activities of them.
The network design of KRIBHCO is comparatively beneficial, because it is located at the

north of the Gujarat which covers the Gujarat side and near states like Rajasthan, Maharastra,
Uttarpradesh, etc. So it has location advantage with its competitors.
Inside the company, the all material handling system is designed in such a manner that it
minimizes the handling of material in maximum possible manner. Railway and road transport
handles the transportation of urea bags trucks. This is the most efficient system that
dispatches at its highest possible speed. Everyday, around 5500 MT urea is dispatched by
railway and trucks.
The finance and purchase departments under the personnel and administration department
handle the purchase functions and inventory management. Several steps are followed for the
contract of the purchase and long term service. Inventory is handled by two ways, first is
stored in the stores department, while other is handled inside the Silos, which is finished
good-Urea.
All the training activities are carried out by human resource department in prescribed way. It
also takes care of employee relations. Good employee & customers relations are the great
ingredient in the success of KRIBHCO.
In short, KRIBHCO handles its logistics functions efficiently. It operates at its effective level
by performing the sequence of operations, and acquires the maximum profits among leading
manufacturers of fertilizers- urea.
25. Bibliography

A
Anand
1. Kribhco Manual
2. Annual Report 2007-08 of KRIBHCO
3. KRIBHCO at Glance
4. KRIBHCO Pragati
Websites:-
http://www.kribhco.org.
http://www.kribhcosurat.com
http://www.google.com

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A

KRISHAK BHARTI CO-OPERATIVE

SUBMITTED BY: Rahul N. Prajapati

Anand Institute of Business Studies

2 Anand Institute of Business Study

In regard to this programmed, we would like to acknowledge our gratitude and

“Anand Institute of Business Studies,

3 Anand Institute of Business Study

I the undersigned RAHUL N.PRAJAPATI this financial training report with

4 Anand Institute of Business Study

I have made my project in “KRISHAK BHARTI CO-OPERETIVE LTD” which is basically

5 Anand Institute of Business Study

1 PART 1: GENERAL INFORMATION ABOUT

3 GLOBAL SCENARIO OF FERTILIZER INDUSTRY 10

5 ORGANIZATIONAL CHART OF KRIBHCO 23

6 HUMAN RESOURCE DEPARTMENT 25

14 PART 2: INVENTORY MANAGEMENT

16 INTRODUCTION OF INVENTORY MANAGEMENT 67

17 INVENTORY MANAGEMENT IN KRIBHCO 70

20 COMPOSITION OF TOTAL INVENTORY 90

6 Anand Institute of Business Study

India lives in villages” said Mahatma

7 Anand Institute of Business Study

A fertilizer is any material, organic, inorganic, natural or synthetic, that is placed

Fertilizer production is of permanent importance for this country because

As this is a vital commodity it is in the interest of nation that farmers get

8 Anand Institute of Business Study

Further under ECA, the government also operates a system of distribution

Government of India fixes the price of fertilizers in such a way that

3. GLOBAL SCENARIO OF FERTILIZER INDUSTRY

9 Anand Institute of Business Study

10 Anand Institute of Business Study

-:: WORTH OF FERTILIZER INDUSTRY ::-

11 Anand Institute of Business Study

2. Green Revolution Period

3. Post Green Revolution Period

● Pro Green Revolution :

● Green revolution Period :

● Post Green Revolution Period :

12 Anand Institute of Business Study

Krishak Bharti Co-operative Limited

“KRIBHCO” the world’s premier fertilizer producing co-operative has an

Krishak Bharti co-operative limited popularly known as “KRIBHCO”

The”KRIBHCO” hazira unit is located around 15 kms, west of Surat and

KRIBHCO multiunit co-operative societies were promoted jointly by

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A cooperative thrives on the trust of, its members. Membership of

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They want to be a world class organization that represents the farmer

a) To undertake the activities for he rural upliftment and agriculture development.

b) To promote economic interest of its members by undertaking manufacturing of

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(I) To undertake production processing, manufacture, sale distribution, marketing,

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Managing Director Shri V.N. Rai is holding the Gold Plaque

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“KRIBHCO” Ltd to made the new giant plant of hazira.