PROJECT REPORT

ON
“COMPARATIVE ANALYSIS OF ANNUAL
CASHFLOW STATEMENT OF MPSEB”

Submitted By
ANUJA DIXIT
[ Finance + Marketing]

Suryadatta Institute of Management

and
Mass Communication

[Academic Session 2009-2011]

Page 1
 DECLARATION

I undersign hereby that the project entitled “CASH FLOW

STATEMENT of MPSEB Jabalpur” in Madhya Pradesh State Electricity Board
[Shakti Bhawan, Jabalpur] has been developed by as a part of my Major Project for
my PGDM course for the year 2009-2011.

The development of the project and its developments is completely

undertaken by me and is not been part of any other project.

I have undertaken this project in MPSEB [Shakti Bhawan] Jabalpur

for the duration of 8 weeks,3rd June 2010 to 29th July 2010.

Anuja Dixit

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 PREFACE

“Trying is the touchstone of accomplishment”

A project forms an integral part of our two-year degree course.It

evokes thinking amongst the students & urges them to shape their knowledge by
doing some experimentation on the subject, which is taught during of their studies.

Prior to embarking upon this project my mind was flooded with

the notion that a project is a tedious affair. But I always had a belief that
“persistence is what makes the impossible”. Thanks to our learned guide who
streamlined & coordinated my efforts. Ultimately all the factors appear pygmies
considering the knowledge that we derived out of this project.

Finally I find pleasure in declaring that it was the constant support

of my project guides, well-wishers & friends which turned each stumbling block
into a stepping-stone & made this project possible.

Anuja Dixit

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 ACKNOWLEDGEMENT

This project was a formidable task but from the active guidance and
help within and outside the organization and institution the task was performed by
me.

I offer my sincere gratitude to the management of “MPSEB” for

giving me an opportunity to complete my Project Report in the esteemed
organization without there help and valuable advice, my Project Report would not
be possible.I would like to pay my sincere thanks to Mr. Jaideep Chate for
allowing me to work and undergo the project training at MPSEB, Shakti Bhawan. I
want to give my heartily thank to Mrs. Naidu for their guidance.

I am also thankful to Mr. A. Rajeshwar & Mr. Rajeev Shrivastava

for their valuable support, suggestion, motivation and guidance. I am thankful to
Brid. Toley Sir and Mr. Mahesh Sir for their valuable support, motivation and
guidance in preparation of the project.

Last but not the least, I wish to remember with the deep sense of
gratitude the encouragement given to me by my parents and colleagues, which has
been indispensable for my project.

DATE: 20/08/10 Anuja Dixit

PLACE: Jabalpur

CONTENTS

Page 4
 CHAPTER 1

INTRODUCTION Page No.

 Explanation of the topic………………………………………………7

 Reasons for selection of this topic…………………………………….8
 Importance of the topic to the company……………………………....9
 What did I learn from the study……………………………………….9

CHAPTER 2

ORGANIZATION PROFILE

 Formation of the Company……………………………………………10

 Scope of the Products and Services…………………………………....11
 Milestones in the history……………………………………………….13
 Head office and branches…………………………………………….....14
 Summary statistics……………………………………………………...15
 Quality Policy and Objective…………………………………………..16
 Organizational Chart…………………………………………………...17

CHAPTER 3

RESEARCH OBJECTIVES AND SCOPE OF RESEARCH PROJECT

 Problem Defination…………………………………………………..19
 Objectives of the Research Project…………………………………...19
 Geographical………………………………………………………….20
 Product Scope………………………………………………………...21

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 CHAPTER 4

RESEARCH METHODOLOGY AND LIMITATIONS

 Research Design……………………………………………………..24
 Hypothesis…………………………………………………………...24
 Research Limitations………………………………………………....25

CHAPTER 5

ANALYSIS, INTERPRETATION AND PRESENT………………………25

CHAPTER 6

CONCLUSION AND SUGGESTIONS

 Conclusion…………………………………………………………..52
 Suggestions………………………………………………………….52

Annexure…………………………………………………………………..55

Bibliography……………………………………………………………….57

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1] INTRODUCTION
1.1] EXPLANATION OF THE TOPIC
TOPIC:-COMPARATIVE ANALYSIS OF ANNUAL CASH FLOW
STATEMENT OF MPSEB

At MPSEB I was assigned with the topic as “Comparative Analysis of Annual

Cash Flow Statement of MPSEB” for my project work. I joined the organization as
summer trainee to understand the process of cash inflow and outflow of the
company.

The Cash Flow Statement (CFS) or “statement of cash flows” is a financial

statement that records the cash and cash equivalents entering and leaving a
company. The “cash inflow” is the money coming into the business, while the
“cash outflow” is the money going out. Cash is the lifeblood of any business since,
without it, no business can function. The CFS provides investors with the
opportunity to better understand a company’s operations, its cash flow sources and
how the business is spending its money. As a tool for fundamental analysis, the
cash flow statement can help determine the viability of a company, particularly its
ability to meet short-term liabilities.

Classification of Cash Flows 

 Operating Activities
o Cash effects of transactions on Net Income
 Investing Activities
o Capital investment
o Salvage value
o Working capital investment or recovery
 Financing Activities
o Debt and repayment of principal

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Operating Activities 

 Sales revenue (inflow)
 Cost savings (inflow)
 Manufacturing expenses (outflow)
 O & M cost (outflow)
 Interest payments (outflow)
 Lease expenses (outflow)
 Income taxes (outflow)

Investing Activities 

 Capital investment (outflow)
 Salvage value (inflow)
 Working  capital (outflow)
 Working capital recovery (inflow)
 Gains taxes (outflow)

  Financing Activities 

 Borrowed Amount (inflow)
 Principal repayments (outflow)

Net cash flow = Cash inflow - cash outflow

1.2] REASON FOR SELECTION OF THIS TOPIC

When planning the short- or long-term funding requirements of a business, it is

more important to forecast the likely cash requirements than to project profitability
etc. The generation of a profit does not necessarily guarantee its development, or
even the survival. More businesses fail for lack of cash flow than for want of
profit.The Statement of Cash Flows is the final document prepared in the Financial
Report set, and provides information that is a direct flow of information from the
Income Statement, Owner Equity Statement and Balance Sheet; therefore, this

Page 8
report adds validity and accountability to the Financial Statements.I found it really
interesting to understand the cashflow system of a company like MPSEB.

1.3] HOW IMPORTANT IS THIS TOPIC TO THE

  COMPANY

The ultimate purpose of giving me this topic was to know about the efficiency of
cash flow management system of MPSEB because effective cash flow
management is vital for any organization; it is a key element in planning and in the
efficient functioning of all aspects of operations. Earning income is a primary
concern (or should be) for both nonprofit and for profit entities. When cash inflows
and outflows—money received and money paid out—are not successfully planned
and monitored, organizations may not be able to pay employees and vendors in a
timely manner. Thus, without good cash flow management, an organization may
be “profitable” based on its financial statements yet unable to pay bills when they
are due. My project report will serve the way for more effective cash flow
management.

1.4] WHAT DID I LEARN FROM THE STUDY

 Relative importance of different components of financial position.

 Reasons for change in working capital.

 Information about MPSEB’s capital resources and current financial position

of MPSEB.

 Cash flow statements shows more economic solvency, and is more attractive
to investors. This will allow a business owner to compare past periods with
the current financial standing and determine whether your receivables have
increased or decreased.

 How can assess the short term as well as long term liquidity position of
organization.

Page 9
2] ORGANIZATION PROFILE
2.1] FORMATION OF THE COMPANY

The Electricity[supply] Act,1948 is a landmark in the history

of power development in our country.Conceived in the background of post
development, it aimed at the coordinated development of electricity on a regional
basis to enable centralized generation, bulk supply, and systematic distribution in
an efficient and economical manner under the control and direction of
authority.This laid down the basis for the formation of state electricity boards.

The Madhya Pradesh Electricity Board was the first board to

be formed in the country, on 9 Dec 1950.At that time the jurisdiction of the board
covered the Mahakaushal region of the present state of Madhya Pradesh and
Vidarbha region of the present Maharashtra State.

MPEB was started on 1.04.1952 at Nagpur[Vidarbha].In

1.04.1957 it was shifted at Jabalpur[Headquarter].

MPSEB

Generation Co. Transmission Co. Distribution Co.

Poorv K.V.V. Co. Madhya K.V.V. Co. Paschim K.V.V. Co

JBP Bhopal Indore

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FLOW OF ELECTRICITY:-

Electricity Generation by Generating company[also called as GENCo]

Electricity purchased in bulk by Treading company[also called as TRADECo]

Transmission of electricity for a charge by companies[also called as TRANSCo]

Buying of electricity from TRADECO and supply to retail customers by

companies called DISCOM

The board in its present form was constituted with effect from the 01 April 1957 in
pursuance of the state, Re-organization Act, 1956. Thus its jurisdiction extends to
the whole of the state of Madhya Pradesh. Establish in 1950, by the covenant of
government, the Madhya Pradesh Electricity Board for the MPSEB has
successfully shouldered the awesome responsibility of making the power reach to
millions in the gigantic of Madhya Pradesh.Responsible for the generation,
transmission and distribution of electricity,the MPSEB has recorded significant
and consistent success in providing vitally needed power to the
industrial,agricultural,commercial and domestic sectors.One of the oldest
Electricity Boards in the country, the MPSEB has truly grown in every dimension
over the last four decades.

2.2] SCOPE OF THE PRODUCTS AND SERVICES

The installed capacity of MPSEB is 2990.45 MW comprising of 2,147.5 MW

Thermal and 842.95 MW Hydel capacity.Further, State has share of 1,665.85 MW
in the Central Sector Projects and additional allocation of 50 MW is available from
EREB. Apart from the above, 1000 MW from Indira Sagar HEP and 712.5 MW
share from Sardar Sarovar HEP (Inter State) from NVDA has become available. In

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all, 1,836.5 MW power generation is anticipated from NVDA by the end of the
tenth plan.

Year-wise capacity addition programme from various sectors for 2006-07 to 2011-
12 is indicated as below:

Based on the above capacity addition programme, Peak availability has been
assessed. Peak requirement, peak availability from 2006-07 to 2011-12 have been
worked out as indicated below:

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For the year 2006-07, the peak availability has been assessed as 5,668 MW against
the estimated peak demand of 6,881 MW resulting in peak shortage of about 1,213
MW (17.63%) has been envisaged. For the year 2007-08, peak availability has
been assessed as 6,639 MW against the peak demand of 7,457 MW resulting in
peak shortage of 818 MW (10.97%). The peak availability at the end of the 11th
Plan (2011-12) has been assessed as 10,505 MW against the peak demand of
10,491 MW. It may, therefore, be seen that the power supply position of the State
will improve by the end of 11th Plan.

2.3 ] MILESTONES IN THE HISTORY

 MPSEB has got gold shield from ministry of energy,Govt. of India in the
yr. 2006-07.

 MPSEB has got silver shield by the Prime minister of India for completing
Indira Sagar Hydal Project.

 Asian power award :-AESIEAP has given two important awards:-

1] Utility of the year-2006
2] Tea and Project of the year-2006

 India Tech Excellence Award-MPSEB has got India Tech Excellence

Award-2007 by India Tech Fondation, Mumbai.

 MPSEB awarded by Governor of Goa on behalf Indian Govt. for

Automated Meter Reading Project.

 MPSEB has got E-Governance award by M.P. State Government for

development of a software which shows location of HT lines.

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2.4] HEAD OFFICE AND BRANCHES

MPSEB has 3 zones:-

1] Jabalpur [East Zone]

2] Bhopal [Central Zone]

3]Indore[West Zone]

*HEAD QUARTER – Jabalpur

Regional Head Quarter [7]

 Jabalpur
 Sagar
 Rewa
 Gwalior
 Bhopal
 Ujjain
 Indore

SUB REGIONAL HEAD QUARTER [4]

 Guna
 Hosangabad
 Mandsaur
 Khandwa

Besides these Regional and Sub Reginal Headquartes there are 39 Circle
Headquarter and 45 District headquarters.

Upon restructured , MPSEB has been unbundled and currently six different
successor companies are undertaking various activities.These companies are
independent entities w.e.f. 1.06.2005.

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For allocated functions M.P. Power Generation Co. Ltd. JBP[GENCo] entrusted
for generation of power.

M.P. Power Transmission Co. Ltd. JBP[TRANSCo] for intrastate transmission of

power .

3 distribution companies namely M.P. Poorv K.V.V. Co. Jabalpur, M.P. Paschim
K.V.V. Co. Indore and M.P. Madhya K.V.V. Co. Ltd. Bhopal for distribution of
electricity in their respective geographical area.

In addition to above, M.P. Power Treading Co. Ltd.[TRADECo] JBP,caters to bulk

purchase of power from GENCo and external agencies and bulk supply of power to
3 distribution companies:-

1] MPSEB as residual Board

2] MP Power Generating Company

3] MP Power Transmission Company

2.5] SUMMARY STATISTICS

WORKING STRENGTH(NUMBER)
WORKING STRENGTH(NUMBER)
57,346

55,945

54,231

52,819

51,368

31-3-05 31-3-06 31-3-07 31-3-08 31-3-09

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WORKING STRENGTH (NUMBER)

Including MPSEB,MPPGCL,MPPTCL,DISCOM(EZ,WZ & CZ) and M.P. Power

Tradeco

WORKING EMPLOYEES (Regular)

Class 31.3.2008 31.3.2009
Class-1 1,188 1,171

Class-2 1,544 1,575

Class-3 21,625 20,806

Class-4 28,462 27,816

Total 52,819 51,368

2.6] QUALITY POLICY AND OBJECTIVE

Under these two plans MPSEB is trying to improve quality of its product and
services. These plan comes under the New Distribution schemes of 11th Plan:-

I] APDRP-II

To strengthen the distribution network of District Headquarter, to achieve the goal

of 0% transformer failure, reduction in losses by 15% and to improve the consumer
satisfaction by way of ensuring quality supply, a distribution project has been
prepared and posed under APDRP – II scheme. Under this project, new 33KV
Lines, 11KV lines, Distribution Transformers, 33/11 KV Sub-stations, consumer
care centers and e-billing are proposed.

II] PFC-II

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To improve the rural network for quality supply to the agriculture sector and
increase hours of supply, improvement in the distribution network with the
objective to reduce the losses and improvement in the revenue collection efficiency
a distribution scheme has been posed to PFC. Under this project, new 33KV Lines,
11KV lines, Distribution Transformers, 33/11 KV Substations and HVDS (High
Voltage Distribution System are proposed.

Approximately 25% of total electricity sale in the state is consumed by rural sector.
Demand from rural sector is mainly for agriculture, residential, water supply and
small-scale industry and commercial establishments.MPSEB adopt a more focused
approach for rural electrification and improving supply of quality power to rural
areas. The Board should come up with an action plan to achieve these objectives in
a time bound manner. Board shall take up the matter with the Government of India
and Coal India Ltd. for supply of adequate quantity of coal to its various thermal
power stations. Matter regarding quality of coal wherever it is not upto the desired
value shall also be taken up with the Coal India for improvement. Entering into
Fuel Supply Agreement with coal companies will be a right step in this direction.

2.8] ORGANIZATIONAL CHART

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Page 18
3] RESEARCH OBJECTIVES AND SCOPE OF
RESEARCH PROJECT:-
3.1] PROBLEM DEFINITION

cash management is concerned with the management of cash inflow and cash
outflow of the business concern, cash flows within the business concern and cash
balance held by the business concern at any point of time. Management of cash is
of paramount importance for the overall activities of a business concern to survive
and for smooth running. High cash turnover ratio indicates that board has better
utilization of cash resources and better financial management of cash but this table
indicates that only for few years it had high ratio and during most of the study
period it had low ratio which is not worthwhile for the board. The average annual
growth of the total cash payment was 79.55% while the average cash growth was
-17.22% which indicates dangerous cash management by the board. The cash
management position of MPSEB is not satisfactory because it has not maintained
adequate amount of cash in hand and cash at bank.The main and obvious problem,
namely, the interruption of the cash flow through leakage, theft, and inefficiency.

3.2] OBJECTIVES OF THE RESEARCH PROJECT

 To know the financial position of MPSEB

 To find out different components of the financial position of MPSEB

 To check the efficiency in the cash inflow and outflow of the company

 To assess the short term as well as long term liquidity position of MPSEB

Page 19
3.3] GEOGRAPHICAL

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Later in July 2002, five companies were formed to unbundle and corporatize
MPSEB. Of these, one is a generation company (MPPGCL), one a transmission
company (MPPTCL) and remaining three are distribution companies covering
three separate geographical areas.

3.4] PRODUCT SCOPE

The demand of electricity is increasing everyday owing to better life style and
consumption attitude.The energy sector is most important sector in the progress of
any nation. The Govt. of India has very well understood its importance and has
adopted the open economic policy for fast and sustained development. The state of
M.P. has been well bestowed by the nature and this fact has been contributed a lot
in building up the confidence of state in taking bold decisions, which are consistent
with uprising life style and economic balance. Every next day, therefore bring a
new host of problem as well as expectations and we in energy sector being aware
of these, welcome these challenges.

OUR CONSUMERS:-

MPSEB's objectives of developing a transmission and distribution network in the

state capable of evacuating the power to the ultimate consumers efficiently and
reliably.Once the vested interests are isolated and most of the other consumers,
who are honest, begin to accept the rational and value enhancing approach of the
company, others will quickly, fall in line. In other words, when consumers begin to
perceive that it pays to be honest, and there are no other choices (deterrents being
strong and effective) bulk of the consumers will avoid imitating the dishonest
consumers. On the other hand, when dishonest consumers can get away easily, the
others would imitate them to create non-adherence or lawless behaviour. In
changing the balance so that vested interests are isolated, political will of the state
and cooperation from the enforcement agencies are necessary. Deterrents such as
detention, treating electricity dues as land revenue in arrears, are effective and
worthy of emulation.

MPSEB recognize that   for the success of reforms the support from Consumers
remains vital. MPSEB therefore   focus on providing the best services to the

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consumers that include quality & reliable supply, quicker attention to fuse-off
calls and billing related problems.

MPSEB and it's companies is also setting certain targets in respect of consumer
care to ensure optimum consumer satisfaction.

Rectify Fuse Off Call Within 3 Hrs (in Cities & Towns).

Billing Related Problems (Cities) Redressal in 3 days.

Billing Related Problems (Rural D/C) Redressal in 7 days.

Receipt of money in the Electricity Board

[1] Sale of power to L.T. consumers

[2] Sale of power to H.T. consumers

[3] Sale of steam to H.T. consumers

[4] Hire purchase and hire receipts

[5] All other receipts, such as deposits, receipt for testing, reconditioning oil
,meter testing, service connections , rents, damages for losses, sale of
Materials/Obsolete/Scrap, sale of coal ash etc.

CONSUMER BENEFITS:-

MPSEB initiatives towards consumer protection and improvement in services:-

 Consumer complaint redressal.

 Establishment of Consumer Redressal Forums

 Intervention of Electricity Ombudsman

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 Online review of status of complaints lodged with the Forums from 1.1.08

 Establishment of Central Call Centers

 Online registration of complaints at Call Centers

 Spot Billing at select cities

 Facility of 24 hours bill payment at select cities

 Involvement of NGO's on consumer issues

 120 NGOs registered with MPERC

 Workshops for NGOs to create awareness amongst consumers

Performance standards

 Fuse off calls to be attended within 4 hrs and 24 hrs in urban and rural area
respectively.

 DTR replacement within 12, 24 and 72 hrs at Revenue Division, Towns

other than division and rural area respectively.

 Defective meters to be replaced within 15 & 30 days in urban & rural area
respectively.

 New connections:-
 Within 30 days in cases no extension work involved.
 Within 103 days in case of extension work involved but connection is other
than agricultural.

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  Within 133 days for agricultural connections subject to availability of
approach road respectively.
 Compensation to be given, if standard not met.

 Own your transformer scheme available to farmers at a lower rate:-

 few farmers together can avail a connection through owned transformer and
pay the bill on the basis of DTR meter and share the bill amongst
themselves.
 Tariff categories brought down to 12 from 21 & complexities reduced.
 Energy efficiency incentives upto 30 paise per unit given to farmers for
installation of ISI motor, friction less PVC pipe, foot valve and shunt
capacitors.

4]RESEARCH METHODOLOGY AND LIMITATIONS:-

4.1] RESEARCH DESIGN

Data Analysis:-Analysis of data is a process of inspecting, cleaning, transforming,

and modeling data with the goal of highlighting useful information, suggesting
conclusions, and supporting decision making. Data analysis has multiple facets and
approaches, encompassing diverse techniques under a variety of names, in
different business, science, and social science domains.Data analysis is closely
linked to data visualization and data dissemination.

The data of MPSEB for the years (2006-07 to 2009-10) used in this study have
been taken from secondary sources e.g., Published annual reports of the company.
Editing, classification and tabulation of the financial data, which has been collected
from the above-mentioned sources, have been done as per the requirement of the
study. For evaluating the performance and position of cash in this study the
technique of ratio analysis has been used.

4.2] HYPOTHESIS

This study has following null hypothesis:

Cash management position of MPSEB is not satisfactory during the study period.

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4.3] RESEARCH LIMITATIONS

 The study is limited to last years performance of the company.

 The data used in this study have been taken from published annual reports
only. As the requirement and necessity some data are grouped and sub
grouped.

5] ANALYSIS, INTERPRETATION & PRESENTATION:

29

28.46
28.5

28

27.5

27 26.93

26.5

26
EAST ZONE

31.3.08 31.3.09

TOTAL NUMBER OF CONSUMERS (IN LAC)

Page 25
21.5

20.99
21

20.5

20

19.5 19.45

19

18.5
CENTRAL ZONE

31.3.08 31.3.09

TOTAL NUMBER OF CONSUMERS (IN LAC)

28.2
28.01
28

27.8

27.6

27.4
27.28
27.2

27

26.8
WEST ZONE

31.3.08 31.3.09

TOTAL NUMBER OF CONSUMERS (IN LAC)

Page 26
 MAXIMUM DEMAND MET(MW)
MAXIMUM DEMAND MET(MW)

7019
6501
5929
5588
5049

2004-05 2005-06 2006-07 2007-08 2008-09

DEMAND OF ELECTRICITY

Installed Capacity(mw)
Installed Capacity(mw)
3780.5
3570.5

2990.5 2990.5 3050.5

2004-05 2005-06 2006-07 2007-08 2008-09

INSTALLED CAPACITY (MW) [MP’s Share]

Page 27
PROJECTS IN PIPELINE:-

 Amarkantak Taap Vidhyut Grah (2012)

 Shri Singa Ji –First Phase (2012)
 Satpura Vistar Ikai (2012)
 Bansagar Taap Vidhyut Pariyojana (2015)
 Shri Singa Ji –Second Phase (2015)

INSTALLED CAPACITY ,as on 31st March , 2009

Item Capacity(MW)
MP’s Share
Thermal Power Station 2,857.5
Hydel Power Station 917.5
Mini/Micro Hydro 5.455
Total 3,780.455
Joint Venture Project
Indira Sagar 1,000
Sardar Sarovar 826.50
Omkareshwar 520
Total 2,346.5
Central Sector
WR(Western Region) 2,084.13
ER(Eastern Region) 76.32
Total 2160.45
NVDA-Bargi
Other States
Rihand HEP (UP) 45
Matatila HEP(UP) 10
Total 55
Grand Total(all sectors) 8,352.405

Page 28
There are 4 types of voucher which MPSEB is using for maintaining the record of
payment and receipt.

1] Journal Voucher :- For correction in a/c code.

2] Credit Slip :- It is used for amount deposit in company’s account .

3] Debit Slip :- For payment use.

4] Transfer Voucher :- For fund transfer from one a/c unit to another a/c Unit.

Apart from this daily cash position is also maintained in separate account.

DISTRIBUTION COMPANIES

Item Poorv-Jabalpur Madhya-Bhopal Pashchim-Indore

Area(Sq. K.M.) 1,35,162 96,069 77,021
Population(Thousands 24,518 18,395 17,472
)
Consumers per 7,374 6,974 7,410
Distribution Center
H.T. Lines- Total 77,620 68,122 67,162
33KV 13,605 10,253 11,971
11KV 64,015 57,869 55,191
L.T.Lines 1,08,278 99,701 1,32,667
Units Sold 6,016 6,604 8,331
Total(Mkwh) 2,885 2,862 4,031
Area wise-Rural 3,131 3,742 4,300
-Urban
Consumption Per
Consumer Total(Kwh) 2,114 3,146 2,974
-Rural 1,549 2,658 2,462
-Urban 3,182 3,659 3,694

Page 29
 COMPARISION OF REVENUE RECEIPT AND
REVENUE EXPENDITURE

Rs. Crore
M.P. M.P. Power M.P. Poorv M.P.Madhya M.P.
2008-09 Power Transmissi- Distribution Distribution Pashchim
Generati- on Co. Ltd. Co. Ltd. Co. Ltd. Distribution
ng Co. Jabalpur Bhopal Co.Ltd.
Ltd. Indore
Revenue 2300.76 804.85 2291.00 2664.62 3204.23
Receipt
Revenue 2295.59 844.79 3301.00 3395.71 4343.18
Expenditure

As we can clearly see that except M.P. Power Generating Co. in all other cases
revenue expenditure is more than revenue receipt. It means cash outflow is more
than cash inflow and main reasons behind this are following:-

Cash Losses Significant

MPSEB, like other SEBs over the years, has also been incurring cash losses in its
operations. The Government of Madhya Pradesh has accepted that even though
MPSEB was making notional profits after accounting for subsidy receivable from
the government, in reality the subsidies were not received from the state
government. After setting up of the state regulatory commission, viz., MPERC in
FY2000, the practice of booking subsidy, not yet received, as income, has been
stopped. According to the white paper, the MPSEB had excess of expenditure over
revenue to the order of Rs 80–90 crore per month or about Rs 1000 crore per year
on the eve of bifurcation of the state of Madhya Pradesh into Madhya Pradesh and
Chattisgarh in 2000.

Free Power to Agriculturists

The Government of Madhya Pradesh, which came into power in 1993,
implemented its electoral promise of providing free power to agriculturists owning
a pump of less than 5 HP. In addition, it decided to provide free power to single
light connection to people below the poverty line. The resultant demand and
natural growth increased the peak unrestricted demand from 4314 MW in 1993 to

Page 30
6638 MW in 2000. The generation capacity, however, increased only to 4261 MW
from 3484 MW during the period leaving a wide gap. Even after buying power
from outside, the peak demand met on the eve of bifurcation of state was only
5566 MW.

MPSEB After Chattisgarh

After carving out a new state, Chattisgarh, from Madhya Pradesh, the latter was
left with only 2900 MW capacity, 68 per cent of the original capacity despite
utilizing 78 per cent of the energy consumption of the undivided state. Since the
remaining parts of Madhya Pradesh dominated in terms of connected agricultural
pumps (94 per cent of the total) and population (73.28 per cent of the total), the
revenue collection was only 64 per cent of the total revenue collection. It also
retained 78 per cent of the total employees. As a result of free unmetered power to
agriculture and single light connections, the T&D losses were assessed to be of the
order of 32 per cent on the eve of the bifurcation as against reported T&D losses of
22.68 per cent in 1993. Both these were gross underestimates. Earlier, the
agricultural consumption was estimated on a load factor of 21 per cent, equivalent
of 16 hours daily supply to the pump sets during Rabi season. Later it was revised
by MPERC in 2000 to 12 per cent, equivalent of 9 hours of supply during the rabi
season. On the eve of the carving out of Chattisgarh, the T&D losses for the
remaining parts of Madhya Pradesh were assessed to be of the order of 51 per cent.

Purchased Power Goes Up

With the carving out of Chattisgarh, Madhya Pradesh had to rely more on
purchased power on one hand and increased (as a proportion) commercial and
technical losses in distribution on the other. Its problems were further compounded
by allocation of 78 per cent of the total liabilities of the undivided SEB to the
MPSEB by the Government of India. The excess of expenditure over revenue on
the eve of bifurcation was assessed at around Rs 140 crore per month (Rs 1600–
1700 crore per year), almost double that of the undivided state. Madhya Pradesh
government initiated the reforms in the power sector in the state in 2000 by
enacting the reforms act and setting up an independent regulator. The reforms act
stipulated that tariff to any class of consumers would be at least 75 per cent of cost
to serve that class of consumer in a timeframe of five years.

Page 31
 SOURCES AND APPLICATION OF FUNDS

Particulars 2007 2008 2009

Sources of Funds 32,330,347,249 67,252,530,417 35,011,720,126
Application of 32,330,347,249 67,242,530,417 35,011,720.126
Funds
Total Current 11,877,341,305 4,569,720,053 9,829,923,139
Asset
Total Current 3,382,496,763 1,150,607,663 2,938.071.529
Liabilities

CASH FLOW MECHANISM 2006

The main objective of the Cash Flow Mechanism (CFM) is the
centralization of the cash management function across all the six companies
namely Madhya Pradesh Power Generating Co. Ltd. (GENCO) , Madhya Pradesh
Power Transmission Co. Ltd. (TRANSCO), Madhya Pradesh Paschim Kshetra
Vidyut Vitran Co. Ltd., Madhya Pradesh Poorv Kshetra Vidyut Vitran Co. Ltd.,
Madhya Pradesh Madhya Kshetra Vidyut Vitran Co. Ltd. (Collectively called as
DISCOM) and M.P. Power Trading Co. Ltd. (TRADECO) with the MPSEB. The
details of the arrangements worked out for various aspects of the CFM are set out
hereunder :

1. BASIC PRINCIPLES OF CASH FLOW MECHANISM :

i. TRADECO shall have first charge over entire generation of the GENCO
from the stations and projects listed in schedule-1 of the inter-se agreement
and shall purchase entire power from the GENCO at the tariff to be
determined / approved by the MPERC.

ii. TRADECO shall receive power from all other suppliers, viz. Central Sector
Stations JVs , Inter State Projects etc. in accordance with the

Page 32
 existing/ongoing PPAs with MPSEB now stood transferred to the
TRADECO.

iii. All the three DISCOMs shall buy power of their requirement from the single
source i.e. from TRADECO as per the inter se bulk supply agreement and
the tariff as determined by the MPERC.

iv. DISCOMS may advise TRADECO to buy short term power for their
immediate need. The cost of such power shall be a pass through to the
respective DISCOM.

v. TRANSCO shall transmit the power to the DISCOMS at the interface points
received through TRADECO as supplied by GENCO and form other sources
as defined in the para 2 above as per the bulk power transmission agreement
to be entered between TRADECO, TRANSCO and DISCOMS.

vi. All the six companies namely TRANSCO, GENCO,DISCOM EAST,

DISCOM WEST, DISCOM CENTRAL and TRADECO shall issue a power
of attorney in favour of MPSEB inter authorizing it to “own, collect and
distribute cash on behalf of the companies.

vii. All the cash collected by DISCOMS RAOs shall be transferred to MPSEB
a/c as per the existing arrangement as also discussed in point 3 cash
transactions.

viii. All letter of credits, Escrow comforts and working capital shall continue to
be maintained by MPSEB on behalf of the companies as MPSEB has first
charge over entire revenue of DISCOM from sale of power subject to
escrow agreements as per the existing arrangements enforced duly supported
by the authorization from companies.

ix. MPSEB shall allocate cash among companies based on a predetermined

priority for payment of expenses as per existing arrangements.

Page 33
 x. The companies shall authorize MPSEB to decide priority of payment as per
availability of cash.

xi. MPSEB shall continue to service the debt liabilities including generic loans
on behalf of all companies.

xii. Payments made by MPSEB to be adjusted against the bills raised by the
companies among themselves as per the inter se commercial agreements.
a. GENCO to raise invoice on TRADECO
b. Other power suppliers to raise bills on TRADECO
c. PGCIL and other transmission licenses facilitating power supply to
MP to raise invoice on TRADECO.
d. TRANSCO to raise invoice for transmission charges on DISCOMS
routed through the TRADECO.
e. TRADECO to raise invoice on DISCOM for power/energy supplied.
f. MPSEB to raise debit note on all companies for servicing of
liabilities which include generic loans.

xiii. Subsidy from GoMP if any shall be received by MPSEB and respective
credit to be passed on to the DISCOM to the extent of their eligibility to
obtain subsidy and payment made thereof by the state government.

xiv. MPSEB needs to maintain and account each in the name of the respective
companies to record and reconcile such transactions and adjustments.

xv. Adequate cash comfort for opening of LC shall be provided by MPSEB to

the companies as and when required against various purchase and woks
orders , on marit basis and on availability of limit.

Page 34
 2. BILLING PROCEDURE

i. GENCO will issue monthly bills to TRADECO on or before 7 th day of the

month for the units sent out during preceding month at the interface points
between GENCO and TRANSCO on the basis of joint meter readings.

ii. TRADECO, will receive periodic bills for the power purchased from Central
Generating Stations including from other sources and also for its
transmission/wheeling charges.

iii. TRANSCO will prepare separate monthly bills for each DISCOM on the
basis of the inter face meter readings adjusted to input level of the MP grid
at the approved tariff on or before 7th day of succeeding month and deliver
these bills to the TRADECO.

iv. The TRANSCO will issue monthly bills to the respective DISCOMs for the
units consumed by them adjusted at MP grid input level including UI charge
by 10th of every months. For this purpose bills issued by the TRANSCO or
the energy account statement issued by the SLDC shall be the basis for
determining the energy consumption by the respective DISCOMs.

v. TRANSCO will forward the bills of GENCO and other power suppliers duly
passed to MPSEB. Similarly DISCOMS will also forward the bills of power
supplied by TRADECO duly passed to MPSEB. MPSEB will arrange to
make payments within the given time schedule. The respective companies
will make debit/credit entries in their books of accounts.

vi. DISCOMs will send directly to the state government the claims for payment
of subsidy towards free and subsidized supply of power under intimation to
MPSEB.

Page 35
vii. MPSEB shall issue the “debit advise” to each company for all the debt
servicing made on behalf of companies giving details of repayments and
interest payments made, which shall be accounted for by the companies in
their books.

3. CASH TRANSACTIONS
i. Revenue collected from all HT/LT consumers of the DISCOMs will be
deposited in the respective RAO’s Revenue Collection Account as already
being done prior to issue of this notification.

ii. As per standing instructions to the banks, entire revenue collected in

DISCOMs collection account of respective RAOs shall be transferred
immediately in the existing MPSEB’s Account maintained by B & CM at
Jabalpur H.Q. on daily and immediate basis , routed through the “ Revenue
Collection Account” of the respective DISCOMs H.Q. except those RAOs
that are escrowed in favour of PFC/REF, revenue of which shall be
transferred directly in the existing MPSEB’s account at Jabalpur H.Q. The
revenue transfer from the escrowed RAOs will be treated as deemed
remittance done by the company head quarters and accordingly accounted
for the company books.

iii. By 10th of each month the companies will submit to MPSEB the monthly
fund requirement on weekly basis regarding their essential requirement their
essential requirements towords statutory payments. Fuel, A&G, O&M,
Capex, debt charges etc. based on the approved ARR and employee cost per
actual stating head wise details.

iv. MPSEB will remit the funds into the expenditure account of the respective
companies on normal due dates and subject to availability of funds towards
statuary payments , employee cost fuel charges, A&G, O&M & Capex etc.
While releasing the funds Directir (Finance) will ensure to maintain the
company wise percentages under the head A&G, O&M & Capex as per

Page 36
 compaany’s respective approved ARRs so that equitable treatment to all
companies is meted out.

v. MPSEB will make payments towords statutory requirements including

those arising out of various court orders, power purchase and including
wheeling charges and debt servicing.

vi. MPSEB will ensure honouring timely payments through L/Cs and Escrows
and also ensure to restrict overdraft to the extent possible while releasing
payments to the companies.

vii. The revenue received from the DISCOMs will be treated as adhoe payment
against power supply bills issued by TRADECO and wheeling charges bills
issued by TRANSCO. The payment made by MPSEB to the DISCOMs
through various heads and against ad-hoc revenue receipts from the
DISCOMs and net of receipts and payments shall be treated as actual
payments shall be treated as actual payments made by DISCOMs against the
energy as well as Transmission/ wheeling charges bills . Accordingly
necessary entries will be made in the books of account of MPSEB as well as
respective DISCOMs as illustrated in para 4(Accounting). MPSEB shall
maintain a separate account for each company for recording and
reconciliation of such adjustments and provide the companies with the
detailed statement of the net adjustment to the bills and net payments
effected by the companies on a monthly basis.

viii. MPSEB will receive subsidy from the state government against the
claims/bills raised by the DISCOMs and the amount shall be treated as ad-
hoe payment against energy bills issued to the concerned DISCOMs by
TRADECO and necessary entries will be made in the books of account of
MPSEB as well as respective DISCOMs.

ix. The payment made by MPSEB to the TRANSCO/GENCO through various

heads and against their debt liabilities shall be deemed to be ad-hoe

Page 37
 payments made to them against their bills to TRANSCO towards supply of
power/wheeling charges respectively. Accordingly necessary entries will be
made in the books of account of MPSEB as well as
TRANSCO/GENCO/TRANSCO as illustrated in para 4( Accounting).

x. ED & Cess collected by the DISCOMs and remitted to MPSEB along with
the transfer of entire revenue collected by DISCOMs will in turn be remitted
by MPSEB to the state government or adjusted against subsidy receivables
based on the directives of the state government.

xi. The amount received by MPSEB against any capital grant/loan, deposits and
reimbursement against claims from any agency will be remitted to the
respective companies in full and shall not form part of the revenue for the
purpose of these arrangements.

xii. Companies will maintain minimum required balance in their expenditure

account to avoid overdraft charges. The overdraft charges paid by MPSEB
shall be booked proportionately to all six companies generally in the ratio of
their respective expenditure on establishment A&G and O&M.

xiii. Payment of employee cost for those employees who are not assigned to any
of the companies and working I common services in MPSEB will be
charged prpportionately to all six generally in the ration their respective
employee cost as per ARR. MPSEB shall issue bills periodically towards
employee cost.

xiv. Expenses on account of common service facilities shall be proportionately

charged to the beneficiary companies and will be treated as deemed payment
towards A&G of the concerned company generally in the ratio of their
respective employee cost as per ARR. MPSEB shall issue bills periodically
towards these expenses.

Page 38
xv. At the end of the month MPSEB and the companies will reconcile their
accounts and make a statement of default/outstanding payments towards
each other.

xvi. At the end of the month, MPSEB will furnish to the TRADECO
consolidated statement of account for the transactions made towards sale and
purchase of power company wise and utility/agency wise and will also remit
the cash balance if any to TRADECO towards trading of power.

4. CASH FLOW ACCOUNTING

A)For the “DISCOMS”

i. To enable the billing & collection from all consumers & to receive funds to
meet out various expenses the DISCOMSs will maintain two bank accounts
in their names in each Regional Accounting Unit (RAOs) one Revenue
Collection Account & other “Expenditure Account” Each RAO will operate
these two bank accounts. At the HQs DISCOMSs will also maintain a
Revenue Collection Account for receiving revenue collection and
Expenditure Account for funds received from MPSEB to meet out their
expenses.

ii. All revenue collection will be received & accounted in the revenue
collection account. Accounting entries as currently passed will be continued
in the books of the DISCOMs.

iii. The DISCOMs will keep maintaining standing instruction to the banks to
remit all collections received on a daily basis to a designated central account
in the name of MPSEB (already maintained by B&CM). Thus all cash
received shall be immediately transferred to the control of the MPSEB.
Revenues received in the escrowed accounts meant for the debt repayment
for PFC / REC loans. In the eventuality of default, if PFC / REC draws their

Page 39
 over dues directly from these RAO’s accounts, it will be treated as
remittance to MPSEB in the books of the said DISCOM & in turn discharge
of debt liability of PFC / REC as the case may be.

iv. On all such such remittance made to MPSEB account the DISCOMs will
account the payment as an “Ad – hoc payment made to MPSEB” which will
be reconciled at the end of the month. Thus in the books of the DISCOMs
revenue will be accounted against bills raised & collected from the
consumers & the cash remittances will be shown as an advance adhoc
payment made to MPSEB against purchase of power from TRANSCO.

v. TRANSCO shall on a monthly basis raise invoices in the name of the

DISCOMs for the power purchased by them. These invoices shall be passed
shall be passed by the DISCOMs & accounted as expenditure in their books.
Invoices raised by TRADECO for power purchase should be credited to the
“TRADECO creditor” account to reflect settlement of specific power
purchase bills of TRANSCO. The liabilities so created shall be set off
against the “Ad – hoc” payment made to MPSEB account after due
confirmations with MPSEB. On such liability set off, the DISCOMs shall
pass a book entry transferring the amount from the “Ad - hoc” account to the
creditor account created in the name of “TRANSCO creditor” towards all
power purchases.

vi. MPSEB shall also remit in the expenditure account at DISCOM’s HQ.
Funds on a regular basis for the DISCOMs to meet the A&G routine or
essential O&M & establishment expenditure. Such remittance shall be set
off against the “Ad – hoc or advance payment made of MPSEB” the
DISCOMs will continue the remittance against the above account.
Expenditure accounting in the DISCOMs will continue to happen as usual.
The expenditure bills will be booked in the DISCOMs books & liabilities so
created will be settled from the remittance received from MPSEB.

Page 40
vii. The bills received from TRANSCO through TRANSCO will be accounted
in the books of the DISCOMs as expenditure. MPSEB will settle the
TRANSCO bills under the advice to the DISCOMs. The liabilities in
DISCOM books will be settled against the Ad – hoc payment made to
MPSEB on the basis of the advice received from MPSEB.

viii. Loan liabilities transferred to the DISCOMs through opening balance sheets,
as a part of the Transfer Scheme will continue to be in the books of the
DISCOMs MPSEB will settle these liabilities on a case – to – case basis
depending upon availability repayment. MPSEB will advice the DISCOMs
of having made payments on their behalf DISCOMs will account for such
liability reduction by crediting the “Ad – hoc payment made to MPSEB”
account.

ix. Under the normal circumstances the debit balance in the “Ad – hoc” account
in the books of the DISCOMs should represent surplus cash generated from
operations & ideally should be remitted back to the DISCOMs by MPSEB.
However, given the cash shortfall in the sector this account in the DISCOM
books will have a credit balance i.e. reflecting an accounts payable situation
in their books against power purchase bills directly paid out by MPSEB on
their behalf.

x. This credit balance may be analyzed & reduced based on the subsidies
received from the State Government.

(b) For the “GENCO”

i. In the case of GENCO each flow management will be based on the cash paid
out against their bulk supplies of power to their single buyer i.e. TRANSCO.

ii. From an accounting perspective GENCO will account for revenues on the
basis of the bulk supply invoices raised on TRANSCO. These receivables
will be settles based on payments made by MPSEB.

Page 41
c) For the “TRANSCO”

i. TRANSCO will raise invoices for transmission / wheeling charges on the

Distribution companies through TRADEO & account for the revenues.
These receivables will be settled against remittances received from MPSEB
on behalf of the DISCOMs.

d) For the “MPSEB”

i. MPSEB will have the accounting perspective as a temporary holder of cash

on behalf of all the sector entities.

ii. For this MPSEB will maintain 3 separate accounts for the 3 DISCOMs as
“Ad – hoc remittances received from DISCOM East / Central / West”. These
accounts shall be mirror accounts of the similar accounts maintained by the
DISCOMs.

iii. MPSEB will have its own separate accounts for the power purchase &
trading functions for & on behalf of TRANSCO.

iv. Depending on the utilization of funds. MPSEB shall carry out the following

 Bills raised by TRADECO for power sales on DISCOMs shall be

accounted in MPSEB accounts as revenues of TRADECO. Amounts
settled by MPSEB against these bills will be transferred through a
book entry from the relevant DISCOM debtor accounts to reflect the
settlement of specific bills for power sales.

v. Amount remitted back to DISCOMs for meeting their respective expenditure

& amounts paid against TRANSCO invoices raised on the DISCOMs will
be directly debited to the “Ad – hoc remittances …” accounts relevant to the
specific DISCOMs

Page 42
 (a) The same as in (b) shall apply in the case of loan liability payment made
by MPSEB on behalf of the DISCOMs.

(b) Copy of bills received from TRADECO for power purchase from
GENCO & other bulk suppliers shall be accounted as expenditure of
TRADECO in the books. Payments made to GENCO & the other bulk
suppliers shall be settled against such liabilities.

vi. On the monthly basis the DISCOMs & MPSEB shall be reconcile their
respective Ad – hoc remittances / payments accounts & ensure that the
balances reflect the correct position in each other books MPSEB will also
reconcile the accounts with the accounts with GENCO TRANSCO &
TRADECO on monthly basis.

e) For the “TRADECO”

i. On the monthly basis MPSEB shall furnish a single a single entry statement
to TRADECO the net & the final amount received & paid towards trading of
power company Utility Agency wise.

5. OTHER TRADING BUSINESS BY TRADECO:

In addition to meeting the demand of the 3 DISCOMs the TRADECO will also
trade the power to the other utilities within or outside the state in that Cash Flow
arrangement shall be as under:

i. Any surplus power of the state power sector can be sold by the TRADECO
to other buyers & proceedings from the Sale of power shall be deposited in a
separate bank account (Trading account) maintained by the TRADECO.
However the cost of energy at the rate being billed to the DISCOMs (Pooled

Page 43
 rate) shall be transferred in MPSEB account for making payments to the
power suppliers.

ii. The transaction from other trading of power i.e. purchase & sale of power
other than the pooled power of the sector shall be made from the
TRADECO’s Trading account which shall not be part of the Cash Flow
Mechanism.

6. DISPUTE RESOLUTION COMMITTEE:

i. Disputed relating to financial matters if any shall be resolved in the monthly

meetings between heads of F &A department in respective companies &
F&A head of MPSEB / TRADECO. They will take guidance & directives
from & directives from the financial Advisor MPSEB as and when
necessary.

ii. Disputes relating to commercial matters shall be resolved in the monthly

meetings between commercial head of TRADECO & counter parts in
respective companies. If required they will take guidance & directives from
the Financial Advisor / Secretary MPSEB.

iii. In the event any dispute either financial or commercial remains unresolved
the same shall be referred to the Apex Redressal Committee comprising of
CMDs / MD of the companies on quarterly basis or as and when required.

iv. If the Apex Committee is unable to arrive at a consensus then the matter will
be referred to the GoMP for adjudication. Decision of the GoMP shall be
final & binding on all the parties.

Page 44
7. CASH FLOW MANAGEMENT DURING TRANSIT PERIOD:

Process for issuing power purchase bills in the name of TRADECO may take some
time. Similarly for banking arrangements for fund transfer between MPSEB &
companies under the changed scenario, negotiations with bankers are to be
initiated & finalized. For switching over into the new arrangement the companies
would also require approval of their BoD. As such during the transition period
settlement of bulk power energy bills by MPSEB shall be treated as settled with
the TRADECO. The transit period will however be not more than 2 months.

8. RIGHT TO AMEND THE CASH FLOW MECHANISM:

i. The state government by issue of separate order(s) from time to time may
amend the CFM & make such provision as may appear to be necessary for
removing the difficulties arising in implementation of this mechanism.

ii. The Financial Advisor of MPSEB may make changes in the CFM from time
to time necessary from smooth operation of the cash flow mechanism to the
extent not disagreed by any of the Company under intimation of the state
government.

9. VALIDITY OF THE CASH FLOW MECHANISM:

The CFM will be valid till:

(a) The cash deficit in the revenue earnings & expenditure requirements is
resolved to the satisfaction of all the companies.
OR
(b) Issue of further directives from the state government.

One DISCOMs are in position to meet all their expenses including power purchase
pooling of the revenue earnings with MPSEB will not be required & the state
government by an order will terminate this mechanism.

Page 45
Specific Account Heads of Annual Statement of Accounts of MPSEB
(Rs. In Lakh)

S. Particulars 2007-08 2008-09

No
.
1 Net profit and loss for the period 5548.01 26800.77
2 Depreciation for this year 47620.19 51876.47
3 Subsidy receivable from govt. 146333.59 42189.99
4 Current Assets
a. Stocks 13010.01 14190.16
b. Receivables against supply of power 45832.71 100651.44
c. Cash and Bank Balances
d. Loans and Advances 8602 29192.01
e. Sundry receivables 1444.9 31504.08
5 Current Liabilties
Security Deposits from consumers 48526 6055.01
Power purchase payables 17753.69 193595.15
Staff related liabilities 19085.77 25083.05
Liabilities towards suppliers 6286.17 1281.95
Deposits-Elect. Sevice connect 859.67 3012
Interest accrued but not due of this year 4768.26 5652.74
Other liabilities 32832.08 14395.01
6 Fixed Assets 72679.12 16108.9
7 Capital work in progress 1440.16 32707.71
8 Investments 7210.47
9 Equity 150342.72
10 Consumer’s contribution 2952.4 2516.38
11 Loans 34847.79 285733.67
12 Reserves & Reserve funds 3062.24 3543.4

Page 46
 Increase/Decrease in specific account heads of annual statement of
accounts of MPSEB for Cash Flow Statement

2007-08 2007-08 2008-09 2008-09

S. PARTICULARS Increase Decrease Increase Decrease
NO.
1 Net profit and loss for the 5548.01 26800.77
period
2 Depriciation for this year 47620.19 51876.47
3 Subsidy receivable from 146333.59 42189.99
govt.

4 Current Assets

a Stocks 13010.01 14190.16

b Receivables against supply 45832.71 100651.44
of power
c Cash and Bank Balances
d Loans and Advances 8602 29192.01
e Sundry receivables 1444.9 31504.08

5 Current Liabilities

a Security Deposits from 48526 6055.01

consumers
b Power purchase payables 17753.69 193595.15
c Staff related liabilities 19085.77 25083.05
d Liabilities towards suppliers 6286.17 1281.95
e Deposits-Elect. Sevice 859.67 3012
connect
f Interest accrued but not due 4768.26 5652.74
of this year
g Other liabilities 32832.08 143395.01

6 Fixed Assets 72679.12 16108.9

7 Capital work in progress 1440.16 32707.71
8 Investments 7210.47 15965.94
9 Equity 150342.72
10 Consumer’s contribution 2952.4 2516.38
11 Loans 34847.79 285733.67
12 Reserves & Reserve funds 3062.24 3543.4

Page 47
13 Total Increase/ Decrease 473418.1

14 Net Increase/Decrease in 12607.53

cash and cash equivalent

CASH FLOW STATEMENT (For the year ended 31st March -2008 & 2009)

(Rs. In lakh )

2007-08 2007-08 2008-09 2008-09

A Cash flow from Operating
Activities
1 Net profit and loss for the 5548.01 -26800.77
period
2 Depriciation for this year 47620.19 53168.2 51876.47 25075.7
a Subsidy receivable from -146333.59 42189.99
govt.

Current Asset
a Stocks -13010.01 -14190.16
b Receivables against supply 45832.71 -100651.44
of power
c Cash and Bank Balances
d Loans and Advances -8602 -29192.01
e Sundry receivables 1444.9 -31504.08
(A) Net change in current asset -120668.47 -133347.7
(a+b+c+d+e)

Current Liabilities
f Security Deposits from -48526 -6055.01
consumers
g Power purchase payables -17753.69 193595.15
h Staff related liabilities -19085.77 -25083.05
i Liabilities towards suppliers -6286.17 1281.95
j Deposits-Elect. Sevice -859.67 -3012
connect
k Interest accrued but not due 4768.26 5652.74
of this year
l Other liabilities -32832.08 143395.01
(B) Net change in current

Page 48
 liabilities(f+g+h+i+j+k+l) -120575.12 309774.79
3 Net cash flow from -93.35 -443122.49
operating activities[(A)+(B)]

B Cash flow from Invetsing

Activities

a Fixed Assets -72679.12 -16108.9

b Capital work in progress -1440.16 -32707.71
c Investments -7210.47 15965.94
4 Net Cash flow from -81329.75 -32850.67
investing activities

C Cash flow from Financing

Activities
a Equity 0 150342.72
b Consumer’s contribution 2952.4 2516.38
c Loans 34847.79 285733.67
d Reserves & Reserve funds 3062.24 3543.4
5 Net cash flow from 40862.43 442136.17
Financing Activities Net
6 Increase/Decrease in cash 12607.53 -8761.29
and cash equivalent
(2+3+4+5)
7 Cash and cash equivalent at 2914.24 15521.77
the beginning of the period
8 Cash and Cash equivalent at 15521.77 6760.48
the end of the period

Page 49
MAJOR FACTORS THAT CONTRIBUTE TOWARDS NET
INCREASE/DECREASE IN CASH AND CASH EQUIVALENT

1. For the year ended 31st March 2008:- Net increase in Cash and Cash
Equivalent for Rs. 12607.53 Lakh are as following:-
I. Decrease in Sundry Receivables for Rs. 1444.90 Lakh
II. Interest accrued but not due of this year for Rs. 4768.26 Lakh
III. Increase in Consumers Contribution for Rs. 2952.40 Lakh
IV. Increase in reserve and Reserves funds for Rs. 3062.24 Lakh

All these major factors which simultaneously contributes towards net increase in
cash and cash equivalent for the year ended 31st March 2008.

2. For the year ended 31st March 2009:- Net decrease in cash and cash
equivalent for Rs. 8761.29 lakh are as following :-
I. Increase in stocks for Rs. -6055.01lakh
II. Increase in deposits- Elect. , service connection for Rs. -3012 lakh

These two major factors which simultaneously contributes towards net decrease in
cash and cash equivalent for the year ended 31st March 2009.

LINK BETWEEN CASH AND BANK BALANCE AND

NET PROFIT & LOSS
For the year ended 31st March 2008:- Net increase in cash and bank balance
from Rs. 2914.24 lakh to Rs. 15521.77 lakh due to increase in net profit for Rs.
5548.01 lakh.

For the year ended 31st March 2009:- Net decrease in cash and bank balance
from Rs. 15521.77 lakh to Rs. 6760.48 lakh due to increase in net losses for Rs.
26800.77 lakh.

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 WORKING CAPITAL
(1) For the year 2007-08:- There was decrease in working capital for Rs.
93.35 lakh , which means that it was cash inflow in the organization.

(2) For the year 2008-09:- There was decrease in working capital for Rs.
443122.49 lakh, which means that it was cash inflow in the organization.

CONCLUSION FROM CASH FLOW STATEMENT

(1) The difference between Net profit and loss for year 2007 and 2008 i.e. for
Rs. -16682.54 lakh and Rs.5548.01 lakh are Rs. -22230.59 lakh. This margin
cash and cash equivalent comes from the year 2008 for the following
activities:-

i. Increase in loans and advances for Rs.-8602.48 Lakh

ii. Increase in liabilities towards suppliers for Rs.-6286.17 Lakh
iii. Increase in Investment for Rs.-7210.47 Lakh

(2) The difference between Net Profit & Loss for year 2008 & 2009 i.e. For
Rs.5548.01 Lakh & Rs. -26800.77 Lakh are Rs. 32348.78 Lakh. This margin
cash & cash equivalent comes from the year 2009 for the following activities:-

i. Decrease in subsidy Receivables from govt. for Rs. 42189.99 lakh

ii. Increase in Fixed Assets for Rs. -16108.90 lakh
iii. Increase in Consumer contribution for Rs. 2516.38 lakh
iv. Increase in Reserve & Reserve funds for Rs. 3543.40 lakh

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6] CONCLUSION AND SUGGESTIONS:-

6.1]CONCLUSION

1] A very big problem with MPSEB is that it has less cash income from consumers
but more expenses on generating and purchasing of power.

2] Company increasing loans every year for working capital from state govt. and
central govt. but not able to pay the interest on loan and make repayments of loan
principal amounts.

3] Company increasing loans every year for working capital from state govt. and
central govt. but not able to pay the interest on loan and make repayments of laon
principal amounts.

4] Increase in debtors shows that cash collection is less than sales figure which is
showing in revenue account.

5] The company is not getting full recovery against the bills receivables.It is
reducing company’s cash flow.

6] The company is able to recover only about 85% out of 100% of its bills for
power distribution.

6.2] SUGGESTIONS

On the basis of findings we offer following suggestions:

1] MPSEB should curtail their cash expenditure and increase their cash in hand,
cash at bank, and marketable securities.

2] Board should try to increase their liquid assets and decrease current liabilities so
that firm can easily meet out the current liabilities. At present the current liabilities
or short term liabilities are not secured.

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3] Board should not only increase cash in hand, cash at bank, and marketable
securities but also increase other current assets for payment of short term liability.

4] Board should curtail their long term borrowings from short term funds so that
financial obligation may be managed properly.

5] MPSEB should try to maintain adequate amount of cash in hand and cash at
bank among total current assets so that liquidity could be maintained.

6] Spot Billing: Spot billing using handheld computers was introduced in

November 2001 in Hyderabad, and now it has been introduced throughout the
state. A meter reader reads the meter and produces a bill immediately using the
handheld computer. According to APCPDCL, there has been a remarkable increase
in billing demand and in customer satisfaction. The company has been able to
reduce the time from when the meter is read until the company receives the
payment from the customer by half (from 90 days to 45days). This has resulted in
better cash flow for the company. As a result, the bills are not bunched, which is
better monitoring and reduction of billing complaints. MPSEB can also adapt this
technique.

7] The Company should re-appraise its investment options to achieve the stated
growth objective.

8] The Board has to reduce its current liabilities.

9] The Board is not making full recovery against the bill of electricity issued to
consumers for which company has to make strict policy rules. They can outsource
people for the bill collection purpose.

10] The Board should estimate funds requirement and then consider best
alternative option.

11] The Board should first compare and then choose the growth plan and the
relevant financing option from various alternatives.

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12] Board should control line loss and losses through theft.

13] Board should charge government because government provides free electricity
to farmers and free electricity in rural areas.

14] Remove power shortage in the State by setting up new generating power
projects to meet the ever increasing power demand.It will increase the cash inflow
ultimately.

15] Strengthening and system improvement of Sub-Transmission and Distribution

system, Energy Audit, 100% meterisation and prevention of theft will increase
profits and then cashinflow.

16] To bridge the Rural – Urban gap by extending the electricity to all the villages
of the State and habitation and provide access to electricity to all rural households
also help in making long term profits and increasing cashinflow.

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 ANNEXURE- 1
RULES AND REGULATIONS

I. The Electricity Supply Act, 1948.

II. Fundamental Rules.

III. M.P.Civil Services(Classification, Control & Appeal)Rules.1966

IV. M.P.Civil Services (Conduct)Rules,1965.

V. M.P.Civil Services(Medical Attendance)Rules,1958.

VI. M.P.Civil Services(Leave)Rules, 1977

VII. General Service Regulations.

VIII. M.P. Reforms Act. 2000.

IX. M.P. Reorganization Act.2000.

X. M.P.Electricity Act. 2003.

XI. ESSAR 1985.

XII. Commercial Accounting Mannual.

XIII. Cash Accounting Mannual.

XIV. Standard standing orders

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ANNEXURE- 2

BIBLIOGRAPHY:-

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 I M Pandey (Financial Management)

 Prasanna Chandra (Financial Management Theory and Practice)

 Audit Reports

 Shashi K. Gupta and R.K.Sharma(Financial Management)

 Company Account & Cost & Management Accounting Paper-2 (Part-B)

[The institute of company secretaries of India]

 Management Accounting (King’s Books)

 www.mpseb.co.in

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