SAIL JO Manual 2022 - General Functional Management
SAIL JO Manual 2022 - General Functional Management
SAIL JO Manual 2022 - General Functional Management
2.1 Overview-
2.2 Material Planning & Indenting
2.3 Management of Automatic Procurement Items
2.4 Procurement of Material
2.5 Procedural aspects
2.6 Vendor Management
2.7 Inspection of Inbound material
2.8 Transportation of Inbound Material
2.9 Stores Functions
2.1 Disposal & Dispatch of material
0
2.1 Inventory Management
1
2.1 Computerization of MM activities
2
3.0 Finance & Accounts
5.1 RTI
5.2 CSR
5.3 Employee Communication
5.4 Essential Computer Skills
Chapter – 1
Personnel Management
All Managers have direct responsibility for the human resources in an organization and
are responsible for activities and decisions concerning people. In this sense all
managers are personnel managers. Still most organizations have a separate personnel
department to coordinate all personnel activities, which mainly consist of the following.
The Human Recourse Plan is prepared on both long term as well as short-term basis.
In SAIL annual Human Resource Plan is prepared keeping the overall separations and
additional requirement into consideration. Such annual plans are short term Human
Resource Plan. The long-term plans are prepared keeping into view the long-term
objectives of the organization. In long-term plan, factors like employment cost and
labour productivity are also kept in view so that operational efficiency can be
maintained to remain competitive in the industry.
In the context of the sweeping changes in the global market, the human resource
would continue to be the most vital key in realization of targets.
Some of the objectives/issues that are envisaged to be addressed through Human
Resource Planning :
i. Achieving progressive increase in Labour Productivity
ii. Preparedness to work with state-of-the-art technology
iii. Identification and bridging the skill gap
iv. Correction in age-mix
v. Ensuring availability of a competent workforce
v. Continued thrust on multi-skill training for ensuring optimal utilization
of manpower
vii Preparing employees for redeployment to meet future plans
Recruitment in SAIL
SAIL is a continuous process industry with state of the art technology. To operate this
industry, SAIL needs highly skilled personnel and competent managers. In order to
meet the present and future manpower needs in diverse disciplines, multiple skills and
different work areas, SAIL is committed to a system of selection that ensures induction
of the best and most competent personnel to take up challenging assignments in the
company. All the posts in the Steel Plant are classified into two categories:
(i) Executives and
(ii) Non-Executives.
Executive Posts- The following policies govern the recruitment of the executives-
i. The recruitment of the executives at the induction level like Management
Trainee (Technical), Management Trainee (Administration) etc. is centrally done
by Corporate Office. Recruitment of Medical Officers is done at Plant level.
ii. At Central level, normal mode of recruitment is through All India Open
Advertisement. At induction level, the selection procedure generally involves
written test, group discussion and interview. However, some posts are also filled
through Campus Selection like MTA-Finance, MTA-Law, Management Trainee
Fire etc., where the candidates are subjected to Group Discussion & Interview
and are not required to undergo the written test. In exceptional cases, for
recruitment at senior level, selection is based only on interview.
iii. In SAIL except for recruitment of specialists in Medical department direct
recruitment at middle and senior level of management is very rare and is
introduced as Lateral recruitment. Posts in the higher levels in the executive
cadre are normally filled up through promotion
Non-Executive Posts
Recruitment of candidates for non-executive posts is done on All India Basis. The
Compulsory Notification of Vacancies Act, requires that the all the vacancies should be
notified to the Regional Employment Exchange, which sponsors the suitable
candidates registered with it against such notifications. As per Government Guidelines,
such vacancies also need to be advertised in the employment news as per
administrative convenience. In SAIL such vacancies/positions are notified on career
page of SAIL careers website @ sailcareers.co.in against which interested and eligible
candidates can apply and submit their applications online. Candidates applying directly
against such advertisement or notice are also required to be considered along with the
candidates sponsored by the employment exchange.
.
Redeployment:
While the Recruitment involves selection of candidates from external sources,
Redeployment is the process in which suitable candidates are identified for deployment
from within the organization. The meaning of the term Redeployment is to change the
job / workplace of the employees from their existing job/workplace after necessary
training / up gradation of skill to meet the requirement of the organization and
individual’s requirement. This process is continuously carried out to meet
organizational requirement and also the requirement of the individual.
Redeployment in an organization helps individual employees in learning new skills and
thereby breaks the monotony of doing the same job over the years. It helps them to get
exposure to newer technology and also prevents job loss in an industry / organization.
Also,for the organization also there are gains that accrue from redeployment in the
form of improved productivity of employees and better utilization of employees who are
accustomed to the culture of the Organization.
LABOUR PRODUCTIVITY
Labour Productivity (LP) is considered as an indicator of productivity of the workforce
directly engaged in production process of any organization. Organization projects LP
as an improvement factor and makes effort to bring it at par with the competitors in the
industry or world class organizations. Being a manufacturing industry, SAIL gives
continuous thrust to enhance its LP to bring it at par with other Steel Manufacturers.
Basically there are two ways to enhance the LP, either by reducing manpower or by
increasing production. In SAIL, substantial improvements have been noticed in LP due
to manpower right-sizing and improvement in production as an outcome of adopting
advance technologies in operations. The status of last ten years manpower vis-à-vis
LP is as under:-
344 389
80000 350
315 320 72339
302 76870 69379
70000 278 65564 300
258 62620
60000 250
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-211.2.2022
Manpower 101878 97897 93352 88655 82964 76870 72339 69379 65564 62620
LP 258 278 302 315 320 344 389 400 396 464
The present method of calculating LP in SAIL is based on the methodology prescribed
in the PM’s trophy scheme. As per this method the main components of LP calculation
are as under:-
i) Crude Steel (CS) Production during the period
ii) Pig Iron (PI) production during the period
iii) Works – Technical Manpower during the period
Training facilitates the development of employee knowledge and skills which in turn
help in attainment of organization’s goals and objectives. The gap between the actual
and desired competence of the individuals and teams can be bridged by systematic
HRD inputs to achieve effective results.
Accordingly, SAIL has formulated training and development initiatives for its
employees. The salient features of these initiatives are:
The technical programs are evaluated to assess their effectiveness. The gap between
the desired effect and the actual effect is analyzed to develop new programs or to
modify the existing programs.
Competence Development
Competencies can be grouped under four areas which are: Technical, Managerial,
Functional and Leadership.
The methodology adopted for Competency Mapping in SAIL involves the following
process:
• Identification of competent manpower in different areas/functions of the
Department.
• Identification of knowledge and skill level in respect of other employees keeping
in view the job requirement/competency.
• Identification of important training needs emanating from competency mapping
• Systematic training efforts to build competencies and bridge the skill gap.
The Managerial and Leadership Competencies are based on SAIL Competency
framework. The framework has 8 Competencies under 4 Leadership Pillars as given
below-
- Business Leadership Pillar
o Strategic Orientation
o Business Acumen
- Relationship leadership pillar
o Customer Orientation
o Managing External Stakeholders
- Result Leadership Pillar
o Change Management
o Execution Excellence
- People Leadership pillar
o People Management
o Personal Effectiveness
Whether
Competent N
Send the list of Employees
Identified for Training to
HoD/HoT
Yes
• Basic Engineering Skills: Training on Basic technical trades that form the
foundation of competent working
• Lab based training: Training aided by simulations in specialized areas like PLC,
Hydraulics and Pneumatics in special training labs
i. To introduce the employees to the organization and familiarize him with it.
ii. To acquaint a new employee with the place of work.
iii. To inform about what is expected from him/her on the job.
iv. To be aware of the rules and regulations of the company.
v. To help a new entrant assimilate the organizational culture and speed up the
adjustment process
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vi. To assist the new employee develop his skill and competence and to contribute his
best.
The treatment a new employee receives during the early days in the new job and the first
impressions made on his/her mind is likely to be a lasting impression. Careful introduction to
his/her job will make adjustment to the job more rapid, mistakes fewer and attitude more co-
operative. Therefore, induction training has to be carefully planned out. In SAIL, Induction
Training Schemes have been formulated for various categories of trainees like, Management
Trainees, Junior Manager (Finance) and for Non-executives; each plant has made their own
training schemes for the new entrants.
The affiliation of our Plant Training Centers at BSP, BSL, RSP, DSP and ISP has been
completed.
SAIL has developed Online e-learning portal- www.eAbhigyan.com. The portal is based on
the Internet and is accessible from anywhere and anytime. All regular employees of SAIL
have access to the portal. All program modules of MTI, Ranchi are available in the portal.
Each of the Integrated Steel Plants , CET, CMO and Mines have their Virtual Campus in the
Portal in which learning material have bee made available by the Plants. Some Major Types
of e-learning modules and material that are available are – Managerial, Technical, Functional,
inputs on Digital Transformation. Online Communities of Practice (CoPs) for various technical
and functional areas like – BF, CO, SP, Finance, HR are also available with inputs shared on
the LEO workshops and option for raising technical queries and questions that can be
responded by experts who are enrolled from across SAIL. All MTI programs that have Online
tests, are administered through e-Abhigyan. eAbhigyan learning portal of SAIL has been
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instrumental in enabling Learning and Development continuity in SAIL particularly during the
pandemic.
After working in a certain job for some time, the employees develop expertise to do so. The
job becomes a routine and interest of employee in doing the same starts waning. It is in
Organization’s interest that the experience/expertise gained at one level of hierarchy is
effectively utilized and the deserving employees get an opportunity to assume higher roles
and responsibilities. It is therefore essential to put in place avenues for the employees, so
that, they continue to acquire new knowledge, skill and experience and apply it in the interest
of the Organization which leads to recognition and higher motivation. With wide experience
and acquisition of managerial skills, an employee becomes capable of shouldering higher
responsibilities. An organization requires such motivated employees to see it through the
various challenges and to take it forward. Thus, a good career growth system works for the
mutual benefit of both the employees and the organization.
(i) To integrate the growth opportunities of employees with the fulfillment of the
objectives of the Company.
Promotions within executive posts are effected only once in a year, i.e. on 30 th June with the
exception for promotion from E-1 to E-2 grade which takes place twice in a year i.e. on
30thJune and 31stDecember.
i. It provides for the concept of clusters for the purpose of promotion and career
planning.
ii. For the purpose of promotion, Average Credit Points (ACP) is the main basis for
determining eligibility for promotion based on the relative weightage of all factors
based on which merit list is derived. The ACP is calculated based on the appraisal
scores of the past years in the prescribed manner. Other factors, which are reckoned
for promotion, are qualification, length of service in the grade and Interview.
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iii. Provides for mandatory ‘Online Test’ and Prescribed Training Programme for select
grades.
iv. Utilization of outcome of the Assessment &Development Center as an input for the
Interview Committee for E-7 grade executives from 30.06.2022 onwards and from
30.06.2023 for E-6 grade executives.
v. Promotion between clusters is based on fulfilling the eligibility criteria and assessment
by theInterview Committeeand Departmental Promotion Committee.
Promotions within non-executive positions are effected by each Plants/Units at its respective
level. Promotions within non-executive positions are based on cluster system. Though the
system of grant of promotion somewhat differ from plant to plant, the promotions are mainly of
following two types:
➢ Within cluster promotion
➢ Between cluster promotion
While within cluster promotions are time bound, the between cluster promotions depend on
availability of vacancies and the suitability of the candidates for the higher post.
The promotion policies explained above are structured systems wherein promotion orders are
issued as per the specified rules at prescribed intervals and the employees who fulfill the
eligibility criteria are considered for promotion to assume higher positions in lien with
organizational requirements/vacancies.
Job Rotation: Job rotation is another tool for development of the employee to enhance
his/her expertise and exposure and prepare for assuming challenging assignments. Besides
routine transfers/postings based upon organizational requirements, Job-rotation normally
happens through following means
On some occasions, in order to meet requirements at one Plant/Unit towards specialized skill-
set/expertise, applications are invited from eligible and interested employees against the
requirements circulated. The circular contains the job specification and other terms &
conditions of selection. Willing and eligible employees are required to apply for selection and
the short-listed employees are required to go through a selection process, including interview
by a selection committee. Candidates selected after following the laid down selection process
are transferred and posted to the Plant/Unit for which the requirements was circulated.
Promotions within non-executive positions are effected by each Plants/Units at its respective
level. Promotions within non-executive positions are based on cluster system. Though the
system of grant of promotion some what differ from plant to plant, the promotions are mainly
of following two types:
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Within cluster promotion
Between cluster promotion
While within cluster promotions are time bound, the between cluster promotions depend on
availability of vacancies and the suitability of the candidates for the higher post.
Non-executive to Executive promotion Policy (JO promotion Policy)
• A new policy for promotion from non- executive to executive cadre has been
introduced in SAIL from the year 2008 which is last revised in 2022.
Main features of the policy are as under :-
• The eligibility in terms of number of years of service has been linked to S6 grade. The
employees having Degree in Engineering /MBA, Diploma In Engineering/Graduation
and matric qualification are eligible if they have put in 2 years, 5 years and 10 years in
S6 grade respectively, provided they have put in minimum 10 years of service in the
company. This has been done to provide opportunity to young and deserving
candidates for faster career growth.
• For fair and objective selection process written test has been introduced, which has a
weightage of 60%. In order to recognize the value of experience and the past
performance on the job, the experience and performance ratings have been assigned
a weightage of 16% and 9% respectively. Rest 15% weightage is given to Interview
• Employees have been provided opportunity to appear for selection for technical or
non-technical stream provided they meet the eligibility criteria and compete in that
stream.
The internal circular is a process, which comes in between the promotion and recruitment.
Like recruitment, in internal circular posts are advertised through internal circulation. The
circular contains the job specification and other conditions of selection. Willing and eligible
employees are required to apply for selection and the short listed employees are required to
go through a selection process, including interview by a selection committee.
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employees, teams and the organization and to identify and develop leadership talent for
future.
Statutory Provisions
Objective
The Payment of Wages Act, 1936 ensures that the wages payable to employees covered by
the Act are disbursed by the employers within the prescribed time limit and that there is no
deductions made by the employers other than those authorized by law
Definition of Wages
▪ Wages includes all remuneration in terms of money and includes payment under award
or settlement and payment in respect of OT and holidays.
▪ Does not include value of accommodation, light, water, medical facilities, TA, LTC/LLTC
and contribution to PF or pension.
Main provisions
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National Joint Committee for the Steel Industry (NJCS)-For Workmen
SAIL has a rich culture of involving employees at various levels and in various forms.
Participation through Collective Bargaining – The issue related to finalization of wages and
allowances is decided at the corporate level by a bi-partite forum called National Joint
Committee for Steel Industries (NJCS). The NJCS has representatives of all the major
national trade unions operating in the steel industry and representatives of the management
of SAIL. The Committee decides its own terms of reference without interference from any
external agency. Other than employee related issues, issues like production-productivity,
improvement in quality reduction of cost and wastage etc. are also under the purview of this
Committee. Decisions in NJCS are taken through the process of collective bargaining. Till
date nine Wage Agreements finalized by NJCS have been successfully implemented in Steel
Industry. While discussing the Wage Revision, a MOU was signed in NJCS on 21-22 October,
2021 which shall be valid for 10 years w.e.f. 1.1.2017. After the approval of SAIL Board and
MoS, an office order for Wage Revision, 2017 has been issued vide dated 18.11.2021.
1.1 For employees who were on the rolls of SAIL as on 31.12.2016 and continued to be
on the rolls as on 1.4.2020.
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2.0 Dearness Allowance
3.1 Concept of Variable perks & allowance shall be adopted w.e.f. 18.11.2021 and the
employees would be paid variable perks and allowances @ 26.5% of revised Basic
Pay.
3.2 The Payment of variable perks & allowances would be linked to attendance as per
existing practice.
3.3 All existing Perks & Allowances being paid to non-executive employees shall be
subsumed and all payments/related issues (in any form) stands withdrawn except the
following which shall continue to be paid and would be outside the ceiling of variable
perks and allowances:
• Night Shift Allowance for performing duty in ‘C’ shift (2200 Hrs. to 0600 Hrs.)
• Mining Allowance being paid at underground Mines/Collieries.
• Special (Difficulty) Area Allowance shall be paid 8% of revised Basic Pay w.e.f.
18.11.2021.
• Underground Allowance shall be paid 12% of revised Basic Pay w.e.f.
18.11.2021.
• Washing Allowance to Nursing/Fire Fighting Staff.
• Uniform Allowance, if any, to Nursing/Fire Fighting Staff.
3.4 The subsidies extended to non-executives employees shall stand withdrawn with
implementation of variable perks.
4.1 The current system of percentage rate of Increment @ 3% of Basic Pay shall
continue. However, the maximum of scale of pay for increment value may be derived
by adding the maximum of scale in 2012 structure plus DA as on 1.1.2017 and by
adding 13% of this maximum of scale and DA.
Revison of Scales of Pay of Executives Holding Posts Below Board Level w.e.f.
01.01.2017- For Executives
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1.0 Scales of Pay
*The executive in E-1 grade will be placed in the scale after completion of one year or
successful completion of training.
3.1 The executives who were on the rolls of Company as on 1.1.2017 and continue to be
on the rolls of the Company as on 1.4.2020 will be fitted in the corresponding revised
scales of pay as per the following fitment methodology:
A B C D
Basic Pay + + IDA @ + 15% of (A+B) = Aggregate amount
Stagnation 119.5% as rounded off to the
Increment as on 1.1.2017 next Rs.10
on 31.12.2016
*In case revised BP as on 1.1.2017 arrived so is less than the minimum of the revised
pay scale, pay will be fixed at the minimum of the revised pay scale, pay will be fixed at
the minimum of the revised pay scale.
4.0 Increment
4.1 A uniform rate of 3% of Basic Pay will be applicable for both annual increment as well
as promotion increment and would continue to be paid. The amount of increment will
be rounded off to the next Rs.10. However, Basic pay in no case will exceed
maximum of applicable scale of pay.
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5.0 Stagnation Increment
5.1 In case of reaching the end point of pay scale, an executive would be allowed to
drawn stagnation increment, one after every two years upto a maximum of three such
increments provided the executive gets a performance rating of ‘Good’ or above.
6.1 100% DA neutralization. DA as on 1.1.2017 will become zero with link point of All
India Consumer Price Index (AICPI) 2001=100, which is 277.33 as on 1.1.2017. The
periodicity of adjustment will be once in three months, as per the existing practice.
The above rates of HRA will be revised to 27%, 18%, 9% for X,Y and Z class cities
respectively when IDA crosses 25% and further revised to 30%, 20% and 10% when
IDA crosses 50%.
However, the issue of House Rent Allowance shall be decided separately and Chairman
may be empowered to take a decision on HRA. Till such time the existing HRA being
paid to executives shall continue.
9.1 Concept of ‘Cafeteria Approach’ shall be continued for payment of perks and
allowances to executives. The Perks &Allowances in the revised structure would be
paid @35% of Basic Pay. The recurring cost incurred on running and maintaining of
infrastructure facilities like hospitals, colleges, schools etc. would be outside the
ceiling of 35% of Basic Pay.
9.2 As regards Company owned accommodation provided to the executives, the
Company would bear the Income Tax liability on the ‘non-monetary perquisite’ of
which 50% shall be loaded within the ceiling of 35% of revised Basic Pay on perks and
allowances.
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10.0 Other Perks & Allowances (beyond the ceiling of 35%)
10.1 Work based Hardship Duty Allowance for actually performing duty in Underground
mines would be 12% of Basic Pay.
10.2 Non-practicing Allowance (NPA) has been allowed @upto 20% of Basic Pay and shall
be payable as per the following categories:
The NPA shall not be considered as pay for the purpose of calculating other benefits.
10.3 Special (Difficult Area) Allowance being paid to executives posted and working in Iron
Ore and Flux Mines under SAIL would be 8% of Basic pay.
The above Perks & Allowances i.e. beyond the ceiling 35% would be paid on revised
Basic pay from the date of issue of Presidential Directive i.e. 18.11.2021.
11.0 Periodicity
11.1 The next pay revision shall take place in line with the periodicity as decided for Central
Government employees but not later than 10 years.
12.1 Revised Performance Related Pay Scheme will be effective from FY 2020-21 as per
OM dated 3.8.2017 issued by DPE with the approval of Remuneration Committee.
Incentive Schemes are being operated in SAIL since late 80’s. The main objective of
Incentive /Reward Schemes is to motivate the employees to enhance production /
productivity at a greater pace to achieve overall goals of organization. The initial schemes
were mainly production oriented and the overriding concern was to achieve the production of
steel plants to its rated capacity. Over a period of time the basis of the incentive schemes
shifted from production to productivity and techno-economic parameters.
ii) Reward schemes: These are based on achievement of Annual Planned Production
(Target) and techno-economic parameters. Reward schemes are mostly level based
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and are generally hit or miss in nature. Unlike incentive schemes which are negotiated
the reward schemes are implemented unilaterally.
Since 01.04.2014, the incentive and reward schemes are applicable for non-executive
employees only. Incentives / rewards earnings are paid on monthly basis.
Component Non-Executives
Production 50%
Cost 15%
Quality 15%
Profitability
• Works Cost 10%
• Gross Margin 10%
The incentive linkages to the maximum earning potential are different for different groups /
departments depending upon their direct contribution to production and the working hours
/week. The Production Departments linkage is 100%, whereas potential of Service
Departments of works like Traffic, Production Planning etc. ranging from 75% to 90%. In
non-works area, incentive linkage is 50% or 28% depending upon 48 hours working or less.
Incentive linkage of the employees of Central Units (working for 48 hours or less per week) is
40% whereas for Corporate Office employees the same is 50%. The incentive amount of
Central Units (including Corporate Office) is calculated based on the average of incentive
earning of BSP, DSP, RSP & BSL.
• The incentive earning of employees should be linked to their actual attendance. The
attendance provision in incentive scheme intends to reward the employees who are
regular and remains present for major period of the month.
iii) SAIL Performance Incentive Scheme (SPIS) : Every year payment under SAIL
Performance Incentive Scheme is made to non-executive employees and the amount is
finalized after detailed deliberations with workers’ representatives based on
performance of respective plants/units and SAIL as a whole.
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iv) Daily Production Incentive Scheme (DPIS) : As and when required, DPIS is
formulated and implemented for non-executive employees of SAIL Plants on a periodic
basis to motivate them to achieve daily production targets.
The implementation of incentive schemes have not only helped in improving quality of
product at reduced cost but also rewarded the employees which results in motivation of
employees.
Discipline in an industry, irrespective of its size and magnitude, is the backbone for attaining
the corporate objectives of the organization. Discipline is a condition in an enterprise in which
the members of the enterprise conduct themselves within the set rules and standards of
acceptable behaviour. The employees need to be set right if they deviate from the set rules to
maintain the system of work. Some hallmarks of effective employee discipline are that it
should be immediate, consistent and impartial. Punishment should commensurate with the
offense and should preferably be progressive in its severity.
Employees in SAIL are governed under either of the following applicable service rules:
All executives of SAIL are covered under the provision of the SAIL CDA Rules, 1977. The
Standing Orders covers non-executive employees and it differs from plant to plant.
These rules broadly covers a set code of conduct for maintenance of integrity, honesty,
impartiality, good behavior, discipline, transparency, accountability and high ethical standards
in the performance of one’s official duties.The code of conduct guides the employee for
proper rules & regulations and helps to keep the decorum of the workplace. The conduct of
an employee is generally regulated for the following actions:
• Observance of Government’s policies: Every employee shall act in accordance with the
Government policies regarding age of marriage, prevention of crime against women,
preservation of environment, protection of wildlife and cultural heritage.
• Criticism of Government and the Company: No employee in any media shall make any
statement of criticism against any policy or action of Government or the Company.
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• Declaration of movable and immovable properties, acceptance of gifts etc.: Every
employee shall submit a return of assets & liabilities for acquisition of movable or
immovable property and report gifts of certain worth received from his/her family, friend or
relatives.
The rules also prescribe the acts of omission and commission amounting to misconduct and
procedure for imposition of major or minor penalties for commission of misconduct.
Misconduct
Misconduct is a deviation from the set rules. The disciplinary procedure begins with an act of
‘misconduct’ or an act of indiscipline. The Standing Orders and the SAIL CDA Rules clearly
stipulate the acts and omissions or commissions, which constitute misconduct. These
misconducts generally include:
• Theft, fraud or taking/giving bribe.
• Furnishing false information to any matter germane to the employment.
• Willful insubordination or disobedience
• Absence without leave or overstaying the sanctioned leave
• Habitual late, irregular attendance.
• Damage to any company’s property.
• Absence from station/headquarter without permission.
• Drunkenness or riotous or disorderly or indecent behaviour.
• Possession of pecuniary resources or property disproportionate to the known source of
income.
• Non-compliance of orders in respect of submission of property return
Disciplinary action
On receipt of the complaint, the Disciplinary Authority may order for a preliminary enquiry, to
ensure whether the allegations made in the complaint are specific on the basis of which any
prima-facie charge(s) can be framed against the delinquent employee before initiating any
disciplinary proceedings. The purpose of the charge sheet is to inform the delinquent
employee about the allegations against him and to give time to reply to the same. Keeping in
view the circumstances and gravity of the misconduct in each case, the disciplinary authority
may decide whether the alleged misconduct calls for a major or minor penalty action or not.
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Penalties:
The following major or minor penalties may generally be imposed on an employee for the
misconduct committed by him/her:
Minor Penalty:
• Censure
• Withholding of increment
• Withholding of promotion
• Recovery of pecuniary losses from pay
• Reduction to one lower stage in the time-scale of pay for a certain period.
Major Penalty:
• Reduction to a lower stage in the time-scale of pay for a specified period, with or without
increment of pay during the period.
• Reduction to a lower time-scale of pay, grade, post or service for a specified period, with
or without conditions of restoration to the grade or post.
• Compulsory retirement
• Removal from the services
• Dismissal from the service.
Appeal
An employee may appeal against an order imposing upon the employee any of the penalties.
The Appellate Authority shall after considering the findings of the case may pass order
confirming, enhancing, reducing or setting aside the penalty.
Statutory Provisions
Objective:
ƒ To regulate working conditions in factories
ƒ To ensure the basic minimum requirements of safety, health and welfare
It regulates working hours, leave, holidays, overtime, and employment of children, women
and young persons.
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appliances; safe means of escape in case of fire; Safety officer must be employed
for 1000 or more workers
Welfare
Provides for washing facilities; sitting arrangement; first-aid facilities (one box for
every 150workers); ambulance room (for 500 or more workers); canteens (for 250
or more workers), shelters/rest rooms/lunch room (150 or more workers); crèches
(30 or more women workers); Welfare Officer must be employed for 500 or more
workers
Working hours, Holidays and Overtime
Restriction on employment of
• Women workers between 7pm to 6am
• Child below 14 years of age
• Child (14 to 15 years), adolescent (15-18 years) only on certificate
of certifying surgeon
• Child between 10 pm to 6 am
Working Hours
• Adults - 48 hrs./week; 9 hrs./day; max. 5 hrs. at a stretch, max
spread over of 10 ½ hrs. in a day including rest.
• Child 4 ½ hours
• No overlapping shifts
Holidays
• One holiday in a week, not more than 10 days continuous work
• Compensatory holiday if required to work on weekly off.
Overtime
ƒ Twice the rate of ordinary wages for working more than 9 hrs./day or 48
hrs./week.
™
™ Annual leave with wages
ƒ Every worker who has worked for 240 days or more during a calendar year is
allowed leave with wages.
– 1 day for every 20 days for an adult and 15 days for a child.
– Carry forward of leave 30 days for adult and 40 days for child.
– For computing 240 days, earned leave availed, maternity leave and layoff
shall be included.
™ Statutory obligations
™ Obligations of Employees
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1.8.2 Employee’s Compensation Act, 1923
Coverage:
This Act covers all workmen, irrespective of their nature of employment, i.e., whether
employed directly or indirectly, employed on casual basis or otherwise for the employer’s
trade or business. Employees covered under ESI Act are outside the purview of this Act.
Amount of Compensation
The amount of compensation payable is as follows:
i. Where death results from injury: An amount equal to the 50% of the monthly wages of
the deceased workman multiplied by relevant factor (this has been specified in the Act
as per age of the workman) or an amount of Rs.1,20,000/- whichever is more.
ii. Permanent total disablement results from injury: An amount equal to 60% of the month
wages of the injured workman multiplied by the relevant factor of an amount of
Rs.1,40,000/- whichever is more.
iii. In case of temporary disablement : A half monthly installment equal to 25% of the
monthly basis.
In case of temporary disablement, SAIL employees get paid full monthly wages in the
form of injury leave under NJCS agreement.
Coverage :
Any person who is employed for wages in any kind of work, manual or otherwise, in or in
connection with the work of the company and who gets his wages from the company is
covered under the Act.
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Contributions to the fund :
Member's contribution: The compulsory contribution of a member shall be 12% of the
emoluments while on duty or on leave. However, a member can increase his own voluntary
contribution to a rate exceeding 12%, but there will be no matching company's contribution to
the PF. The rate of Voluntary PF contribution of a member may be enhanced or reduced at
any time during the financial year.
Company's Contribution: The contribution of the Company to the PF Fund shall also be 12 %,
i.e. matching to the employee's contribution.
Except in the case of employees who have joined service prior to 1971 and did not become
member of FPS 1971, all other employees are compulsorily members of Employee Pension
Scheme (EPS, 1995). In their cases, the effective company's contribution to the PF fund will
be 12% of emoluments less 8.33% of emoluments or Rs.1250/- per month which ever is less.
The difference amount is remitted as the employee's contribution to the EPS Fund. The figure
of Rs 1250/- p.m. or Rs 15000/- per year is as per the present ceiling of EPS contribution
notified by the Govt.
For example, if an employees monthly pay is Rs 20,000/- , its 12% will be Rs 2400/- and
8.33% will be Rs 1666/- . Accordingly, in this case, out of the employer's contribution, Rs
1250/- will be remitted to EPS Fund, and the remainder, i.e. Rs 1150/- will be credited to the
PF fund. If however, pay is Rs 10000/- , (12% = Rs 1200/- and 8.33% is Rs 833/-), then only
Rs 833/- will be remitted to the EPS fund and the remainder of employer's contribution, i.e. Rs
367/- will be credited to the member's PF accumulation.
Objective
ƒ To provide retirement benefit to workmen who have rendered long and unblemished
service to the employer as a social security measure
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Qualifying period for payment of Gratuity :
Reasons for Separation Minimum qualifying service
Superannuation / discharge on
abolition 5 years
of post / resignation/ termination on
account of
unauthorized absence / misconduct
In case of death /permanent physical
or Irrespective of any qualifying period
mental incapacity
Amount of Gratuity:
a) The amount of gratuity shall be equal to 15 days emoluments for each completed year of
service or part thereof in excess of 6 months.
For the purpose of computation of gratuity, 15 days wages will be computed in the following
manner.
15 days wages = Monthly wages x 15/26
Coverage:
i) Retired employees
ii) The employees who have taken voluntary retirement
iii) The employees who cease to be in employment on account of permanent total
disablement.
iv) The spouse of an employee who dies in service.
v) The employees who resign at the age of completion of 57 years
This scheme is optional. The members are covered through Group Insurance Policy of the
Insurance Company and the period of policy is of one year which commences from 11 th of
July every year.
Benefits :
a) The members covered under the scheme can get themselves admitted in any of the
registered nursing homes / hospitals anywhere in India including SAIL hospitals for major
/minor surgical and non surgical diseases/hospitalization.
b) The member can get the hospitalization benefit upto Rs. 4,00,000/- per member per policy
(with clubbing facility of Rs. 8,00,000/- between employee & spouse). This limit includes
domiciliary hospitalization.
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c) The limit of reimbursement of OPD expenses is Rs.4000/- per member (below age of 70
years) and Rs. 8000/- (above 70 years age) for the policy period.
Procedure
Open Tender Enquiry is invited from IRDAI approved Insurance Companies. Work order is
awarded to L1 bidder based on the quoted premium, which at present (from 11.07.2021 to
10.07.2022) is M/s New India Assurance.
Objective:
To provide monetary benefit to an employee in case of permanent total disablement or
permanent medical unfitness or to his / her family in case of death of the employee while in
service of the Company.
Eligibility:
The scheme shall cover all regular employees including employees recruited through
Management Trainees route in Executive Cadre and through trainee route in Non-Executive
cadre.
Benefit:
On the separation of an employee from the services of the company on account of death,
permanent total disablement or permanent medical unfitness, his / her nominee / the
employee, as the case may be, on depositing with the company a sum equivalent to the PF
and Gratuity amounts due to the employee, would be entitled to monthly payments equivalent
to the basic pay + DA last drawn as per the scheme. However, in case of death or permanent
total disablement of a trainee in a Non-Executive cadre due to accident arising out of and in
the course of employment, beneficiary will be paid the Basic Pay at the minimum of scale in
which he would have been absorbed on successful completion of training, alongwith
corresponding Dearness Allowance thereon, as applicable on the date of separation of the
trainee from the service of the company on account of death/Permanent total disablement.
Such monthly payment would continue till the notional date of superannuation of the
employee. If the amount deposited is less than the amount due as PF and Gratuity to the
employee, the monthly payment will be reduced in the same proportion.
Termination of Benefit:
On the notional date of superannuation of the employee, the monthly payment of the scheme
would cease and the amount deposited with the company under the scheme would be
refunded to the depositor or his / her nominee, as the case may be. Under the scheme, no
interest on the PF and gratuity deposits will be admissible for the period of deposit.
a) SAIL Pension Scheme will cover all executives (including Management Trainees) on rolls
of the Company on or after 01.01.2007 (including those appointed at the Board level) and
non-executives (including trainees recruited for eventual employment) on rolls of the
Company on or after 01.01.2012. The employees on Contract Appointment or deputation
from other organizations/ Central/ State Government, shall not be covered.
b) The employer’s contribution to the Scheme will be a percentage of Basic Pay plus DA.
The employee also has the option to make voluntary contribution towards Pension.
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c) The Company contribution towards Pension shall be based on the affordability,
sustainability and capacity of the Company, measured as a percentage of Profit Before
Tax (PBT) to average Net-worth of the Company as detailed hereunder:
ii) If the percentage of PBT to average Net-worth is lower than 8%, the amount of
Company’s contribution towards Pension will be reduced proportionately. However, a
minimum Pension contribution is kept at the rate of 3% of Basic Pay plus DA for
Executives and 2% of the Basic Pay plus DA for Non-Executives.
In case of loss during a Financial Year, the floor percentage of 3% and 2% for
Executives and Non-Executives respectively, would be maintained.
Further, in case of loss during a financial year, the floor percentage of 3% as against
2% would be maintained.
d) All regular employees who have completed minimum 15 years of continuous service and
superannuate from the Company will be eligible for the benefits under this Scheme.
Cases of separation including superannuation / death / permanent total disablement &
incapacitation (including cases of permanent total disablement) leading to cessation of
service, shall be eligible for Pensionary benefits irrespective of duration of services
rendered.
e) The benefits under the Scheme shall be payable only in the form of annuities on notional
date of superannuation of the employee from the services of the company. However, in
cases of Death/Permanent Disablement & Incapacitation (including PTD) leading to
cessation of service, the benefits would accrue on separation of the employee from the
services of the Company.
f) In case the total corpus in the account of ex-employees/beneficiaries is less than Rs. 2
Lakhs on the date of purchase of annuity, the member or the beneficiary can avail the
option of withdrawal of corpus in lump-sum. The withdrawal in such cases will be subject
to Income Tax deduction.
g) The application from ex-employees/beneficiaries whose corpus is more than Rs. 2 lakhs
has to compulsorily opt for the annuity.
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for
.
Reservation in Promotion
While there is no reservation for OBCs in promotion, for SCs and STs a uniform percentage
of 15 % and 7.5% respectively has been prescribed for all the States. However, it must be
understood that even for SC/ST reservation is applicable only in promotion through selection
within Group ‘C’, from Group ‘C’ to Group ‘B’, within Group ‘B’ and from Group ‘B’ to the
lowest rung of Group ‘A’ posts only.
In respect of SAIL it is applicable for all promotions from lower cluster to higher cluster in
non-executive cadre and from non-executive to executive cadre promotion to E0/JO grade
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Calculation of 4 % reservation
In Group ‘A’ & ‘B’ posts, the 4% reservation is to be provided for recruitment against identified
posts only, whereas, for Group ‘C’ posts the 4% reservation is counted against total
recruitment. However in both the cases the physically disabled persons are to be recruited
only on such posts, which have been identified suitable for them
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1.10 Industrial Relations Management
Objective
To secure industrial peace and harmony by providing machinery and procedure for settlement
of industrial disputes
Definitions
• Industry means any business, trade, undertaking, manufacture or calling of employers
and includes any calling, service, employment, handicraft, industrial occupation or
avocation of workmen.
• Industrial dispute means any dispute between employers and employers, employers and
workmen or between workmen and workmen which is connected with employment or non-
employment or the terms of employment or with the conditions of employment of any
person.
v. Tribunals
The appropriate Govt. may constitute one or more Industrial Tribunals for the
adjudication of industrial dispute relating to any matter, whether specified, in the
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second or third schedule and for performing such other function as may be
assigned to them.
vi Arbitrator :
Voluntary reference of dispute to arbitrator for adjudication under an agreement.
Publication of arbitration agreement in official gazette is mandatory
iii. Workmen in a Public Utility service cannot go on strike and the employer in
Public Utility Service cannot declare lock-out-
a) without giving six weeks notice in the prescribed form ;
b) within 14 days giving notice;
c) before the expiry of the date specified in the notice ;
d) During the pendancy of conciliation proceedings and 7 days after their
conclusion.
ƒ Illegal strike
• Any strike or lockout in contravention of provisions
• A strike or lockout does not become illegal if reference for
arbitration/adjudication was made after commencement of strike
• A strike or lockout commenced before 14 days notice period shall be
illegal for un-expired period of notice only, thereafter it shall be legal.
• A lockout/strike declared in consequence of illegal strike/lockout shall be
legal
Workmen are liable to lose wages and punishment in illegal strike
Objective
It legalizes organisation of labour by providing for their registration and conferring upon them
certain protections and privileges with an aim to regularise Labour Management relations.
• Any 7 or more members may apply provided at least 10% or 100 of the total
workmen, which ever is less are members of such trade union.
• Application should accompany rules of the Trade Union, names and addresses of
the members, office bearers, head office etc.
o Registration may be cancelled / withdrawn if obtained by fraud or mistake
or union ceased to exist or willfully contravened any provision of this Act
despite notice from Registrar. Two months notice required to be given
before cancellation/ withdrawal of registration.
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Privileges of a Trade Union
• Every registered trade union shall be a body corporate by the name it is registered,
shall have perpetual succession, common seal and power to acquire and hold
moveable & immoveable property, to contract, to sue and be sued by the said
name.
• Not less than one-half of the total number of the officer bearers of every registered
trade union in an unorganized sector (two-third in an organized sector) shall be
persons actually engaged or employed in the connected industry. For this purpose
an employee who has retired or has been retrenched shall not be construed as
outsider for the purpose of holding an office in a Trade Union.
• No member of the Council of Ministers or a person holding an office of profit in the
Union or State (other than engagement/ employment in the connected industry)
shall be an executive or other office bearer of a registered Trade Union.
• Audited statement of assets and liabilities, changes in office bearers, rules of the
Trade Union are to be sent annually to the Registrar
• Every registered trade union is required to submit annual returns to the registrar. In
case of default or on submission of false information regarding trade union, office
bearers are liable to be punished with fine.
Objective
To regulate employment of contract labour to place it at par with regular employees w.r.t.
working conditions and certain other benefits available under labour laws.
Restrictions
It empowers the appropriate Govt. to prohibit employment of contract labour in any process,
operation or other work in any establishment keeping in view :
• The conditions of work and benefits to contract labour
• Whether the work is incidental to or necessary for the work of establishment
• Whether it is of perennial nature
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ƒ Every contractor should have a license for getting any work done through
contract labour.
Responsibilities of Contractor
ƒ To make regular and timely payment of wages as per fixed rates in presence of
principal employer’s representative.
ƒ To maintain Muster Roll, Wage Register, Deduction Register and OT Register.
Introduction
Grievance means any discontent or dissatisfaction whether expressed or not, arising out of anything
connected with the company that an employee thinks, believes or even feels is unfair, unjust or
inequitable. A grievance even when trivial, unjustified or fancied can be very real to the employee who
raises it. Hence, it deserves serious and empathetic consideration. An unattended complaint or
grievance often leads to a bigger dispute later and can affect industrial peace and harmony.
Setting up of grievances settlement authorities and reference of certain individual disputes to such
authorities:
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The employer in relation to every industrial establishment in which fifty or more workman are
employed or have been employed on any day in the proceeding twelve months, shall provide for, in
accordance with the rules made in that behalf under this Act, a grievances settlement authority for the
settlement of industrial disputes connected with an individual workman employed in the
establishment.
1.12 Counselling
Introduction
Despite the efforts to place people in well-designed, highly motivating jobs and to train them properly
for those jobs, some people do behave in ways that cause problems for themselves and for the
organization. These problems may be work-related, sometimes personal concerns and pressures,
which the individual brings to the job each day. Sometimes a friendly suggestion or comment from the
colleges or superior is all that is needed to remedy the problem. In more serious cases, the employee
need to be counselled in the structured and systematic way in order to help them to change their
attitude and to overcome their personal problems.
In the industrial context, Counselling can be defined as the development of people through a change
in the attitude and the behaviour, which will help them to obtain a better adjustment to their work
environment. It is a person-to-person process (through discussion) aimed at improvement of
performance, potentialities and personal relations, with a view to helping both the individual and the
organisation.
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Situations requiring Counseling
i. An employee may sense that he is not doing too well on the job, or may be having problems at
home, which are affecting his/her work, and he/she may seek the help of the supervisor.
ii. Employees may also come to the supervisor for the problem they are having with other people.
iii. An employee’s behaviour is not up to the mark, or is causing problems with others; yet he/she is
not aware of it. In this case the supervisor must initiate action and bring the problem to the
attention of the subordinate.
Thus, shop- floor managers and supervisors most often required to counsel employees who are
habitual unauthorized absentees, alcoholics, under-performers, and employees who have adjustment
problems on the shop floor.
The Counsellor’s Role
The counsellor’s role can be summed up as follows: -
i. To give the person recognition, credit and praise for accomplishment and abilities, thus
building up his or her confidence and enthusiasm for the job.
ii. To provide an opportunity to the person for discussion of his problem and to create better
understanding.
iii. To give the individual feedback about his/her performance and to explain the standard
expected and how it is measured.
iv. To encourage the individual to bring to the surface; problems, conflicts or other aspects of
which he may not have been fully aware and which are likely to affect his behaviour or
performance.
v. To suggest positive steps which will bring about improvement.
vi. To eliminate or relax any tension which may exist, either on the surface or in the back of the
person's mind.
vii. To create a desire in the individual to change and to improve along the lines discussed.
Types of Counselling
i. Directive counselling - where the counsellor guides the process all the way throughout.
ii. Non- directive counselling- where counselee is encouraged to talk about his/her problems and
bring them to surface
The type of counselling to be used in each case varies with the problem. For instance, in counselling
a habitual absentee the counsellor has to be more directive with the counsellor explaining the benefits
of attending duty everyday, whereas while counselling an employee with adjustment problems, the
counsellor has to listen more and let the employee dominate the counselling session.
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a) State what the employee has done / not done (employee’s performance, not his/her
personality or attitude)
b) Try to find out and understand why the employee has acted as he/ she did (gain
insight and not pass judgement)
c) Make clear that the objective is to help the employee (develop him/her and not
condemn)
In 1997, Social Accountability International (SAI) was established and convened an expert,
international, Advisory Board to partner in developing standards and systems to address workers’
rights. Representatives of trade unions, human rights organizations, intellectuals,retailers,
manufacturers, contractors, as well as consulting, accounting, and certification firms, by consensus
developed the Social Accountability 8000 (SA8000) Standard. Published in late 1997, revised in 2001,
2008& in 2014, the SA8000 Standard and verification system is a credible, comprehensive and
efficient tool for ensuring rights of workers and creating a humane workplace.
Child Labor: No workers under the age of 15; minimum lowered to 14 for countriesoperating under
the ILO Convention 138 developing-country exception; remediation of any child found to be working.
Forced Labor: No forced labor, including prison or debt bondage labor; no lodging ofdeposits or
identity papers by employers or outside recruiters.
Health and Safety: Provide a safe and healthy work environment; take steps to preventinjuries;
regular health and safety worker training; system to detect threats to health and safety; access to
bathrooms and potable water.
Freedom of Association and Right to Collective Bargaining: Respect the right to form andjoin
trade unions and bargain collectively; where law prohibits these freedoms, facilitate parallel means of
association and bargaining.
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Discrimination: No discrimination based on race, caste, origin, religion, disability, gender,sexual
orientation, union or political affiliation, or age; no sexual harassment
Working Hours: Comply with the applicable law but, in any event, no more than 48 hoursper week
with at least one day off for every seven day period; voluntary overtime paid at a premium rate and
not to exceed 12 hours per week on a regular basis; overtime may be mandatory if part of a collective
bargaining agreement.
Compensation: Wages paid for a standard work week must meet the legal and industrystandards
and be sufficient to meet the basic need of workers and their families; no disciplinary deductions.
Management Systems: Facilities seeking to gain and maintain certification must go beyondsimple
compliance to integrate the standard into their management systems and practices.
SA8000 Implementation
Initial evidence indicates that SA8000 certified companies enjoy a competitive advantage and workers
experience concrete benefits as the SA8000 management system and any needed corrective actions
are implemented.
SA8000:2014 is the latest version of the SA8000® Standard launched in June 2014. A central
improvement to the Standard was the inclusion of Social Fingerprint®. It is a set of tools that helps
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organizations continuously measure and improve their management system for social performance,
helping them fulfill the requirements of the Management System Element of SA8000.
Social Fingerprint® breaks down the Management System Element into ten process-based
categories:
With the
following three tools, organizations can measure and improve their management system.
• Social Fingerprint® Self-Assessment: Completed by the organization applying for an SA8000
certification, the self-assessment provides a baseline score of the organization’s management
system maturity.
• Rating Chart: The Rating Chart explains the organization’s maturity level in each of the ten
categories listed above. The maturity levels are rated on a scale of one to five, with five being
the highest level (see table below). The results help the organization identify areas for
improvement.
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Chapter – 2
MATERIALS MANAGEMENT
2.1 Overview:
From our daily life, we know that each one of us depends on commodities and services supplied by
other individuals or organizations. Similarly, every organization, big or small, depends on materials
and services from other organizations to varying extents. These materials and services are obtained
through exchange of money or through barter arrangements.
SAIL, is a major steel producer in the world with an annual turnover of around
103473Cr in FY 2021-22. Materials constitute an important ingredient of inputs to the activities of a
manufacturing organization like ours, where about 50 to 60 % of the total expenditure is incurred on
materials and related services. The various materials used as inputs, such as raw materials,
consumables & spares are required to be purchased or manufactured in-house & made available to
the shops / users as & when needed to ensure uninterrupted production. Therefore efficient
management of input materials is of paramount importance in a business organization for maximizing
material productivity, which ultimately adds to the profitability of the organization. This requires a well-
coordinated approach towards various issues involving decision making with respect to materials.
All the materials related activities such as material planning & indenting, purchase systems &
procedures, standardization through variety reduction & rationalization, reducing uncertainties in
demand & supply, handling & transportation, quality assurance, proper storage & issue of materials to
the internal customers, inventory management, vendor management & finally disposal of obsolete,
surplus & scrap materials etc. taken together is termed as “INTEGRATED MATERIALS
MANAGEMENT”.
To carry out these functions efficiently, it is essential to have a unique identification of individual
material, very good supplier base, effective order booking process and inventory management system
as well as professional Materials Managers.
SAIL, being a Central Public Sector Enterprise (CPSE), follows a detailed Purchase Procedure which
incorporates the guidelines of Central Vigilance Commission (CVC) & different Ministries & Depts. of
Government of India (GoI) and executes these functions in a transparent & fair manner. Leveraging
different forms of emerging technology to carry out the MM functions & activities in procurement,
storage and maintenance of optimum levels of inventory has been focus area in SAIL.
Govt. e-Marketplace (GeM), since its adoption in SAIL in 2018, has emerged as the leading e-
platform on which procurement of products & services has become mandatory as per extant Govt.
directives. Progressively, more and more items and services are being procured on GeM across SAIL
plants and units, which has made SAIL a leading buyer on GeM among all CPSEs.
The Material Planning Cell of the user department as well as the Central Planning Agencies make
their Annual Procurement Plan for consumables, equipments, spares etc. based on the Annual
Production Plan envisaged, capital repair / major repair plan, past consumption pattern of various
operational consumables / spares etc. Lead time of procurement is kept in mind, while making the
procurement plan & required delivery schedule.
With a view to optimize utilization of Plant’s internal facilities, such as Central Engineering &
Maintenance (CEM) Shop, Machine Shop, Fabrication Shop, Foundry Shop, Wagon / Loco Repair
Shops etc., in order to reduce overall cost of outside procurement, each Plant / Unit prepares an
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annual plan for ‘Make’ items, before the beginning of each financial year, which is duly approved by
the Competent Authority. Indents are not raised for items identified as 'Make' in the annual plan. For
such items the User department raises a demand in the prescribed format to the Production Planning
& Control Department (also referred as PPC). Based on such demand PPC makes a production
plan/order and after getting it manufactured in the relevant shops the materials is made available for
use. Where there is limited capacity in the plant to make total annual requirement the item may be
marked as ‘Make & Buy’ so that the balance quantity of such item may be procured from the vendors.
SAIL Policy Guidelines on Inventory Management of Stores & Spares stipulates that Department-wise
standing list of “Make” items which can be produced in-house or in sister plants shall be published
and maintained on Intranet portals of all plants and CMMG. Material UCS Code, material description
and other details like normal lead time of manufacturing, etc. may be included in such lists. There will
be two such lists – “Make Items” list within the plant; and “Make Items” list within SAIL. The list shall
be updated every quarter or earlier
ESTIMATED VALUE
The estimated value is worked out to know the cost to company (Landed Cost Net of Input Tax Credit
of GST or LCNITCG) of the purchase / in-house production of any material so that appropriate
procurement strategies can be adopted. The LCNITCG is the sum of all costs including materials /
services cost, taxes, duties, freight, insurance etc. less the amount of Input Tax Credit on account of
Goods & Services Tax (GST) or other credit made available by the Government. This is also
important to prepare the annual indenting/procurement budget.
It is the prime responsibility of the Indenter to prepare a judicious estimate of the current value of the
Indent. The indenter shall take the help of engineering services and other centralized agencies, if so
required, for the preparation of judicious estimate using scientific / technical methods. Following
guidelines apply for the preparation of estimates:
• For frequently purchased items(i.e. items purchased at least twice during last three years), the
estimate is based on the Last Purchase Price (LPP) obtained through normal tendering &
competitive bids in the last 3 years with adjustments for variations in current market conditions.For
infrequently purchased items, budgetary quotation(s) is generally considered for preparation of
departmental estimate along with LPP or Cart Value on GeM, whichever is lower.
• For new items engineering estimate is prepared taking into consideration material cost and cost
of workmanship. At times budgetary quotations may be obtained.
• For proprietary items, the estimate is based on the Last Purchase Price (LPP), if available within
the last 2 years, otherwise supplier’s price list along with applicable discounts or prices obtained
directly from manufacturer / their duly authorized representative is considered for preparing the
estimate.
The estimated value of each and every item to be procured is indicated in the indent. Indents are
processed with the approval of the Head of the Department (HoD).
BUDGET PROVISION
The Revenue Budget as allocated by Corporate Office to the individual plant based on the Annual
Production Plan (APP) is distributed to the various shops under different categories. SAIL Policy
Guidelines on Inventory Management of Stores & Spares stipulates that emphasis shall be given on
need based budgeting for department-wise and category-wise budget preparation using Dept. Code,
Cost / Consumption Centre, Category Codes e.g. mechanical spares, electrical spares,
instrumentation spares, general stores items, refractories, etc. considering their projection for the
subsequent year and planned capital repairs, if any.
Normally, not more than 90% of consumption budget shall be used for indenting purpose by any dept.
/ shop and not more than 90% of indenting budget shall be used for procurement purpose. Each dept.
/ shop may therefore develop an indenting calendar indicating quarterly milestones for utilizing their
indenting budget under each material category.
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For procurement of Capital items (Plant & Machinery, Equipments etc) the budget is allocated
separately for each scheme.
SAIL Policy Guidelines on Inventory Management of Stores & Spares stipulates that appropriate
forecasting techniques will be used by each Dept. / Shop for working out its material requirement as
per Annual Production Plan / Annual Maintenance Plan / Annual Business Plan, as applicable.
Targeted benchmarks of consumption shall be given due weightage in place of historical consumption
data, if any, for an item or an equipment.
Normally, no indents shall be raised in the last quarter of a financial year. The “indenting holiday” i.e.
the period Jan-Mar shall be utilized for comprehensive review and restricting / regulating the delivery
of items already ordered for.
For raising of an indent / PR, Material UCS code / legacy Catalogue no. as per Material Item Master is
used for each item of the indent / PR. The Indenter gives complete specification of the item to be
procured. To the extent possible, specifications given should be standard specifications conforming to
IPSS (Inter Plant Steel Standard), PS (Plant Standard), ISS (Indian Standard Specification), ASTM
(American Society For Testing And Materials) or DIN (German Institute for Standardization) etc.
There should be strict control on addition of an item to Material Item Master. Adding of any new
catalogue number (Material UCS Code) by any plant / unit shall be done only after due checking
using “e-string” maintained and operated by SAIL/BSP. Introduction of a new item to the catalogue
master shall be done only after the recommendation of Divisional Head (DRO to the Head of Plant /
Unit) and approval of HOMM for entry into the computer system. In order to avoid unnecessary
increase in no. of items in inventory, focus should be on variety reduction.
The indenter also suggests the Mode of tendering, giving reasons, in the indent / PR raised by him:
a) In case of Open Tender Enquiry (OTE) / Global tender Enquiry (GTE), the indenter proposes
the eligibility criteria.
b) In case of Limited Tender Enquiry (LTE), the indenter may mention proposed vendor list for
consideration. However, as per procedure, LTE is issued only to the vendors registered /
provisionally registered for the item.
c) In case of Single Tender Enquiry (STE), the indenter needs to specify if the procurement is
proprietary in nature or not. For STE (Proprietary), the indenter indicates the name of the
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Original Equipment Manufacturer (OEM) with a Proprietary Certificate stipulated for the
purpose. For STE (Non-Proprietary) or Nomination-basis procurement, the indenter indicates
the name of vendor along with approval of Competent Authority.
The modes as available on Govt. e-Marketplace (GeM) shall be utilized for procurement of goods &
services through the GeM portal.
SCREENING COMMITTEE
The Indents raised by the departments / centralized agencies for purchase of material are scrutinized
by various Screening Committees / Task Forces constituted by the Competent Authority depending
on the nature of the items concerned. The Screening Committees comprise of representatives of
departments such as Indenter, MM Dept., Finance, etc. in the rank of E-5 and above. In case of
computer generated indents of Automatic Procurement (AP), based on re-order level, screening is not
required.
The scrutiny of indents by the Screening Committee is done w.r.t. the following:
a) For Material Procurement :
a) Norms prescribed with the approval of the Competent Authority for inventory holding, both in
terms of value and duration of consumption.
b) Complete specifications, including drawings if required.
c) Non-inclusion of the item in approved annual plan for “Make Items”.
d) Consumption pattern.
e) Stock in hand and Dues in.
f) Budget availability.
g) Availability of all prescribed enclosures and certificates.
h) Estimates along with the basic data.
i) Suggested mode of procurement /tendering, giving reasons.
j) Names of suppliers suggested by the Indenter in the Indent.
k) Inspection guidelines.
l) Eligibility/Acceptance criteria for Open/Global tender enquiries or GeM.
In case of any indent going beyond the approved overall budget of the department concerned, for
additional / readjustment / reappropriation of the budget, approval of Competent Authority as per DOP
is obtained. Once approved, the Indent is forwarded to the Contracting Agency (Purchase/Contract
Cell) for taking procurement action.
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AP items are identified and listed periodically in each Plant for the convenience of all the users. These
items are grouped under various commodities like Fasteners, Hardware items, Electrodes, Cables etc
based on the nature of these items. Planning, Indenting, Stock and Issue of such items are monitored
by a central agency under Materials Management, known as “Stock Control”. However special
requirement by different users, additional capital repair requirements are considered while finalizing
the quantity for procurement. Scrutiny through a Screening Committee is not required in case of AP
items; as such the indents raised by Stock Control (AP items Planning Agency) are directly forwarded
to Purchase department for procurement. Some of the systems followed in the automatic indent
generation are listed below.
Safety Stock = Buffer Stock to take care of consumption variations + Buffer stock to take care of
supply variations.
Safety stock of an item is decided based on the criticality of that item and uncertainties involved in the
consumption & supply of that item. So Safety Stock varies for various categories of items.
Re-Order Level (ROL) is the stock level of an item at which the procurement activity is initiated by
raising indent so that the items are received before the stock out of that item.
ROL = Quantity required for consumption during the lead time of procurement+ Safety Stock
Based on the lead time of procurement of the item & its safety stock requirement, the ROL is fixed for
each AP item.
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The fundamental principles of Purchasing are usually based on 5 R’s i.e. buying materials of Right
Quality, in Right Quantity, at the Right Time, at the Right Price, from the Right Source. The main
objectives are:
(i) To make the user department of the organization periodically aware of the range of materials
available in the market and to maintain the right quality based on standards, technical
specifications and suitability.
(ii) To procure at the lowest possible cost (Total Cost of Ownership or TCO) considering quality,
service / maintenance requirements, product life and any other costs for use or upkeep of the
material.
(iii) To maintain continuity of supply to ensure that the scheduled activities are not interrupted.
(iv) To integrate the requirements of various departments of the organization in order to take
advantage of economies of scale, wherever possible, and also to avoid waste and
obsolescence.
(v) To create goodwill for the organization through healthy buyer-supplier relationship.
Procurement Activities:
Indent Scrutiny:
On receipt of the Indent by the Contracting Department the same is scrutinized by the Dealing
Purchase Officer. While processing the indent for tendering, if any discrepancy is found, the MM
Department returns the indent to the Screening Committee / Indenter for compliance or clarification.
In cases where there are less than three registered suppliers for an item, vendors registered for
similar items with other SAIL plants / units should be considered for issuance of LTE, provided
there is no adverse report on their performance. Under exceptional cases, such tender enquiry to
only these two registered suppliers shall be issued with the approval of CEof plants / units.
LTEs should be issued in such a way that sufficient competitive quotations are received from the
parties.
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Enquiries for Proprietary items (Original Equipment Manufacturer / Suppliers / Technology
Supplier / Job Contracts) should be issued with the approval of competent authority as per the
DOP. Such proprietary items should be purchased from their manufacturers or their authorized
dealers only, where the manufacturer does not supply the equipment directly. In case there is
more than one dealer authorized to sell a particular proprietary item to plant / units, discount may
be possible through Limited Tender Enquiry, therefore LTE may be issued to the authorized
dealers.
However, for the items so far purchased as proprietary for which additional vendor(s) has/ have
been found/ developed as proven source, LTE to all such additional vendors shall also be issued
with the approval of Competent Authority as per DOP.
REPEAT ORDER:
Normally, as per the lead time, prior to expiry of the running supplies, the Indenter has to process
fresh Indent. However, due to unavoidable circumstances, if either the Indent is not processed or
even after processing the Indent, it is not possible to place fresh order in time or where prices show
an upward trend for the Item for which continuity is essential, it may be necessary to place repeat
order on existing party.
After recording the reasons leading to placement of repeat order, the proposal for repeat order on
same terms, conditions and specifications may be considered on the following:
i) The original order must have been placed in the usual course after issue of LTE or Open
Tender. Emergency orders shall not be considered.
ii) Not more than two years have elapsed since placement of the original order.
iii) No price escalation for firm price orders shall be given.
iv) No repeat order shall be placed, if there is downward trend in prices.
v) Not more than two repeat orders should be placed.
vi) The quantity considered for ordering is not more than 100% of the original ordered quantity,
for each repeat order.
vii) The original order was not placed on the basis of a higher price for earlier delivery
viii) Sanction of Competent Authority for repeat order shall be obtained
However in exceptional cases, a third repeat order can be placed with approval of Chief Executive of
plant/units after recording justification.
RATE CONTRACT:
As a substitute to frequent tendering, it is recognized that it is often advantageous on commercial as
well as technical grounds to finalize orders on Rate Contract basis for items which are procured
regularly, repetitively and for items of proprietary nature. The rate contract is finalized where the total
annual requirement of such items / quantum of such jobs is large but not fixed. For entering into rate
contracts / long term contracts, the mode of tendering to be followed may be decided as per the
nature of the job / item, the available sources, etc. Thus, rate contract enquiries may be either Open /
Limited / Single Tender depending upon the nature of item / job.
Where rate contracts are finalized then the process of tendering is avoided and backup orders with
reference to Rate Contract are directly placed on receipt of indent by contracting agency, thereby
saving time and cost for the organization.
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SAIL Policy Guidelines on Inventory Management of Stores & Spares stipulates that list of items
under plant-level Rate Contracts shall be maintained on Intranet portals of all plants. List of items
under centralized Rate Contracts shall be maintained on CMMG portal. Material UCS Code, material
description and order details like price, validity, normal lead time of supply, etc. may be included in
such lists. The list shall be updated every month.
PROCUREMENT ON GeM:
Government e-Marketplace (GeM) is presently utilized for procurement of goods & services only and
not for works contracts, but the items to be used in works contracts may be procured through GeM.
For processing of indent / enquiry /placement of Orders on GeM, the delegation of powers (DOP) is
based on mode of tendering viz. OTE / LTE / STE selected.
EMERGENCY PROCUREMENT
• Provisions for emergency purchase have to be kept to meet the emergency needs of the Plants/
Units such as break down jobs, unscheduled repairs etc so as to keep the flow of production
uninterrupted.
• In case of purchase, such emergency normally occurs when there is no stock in the Stores and
either there is no pending order or chances of getting supplies against pending orders within the
stipulated time schedule are remote. Similarly, in case of job contracts, such emergency occurs
when break down of equipment occurs and internal resources are not adequate to take timely
action.
• Due to the very nature of the requirements, which has to be met in the shortest possible time, the
normal process of tendering stipulated in this procedure cannot be followed. For emergency
Indents, the mode of tendering and method of placement of order may, therefore, be adopted as
per the specific requirements of the case and the time available for the placement of order and
getting materials / execution of jobs.
• Emergency Indents should be accompanied by non-availability & criticality certificates issued by
the concerned HOD on prescribed format.
• Provisional order at the rate to be finalized later on / spot quotations and placement of order on
Single Tender basis may be adopted in such situations. The materials may be procured from best
possible source and jobs be awarded to reliable Contractors.
• Formal purchase orders should be issued / contracts entered into, in due course for regularizing
the emergent action taken.
A number of high value critical items required by most of the Plants/Units like Ferro Alloys, Cast &
Forged Rolls, Explosives & Detonators, Lamps & Fittings, Sea Water Magnesia etc have been
identified for centralized procurement in SAIL. At present 28 items worth approximately Rs.4400 Cr
are being procured under this system, with Reverse Auction (RA) being the preferred method of
discovering lowest price.
Under PCRM for centralized procurement, generally the highest consuming plant becomes the
Central Procurement Agency (CPA) which coordinates & undertakes the activities for order
finalization on behalf of all plants/units. An inter plant committee of Technical & Commercial members
from the plants called the Sourcing Team (ST) or Core group (CG) is constituted for each CP item.
The HOMM of a CPA plant is called the Commodity Champion (CC).
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The HOMMs of the 5 ISPs & CMMG are members of the Working Committee (WC), which takes all
major decisions or make recommendations w.r.t. the Mode of Tendering, Tender Terms & Conditions,
Vendors list etc. and other short / long term strategies of procurement. The Chief Executive (CE) of
the CPA plant approves the order placement. The individual plants then execute the contracts by
issue of Back-up Orders against the central Letter of Acceptance (LOA) of the CPA.
The advantages of CP are volume consolidation, better bargaining power, and enhanced
competition due to increased vendor base, rationalization of specification as well as uniform
terms & conditions across SAIL. Centralized procurement in SAIL is done as per guidelines issued
by Corporate Materials Management Group (CMMG) with the approval of Competent Authority.
Reverse Auction (RA) is a methodology of on-line price bidding through internet by eligible suppliers
against a tender at a pre-scheduled date & time, in which these suppliers continuously bid & re-bid to
reduce the lowest bids of others. At the closure of an RA event, the lowest bidder becomes eligible for
award of the contract. An Auction Administrator conducts the RA event neutrally by using software
referred to as Auction Engine. The basic features of the RA process are:
▪ It is an internet based on-line price negotiating tool
▪ It creates a competitive environment during auction, leading to better price discovery
▪ This bidding process is fully transparent & hence fair
▪ It gives equal opportunity to all the participating bidders to revise their bids during the time
period specified for the auction event.
▪ It helps in avoiding cartelization amongst suppliers
▪ It is a globally accepted tool of e-commerce
▪ L1 price / bidder is determined by the Auction Engine (software)
▪ Only one vendor is declared as L1 or the winning bidder
▪ It is a faceless transaction – bidders are able to see the lowest prevailing price at any point of
time but are unable to see the identity of other bidders
Reverse Auction in SAIL is conducted as per guidelines issued by Corporate Materials Management
Group (CMMG) with the approval of Competent Authority.Reverse Auction on GeM is conducted as
per the extant provisions of GeM.
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Picture: MM-01
Trial Orders:
For fostering purchasing cost-reduction in SAIL, plants/units may try out: i) a new source of supply for
an existing item; or ii) an alternate / new product / concept which can offer better techno-economic
advantages over the existing product.Cost reduction and need-based vendor development is an
integral part of all initiatives for trial of New Item / Product / Concept / Source at SAIL plant / unit.
The initiative to try out new item/product/concept/source is taken by a SAIL plant/unit either internally
on its own as part of structured regular deliberations or externally on the basis of proposals received /
forwarded for it.
For trial of new source for the existing product category or for the development of new/alternate
products, user departments of each plant/unit need to finalize a list and/or category of items/areas for
input cost reduction and share the same with respective MM department to take up for further
examination.
Provisions of Trial Procedure as applicable are followed in case of placement of Trial Orders. For
items under centralized procurement, the uniform Trial Procedure (TP-CP: 2017) issued by CMMG
stipulates detailed examination of every trial proposal for its technical feasibility by a Technical
Screening Committee (TSC) and its commercial feasibility by MM Dept. & Finance Dept. In case trial
is agreed to, based on potential cost-benefits for SAIL, performance during trial is assessed by a
Performance Assessment Committee (PAC); and after completion of trial, results are communicated
to the vendor in a time-bound and transparent manner. The price payable to the trial vendor shall in
no case be more than that of the proven vendor. If it is established that the material supplied by a trial
vendor has achieved the desired results, the trial vendor is considered for inclusion in the list of
proven vendors for the item.
Imports:
As the import of goods involves business transaction with suppliers located in foreign countries, it is
governed by international regulations, like INCOTERMS. Hence stipulation of suitable terms &
conditions in the Tender as well as documentation is very important. Documents of title of goods
include Supplier’s Invoice, Bill of Lading, Country of Origin Certificate etc.
The Bill of Lading is a document issued by the master of the ship in which goods are loaded,
acknowledging the receipt of the goods. It is also an undertaking to deliver them at the end of the
voyage subject to such conditions as may be mentioned in the Bill of Lading. It is similar to the
“Consignment Note” issued by the transporters in India.
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shipment to the buyer to enable him to insure the goods. The buyer pays the ocean freight
& marine insurance charges.
ii) Cost & Freight (Free Out) i.e. C&F (FO) contract: In this contract, ocean freight is borne
by the supplier whereas marine insurance is arranged by the buyer. Delivery point is
discharge port.
iii) Cost-Insurance-Freight (C.I.F.) contract: This contract includes the price of goods, ocean
freight and marine insurance charges up to the discharge port. It is the supplier’s
responsibility to arrange for loading of goods, insurance & payment of freight charges for
delivery of materials at discharge port.
In import cases, the buyer obtains delivery of goods against the receipt of shipping documents and
certificates as stipulated in the contract for which the buyer generally pays through Letter of Credit
(LC). The buyer arranges for Bill of Entry at discharge port for clearance of goods after payment of
applicable port related charges and duties/taxes such as Customs Duty (CD), GST, etc. as applicable.
Post implementation of GST since 01.07.2017 in India, import of Goods & Services are treated as
inter-state supplies and IGST are levied on imported goods & services. The incidence of GST follows
the destination principle and the tax revenue in case of SGST accrues to the State where the
imported goods & services are consumed. Full and complete set-off are available on the GST paid on
import of goods & services.
As per the extant policy, opportunity is given to the MSEs for matching the L-1 price in case their
quoted price is up to 15% higher compared to the L-1 price. However, there is no price preference.
As per the PP Policy, M/o MSME has reserved 358 categories of items for exclusive procurement
from MSEs only. Each SAIL plant / unit has its identified list of items for exclusive procurement from
MSEs.
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• Octroi
• Countervailing Duty (CVD) & Cess on CVD
• Special Additional Duty (SAD) or Special CVD (SCVD)
GST has subsumed CVD and SAD which were applicable for import cases. However, Basic Customs
Duty (BCD) continues to apply in all cases of import.
All invoices must bear the GSTIN no. of the supplier and buyer (to avail benefits of input credit). GST
is indicated against Harmonized System of Nomenclature (HSN) Code of each item in invoice so as to
keep proper accounting of GST. Statutory returns are to be filed by both supplier and buyer through
fully computerized GSTN network of Govt. of India.
Risk Purchase
Risk Purchase action against a supplier can be initiated by Purchaser in case of breach of contract
where delivery against Purchase Order is overdue or even in case of anticipated breach of contract
where delivery commitments of supplier are not likely to be met as per the scheduled delivery.
On reasonable grounds and with recorded reasons, Tender Enquiry is issued in such cases by
Purchaser; keeping the technical specifications of material and also the commercial terms &
conditions same as the original Purchase Order. However, notice, generally 15 days, to defaulting
supplier for completing supplies must be given by Purchaser before taking RP action against the
defaulting supplier.
Differential amount is recoverable from the defaulting supplier in case purchase price obtained
through RP action exceeds the original order price and vice versa.
Risk Purchase actions are taken on the basis of extant guidelines of SAIL, which are issued by
CMMG with the approval of Competent Authority.There is no provision for Risk Purchase on GeM.
Liquidated Damages:
Liquidated Damages, not by way of penalty, are levied against suppliers in case of delay in supply of
materials beyond the date of delivery specified in Purchase Order. Extension of delivery period may
be granted by the Competent Authority as per DOP, if the delay in completion of supply is attributable
to SAIL or under Force Majeure conditions.
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A number of circulars / procedure orders are issued by CMMG (Corporate Materials Management
Group), CVO (Chief Vigilance Officer) and also the head of Contracting Department of the plant,
which are to be complied with while processing indents for procurement of materials.
Vendors are empanelled for the supply of various categories / subcategories of items by each of the
SAIL Plants. Applications are invited periodically by SAIL plant/unit from vendors interested to supply
the specific category/sub-category of items. Prospective vendors are asked to submit the application
in specified format downloadable from SAIL website, along with all the documents required to
establish their financial & technical capability.
The filled up application forms are scrutinized and the vendor capacity assessment is carried out
through inspection department / technical experts to establish the technical capability of the vendors.
The scrutinized application form along with relevant documents and capacity assessment report are
put up to a Vendor Registration Committee (VRC). After due deliberation in the VRC, the vendors are
recommended for the registration for specific category/subcategory. After approval of Competent
Authority, a Registration Certificate, generally valid for 5 years, is issued to the vendor by SAIL
plant/unit. The vendor has to apply for renewal of its registration well before the expiry of validity.
The firms registered for a particular category are all given coverage by rotation and no registered
party should be considered for LTE for a second time unless all the registered parties in the list have
been considered at least once in each cycle. Also wherever sub-category wise registration exists,
enquiry shall be issued to all such registered vendors.
Some reputed vendors, Public Sector Units and/or foreign vendors who may not take initiative to get
themselves registered with SAIL, are registered provisionally by Purchaser with the approval of
Competent Authority.
Vendor Development:
It shall be the continuous endeavor on the part of all Plants/ Units to find out and develop substitutes
& sources of supply with a view to reduce cost of input materials and also to have reliable alternative
source for imported/critical material. Efforts are continuously made to explore suitable vendors from
various sources like internet websites, international bulletins, and vendor list of other PSUs etc.
Vendor Rating:
There is a need to continuously monitor and update our registered vendor base to have the most
competent & competitive vendors in our panel of vendors. For this purpose the efforts are made to
monitor supply performance of the vendors and rate them objectively. The major factors usually
considered for such vendor rating are competitiveness of vendor (price), quality of supply and delivery
adherence. This vendor rating may also be used in removing a vendor from registered vendor list and
also in the selection of vendors for issue of LTE. The IPSS guideline for Vendor rating is to be
followed. On GeM, both Sellers (vendors) and Buyers are rated with respect to their performance and
timely adherence to contractual provisionsand their rating is displayed to all.
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Quality denotes “CONFORMANCE TO ORDERED SPECIFICATION & FITNESS FOR USE” -
whether for products or services. Depending upon the nature, criticality & value of items, inspection is
pre-specified in Purchase Orders and as per contractual terms, conducted either at supplier’s
premises (Stage or Pre-Dispatch Inspection) or at Plant Stores after receipt. However, a large no. of
consignments is also accepted based on Manufacturer’s Test Certificate / Guarantee Certificate and
they are subject to cross-checking on random basis.
Stage Inspections
For critical items, it is required to conduct stage inspection of semi-finished items (such as castings,
forgings etc) at suppliers premises. In such cases, the supplier gives an interim Inspection Request to
the inspection agency. During stage inspection, sample is collected by the inspecting officer for
chemical analysis / Physical testing at either plant laboratory or authorized laboratories. On receipt of
test results, conformance to specification is verified & clearance is given to the supplier for further
processing of the item.
Pre-Dispatch Inspection:
If it is specified in the Purchase Order (PO) that, the inspection is to be carried out at supplier’s
premises, the supplier gives an Inspection Request (IR) to the inspection agency mentioned in the
PO. On receipt of IR, the inspecting officer visits the supplier’s premises along with copy of PO,
drawing, specification etc. The following checks are conducted depending on the nature of item:
• Visual check
• Dimensional check
• Functional check
• Physical testing such as hardness, pressure test, load test etc
• Electrical tests such as High voltage test, Insulation resistance test etc.
• Verification of documents as mentioned in PO
With a view to minimize inspection costs, Pre-Dispatch Inspection (PDI) is normally avoided where it
does not add value. For this a list of such items where pre-dispatch inspection is not required has
been made at respective plant level.
Final Inspection
After readiness of the material in all respect & internal checking, the supplier gives the final Inspection
Request to the inspection agency. In some critical cases, joint inspection by Indenter & Inspection is
carried out at supplier’s premises.
The supplier also submits the required certificates such as Material Test Certificate (MTC),
Manufacturers Test Certificate (TC), Guarantee Certificate (GC), Warranty Certificate (WC) etc.,
as mentioned in the PO, to the inspecting officer for verification.
After ensuring conformance of materials to the ordered specification in all respect, Inspection
Certificate (IC) is issued by the inspecting officer to the supplier. Materials are marked by stamping /
punching / stickers / seal / tag etc as a mark of acceptance or rejection. The supplier is asked to
deliver the accepted material to the consignee as per PO.
For bulky items such as Ferro-alloys, sample is collected & tested at plant laboratory & on receipt of
test report, acceptance or rejection is decided. Uniform Sampling Procedure for Ferro-alloys (SP-FA:
2014) issued by CMMG and available on CO portal may be referred to for details.
Page 58 of 162
Materials having deviations from the ordered specifications are rejected by inspection. However, there
are occasions when, rejected materials are taken in to use under the following circumstances:
i. Non-availability of accepted material & urgency of requirement
ii. Extent of deviation being nominal
The proposal for using rejected material in view of the above situation is to be approved by the
Competent Authority as per Delegation of Power. Such cases are processed through Material
Review Board (MRB) for deciding price reduction depending on the performance vis-à-vis expected
life of item, consumption rate, extent of deviation etc. MRB consists of members from Purchase,
Inspection, Stores, Finance, Indenter and also from specialized agency like Laboratory, Design etc.
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Page 59 of 162
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Page 60 of 162
ii Packing list
iii Challan
iv Invoice
v Insurance Declaration
vi Inspection Certificate (IC)
vii Material Test Certificate (MTC)
viii Guarantee / Warranty certificate (GC/WC)
Railway Transportation & Documents :
Railway transport is used in case of bulk material (like coal, iron ore, limestone etc) as it is cheaper.
If the port of Loading is not serviced by SCI ship, or where freight charged by SCI is higher that the
market rate, dispensation has to be sought from Ministry of Surface Transport for placement of PO on
CFR or CIF basis, whereby sellers can employ any shipping line of their choice.
Shipping documents
• Bill of Lading
• Packing List
• Invoice
• Country of Origin Certificate
• Third Party Inspection Certificate (TPIC)
• Material Test Certificate (MTC)
• Guarantee / Warranty certificate (GC/WC)
• Bill of Entry
Air Transport:
1. If an overseas consignment is small by weight / volume or where the consignment is required
urgently, such material may be airlifted.
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i. On arrival of vessel at port of discharge, the shipping company files an Import General
Manifest (IGM) on behalf of ship owner or master of the vessel.
ii. IGM is a declaration to Customs authorities on the items to be discharged at the Port of
Discharge.
iii. After filing IGM, vessel is allowed to berth and cargo is unloaded.
iv. Simultaneously, shipping company informs the importer regarding arrival of vessel, IGM
number and the amount of sea freight that is payable.
v. On importer’s behalf, Customs House Agent (CHA) will prepare draft bill of entry, known
as checklist.
vi. With checklist, CHA encloses Bill of Lading, Packing List, Invoice, Country of Origin
Certificate and Freight Bill, and enters all details in Indian Customs and Central Excise
Electronic Commerce/Electronic Data interchange (EC/EDI) Gateway (ICEGATE)
system
vii. If the information in Checklist and IGM (available with Customs) match, then Customs
authorities give a Bill of Entry Number (BE Number), and case goes to Customs
Appraising Officer (CAO).
viii. CAO scrutinizes documents, checks the Brussels Tariff Number (BTN), checks
requirement of license, if any. If the invoice value is more than Rs. Five lakhs, the case
goes to Customs Audit.
ix. After Customs Audit Clearance, the case goes to Assistant / Deputy Commissioner of
Customs for clearance, after which TR 6 challan is printed for customs duty payment.
x. After customs duty payment, TR 6 challan (duly paid) is sent to the docks. At docks, all
shipping documents and TR 6 challan are presented to examiner who comes and
examines goods, and passes an Examination Order.
xi. With Examination Order, file goes to Appraising Officer, who issues Out of Charge
Certificate (OOC).
xii. Along with OOC, Bill of Entry is printed.
xiii. In the meantime, shipping company issues Delivery Order (DO) after receiving all its
dues like freight, detention charges, demurrage charges, handling charges etc.
xiv. The DO and OOC are sent to Port Trust authorities for payment of stamp duty and port
charges. After payment of Stamp duty and Port charges, Release Order is issued by
Port Authority
xv. Based on DO, OOC and Release Order of Port Authorities, CHA brings the material out
of Port and hands over the same to authorized transporter.
By Rail: The bulky material required in huge quantity like Raw Materials are received by Rail in rake
load. A rake consists of multiple numbers of wagons received together. In such cases the whole rake
is received inside the plant/unit and the wagons are returned back to railways after unloading. When
the quantity received is less than a rake load, materials are received in wagons which are transferred
inside the plant by the Railways and empty wagons are returned to railways after unloading. The
consignments received in rake load or wagon load are accompanied by the carrier’s (Railways)
document called Railway Receipt (RR).
The wagons / rakes are to be unloaded within the stipulated time limit given by the Railways known as
Free Time. For any delay in releasing the wagons beyond the free time Railways charge extra amount
known as “Demurrage” based on the extra time that wagons are held.
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Material less than a wagon load are received in smaller consignments also known as “Smalls”. The
railway document accompanying such small consignments is also known as Parcel Way Bill (PWB).
These small consignments / parcels are received from the railways from their Godown within the
stipulated time. For any delay in collection of such material from Railway godown, Railways charge an
extra amount known as ‘wharfage’.
By Road: The materials are also received through Road by trucks/trailer/vans etc. The materials
received by road are accompanied by a transporters document know as consignment note.
Depending on the terms of the Purchase Order, the material by road are received in the Plant Stores
or in the transporters local godown in which case Stores collects the material from the transporters
godown.
The materials sourced from the foreign countries are received by Ship or through Air Carrier up to the
nearest Seaport / Airport respectively which is further transported to Plants by road.
Verification of Consignments:
When the materials are received by Rail the wagons received are verified for any pilferage / shortage
and also weighed for ascertaining the receipt of correct quantity. Any discrepancy in the quantity
found or the damages observed is recorded on the RR / PWB. A Railway claim is lodged against this
discrepancy. This Railway claim becomes a prerequisite for lodging insurance claim with
underwriters.
The materials received through road are verified at the point of receipt for the correctness against our
Purchase Order and the suppliers’ challan and outward damages or shortages in quantity if any. If
any shortage or outward damage in the received material/consignment is observed the remarks is
made on the transporters document and a carrier claim is lodged. Acknowledgement for the receipt of
consignment/material is given on the transporters document like consignment note or on the delivery
challan of the firm.
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For example, a manufacturer whose tax payable on Output (Final Product) is Rs.450 but who has
already paid total tax of Rs.300 on different Inputs, can claim an Input Credit of Rs.300 and only need
to deposit as Rs.150 in tax payable to the Govt.
However, there is distinct mechanism for availing this input credit under GST.
To claim input credit under GST –
• You must have a tax invoice (of purchase) or debit note issued by registered dealer.
Note: Where goods are received in lots/installments, credit will be available against the tax invoice
upon receipt of last lot or installment.
Note: Where recipient does not pay the value of service or tax thereon within 3 months of issue of
invoice and he has already availed input credit based on the invoice, the said credit will be added to
his output tax liability along with interest.
• The tax charged on your purchases has been deposited/paid to the government by the
supplier in cash or via claiming input credit.
• Supplier has filed GST returns.
Possibly the most path breaking reform of GST is that input credit is ONLY allowed if your supplier
has deposited the tax he collected from you. So every input credit you are claiming shall be matched
and validated before you can claim it.
Therefore, to allow you to claim input credit on purchases all your suppliers must be GST
compliant as well.
• It is possible to have unclaimed input credit. Due to tax on purchases being higher than tax on
sale. In such a case, you are allowed to carry forward or claim a refund.
If tax on inputs > tax on output –> carry forward input tax or claim refund.
If tax on output > tax on inputs –> pay balance.
No interest is paid on input tax balance by the government
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• Input tax credit cannot be taken on purchase invoices which are more than one year old.
Period is calculated from the date of the tax invoice.
• Since GST is charged on both goods and services, input credit can be availed on both goods
and services (except those which are on the exempted/negative list).
• Input tax credit is allowed on capital goods.
• Input tax is not allowed for goods and services for personal use.
• No input tax credit shall be allowed after GST return has been filed for September following
the end of the financial year to which such invoice pertains or filing of relevant annual return,
whichever is earlier.
To Pay IGST: Take Input Tax Credit from IGST, CGST and SGST paid on purchases
To Pay CGST: Take Input Tax Credit from IGST and CGST paid on purchases
To Pay SGST: Take Input Tax Credit from IGST and SGST paid on purchases
Suppose there is a seller Mr A and he sells his goods to Mr B. Here Mr B i.e the buyer will be eligible
to claim the credit on purchases based on the invoices. Let’s understand how:
Step 1: Mr A will upload the details of all tax invoices issued in GSTR 1.
Step 2. The details with respect to sales to Mr B will auto populate/ get reflected in GSTR 2A, the
same data will be pulled when Mr B will file GSTR 2 (i.e details of inward supply).
Step 3: Mr B will then accept the details that the purchase has been made and reported by the seller
correctly and subsequently the tax on purchases will be credited to ‘Electronic Credit Ledger’ of Mr B
and he can adjust it against future output tax liability and get the refund.
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Input Tax Credit (ITC) can be claimed by the consuming plant/unit of SAIL based on its GSTIN.
Storage of Material:
The materials received from various sources need to be stored properly for ensuring the proper
upkeep of material till its use, to ensure security and safety of the material as well as ease of retrieval
and handling. The various aspects considered in the storage of material are given below:
Codification/cataloguing of items
When we use a large number of items it is difficult to identify, account and handle the material by its
nomenclature alone. So each item is given a unique code representing that item alone for enabling
easy identification, accounting and handling which also enables easy computerization. These item
codes are also known as material codes of the item. At SAIL there has been an effort to standardize
material codes across the plants through a Uniform Codification System (UCS) so that same material
is identified by a unique number by all SAIL units.
Bin Card
Bin card is the document in the stores depots where the history of transactions of an item is
maintained. There are separate bin cards maintained for each of the stores item under separate
material codes. Each receipt and issue transactions is posted in the bin card giving the updated stock
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position of the item. The item description, unit of transaction and location of items are also
maintained. With the advent of ERP based systems, e-bin cards have become the norm.
Location
Location of an item in stores is the physical storage location where material is kept. The location of
the stock of each item is maintained for ease in receipt & issue.
There are two ways of maintaining item locations: Fixed location&Random Location. In case of
fixed location system the item is stored in a specific place every time it is received. This fixed location
is maintained in bin cards. In case of Random location system, items are stored in different locations
based on the availability of space and corresponding location reference is given on the bin card
against the corresponding stock.
Preservation of material
There may be a time lag between the receipt & actual use of the material. Different materials
deteriorate to different extent during the storage period, so some items need to be preserved to
maintain their useful life. The action taken to maintain the useful life of the material to avoid its
deterioration is known as preservation of material. Items need to be initially preserved to avoid
deterioration during storage and subsequently verified for any change in condition for corrective
actions to be taken to restore the preservation.
Proper Storage:
For maintaining the useful life of the items stored for future use proper storage needs to be ensured.
Different materials have different storage requirement for ensuring useful life & to avoid damage /
loss. The items which get affected by keeping in open weather need to be stored in the closed
storage spaces, costly items should be kept under lock & key etc.
Material Handling:
Material handling involves loading, unloading, stacking and transportation of the material.
Loading / unloading
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While receiving the material they need to be unloaded from the carrying vehicles like trucks and
wagons. Once the items are unloaded they need to be placed in a proper manner so as to ensure
proper storage as well as ease of further handling which is known as stacking. While the materials
need to be transported the same needs to be loaded back on the carrying vehicles like trucks and
wagons. While loading and unloading of material precaution is to be taken so as to ensure that no
damage or loss occurs to the material being handled or to other material / properties in the vicinity or
to people.
Internal Transportation
Internal transportation involves the process of shifting the material from the point of unloading to the
place of actual storage in stores and also from the stores to the point of actual use of materials.
Contractual handling
Manual loading / unloading, shifting, stacking, sorting, opening of bags, sewing, re-stitching, sampling
etc. are managed through contract labour.
Stores issues the materials to the user department after scrutinizing the document and updates the
bin card by posting the issue transaction. To ensure secured material movement outside the plant the
system of moving the items against a Gate pass issued by the Stores depot exists.
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All such items are normally disposed off through e-auctions also known as Online Forward Auctions.
However, sometimes other disposal methods like Open Tender, Quick Open Sales (QOS), etc. may
also be adopted as per extant guidelines issued by CMMG.
Lot formation is done normally by shifting the disposable materials to Disposal stores. Sometimes,
Lots are also offered for sale on arising basis. With a view to maximize revenue, size and composition
of Lots are maintained judiciously. The items which can fetch better price are kept in separate Lot.
Lots have to be clearly identifiable to avoid any commercial issues.
Online Forward Auctions (e-Auctions): Under Forward Auction, these lots are declared to the
general public by uploading the Auction Catalogue on SAIL website and offering for sale through the
Internet.
• As of now, auction is conducted by mjunction services ltd, which is a joint venture of SAIL and
TATA STEEL.
• Each vendor who shows a willingness to participate in the weekly forward auction for iron &
steel items by submitting the required EMD, is given a unique user name and password,
through which they can access the online auction and bid for eligible lots.
• After completion of auction, the service provider (MJ) submits lot-wise H-1 bid report. The H-1
bids are compared with the lot-wise reserve price and those lots which are within a specified
percentage of the reserve price are sold.
• Sale Orders for sold lots are issued in favour of the highest bidder, asking them to deposit the
lot value. On receipt of lot value, Delivery Order is issued in favour of the highest bidder, who
then lifts the sold lot within the stipulated time.
Online Forward Auction is the most prevalent way of disposal of materials by any plant / unit. Other
methods of disposal, if chosen for use by plant / unit on practical or any other considerations, are as
per extant policy guidelines issued by CMMG.
Insurance Spares –
Insurance spares are those Revenue spares which normally do not fail, but whose life expectancy is
uncertain; and failure of which will result in stoppage of production process not only of the concerned
shop but will also affect the preceding and succeeding shops. Availability of such items is vital to
liquidate break-downs and to reduce the down-time of the shop/mill.
These are required to be declared as Insurance spares from indenting stage and have to be
capitalized on receipt at stores, i.e., their value has to be added to the mother asset value.
2. XYZ analysis - If inventory value of all items used in manufacturing process as on a particular
date (normally end of financial year) is compiled and sorted in descending order, then items
which cover top 70% cumulative stock value shall be called X class items, next 20% shall be
called Y class items and balance as Z class items.
3. VED analysis – Classification of items based on their criticality to the production process
i.e., Vital items, Essential items and Desirable items.
• Inventory Holding Norms – Five months in terms of number of months’ consumption. However,
the norms are dependent on type of item, criticality to process, cost of item and availability of
storage space.
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• Nonmoving inventory – Stock items which have not been consumed for preceding five years.
• Slow Moving Inventory - Stock items which have not been consumed for preceding four years
and shall get added to NM inventory of next year if not drawn in the current year.
• Obsolete/Surplus Items – Any stock item that is no longer of use in the plant/unit owing to
technological reasons is called as obsolete item. These items are put up to a Committee
chaired by Head of Plant Maintenance for declaration as surplus. After declaration as Surplus,
these items are not included in Stores & Spares inventory and are taken up for use by other
plants or for disposal.
• Idle Assets – An asset which has some useful life left, but which is not required / used at its
present location is an Idle Asset.
• Stores/Goods In Transit – All items dispatched on or before 31 st March of any year (i.e., the
date of AWB, BOL, MR, RR etc is dated 31 st March or earlier) but not received on or before
31st March of the same financial year. SIT also includes items received at Stores but neither
accepted nor rejected as on 31 st March.
The computerized system of processing the entire activity chain of the Materials Management &
related functions, including management of documents / forms involved, is known as IMMS. It
generally covers functions of Indenting, Procurement (Tendering, Comparative Statement, Proposal
and Order), Quality Assessment, Receipt, Inventory, Issue, Disposal etc. The computerized system
helps in reducing paper work, reducing procurement lead time, increasing accuracy of inventory
status besides providing important information for decision making.
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these items are sold through FA mode only. This helps in getting the best market prices and
generation of additional revenue for the company.
E-Procurement:
E-procurement means electronic processing of procurement activities right from indenting stage to
payments and overall contract management. SAIL plants / units have implemented e-procurement by
adopting / using a combination of products such as Enterprise Resource Planning (ERP), Supplier
Relationship Module (SRM), Enterprise Procurement System (EPS),., etc., for carrying out these
activities. However, in recent years, GeM has emerged as the leading e-platform fore-procurement of
all goods & services other than those imported.
e-Payment -
E-Payment is implemented in the form of NEFT/RTGS for payments to Vendors.
A dedicated tender website of SAIL (https://www.sailtenders.co.in) has been hosted on the internet,
which has the following salient facilities
A user, buyer / seller, has to complete a simple process of user registration on the SAIL Tender site.
The site provides easy access/downloading of tenders, notices & other information to interested
vendors. The website is secured with SSL (Secured Socket Layer) certification and uses Digital
Signature Certificate (DSC) for uploading of Tenders & other content to ensure authenticity & prevent
unauthorized changes.
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Chapter – 3
Finance & Accounts
The Finance & Accounts Department plays pivotal role in any organization, and is generally
considered to be the nerve centre of all activities, as all activities have a commercial and financial
implication.
The activities of Finance can be broadly classified into the following categories:
1. Finance functions:
5. MIS functions– providing the management with data for decision making.
Based on the above functions, various sections are formed which deal with specific activities. This is
required as every single business activity taking place in an organisation has some sort of financial
implication, the effect of which is reflected in the financial statements.
Accounts
Financial accounting is the art and science of recording transactions and events in a manner that
captures the economic realities of those transactions and events. The financial accounting is
concerned with book keeping and measurement of assets and liabilities.
Accounting is the language of business. Affairs of a business are communicated to others as well as
to those who own or manage it through accounting information, which has to be suitably recorded,
classified, summarised and presented. Certain fundamental accounting assumptions underline the
preparation and presentation of financial statements. They are usually not specifically stated because
their acceptance and use are assumed. The following are accepted as fundamental accounting
principles and assumptions:
Going Concern: The enterprise is normally viewed as a going concern, that is, as continuing in
operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the
necessity of liquidation or of curtailing materially the scale of the operation.
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Consistency: It is assumed that accounting policies are consistent from one period to another.
Accrual: Revenues and costs are accrued, that is, recognized as they are earned or incurred (and
not as money is received or paid) and recorded in the financial statements of the periods to which
they relate.
The accounting policies refer to the specific accounting principles and the methods of applying those
principles adopted by the enterprise in the preparation and presentation of financial statements. There
is no single list of accounting policies which are applicable to all circumstances. The differing
circumstances in which enterprises operate in a situation of diverse and complex economic activity
make alternative accounting principles and methods of applying those principles acceptable. The
choice of appropriate accounting principles and applying those in specific circumstances calls for
considerable judgment by the management. . All significant accounting policies adopted in the
preparation and presentation of financial statements should be disclosed as part of the Financial
Statements.
When a transaction is entered into, its consequences are bound to follow. The accrual concept of
accounting requires that all transactions or events, even if not yet settled in cash, must be taken into
account. Such system is called mercantile system of accounting. Book keeping is based on the
double-entry system that records transactions and events by the Debit-Credit principles. The debit-
credit principle is a set of instructions for recording changes in balance sheet elements, that is,
assets, liabilities and equity.
1. Real account : Debit what comes in, credit what goes out.
3. Nominal account:Debit expense and losses and credit revenues and gains.
Accounting equation is a statement of equality between the three basic elements of accounting. They
are assets, capital and liabilities. Each and every financial transaction affects the three basic
elements. However, the total of all assets is always equal to the total of capital and liabilities at any
point in time. The rules of debiting and crediting an account based on the accounting equation can be
summarised in the following way:
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The accounting cycle begins with recording of opening entries (balances carried forwards from the
previous reporting period) in the general ledger, and ends with the preparation of financial statements
for a particular period. Transactions are recorded in books of accounts in chronological order. Account
heads, in accordance with their nature of classification , are opened in the general ledger and journal
entries are posted in the general ledger. Accounts in the general ledger are balanced periodically.
Usually, a trial balance, a statement that lists out balances in different ledger accounts, is prepared
periodically. At the end of the reporting period, adjustments entries are passed to adjust revenue and
expenses for matching expenses with revenue. A revised trial balance is prepared and closing entries
are passed to close nominal accounts and prepare Statement of Profit and Loss. Balances that
appear in the general ledger after preparation of the Statement of Profit and Loss are aggregated and
classified for presentation in the balance sheet.
According to matching principle, , all items of revenues earned and expenses incurred (whether
paid for in cash or not) should be recorded properly under different heads in accordance with nature
of classification, for preparation of Statement of Profit and Loss. Further, transactions of capital nature
are accounted for directly in the Balance Sheet. Therefore, the capital and revenue nature of
transactions must be distinguished properly. The transactions concerning assets and liabilities will
affect the items in the Balance Sheet, reflecting the financial position.
Balance Sheet
Every Balance Sheet of a Company should give a true and fair view of its state of affairs as at the
reporting date, and should be set out in the form prescribed in Schedule III (Part I)to the Companies
Act, 2013. The Companies Act, 2013 prescribes the format of the Balance Sheet and the details
required to be disclosed under the various categories of assets and liabilities in Balance Sheet.
Liabilities are classified into five main categories; (i) Share Capital, (ii) Other Equity, (iii) Non-Current
Liabilities and Provisions, (iv) Current Liabilities and Provisions & (v) Tax Liability. Non-current and
Current liabilities are further divided into Financial and Non-financial liabilities. Apart from these,
contingent liabilities (a potential liability that may occur, depending on the outcome of an uncertain
future event) and certain other items are required to be disclosed by way of note to the Financial
Statements. Assets are classified into 3 major categories; (i) Non-Current Assets, (ii) Current Assets
and (iii) Assets classified as held for Sale. Also, Non-current and Current assets are further divided
into Financial and Non-financial assets.
The Statement of Profit and Loss of a company should give a true and fair view of the profit or loss
of the company for the financial year and should comply with the requirements of the Companies Act.
The sum of (1) and (2) above is 'Total Comprehensive Income' to be carried forward to Other Equity.
Schedule III (Part-II) to the Companies Act, 2013 prescribe the format of Statement of Profit & Loss
and the details required to be disclosed therein under the various categories of Incomes and
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Expenses. Income of a company are divided into two categories; (i) Revenue from Operations and (ii)
Other Income. The Expenses are divided into seven categories; (i) Cost of material consumed, (ii)
Purchases of Stock in Trade (iii) Changes in Inventories of finished goods, Stock in Trade and Work-
in-progress, (iv) Employee benefit expenses, (v) Finance cost, (vi) Depreciation and Amortisation, (vii)
Excise Duty and (viii) Other Expenses. The difference between Income and expenses is Profit/Loss
before exceptional items. Exceptional items are adjusted to calculate Profit before tax (PBT). Further,
Tax expenses are adjusted with PBT to arrive at Profit after tax (PAT).
With effect from 1st April 2015, Companies listed on Stock Exchanges in India or Outside India and
having net worth of Rs.500 crore or more are compulsorily required to prepare its Financial
Statements in accordance with Indian Accounting Standards (Ind AS), recommended by the Institute
of Chartered Accountants of India (ICAI) and notified by The Ministry of Corporate Affairs (MCA). For
this purpose, Net Worth shall be calculated in accordance with the stand-alone financial statements of
the Company as on 31st march, 2014 or the first audited financial statements for accounting period
which ends after that date.
Once Ind AS are applicable, an entity shall be required to follow the Ind AS for all the subsequent
financial statements.
Ratio Analysis
Financial statements are required among other purposes, for making evaluations and financial
decisions. Users cannot make reliable judgments unless the financial statements are clear and
understandable. Ratio analysis is an important tool for analyzing financial statements.
The ratio analysis involves comparison for a useful interpretation of the financial statements. The
parties interested in financial analysis are short and long term creditors, owners and management.
Short term creditors’ main interest is in the liquidity position or short term solvency of the firm. Long
term creditors on the other hand are more interested in the long term solvency and profitability of the
firm. Similarly, owners concentrate on the firm's profitability and financial condition. Management is
interested in evaluating every aspect of the firm's performance. They are classified into four
categories:
• Liquidity ratios
• Leverage ratios
• Activity ratios
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• Profitability ratios
Liquidity Ratios:
Liquidity ratios measure the firm’s ability to meet current obligations. It is extremely essential for a
firm to be able to meet its obligations as they become due. Liquidity ratios measure the ability of the
firm to meet its current obligations. In fact analysis of liquidity needs is done thru preparation of cash
budgets and cash and funds flow statements, but liquidity ratios by establishing a relationship
between cash and other current assets to current obligations provide a quick measure of liquidity.
A firm should ensure that it does not suffer from lack of liquidity and also that it does not have excess
liquidity. The failure of the company to meet its obligations due to the lack of sufficient liquidity will
result in a poor credit worthiness, loss of creditors confidence or even in legal tangles resulting in the
closure of company. A very high degree of liquidity is also bad, as idle assets earn nothing. The
firm's funds will be unnecessarily tied up to current assets. Therefore, it is necessary to strike a
proper balance between high liquidity and lack of liquidity. Various types of liquidity ratios are
• Current ratio
• Quick ratio
• Interval measure
Leverage Ratios:
The short term creditors, like bankers and suppliers of raw material are more concerned with the
firm’s current debt paying ability. On the other hand, long term creditors like debenture holders,
financial institutions etc. are more concerned with firm’s long term financial strength. In fact a firm
should have short as well as long term financial position. To judge the long term financial position of
the firm, financial leverage or capital structure, ratios are calculated. These ratios indicate mix of
funds provided by owners and lenders. As a general rule, there should be an appropriate mix of debt
and owners equity in financing the firm’s assets. Various types of leverage ratios are;
• Debt Ratio
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Activity Ratios:
Funds of creditors and owners are invested in various assets to generate sales and profits. The
better the management of assets, the larger is an amount of sales. Activity ratios are employed to
evaluate the efficiency with which the firm manages and utilizes its assets. These ratios are also
called turnover ratios because they indicate the speed with which assets are being converted or
turned over into sales. Activity ratios, thus, involve a relationship between sales and assets. A proper
balance between sales and assets generally reflects that assets are managed well. Various activity
ratios are
• Collection period
Profitability Ratios:
A company should earn profits to survive and grow over a long period of time. Profits are essential
but it would be wrong to assume that every action initiated by management of a company should be
aimed at maximizing profits, irrespective of social consequences.
Profit is the difference between revenues and expenses over a period of time. Profit is the ultimate
output of a company and it will have no future if it fails to make sufficient profits. Therefore, the
financial manager should continuously evaluate the efficiency of the company in terms of profits. The
profitability ratios are calculated to measure the operating efficiency of the company.
▪ Return on Investment
▪ Return on equity
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▪ Earnings per share(EPS)
The Companies Act requires that Statement of Profit and Loss and Balance Sheet of the company
shall comply with the accounting standards. The expression "accounting standards" means the
standards of accounting recommended by the Institute of Chartered Accountants of India as may be
prescribed by the Central Government in consultation with the National Advisory Committee on
Accounting Standards.
Where the profit and loss account and the balance sheet of the company do not comply with the
accounting standards, such companies are required to disclose in their profit and loss account and
balance sheet the deviation from the accounting standards, the reason for such deviation and the
financial effect, if any, arising due to such deviation.
Corporate Governance
In a narrow sense, corporate governance involves a set of relationships amongst the company’s
management, its board of directors, its shareholders, its auditors and other stakeholders. These
relationships, which involve various rules and incentives, provide the structure through which the
objectives of the company are set, and the means of attaining these objectives as well as monitoring
performance are determined. Thus, the key aspects of good corporate governance include
transparency of corporate structures and operations, the accountability of managers and the boards
to shareholders, and corporate responsibility towards stakeholders.
In a broader sense, however, good corporate governance, the extent to which companies are run in
an open and honest manner, is important for overall market confidence, the efficiency of capital
allocation, the growth and development of countries’ industrial bases, and ultimately the nations’
overall wealth and welfare.
Corporate governance is a process or a set of systems and processes to ensure that a company is
managed to suit the best interests of all. The systems that can ensure this may include structural and
organisational matters. The stake holders may be internal stakeholders (promoters, members,
workmen and executives) and external stakeholders viz.
• customers,
• lenders,
• vendors,
• bankers,
• community,
• government
• and regulators.
Corporate governance is concerned with the establishing of a system whereby the directors are
entrusted with responsibilities and duties in relation to the direction of corporate affairs. It is
concerned with accountability of persons who are managing it towards stakeholders. It is concerned
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with the morals, ethics, values, parameters of conduct and behaviour of the company and its
management. Corporate governance is nothing but a voluntary ethical code of business of
companies. This is based on the core values of the top management and the guiding principles that
emanate from it.
Corporate governance is the system by which companies are directed and controlled. The board of
directors is responsible for the governance of the company. The directors and the auditors are to
satisfy themselves that an appropriate governance structure is in place.
AUDIT COMMITTEE
For better corporate governance, the concept of Audit Committee for companies was introduced by
section 292A of the Companies Act, 1956. Every public company having paid up capital of not less
than Rs.5.00 crores must have an Audit Committee.
The auditors, the internal auditor, if any, and the director-in-charge of finance are to attend and
participate at meetings of the Audit Committee.
As per section 292A (6) of the said Act, the function of the Audit Committee includes the following:
1. The Audit Committee has to discuss with the auditors periodically about internal control
systems, the scope of audit including the observations of the auditors.
2. The Audit Committee has to review the quarterly, half yearly, nine monthly and annual
financial statements before submission to the Board.
The Audit Committee has the authority to investigate into any matter in relation to the items specified
in this section or referred to it by the Board and for this purpose, has full access to information
contained in the records of the company and external professional advice, if necessary.
The recommendations of the Audit Committee on any matter relating to financial management, shall
be binding on the Board and if the Board does not accept the recommendations of the Audit
Committee, it shall record the reasons therefore and communicate such reasons to the shareholders.
The above provisions of law relating to powers and functions of the Audit Committee relating to
financial statements has helped in achieving one of the objectives of corporate governance, i.e.,
accountability and avoidance of poor financial reporting. It also ensures that the companies are
managed in clean and transparent manner.
A management information system (MIS) is a system that provide requisite information to the
management in a timely manner relating to an organisation’s operations which in turn helps them to
take necessary decisions.
The terms MIS and information systems are often confused. Information systems include systems that
are not intended for decision making. The following are pre-requisites of an effective MIS:
Database
It is a master file which consolidates data records formerly stored in many data files. The data in
database is organized in such a way that access to the data is improved and redundancy is reduced.
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Normally, the database is subdivided into major information sub-sets needed to run. The database
should be user-friendly, capable of being used as a common data source, available to authorized
persons only and should be controlled by a separate authority. Such a database is capable of meeting
information requirements of its executives, which is necessary for planning, organizing and controlling
the operations of the business.
MIS are manned by qualified officers. These officers who are experts in the field should understand
clearly the views of their fellow officers. The organizational management base should comprise of
two categories of officers (i) System and Computer experts and (ii) Management experts.
Management experts should clearly understand the concepts and operations of a computer. Their
whole hearted support and cooperation will help in making MIS an effective one.
An MIS becomes effective only if it receives the full support of top management. To gain the support
of top management, the officer should place before them all the supporting facts and state clearly the
benefits which will accrue from it to the concern. This step will certainly enlighten the management
and will change their attitude towards MIS.
Control of the MIS means the operation of the system as it was designed to operate. Sometimes
users develop their own procedures or shortcut methods to use the system, which reduces its
effectiveness. To check such habits of users, the management at each level in the organization
should device checks for the information system control.
Maintenance is closely related to control. There are times when the need for improvements to the
system will be discovered. Formal methods for changing and documenting changes must be
provided.
Evaluation of MIS
An effective MIS should be capable of meeting the information requirements of its executives in future
as well. The capability can be maintained by evaluating the MIS and taking appropriate timely action.
The evaluation of MIS should take into account the following points:
2. Ascertaining the view of the users and designers about the capabilities and deficiencies of the
system ;
3. Guiding the appropriate authority about the steps to be taken to maintain effectiveness of MIS.
Cost Accounting
Cost accounting, or Costing, is the process of tracking, recording and analyzing costs
associated with the products or activities of an organization. Managers use cost accounting to support
decision making to reduce a company's costs and improve its profitability.
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deals with the tracking of such costs, and analyzing them, in order to work out the cost of the product
(or service), and to control such costs.
The Louisville & Nashville Railroad first used cost accounting in the late 1860s. This enabled the
company to determine such measures as comparative cost per ton-mile among its branches, and it
was by these measures, rather than earnings or net income, that the company evaluated the
performance of its managers.
There are two conventional costing approaches used in manufacturing. The first, and more common,
is Process Costing. Used in most mass-production settings, a process cost system analyzes the net
cost of a manufacturing process; say rolling slabs into plates, over a specified period of time. The per-
tonne cost for rolling plates is simply the net cost incurred while rolling all slabs into plates during the
period, divided by the tonnage of plates rolled. Since most manufacturing processes involve more
than one step, a similar calculation is made for each step to arrive at a unit cost average for the entire
production system.
By contrast, the second major costing method, Job-order costing, is concerned with recording all the
costs on an individual product basis. This is useful in settings where each unit of production is
customized or where there are very few units produced, such as in machining customized products,
or fabricating goods against specific orders. Under job order costing, the exact costs incurred in the
production of a particular unit are recorded and are not necessarily averaged with those of any other
unit, since every unit may be different. A single manufacturer may use both process and job-order
costing for different parts of its operations. For example, in most integrated units of SAIL, process
costing method is followed for the main production line (coke-making to finished product rolling), while
job order costing is used in foundry, machine shop, structural shop, etc for calculating the cost of
items made against specific job-orders.
Activity-based costing (ABC) is a costing method that assigns overhead and indirect costs to
related products and services. This accounting method of costing recognizes the relationship between
costs, overhead activities, and manufactured products, assigning indirect costs to products less
arbitrarily than traditional costing methods. Activity-based costing (ABC) is mostly used in the
manufacturing industry since it enhances the reliability of cost data, hence producing nearly true costs
and better classifying the costs incurred by the company during its production process. ABC clusters
all the costs associated with a single manufacturing task, regardless of whether they fall under the
headings of labour or materials or something else, into a single activity cost.
Costs can be divided into two main categories – Variable and Fixed Cost. Variable cost are those cost
that change proportionately to the level of output. For example, a manufacturing firm pays for raw
materials. When activity is decreased, less raw material is used, and so the spending for raw
materials falls. When activity is increased, more raw materials is used and spending therefore rises.
Thus, raw material is a variable cost. In the context of a steel plant, coal, iron ore, fluxes, ferro-alloys,
power, oxygen, etc are examples of variable costs. Since variable cost changes in proportion to the
change in output levels, the ‘per-unit’ variable cost is almost the same at all levels of output. That is, if
the cost of coal is Rs 8,000 per tonne of coke produced, it would remain at (or near about) this rate at
all levels of coke production.
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Rs
Variable cost
Production
Fixed Costs are those costs that do not change with changes in the level of output within a given
period or scale of operation. Expenses like Salaries & Wages, Depreciation, Interest, Maintenance
Costs, etc are examples of fixed costs. The amount of fixed cost is a certain sum of money that would
remain more or less constant at different output levels (provided, of course, that the level of operation
does not change). Since the expenditure on fixed costs is more or less constant, therefore as the level
of production increases, the per-unit fixed cost falls, and as the level of production decreases, the per-
unit fixed cost increases.
It needs to be understood that fixed costs do not remain ‘fixed’ or un-changed over a period of time. It
only signifies that such costs do not vary with production levels.
Cost can also be categorized by traceability. Direct costs are those costs readily traceable to the cost
object, whereas indirect costs are less-readily traceable. Direct costs typically include the major
components of any manufactured goods and the labour directly required to produce that good. Direct
costs are often subdivided into direct material costs and direct labour costs. Direct costs are also
referred to as prime costs.
Indirect costs include plant-wide costs such as those resulting from the use of fixed capital, but
indirect costs may also include the costs of minor components such as solder or glue. While all costs
are conceivably traceable to a cost object, the determination of whether to do so depends on the cost-
effectiveness with which this can be done. Indirect costs of all kinds are sometimes referred to as
overhead.
Cost Centres:
Cost centres are divisions within an organization, against which cost is collected. For example, Blast
Furnace, Coke Ovens, Steel Melting Shop, etc are cost centres in a Steel Plant. Big departments may
be further broken down into sub-cost centres. Coke Oven may have the following sub-cost centres:
• Coke handling
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• Ammonium Sulphate Plant
All costs incurred in a cost centre are collected in order to calculate the product cost/ service cost.
The Institute of Cost Accountants of India, recognizing the need for structured approach to the
measurement of cost in manufacture or service sector and to provide guidance to the user
organizations, government bodies, regulators, research agencies and academic institutions to achieve
uniformity and consistency in classification, measurement and assignment of cost to product and
services, has constituted Cost Accounting Standards Board (CASB) with the objective of formulating
the Cost Accounting Standards.
Keeping in view latest legal and contemporary developments, the Cost Accounting Standards Board
develops Cost Accounting Standards. Cost Accounting Standards (CAS) are a set of standards that
are designed “to achieve uniformity and consistency in cost accounting practices.” To explain the
requirements of Standards and provide the guidance with practical examples and illustrations on
technical issues relating to Cost Accounting Standards issued by the Institute, CASB also issues
Guidance Notes. Further, there may also be other technical issues relating to topics of importance for
which the Cost Accounting Standards are not necessary but these technical issues need guidance to
members and industry with respect to measurement, classification, assignment and presentation of
cost in cost statements, the CASB issues Guidance Notes on such topics. The Institute/Board has so
far issued 24 Cost Accounting Standards, Generally Accepted Cost Accounting Principles, 9
Guidance Notes on Cost Accounting Standards and two Guidance Notes on “Treatment of Costs
Relating to Corporate Social Responsibility (CSR) Activities” and “Maintenance of Cost Accounting
Records for Construction Industry Including Real Estate and Property Development Activity”.
The structure of Cost Accounting Standard consists of Introduction, Objectives of issuing standards,
Scope of standard, Definitions and explanations of the terms used in the standard, Principles of
Measurement, Assignment of Cost, Presentation and Disclosure.
While formulating the Cost Accounting Standards, the CASB takes into consideration the applicable
laws, usage and business environment prevailing in India. CASB also gives due consideration to the
Cost Accounting Standards, principles and practices being followed by the other countries in the
world. If due to subsequent changes in the law, a particular standard or any part thereof becomes
inconsistent with such a law, the provisions of the said law shall prevail.
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LIST OF COST ACCOUNTING STANDARDS (CAS) AND GUIDANCE NOTES ISSUED AS ON
DATE
Effective Date
(For the period
CAS No. Title Guidance Note
commencing
from)
CAS 1 (Revised
Classification of Cost 1st April 2015
2015)
Guidance Note on
Packing Material 1st April
CAS 9 Packing Material Cost
Cost 2010
(CAS-9)
Guidance Note on
Administrative 1st April
CAS 11 Administrative Overheads
Overheads 2010
(CAS-11)
Guidance Note on
Repairs and 1st April
CAS 12 Repairs and Maintenance
Maintenance Cost 2010
Cost (CAS-12)
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Centre 2011
Depreciation and
CAS 16 1st April 2014
Amortisation
Treatment of Revenue in
CAS 24 1st April 2017
Cost Statements
Budget
Budget refers to the list of all planned expenses and income of a future period (generally a financial
year). The Budget exercise for the next financial year generally starts around January/ February of the
previous year. The exercise begins with the marketing projection. In SAIL, the Central Marketing
Organization (CMO) gives a projection about the likely demand for various products of SAIL, and the
likely selling prices. Based on the demand projection, the Plants prepare the production plan. In order
to achieve the production plan, the plants also work out the consumption of various raw materials and
inputs (power, oxygen, etc). The Budget Section of Finance Department then compiles the
expenditures and incomes (including expenditure on Stores & Spares, Contractual expenses, etc).
The projects likely to be capitalized next year are also considered. Finally, the Budgeted Profit & Loss
A/c and the Budgeted Cash Flow Statement are worked out. After various rounds of discussions, the
figures are frozen, and the Budget is approved by the Board of Directors.
Standard Cost:
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Based on the Annual Production Plan (APP) and the Financial Budget, the Costing section of Finance
prepares the Standard Cost for the next year (Budget year). The Standard Cost explodes the macro
expenditure figures into detailed shop-wise expenses. The product-cost thus worked out are the
Standard product costs for the products. The actual production cost during the budget year is
compared with the Standard Cost, and the variances are analyzed.
Cost Variance:
The actual cost of each month/ period of the Budget Year would generally be different from the
Planned (Budgeted) cost. The difference needs to be analyzed in order to know the reasons for
variation. This exercise is known as Cost Variance Analysis.
The variance between the actual cost and Standard cost is analyzed under the following heads:
Volume Variance Measures the impact of increase/ decrease in the per-unit Fixed Cost
of a product due to difference between planned volume and actual
volume of production.
Price Variance Measures the impact of increase/ decrease in the per-unit cost of a
product due to difference between the planned price and actual price
of input materials.
Usage Variance Measures the impact of increase/ decrease in the per-unit cost of a
product due to difference between the planned usage and actual
usage of input materials (for example what is the impact on cost due to
change in coke rate from 480 Kg/THM (planned) to 490 Kg/THM
(actual)).
Fixed Expenditure Measures the impact of increase/ decrease in the per-unit cost of a
Variance product due to difference between the planned and actual expenditure
on Fixed Costs (salaries, depreciation, stores & spares, etc).
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3.4 Financial Management
Financial Management is the management related to the financial structure of the company and
therefore to the decisions of source and use of the financial resources, that is reflected in the size of
the financial income and/or charges.
A company needs funds to finance its day-to-day operations (paying salary, buying raw materials,
etc.) and also to finance its capital expenditure on projects. Financial Management deals with the
arrangement of funds from various sources, and their management.
Sources of Funds:
1. They make profit by selling a product for more than it costs to produce. This is the most basic
source of funds for any company and hopefully the method that brings in the most money.
2. Like individuals, companies can borrow money. This can be done privately through bank
loans, or it can be done publicly through a debt issue. The drawback of borrowing money is
the interest that must be paid to the lender.
3. A company can generate money by selling part of itself in the form of shares to investors,
which is known as equity funding. The benefit of this is that investors do not require interest
payments like bondholders do. The drawback is that further profits are divided among all
shareholders.
Internal Accruals:
These are funds in the possession of the company created out of un-distributed profits of previous
years.
The Profit & Loss A/c of a company shows the net profit earned by the company in a year. Net profit is
calculated by subtracting a company's total expenses from total income, thus showing what the
company has earned (or lost) in a given period of time (usually one year).
The Net Profit (after deduction of Income tax) plus all non-cash charges, i.e., charges that don't entail
actual cash outflow but they are only notional charges like depreciation, writing off preliminary
expenses etc, gives the cash profit.
The total un-distributed cash profit available as reserves with a company constitute Internal Accruals.
A company may use a part of its internal accruals to finance its working capital needs, and to fund the
project costs. The advantage of using own funds is that it does not increase the borrowing levels,
there is no expenditure towards interest, and the company is not under pressure for loan repayments.
However, it needs to be understood that the cost of own funds is very high (as they reflect the
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expectation of the shareholders), and also income tax benefit is not available on the utilization of such
funds.
Borrowings:
A company may borrow money from banks or financial institutions. A company can also borrow
money from the market by issuing Debentures or Bonds. Obviously, borrowed money has a cost, i.e.
the interest to be paid. There is also the worry of cash flows to repay the principal and interest. The
lenders view a default on re-payment very seriously. However, borrowed money has two major
advantages. Firstly, the interest cost is an allowable expenditure in Income Tax. That is, tax benefit is
available, and therefore the net cost to the company is less than the amount of interest paid.
Secondly, interest gives‘leverage’ to the earnings available to shareholders. In a company having
higher debt content, a 10% increase in profit will translate into more than 10% increase in EPS
(earnings per share).
Issue of Shares:
A company can raise money by issuing shares in the market. The share price of companies having a
good track record usually trades in the stock markets at a higher price than its face value. Such
companies can issue shares at a ‘premium’. For example, a company has shares of Rs 10/-each
(face-value). The shares trade in the stock market at Rs 40/- each. The company could easily issue
shares at a premium of Rs 30/- per share. As explained earlier, though there is no compulsion of
making payment to shareholders, the available profits get more thinly distributed among the increased
number of shares, thereby reducing the earnings per share.
Debt-Equity ratio:
This is the ratio that shows the proportion of ‘own funds’ and ‘loan funds’ being employed by a
company. ‘Own Funds’ refer to the Net Worth of the company (i.e. the sum of equity shares plus all
free reserves). A debt-equity ratio of 2:1 may be considered healthy in many industries. This means
borrowings are double the net worth.
For example, if a company has a net worth of Rs 100 crores, and borrowings of Rs 150 crores, it
would have a debt-equity ratio of 1:1.5.
Working Capital refers to the difference between current assets and current liabilities of a company.
Current assets comprise of cash, bank balance, stock, debtors, etc., while current liabilities comprise
of creditors and liabilities.
Working capital management is concerned with making sure that exactly the right amount of money
and lines of credit are available to the business at all times. Cash is the life-blood of any business, no
matter how large or small. If a business has no cash and no way of getting any cash, it will have to
close down.
The aim of working capital management is to minimize the cash conversion cycle (purchase to pay,
order to cash, etc), so as to minimize the amount of capital tied up in current assets.
To manage working capital, we need to manage the individual components of working capital.
Inventory Management
It deals with minimizing the total cost of inventory. This consists of optimizing the size of inventory.
Concepts such as ‘Just-in-time inventory’ are strategies of inventory management. A company should
attempt to minimize the inventory size without facing a risk of stoppage of work because of non-
availability of materials. ‘A-B-C’ classification of inventory is also a strategy in this direction.
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Cash Management
It refers to the management of receivables, optimize free cash balances, and manage liquidity. The
‘order-to-cash’ cycle and ‘’purchase-to-pay’ cycle are important parameters to watch. Cash flow
statements and cash flow forecasts are used to monitor the cash position on a short-term basis.
Receivable Management
It deals with the realization of cash from customers to whom goods have been sold on credit. The
effort here is to reduce the credit period and hasten the collection of cash.
Project Finance
The role of Finance department in the life cycle of a project begins with the investment proposal and
ends with the de-capitalization of an asset that has completed its useful life.
Project Viability:
There are three methods that are commonly used to assess the viability of an investment decision.
These are the Payback Method, the Net Present Value (NPV) Method, and the Internal Rate of
Return (IRR) Method.
Payback Method:
In this method, we calculate the number of years it would take for the asset to return the original
investment. For example, an asset costs Rs 20 crores to acquire. The asset is expected to give a
saving of Rs 5 crores each year. Thus the payback period of this investment decision will be 4 years
(Rs 20 crores / Rs 5 crores).
Payback method is simple to calculate and understand. It shows how quickly the company will get
back its money. However, it suffers from a major drawback; that is, it ignores the ‘time value of
money’.
It will be appreciated that Rs 100 earned today is worth more than Rs 100 earned after five years. Or,
Rs 100 earned after five years in less valuable than Rs 100 earned today. This is because, Rs 100
earned today, and invested at a certain rate of interest, would amount to more than Rs 100 after five
years. In fact, Rs 100 earned today and invested at an interest rate of 10% per annum (compounding)
would amount to Rs 161 after five years. Or, Rs 100 earned after five years is equivalent to only Rs
62 today.
Payback method suffers from a major drawback in that it treats cash flows of all years as equal and
does not consider time value of money.
Thus, it is required to ‘discount’ the future cash flows in such a way as to arrive at their ‘present
value’ today. Discounting of future cash flows can be done by applying the following formula:
PV = FI x 1/ (1+R) N
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Where,
R = Discounting rate
N = period
The present value of an income of Rs 100 earned after 5 years, and discounted at 10% per annum is:
100 x 1/ (1.1)5
= Rs 62.09
Under the Net Present Value (NPV) method of calculating project viability, the future cash inflows and
outflows (over the life of the asset) are discounted to the present value. If the sum is positive, the
project is viable; if the sum is negative, the project is unviable.
The NPV method, though an improvement over the payback method, is still short of full acceptability
because it deals with absolute numbers. It does not give a clear decision regarding cases where the
cash flows are different. For example, is a project having a cost of Rs 50 crores and an NPV of Rs 8
crores better than a project costing Rs 10 crores with an NPV of Rs 4 crores?
The Internal rate of Return (IRR) method refers to the discounting rate at which NPV of a project is
equal to zero. This is the return being earned by the project. The advantage here is that, since IRR is
relative, it is possible to compare the viability of different projects having different costs and different
cash inflows.
Discounting rate:
We have mentioned that future cash flows need to be discounted at a certain rate in order to arrive at
the present value. How do we arrive at a discounting rate? It needs to be emphasized here that a
correct discounting rate is essential for calculations, because it is easy to manipulate project viability
by playing around with the discounting rates. For example, reducing the discounting rate can increase
the viability of a project.
Discounting rate is the weighted average cost of capital employed in the project. For a project funded
entirely out of bank borrowings, the discounting rate would be the after-tax rate of interest. For
example, if a company takes a bank loan at 10% rate of interest, and the corporate tax rate is 30%,
the after-tax cost to the company is 7% [10% x (100 – 30)%]. This would be the discounting factor.
In case of a company taking a mix of bank borrowings and own funds (internal accruals), the
weighted average cost of capital (WACC) would be the discounting rate. To assign a cost to own
funds is somewhat subjective, and there are certain mathematical models available for this purpose.
The model commonly used is the Capital Asset Pricing Model (CAPM).
Discounting factor:
As explained earlier, discounting of future cash flows is done by applying the following formula:
PV = FI x 1/ (1+R) N
Where,
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PV = Present value of future cash flow
R = Discounting rate
N = period
The discounting factors for three years calculated at a discounting rate of 10% are as follows:
Year Discounting
factor
0 1.000
1 0.909
2 0.826
3 0.751
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Asset acquisition:
• by outright purchase
• by awarding a contract
• by own construction
Large projects are generally acquired by awarding contracts. Contracts may be awarded on turnkey
basis or non-turnkey basis. In a turnkey contract, the contractor is given full responsibility for the
execution of the job. A turnkey contract may be awarded to a single contractor, or a consortium of two
or more contractors. Contracts may be Global or indigenous; it may be issued on open tender, limited
tender or single tender basis.
Capitalization of assets:
Once an asset is commissioned, or put to use, it needs to be capitalized. Capitalization signified that
an asset has been created. Till the time an asset is commissioned, it is kept under Capital Work In
Progress (CWIP). An asset is capitalized at the actual cost incurred in commissioning the asset, net of
any credit available on Excise Duty, CVD, service tax, and VAT.
Depreciation:
An asset, once created and put to use will gradually lose value due to wear and tear and
obsolescence. The gradual reduction in value of an asset over its useful life is known as depreciation.
Schedule XIV of the Companies Act specifies the rate at which various assets are to be depreciated.
The amount of depreciation is reduced from the asset value and charged off the Profit & Loss A/c as
an expense. Depreciation stops when the asset has reached terminal value (i.e. 5% of the original
cost).
An asset that has completed its useful life is removed from the asset register and disposed off. The
profit or loss on disposal of asset (i.e. the selling price minus the depreciated value of the asset) is
shown in the Profit & Loss A/c of that year. With this, the life cycle of an asset is completed.
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3.5 Audit
An audit is an examination of records for desired purpose. Out of various audits, the following
important audits are conducted in the company.
Statutory Audit
The first auditors of a company shall be appointed by the Board of Directors within one month of the
date of registration of the Company. Such auditors hold office until the conclusion of the first annual
general meeting. Every company shall at each annual general meeting appoint an auditor or auditors
to hold office from the conclusion of that meeting until the conclusion of the next annual general
meeting and shall within seven days of the appointment, give intimation thereof to every auditor so
appointed. Only Chartered Accountants can be appointed as the auditors of a company. Under the
Companies Act, the auditors of a government company shall be appointed or re-appointed by the
Central Government on the advice of the Comptroller and Auditor General (C&AG) of India.
The auditor has a right of access al all times to the books and accounts and vouchers of the company
and is entitled to enquire from the officers of the Company such information and explanations as the
auditor may think necessary for the performance of his duties.
The auditor shall make a report to the members of the company on the accounts examined by him
and on the balance sheet and profit and loss account and on every other document declared by this
Act to be part of or annexed to the balance sheet or profit and loss account which are laid before the
company in general meeting during his tenure of office. The auditors are required to state in their
report whether the financial statements of the company present a true and fair view of state of affairs
and working results. The balance sheet and profit & loss account should be drawn up in conformity
with the requirements of companies Act and generally accepted accounting principles.
Internal Audit
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The internal auditor is a representative of management. The nature and scope of his operations are
determined by the management and may, therefore, differ from one organization to another according
to the needs of different management. The rights and duties of the statutory auditor, on the other
hand, are not defined by the management. The statutory auditor is independent of the management.
Internal check is a method of organizing the accounts system of a business concern where the duties
of different officials are arranged in such a way the work of one person is automatically checked by
another and thus the possibility of fraud or error is minimized. The advantage of good internal check
system is that the auditor can rely upon the accuracy of the accounts.
Government Audit
The Companies Act gives the C&AG the power to direct the manner in which the Company’s
accounts shall be audited and to give the auditor “instructions in regard to any matter relating to the
performance of his functions as such”. The auditor of a Government Company is required not only to
verify whether the financial statements of accounts are true and fair, but has also to look into the
efficacy of systems and point out specific cases of inefficiency, under-utilization of capacity and
wastages.
Under the Companies Act, the C&AG has the power to “conduct a test or supplementary audit of
company’s accounts by such person or persons as he may authorize in this behalf”.
Under the Companies Act, the Company auditors shall submit a copy of his audit report to the C&AG
who shall have the right to comment upon or supplement the audit report in such manner as he may
think fit. Under section 619(5) of the Companies Act, the comments of C&AG have to be placed
before the annual general meeting of the company together with the audit report.
The auditor of a Government Company has to conduct the audit according to the manner,
instructions and directions issued to him in this behalf by the Comptroller & Auditor General of India
and has also to examine the efficiency of the management e.g. whether manpower is fully utilized or
not; whether there has been any wastage etc.
Cost Audit
Cost audit is audit of cost records. Cost audit is the verification of cost accounts and a check on
adherence to the cost accounting plan. Under the Companies Act, the Government has the powers to
make it compulsory in case of specified classes of companies to maintain the cost records. Under the
Companies Act, the Central Government may if it feels necessary, by an order direct that an audit of
the cost records kept by a company shall be conducted by a cost accountant within the meaning of
the Cost and Works Accountants Act, 1959 in such a manner as may be specified.
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Under the Companies Act, the cost auditors shall be appointed by the Board of Directors of the
Company with the previous approval of the central Government. The cost auditor is required to
submit his report in triplicate to the Central Government within 120 days from the end of the
financial year of the company. A copy of the report should be sent to the company also. The
report should be in the form laid down in the Cost Audit (Report) Rules, 1968 and the
subsequent amendments to the same.The Company has to furnish to the central Government full
information and explanation on every reservation or qualification contained in the cost audit report
within 30 days from the date of receipt of such report.
Accounts Manual
This document has been prepared at SAIL level and is applicable to all units wherein policies
regarding each item of asset, liability, income & expenditure and its treatment in accounts have been
laid down.
Chart of Accounts
This document has been prepared at SAIL level and is applicable to all units wherein each item of
asset, liability, income & expenditure has been allotted unique account codes.
This document outlines the procedural steps & powers delegated to different levels in the
organization. It deals with powers relating to Purchases, Contracts, Projects, Finance, Administrative
& Miscellaneous matters.
This document has been prepared by Corporate Material Management Group (CMMG) wherein
procedures has been outlined regarding various issues concerning purchases & contracts viz. issue
of indents, scrutiny of indents, modes of tendering etc. to bring in transparency in the methodology of
working.
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Indian Contract Act
This act deals with the law relating to contracts between parties. It is popularly known as Indian
Contract Act, 1872. It clearly enunciates the law relating to promise, promisee, promisor, role of
agents etc.
It extends to the whole of India except the State of Jammu and Kashmir.
Indian Contract Act really codifies the way we enter into a contract, execute a contract, and implement
provisions of a contract and effects of breach of a contract. Basically, a person is free to contract on
any terms he chooses. The Contract Act consists of limiting factors subject to which contract may be
entered into, executed and breach enforced. It only provides a framework of rules and regulations
which govern formation and performance of contract. The rights and duties of parties and terms of
agreement are decided by the contracting parties themselves. The court of law acts to enforce
agreement, in case of non-performance.
Section 1 of Contract Act provides that any usage or custom or trade or any incident of contract is not
affected as long as it is not inconsistent with provisions of the Act. In other words, provision of
Contract Act will prevail over any usage or custom or trade. However, any usage, custom or trade will
be valid as long as it is not inconsistent with provisions of Contract Act.
It must be noted that contract need not be in writing, unless there is specific provision in law that the
contract should be in writing. [e.g. * contract for sale of immovable property must be in writing,
stamped and registered. * Contracts which need registration should be in writing * Bill of Exchange or
Promissory Note must be in writing. * Trust should be created in writing * Promise to pay a time
barred loan should be in writing, as per Limitation Act * Contract made without consideration on
account of natural love and affection should be in writing]. A verbal contract is equally enforceable, if it
can be proved.. A contract can be enforced or compensation/damages for breach of contract can be
obtained through Civil Court
1. When one person signifies to another his willingness to do or to abstain from doing anything,
with a view to obtaining the assent of that other to such act or abstinence, he is said to make a
proposal.
2. When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted. A proposal, when accepted, becomes a promise.
3. The person making the proposal is called the “promisor”, and the person accepting the
proposal is called the “promisee”.
4. When, at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or to abstain from doing,
something, such act or abstinence or promise is called a consideration for the promise.
5. Every promise and every set of promises, forming the consideration for each other, is an
agreement.
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6. Promises which form the consideration or part of the consideration for each other are called
reciprocal promises.
9. An agreement which is enforceable by law at the option of one or more of the parties thereto,
but not at the option of the other or others, is a voidable contract.
10. A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.
This Act defines the law relating to the sale of goods and also enunciates the rights, duties & liabilities
of the purchaser as well as the seller. It is commonly known as the Sale of Goods Act, 1930. It
extends to the whole of India except the State of Jammu and Kashmir.
The Sale of Goods Act is complimentary to Contract Act. Basic provisions of Contract Act apply to
contract of Sale of Goods also. Basic requirements of contract i.e. offer and acceptance, legally
enforceable agreement, mutual consent, parties competent to contract, free consent, lawful object,
consideration etc. apply to contract of Sale of Goods also.
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property
in goods to the buyer for a price. Thus, following are essentials of contract of sale :
3. goods are said to be in a "deliverable state" when they are in such state that the buyer would
under the contract be bound to take delivery of them.
5. "future goods" means goods to be manufactured or produced or acquired by the seller after
the making of the contract of sale.
6. "goods" means every kind of movable property other than actionable claims and money; and
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includes stock and shares, growing crops, grass, and things attached to or forming part of the
land which are agreed to be severed before sale or under the contract of sale.
7. a person is said to be "insolvent" who has ceased to pay his debts in the ordinary course of
business, or cannot pay his debts as they become due, whether he has committed an act of
insolvency or not.
11. "specific goods" means goods identified and agreed upon at the time a contract of sale is
made.
This Act defines the law relating to Promissory Notes, Bills of Exchange and Cheques. This Act may
be called the Negotiable Instruments Act, 1881.
The instrument is mainly an instrument of credit readily convertible into money and easily passable
from one hand to another.
The Act does not affect any local usage relating to any instrument in an oriental language. However,
the local usage can be excluded by any words in the body of the instrument, which indicate an
intention that the legal relations of the parties will be governed by provisions of Negotiable
Instruments Act and not by local usage. [section 1]. - - Thus, unless specifically excluded, local usage
prevails, if the instrument is in regional language.
Section (1)(4)(a) of Information Technology Act provides that the Act will not apply to Bill of Exchange
and Promissory Notes. Thus, a Bill of Exchange or Promissory Note cannot be made by electronic
means. However, cheque is covered under of Information Technology Act and hence can be made
and / or sent by electronic means.
CHANGES MADE BY AMENDMENT ACT, 2002 - (a) Definition of ‘cheque’ and related provisions in
respect of cheque amended to facilitate electronic submission and/or electronic clearance of cheque.
Corresponding changes were also made in Information Technology Act. (b) Bouncing of cheque -
Provisions amended * Provision for imprisonment upto 2 years against present one year * Period for
issuing notice to drawer increased from 15 days to 30 days * Government Nominee Directors
excluded from liability * Court empowered to take cognizance of offence even if complaint filed
beyond one month * Summary trial procedure permitted for imposing punishment upto one year and
fine even exceeding Rs 5,000 * Summons can be issued by speed post or courier service * Summons
refused will be deemed to have been served * Evidence of complainant through affidavit permitted *
Bank’s slip or memo indicating dishonour of cheque will be prima facie evidence unless contrary
proved.
1. “Banker” includes any person acting as a banker and any post office saving bank.
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2. A “promissory note” is an instrument in writing (not being a bank-note or a currency-note)
containing an unconditional undertaking, signed by the maker, to pay a certain sum of money
only to, or to the order of, a certain person, or to the bearer of the instrument.
4. A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand and it includes the electronic image of a truncated cheque and a
cheque in the electronic form.
5. The maker of a bill of exchange or cheque is called the “drawer”; the person thereby directed to
pay is called the “drawee”.
6. After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof
than one, upon one of such parts, and delivered the same, or given notice of such signing to
the holder or to some person on his behalf, he is called the “acceptor”.
7. The person named in the instrument, to whom or to whose order the money is by the instrument
directed to be paid, is called the “payee”.
8. The “holder” of a promissory note, bill of exchange or cheque means any person entitled in his
own name to the possession thereof and to receive or recover the amount due thereon from
the parties thereto.
9. A promissory note, bill of exchange or cheque drawn or made in India and made payable in, or
drawn upon any person resident in India shall be deemed to be an inland instrument.
10. Any such instrument not so drawn, made or made payable shall be deemed to be a foreign
instrument.
11. A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either
to order or to bearer.
Partnership Act
This Act defines the law relating to partnerships and is commonly known as the Indian Partnership
Act, 1932. It extends to the whole of India except the State of Jammu and Kashmir. Some of the
important aspects covered in the act are as follows:
• Formation of partnership
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Some of the important terms used in the act are :
1. an "act of a firm" means any act or omission by all the partners, or by any partner or agent of
the firm which gives rise to a right enforceable by or against the firm.
3. "third party" used in relation to a firm or to a partner therein means any person who is not a
partner in the firm.
4. "Partnership" is the relation between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all.
5. Persons who have entered into partnership with one another are called individually "partners"
and collectively "a firm", and the name under which their business is carried on is called the
"firm-name".
6. The relation of partnership arises from contract and not from status; and, in particular, the
members of a Hindu undivided family carrying on a family business as such, or a Burmese
Buddhist husband and wife carrying on business as such are not partners in such business.
This is the basic law which governs the creation, continuation, the winding up of companies and also
the relationships between the shareholders, the company, the public & the government. Coupled with
other statutes dealing with corporate entities, this is an important piece of legislation. This act extends
to the whole of India except Jammu & Kashmir.
1. Schedule VI
• Part I of this schedule outlines that the Balance Sheet can be drawn in the ‘Horizontal’ or
‘Vertical’ form.
• Part II of this schedule outlines the requirements of Profit & loss Account.
2. Schedule XIV
• Herein the rates of depreciation are enunciated with respect to assets of the company. The
rates specified herein are different from the rates given under the Income Tax Act.
Tax Laws
This Act is commonly known as the Income-tax Act, 1961. It extends to the whole of India.
Under this act income-tax shall be charged for any assessment year at any rate or rates, applicable
for that year in respect of the total income of the previous year of every person. It is also provided that
All income shall, for the purposes of charge of income-tax and computation of total income, be
classified under the following heads of income :
1. Salaries.
4. Capital gains.
Customs Duty
This Act has been incorporated to consolidate the law relating to customs. This act deals with both
export & import of goods.
Goods are imported in India or exported from India through sea, air or land. Goods can come through
post parcel or as baggage with passengers. Procedures naturally vary depending on mode of import
or export.
1. "coastal goods" means goods, other than imported goods, transported in a vessel from one
port in India to another
2. "customs area" means the area of a customs station and includes any area in which imported
goods or export goods are ordinarily kept before clearance by Customs Authorities
3. "dutiable goods" means any goods which are chargeable to duty and on which duty has not
been paid
7. "export goods" means any goods which are to be taken out of India to a place outside India
8. "goods" includes
c. baggage
10. "imported goods" means any goods brought into India from a place outside India but does not
include goods which have been cleared for home consumption
Background
The indirect taxation regime in India has undergone many transformations over the past 5 to 6
decades. Introduction of MODVAT Scheme in 1986, fundability of credit between Excise and Service
Tax (2004), rollout of VAT (2005 onwards) have over the years increased transparency in tax
administration, reduced hassles to tax payers, and eliminated the cascading effect, thus benefitting
the consumer. However, the federal structure of India has resulted in tax being administered by both
Centre and State. Lack of facility to utilize credits across these two entities has resulted in partial
cascading still being left in the system. Added to this, the burden of compliance has also increased
due to involvement of multiple agencies. GST precisely addresses these concerns by driving
uniformity across India through a single tax and ensuring an unrestricted flow of tax credit.
Conceptually, GST is similar to VAT, meaning tax will be applied only on the value addition at each
point in the supply chain.
August 3rd, 2016 will be recorded as a red letter day in the history of Indian taxation due to the near
unanimous passage of 122ndConstitutional Bill in RajyaSabha, paving the way for roll-out of GST
(Goods and Services Tax) in India from 1st of April 2017. Goods and Service Tax Bill has significantly
evolved over the past decade and is touted as the single largest tax reform in India since
independence. It is estimated to boost GDP by 1.5 to 2%.
GST is one indirect tax for the whole nation, which has make India one unified common market. GST
is a destination-based consumption tax and levied on every supply of goods or services till it reaches
the ultimate consumer. GST is based on the principle of value added tax. GST is a single tax on the
supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid
at each stage will be available in the subsequent stage of value addition, which makes GST
essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST
charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. GST law
has emphasised on voluntary compliance and accounts-based reporting and monitoring system.
There is no scope for multiple levy of tax on goods and services, such as, sales tax, entry tax, octroi,
entertainment tax, luxury tax, additional duty of customs, central excise duty, etc.
India operates as a combination of a federal structure as well as a decentralised structure. Given the
federal structure under which India operates, the Central Government also has the powers to lay
down legislations to raise revenues. Similarly, every state has been granted the power to raise
revenues for its administration. These powers are granted to the Central and State Governments by
the Constitution of India, 1949 (the constitution). Article 246 of the constitution specifically lays down
the powers granted to the Central and State Governments to make laws on matters specified in the
Union, State and Concurrent lists of the Seventh Schedule to the Constitution. Thus, there are laws
made by the Central Government on specified matters and there are laws made by the State
governments on specified matters. These matters include various transactions / activities on which
taxes can be levied and collected by the Central and State Governments to raise revenues for its
administration.
Article 265 of the Constitution specifically provides that no tax shall be levied or collected except by
authority of law. This means that the Government can impose taxes only under the authority of the
Constitution. Accordingly, the transactions/ activities on which taxes can be levied are laid down in the
Seventh Schedule to the Constitution by way of List I (the Union List), List II (the State List) and List III
(the Concurrent List). Initially there was no specific entry in the Union List for levying service tax.
Service tax was levied by the Central Government through the powers granted by the residuary entry
in the Union list, i.e. any other matter not enumerated in List II or List III including any tax not
mentioned in either of those List. However, subsequently, tax on services to be incorporated in the
Union list w.e.f. January, 2004.
It can be seen from the above that taxes were levied at the Central Level as well as the State Level.
Some of the Central Taxes levied by the Central Government including Income Tax (being a direct
tax), Custom Duty, Excise Duty, etc. some of the State level taxes include VAT, Entry Tax.
As taxes were levied and administrated by the Central and State Governments separately, the Central
and State taxes paid on the various transactions cannot be set-off against each other. For e.g. the
Excise Duty paid on the purchase of particular product cannot be set-off against the VAT payable on
the sale of the said product, as the Excise duty was levied by the Central Government and VAT was
levied by the various State Governments. This leads to the situation of VAT being levied on the
Excise component as well as thereby leading to a cascading impact of taxation.
1. Conferring simultaneous power upon Parliament and the State Legislatures to make laws
governing goods and services tax;
2. Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional
Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty,
and Special Additional Duty of Customs;
Benefits of GST:
o Easy compliance: A robust and comprehensive IT system has been laid down in the GST regime in
India. Therefore, all tax payer services such as registrations, returns, payments, etc. are available to
the taxpayers online, which made compliance easy and transparent.
o Uniformity of tax rates and structures: GST has ensured that indirect tax rates and structures are
common across the country, thereby increasing certainty and ease of doing business. In other
words, GST has made doing business in the country tax neutral, irrespective of the choice of place
of doing business.
o Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across
boundaries of States, has ensured that there is minimal cascading of taxes. This has reduced
hidden costs of doing business.
o Improved competitiveness: Reduction in transaction costs of doing business has eventually leaded
to an improved competitiveness for the trade and industry.
o Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST,
complete and comprehensive set-off of input goods and services and phasing out of Central Sales
Tax (CST) has reduced the cost of locally manufactured goods and services. This has increased the
competitiveness of Indian goods and services in the international market and given boost to Indian
exports. The uniformity in tax rates and procedures across the country has resulted in reducing the
compliance cost.
o Simple and easy to administer: Multiple indirect taxes at the Central and State levels were replaced
by GST. Backed with a robust end-to-end IT system, GST has simpler and easier to administer than
all other indirect taxes of the Centre and State levied so far.
o Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect
taxes were levied by the Centre and State, with incomplete or no input tax credits available at
progressive stages of value addition, the cost of most goods and services in the country were laden
with many hidden taxes. Under GST, there has only one tax from the manufacturer to the consumer,
leading to transparency of taxes paid to the final consumer.
o Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax
burden on most commodities has come down, which has benefit consumers.
3. Service Tax,
2. Entertainment Tax (other than the tax levied by the local bodies),
3. Central Sales Tax (levied by the Centre and collected by the States),
5. Purchase Tax,
The Central GST and the State GST are levied simultaneously on every transaction of supply of
goods and services except on exempted goods and services, goods which are outside the purview of
GST and the transactions which are below the prescribed threshold limits. Further, both are levied on
the same price or value.
A diagrammatic representation of the working of the Dual GST within a State is shown below:
Supply:
The term ‘supply' has wide connotation and covers both supply of goods and services. It covers all
forms of supply and there are some transactions/ activities mentioned in the schedule of GST law,
Classification of Goods/Services:
In the GST regime, the HSN classification has been adopted. Further, classification of goods
assumed significance only for the purpose of determining the taxable / exemption status of a
transaction or activity. Under GST law the distinction between goods and services has reduced to a
great extent. This has been avoided classification disputes, which was exist in the VAT/ST regime.
Under GST regime valuation is determined based on transaction value, which is similar to the
Customs Valuation Rules. Further, various methods of determining value under various situations has
also been provided.
Exemption limit:
Under GST regime taxable persons having turnover less than Rs. 20 Lakh is exempt from GST.
Cross utilization of credit of CGST between goods and services are allowed. Similarly, the facility of
cross utilization of credit is available in case of SGST. However, the cross utilization of CGST and
SGST are not allowed except in the case of Inter-State supply of goods and services under the IGST .
In case of inter-State transactions, the Centre is levy and collects the Integrated Goods and Services
Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution.
The IGST is equal to CGST plus SGST. The IGST mechanism has been designed to ensure
seamless flow of input tax credit from one State to another. The inter-State seller is paying IGST on
the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on
his purchases (in that order). The exporting State is transfer to the Centre the credit of SGST used in
payment of IGST. The importing dealer is claim credit of IGST while discharging his output tax liability
(both CGST and SGST) in his own State. The Centre is transfer to the importing State the credit of
IGST used in payment of SGST. Since GST is a destination-based tax, all SGST on the final product
is ordinarily accrued to the consuming State.
A diagrammatic representation of the working of the IGST for inter-State transactions is shown below:
The Additional Duty of Excise or CVD and the Special Additional Duty or SAD were levied on imports
have subsumed under GST. As per explanation to clause (1) of Article 269A of the Constitution, IGST
is levied on all imports into the territory of India. The States where imported goods are consumed are
now gain their share from this IGST paid on imported goods.
For the implementation of GST in the country, the Central and State Governments have jointly
registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to
provide shared IT infrastructure and services to Central and State Governments, tax payers and other
stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the
taxpayers, and shared infrastructure and services to Central and State/UT governments.
There is no manual filing of returns under GST Law. All taxes shall be paid online. All mis-matched
returns are auto-generated, and there is no need for manual interventions. Most returns are self-
assessed.
Registration procedures:
The major features of the registration procedures under GST are as follows:
1. Existing dealers: Existing VAT/Central Excise/Service Tax payers have automated granted
registration under GST.
2. New dealers: Single application is to be filed online for registration under GST.
a) The registration number is PAN based and is serve the purpose for Centre and State.
The major features of the returns filing procedures under GST are as follows:
1. Common return is serving the purpose of both Centre and State Government.
2. There are nine forms provided for in the GST business processes for filing for returns. Most of
the average tax payers are using only four forms for filing their returns. These are return for
supplies, return for purchases, monthly returns and annual return.
3. Small taxpayers: Small taxpayers who have opted composition scheme are require to file
return on quarterly basis.
4. Filing of returns shall be completely online. All taxes shall be paid online.
Tax due is payable on a monthly basis. The input tax credit available can be set off against the tax
due on the taxable turnover. Since GST is wholly integrated to information technology monthly
matching of input credits and payments is happen.
3. Payment can be made through online banking, Credit Card/Debit Card, NEFT/RTGS and
through cheque/cash at the authorised bank only
Demand of Tax:
There are provisions to determine point of supply and time of supply apart from Inter-State and Intra-
State supplies. In case of short payment or non-payment of tax or erroneous refund of tax, the
department is entitled to conduct re-assessment proceedings.
Amounts owed by the business for purchases made on credit. These amounts
Accounts Payable are paid by the business after a time lag that is measured by Days Payable
Outstanding.
Expenses that the business has incurred for which it has not received, or will not
Accrued Expenses
receive, an invoice, and that have not yet been paid.
Accumulated The total amount of depreciation expense recorded to date for the company's
Depreciation fixed assets. On the balance sheet, this value is subtracted from the gross value
of Property, Plant and Equipment to derive a net figure.
The amount actually paid to purchase an asset. This includes all costs
Acquisition Cost
associated with the purchase, such as installation, freight, and sales tax.
Anything that has future economic value. In addition to items such as cash and
Asset
equipment, assets can include intangibles such as goodwill.
A financial statement that lists the assets, liabilities, and equity of a company at
Balance Sheet
a certain point in time.
The value of an asset for accounting purposes. For assets where depreciation is
taken or reserves booked, this is often expressed as a net book value. The book
Book Value
value of a company is the excess of assets over liabilities, which is equivalent to
total owner's equity.
An analysis tool that models how revenue, expenses, and profit vary with
Breakeven
changes in sales volume. Breakeven analysis estimates the sales volume
Analysis
needed to cover fixed and variable expenses.
Breakeven Point The sales level at which revenues equal expenses (fixed and variable).
Cash Flow A financial report that expresses a company's performance in terms of cash
Statement generated and used.
Contribution The difference between revenue and the associated variable costs. This is an
Margin important concept in breakeven analysis.
Cost of
All the costs associated with the goods or services that were sold during a
Sales/Services
specified accounting period, including materials, labor, and overhead.
(COS)
Assets that are convertible to cash within one year in the normal course of
Current Assets business. This usually includes cash, accounts receivable, inventory, and
prepaid expenses. See also non-current assets.
Obligations that will come due within a year from the current date. These usually
Current Liabilities include accounts payable, accrued expenses, and the portion of long-term
obligations due within one year. See also non-current liabilities.
Debt to Equity The ratio of total debt to owners' equity, used as a measure of leverage and
Ratio ability to repay obligations.
Expenses, such as labor, overhead, and materials, that vary in direct proportion
Direct Costs
to units produced or services rendered.
Wages paid for activities directly related to production of units sold or services
delivered, considered part of cost of sales. This does not include management
Direct Labor
and administrative salaries, which are treated as operating expenses or
overhead. Also referred to simply as labor.
Net income before income tax expense and interest expense. This is a popular
Earnings Before
measure for comparing the earning power of companies, because it eliminates
Interest and Taxes
the impact of capital structure and effective tax rates, two non-operating
(EBIT)
factors.
Earnings Per Net income divided by the number of outstanding shares of common stock and
Share (EPS) equivalents.
The 12-month period, not necessarily coinciding with the calendar year, chosen
Fiscal Year
to constitute a single year for external financial reporting and taxes.
The accounting term for amounts paid for assets over and above their fair
market value. Goodwill arises, for example, when a company purchases another
business and pays a price higher than the value of the acquired assets alone.
Goodwill
Goodwill theoretically represents the value of the business's name, reputation,
and customer relations, which increase the true value of the business beyond
the value of its assets alone.
Net Sales less cost of sales (including both fixed and variable costs), often
Gross Margin
expressed as a percentage of sales. Also referred to as gross profit.
The total of amounts received (sales for cash) and amounts expected (sales on
credit) in return for products sold or services rendered during the given time
Gross Sales
period. Gross sales reflects sales at invoice values, before sales discounts and
credit card fees.
A long-term contract granting use of real estate, equipment or other fixed assets
in exchange for payment. All leases entered in the Property, Plant and
Lease
Equipment Detail are considered capital leases; operating leases should be
entered as expenses in the Expenses Detail. See also mortgage.
Line of Credit The amount of short-term credit available to a business from banks.
Marketable Securities that can readily be converted into cash, including government
Securities securities, bankers' acceptances, and commercial paper.
The physical inputs to manufacturing treated as part of cost of sales. Also known
Materials
as raw materials.
Net Book Value The acquisition cost of an asset less any accumulated depreciation.
Sales revenue minus cost of sales and operating expenses. Similar to earnings
before interest and taxes, operating income is examined when the earnings of
Operating Income
the core business are analyzed. Also referred to as operating profit, operating
earnings, and income from operations.
Services, goods, and intangibles paid for prior to the period in which they
Prepaid Expenses provide benefit. Prepaid expenses are accounted for as assets until their benefit
is realized.
The interest rate that banks charge to their most creditworthy customers. The
Prime Rate prime rate is an important reference number, because loans to companies are
often tied to it on a percentage basis.
Discounts that a business gives to credit customers who pay within a specified
Prompt Payment
period of time; also called sales discounts. On an income statement, this amount
Discounts
is subtracted from Gross Sales to yield Net Sales.
Property, Plant Assets used in the operations of a business that have a useful life greater than
and Equipment one year, including land, buildings, machinery, equipment, and furniture. Also
(PP&E) known as fixed assets. See also depreciation.
Return on Equity Net income divided by equity. This ratio is often used as a measure of the return
(ROE) on funds invested in a business.
The scrap value of an asset. Acquisition cost minus salvage value yields the
Salvage Value
total amount that an asset is depreciated over its useful life.
An asset that represents a physical object such as land, furniture, and buildings.
Under accounting rules, a tangible asset must have a useful life greater than
one year, and must be used in business operations rather than being held for
Tangible Asset resale. The following types of assets are not considered to be tangible assets:
items held for resale, which are considered to be inventory, cash and other liquid
assets which are considered as current assets, and abstract assets such as
goodwill, which are intangible assets. See also tangible equity.
The net amount of current assets and current liabilities. This is equivalent to a
Working Capital
company's liquid assets.
Chapter – 4
Marketing Management
DEFINITION OF MARKETING:
As defined by American Marketing Association (2017), “Marketing is the activity, set of institutions,
and processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large”.
In general terms, marketing refers to what an organization must do to create and exchange value with
customers. In this sense, marketing has a major role to play in setting a firm’s strategic direction.
Successful marketing requires both a deep knowledge of customers, competitors, and collaborators
and great skill in deploying an organization’s capabilities so as to serve customers profitably.
Marketer decides which opportunities to pursue, which customers to target, what product and services
to offer when and at what price, how to communicate with prospects and customers, what distribution
systems to use, etc. These inter-related decisions when brought together into an integrated whole are
called a company’s marketing program. Executing the marketing program is how the organization
attracts, retains and grows its customers.
The word Market (noun) refers to where buyers and sellers come together to do the business. The
word Market (verb) is synonymous to ‘Sell’ which is but a part of what professional marketers actually
Salespeople serve as ambassadors for their company, providing what is often the only direct source
of information the prospect has about the company. Information about the company can be a strong
appeal during the sales demonstration, particularly when products are very similar. Thus, being fully
acquainted with own product & business as well as that of customer’s is necessary for a successful
sales person. Well-informed salespeople also have adequate knowledge of the competition.
Four variables that a marketer can use in different combinations to create value for customers are:
Product, Price (or pricing), Promotion (marketing communications), and Place (distribution). Together
these variables are popularly known as 4Ps or marketing mix and they describe the set of activities
comprising a firm’s marketing program. These variables are briefly described below.
Product
A product is defined as a bundle of attributes (features, functions, benefits, and uses) capable of
exchange or use, usually a mix of tangible and intangible forms.
Thus a product may be an idea, a physical entity (goods), or a service, or any combination of the
three. It exists for the purpose of exchange in the satisfaction of individual and organizational
objectives.
While the term “products and services” is occasionally used, product is a term that encompasses
both goods and services.
Price
Price is the formal ratio that indicates the quantity of money, goods, or services needed to acquire a
given quantity of goods or services.
Distribution refers to the act of marketing and carrying products to customers / consumers. It is also
used to describe the extent of market coverage for a given product.
Promotion
According to the Association of National Advertisers (ANA), promotion marketing includes tactics that
encourage short-term purchase, influence trial and quantity of purchase, and are very measurable in
volume, share and profit.
SCOPE OF MARKETING:
Marketing is required to continuously gather and evaluate ideas for new products, bring about product
improvements and services so that the customer receives additional value. In other words, the
perceived value to the customer is more than the cost incurred by him, which eventually will lead to
customer delight. Marketing is to satisfy – stated needs, real needs, unstated needs, delight needs
and secret needs. For example:
Stated needs – Customer wants an inexpensive car.
Real need-- Customer wants a car whose operating cost, not its initial price, is low.
Unstated needs – Customer expects good service from the dealer.
Delight needs --Customer will like the dealer to include a branded music system free of cost
Secret needs -- Customer wants to be seen by friends as having got a better deal than others.
MARKETING OF STEEL PROCUDTS
Industrial marketing or marketing in business market is the marketing of goods and services to
commercial enterprises, government agencies, and nonprofit institutions for use in the goods and
services that they in turn produce. By contrast, marketing in consumer market is marketing to
individuals and families for their own consumption and to wholesalers and retailers engaged in
distribution system. Thus the distinction between industrial and consumer marketing is drawn in
terms of the intended customers, not in terms of products. In fact, many products go both to
consumers and industrial customers e.g. computers, vehicles, furniture, stationery, etc.
Business markets are very different from consumer markets. In a consumer market, large numbers of
buyers have similar wants, transactions are usually small in value, products can be mass-produced,
consumers’ perceptions determine products’ value, and companies focus on managing brands. In
addition, the selling process is brief, retailing strategies play a vital role, and sales efforts are focused
on end users. A business market, by contrast, has fewer customers, and transactions tend to be
larger. Customers often need a customized product or price, the usage of the product or service
determines its value, and brands often mean very little to customers. Moreover, selling is a long and
complex process, retailing isn’t a factor in most cases, and the target of the sales pitch may not be the
product’s end user. In business markets, a given customer often uses a vendor’s products in
numerous different applications. Also, industrial commodities (think of cement, for instance, or Steel)
aren’t easily differentiated by their features. Customers are interested only in the money they can
save by buying from one vendor instead of another.
Steel is sold both in B2B markets as well as in the B2C markets. The demand for steel in B2B is
derived demand pulled through a chain as a result of demand for the final end product. Most industrial
businesses consuming steel produce a limited number of final goods and changes in demand at the
end of the value chain have serious repercussions on all the steel manufacturers. Derived demand is
Buying Situation
• Straight Rebuy
• Modified Rebuy
Hard Facts • New Task Soft Facts
• Price • Risk Reduction
• Features • Relationship
• Quality • Trust
• Delivery Buying Center • Time pressure
• Services • Image benefits
― To add value for our customers and plant by way of adopting practices and systems, and
developing capabilities which are world class.
― To market steel materials produced by Steel Plants in most efficient manner in terms of cost
and service
― Developing export markets in target destinations for sustained exports
― To achieve excellence in quality across the value chain
― To generate profit for the company
SAIL PRODUCTS AND THEIR END USES
― Pig Iron: Used in foundries and castings. Mostly disposed either by plant / CMO based on
policy and availability from time to time.
― Semi-finished: Ingots, Blooms, Billets and Slabs are classified as semi-finished products,
since these products can be further rolled into finished products.
1. Long Products
Product Applications
Bars &Rebars Reinforced Concrete Construction (RCC) in buildings, bridges and other
concrete structures
RCC Construction exposed to coastal, marine or underground
environment
RCC construction in earthquake prone zone
Underground mine and tunnel roof support
Slope stabilization in hills and Soil nailing/ anchoring
Wire rods Used for making nails, bolts, nuts, screws, rope wires, pre-stressed
concrete wire, needle wires, general purpose wires, industrial wires, chain
rivet wires, umbrella ribs, piano wire etc
Arc welding electrodes, welding machine wires
Cable armouring, wire mesh and other low carbon applications
Coil springs for shock absorbers etc.
Beams Industrial structures, utility buildings, multi-storey buildings, car parks
Roads, bridges, composite constructions
Material handling systems
Trailer and truck bed framing
Ports and harbours
Off-shore drilling rigs
Channels Common uses among others are stair stringers, wind girts, small joist or
purlins, framing around openings, and pipe supports.
Angles Used in transmission towers
Used as braces to help reinforce structures
Used as brackets to provide support
Used to hold structures together, also large angles can form the frame
itself
Used as decorative trim on furniture edges and building interiors, including
doorways, counters and floors.
Crane Rails Used by crane in ports, warehouses and shipyards.
Crane rails in CR-80/CR-100/CR-120 sections are used for tracks of
different types of cranes.
Z-Type Sheet- Leak proof retaining wall in construction of dams, bridge foundation ,
piling Section construction in ports
3. Flat Products
Hot Rolled Coils Tube making
and Sheets Cold reducing segment
General structural applications, manufacture of Prefabricated structures ,
fabrication of engineering structural, poles and flanging applications
Manufacture of cycle rims, propeller shaft , fork and spokes for two
wheelers, chains, hair clip, sprocket, clutch plate, hacksaw blade,
Strapping for packaging etc.
Manufacture of electrical equipment
Domestic/Auto LPG Cylinders , Export quality LPG Cylinders
wheel disc, wheel rim and other structural components of passenger car
Plates Steel structures
Ship building
Storage tanks, ATM safe
Boilers and Pressure vessels
Oil and gas pipeline manufacturing
Railway wagons, earth moving equipment
Weather-proof steel plates for the construction of railcars
CR Sheets, CR Precision tubes, Coated sheets, packaging, containers
Coils Automobile industry to produce car body panels, Automobile Chassis
parts, Rly Wagons
Precision pipes, Tubes, Automobile Components/ Body
White Goods, Cycle, Furniture, Drum & Barrels, Containers, Panels,
Construction Coolers, etc.
Galavanised Agriculture- Grain Silos, Sprayers, Ghamellas, Pans, Feeding Troughs,
Plain Sheets / Automobile- Cars, Busses, Truck Bodies, Undercarriage Work, Air & Oil
Coils (GP) Filters, Fuel & Oil Tanks, Exhaust Pipes, Railway Coaches
Domestic- Trunks, ice Boxes, Household Machines, Tubs, Pails, Buckets,
Storage Bins, Water Tanks, Washing Machines,
Furniture & Fixtures- Desks, Lockers, Racks, Lightweight Chairs,
Panelling, door frames, shutters, AC ducts, coolers, storage bins
Industry- Ducting, Drums/Barrels, Thermal Cladding, Air-Conditioning
Ducts, coolers, etc
Galavanised Roofing, Fencing (Construction)
Corrugated Industrial sheds
Sheets / Coils
(GC)
Electrically Transportation of Water, Oil, Gas, Chemical, Petroleum
Resistant Welded
(ERW) Pipes and
Spirally Welded
Pipes
CRNO Electrical Air/Oil cooled medium sized power and distribution transformers, medium
Sheets sized continous duty, rotating electrical machinery
Fractional horsepower motors and relays, small communication power
transformers and reactors
Medium sized continous duty high efficiency rotating electrical machinery
4. Stainless Steels Products
Hot Rolled Air heaters, annealing boxes, boiler baffles, ducts, carburizing boxes, coal
Stainless Steel & ore handling systems, crystallizing pans, fire box sheets, furnace
Other special finishes- Moon Rock, Chequered, Striped, Hammer Tone, Pearl Plus,
Honeykom, Macromatt, Aqualine, Frondz, Mystique, Linen, Epiderma, Fabrique finishes are
used in Architectural panels, flooring, interior decoration, transport industry etc.
5. Alloy Steels Products
Ingots, Blooms, Railways: Loco & Coach parts, Helical & Leaf Springs Automobiles:
Billets Engine , Transmission and Steering Components
Power Plants: Boiler Accessories, Heat Exchangers, Turbine parts
Oil Exploration & Petrochemical: Pipeline & Drilling Parts
Machine Building & other Engg. / Defence Applications: Shafts, Gears,
Cams, Fasteners, Pistons, Arms’ components, Cathode Bars etc.
Bearings: Races, Balls & Needles
Plates - Hard
Field Manganese Liners of Bunkers and Chutes
Plates & Defense applications
specialized
Plates
High quality Gear Box, Engineering shafts, racks, pinions etc.
Rolled and Railways - coaches, axels etc.
Forged Alloy and Defense applications – barrels, shells etc.
Special Steels
SAIL Jyoti
Galvanised
steels
produced
by the
Bokaro and
Rourkela
Steel Plant
SAIL‐TMT :
Thermo‐mechanically treated Rebars
produced by the Bhilai and Durgapur
Steel Plants
Indian steel industry is poised to grow from the current level of 64 kg per capita to 160 kg per capita
consumption by 2030-31, as envisaged by the National Steel Policy 2017. SAIL has planned an
overall sale of Mild Steel during 2021-2022 at a level of 16 Million Tonne in the domestic market. The
major thrust would be on sales to Projects, Construction Sector, Tube Sector, Railways which form
our traditional customer base. In addition a special focus will be given to retail sales. With new
products from the various plants, special efforts are also being made to reach out to new
markets/segments.
The market share of SAIL in the domestic market increased to 12.3% during 2021-2022 against
11.9.7% the previous year.
India’s growing urban infrastructure and manufacturing sectors indicate that demand is likely to
remain robust in the years ahead. It is expected that at the current rate of GDP growth, the steel
demand will grow threefold in next 15 years to reach a demand of 212 - 247 MT by 2030-31.
4.3 Marketing of Steel by CMO
Central Marketing Organization is a unit of SAIL primarily engaged in marketing products produced by
the 5 integrated steel plants namely ISP, RSP, BSP, DSP and BSL and the 3 Special Steels Plants
namely VISL, SSP and ASP. Backed by a strong ERP system, CMO’s network of 37 Branch Sales
Offices (BSO), 27 Customer Contact Offices (CCO), 25 departmental warehouses and 22
Consignment Agencies (CA), function in a synchronized manner to deliver quality steel to every nook
and corner of the country.
There are 11 BSOs in Northern Region, 7 in Eastern Region, 11 in Western Region and 8 in Southern
Region. There are 8 CAs in Northern Region, 6 in Eastern Region, 7 in Western Region and 1 in
Southern Region.
The Steel Plants market defectives and arising (generated while producing iron and steel products) on
their own directly from the plant.
BRANCH FUNCTIONS
Some of the major activities in the Branch Sales Offices include customer contact, order booking, co-
ordination with SRM and Warehouses, collecting payments against orders, attending to customer
complaints, demand forecast, market feedback, competitors, activities etc.
SRM FUNCTIONS
SRM Office is the interface between plant and CMO and SRM Offices are situated at all the plant
locations.
― The monthly sales plan released by SRM office is forwarded to plant for production of
materials.
― The SRM Ofiice co-ordinates with plant and Regions for dispatches (both Direct and
Warehouse) to the respective destinations / Consignees as per the plan
― Arranges meetings and plant visits for customers, plant officials and CMO officials
― Coordinates with Plants , T&S and ITD for timely dispatch of export materials
― Reports and Returns in respect of production and Dispatch
Segmenting is the art of identifying distinctive customer groups that exhibit homogeneous needs. The
point of segmentation is to be able to tailor the marketing efforts to address the unique needs of
various segments. Marketing professionals use the segment-focus approach to design a marketing
mix that precisely matches the expectations of customers in the targeted segment.
Few companies are big enough to supply the needs of an entire market; most must breakdown the
total demand into segments and choose those that the company is best equipped to handle. Four
basic factors that affect market segmentation are (1) clear identification of the segment, (2)
measurability of its effective size, (3) its accessibility through promotional efforts, and (4)
its appropriateness to the policies and resources of the company. The four basic
market segmentation-strategies are based on (a) behavioral (b) demographic, (c) psychographic, and
(d) geographical differences.
The main segments identified by CMO depending on end use are: Automotive, Construction, Energy,
Engineering, Export, Fabrication, Infrastructure, Packaging, Resale and Transportation. These
segments have been further broken down in to 31 sub-segments like agriculture, air-conditioning,
auto ancillary/body, auto OEM, bearing industry, boilers & pressure vessels, bright bars, coated
products, cold forming, cold reduction, containers, cycle, defense, electrical equipment, electrode
manufacturer, export, fasteners, forging, foundries, general fabrication, etc.
The customers are identified to fall into one or more segments and the customer master data in the
computer system is linked with specific segments. The enquiries, off take of these customers are
analyzed and marketing efforts are strategized accordingly.
Apart from servicing the smallest requirement of the customer, SAIL has tried to differentiate its
products so as to combat the commodity nature of steel. SAIL has branded some of its products.
Currently, TMT bar is being marketed as “SAIL SeQR TMT” and Galvanised products (GP/GC
sheets/coils.) are marketed as “SAIL JYOTI”.
In order to promote steel, SAIL at its Branch level undertakes Mason, Architect, and Dealer Meets
periodically at different locations. SAIL Dealers are presently being given an incentive for various
other promotional activities like putting up hoardings, wall paintings, newspaper /magazine
advertisement, advertisement on bus panels, auto branding, bus Q shelter branding and distribution
of promotional items like key rings, T-shirts, caps, stickers etc. and to set up stalls in rural fairs.
EFFICIENT BRAND MANAGEMENT
Consumers often don’t buy products, they buy the images associated with products. Brands have
differentiating features that distinguish them from competitors and add value for consumers. A
company’s management of a brand is typically the determining factor in the ultimate success or failure
of the brand. The power of the brand and its ultimate value to the firm resides with customers.
Efficient Brand Management is under taken to position our product and services in the mind of the
customer so that he perceives value in it and therefore prefers to buy from SAIL than from our
competitors. A brand value is perceived not only in terms of the product features but also through
distribution channel , support services , brand promotion and the company (i.e SAIL in our case). Our
most popular brands are SAIL SeQR for TMT , SAIL JYOTI for Galvanished sheets/coil , SAIL
NEX for Parallel Flange Sections in Structural. The brands has the name embossed in each piece of
the product and has unique brand promises / brand differentiator. In order to increase brand
awareness following activities are undertaken:
― Advertisement by way of wall paintings and hoardings at strategic location like traffic kiosks,
metro and railway stations, airports, highways , places of tourist attraction , branches and
warehouses, dealer/distributor locations.
― Display boards at dealer shop/godowns , SAIL branch office/warehouse
― Advertisement in auto back , bus back, mini-van , truck/trailers
― Advertisement in TV media, FM channels , Print media , Cinema halls
― Dealer shop painting
― Distribution of brochures / pamplets from our outlets
― Advertisement on Point of purchase items like caps, masks, cup, mouse pad, pen stand etc for
distribution to end customers from our outlets
― Arranging dealer / distributor/customer meet for promotion of our brands
― Arranging architect/engineers/contractors/masons meet for promotion of our brands
Annual Forecast,
Current Trend of
Aggregation of demand Consumption
and moderation at HQ JPC, ISA, PMG,
MRG, AEG
NSR,
Region wise Focus Segments
demand Forecast
All the above processes are captured in the customer relationship module (CRM) of ERP system.
The sales activity involves discovering a customer’s needs, matching the appropriate products with
these needs, communicating benefits through informing, reminding, and/or persuading, and
developing customer intimacy / relationships. The product delivery process commences on receipt of
a purchase order from the customer. Sales can be from the warehouses or on direct dispatch basis
from the plant. The first step is to capture the customer PO in ECC system of ERP. If the mode of sale
is from the stockyard a quotation is given to the customer against the PO. A sales order (SO) is
issued against the quotation when financial arrangement is made by the customer. For direct dispatch
orders are released to the plant for dispatch of the materials against permanent financial arrangement
(PFA).
Post sales activities consist of settling the customer account with discount or rebate processing or
handling customer complaints if any. For future business the customer has to be kept engaged
through customer visits.
1. Requisitions from customers for materials readily available / or incoming are offered to the
customer as per applicable price as per Marketing tools and in line with the Marketing
circulars, released from time to time. If materials are not readily available, orders are booked
on the plant depending on the feasibility of production.
1
1. A product is broadly defined as information, services, ideas, and issues.
3. Marketing Circulars are marketing policy guidelines, issued by Commercial Division, within the
framework of which the entire CMO function. They are issued on calendar year basis in
running serial no.- the first number from January of any year.
4. Pricing Circulars are issued time to time, by respective Pricing Managers for LP and FP
separately, whenever there is a correction in base prices, dimension extras, quality extras,
freight, stockyard margin or excise duty. Any of these components have a direct bearing on
the prices. They are also issued in running serial number, the first number from January of any
year.
Wherever, fixed price are to be quoted, / or sales against a tender bid, necessary approvals are taken
before quoting.
If materials are not available with a particular branch, possibility of getting the same stock transferred
from a neighbouring branch is explored
If available in neighbouring branch, offer the material after building up STTR expenses. In case, the
customer does not mind lifting from neighbouring branch, intimate the concerned BM to offer the
material directly, at applicable price for that branch.
If surplus materials are available at a particular location, circulate the list of surplus stocks among all
branches in the region and also put the list of such materials on Free Sale through FSNB.
Requisitions against FSNB, can be offered to any customer, subject to availability on first cum first
served basis.
Materials can also be put on on-line auctions / tender sales, as per the policy, spelt out from time to
time. In such cases, offer to H1 bidder can be given after approval is accorded by the competent
authority.
The customers’ enquiries have to be also reviewed from time to time so that materials not available at
some point of time (i.e. at the time of receiving the enquiry) may be available at a later point of time.
The possibility of servicing the customer by offering converted materials, or by arranging stock
transfer or directly from plant has to be explored from time to time.
MODE OF SALES
Broadly, mode of sales can be of two types: 1. Sales through Warehouse; 2. Direct Despatch
Sales through Warehouse:
If customer does not exist in the ERP system new customer code is created by master data
management (MDM) team of ERP. Offer Letters (OL) are issued as per the purchase order and
materials received in the appropriate product code. Care has to be taken to ensure that the price
charged in the OL is as per the price spelt out in the Marketing tool. Normally, offers are valid for 7
days including the date of OL. OL should also indicate the correct code for tax, segment, sales type
and sales identifier. Sales order (SO) against the offer, within the validity period can be made at the
branch and financial arrangements can be made thereafter, through any of the following 3 modes:
By cheque –
For customers having cheque facility, payments up to the cheque limit can be accepted by filling the
cheque acceptance memo and MR is generated.
For customers not having cheque facility, payment can be accepted by DD or Pay order, payable to
SAIL. Alternatively, if cheque is accepted, the SO is issued only after the cheque is cleared.
By credit -
LOGISTICS
Physical distribution of materials is called logistics. Customers want right material, at the right time, at
the right location and at the right price. This is achieved by:
− Enhancing storage and distribution capabilities (for domestic sales) – through our network of
warehouses, CA and district dealers.
− Network expansion for export (for international sales) - At strategic locations both offshore and
on shore. Presently, Transport and Shipping is operating through port facilities at Kolkata,
Haldia, Paradip and Vizag.
− Efficient Contract Management – By managing different contracts like Handling Contracts,
Consignment Agency (CA) Contracts, Road Transportation Contracts, Decoiling Contracts etc,
so that customer gets improved service.
Following the physical dispatch of materials to Warehouses / CAs, plants simultaneously dispatch the
related documents to the respective branches. The following documents are received from the plants:
Railway Receipts: If the RR pertains to direct dispatches, the same is forwarded to Finance for issue
of intimation letters to the customers. If the RR pertains to warehouse dispatches, they are
segregated plant wise, entered in a register and forwarded to Warehouse.
Materials received on account of other branches are stock transferred to those branches through a
stock transfer order by the concerned BSO.
AFTER SALES SERVICE
This includes:
1. Branch Finance Functions: a) Arranging refunds in time against executed and closed Delivery
Orders (regular) ; b)Processing of credit notes with respect to Marketing tools (once a month)
2. Branch/ Application Engineering Functions: a) Attending and settling Quality complaints
(whenever there is a Quality complaint) b) Feedback received from customers communicated
to plants for improvements, corrective / preventive action (as and when the need arises).
Receipts By Rail
No Information End
Start
railways
Y N Unload at PBP,
Check marking and
Check Information Arrivals of SAIL Pilferage,
Ownership? transport to WH
ERP system for Matls at PBP Shortage
despatches
Placement Memo /
Arrival of Wagons Railway gate of HC Input data
WH generated by Entry at main gate
HC/CA In ERP register
System
HC input Data
SAIL Y Entry at main gate and available for Weighment at yard
Ownership? placement in WH siding linking with CA
data
Unloading from
wagon by HC and
transportation to
bay
End Y Re-weighment/
Independent
Survey
Abbreviations used:
PBP - Public Booking HC - Handling Contractor
Point
Y - Yes N - No
Receipts by Road from Plants, other Yards/ Conversion Agents/ Decoiling Agents outside the
Warehouse/ Service Centers/ Return Material
Check
Whetther Entry at gate register
Arrival of Pilferage,
Start Documents
Vehicle Shortage
are ok
DELIVERY OF MATERIAL
DELIVERY OF MATERIAL
Start
Additionally,
No Physical verification for door
of material with CCI delivery incl
and update register STTR, RMDM
is generated
Page 137 of 162 through system
No Rectify and sent to
Check AL
Tare Weight
No
Abbreviations used:
SO - Sales Order ; LS - Loading Slip STTR - Stock Transfer
HC -Handling Contractor AL - Authority Letter WL - Wagon Ledger
AL - Authority Letter CCI -Challan cum Invoice CCI -Challan cum Invoice
Other Activities:
Warehouses deliver the materials to customer premises. i.e Door Delivery. All Warehouses have
enlisted Transporters and whenever order for door delivery is obtained and passed on by Sales team,
Transportation contract is finalized from among the enlisted Transporters to the desired destinations.
The Transportation Contracts may be one time or for a period depending on the quantity involved/
time for supply and type of door delivery orders. The materials are door delivered to the Customers,
acknowledgement of receipt of materials from customers are obtained. This is being done with close
co-ordination with Sales Team. More and more Customers predominantly institutional and project
customers prefer door delivery.
Presently there are 13 warehouses ( ER – Kol-Dankuni, Durgapur and Bokaro : NR – Delhi,
Ghaziabad, Faridabad and Kanpur; WR – Mumbai and Ahmedabad : SR- Chennai, Hyderabad,
Bangalore and Vizag ) are certified ISO 14001.
Safety Drill, Fire Drill are part of the regular activities being undertaken on the importance of Safety.
Medical check-up for all employees including Contract Labour are done periodically for fitness of all
employees.
In departmental Warehouses, there are other contracts being finalized by Warehouses for smooth
and efficient operations, i.e. Security Contract from the agencies sponsored by Directorate General of
Re- settlement (DGR), Contract for maintenance of Electrical Installations i.e DG set, Tower Lights,
HT panels available in the Warehouses, Contract for maintenance of Railway Siding wherever internal
For export of Iron and Steel, T&S department fixes the vessel / container and arranges receipt /
handling and shipment of goods. Export through sea rout is carried out through Vizag, Haldia,
Chennai. Land export to Nepal/ Bangladesh is carried out directly from the plant or from stockyards of
Kanpur, Bokaro , Bhilai and Dankuni.
The salient features of exports by sea are:
1. Orders are booked by the ITD ( International Trade Division ) at New Delhi
2. Coordination with SRM / plant for timely dispatch to the ports
3. Receipt, shortage of material at the export yard.
4. Arranging Third party inspection wherever required as per contract at the ports
• After meeting requirement of own steels plants, SPUs and Conversion Arrangements in
India, some surplus Semis will be targeted for exports to avoid competition in India with
Own Finished Products.
• Exports will continue for higher size Semis like BCB 200X280 from ISP and BCB
240X350 from DSP, where the company has surplus availability
• In Nepal market, which is high NSR market by maintaining exports of Billets, WRC, HRC
/ CRC and also by maximizing exports of PM Plates (NPM - RSP), Structural (New and
Old Mills) and then gradually enhance market presence in neighboring markets like
Bangladesh, Myanmar and Sri Lanka etc.
Objective
The basic object of the Right to Information Act is to empower the citizens, to promote
transparency and accountability in the working of the Government, to contain corruption, and to
enhance people’s participation in democratic process thereby making our democracy work for the
people in a real sense. It goes without saying that an informed citizen is better equipped to keep
necessary vigil on the instruments of governance and make the government more accountable to
the governed. The Act is a big step towards making the citizens informed about the activities of the
Government.
RTI Act 2005 empowers every citizen to ask any questions from the Government/Public Authority
or seek any information, take copies of any government documents, inspect any government
documents, inspect any Government works, take samples of materials of any Government work.
Any person can seek information from any department of the central or state government, from
panchayati raj institutions, and from any other organization or institution (including NGOs) that is
established, constituted, owned, controlled or substantially financed, directly or indirectly, by the
state or central government
In addition, Assistant Public Information Officers (APIOs) are also appointed to assist the PIO.
These are the officers at sub-divisional level to whom a person can give his RTI application or
appeal. These officers send the application or appeal to the Public Information Officer of the public
authority or the concerned appellate authority. An Assistant Public Information Officer is not
responsible to supply the information.
Procedure
Any person seeking information should file an application in writing or through electronic means in
English or Hindi (or in the official language of the area) along with prescribed application fee to the
PIO/APIO.
Where a request cannot be made in writing, the PIO is supposed to render all reasonable
assistance to the person making the request orally to reduce the same in writing. Where the
applicant is deaf, blind, or otherwise impaired, the public authority is supposed to provide
assistance to enable access to the information, including providing such assistance as may be
appropriate for the inspection. .Besides the applicant's contact details, the applicant is not required
to either give any reasons for requesting the information or any other personal details.
Application fee
A reasonable application fee will be charged for each application and supply of information.
Central Government has prescribed Rs 10/- as application fee, whereas in other states the fee
amount may vary. However, no fee is chargeable from persons below the poverty line, or if the
information is provided after the prescribed period.
Fee is charged for obtaining a copy of the documents. The Central Government has prescribed
fees of Rs.2/- for each page created and copied. A citizen has a right to inspect the records of a
public authority. For inspection of records, the public authority shall charge no fee for the first hour.
The Act does not require the public authorities to retain records for indefinite period. The records
need be retained as per the record retention schedule applicable to the concerned public
authority.
Responsibilities of PIO
PIO has to ensure that the information pertaining to his organization is provide within 30 days from
the date of receipt of application for such information. It is possible that in a public authority with
more than one Public Information Officer, an application is received by the Public Information
Officer other than the concerned Public Information Officer. In such a case, the Public Information
Officer receiving the application should transfer it to the concerned Public Information Officer
immediately, preferably the same day. Time period of five days for transfer of the application
applies only when the application is transferred from one public authority to another public
authority and not for transfer from one Public Information Officer to another in the same public
authority.
If the PIO feels that the sought information does not pertain to his department then it shall be his /
her responsibility to forward the application to the related/relevant department within 5 days and
also inform the applicant about the same. In such instance, the stipulated time limit for provision of
information would be 35 days.
If the appellant is not satisfied with the information/ reply/ response to the 1st appeal then he / she
can file second appeal against the decision within ninety days from the date on which the decision
should have been made or was actually received, with the Central Information Commission or the
State Information Commission, provided that the Central Information Commission or the State
Information Commission, as the case may be, may admit the appeal after the expiry of the period
of ninety days if it is satisfied that the appellant was prevented by sufficient cause from filing the
appeal in time.
In case a PIO without any reasonable cause fails to receive an application for information or does
not furnish information within the prescribed period or unreasonably troubles the applicant or
malafidely denies a request for information or knowingly gives incorrect, incomplete or misleading
information, or asks for high fees for furnishing the information the applicant can file a direct
complaint to the Central or the State Information Commission.
Penalties
If a PIO fails to furnish the information asked for under the Act or fails to communicate the rejection
order, within the time specified, the PIO will be liable to pay a penalty of Rs 250 per day for each day
of delay, subject to a maximum of Rs 25,000. The information commission can also recommend
disciplinary action against the concerned PIO, under the service rules applicable to him/ her.
Corporate Social Responsibility (CSR) of SAIL defines the statutory obligations and the Company’s
commitment to its stakeholders to conduct business in an economically, socially and environmentally
sustainable manner, whereby organizations serve the interests of society by taking responsibility for the
impact of their activities.
SAIL has been structuring and implementing socio-economic initiatives right from its inception in 1973,
much before ‘CSR’ became a buzzword. These efforts have seen the obscure villages, where SAIL plants
are located, turn into large industrial centres today.
SAIL carries out CSR projects mainly in periphery of steel townships and mines, i.e. in 8 states and
their 19 districts (approx.); in the thrust areas falling in line with the Schedule-VII of the Companies
Act-2013, namely, Promotion of Education and Health, Women Empowerment, Sustainable Income
Generation through Self Help Groups, Assistance to Divyangs (People with Special Abilities), Access
SAIL CSR initiatives are undertaken in conformity to the CSR provisions (Section 135) of Companies
Act, 2013, its Schedule-VII, CSR Rules, 2014 and Companies (CSR Policy) Amendment Rules, 2021
and Government Circulars/Orders/Clarifications issued from time to time. To carry out the CSR
Activities, well laid systems and procedures have been formulated. The Plants/Units are authorized to
incur expenditure within the budget allocation approved by the SAIL Board. They have in place High
Power Committees to oversee & monitor the projects as well as their implementation. They also have
multifunctional working level committees to scrutinize and recommend various projects.
➢ The comprehensive CSR Policy(revised in 2020-21 as per provisions of the Cos. (CSR Policy)
Amendment Rules, 2021) and duly approved by the SAIL Board, encompasses geographical
coverage, broad areas of CSR projects/schemes to be undertaken in conformity with Schedule-
VII of the Companies Act, 2013, resourcing, planning, execution & implementation methodology,
monitoring mechanism and reporting.
➢ CSR Policy and annual reporting on CSR projects and budget expenditure is published in the
Company’s Annual Report, all available on SAIL Portal.
➢ As per Companies (CSR Policy) Amendment Rules, 2021, effective from FY 2020-21:
i. the expenditure incurred in excess of mandatory CSR expenditure, i.e. at least 2% of the
Average Net Profits of immediately preceding 3 financial years, shall be set off/carried
forward as ‘credit’ against the budget requirement of immediately succeeding 3 financial
years, for which Board would pass a resolution.
ii. CSR funds remaining Unspent pursuant to“Ongoing Project” (multi-year project not
exceeding 03 years excluding the year ofstart) would be transferred to “Unspent CSR
iii. Any surplus arising out of CSR projects would not form part of the business profits of the
company. This surplus would be :
(i) ploughed back into the same project or
(ii) be transferred to the ‘’Unspent CSR Account’’ and spent in pursuance of CSR Policy
and Annual Action Plan of the Company or
(iii) transferred to a Fund specified in Schedule-VII, within 6 months of the expiry of a fiscal,
i.e. upto September.
➢ SAIL believes in making a meaningful difference to the lives of people. The major CSR initiatives
undertaken by SAIL are as follows :
SAIL has supplied over One Lakh Metric Tonnes of Liquid Medical Oxygen (LMO) to different
States.SAIL Plants have setup separate Jumbo CoVID Care facilities totaling to 1100 beds
equipped with Oxygen supply,Ventilators, ICU beds,as well as600 bedded Quarantine
Facilitiesand developed CoVID-19 Testing facilities like RAT, RTPCR, TRU-NAT. Touch-free
hand-sanitizers, water dispensers have been installed, spraying disinfectants, using digital
thermal recorders at prominent locations, ensuring continuous water supply in all the peripheral
villages. SAIL Hospitals are manned by approx 900 doctors and 1500 para-medical staff.
In order to support the vulnerable sections of society, daily-wagers and their families, who are left
with dwindled resources during the pandemic, the SAIL Plants and Units, through district
authorities, distributed dry ration packets (comprising of Rice, Dal, Salt, Condiments, wheat atta,
soap, etc.), Milk packets, Milk powder, Khichdi, routine medicines, sanitary napkins for women,
etc.CSR departments of Plants are also facilitating stitching of Face Masks, Gamachhas, Aprons,
Gloves, etc. through SHGs, and their distribution.
d) Model Steel Villages: In order to bridge the gap between rural and urban areas and to facilitate
comprehensive development of both physical and social infrastructure, 79 villages have been
developed as “Model Steel Villages” across the country (in 8 states). These facilities are
maintained regularly.
Regular Health Camps and Mobile Medical Units (MMUs) deliver quality healthcare at the
doorsteps of needy people in the periphery of Plants, Units and Mines.
g) Education: To develop the society through education, SAIL is supporting over 77 schools
imparting modern education to about 40,000 children and is assisting over 600 Govt. schools in
Bhilai and Rourkela with about 62,000 students by providing Mid-day meals and dry ration kits in
association with Akshya Patra Foundation. 20 Special Schools (Kalyan & Mukul Vidyalayas) are
benefitting over 4478 BPL category students at integrated steel plant locations with facilities like
free education, mid-day meals, uniform including shoes, text books, stationary items, school bag,
water bottles, etc. in some cases are running under CSR.
➢ Tribal children are getting free Education, Accommodation, Meals & Uniforms, textbooks,
etc. at Saranda Suvan Chhatravas, Kiriburu; RTC Residential Public School, Manoharpur;
Gyanodaya Chhatravas, BSP School Rajhara, Bhilai; Kalinga Institute of Social Sciences,
Bhubaneswar; Gyanjyoti Yojna, Bokaro.
➢ School students are awarded annual scholarships in plant peripheries.
➢ Gyan Jyoti Yojana: Bokaro Steel Plant is providing education and holistic development for
the children of Birhor tribe, which is at the verge of extinction. 15 Birhor children were
adopted and provided free Education along with boarding, lodging, nourishing and
wholesome food, clothing, free medical treatment, sports and cultural opportunities in a
conducive atmosphere. They are the first Matriculates and 12 th pass from their community.
Inspired from their achievements, another batch of 15 new Birhor children has been
adopted. For Skill Development and better employability, 9 Matriculate Birhor Boys
adopted under Gyan Jyoti Yojana have been sponsored for ITI training in ”Welder trade”
alongwith stipend, accommodation and fooding facility at Bokaro Pvt ITI.
h) Women Empowerment & Sustainable Income Generation: Vocational and specialised skill
development training targeted towards sustainable income generation is provided to youths &
women in areas such as Nursing, Physiotherapy, LMV Driving, Computers, Mobile repairing,
Welder, Fitter & Electrician Training Improved agriculture, Mushroom cultivation, Goatery,
Poultry, Fishery, Piggery, Achar/ Pappad/Agarbati/Candle making, Screen printing, Handicrafts,
Sericulture, Yarn Weaving, Tailoring, Sewing & embroidery, Gloves, Spices, Towels, Gunny-
bags, Low-cost-Sanitary Napkins, Sweet Box, Soap, Smokeless chullah making etc.
➢ These activities are organized at Bhilai IspatKaushalKutir&Swayamsiddha at Bhilai, PG
College of Nursing, Bhilai, Kishori at Rourkela, Skill Development and Self Employment
Training Institute (SDSETI) at Durgapur, Garment Technician Training at Salem,
JHARCRAFT centre at Bokaro and Self employmentcentre “KIRAN” at Kiriburu Ore Mines
Rural youthsare sponsored for ITI training at ITIs Bolani, Bargaon, Baliapur, Bokaro Pvt ITI and
Rourkela etc. The ITIs at Bolani&Bursua have been adopted for upgradation and operation by
SAIL. At Bokaro Pvt. ITI rural youths are being trained in streams, viz. Electrician, Welder &
Fitter.
i) Infrastructure Development in Rural Areas: Over 79.03 Lakh people across 450 villages have
been connected to mainstream by SAIL since its inception by constructing and repairing of roads.
Over 8176 water sources have been installed during last four years thereby enabling easy access
to drinking water to over 50 lakh people living in far-flung areas.
j) Environment Conservation :To promote renewable sources of energy, Solar street lights have
been installed in rural areas, Solar Lanterns and smokeless chullahs have been distributed
among the rural people of Saranda and other locations. Maintenance of parks, botanical
gardens, water bodies and plantation of over 5 Lakh trees at various locations has been
undertaken.
SAIL has supported setting up and operation of 100 KW Capacity Solar Power Plant at Jari,
Gumlain Jharkhand.
k) Support to Differently Abled & Senior Citizens: Differently abled children/people are being
supported through provision of equipments like- tricycle, motorized vehicles, calipers, hearing
aids, artificial limbs, etc. SAIL supports various schemes and centers at SAIL Plants under CSR
like “SnehSampada”, “Prayas”and ‘Muskaan” at Bhilai, “Schools for blind, deaf & mentally
challenged children” and Home and Hope” at Rourkela, “AshalataViklang Kendra” at Bokaro,
various programs like “Handicapped Oriented Education Program” (Hope) and “Durgpaur
Handicapped Happy Home” at Durgapur, “Cheshire Home” at Burnpur. Old age homes are
being supported at different Plant townships like “SiyanSadan” at Bhilai, AcharyaDham and
Badshah at Durgapur etc.
SAIL has adopted, developed and is maintaining a Lepers Colony at Kajora through Durgapur
Steel Plant wherein all the social and infrastructure facilities have been maintained.
l) Sports, Art & Culture and Heritage Conservation: SAIL is regularly organizing inter-village
sports tournaments, extending support to tribal and major national sports events & tournaments.
Also, supporting and coaching aspiring sportsmen and women through its residential sports
academies.
Cultural events like Chhattisgarh Lok Kala Mahotsav, GraminLokotsav are organised every year.
Conservation and maintenance of National heritage sites such as 5 monuments in the Lodhi
Gardens at Delhi, “Ved-vyas” of Mahabharat fame historical site in Rourkela, etc. are supported
by SAIL.
m) Disaster relief: SAIL, as a responsible corporate citizen, supported the rehabilitation initiatives
for the people affected by National & Natural Calamities, the recent being Covid, flood ravaged
Jammu & Kashmir, Phylin cyclone in Odisha, Flash Floods in Uttarakhand, etc.
Communication may be defined as the art of transmitting ideas and information to others with a view
to making one-self clearly understood. It aims at establishing contacts and developing and
maintaining appropriate relationship between and among the people in the different level of
community or an organization. It important because
Management
Upward
Downward Communication
Communication
Employees
Horizontal
Communication
Peers Peers
Downward communication:
Downward communication flows from the management to the employees at lower level. With effective
downward communication employees become aware about Companies vision and goals. With
knowledge about organization’s strategy, products and various schemes being run for their benefit,
the employees become better motivated and more efficient. Management can clear various
apprehensions of the employees by making their viewpoint clear on the controversial issues. It is a
known fact that employers who communicate effectively have more productive employees.
By upward communication employees provide feedback to the management about its various actions.
Successful managers listen closely to the opinion, problems and suggestions of their employees. It
also helps in reduction of employees’ grievances.
Horizontal Communication
Horizontal communication between peers (employees working at more or less same level) and
department to department is important in enhancing cooperation, coordination and generation of
ideas for solving the day to day problems.
It is very important to have effective communication flow in the organization as it the communication
only through which the organization achieves its goals. Good communication system pre-supposes
formal and informal flow of ideas and information, in all these directions.
Communication may be Written, Spoken, or Visual. The first two are usually resorted to in a day
working of an organization or industry and third one is generally used for education training or
publicity.
Barriers of Communication
Wrong choice of medium: Generally verbal communication is used when the message is short. If a
long message containing various facts and figures is communicated orally, there is every chance that
it will get distorted. Therefore it is very important to choose the proper medium for communication as
per the requirement of the message.
Inability to Transmit or Receive Information: Inability to transmit on the part of the sender and then to
receive on the part of the receiver, both ways it acts as a serious barrier.
Fear, Suspicion and Jealousy: It has been observed that the communicator (subordinates to superior)
who suffers from other fear or complex or is skeptical or jealous or has lack of trust has a tendency to
conceal many vital information. It may be due to the fear of boss, the fear of being punished or tried.
Evaluative Tendency: The tendency to evaluate, pass judgment and approve based on own frames of
reference acts as barrier. In such cases, the communication is available only when it is consistent with
the attitude and views of concerned persons. The typical reaction is either to reject or approve.
The following are some of the methods to overcome the barriers and ensure free of flow of
communication in an organization :
a) A proper atmosphere has to be created for flow of communication.
b) Proper attitude towards communication has to be developed.
Listening
Listening forms a important tool for a manager who seeks excellence in performance –
(a) Learn to tolerate silence – A good listener is not disturbed, embarrassed, or fearful of
silence. A thoughtful silence is better than meaningless chatter.
(b) Look and listen hard – A good listener maintains comfortable eye contact with the
speaker, sit or stand alternatively to become a positive power for the speaker.
(c) Know your power as listener – A poor listener can destroy the speaker’s desire to talk
or self-confidence in communication ability.
(d) Ask questions – to clarify your understanding the message.
(e) Reflect feelings – phrase emotional responses that will assure the speaker about
understanding the message.
(f) Positive body language – Body language should suggests that you are interested in
the communication
(g) Know your emotional biases and try to correct them – person should be aware of their
biases and make an extra effort to correct them
(h) Avoid judging – a good listener will create a warm non-judgmental atmosphere that
encourages communicator to expand fully.
The following aspects are generally outside the scope of suggestion schemes:
The deserving cases are nominated for various awards including the coveted “Prime Ministers’ Shram
Awards”.
Introduction
Definition of Computer
Computer is an electronic device that
• Operates under control of instructions stored in its own memory unit,
• Accepts data,
• Processes data arithmetically and logically,
• Produces output of processing and stores results
c) Secondary Storage
• Computers load the program instructions from hard disk to main memory (RAM) and then
execute these instructions. Since RAM is volatile, the results of processing and data needs to
be stored in permanent secondary storage media like hard disk.
• Hard disks are smooth metal plates coated on both sides with thin film of magnetic material. A
set of such plates is fixed to a spindle one below the other to form a disk pack, which gets
rotated. Magnetic heads do read / write operation on circular tracks.
• Compact Disk Read Only Memory (CD-ROM ) is a disc of special plastic with a thin layer of
aluminium applied to the surface.
• Digital Video Disk (DVD) is a medium where a number of disks are bound together to offer
several layers of data.
• Pen Drives are flash memory data storage devices integrated with a USB (universal serial
bus) connector. They are typically small, lightweight, removable and rewritable.
b) MS EXCEL
• A file created by EXCEL program is known as a Workbook and contains .xls/.xlsx file
extension. One Workbook can have a number of Worksheets. EXCEL program is typically
used to make analysis of data, do calculations using formula, create graph etc
• Command File New opens a new Workbook, whereas File Open opens an existing Workbook.
Workbook needs to be saved to retain the modifications
• Data in each Worksheet is filled in cells which have row (1,2,3 etc) and column (A,B,C,D etc )
addressing ( A23, V56 etc ). Each cell can take data like numerical, character, function or
formula. The results of formula get calculated automatically on change of data
• It is possible to draw graphs like X-Y, bar-graph, line-graph, pie-chart etc, sort data, do matrix
operation, do query on data
• Command File Print helps us to print the data / graph in a printer
• Command File Exit makes us close and exit from EXCEL program
c) MS POWER POINT
• A file created by POWERPOINT program is known as a presentation and contains .ppt/.pptx
file extension. PowerPoint program is typically used to prepare slide presentation
Database Concepts
a) Data and Information
• Number, character, images that can be accessed by humans and computer, capable of getting
stored and processed by computer is known as data. Data is in raw form without having
meaning in itself. For example 12345, 10000.0, 1000.0 are various forms of raw data.
• Data when undergoes processing becomes meaningful information. Information is data that
has been given meaning by way of relational connection. For example Personal-No= 12345,
basic-pay = Rs. 10,000.0, DA = Rs. 1,000.0 is information
b) Structured Storage of Data in Rows and Columns
• A computer database is a structured collection of records of data that is stored in a computer
system. Database describes the objects and the relationships among them. A database relies
upon software to organize the storage of the data and to enable us to extract desired
information. The data is stored in such a way that they are independent of the programs that
use them. Each group of data items is generally stored in a database table which has fields
Intranet and World-Wide-Web
• An Intranet is a company-specific network that uses software programs based on the Internet
TCP/IP protocol and the web browser. Intranet is the application of Internet technologies within
an organization private LAN and web servers. Example of intranet is the internal mail system.
Intranet increases internal communication, reduces paper distribution cost and works on open
protocols
• Internet is "network of networks" that consists of millions of smaller domestic, academic,
business, and government networks, which together carry various information and services,
such as electronic mail, online chat, file transfer and web pages.
• The World Wide Web (www) is defined as the universe of network-accessible information,
accumulation of human knowledge, consisting of all the resources on the Internet
Day-to-day applications using web like e-mail, web-browser etc
• e-mail: Electronic mail or e-mail is a store and forward method of composing, sending, storing,
and receiving messages over electronic communication systems like intranet or internet. E-
mail sometimes leads to unwanted messages ("spam"). E-mail contains address of the sender
and the address of the receiver. We can use internet e-mail systems like yahoomail.com,
rediff.com, gmail.com etc without extra expense. Our SAIL/ plant-based e-mail systems also
allow us to send to / receive mails from anyone in the world
• A web browser is a software application that enables a user to display and interact with text,
images, videos, music and other information located on a Web page at a website on the World
Wide Web or a local area network.
• A web based search engine is an information retrieval software system designed to help find
information stored in a computer system on World Wide Web. Example is www.google.co.in,
www.yahoo.com etc
• A website is a location on the World Wide Web, that contains a home page which is the first
document users see when they enter the site and multiple links. The site is invoked by giving
Advantages of Computers
• The main advantagesof a computer are its speed, accuracy, doing variety of tasks, doing
repetitive jobs and automatic program execution
• In today's world everything we do has a computer element embedded. If we have the basic
computer knowledge and training in computer, we can be upto date in the existing
environment
• Using the computer, one can do in-depth analysis of data and take decision about the future
course of action, in matter of seconds. We can plug the shortcomings in advance with
appropriate measures.
• Electronic mail and web-browsing have spread rapidly to cover the whole globe. Now, a few
keys on the computer would bring instant connectivity with our business partners.
• Computers provide highly accurate answers and calculations. Hence, computerized financial
estimate and balance sheet are dependable irrespective of the persons who presented it.
• Computers help in Elimination of repetitive tasks and result in higher productivity and benefit to
our Organisation.