A

PROJECT REPORT
ON
“ Role of different sections of finance department and BUDGET ,
INVESTMENT AND FINANCIAL Analysis of Western Coalfields Limited , Nagpur
, Maharashtra , India “

A Project Report submitted to Hyderabad Business School in partial

fulfillment of the requirement for the award of the degree of
BACHELOR’S OF BUSINESS ADMINISTRATION
(SESSION: 2022 – 25 )
Submitted by
Garisa Sri Harsitha Reddy
HU22MGMT0700082

Under the guidance of

Mrs Shobha Mishra
Assistant Professor

GITAM
(DEEMED TO BE UNIVERSITY)
Rudraram, Patancheru (M), Sangareddy Dist., Telangana

1
 DECLARATION

I hereby declare that this Project Report titled “ Role of different sections of
Finance Department and “ Role of different sections of finance department
and BUDGET , INVESTMENT AND FINANCIAL Analysis of Western Coalfields
Limited , Nagpur , Maharashtra , India “ submitted by me to the School of
Business , GITAM University , Hyderabad , is a bonafide work undertaken by
me and it is not submitted to any other University or Institution for the award
of any degree certificate or published any time before .

Name of the student – Garisa Sri Harsitha Signature of the student

Reddy
Roll Number – HU22MGMT0700082

2
 CERTIFICATE

This is to certify that the Project Report titled“ Role of different sections of
finance department and BUDGET , INVESTMENT AND FINANCIAL Analysis of
Western Coalfields Limited , Nagpur , Maharashtra , India “ submitted in
partial fulfilment for the award of BBA Programme of School of Business ,
GITAM University , Hyderabad , was carried out by under my guidance . This
has not been submitted to any other University or Institution for the award of
any degree/diploma/certificate .

Name and Designation of the Guide Signature of the Guide

Mrs Shobha Mishra
Assistant Professor
Hyderabad Business School;
GITAM University
Hyderabad

3
 ACKNOWLEDGEMENTS

I would like to extend my sincere thanks to “Western Coalfields Limited” for their
continuous guidance and supervision during Internship / practical training . I would like to
acknowledge all the people who have guided me , advised me , and helped me complete my
report . I would like to thank Mr. K Anand Sir ( General Manager Finance ) for giving me an
opportunity to undergo my internship without any hiccups in Western Coalfields Limited . I
am highly indebted to Mr. Anil Kumar Verma , ( Chief Manager Finance ) , for guiding me
throughout the one month tenure of internship , and extending his support whenever
required . His valuable experience has helped me understand the workings in the Finance
Department of WCL . I would also like to convey my sincere gratitude to Mr. B.
Pandurangan , Jitesh Sir and Sumit Kheecha Sir for always making time to clear my doubts ,
and also giving snippets of information regarding the work carried out in Western Coalfields
Limited ( WCL ) and Coal India Limited (CIL) , and providing useful information for my report
.
I would also like to thank my Professors , for teaching me the basics of Finance without
which I wouldn’t have been able to complete my report . Last but not least it would be
unfair if I don’t extend my gratitude to all my faculties , to my parents and all my friends for
their active cooperation which was of great help during the course of my internship process
. Without the support of all the above mentioned people this study would not have been
successful . I Once again thank you all for your great interest and support throughout my
study .

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 ABSTRACT

Western Coalfields Limited (WCL) is one of the eight Subsidiary Companies of Coal India
Limited (CIL) which is under administrative control of Ministry of Coal .
Objective of summer Internship Project is to understand “ The role of different section of
finance department and Budget Analysis and Financial Analyis of the Western Coalfields
Limited “ . Western Coalfields Limited (WCL) is a key player in India's coal mining sector .
Analyzing its budget and finance condition provides valuable insights into its financial
health , spending patterns , and opportunities for improvement .

Financial analysis guides the creation of realistic budgets . By analyzing past data and
current trends , analysts can estimate future income and expenses . This helps businesses
allocate resources efficiently and anticipate potential shortfalls .
This project report analyzes the budget and fianancial health of Western Coalfields Limited
(WCL) , a prominent coal mining company in India. The analysis aims to identify key budget
areas , spending trends , and potential areas for optimization and role of sections of
finance departments .
The primary data source will be WCL's annual reports, specifically focusing on the financial
statements . The report will examine budget components like production costs , employee
expenses, capital expenditures, and Corporate Social Responsibility (CSR) spending . It will
assess trends in these areas over a specified period (e.g., past 3 years).The analysis might
also consider relevant data from the Ministry of Coal , Government of India .

Expected Outcomes : -
Identify major cost drivers for WCL's operations . Understand if budget allocations are
aligned with WCL's strategic goals (e.g., production targets, safety initiatives) . Explore
opportunities for cost reduction or budget reallocation to improve efficiency .

Project Deliverables : -
The report will present a comprehensive analysis of WCL's financial health with insights and
recommendations . It may include visualizations like charts and graphs to illustrate spending
patterns . This project offers valuable insights for stakeholders interested in WCL's financial
health and operational efficiency .

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 INDEX

PAGE CONTENT ON PAGES

NUMBER
1. NAME OF THE TOPIC
2. DECLARATION
3. CERTIFICATE

4. ACKNOWLODGEMENT

5. ABSTRACT

6. INDEX

7–8 INTRODUCTION TO THE PROJECT

8 – 16 OVERVIEW OF COAL INDUSTRY

17 - 40
INDUSTRY BACKGROUND
41 – 54 INVESTMENT ANALYSIS

54 - 69 BUDGET ANALYSIS

69 – 83 FINANCIAL ANALYSIS

84 . SWOT ANALYSIS

85 . SUGGESTIONS AND CONCLUSION

86 . BIBLIOGRAPHY

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 CHAPTER – 1

INTRODUCTION TO THE PROJECT

Scope :-
The project report will delve into the structure of the finance department at WCL . Each
section , you will explain its specific responsibilities and how it contributes to the overall
financial health of the company .
It will focus on how WCL creates and manages its budget . It will explore the process of
budget development , including forecasting revenue and expenses .
It will involve analyzing the financial performance of WCL .

Objective of the project : -

1 . Examining budget components and spending trends, the project aims to assess WCL's
overall financial stability and profitability .
2 . Analyzing budget breakdowns will help pinpoint the factors that significantly impact
WCL's financial standing .
3 . The project will evaluate whether WCL's budget allocations are aligned with its strategic
goals .
4 . By understanding spending patterns and cost drivers , the analysis can identify potential
areas for cost reduction or budget reallocation.
5 . Ultimately, the project aims to provide insights that can help WCL improve its operational
efficiency .

Research Methodology :-
The methodology adopted for this project was completely based on secondary information
and reasonable assumptions for projecting budgets for next two years .

The first stage included understanding the different work of different departments of WCL.
The second stage comprised of determining the objective of the study of Role of sections of

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Finance Departments and performing budget analysis and fianancial analysis of the
company with the help of secondary data .

Data sources : -
Data was collected from publicly available annual reports which includes income statements
, balance sheet , cash flow satements , Industry Benchmarks and Reports on Coal Mining
Costs , company’s books of accounts, and company website .

Limitations : -
There are certain limitations associated with the project which are as follows : -
Data limitations might exist. WCL annual reports might not provide a detailed breakdown of
all budget components .
Availability of data: Certain management information is classified and therefore is not made
available for the project purpose which is a big constraint .
Scope of project: The scope of the project is financial analysis and thus imposes certain
restrictions beyond which one cannot go .

CHAPTER – 2

OVERVIEW OF COAL INDUSTRY

Coal Industry
Coal is a fossil fuel that is burned to generate electricity. It is the single largest
source of greenhouse gas emissions globally, accounting for about 25% of total
emissions. The burning of coal also releases other pollutants into the
atmosphere, such as sulfur dioxide, nitrogen oxides, and mercury. These
pollutants can cause respiratory problems, heart disease, and cancer.
Despite its environmental drawbacks, coal remains an important source of
energy for many countries around the world. This is because it is a relatively
cheap and abundant fuel source. However, the use of coal is declining in many

8
developed countries as they transition to cleaner sources of energy, such as
solar and wind power.

Factors which led up to Nationalization of Coal Industry in India : -

Nationalization of coal industry in India in the early seventies was a fall out of two related
events. In the first instance it was the oil price shock, which led the country to take up a
close scrutiny of its energy options. A Fuel Policy Committee set up for this purpose
identified coal as the primary source of commercial energy. Secondly, the much needed
investment needed for growth of this sector was not forthcoming with coal mining largely in
the hands of private sector. The objectives of Nationalization as conceived by late Mohan
Kumaramangalam were, Conservation of the scarce coal resource, particularly coking coal,
of the country by
● Halting wasteful, selective and slaughter mining.

● Planned development of available coal resources.

● Improvement in safety standards.
● Ensuring adequate investment for optimal utilization consistent with growth needs.
● Improving the quality of life of the work force.

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 COAL INDIA LIMITED( COAL INDIA LIMITED )
( HOLDING COMPANY )

MCL WCL BCCL NCL SECL ECL CCL CMPDIL

MAHANADI WESTERN BHARATCOKING NORTHERN COAL SOUTHEASTERN EASTERN CENTRAL COAL MINE PLANNING
COAL FIELDS COALFIELDS COALFIELDS FIELDS COALFIELDS COALFIELDS COALFIELD AND DESIGN INSTITUTE

Coal India Limited (CIL) and its Subsidiary Companies : -

CIL (Coal India Limited) is a state-owned enterprise and the world's largest coal producer. It
was formed in 1975 by nationalizing several private coal mining companies in India. CIL plays
a vital role in meeting India's energy needs, accounting for over 80% of the country's
domestic coal production .
Subsidiary Companies : -
CIL functions through its seven wholly owned subsidiary companies, each responsible for
mining operations in a specific geographic region :-
Eastern Coalfields Limited (ECL)
Bharat Coking Coal Limited (BCCL)
Central Coalfields Limited (CCL)

Western Coalfields Limited (WCL)

South Eastern Coalfields Limited (SECL)
Northern Coalfields Limited (NCL)
Mahanadi Coalfields Limited (MCL)
In addition to these seven production companies, CIL also has : -

Central Mine Planning & Design Institute (CMPDI) : - This is a mine planning and
consultancy company that provides technical services to the coal industry.
Coal India Africana Limitada (CIAL) : - This is a foreign subsidiary of CIL located in
Mozambique .

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Importance of Subsidiaries : -
The subsidiary structure allows CIL to
Decentralize operations: Each subsidiary manages its own mining activities, enabling a more
efficient and responsive approach to regional needs.
Specialization: Some subsidiaries, like BCCL, focus on coking coal, a crucial input for steel
production.
Improved Management: The division allows for focused management teams to address the
specific challenges and opportunities in each coalfield.
Criticisms of CIL : -

Despite its importance, CIL has faced criticism for:

Environmental impact: Coal mining can have significant environmental consequences,
including air and water pollution.
Safety record: The Indian coal industry has a history of mine accidents, raising concerns
about worker safety.
Inefficiency: Some argue that CIL's operations are not as efficient as they could be, leading
to higher production costs.
The Future of CIL : -
Coal Production India's coal production increased by 10.74% to 92.92 MT from 83.91 MT
during Dec'23 as compared to Dec'22. During Dec'23, CIL and Captives/Others registered a
growth of 8.23% & 35.30% by producing 71.89 MT & 14.56 MT of coal respectively. Whereas
SCCL registered a negative growth of 3.83% .

11
 Railways , Fertilizer , Steel including Sponge Iron & Pig iron manufactures and other
metallurgical industries who use coal/coke for their own end use . Cement industries are
the major consumers of coal .

COAL MINING TECHNIQUES

There are two different types of coal formation

• Drift coal
• In situ coal formation
In India, the coal available is basically drift coal and accordingly the suitable mining
technique is adopted.
There are more than one ways to mine coal. The selection of the optimum method rests
primarily on the depth of the seam, i.e., the amount of earth separating the coal from the
crust of the Earth.
Broadly there are two ways to mine coal:
● Open Cast/Surface Mining (OC); and

● Underground (UG) mining

Open Cast (Surface) Mining

In OC mines, the whole portion of land (overburden) is dug from the top until the coal seam
is sighted. The ratio of overburden excavated to the amount coal removed is called the
overburden ratio (OBR). The deeper the coal is below the surface, the greater the time and
effort required excavating it, thus the productivity of a mine is inversely proportional to its
OBR. OC mining is suited when the coal is nearer to the surface.

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Underground Mining
In UG mining, coal is found deeper inside the earth. The depth can vary from a few metres
to more than 1000 metres. Here, a small portion of land is excavated until the coal seam is
found. Such mines have to be developed deep inside the earth. This also affects productivity
vis-à-vis opencast production.

When the coal seam is found, different techniques are applied to extract coal . There are
three types of underground coal mines;
a. Shaft mines, b. Slope mines . The decision on what type of mine to construct depends on
the depth of the coal seam and surrounding terrain.

Coal is sold to consumers through various channels depending on the

quantity , type of consumer , and market dynamics . Here's a breakdown of
the common methods : -

Fuel Supply Agreements (FSAs) : -

This is a formal contract between Coal India Limited (CIL) , the dominant coal producer in
India , and large consumers like power plants and steel mills .
FSAs typically specify the quantity , grade , price , and delivery schedule of coal for a fixed
period . FSAs offer security of supply for consumers and enable CIL to plan production and
transportation efficiently .
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As contemplated in and in accordance with the terms of the NCDP, we enter into legally
enforceable FSAs with our customers or with State Nominated Agencies that in turn enters
into appropriate distribution arrangements with end customers . Our FSAs can be broadly
categorized into –
FSAs with customers in the power utilities sector, including State power utilities, private
power utilities (“PPUs”) and independent power producers (“IPPs”) FSAs with customers in
non-power industries (including captive power plants (“CPPs”)); and FSAs with State
Nominated Agencies . In addition to the FSA forms discussed above , WCL currently supplies
coal under certain “cost plus” coal supply agreements .

E-Auction : -
This method involves electronic auctions where coal producers (including CIL and private
miners) sell coal to various buyers .
Buyers submit bids online , competing for specific lots of coal based on price and other
factors . E-auctions are transparent and allow for wider participation , potentially leading to
price discovery based on market demand .
The E-Auction scheme of coal has been introduced to provide access to coal for customers
who were not able to source their coal requirement through the available institutional
mechanisms under the NCDP for various reasons, for example, due to a less than full
allocation of their normative requirement under NCDP, seasonality of their coal
requirement and limited requirement of coal that does not warrant a long-term linkage. The
quantity of coal to be offered under E-Auction is reviewed from time to time by the Ministry
of Coal . Credit risk arises when a counter party defaults on contractual obligations resulting
in financial loss to the company .

Spot Sales : -

This is a short-term arrangement where producers sell surplus coal on the market through
auctions or direct negotiations . Spot sales are suitable for immediate coal requirements or
when consumers cannot secure enough coal through long-term contracts .

Brokerage : -
Coal brokers act as intermediaries between producers and consumers , facilitating
negotiations and transactions . Brokers can help connect buyers with suitable coal sources
and manage logistics.

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 Fuelling India’s energy needs

Coal India Limited (CIL), a ‘Maharatna’ Company, operating under the aegis of the Ministry
of Coal, Government of India , is a prominent player in the global energy landscape.
CIL operates diverse coal mines, including open cast , underground , and mixed mines to
serve the unique requirements of various industries. Our coal and coal-based products are
essential for sectors such as steelmaking, fertilisers , glass , power utilities , cement,
ceramics , chemicals , paper , domestic fuel , and industrial plants.

With operations spanning 83 mining areas across eight states, we contribute extensively to
the nation’s energy needs and its socio-economic progress. Headquartered in Kolkata , West
Bengal, we fulfil approximately 79% of India’s coal production needs .

Governance of Coal India Limited ( CIL ) : -

A strong framework for ethical and transparent operations We have implemented robust
governance measures to ensure transparency, accountability , and the prevention of
corruption . Our corporate structure , operations , and disclosure practices reflect our
constant commitment to good corporate governance . Ensuring ethical operations Vigilance

15
framework One of the key aspects of our governance structure is the formulation of
comprehensive policies and frameworks .
At the corporate headquarters in Kolkata, we have established a well-structured Vigilance
Division , led by a Chief Vigilance Officer (CVO) and supported by a team of vigilance officers
with diverse expertise .
Each of our eight subsidiaries has its own independent Vigilance Unit, headed by a
dedicated full-time CVO. The CVO at the corporate level acts as a coordinating authority
between subsidiary vigilance units , the Central Bureau of Investigation (CBI) , the Ministry
of Coal , and the Central Vigilance Commission (CVC) . This coordination ensures effective
handling of complaints , investigations , and systemic improvements that have implications
on multiple subsidiaries as well as the Company .

Any misconduct with a vigilance angle that is a violation of the CDA Rules of CIL , is verified
, investigated and as per the merits of the case, disciplinary/ departmental proceedings
initiated against the delinquent officials . Based on the outcome of the enquiry , appropriate
action as mandated in the CDA Rules is taken .

VISION AND MISSION : -

Vision : -
To emerge as a global player in the primary energy sector committed to provide energy
security to the country by attaining environmentally and socially sustainable growth through
best practices from mine to market.

Mission : -
To produce and market the planned quantity of coal and coal products efficiently and
economically in an eco-friendly manner with due regard to safety, conservation and quality

16
 CHAPTER – 3

INDUSTRY BACKGROUND

Coal is extracted from the ground by the coal mining, either underground mining , or at
ground level by open cast mining extraction . But the methods for recovering coal from the
earth have undergone drastic changes in the past 25 years, as a consequence of
technological advances .
Fifty years ago when coal mining was done manually, underground mines accounted for 96
percent of the coal produced each year. Today almost 93 percent is produced from surface
mines . Before industrial revolution, coal was used generally for household purpose . Large
scale coal mining was developed during the industrial revolution , and coal provided the
main source of primary energy for industry (especially in smelting and alloy production as
well as electricity generation) and transportation in industrial areas from the 18th century
to the 1950s. Coal remains an important energy source, due to its low cost and abundant
availability when compared to others fuels, particularly for electric generation. Coal is also
mined today on a large scale by open pit methods wherever the coal strata strike the
surface are relatively shallow. By the late 20th century coal was for the most part replaced
in domestic as well as industrial and transportation usage by oil , natural gas or electricity
produced by oil , gas , nuclear power or renewable energy sources By 2010 coal produced
over a fourth of the world’s energy, and by 2050 is expected to produce about one – third .

WESTERN COALFIELDS OVERVIEW

Western Coalfields Limited (WCL) is one of Coal India’s subsidiaries under the control of the
Ministry of Coal . It is a Miniratna company , headquartered in Nagpur, India and
accounted for7.02% of the total coal production during 2021- 22 . In the year 2022 – 23 ,
WCL has achieved production of 44.815 million tons . The company achieved a turnover of
Rs. 10349.54 crores with the pre-tax profit of Rs. 431.46 crores . The Profit after tax (PAT) of
the company is Rs. 296.60 crores . The net worth of the company is Rs. 3157.20 crores . The
company has paid a dividend of Rs. 581.60 crores which is 195.76% of the paid-up capital .

17
The areas in the Maharashtra region of WCL is is Chandrapur , Ballarpur , Majri , Wani , Wani
North , Nagpur , Umrer . By totalling all the underground and opencast mines the
Maharashtra region has 40 working mines .

Areas of Western Coalfields Limited on map ( Maharashtra ) : -

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 Different
Departments
There are several departments in Western Coalfields Limited . They include
1 . Mining Department - A mining department is a branch in a company that is responsible
for the extraction of coal from the earth . The mining department typically oversees all
aspects of the mining process, from exploration and planning to extraction and reclamation.
2 . Sales and Marketing - Sales and marketing are two interdependent business functions
that work together to drive revenue and brand awareness . Creating awareness, building
relationships , and driving long-term sales growth.
3 . Finance - The finance department plays a crucial role in managing the financial health of
the company . The team forecasts future financial performance, creates budgets, and
analyzes financial data to support decision-making . They would likely be involved in
budgeting for coal production, equipment acquisition, and employee costs .

5 . Medicine - Medical Department dedicated to the health and well-being of its employees
and their families . The department likely provides medical services to employees .

6 . Vigilance - Vigilance plays a crucial role in ensuring transparency, integrity, and ethical
conduct within the organization .

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 CHAPTER – 4

ROLE OF FINANCE DEPARTMENT IN WESTERN COALFIELDS LIMITED

Finance Department

COST AND SALES AND TAXATION CORPORATE AUDIT

BUDGETING ACCOUNTS TREASURY

The finance department is the backbone of any organization, responsible for

the financial health and well-being of the company. It encompasses a wide
range of functions, including : -

Cost and Budgeting in WCL

WCL would likely have a budgeting process to plan for future expenses and
revenue . This would involve - Forecasting future production or sales volumes .
Estimating associated costs for materials, labor, and other expenses . Setting
financial targets for the organization .

Budgeting : -
Budget analysis is the process of examining your income and expenses to see
how well you're sticking to your budget. It's a crucial step for anyone who
wants to take control of their finances .

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Cost Management : -
Monitoring and tracking actual expenses against the set budget. This likely
involves identifying variances and investigating reasons for cost overruns .
Implementing cost-saving measures and efficiency improvements .
Providing regular reports to management on cost performance and adherence
to budgets .

PRODUCTION ANALYSIS : -

The data presented in the chart compares the performance highlights of Coal India Limited
(Consolidated) for the financial year 2022-23 to the previous year. Here's a summary of the
key findings : -
Production of Coal: There was an increase in coal production from 622.634 million tonnes in
2021-2022 to 703.204 million tonnes in 2022-2023.
Off-take of Coal: Similar to production, the off-take of coal also increased from 661.885
million tonnes in 2021-2022 to 694.689 million tonnes in 2022-2023.
Sales: Gross sales increased from 152603.30 crore in 2021-2022 to 187455.57 crore in 2022-
2023.
Profit: There was a significant rise in both profit before tax (PBT) and profit for the year. PBT
increased from 23616.28 crore to 38000.81 crore, and profit for the year grew from
17378.42 crore to 28124.94 crore.

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Return on Equity (ROE) and Return on Average Capital Employed (ROACE): Both ROE and
ROACE increased in 2022-2023 compared to the previous year. ROE went up from 43.65% to
56.05%, and ROACE increased from 19.25% to 26.83%.
Earnings per Share (EPS): EPS nearly doubled from 28.17 in 2021-2022 to 45.70 in 2022-
2023.
Inventory Turnover Ratio: This ratio decreased from 0.92 in 2021-2022 to 0.68 in 2022-2023,
indicating an increase in inventory holding time.
Debtor Turnover Ratio: Similar to the inventory turnover ratio, this ratio also decreased
from 1.22 in 2021-2022 to 0.78 in 2022-2023, indicating a slower collection of receivables
from debtors.
Overall, the chart depicts a positive performance for Coal India Limited in the financial year
2022-2023 compared to the previous year. There were increases in production, sales, profit,
ROE, ROACE, and EPS. However, there were also negative trends in inventory turnover ratio
and debtor turnover ratio .

RISKS THAT CAN BE INTERPRETED FROM THE ANALYSIS

1 . Fluctuations in Coal Prices : -

The budget might be based on projected coal prices. If actual prices fall below expectations,
CIL's revenue could be negatively impacted.

2. Rising Input Costs : -

The budget might not fully account for potential increases in the costs of labor, equipment,
or supplies. This could squeeze profit margins.
3. Demand Fluctuations : -
The budget might be based on assumptions about continued demand for coal. However, a
shift towards renewable energy sources or a slowdown in the economy could reduce
demand for coal, impacting revenue.
4. Environmental Regulations : -
Stringent environmental regulations or increasing costs associated with complying with
existing regulations could put pressure on CIL's budget.
5. Execution Risks for Capital Expenditure Projects : -

Delays or cost overruns in planned capital expenditure projects for equipment,

infrastructure, or new mines could disrupt production or increase costs beyond budget
allocations .

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6. Labor Relations : -
Industrial unrest or challenges in recruiting and retaining skilled workers could disrupt
production and impact budgeted targets .
7. Geological Challenges : -

Unexpected geological conditions in existing mines or new projects could increase

extraction costs or delay production, impacting the budget.
8. Competition : -
Increased competition from other coal producers, both domestic and international, could
put pressure on CIL's market share and profitability .
9. Geopolitical Risks : -
Global events or political instability in key coal-consuming countries could disrupt coal
imports or exports, impacting CIL's revenue .
10. Efficiency Issues : -
If the budget is not effectively allocated or operational inefficiencies persist, it could hinder
CIL's ability to achieve its financial targets .

The cost and budgeting section in WCL (Western Coalfields Limited) is likely responsible for
the financial planning and cost control of the company's coal mining operations .

SALES AND ACCOUNTS

Sales and Accounts - WCL likely has an Accounts department handling various
financial activities . It performs functions related to accounts receivable, such
as collections and managing outstanding payments . It's likely they also
manage accounts payable, ensuring timely payments to suppliers for mining
operations and other expenses .

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COAL INDIA HAS A FUEL SUPPLY AGREEMENT ( FSA ) UNDER WHICH THE
DEPARTMENT TAKES THERE WORK FORWARD

FSA AGREEMENT - Fuel Supply Agreements (FSAs) are a crucial part of Coal India
Limited's (CIL) business . These agreements define the terms for coal supply between CIL
and various customers .

Purpose - FSAs establish a formal framework for coal delivery, outlining the quantity,
quality, price, and other critical aspects of the transaction between CIL and the buyer .
Term - The term of a Coal India FSA can vary depending on the type of customer and the
agreement version . As of September 2022, FSAs for the non-regulated sector can have a
tenure of up to 10 years [Deccan Herald] .
Standardized Format - CIL utilizes a model FSA that serves as a foundation for agreements
with different customers . However, there can be modifications based on specific
requirements [Western Coalfields Limited] .
Fuel Supply Agreements (FSAs) for coal in India do not categorize coal based on specific
characteristics . However , FSAs may reference coal grades , which are classifications based
on the quality and properties of the coal . These grades are important factors determining
the suitability of coal for different applications .
Grade A - High-quality coal with low ash content and high calorific value . This type of coal
is primarily used in thermal power plants .
Grade B - Medium-quality coal with moderate ash content and calorific value. It is used in
thermal power plants and some industrial applications .
Grade C - Lower-quality coal with higher ash content and lower calorific value. This grade is
used in industries like cement production and brick manufacturing .
Grade D - Low-quality coal with high ash content and the lowest calorific value. It is typically
used in power plants with pulverized coal combustion technology .

FSAs (Fuel Supply Agreements) are crucial for Coal India Limited (CIL), the
world's largest coal producer, for several reasons : -

Transparency and Legally Binding Contracts - FSAs replace the older linkage system, which
lacked transparency . FSAs are formal agreements that clearly define the rights and

24
obligations of both CIL and the consumers . This ensures fair and predictable coal supply
system .
Assured Supply for Consumers - Power plants, steel mills, and other industries heavily rely
on a steady coal supply . FSAs guarantee a specific amount of coal to consumers for a fixed
period , providing them with the security of fuel for their operations .
Improved Planning and Efficiency - FSAs enable CIL to plan production and transportation
based on committed offtake by consumers . This leads to better utilization of resources and
potentially reduces inefficiencies in the coal supply chain .
Payment Security - FSAs often incorporate "Take or Pay" clauses , which means consumers
have to pay for a certain amount of coal even if they don't take delivery of the entire
quantity . This provides CIL with some financial security and helps with revenue
predictability .

Market Orientation - FSAs introduce a more market-oriented approach to coal distribution

. Consumers have a clearer understanding of coal prices and terms , allowing them to make
informed decisions .
FSAs play a significant role in streamlining coal distribution for Coal India, ensuring a
reliable supply for consumers, and bringing more transparency and efficiency to the Indian
coal market .

Bank guarantees and Letters of credit are financial instruments used in Coal
India Limited (CIL) , they are typically handled by the Sales and Accounts
sections for the supervision of transfer of money from consumer to seller .

Bank Guarantee : -
Purpose - Provides financial security to CIL in case a buyer fails to meet their
payment obligations . For instance, CIL might ask for a bank guarantee from a
contractor to ensure they complete a project as per the agreement .
Users - Primarily handled by the Finance department or sales and accounts
department in CIL .

Letter of Credit (LC) : -

25
Purpose - Offers a guarantee from the buyer's bank to CIL that payment will
be made upon fulfilling specific conditions. This is often used in international
trade. For example, CIL might issue an LC to a foreign supplier to assure
payment upon delivery of goods that meet agreed-upon specifications.
Users - Supervised by sales and accounts department of CIL .
While the Sales and Accounts section might be involved in initiating
transactions or providing relevant information for issuing bank guarantees or
LCs , the issuance and handling of these instruments typically fall outside their
core responsibilities in CIL .

WHY DEBIT NOTE AND CREDIT NOTE IS ISSUED BY

COAL INDIA LIMITED ( CIL )

Reasons for CIL to Issue a Debit Note : -

Undercharged Invoice - If CIL accidentally undercharged a customer on the initial invoice
(e.g., a pricing error), they might issue a debit note to inform the customer about the
additional amount due .
Additional Charges - In certain scenarios, CIL might incur additional expenses after the
invoice is issued (e.g., unexpected transportation costs). A debit note would be used to
communicate these extra charges to the customer .

Incomplete Delivery - If CIL delivers a partial shipment or there are discrepancies in the
quantity delivered compared to the invoice, they might use a debit note to reflect the actual
quantity and potentially adjust the final amount owed .

Reasons for CIL to Issue a Credit Note : -

26
Returned Goods - If a customer returns goods due to damage, quality issues,
or cancellation of the order, CIL might issue a credit note to acknowledge the
return and adjust the invoice amount accordingly.
Invoice Errors - If an error is discovered in the invoice (e.g., overcharging for a
product or service) , CIL would typically issue a credit note to the customer,
reflecting the corrected amount.
Discounts or Rebates – If CIL offers a discount or rebate to a customer that
wasn't included in the initial invoice , they might issue a credit note to notify
the customer about the reduced amount payable .

COMPONENTS OF BILL THAT IS ISSUED BY CIL IN CONTRACT OF EXCHANGE

OF COAL : -
General Information : -
Bill Number - A unique identifier for the specific bill.

27
Bill Date - The date the bill is issued.
Supplier Name - CIL's name and contact details (may vary depending on the specific
subsidiary issuing the bill).
Customer Name and Address - Information about the buyer receiving the coal.
Purchase Order Reference Number - (if applicable) The reference number of the purchase
order placed by the customer.

Coal Details : -
Grade of Coal - The specific type of coal being supplied ( Eg – G1 to G 17 )
Quantity - The total amount of coal being delivered (usually in tonnes).
Rate per Tonne - The price charged per tonne of coal.
Total Value - The total cost of the coal based on the quantity and rate.

Charges and Taxes : -

Taxes - Applicable taxes like Goods and Services Tax (GST) or any other relevant levies.
These might be shown separately or included in the total price . ( Eg – CGST , SGST , IGST ) .
Transportation Charges - If transportation costs are borne by the customer, they might be
listed as a separate item on the bill.
Other Charges - Any additional charges, like loading or unloading fees, could be included
here.
Payment Information : -
Due Date - The date by which the payment for the coal is expected.
Payment Terms - Information on accepted payment methods (e.g., bank transfer, electronic
clearing system).
Bank Details - CIL's bank account information for receiving the payment.

Additional Information : -
Delivery Information - Details about the delivery location or any specific instructions related
to unloading .
Remarks Section - This section might be used for including any additional information
relevant to the transaction , such as special terms or conditions .

28
 TAX DEPARTMENT

Tax Department - GST (Goods and Services Tax): WCL likely deals with Goods
and Services Tax (GST) as it's a prevalent tax in India. Their website mentions
adhering to GST regulations and issuing tax invoices .
Tax Management in WCL : -
Internal Expertise: WCL have tax specialists within their finance department
responsible for:
Staying updated on tax laws and regulations . Calculating and filing tax returns .
Ensuring compliance with tax authorities .
CIL's primary business is coal mining and sales . Taxes are a government
responsibility, and CIL would comply with them, not administer them .
CIL's finance department would likely handle tax-related functions such as : -
GST and Other Taxes - Calculating and paying Goods and Services Tax (GST)
and any other applicable taxes on coal sales and purchases .
Tax Compliance - Ensuring CIL adheres to all tax regulations and filing tax
returns accurately and on time .
Tax Planning - Working with tax advisors to minimize CIL's tax liability within
legal boundaries .
Liaison with Tax Authorities - Representing CIL in communication with tax
authorities if necessary .

TAX PAID BY CIL

DIRECT INDIRECT
Corporate Tax Royalties , Goods and Service Tax

29
Direct Taxes : -
Corporate Tax - This tax is levied on the profits earned by CIL . Given its size
and profitability , CIL is a major contributor to the Indian government's tax
revenue . The exact amount of income tax paid by CIL can vary depending on
various factors like profitability , tax laws , and deductions claimed .
Annual corporate tax paid by Western Coalfields Limited in the year 2022 –
2023 is 936.24 cr .

Indirect Taxes : -

 Royalty - CIL likely pays royalty on the coal it extracts. Royalty rates vary
by state .

Breakdown of royalty payments in the Indian coal sector : -

Royalty Recipient - The government, usually the state government where the
coal mine is located , is the recipient of the royalty charges.

Royalty Basis - The royalty amount is calculated based on the quantity of coal
extracted from the mine . The specific rate can vary depending on the state
and the coal grade .
CIL's Role - CIL acts as a facilitator, collecting the royalty charges from
consumers along with the price of the coal . They then pay these collected
royalties to the respective state government .

There are a few instances where CIL might incur a royalty-like charge : -
Use of Private Land - If CIL mines coal on private land , they might need to pay
a royalty or similar fee to the landowner .

30
Sub-Contracting - In some cases , CIL might sub-contract mining operations to
other companies . The sub-contractor might be responsible for paying
royalties on the extracted coal .
Finding Specific Royalty Rates -
The exact royalty rates for different states and coal grades can be complex and
vary depending on the specific regulations .

 Goods and Services Tax (GST) - This tax applies to the sale of coal . The
specific GST rate might depend on factors like the type of coal and the
purpose of sale (e.g., power generation) .
Types of GST applicable : -
Coal Supply - As of today (May 19, 2024), the supply of coal attracts a GST rate
of 5% [GST Rates in India 2024] .

Understanding CGST, SGST and IGST : -

CGST (Central Goods and Services Tax) - This tax goes to the central
government .
SGST (State Goods and Services Tax) - This tax goes to the state government
where the coal is sold (consuming state) .
IGST (Integrated Goods and Services Tax) - This tax applies to interstate
transactions of coal (between two different states) .

Which GST applies when?

Intra-state Sale (within the same state) - Both CGST (2.5%) and SGST (2.5%)
are levied, making a total GST of 5% on the sale of coal .
Inter-state Sale (between two different states) - Only IGST (5%) is levied on
the sale of coal. The central government later distributes the IGST collected
between the supplying state and the consuming state .

Example : -

31
A coal supplier in Maharashtra sells coal worth ₹5,000 to a consumer in the
same state (Maharashtra).
CGST = ₹125 (2.5% of ₹5,000)
SGST = ₹125 (2.5% of ₹5,000)
Total GST paid by the consumer = ₹250 (CGST + SGST)
A coal supplier in Maharashtra sells coal worth ₹5,000 to a consumer in
Gujarat.
IGST = ₹250 (5% of ₹5,000) (This IGST will be divided between Maharashtra
and Gujarat by the central government) .

 Service Tax (historical) - Before the implementation of GST, CIL might

have paid service tax on transportation services related to coal .
Service tax was a tax levied on services provided in India . However, there were
exemptions for certain entities , including government departments . CIL being
a public sector undertaking under the Ministry of Coal , might have been
exempt from service tax on its coal sales .
Even if not considered a government department , CIL could have benefited
from a specific exemption for coal sales . There were notifications issued by
the government that exempted services provided by government or local
authorities to business entities from service tax , potentially including coal
sales by CIL "service tax on services by government to business entity
(investigation of search results for the query " service tax on services by
government to business cil " .
It's important to note that the service tax regime in India has been replaced by
the Goods and Services Tax (GST) since July 1st 2017 . The current tax
implications for CIL's coal sales would be determined under the GST framework
.

CIL (Coal India Limited) can avail Input Tax Credit (ITC) on GST paid for
purchases related to their business activities, which can help reduce their
overall GST liability .

32
 A breakdown of how CIL (Coal India Limited) can benefit from Input Tax Credit
(ITC) on GST : -

Input Tax Credit (ITC) : -

ITC is a mechanism under the Goods and Services Tax (GST) regime in India .
It allows registered businesses to claim credit for the GST they have paid on
purchases (inputs) used for their business activities .
This credit can be used to offset the GST liability arising from their sales
(outputs) .
How CIL benefits from ITC : -
CIL likely incurs GST on various purchases , like machinery , equipment ,
transportation services , and other supplies needed for their coal mining
operations .
By claiming ITC on this GST paid on purchases , CIL can effectively reduce the
amount of GST they owe to the government .
EXAMPLE : -
Let's say CIL pays ₹10,000 as GST on machinery they buy .
They also owe ₹20,000 as GST on the coal they sell .
By claiming ITC of ₹10,000 (paid on machinery), CIL's actual GST liability to the
government reduces to ₹10,000 (₹20,000 original liability - ₹10,000 ITC) .

ITC CLAIMABLE AND ITC NON – CLAIMABLE : -

ITC Claimable by CIL : -
Purchase of Goods and Services: CIL can claim ITC on various goods and
services they purchase for their mining and coal transportation operations.
This could include : -
Procurement of mining equipment and machinery
Purchase of fuel and lubricants

33
Repair and maintenance services for equipment
Transportation and logistics services
Insurance for their operations

ITC Not Claimable by CIL : -

Exempt Supplies - CIL cannot claim ITC on goods or services they receive for
which they don't pay GST. For example, if they receive any government
subsidies or grants exempt from GST, ITC wouldn't be applicable.
Personal Expenses - ITC is only available for purchases related to business
operations . Expenses for employee welfare , entertainment , or unrelated
activities wouldn't qualify for ITC .
Capital Goods: While ITC can be claimed on repairs and maintenance of capital
goods (like mining equipment), the full cost of acquiring the capital goods itself
typically isn't eligible for ITC .

Factors Affecting ITC Claims : -

Invoice Validity: The ITC claim depends on a valid GST invoice being issued by
the supplier. The invoice must contain all the necessary details as per GST
regulations .
Use of Goods and Services: The ITC can only be claimed for goods and services
used for taxable supplies. If CIL uses any purchases for exempt supplies or
personal use, they wouldn't be able to claim ITC on those .

Benefits of ITC for CIL : -

Reduced overall tax burden - ITC helps CIL save money on GST, leading to
improved cash flow and potentially lower coal prices for consumers.
Streamlined tax compliance - ITC encourages proper record-keeping and
invoice matching , simplifying tax compliance for CIL .
CIL can only claim ITC for GST paid on purchases that are used for their
business activities .

34
There are specific rules and conditions for claiming ITC as per the GST law . CIL
needs to ensure they meet these requirements to claim valid ITC .

CORPORATE TREASURY
Corporate treasury is the lifeblood of a company's financial health . It's the
department responsible for overseeing the company's cash flow, managing
financial risks, and ensuring the company has enough money to meet its
obligations .

CILS Treasury in Action : -

Cash Flow Forecasting - The treasury team would likely forecast WCL's upcoming income
and expenses . This would involve analyzing sales trends , upcoming bills , payroll needs ,
and any planned investments .
Liquidity Management - Based on the forecast , they'd ensure WCL has enough cash readily
available . This could involve managing bank accounts, short-term investments, and
potentially negotiating credit lines .

Risk Management - WCL's treasury would identify and mitigate financial risks . For example
if WCL relies heavily on foreign suppliers , the treasury might monitor currency exchange
rates and implement strategies to minimize risk from fluctuations .
Capital Acquisitions - If WCL needs additional funding for growth , the treasury might be
involved in securing loans or issuing new stock . They'd also manage relationships with
banks and financial institutions .

Investment Strategy - Any excess cash WCL has might be invested by the treasury team .
This could involve buying low-risk securities like government bonds or exploring higher-
return options with careful risk assessment .
The money is invested on debt funds and not in equity funds as risk is more in equity funds
and thy have no fixed return .

35
 AUDIT

Western Coalfields Limited (WCL) likely undergoes various audits to ensure

financial transparency and compliance with regulations. Here's a breakdown of
possible audits in WCL : -

Types of Audits in WCL : -

Statutory Audit : - This is a mandatory annual audit conducted by an
independent chartered accountant firm appointed by the company's board of
directors. It verifies the accuracy of WCL's financial statements and ensures
adherence to accounting standards .
WCL might publish details on the appointed audit firm in their annual reports.
Internal Audit : - WCL likely has an internal audit department or hires an
external firm to conduct internal audits periodically. This assesses the
effectiveness of internal controls, risk management practices, and adherence
to company policies .
Cost Audit : - This is a specialized audit mandated by the Indian government
for certain companies, including those in the coal mining sector. It focuses on
evaluating the efficiency and effectiveness of cost management practices
within WCL .

36
SECRETERIAL AUDIT REPORT OF WESTERN COALFIELDS LIMITED : -

The report states that the company was in compliance with applicable statutory provisions
and adhered to good corporate practices during the audit period .
Audit reports like this are important for investors and other stakeholders to assess a
company's financial health and governance practices . In this case , the report provides
assurance that Western Coalfields Limited is following the relevant regulations .

37
RISK RATING CRITERIA
About Risk rating criteria
This Risk Rating Criteria, a key element of the risk management framework at a
company, seeks to establish the standard for prioritizing the risk based on the
assessment of the following:
● Consequence of the risk on the stated objectives and goals
● Probability of occurrence of the risk
● Existence/Level of effectiveness of the company’s capability to mitigate
these risks currently .
Accordingly, this risk rating criteria details the following : -
● Indicative parameters for assigning the consequence rating to the risk
● Indicative parameters for assigning the probability rating to the risk
● Indicative parameters for assigning the rating to the current level of competency to
mitigate the risk
● Scorecard for determining the inherent risk rating, which shall be computed as a
multiple of consequence rating and probability rating of the risk .
● Scorecard for determining the Net risk rating, which will be determined on the basis of the
iinherent risk rating .

38
39
40
 CHAPTER - 5
INVESTMENT ANALYSIS

Investments in WCL
According to the policy by DPE and implemented by CIL, all the subsidiaries of CIL can invest
the surplus fund in three ways based on the period of the investments. They are:
Long-term investments
Medium-term investments
Short-term investments
Long-term investments have a minimum period of three years. In this investment process,
CIL and its subsidiaries, namely WCL can invest in any of the AAA rated PSU Bonds in a first
come first serve basis. The limit on this type of investment is Rs. 1000 crores or 25% of the
surplus fund, whichever is lower. CIL can also invest in its subsidiaries in the form of equity
capital as well as through debts or loans or bonds or debentures.
Medium-term investments have a period of 1-3 years. These investments consist of Fixed
Deposits in a list of banks approved by the Ministry of Coal and in Mutual Funds Fixed
Maturity Plan (FMP) under Debt Fund scheme. The funds will be invested only in AA+/AAA
rated instruments where the risk is almost nullified.
Short-term investments have a period of less than one year. These investments consist of
shortterm deposits, Liquid Mutual Funds, Liquid funds with daily dividend reinvestment
option, Corporate Liquid Term Deposit (CLTD), all approved by the Ministry of Coal. The
funds will be invested only in AA+/AAA rated instruments where the risk is almost nullified .
As WCL is a Miniratna company, it is eligible to place surplus funds in Mutual funds. As per
the current guidelines, DPE allows only 30% of the surplus funds to be invested in Mutual
Funds, with 20% in short-term investments, and the other 10% in FMP. Although DPE had
permitted the investment of mutual fund in both debt and equity funds, Ministry of Coal
approved for investments in Debt Mutual funds only, so as to avail tax benefits and to
manage short-term surpluses more efficiently.
Keeping the guidelines in mind, WCL invests 20% of the total surplus funds in short-term
investment instrument “Liquid Mutual Funds with daily dividend reinvestment option.” The
rest of the 80% is invested in Fixed Deposits in the list of banks given in the table below.

41
According to the guidelines, for investment in liquid funds, the ideal corpus of the mutual
fund should be in the range of Rs. 500 crores to Rs. 1000 crores. And the funds should be
placed in short-term liquid funds and managed on a day to day basis. A Committee of at
least two members from the Finance Division is constituted comprising the HOD of Finance,
and the other members will be at least of the rank of Chief Finance Manager (CFM). This
committee will have the authority to approve deposit proposals put up by the treasury
department.

Investment Process : -
While investing surplus funds in mutual fund schemes, WCL ensures that the funds are
distributed based on the proportion of the schemes Assets under Management (AUM). The
investment by WCL in each scheme should be less than 25% of the schemes AUM while
ensuring that the total investment in all the schemes do not exceed 20% of the total surplus.

The minimum investment in each scheme has to be maintained at Rs. 1 Lakhs all the time
unless that scheme is dropped permanently.
The daily dividend obtained from the mutual funds is either reinvested or redeemed
depending upon the requirement of the surplus funds for any payments or expenses to be

42
made. If WCL receives payments from any source, then the amount is invested on the same
day in the mutual funds.The returns from the mutual funds are calculated daily and the
average rate of return for each scheme in the preceding seven days is compared on a day to
day basis. If the difference between the mutual fund having the highest rate of return and
the returns of the other schemes is greater than 25 basis points, then the lower return
schemes are dropped, and all their investment is redeemed, barring the minimum
investment amount of Rs. 1 Lakhs.
While redeeming the money from the mutual funds, the lowest return schemes will always
be redeemed first, and the highest return scheme will be redeemed last.Based on the
guidelines by DPE, and the Ministry of Coal, CIL and its subsidiaries invest in five Liquid
Mutual Fund schemes. They are:
1. SBI Premier Liquid Fund - Direct Plan – Daily Dividend Option
2. Union Liquid Fund - Direct Plan – Daily Dividend Option

3. UTI Liquid Fund - Cash Plan - Direct Plan – Daily Dividend Option
4. BOI AXA Liquid Fund - Direct Plan – Daily Dividend Option
5. Canara Robeco Liquid - Direct Plan – Daily Dividend Option

Current Scenario
Currently, the five public sector mutual funds WCL is investing in are SBI Premier Liquid Fund
– Direct Plan, Union Liquid Fund – Direct Plan, UTI Liquid Fund – Direct Plan, BOI AXA Liquid
Fund – Direct Fund, Canara Robeco Liquid Fund – Direct Plan. In all the above funds, WCL
invests in the option “Daily Dividend.” The fund details for each scheme can be seen below.

SBI Premier Liquid Fund : -

SBI Premier Liquid Fund is an open-ended Liquid Scheme. The investment objective of
thescheme is to provide attractive returns to the unit holders either through periodic
dividends or capital appreciation through an actively managed portfolio of debt and money
market instruments. Income may be generated through the receipt of coupon payments,
the amortization of the discount on the debt instruments, receipt of dividends or purchase
and sale of securities in the underlying portfolio. Direct Plan is for investors who purchase
/subscribe Units in a Scheme directly with the Mutual Fund and is not available for investors
who route their investments through a Distributor.
The funds collected under the scheme shall be invested consistent with the objective of the
scheme in the following manner : -

43
The AUM of this scheme is Rs. 23,625.93 crores .

Union Liquid Fund : -

Union Liquid Fund is an open-ended Liquid Scheme. The investment objective is to provide
reasonable returns commensurate with lower risk and high level of liquidity through a
portfolio of money market and debt securities . 9Direct Plan is only for investors who
purchase /subscribe Units in the Scheme directly with Union Mutual Fund and is not
available for investors who route their investments through a Distributor . The funds
collected under the scheme shall be invested consistent with the objective of the scheme in
the following manner : -

The AUM of this scheme is Rs. 1586.90 crores.

44
UTI Liquid Fund : -
Like other schemes in the list, it is also an open ended scheme. The investment objective of
the scheme is to generate steady and reasonable income, with low risk and high level of
liquidity from a portfolio of money market securities and high-quality debt . The scheme will
offer subscription of units on every business day on an ongoing basis. Redemptions will be
open throughout the year without any lock-in period subject to restrictions if any, as stated
in the SID. However, no redemption will be allowed during the book closure period/s, if any
that may be announced by UTI AMC . The funds collected under the scheme shall be
invested consistent with the objective of the scheme in the following manner : -

The fund size of UTI Liquid Fund is Rs. 23,010.68 crores

BOI AXA Liquid Fund

It is an open ended scheme. The Scheme seeks to deliver reasonable market related returns
with lower risk and higher liquidity through a portfolio of debt and money market
instruments The Scheme will offer Units for Purchase and Redemption at NAV related prices
on every Business Day on an on-going basis. The Fund will endeavor to dispatch redemption
proceeds within 2 Business Days from the acceptance of the Redemption request, but not
laterthanten working days6 .

45
 The AUM of this scheme is Rs. 1213.07 crores .

Canara Robeco Liquid Fund

It is an open-ended Cash Management Scheme. The scheme has been formulated with the
objective of enhancement of income, while maintaining a level of high liquidity, through
investment in a mix of Money Market Instruments & Debt Securities . As it is an Open-Ended
Scheme, units may be purchased or redeemed on every Business Day at NAV based prices,
subject to provisions of entry/exit load / CDSC, if any. The AMC reserves the right to reject
further subscription/ application for units of the Scheme on an on-going basis, depending on
the prevailing market conditions to protect the interest of the Investors .
The Asset Allocation Pattern of the Scheme under normal circumstances would be as under
:-

Analysis of the Mutual Funds : -

The total Asset size of the five firms combined is Rs. 50,647.45 crores. The distribution of
surplus fund among these schemes is to be done by their AUM. The distribution of funds
proportionate to the AUM of the five schemes can be seen below .

We can see that SBI Liquid Fund has the highest AUM and thus the maximum proportion of

46
the surplus fund money will be distributed to SBI, then UTI Liquid Fund, Union Liquid Fund,
BOI AXA Liquid Fund, and Canara Robeco Liquid Fund in the decreasing proportion of the
AUM’s .
We used the historical dividends for the past five years to analyze the returns and the risk
associated with all the five mutual fund schemes. Using them, we calculated the risk of each
of the schemes, their average returns, their daily rolling returns, and their variation with the
market .

Annualized Rate of Return : -

Assuming that we invested an amount of Rs. 1 crore in the fund either on April 1st, 2018 or
when the scheme began (whichever comes later), then the annualized returns from the
scheme can be seen below : -

Thus, from the above tables, we can see the annualized returns of the Liquid fund schemes
during particular time periods . According to the analysis, BOI AXA Liquid Fund - Direct Plan
has the highest rate of return of 6.23%. If WCL had invested Rs 10000000 on 04/01/2013,
then by 15/05/17 it could have earned Rs. 13019039.61 assuming that there were no
redemptions and other investments in this fund during the concerned period.
The rate of return from SBI Premier Liquid Fund – Direct Plan would be 6.11%. If WCL had
invested Rs 10000000 on 31/12/2012, then by 31/03/16 it could have earned Rs.
12128826.2 assuming that there were no redemptions and other investments in this fund
during the concerned period.
The rate of return from Union Liquid Fund – Direct Plan would be 5.97%. If WCL had
invested Rs 10000000 on 02/04/2012, then by 15/05/17 it could have earned Rs.

47
13465051.3 assuming that there were no redemptions and other investments in this fund
during the concerned period.
The rate of return from UTI Liquid Fund– Cash Plan would be 5.47%. If WCL had invested Rs
10000000 on 01/04/2012, then by 15/05/17 it could have earned Rs. 13136960.4 assuming
that there were no redemptions and other investments in this fund during the concerned
period . The rate of return from Canara Robeco Liquid Fund– Direct Plan would be 5.03%. If
WCL had invested Rs 10000000 on 01/05/2017, then by 15/05/23 it could have earned Rs.
12810086.14 assuming that there were no redemptions and other investments in this fund
during the concerned period . During the same period, the returns from Sensex can be seen
below .
During the same period, the returns from Sensex can be seen below .

The rate of returns of the five Liquid Fund schemes can be seen below .

Daily Rolling Returns : -

To analyze the returns of the Liquid funds risk and its volatility, we calculated the daily
rolling returns of the funds and determined its volatility with the market .

48
During the five year period from 2018 to 2023 , the daily dividend returns of all the Liquid
funds were analyzed and based on that; we calculated their risk and volatility .
The Standard Deviation gives the risk of the Liquid Funds. It can be seen that BOI Liquid
Fund has the highest risk whereas Canara Robeco Liquid Fund has the least risk. It is
interesting to note that the annualized returns, shown in the previous page, of BOI Liquid
Fund is the largest whereas that of Canara Robeco is the least. We can also notice that SBI,
despite having the second highest annualized rate of return has a smaller Standard
Deviation than all the other Liquid Funds (except Canara Robeco).
The Average Daily Rolling Return follows a similar trend as the Standard Deviation except for
SBI Liquid Fund and UTI Liquid Fund. Though the risk for UTI is higher than SBI, the average
returns for SBI is greater than that of UTI.
The Covariance of all the five funds with Sensex is negligible, with only BOI and UTI Liquid
Fund having non-zero values. But even their values show that there is not much variance
with the market for these funds .
The Correlation shows how strongly the two variables are related. We can see that for
Union Liquid Fund, the correlation is negative. It implies that when there is a 1% increase in
the Sensex, there would be 0.6% decrease in the returns of Union Liquid Fund. This relation
is rare, as many funds and stocks have a positive correlation with the Sensex, even if the
value is negligible (close to zero). For the rest of the funds, the values are positive with UTI
Liquid Fund having the highest correlation and BOI Liquid Fund having the least correlation.
The Beta of an investment shows the volatility of that particular investment. Where
correlation measures the change in price of the two stocks being compared, beta tells the
price volatility of a stock when compared to a benchmark. In this case, the Beta of Union
Liquid Fund is negative, which shows that the fund will decrease its value if the value of
Sensex increases. The Beta of UTI Liquid Fund is greater than 1, which indicates that UTI is
more volatile than Sensex i.e. 16% more volatile than the benchmark. The values of Beta of
the other funds are less than one which shows that they are less volatile than Sensex

49
Yearly Returns of the Liquid Funds : -
In the previous sections, the annualized returns and the daily rolling returns of the mutual
funds were analyzed. In this section, we’ll look into the yearly returns of each fund.
Union Liquid Fund:

The annual returns for Union Liquid Fund from the years 2018 – 2023 (Till 15th May) can be
seen below. From the analysis, we can see that the Yearly Mutual Fund Returns have been
decreasing with the return rate for the current year being 4.45% which is far less when
compared to a return of 6.86% in the year 20138.
The average return in the past five years has been 5.67%.

Canara Robeco Liquid Fund : -

The yearly returns for Canara Robeco Liquid Fund from the years 2013 – 2017 (Till 15th
May) can be seen below. From the analysis, we can see that the Yearly Mutual Fund Returns
have been decreasing with the return rate for the current year being 4.39% which is far less
when compared to a return of 6.88% in the year 20139.

50
The average return in the past five years has been 5.65%

SBI Premium Liquid Fund : -

The yearly returns for SBI Premier Liquid Fund from the years 2018 – 2021 (Till 31st March)
can be seen below . From the analysis, we can see that the Yearly Mutual Fund Returns have
been decreasing with the return rate for the latest year being 5.64% which is far less when
compared to a return of 6.88% in the year 201310.

The average return in the past five years has been 6.03% .

51
BOI AXA Liquid Fund : -
The yearly returns for SBI Premier Liquid Fund from the years 2018 – 2023 (Till 16th May)
can be seen below . From the analysis, we can see that the Yearly Mutual Fund Returns
have been decreasing with the return rate for the latest year being 4.88% which is far less
when compared to a return of 6.97% in the year 2018 – 23 .
The average return in the past five years has been 6.06% .

UTI Liquid Fund : -

The yearly returns for SBI Premier Liquid Fund from the years 2017 – 2023 (Till 15th May)
can be seen below. From the analysis, we can see that the Yearly Mutual Fund Returns have
been decreasing each year, the exception being in 2018 where the yearly return was higher
than 2013. The return rate for the latest year is 4.52% which is far less when compared to a
return of 7.03% in the year 2017 – 23 .
The average return in the past six years has been 5.43% .

52
 Recommendations
While working on the project, I have observed that WCL invests just 20% of its surplus funds
in Mutual Funds whereas DPE has approved a limit of 30% on the surplus funds to be
invested. Thus, WCL can further invest an additional 10% in Mutual Funds and gain greater
returns. Though the primary business model of WCL is related to coal mining, increasing
efficiency of coal production, and ensuring that the thermal power plants receive adequate
coal for power generation, and not towards investment, it can still invest additional money
in the Mutual Funds. As the option they invest is Daily Dividends, they can get daily returns
and can redeem the surplus when required, thereby posing no shortcomings in having funds
for operational expenses.
Based on the suggestions by CRISIL, WCL could look into investing in equity funds. Though
they are riskier than debt and liquid funds, the risk varies in different schemes. Initially, WCL
can focus more towards Index and Conservative Equity Funds. To assess the risk of these
funds, investment objective, benchmark index, historical volatility, and peer comparison can
be used as factors.

WCL can also look into investing in Fixed Maturity Plans, for mid-term investments, as they
are bound to give higher returns than Fixed Deposits and are relatively risk-free.

Currently, WCL invest money in the Liquid Fund schemes based on the proportion of their
AUMs. Thus, the money invested in Bank of India Liquid Fund is less as its proportion of
AUM is very little. BOI has the highest annualized returns over the last five years, and with

53
the current investment strategy, WCL is losing out on the high returns it provides. Thus, WCL
could change its strategy to invest based on their average returns rather than based on the
proportion of AUM.
Apart from the five schemes WCL already invests in, there are a few more schemes from
nationalized mutual funds in which WCL can invest. They are:
1. Baroda Pioneer Liquid Fund
2. PNB Principal Cash Management Fund

CHAPTER – 6
BUDGET ANALYSIS

CIL's budget preparation process likely involves a combination of top-down and bottom-
up approaches, with final approval from the board of directors.

Top-Down : - CIL's management sets overall financial targets based on factors like:
Government directives and production quotas .

Market demand for coal .

Expected coal prices .
Past financial performance .
Bottom-Up : - Individual departments and subsidiaries submit their budget proposals based
on : -
Estimated production costs (refer to your breakdown in previous interaction).
Administrative expenses.

Planned capital expenditure projects (new equipment, mine development).

CSR (Corporate Social Responsibility) budget allocation (as mandated by law).
Negotiation and Approval : -
The proposals from departments and subsidiaries are reviewed and negotiated with the
central management.
Adjustments might be made based on overall financial targets and resource availability.
The final budget is then presented for approval by the board of directors.

54
Additional Considerations : -
Government Regulations: CIL, as a public sector undertaking, likely needs to adhere to
government budgeting guidelines and reporting requirements.
Performance Monitoring: The actual performance is monitored throughout the year, and
adjustments might be made to the budget if necessary .

While the specific details of the budget preparation process are likely confidential : -
Annual Reports: - These reports might discuss overall budgetary strategies or allocations for
specific areas like capital expenditure .
Press Releases - Announcements related to future projects or investments might provide
insights into budget allocation for those specific areas .

ROLE OF BUDGET ANALYZER IN ANALYZING THIS DATA : -

Investigate Revenue Decline : -

Price vs. Volume Analysis - Analyze the price per tonne of coal sold . Has it decreased
significantly despite production increase .

Coal Type Analysis - Investigate if the company is selling a lower quality or less expensive
type of coal compared to previous years .
Market Analysis - Research the overall coal market trends . Is there a decline in coal prices
due to factors beyond the company's control .

Improve Profitability : -
Cost Analysis - Identify areas for cost reduction to maintain profitability despite potential
revenue challenges .
Operational Efficiency Review - Analyze operational efficiency gains that might be
contributing to improved profit margins .

Government Contribution : -
Tax Optimization Analysis - Ensure the company is complying with all tax regulations and
explore any legal tax optimization strategies .
Royalty Review - Investigate if there are any changes in royalty rates paid to the
government for coal extraction , which could explain the decline in payments .

55
Process of forecasting WCL's Budgeting Statements
Forecasting WCL's budgeting statements involves predicting future financial performance
based on the current budget and other relevant information . Here's a breakdown of the
process : -
1. Gathering Information : -
Historical Data - Collect past budgeting statements , financial reports , and production data
for WCL . This helps identify trends and seasonality in income and expenses .
Industry Outlook - Research reports and forecasts on the coal industry's future , including
factors like coal prices , demand trends , and government regulations .
Company Plans - Consider WCL's strategic plans regarding production targets , cost-cutting
initiatives , or investments in new technologies .

2. Choose a Forecasting Technique : -

Trend Analysis - This method projects future values based on historical trends found in the
data. It's simple but may not capture sudden changes. Regression Analysis: This uses
statistical models to identify relationships between variables in the budget , like production
volume and costs. It's more complex but can be more accurate.
Scenario Planning - This involves creating different forecasts based on various assumptions
about future events. This helps explore potential risks and opportunities .

3. Forecast Budget Items : -

Sales - Analyze historical sales data, industry trends, and WCL's production targets to
forecast future coal sales volume and prices .
Cost of Goods Sold (COGS) - Consider production costs, raw material prices, labor costs, and
projected production volume to estimate COGS .
Operating Expenses - Analyze historical data on administrative expenses, marketing &
distribution costs, and other operational expenses, factoring in potential changes due to
inflation or efficiency initiatives .
Capital Expenditures - Review WCL's planned investments in equipment, infrastructure, or
new mines to forecast capital spending .

56
 BUDGET

CAPITAL REVENUE

CAPITAL BUDGET – A capital budget is a financial plan that focuses on a

company's long-term investments , typically spanning several years . Unlike
an operational budget that tracks everyday expenses , a capital budget
allocates funds for major assets and projects that will have a significant impact
on the company's future .

REVENUE BUDGET – A revenue budget is a financial plan outlining a company

or government's expected income over a specific period, typically a year . It
focuses on the inflow of cash rather than outflow, unlike a spending budget .

In WCL it is prepared in two ways

WCL HQ RB prepare CIL vetting WCL Board
Aprroval Implement

Area RB prepare WCL consolidate Area RB

Approval End to area for implementation

57
PROCESS OF DOING BUDGET ANALYSIS IN WCL : -

STEP 1 – AREAS SEND THERE ESTIMATED BUDGET REQUIREMENT FOR

DIFFERENT PURPOSE . AND IT IS COMPARED WITH THE TOTAL AMOUNT SPENT
BY THE AREAS .

This chart consists of the BUDGET ESTIMATES of different areas and also the
actual expense that they did on different sections . In this chart there are
different areas of WCL and there expenses .
Coal production for the year 2022-23 was higher than the BE for all the areas
mentioned in the table except Umrer .
Overburden removal for the year 2022-23 was higher than the BE for all the
areas mentioned in the table except Umrer .
Total coal production for the year 2022-23 was 3300.05 LT whereas the BE for
the same period was 2920.0 LT .

58
Total overburden removal for the year 2022-23 was 332.08 whereas the BE for
the same period was 2920.0 LT .

THE SPECIAL PURPOSE BUDGET : -

STEP 2 - THE SPECIAL PURPOSE BUDGET IS PREPARED BY DIFFERENT AREAS
FOR DIFFERENT PURPOSES .
The table compares three categories - Budget Estimates (BE) for 2022-23,
Actuals for 2022-23 , and Budget Estimates (BE) for 2023-24 .
It includes details on some of the mines like Umrer , Nagpur , Chandrapur ,
Ballarpur , and Wani .

In this way the budget is prepared as estimated and signed by the DT and WCL
head panel then it is passed to the head Coal India Limited .

59
Then the actual expense chart is made to compare if the budget given before
was correct as the expected budget expense happened or any additional
expense took place .

The total budget for 2022-23 was ₹16,874.06. The most expensive category
was "Other Civil Works under Mission SEHAT" at ₹6,292.98, followed by
"Miscellaneous Expenses - CISF" at ₹4,825.28 .

THE AREA WISE BE ( BUDGET ESTIMATE ) OF WCL : -

STEP 3 – The area wise budget is prepared which are supervised in WCL
Headquarters .

60
Overall , the chart provides a snapshot of WCL's coal production costs for the specified
period , categorized by department and location . It likely helps WCL with budgeting ,
identifying areas for cost optimization , and monitoring departmental performance .

The chart is a table showing the total revenue of Ballarpur, Wani, Majri, Vani North,
Chandrapur, Khanhan, Umrer, CWS, and HQ for the year 2023 . It also shows the total
revenue of the Western Coalfields Limited (WCL) .
Total Coal Production in lakh tonnes (LT) is 620.00 .
Ballarpur has the most revenue estimate at 162.75 lakh tonnes , followed by Wani at
162.75 lakh tonnes .
HQ has the least revenue estimate at 6.00 lakh tonnes .

THE SALES PROJECTION BY DIFFERENT AREAS OF WCL : -

Umrer factory crushed the highest quantity of coal at 137.13 lakh tonnes (LT) , exceeding its
target of 119.58 LT by 17.55 LT .
Wardha factory crushed the second highest quantity at 98.61 LT , exceeding its target of
90.62 LT by 7.99 LT .
Chandrapur factory crushed 45.00 LT, falling short of its target of 41.58 LT by 3.42 LT .
Ballarpur factory crushed the least quantity at 42.20 LT, falling short of its target of 64.38 LT
by 22.18 LT .

61
Overall , the five coal factories crushed a total of 410.82 LT of coal during the crushing
season 2023-24 , exceeding their combined target of 316.16 LT by 94.66 LT .
The total amount of excise duty collected in 2022-23 was ₹2,60,006.87 lakh .
This was higher than the budgeted estimate of ₹1,19,29.88 lakh .
The excise duty collected from Umrer was the highest at ₹2,60,006.87 lakh , which was also
higher than the budgeted amount .

COST BREAKDOWN STRUCTURE OF COAL INDIA : -

Coal India (CIL) likely utilizes a Cost Breakdown Structure (CBS) with a hierarchical format,
categorizing costs incurred throughout their coal mining operations. Here's a possible
breakdown structure for CIL's costs:

1. Production Costs : -
This would be the biggest category, encompassing all expenses directly related to extracting
coal from mines.
Mining : -
Labor costs (wages, salaries, benefits)

Equipment costs (operation, maintenance, repairs)

Supplies (explosives, lubricants, tools)
Depreciation and amortization of mining assets
Overburden removal (removing earth/rock to access coal)
Transportation : -

Costs of moving coal from mines to stockyards or transfer points

Rail transportation costs
Road transportation costs (trucks)
Conveyor belt operations (if applicable)

2. Processing Costs : -
This category would include any costs associated with processing raw coal before selling it.

Crushing and screening (sorting coal by size)

Washing (removing impurities)

Blending (mixing different coal types for specific qualities)

62
3. Administrative Costs : -
Costs related to the overall management and administration of CIL.

Salaries and benefits for administrative staff

Office expenses (rent, utilities, supplies)

Professional fees (legal, accounting)

4. Other Costs : -
This category would encompass any remaining costs that don't fit neatly into the above
categories.
Royalties paid to the government for coal extraction

Research and development expenses

Environmental compliance costs
Social welfare expenses

PRODUCTION COST – 70 %
PROCESSING COST – 15 %
ADMISTRATIVE COST – 10 %
OTHER COSTS – 5 %
Production cost is the most significant cost factor , consuming 70% of the total cost .
Processing cost is the second most important cost factor , at 15% Administrative costs and
other costs contribute a smaller portion , at 10% and 5% respectively .

63
 ANALYSIS OF KEY TRENDS OF COAL PRODUCTION : -

Coal Production - Coal production has increased from 53.38 million tonnes in 2018-19 to
64.17 million tonnes in 2022-23 .
Offtake - Offtake has increased from 10.27 million tonnes in 2018-19 to 62.15 million tonnes
in 2022-23 .
Turnover - Turnover has increased from Rs 18000 crores in 2015-20 to Rs 1259.71 crores in
2021-22 .

Profit Before Tax - Profit before tax has increased from Rs 12.12 crores in 2008-19 to Rs
280.72 crores in 2021-22 .

Number of Employees - The number of employees has increased from 34330 in 2018-19 to
430 in 2022-23 .

Payment to Exchequer - Payment to exchequer has increased from Rs 5345 crores in 2018-
19 to Rs 55 in 2022-23 .

64
The data suggests increased production and sales activity , but with a significant decline in
revenue . Profitability has improved, but workforce size and contribution to the
government have shrunk .

ADVANTAGES OF THE BUDGET ANALYSIS : -

By analyzing this data and taking the above actions, budget analysts can make informed
decisions to : -

Improve the company's financial health despite the challenges in the coal industry .
Maintain profitability through cost optimization and operational efficiency .
Develop a long-term strategy that considers the future of the coal industry .
Ensure the company remains a responsible corporate citizen by fulfilling its financial
obligations to the government .

CORPORATE SOCIAL RESPONSIBILITY ( CSR )

WCL is a subsidiary of Coal India Limited(CIL) and follows CSR Policy of CIL . With the rapidly
changing corporate environment , Coal India Limited (CIL) has adopted CSR as a strategic
tool for sustainable growth . In the present context , CSR means not only investment of
funds for social activity but also integration of business processes with social processes .
WCL has envisioned a Corporate policy of ensuring Sustainable Development with inclusive
growth .
For CIL and its subsidiaries (WCL , SCCL) , funds for CSR should be allocated based on 2% of
the average net profit of the company for the three immediate preceding financial years or
Rs. 2.00 per tonne of coal production of the previous year whichever is higher .
As per Section 135 of the Companies Act 2013, every company meeting certain criteria must
constitute a CSR committee and undertake CSR activities. The criteria are as follows:
Companies with a net worth of ₹ 500 crore or more, or. Companies with a turnover of ₹
1,000 crore or more . CSR budgeting as the total amount of money .

65
CSR Budget Allocation (Rs Crore): This column shows the total amount of money the
company has budgeted for CSR activities each year. The amount has increased
significantly over the five years. Here's a breakdown of the allocations : -
2019-20: Rs. 0.00

2020-21: Rs. 0.00

2021-22: Rs. 1.07 crore

2022-23: Rs. 8.45 crore

2023-24: Rs. 14.92 crore (as of January 31st, 2024)

CSR Budget Expenditure (Rs Crore): This column shows the actual amount of money the
company has spent on CSR activities each year. The expenditure has not always matched
the allocated budget : -
2019-20: Rs. 9.59 crore (spent more than allocated)

2020-21: Rs. 5.95 crore (spent less than allocated)

2021-22: Rs. 12.54 crore (spent more than allocated)

2022-23: Rs. 11.62 crore (spent less than allocated)

2023-24: Rs. 8.12 crore (spent as of January 31st, 2024)

Overall Trend - The company's CSR allocation and expenditure have significantly
increased over the past five years. This suggests that the company is placing greater
emphasis on its social responsibility efforts .

66
Theme-wise expenditure of a company for the financial years 2020-21, 2021-22, and 2022-
23. The expenditure is shown in crores of rupees (Rs). Here's a breakdown of the spending
by theme : -
Healthcare - The company spent the most on healthcare in 2020-21 (Rs 2.87 crore) and the
least in 2022-23 (Rs 2.87 crore) .
Sanitation - Spending on sanitation has increased steadily over the years, from Rs 0.09 crore
in 2020-21 to Rs 0.27 crore in 2022-23 .
Drinking Water - Similar to sanitation, expenditure on drinking water has also increased
each year. It was Rs 0.63 crore in 2022-23 .
Education - Spending on education saw a significant jump from Rs 0.38 crore in 2020-21 to
Rs 1.31 crore in 2022-23 .
Skill Development - This category has shown the most significant rise in expenditure over
the three years. It went from Rs 0.22 crore in 2020-21 to Rs 3.38 crore in 2022-23 .
Environmental Sustainability - The company spent the least on environmental sustainability
initiatives across all three years. Expenditure fluctuated between Rs 0.05 crore and Rs 0.26
crore .
Promotion of Sports - Spending on sports promotion has seen a decline over the years, from
Rs 0.05 crore in 2020-21 to Rs 0.04 crore in 2022-23 .
Rural Development Projects - Expenditure on rural development projects has fluctuated
somewhat but has generally increased over the period It was Rs 2.36 crore in 2022-23 .

67
Other Themes - Spending on other themes (including women empowerment and disaster
management) has also increased over the years . It reached Rs 0.71 crore in 2022-23 .
Total Expenditure - The total CSR expenditure by the company has fluctuated over the
years. It was Rs 11.62 crore in 2022-23 .

ABOUT COAL INDIA LIMITED : -

REVENUE BUDGET OF CIL : -

The projected revenue (Total Income) for Coal India for the FY 2023-24 is Rs. 140526.07
Crore.

The revenue and operating profit for Coal India during the last five years, year wise is as
under : -

CAPEX EXPENDITURE OF COAL INDIA LIMITED : -

With Coal India Limited (CIL) continuing to invest heavily in evacuation infrastructure, land,
and mining machinery the company’s capital expenditure at Rs.4,700 Crores ending July FY
2024 clocked 8.5% year-on-year growth . The capex utilization during the referred period
was nearly 100% of the progressive target of Rs.4,754 Crores and 28.3% of annual target of
Rs.16,600 Crores of FY 2024 .
Land was the major expenditure head at Rs.1,311 Crores accounting for 28% of the total
capex spend of April-July 2023 . This was closely followed by the procurement of heavy
earth moving machinery that took up Rs.1,083 Crores or 23% .
Land acquisition and strengthening the modernized mining fleet are twin essentials for
sustaining the production tempo especially when the company is faced with stiff targets .

68
Coal India’s PAT up 18% Y-o-Y to Rs. 9,094 Crs in FY 2024

Powered by positive performance, Coal India’s (CIL) consolidated profit after tax (PAT) rose
sharply to an all-time of Rs. 9,094 Crores during the third quarter ending December 2023 ,
of FY 2024 , posting a robust 18% year-on-year growth . This was the highest PAT earning
during the third quarter of any year since the company’s listing . Coal supplies were up by
9% to 191.30 MT during the quarter against 175.8 MT of last fiscal’s third quarter . Market
Capitalization , stood at Rs.2,31,719 Crores at the closure of December FY 2024 . EBITDA or
earnings before interest, tax, depreciation and amortization, which reflects a measure of
profitability to net income climbed to Rs.32,451 Crores , up by Rs. 453 Crores , during the
nine months ended December of FY 2024 .

CIL extends FSA tenure to 10 years for NRS; Sponge Iron units respond well in
tranche-VI

Coal India Limited (CIL) has begun the linkage auction to non-regulated sector (NRS) within
days of completion . CIL has proactively increased the tenure of fuel supply agreement (FSA)
to 10 years , beginning with seventh tranche , to ensure long term assurance of coal supply
through linkage auction to NRS . For sponge iron sub-sector customers tranche-VII of linkage
auction has commenced in the last week of December 2023 , to meet their coal demand ,
even though the conversion ratio of successful bids into FSAs was low , by this sector , in
tranche-VI . “ CIL is committed to supply coal to the extent of the normative requirement of
all industrial sectors including sponge iron .

69
 CHAPTER – 7

FINANCIAL ANALYSIS OF COAL INDIA LIMITED

This helps identify areas where CCL might be excelling or lagging behind
competitors .

ANALYSIS OF BALANCESHEET OF WESTERN COALFIELDS LIMITED : -

70
Non-current assets
(a) Property, plant and equipment - ₹4,456.21 crore as of 31.03.2023 and ₹4,493.38 crore as
of 31.03.2022
(b) Capital work in progress - ₹563.21 crore as of 31.03.2023 and ₹356.66 crore as of
31.03.2022
(c) Exploration and Evaluation Assets 479 . 75 crore in 31 . 03 . 2023 and 409 . 78 as of 31 .
03 . 2022
(d) Intangible Assets: ₹479.75 crore as of 31.03.2023 and ₹409.78 crore as of 31.03.2022
(e) Intangible Assets under Development - ₹9.48 crore as of 31.03.2023

(f) Financial Assets:

(i) Loans: ₹1.42 crore as of 31.03.2023 and ₹1.73 crore as of 31.03.2022
(ii) Other Financial Assets: ₹2,719.22 crore as of 31.03.2023 and ₹2,318.72 crore as of
31.03.2022
(g) Deferred Tax Assets (net): ₹861.89 crore as of 31.03.2023 and ₹1,061.53 crore as of
31.03.2022

71
(h) Other non-current assets: ₹509.57 crore as of 31.03.2023 and ₹353.96 crore as of
31.03.2022
Current assets : -
(a) Inventories - ₹1,659.77 crore as of 31.03.2023 and ₹1,286.54 crore as of 31.03.2022
(b) Financial Assets : -

(i) Investments - ₹591.08 crore as of 31.03.2023 and ₹837.50 crore as of 31.03.2022

(ii) Trade Receivables - ₹3,089.80 crore as of 31.03.2023 and ₹2,947.89 crore as of
31.03.2022
(iii) Cash and cash equivalents - ₹780.90 crore as of 31.03.2023 and ₹567.43 crore as of
31.03.2022
(iv) Other Bank Balances - ₹1,653.33 crore as of 31.03.2023 and ₹950.22 crore as of
31.03.2022
(v) Loans - ₹360.19 crore as of 31.03.2023 and ₹0.11 crore as of 31.03.2022
(vi) Other Financial Assets - ₹329.55 crore as of 31.03.2023
(c) Current tax assets (Net) - ₹173.44 crore as of 31.03.2023 and ₹137.33 crore as of
31.03.2022

(d) Other current assets - ₹1,505.91 crore as of 31.03.2023 and ₹1,133.00 crore as of
31.03.2022

Total Assets = Total non-current assets (A) + Total current assets (B) ₹19,469.67 crore as of
31.03.2023 and ₹17,230.98 .

Total Equity and Liabilities : -

The company's total equity and liabilities increased from ₹17,231 crore as of 31 March 2022
to ₹19,470 crore as of 31 March 2023. This represents an increase of ₹2,239 crore .
Equity : -
The company's total equity increased from ₹1,505 crore as of 31 March 2022 to ₹2,091
crore as of 31 March 2023. This represents an increase of ₹586 crore .
The increase in equity is primarily due to an increase in other equity (1,794 crore) as of 31
March 2023 compared to ₹1,209 crore as of 31 March 2022. There is no change in equity
share capital (₹297 crore) between the two years .
Liabilities : -

The company's total liabilities increased from ₹15,725 crore as of 31 March 2022 to ₹17,379
crore as of 31 March 2023. This represents an increase of ₹1,654 crore .

72
The increase in liabilities is mainly due to an increase in non-current provisions (₹10,138
crore as of 31 March 2023 compared to ₹9,314 crore as of 31 March 2022) .
The information about borrowings under current liabilities is not shown in the image .

The balance sheet suggests that Western Coalfields Limited's equity and liabilities have
increased over the year. The increase in equity is positive , but the increase in liabilities may
require further investigation .

PROFIT AND LOSS STATEMENT OF WESTERN COALFIELD LIMITED : -

73
Revenue from Operations

Total revenue from operations increased from ₹13,792 crore in the year ended 31 March
2022 to ₹14,965 crore in the year ended 31 March 2023.
This represents an increase of ₹1,173 crore.
Income from Other Sources
Total income from other sources increased from ₹281 crore in the year ended 31 March
2022 to ₹717 crore in the year ended 31 March 2023.
This represents an increase of ₹436 crore.
Total Income

Total income increased from ₹14,073 crore in the year ended 31 March 2022 to ₹15,682
crore in the year ended 31 March 2023.

This represents an increase of ₹1,609 crore.

Expenses
Total expenses increased from ₹12,813 crore in the year ended 31 March 2022 to ₹15,056
crore in the year ended 31 March 2023.
This represents an increase of ₹2,243 crore .

74
Profit or Loss

Profit before tax decreased from ₹1,259 crore in the year ended 31 March 2022 to ₹626
crore in the year ended 31 March 2023.

This represents a decrease of ₹633 crore .

Profit or Loss
The company's profit for the year ended 31 March 2023 (₹466.46 crore) is lower than the
profit for the year ended 31 March 2022 (₹942.41 crore).
Other Comprehensive Income
Total other comprehensive income for the year ended 31 March 2023 (₹118.65 crore) is
lower than other comprehensive income for the year ended 31 March 2022 (₹158.55 crore)
.
Total Comprehensive Income
Total comprehensive income for the year ended 31 March 2023 (₹585.11 crore) is lower
than total comprehensive income for the year ended 31 March 2022 (₹956.94 crore) .

The statement of profit or loss shows that Western Coalfields Limited's profit and total
comprehensive income have decreased for the year ended 31 March 2023 compared to the
previous year .

75
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31.03.2023

76
The statement of changes in equity for Western Coalfields Limited for the year ended 31
March 2023 , based on the image you provided . Here's a breakdown of the equity changes :
-
Equity Share Capital - There has been no change in the equity share capital (₹297.10 crore)
between the years 2022 and 2023 .
Other Equity : -
The balance of other equity as of 31 March 2023 (₹1,793.83 crore) is higher than the
balance as of 31 March 2022 (₹1,208.72 crore). This represents an increase of ₹585.11
crore.
The changes in other equity seem to be driven by a few factors : -
Positive factors that increased other equity include : -

Total comprehensive income for the year (₹585.11 crore). This could be due to profits
accumulated over the year after considering taxes and other adjustments .

Other factors that may have contributed to the increase in other equity are not shown in
the image .

Total Equity - The company's total equity has increased from ₹1,505.82 crore as of 31 March
2022 to ₹2,090.93 crore as of 31 March 2023. This represents an increase of ₹585.11 crore,
which is the same amount as the increase in other equity .

Equity Share Capital - There has been no change in the equity share capital (₹297.10 crore)
between the years 2022 and 2023.

Overall , the statement of changes in equity shows a positive increase in Western Coalfields
Limited ‘ s total equity for the year ended 31 March 2023 . This increase is primarily due to
the positive comprehensive income for the year .

77
CASHFLOW STATEMENTS ( INDIRECT ) OF WESTERN COALFIELDS LIMITED : -

78
Cash flow from operating activities : -
Profit before tax (₹626.19 crore) represents the company's profit before considering income
taxes .
Adjustments for : -
Depreciation and amortization expenses (₹694.69 crore) - This is a non-cash expense that
adjusts profit before tax for the wear and tear of assets . Adding depreciation expense
increases cash flow because the company did not spend cash on these assets in the current
year.
Interest income (₹(226.39) crore) - A negative value for interest income means the
company paid more interest than it received during the year. This reduces cash flow.
Finance cost related to financing activity (₹1.36 crore) - This could be interest expense on
loans or borrowings . It reduces cash flow.
Dividend Received from Investments (positive value not shown) - This section likely
represents cash received from dividends on equity investments held by the company. This
increases cash flow .
Stripping Activity Adjustment (₹1,075.06 crore) - I could not find a definition for this
specific term. It's possible it's a non-cash adjustment related to mining assets .
Provisions made during the period (₹337.04 crore) - Adding provisions back to profit
before tax increases cash flow because the company did not spend cash on these provisions
in the current year. Provisions are liabilities that represent potential future expenses .
Profit on Sale of Assets (negative value not shown) - A negative value for profit on sale of
assets means the company received less cash from selling assets than the book value of the
assets. This reduces cash flow .
Loss on Sale of Assets (₹5.27 crore) - This reduces cash flow because the company received
less cash from selling assets than the book value of the assets .
Operating profit before working capital changes (₹2506.85 crore) - This subtotal
represents the company's cash flow from operations before considering changes in working
capital .
Changes in working capital : -
Trade Receivables (negative value - ₹(484.74) crore) - A decrease in trade receivables
means the company collected more cash from customers than it sold goods or services on
credit during the year. This increases cash flow.

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Inventories (negative value - ₹(368.14) crore) - A decrease in inventories means the
company sold more inventory than it purchased during the year. This increases cash flow.
Loans, other financial assets and other assets (negative value - ₹(958.54) crore) - A
decrease in other assets means the company used more cash than it received from these
assets during the year. This reduces cash flow .
Trade payables, Other financial liabilities, other liabilities and provisions (₹737.07 crore) -
An increase in trade payables and other liabilities means the company paid less cash to
suppliers and other creditors than the amount of goods or services purchased on credit
during the year. This increases cash flow .
Cash generated from operations (₹1432.50 crore) - This is the net cash flow from the
company's operating activities after considering all the adjustments for changes in working
capital .

Cash flow from investing activities : -

Purchase of Property, Plant and Equipment (negative value - ₹(895.79) crore) - This
represents the cash spent on purchasing property, plant, and equipment. This reduces cash
flow.
Proceeds from Sale of Property Plant and Equipment (₹21.01 crore) - This represents the
cash received from selling property, plant, and equipment. This increases cash flow.
Upfront Fees against Cancellation of Odisha Blocks (₹0.00 crore) - No cash flow impact
from upfront fees related to cancellation of Odisha Blocks.
Addition in Exploration and Evaluation Asset (₹77.84 crore) - This represents the cash
spent on exploration and evaluation activities. This reduces cash flow .
Proceeds (Purchase) of Investments including Fixed Deposit and Mutual funds (negative
value - ₹(456.69) crore) - A negative value for proceeds from investments means the
company purchased more investments than it sold during the year. This reduces cash flow.
Interest Received (₹226.39 crore) - This represents the cash received from interest on
investments. This increases cash flow .

SUMMARIZING THE DATA : -

Cash flow from operating activities : -
Net cash flow from operating activities was ₹1,432.50 crore .
Profit before tax was ₹626.19 crore .

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Depreciation and amortization expenses of ₹694.69 crore were added back as they are non-
cash expenses .
Interest income of ₹226.39 crore was added as the company received this cash from
interest on investments .
Provisions made during the period of ₹337.04 crore were added back as they are non-cash
expenses .
Changes in working capital had a net negative impact of ₹1,070.77 crore on cash flow. This
means the company used more cash for working capital than it generated from its core
business operations .
Cash flow from investing activities : -
Net cash flow from investing activities was negative ₹1,147.33 crore .

The company spent ₹895.79 crore on purchasing property, plant, and equipment .
The company spent ₹77.84 crore on exploration and evaluation activities .
The company purchased more investments than it sold during the year, resulting in a
negative cash flow of ₹456.69 crore .
Cash flow from financing activities : -
I couldn't find information about cash flow from financing activities in the image .
Net Increase in Cash and Cash Equivalents : -

The net increase in cash and cash equivalents was ₹213.47 crore .

PHYSICAL AND FINANNCIAL PERFORMANCE OF WESTERN COALFIELDS

LIMITED : -

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Coal Production - WCL's coal production has been steadily increasing over the past three
years. It produced 69.11 million tonnes of coal in 2023-24, which is 4.83 million tonnes more
than what it produced in 2022-23 .
OB Removal - Overburden (OB) removal has also increased each year. OB removal is the
process of removing waste material that lies above the coal seam. More OB removal
typically means more coal can be accessed .
Offtake - Coal offtake signifies the amount of coal sold or dispatched to consumers. WCL's
offtake has fluctuated over the years. It was 70.24 million tonnes in 2023-24, which is higher
than production for that year. This suggests WCL might have sold some coal from its
reserves .

Output per Manshift - This metric indicates the amount of coal produced per worker shift. It
has significantly decreased from 8.06 Te in 2022-23 to 7.98 Te in 2023-24 .
Earnings per Manshift - Earnings per manshift have also shown a decline from Rs. 6878 in
2022-23 to Rs. 6671 in 2023-24 .

The table shows Particulars (financial items) for the fiscal years 2021-22,
2022-23, and 2023-24 . Here is a summary of the financial performance for
the company WCL : -

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Sales - Sales (net of levies) have increased year-over-year from ₹14,116.01 crore in 2021-22
to ₹16,429.65 crore in 2023-24 .
Employee Benefit Expenses - Employee benefit expenses have also increased year-over-
year from ₹6,034.22 crore in 2021-22 to ₹6,616.61 crore in 2023-24 .
Profit - Profit after tax has decreased year-over-year from ₹942.41 crore in 2021-22 to
₹3,245.43 crore in 2023-24 .
Working Capital - Working capital has increased year-over-year from ₹2,245.62 crore in
2021-22 to ₹3,472.07 crore in 2023-24 .
Capital Expenditure: Capital expenditure has significantly increased year-over-year. It was
₹2,269.77 crore in 2023-24 .

Cost of Materials - The cost of materials consumed has fluctuated but has generally
increased over the period. It was ₹1,599.54 crore in 2023-24 .

CHAPTER – 8

CONSTRAINTS IN WCL

The coal producing mines are not much remunerative as compared to mines of other
subsidiaries like MCL, SECL and NCL due to following reasons . Adverse geo-mining
condition: WCL is beset with the following issues which lead to lower coal production at
higher costs compared to other subsidiaries of CIL.High stripping ratio ( average 1.5 ) .
Steep gradient.
Low grade of coal with intermittent bands . Low capacity deep mines . Less space for
internal dumping in many projects . High cost of production: The adverse geo-mining
conditions mentioned above and the composition of large number of Underground mines
has led to very high cost of production. Further, the prices of land and cost of rehabilitation
and resettlement of land oustees are so high that projects become unviable.
Evacuation Constraints: Coal Offtake of is hindered by lack of evacuation facilities especially
in railways and restriction on transportation of coal by road during day-time. 4. Coal
Demand: Many Power utilities have signed FSA (Fuel Supply Agreement) with WCL for
supply of coal. WCL over the years has been successful in fulfilling the demand of the power
industry and therefore many power utilities now have surplus coal stock with them.
However, with fluctuations in prices of coal in international market and demand of

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electricity (which is based on the economic development and weather conditions) the
demand for coal fluctuates.
Regular coal supply the non regulated market is also evident in decreasing price realization
in e-auction .

SWOT ANALYSIS OF WESTERN COALFILEDS LIMITED

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 CHAPTER - 9
SUGGESTIONS & CONCLUSION

 One of the major reasons for losses suffered by the company is quality degradation .
 Employee Benefit Expenses accounts for more than 50% of the total cost of WCL . It
is further observed that 2/3 of the manpower is employed in Underground mines
which are under huge losses . WCL must initiate measures to close down unviable
UG/OC mines to arrest further losses and suitably redeploy the manpower in
profitable opencast mines to improve production and productivity .
 WCL should engage in meaningful dialogues with Railways and Road Transport
contractors to ensure higher rake availability and thereby removing constraints in
evacuation of coal .
 WCL should attempt to move towards becoming self-reliant in meeting their energy
needs .
 Develop financial models that consider different future scenarios (e.g., fluctuations
in coal prices, changes in government regulations) . This helps WCL prepare for
potential challenges and opportunities .
 Zero-based budgeting - Implement a system where each budget item is justified
from scratch every year. This encourages a more critical evaluation of spending
needs .
 Rolling forecasts - Update financial forecasts throughout the year to reflect real-time
data and changing market conditions. This allows for more agile financial
management .
 Strategic partner - The finance department should move beyond simply reporting
financial data and become a strategic partner to other departments. Provide insights
and recommendations to support informed decision-making .
 Risk management - Implement a robust risk management framework to identify,
assess, and mitigate financial risks faced by WCL .
 Technology adoption - Leverage technology for financial tasks like data analysis,
budgeting, and forecasting. This improves efficiency and accuracy . By conducting a
comprehensive financial analysis, implementing a rigorous budget process, and
fostering a strategic finance department, WCL can gain a significant advantage. This
will enable them to make informed financial decisions, optimize resource allocation,
and achieve long-term financial sustainability.

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 BIBLIOGRAPHY

Websites
1. www.worldenergycouncil.com
2. www.coalindia.in
3. www.westerncoal.nic.in

4. Admin of the website, ‘Mine Design - Major Considerations’, - Types of Coal

available in India and mining techniques., as appeared in
http://coalminingandgeology.com/category/coal-mining
5. International Coal prices and country production as published in various reports in
www.reuters.com

Books & Reports

Annual Report and Accounts of WCL YEAR 2022 – 2023

News Paper & Other Resources

Economic Times , Business Standard , Financial express , press releases
of Coal India

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