SUMMER INTERNSHIP

REPORT
BUDGETING PROCESS & CONTROL IN
GAIL (INDIA) LTD.
IN ASSOCIATION WITH

GAIL (INDIA) LTD

(TOWARDS PARTIAL COMPLETION OF PGDM COURSE)

SUBMITTED TO:
PROF.P.C.MISHRA
DEAN
BLSIM, GHAZIABAD

SUBMITTED BY:
NEERAJ MISHRA
ROLL.NO:0318321129
BLSIM, GHAZIABAD

DECLARATION
I Neeraj Mishra student of Post Graduate Diploma in Managemnet from BLS Institute
Of Management Ghaziabad approved by AICTE hereby declare that I have completed
Summer Internship on

Budgeting Process & Control in GAIL

2

At

GAIL (India) Limited as Part of the Course Requirement.

I further declare that the information presented in this project is true and original to the
best of my knowledge.

NEERAJ MISHRA

CERTIFICATE
This is to certify that the project entitled Budgeting Process & Control In
GAIL (INDIA) LTD submitted to BLS Institute of Management, Ghaziabad
for the partial fulfillment of the Post Graduate Diploma in Management is

a record of original work done by Mr. Neeraj Mishra during the period of
her study and was under my guidance.
This study was conducted during 2th June 2010 to 31th July 2010 at GAIL
(INDIA) LTD Noida as a Management Summer Trainee.
She had completed the project successfully and efficiently.

SUBMITTED TO:

Mr.Jitendra Sood
Sr.Manager(F&A)
Gail (India) ltd,noida

INDEX
TOPIC NAME
EXECUTIVE SUMMARY

PAGE
NO.
10

COMPANY PROFILE

15

RESEARCH METHODOLOGY

36

INTRODUCTION TO BUDGETING AND BUDGETARY CONTROL

40

BUDGETING PROCESS IN GAIL

43

USE OF SAP IN BUDGETING PROCESS & CONTROL

65

FINDINGS AND ANALYSIS

92

CONCLUSION

94

GLOSSARY

96

BIBLIOGRAPHY

99

CONTENTENTS
Part: 1
1. COMPANY PROFILE
Vision and Mission Of GAIL
5

 Strategy
SWOT Analysis
Business Overview
Company Analysis
Business Portfolio
Joint Ventures & Associates
Subsidiary Companies
GAILs Unique Selling Points
Major Achievements of GAIL
Key Events

Part: 2
2. BUDGETING INTRODUCTION
Budget
Budgeting
Budgetary Control
3. BUDGETING PROCESS AND CONTROL IN GAIL (INDIA) LTD.
Objectives
Budget Preparation in Gail
Budgeting Process in Gail
Sources of Revenue
Application of Revenue generated from different Source

4. USE OF SAP IN BUDGETING PROCESS & CONTROL

What is SAP?
Fund Management
Investment Management
6

 Master Data
Budgeting

LIST OF TABLES
TABLE NO.
TN-1.1

NAME OF TABLE
Segment Wise Performance of Gail India Ltd
7

PAGE NO.
49

TN-1.2

Expenditure made for Raw Materials

50

TN-1.3

Manufacturing,Transmission,administration,
Selling, Distribution and Other expenses

52

TN-1.4

Summary of Financial Performance for Actual

2006-07 & 2007-08, RE for 2008-09 and BE for
2009-10
Segment wise Financial Performance For Actual
2006-2007

54

TN-1.6

Segment wise Financial Performance For Actual

2007-2008

57

TN-1.7

Segment wise Financial Performance For RE 20082009

58

TN-1.8

Segment wise Financial Performance For BE 20092010

59

TN-1.9

I&EBR statement (RE 2008-2009 and BE 20092010) Part I

61

TN-1.10

I&EBR statement (RE 2008-2009 and BE 20092010) Part II

62

TN-1.5

56

LIST OF FIGURES
Figure No.

Name of Figures

Page No.

FG-1.1

Types of Budget

40

FG-1.2

Process of Budgetary Control System

42

FG-1.3

Revenue Budget

43

FG-1.4

Capital Expenditure Budget

44

FG-1.5

Budgeting Process in Gail

46

FG-1.6

Graphical Presentation of Summary of Financial

Performance

55

FG-1.7

Organizational structure

68

FG-1.8

Fund Center Hierarchy

69

FG-1.9

Investment Cost Program: Planning

84

FG-1.10

Over Plan to Budget

85

FG-1.11

Takeover Plan to Budget

86

ACKNOWLEDGEMENT
With the completion of my project entitled Budgeting Process & Control in GAIL
(INDIA) LTD, I would like to extend my sincere gratitude and thanks to Mr. Jitendra
Sood, Sr. Manager (F&A), whose support was very important in the completion of my
report and to give it the final shape.

I would also like to thank the entire staff of GAIL (INDIA) LTD, who helped me to
satisfy my queries in the completion of my project.
I would like to express my earnest gratitude to Prof. Dr.N.L.Ahuja for his superlative
guidance and unflinching support throughout the project work. No development would
have been feasible had it not been for their excellent supervision, constant
encouragement and careful perusal.
I would like to express my sincere thanks to Prof. Prena Jain for support in the
completion of the project successfully.

Last but not the least I would like to thanks my parents for always being my inspiration.

\
NEERAJ MISHRA

EXECUTIVE SUMMARY
GAIL (INDIA) LTD is one of the major players in Indian gas structure. Gas
transmission is one of the core businesses of GAIL. However the companys strategy for
future is to look out for diversified growth viz hydrocarbons and petrochemicals, by
leveraging on its core competency of gas transmission. Thus to gain a dominant market
position keeping in view the unfolding demand and supply scenario, entry of new
competitors, and changing dynamics in the market place is expanding its activities
particularly in gas transmission business. For this very purpose GAIL has taken up the

10

task of adding 5000 km of new pipelines by year 2011 and expands 3 of its existing
pipelines at an estimated cost of Rs. 14500 crores.
GAIL (India) Ltd in the recent past has funded its projects through internally generated
funds like the DVPL project. However to take up such a large scale expansion policy
involving a cost of Rs.14500 crores GAIL needs to seek funds from the market.
The project will explain very clearly what a budget is, the need for budgeting and what
are the various types of budgets that are prepared in GAIL. It will also show the various
stages in the preparation of budgets wherein the processes of preparation, approval and
review will be studied.
This project is about the budgetary procedure and policies of GAIL. Budgeting is the
Companys formal short term planning process for the acquisition and investment of
Capital. In the preparation of the Budgets, the principle of Zero Base Budgeting is
followed according to which expenditure is required to be justified after evaluation of
various alternatives and ranking them in order of importance by systematic analysis.

As GAIL (INDIA) LTD is one of the public sector unit thus budget is prepared after the
circular is received from concerned ministry i.e Ministry of Petroleum and Natural gas
(MoPNG). In GAIL (INDIA) LTD two different types of budgets are prepared Revenue
budget and Capital expenditure budget.
1. Revenue Budget: In revenue Budget the Income forecast to be prepared for
different segments such as Natural gas, LPG, Petrochemicals, Gailtel, E&P etc.
2. Capital Expenditure Budget: is of two types, viz Plan capital expenditure and
Non plan capital expenditure.
a. Plan Schemes: Are those schemes which are required to be included in the
11th Five year plan documents for submission to Govt./ Planning commission
for approvals.

11

b. Non Plan schemes: Non Plan capital Expenditure plays a very important role
and is vital for constant up gradation of efficiency and productivity. Non plan
schemes generally cover capital investments on additional facilities like
buildings offsites, utilities, furniture, Vehicles etc. in units under operations.
While preparing budget in GAIL following steps are followed:
Receipt of Circular from Govt.
Issue of Circular to different Workstations/Various Department of Corporate
office.
Preparation of Budget by Workstations/ Various Department of Corporate office.
Submission of Budget by each Workstation/each Department of Corporate
office.
Compilation of Budget by Corporate Planning
Preparation and Submission of final Budget to MoPNG/ Planning commission.
SAP is also one of the essential parts of budgeting process of GAIL (INDIA) LTD.
Different modules of SAP such as General Ledger, Accounts Payables, Accounts
Receivables, Bank Accounting, Asset Management and Project System etc. are used in
Budgeting Process.
The two important modules of SAP used in Budgeting Process of Gail (India) Ltd are :
Fund Management (FM): Revenue budgetary control.
Investment Management (IM): Preparation of capital Budget & their Control.
Budgetary Control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the actual
performance for calculating variances. In GAIL, budgets is prepared, executed and
12

controlled at combination of Fund Center and Commitment items in case of Revenue

Budget and in case of capital budget, the budget is prepared and controlled at project or
internal order level.

13

14

COMPANY PROFILE
15

GAIL (Gas Authority INDIA Ltd), a premier company in natural gas industry. Having
incorporated in 1984 as a public limited company registered under COMPANIES ACT
1956. Starting the gas transmission in 1987, GAIL established itself as a monopoly
natural gas transmission and marketing company in India. It has grown organically over
the years by building a large network of gas trunk pipelines covering an area of around
7000km. apart from natural gas; GAIL has interest in the business of LPG,
Petrochemicals, and CNG. GAIL (India) is propagating a move towards usage of cleaner
fuels in industries. It has been responsible for creation of a network of green energy
corridors, LNG terminals, gas fields and gas sourcing points across borders. It has
diversified its wings into the field of new exploration and production of natural gas, City
gas distribution. GAIL is the only company in India which owns and operates pipelines
for LPG transmission which connects the western and southern and also northern part of
the country. From its inception GAIL has formed eight joint venture companies for city
gas in various parts of the country. It has established its presence in overseas also like
Egypt and Mainland China. GAIL feels proud to develop a sole Petrochemical plant at
Pata, the first in India and Northern India. GAIL today has reached new milestones with
its strategic diversification into Petrochemicals, Telecom and Liquid Hydrocarbons
besides gas infrastructure.

Company at a glance
Incorporated
Turnover (2008-09)
Net worth(2008-09)
Employees
Registered office
Market share

Chairman and managing director

16th August 1984

Rs.23,776 crores
Rs.2804 crores
3408
16 Bhikaji Cama Place, RK Puram, New
Delhi-110066
79% market share in natural gas
transmission
70% market share in natural gas
marketing.
Shri B.C. Tripathi

Source: Annual reports of the company

GAIL (INDIA) LIMITED PIPELINE NETWORK

16

VISION AND MISSION OF GAIL

VISION
17

Be the Leading Company in Natural Gas and beyond, with Global Focus, Committed to
Customer Care, Value Creation for all Stakeholders and Environmental Responsibility.

MISSION
To accelerate and optimize the effective and economic use of Natural Gas and its
fractions to the benefit of national economy.

STRATEGY
The company aims to further expand its core business of Natural Gas Transmission &
Marketing, to capture larger share of the growing market. The company wishes to move
upstream to secure gas supplies for the core transmission business. Additionally,
investments in petrochemicals and city gas distribution are being planned to enhance
margins and increase sources of revenue. Further, the company is exploring and
investing in international opportunities with a strategic rationale of gaining international
presence.

MAJOR KEY PLAYERS IN INDIAN OIL & GAS SECTOR

Oil And Natural Gas Corporation (ONGC)

Gail (India) Limited

Hindustan Petroleum Company Ltd (HPCL)

Bharat Petroleum Corporation Ltd (BPCL)

Indian Oil Corporation (IOC)

Reliance India Limited (RIL

Gujarat State Petroleum Corporation Limited (GSPCL)

British Gas Limited

SWOT ANALYSIS

18

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Sound financial
position

Lack of upstream gas Potential for

efficiency gains
exposure

Controls gas
transmission
infrastructure

Limited financial or
operational freedom

Transmission system Changes in national

expansion
energy policy

Dominates gas
processing

Cost & efficiency

disadvantages

Petrochemicals
capacity expansion

Growing
international
portfolio

Upcoming competitors
like RIL

Competitors coming in
this field have their
own gas sources as
well as pipeline
network like RIL but
GAIL doesnt have it.

Strong domestic
energy demand
growth

Share of LNG
import projects
Major
petrochemical
portfolio

BUSINESS OVERVIEW
GAIL (India) Ltd, a truly dominant gas major, has been turning out disciplined financial
performance with excellence in project management, service quality and customer
19

satisfaction. Building on with business strength, GAIL has set its future vision to be a
Dominant company in Natural gas business, with a significant global presence,
integrated in energy and petrochemicals.

COMPANY ANALYSIS

GAIL has ambition to be a highly efficient integrated gas company, with interest from
field development & production, through national transmission & imports, to
distribution & allied industries such as petrochemicals. These ambitions are not limited
to India, as GAIL is building a portfolio of international upstream & downstream gas
assets. It dominates domestic infrastructure & gas purchasing from domestic suppliers.
With huge potential for growth in Indian gas demand, GAIL should be able to deliver
sustained long term revenues & earnings appreciation.

BUSINESS PORTFOLIO

20

GAS TRANSMISSION

21

GAIL is the largest organization in India handling post-exploration activities relating to

transmission, processing, distribution and marketing of natural gas and its fractions and
by-products. The gas transmission is done through pipelines covering an area of 6000
km. The gas transmission during the year 2007-08 was 82.10 MMSCMD compared to
77.28 MMSCMD in the 2006-07 financial year.

LPG & Other Liquid HydroCarbons

GAIL today has seven LPG Plants two at Vijaipur and one at Vaghodia, and one each in
Lakwa (Assam) and Usar (Maharashtra), Auraiya (U.P.) and Gandhar (Gujarat)
producing over 1 million TPA of LPG and other liquid hydrocarbons. The LPG is sold
in bulk to LPG retailing companies and the other liquid hydrocarbon products are sold to
industries.

TELECOM

GAILTEL ,the telecom wing of GAIL has been operating commercially in the Indian
GAILTEL sector since June 2001,offers commercial telecom services to all the leading
telecom operators which include VODAFONE, BSNL, Airtel, Idea Cellular, Reliance

22

Infocom, Tata Tele services, to name a few in the country. It is also responsible for
meeting the captive communication requirements of GAILs pipeline installations.
GAILTEL currently operates its telecom wing through fine optic fibre cables.

PETROCHEMICAL

GAILs foray into petrochemicals, with its state-of-the-art production facilities at Uttar
Pradesh Petrochemical Complex (UPPC), Pata marks it step towards integration of its
business, to fulfill its mission to be a global business organization. In this sector GAIL
has registered remarkable growth. Petrochemicals are a major area of GAIL's business
activity. GAIL has set up a world-scale Gas Cracker plant at Pata in Uttar Pradesh in
Northern India at an investment of Rs. 25 billion having a design capacity to produce
410,000 TPA of ethylene (Expandable to 500,000 TPA).The Plant was commissioned in
March 1999.

EXPLORATION & PRODUCTION

GAIL is currently participating in 32 exploration blocks, in Basins such as Mahanadi,

Mumbai, Cambay, Assam-Akaran, Tripura Fold Belt and Cauvery. GAIL has
partnership in these blocks with various companies such as ONGCL, GSPCL, OIL,
Hardy Exploration & Production, Petrogas, JOGPL, Daewoo, OVL, IOCL, Korea Gas
Corporation, Hallworthy, BPCL, HPCL and Silverwave. GAIL also has stake in 3
overseas blocks (A-1 and A-3 blocks in Myanmar and Block-56 in Oman).

23

Apart from securing sources for Natural Gas, there were other compelling reasons for
GAIL to get into E&P:

Integration in supply-chain

Large gap in Gas demand and supply

Global opportunity

Balancing of Business portfolio

LNG (LIQUEFIED NATURAL GAS)

GAIL continued to have strong focus on securing gas supplies from international
markets. LNG & trans-national pipelines are the two prevalent modes of cross border
gas trade. On the trans-national pipeline front, GAIL has been pursuing three options
like: Iran-Pakistan-India (IPI) pipeline, Turkmenistan Afghanistan Pakistan-India
(TAPI) pipeline & Myanmar-India (MI) pipeline.
GAS RETAILING

GAIL has reached its end consumers by entering into retailing of natural gas in various
cities by way of Joint Venture. As of now have mainly different Joint Venture
companies such as MGL, IGL, PLL, BGL, TNGCL, GGL, MNGL, and AGL. It has
plans to spread this environment friendly fuel to other 22 cities across the country.

24

JOINT VENTURES & ASSOCIATES

JOINT VENTURE COMPANIES
Mahanagar Gas Ltd (MGL)
MGL has set up 128 CNG stations catering to over 185000 vehicles spread over
Mumbai,Thane city & Mira-Bhayandar areas besides supplying PNG to domestic,
commercial & industrial consumers.GAIL holds a 49.75% stake in the company at
an investment of Rs.44.45 crores.

Indraprastha Gas Ltd (IGL)

IGL is supplying piped gas to domestic, commercial consumers & CNG to over
128000 vehicles through 146 CNG stations. GAIL holds 22.5% stake in the
company at an investment of Rs. 31.50 crores.

Petronet LNG Ltd (PLL)

PLL was formed for setting up of LNG regasification facilities. GAIL holds 12.50%
stake in the company at an investment of Rs. 98.75 crores.

Bhagyanagar Gas Ltd (BGL)

BGL is currently operating 3 auto LPG stations in Hyderabad & 1 in Tirupati.GAIL
holds 22.5% stake in the company.

Tripura Natural Gas Corporation Ltd (TNGCL)

TNGCL is currently supplying gas to domestic, commercial, industrial consumers in
Agartala city. GAIL holds 29% stake in the company.

Green Gas Ltd (GGL)

GGL is currently operating 4 CNG stations in Lucknow & 1 in Agra.GAIL has
22.5% stake in the company.
25

Maharastra Natural Gas Ltd (MNGL)

MNGL is a joint venture of GAIL & Bharat Petroleum Corporation Limited & was
incorporated in January, 2006 for implementation of city gas. GAIL has a 22.5%
stake in the company.

Avantika Gas Limited(AGL)

AGL is a joint venture of GAIL & HPCL & was incorporated in June,2006 for
implementation of city gas projects in Madhya Pradesh. GAIL has a 22.5% stake in
the company.

China Gas Holding Ltd

The Group's principal activities are the trading of natural gas and petroleum.

Ratnagiri Gas and Power Private limited (RGPPL)

GAIL holds 28.33% stake in the company at an investment of Rs. 500 crores.

Gujarat State Electricity Generation Ltd

Shell Compressed Natural Gas

26

SUBSIDIARY COMPANIES
GAIL Global (Singapore) Pvt. Limited
This is GAILs wholly owned subsidiary company. This company has been made profit
of Rs. 1.35 Crores in the year 2007-08.

Brahmaputra Cracker & Polymer Limited (BCPL)

GAIL has promoted a subsidiary named BCPL for producing 2,80000MT per year of
petrochemical products at Lepetkata, Assam. GAIL will have 70% equity share with Oil
India limited (OIL), Numaligarh Refinery Limited (NRL) &Govt. of India, each having
10% equity shares.

GAIL Gas Limited

GAIL has formed a wholly owned Subsidiary named GAIL Gas Limited for
implementing city gas projects and CNG corridors in the country. The subsidiary
company will act as a vehicle for bidding for lying of pipeline infrastructure in the
country.

27

GAILs Unique Selling Points (USP)

GAIL India ltd is committed to maintain highest industry standards of services to

the complete satisfaction of customers through observance of quality
management systems based on continual improvement.

First competitive service provider in market.

Solutions to meet specific individual needs.

Minimum MTTR, skilled maintenance teams at every 150 kms.

Discounts offered on TRAI rates for highly competitive tariffs.

Varied product feature.

Quick service commencement and upgradable capacities.

High quality, cost effective service.

28

FINANCIAL PERFORMANCE
GAIL has registered a turnover of Rs 23,784.71 crore in the financial year 2008-09, a 32
% increase, as against the net sales of Rs 18,012.74 crore in the previous year.
Financials of the company (all figure in Rs. Crores)
FINANCIALS 2003-04
Gross sales
11,295.67

2004-05
12927.07

2005-06
14875.49

2006-07
16545.85

Profit
after 1869.34
tax
Net worth
7410.7

1953.91

2310.07

2386.67

8559.65

9874.81

11262.42

2007-08
18580.2
1
2601.46

2008-09
24292.24

12842.3
8

14575.12

2803.70

Source: Annual reports of the company

CAGR on financials
2004-05
Gross sales
14.44%
Profit
after 4.52%
tax
Net worth
15.50%

2005-06
15.07%
18.23%

2006-07
11.23%
3.32%

2007-08
12.29%
9.00%

2008-09
30.74%
7.77%

15.36%

14.05%

14.03%

13.49%

financials of the company

25,000.00
20,000.00
15,000.00

Gross sales
Net worth

10,000.00

Profit after tax

5,000.00
0.00

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Source: Annual reports of the company

29

The gross sales have continuously increased over the years. But at the same time profits
were positive when compared with the last year.
GAIL is planning to do take up extensive projects in the coming few years.
Reserves and surplus (all figure in Rs. Crores)
YEAR
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09

RESERVE
SURPLUS
6599.50
7780.46
9127.64
10547.26
12159.23
13,501.15

AND CAGR
20.13%
17.90%
17.32%
15.55%
15.28%
11.03%

Source: Annual reports of the company

Reserves and surplus
14000
12000
10000
8000
RESERVEAND SURPLUS

6000
4000
2000
0

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Source: Annual reports of the company

Looking at the amount of surplus funds available with GAIL, it has consistently shown a
double digit growth except in 2001-02 when it was negative.

30

Consumption and production of oil and gas

Source: Consumption & Production from Petroleum Planning & Analysis Cell, Ministry
of Petroleum & Natural Gas, Govt. of India
Over the last 4 years, consumption and production have grown at CAGRs of 3.58%
and 6.53% respectively
Analysts 1say that with successful exploration in the country over the past half a decade,
crude oil production is expected to increase 26% over the next five years. Natural gas
production is likely to increase 41% over the same period.
According to petroleum ministry reports, Indias import of liquefied natural gas (LNG)
is projected to increase to 23.75 million metric tonne per annum (mmtpa) by the end of
the 11th Plan, 2012.

Article titled New gas finds could turn India into a net exporter- The
financial express dated July 2008

31

MAJOR ACHIEVEMENTS OF GAIL

Selected as the top Indian company in the Gas Processing, Transmission and
Marketing sector for the Dun & Bradstreet - American Express Corporate Award
2006

GAIL's Dahej-Vijaipur Pipeline Project won the Silver Medal in Mega Projects
Category at the International Project Management Association Awards, 2006.

Received the Platts Global Industry Leadership Award 2005. Rated as one of the
Best Employers in India by Hewitt Associates in 2004.Global Platts Survey No.
1 Company among global gas utilities in terms of Return on Invested Capital
(2002-03).

GAIL in recognition of its high standards of quality control initiatives has been
conferred with the Quality Excellence Award 2007.GAIL has been chosen as a
proud recipient of award in the business result category for its overall
impressive

financial

&

market

performance,

dynamic

system,

social

responsibility results & excellent execution of quality management target. GAIL

has received the award on Best Overall Performance Amongst Upstream Sector
Oil Companies for gas conservation activities.

Received the national awards for excellence in Cost Management for three
Consecutive Years (2006, 2007 and 2008) from The Institute of Cost and Work
Accountants of India (ICWAI).

32

KEY EVENTS
1984: Gas Authority of India Limited incorporated
1987: Phase 1 of the Hazira Bijaipur Jagdishpur pipeline, inaugurated by honble
MoPNG hri Brahm Dutt.
1988: Commissioning of HBJ pipeline phase 3 gas system for UP by honble Prime
Minister of India Shri Rajiv Gandhi
1989: Foundation stone for Uttar Pradesh Petrochemical Plant was laid by Shri Rajiv
Gandhi, Honble Prime Minister of India.
1991: 2800 km Hazira- Vijaipur- Jagdishpur pipeline becomes operational.
1992: Phase 2 of LPG Vijaipur plant commissioned
1993: LPG project at Vaghodia commissioned
1994: Mahanagar Gas Limited incorporated to implement Bombay City Gas Distribution
project.
1997-98: Government of India grants Navratna status to GAIL.
1998-99: LPG plants at Usar and Lakwa commissioned.
1998-99: Indraprastha Gas Limited incorporated for Delhi and NCR City Gas
Distribution project.
1998-99: Uttar Pradesh Petrochemical Complex at Pata commissioned by Shri Atal
Bihari Vajpayee, Honble Prime Minister of India

33

2000-01: Jamnagar- Loni LPG pipeline project, the worlds longest LPG pipeline
completed.
2003-04: GAIL secures participation in retail gas companie in Egypt.

2003-04: Platts declares GAIL as the first among Global Gas Utilities based on Return
on Invested Capital
2003-04: Significant gas find in the block A-1 in Myanmar and discovery of Oil and Gas
in the Cambay block.
2004-05: Commissioning of vizag- Secunderabad LPG pipeline.
2005-06: GAIL and Consortium partners awarded Block- 56 in Oman
2006-07: GAILs Dahej- Dabhol pipeline commissioned.
2006-07: GAIL consortium wins 3 CBM blocks in 3rd round of bidding.
2007-08: GAIL forms 50:50 Joint Venture with China Gas Global Energy Holding.
2007-08: MOUs with RIL, ONGC for gas sourcing.
2007-08: Grant of Authorization from MOPNG (GoA) for five new Pipelines projects in
2007-08.
2008-09: GAIL given gas marketing rights for the entire gas production from PMT
fields.

34

TRANSMISSION OF GAS FROM SOURCE TO

DESTINATION

35

36

RESEARCH METHODOLOGY
RESEARCH OBJECTIVE
To understand Indian gas industry asses the contribution of Gail in
Industry.

To understand different types of budgets prepared in Gail (India) Ltd.

To determine estimated revenue expenditure and PAT for different
financial years.

To understand budgeting process in Gail.

To understand use of SAP in budgeting process of Gail.
Methods Of Data Collection
The present study is based on secondary published and unpublished data collected from
financial documents, annual reports of GAIL, PNGRB documents, MINISTRY of OIL
and PETROLEUM and NATURAL GAS etc. The study focuses on the budgeting
control and process in GAIL (India) and uses various statistical and financial tools and
advance tools of Microsoft Excel.

LIMITATIONS OF STUDY
Time Constraint
Eight weeks had been found to be inadequate to gather much information about
the financial operations of the company.
Unable to Extract Figures of Variances and some other Financial Data
This is because the management refused to extend such confidential data, as that
might create problem for the company in the future.

37

 Problem Of Availability Of Information

As Gail (India) Ltd. is one of the public sector unit thus some sort of
confidentiality is maintained in available information. There are different factors
which affect the budgeting process therefore it is not possible to calculate exact
estimated figures.

38

39

40

INTRODUCTION TO TOPIC
Budget
Budget is a quantitative expression of a plan of action relating to forth coming Budget
period. It represent written operational pal of management for the Budget period. It is
always express in terms of money and Quantity. It is policy to be followed during the
Budget period for attainment of specified organizational Goals.

Budgeting
The process of preparation, Implementation and the operation of Budget is known as
Budgeting. Budgeting is the formulation of plans, for a given future period in numerical
terms. It is method of looking ahead and attempting to solve problems before they arise.
It requires that a business study and it evaluate its role in the economic environment with
the object of establishing and achieving stated goals for all levels of organization.

Types of Budget
Types
of
Budget

On the
Basis of
Functio
ns

On the
Basis of
Time

Long
Term
Budget

Short
Term
Budget

Current
Budget

Operati
ng
Budget

41

Financi
al
budget

On the
basis of
Flexibili
ty

Master
Budget

Fixed
Budget

Flexible
Budget

Figure: 1.1

1. Classification According to time

A. Long Term Budget: The Budget are prepare to depict long term planning of
business. The period of long term budget varies between 5 -10 Years.
B. Short Term Budget: These budgets are generally for 1 or 2 Years. And in the
form of Monetary term
C. Current Budget: The period of current budget is generally of months and
Weeks. These Budgets relate to the current activities of Business.

2. Classification on the basis of functions

A. Operating Budget: These budgets relate to the different activities of operations
of a firm such as sales budget, Production Budget etc.
B. Financial Budget: Financial Budget is concerned with cash Receipt and
Disbursement, working capital, Capital Expenditure, Financial Position and
results of business operations.
C. Master Budget: Various functional budgets are integrated into master budget.
This budget is prepared by the ultimate integration of separate functional
budgets.

3. Classification on the Basis of Flexibility

A. Static Or Fixed Budget: Fixed Budget is the budget which is design to remain
unchanged irrespective of the level of activity actually attained.

42

B. Flexible budget:

Flexible budget is the budget which by recognizing the

difference between fixed, semi fixed and variable cost is designed to change in
relation to the level of activity.

BUDGETARY CONTROL
Budgetary Control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the actual
performance for calculating variances, if any.

Generally following steps are followed in the process of Budgetary

Control System:

43

Publishing
the
Budget

Preparati
on of Budget

Correction
of
Unfavorab
le
Variances

Measuring
the Result

Reporting
the
Results

Comparison of

Results

with Budget

Figure: 1.2

BUDGETING PROCESS & CONTROL IN GAIL INDIA LTD.

Objectives
Determining the different sources of revenue and estimating the changes occur in
the revenue of the future period of time.
Determining the amount of different types of Expenditure and estimating the
expenditure of future requirements.
Determining the future plans and strategy of the company.
44

 Determining the amount of PAT.

Determining the usefulness of SAP in Budgeting control and process.

Budget Preparation in Gail

Company prepares its Budget when Circular is received from Ministry of Petroleum and
natural gas and submits it to the Government in month of October.

Generally there are two types of budgets prepared in Gail

Budget

Capital Expenditure
Budget

Revenue Budget

Figure: 1.3
Revenue Budget: In revenue Budget the Income forecast to be prepared for
different segments such as Natural gas, LPG, Petrochemicals, Gailtel, E&P etc.

Revenue Expenditure Budget: In Revenue expenditure budget the

expenditure forecast is to be made. It must be submitted in the prescribed format
while preparing revenue expenditure budget following points must be considered.
I. The revenue expenditure heads to be in the prescribed format.
II. The revenue expenditure needs to be compiled department wise for each work
center.
III. The salaries and wages expenditure to be provided by each work center as per
the current manpower.
45

IV. The CSR (Corporate Social responsibility) budget to be shown separately under
other expenses as also depicted in the format.

Capital Expenditure Budget: Capital Budget may further be of two types.

Capital Budget

Plan Capital expenditure

Non Plan Capital expenditure

Figure: 1.4
Plan Schemes: Are those schemes which are required to be included in the 11th
Five year plan documents for submission to Govt./ Planning commission for
approvals.

Non Plan Schemes: Non Plan capital Expenditure plays a very important role and
is vital for constant up gradation of efficiency and productivity. Non plan
schemes generally cover capital investments on additional facilities like
buildings offsites, utilities, furniture, Vehicles etc. In units under operations.

Budgeting Process in Gail

46

 Various Department of Corporate office after receiving the circular from

ministry of Petroleum and Natural gas for the preparation of Budget and send to
its different workstation from the corporate office of Gail.
Each Department of Corporate office prepares its separate budget.
Time limit is given to the each Department of Corporate office for the
preparation of budget normally it is a One Month.
Budget prepared by each Department of Corporate office is submitted to
corporate office of Gail.
In corporate office a separate department called as corporate planning (CP)
makes the compiling of all the budgets, submitted by different workstation.
Accordingly final budget is prepared and submitted to the concerned ministry in
the month of August.

Receipt of Circular From Govt.

Issue of Circular to different Workstations

Preparation of Budget by Workstations

47

Submission of Budget by each Workstation

Compilation of Budget by Corporate

Planning

Preparation and Submission of final Budget

Figure: 1.5

Budgeting Control
Budgetary Control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the actual
performance for calculating variances.

Sources of Revenue
Natural Gas (Trading & Transmission) : Company owns and operates
a network of over 7000Km. of Natural gas high pressure trunk pipeline. Its
48

supplies over 80 million cubic meter of natural gas per day as fuel to power
plants, feedstock for gas based fertilizers plants and to over 500 small, medium
and large industrial units to meet their energy and process requirements. Natural
gas continues to constitute the core Business of company. During the years 200708 gas sales have increased marginally 69.10 MMSCMD from 67.83 MMSCMD
in the previous financial year.
LPG Transmission: Company is the only Company in India which owns
and operates pipelines for LPG transmission. It has a 1900 km LPG pipeline
network, 1300 km of which connects the Western and Northern parts of India
and 600 km of network is in the Southern part of the country. The LPG
transmission system has a capacity to transport 3.8 MMTPA of LPG. LPG
transmission throughput was 2.754 million MT in the year 2007-08.
Petrochemicals: Company owns and operates a gas based integrated
petrochemicals plant at PATA, Utter Pradesh with a capacity of producing 4,
10,000 TPA of polymers i.e. HDPE and LLDPE which has been enhanced by
1,00,000 TPA from the earlier capacity of 3,10,000 TPA. Company is currently
in the process of setting up a 2, 80,000 TPA Assam petrochemicals complex at
an investments of Rs. 5460.

LPG & Other Liquid Hydrocarbons: Company has 7 LPG plants in the
country. In the year 2007-08, total Liquid Hydrocarbon production was over
1.348 million MT which mainly included 1.043 million MT of LPG, 0.156
Million MT of Propane and 0.074 million MT of Pentane.
Tele communications: Leveraging on its pipeline network, Company has
built up an OFC network for leasing of bandwidth as a carriers carrier.
Companys telecom business unit - `GAILTEL has approximately 13,000 km

49

network. During the year under review, GAILTEL achieved profit before tax of
Rs. 3 Crores.
Exploration and Production (E&P): Companys strategy and towards
integration along the energy chain, E&P activities have gathered momentum
during the year. The gas discovery in blocks A-1 and A-3 in Myanmar is
maturing to development stage and various studies preliminary to finalization of
the development plan and its implementation are underway. Presently, Company
is involved in oil and gas exploration activities over acreage of 1.7 Lac sq. km.
Company now hold a participating interest between 10 to 80 per cent in 27 oil
and gas exploration blocks. Of these, 9 are on-land blocks and 18 are off-shore
blocks. In India, there are 24 blocks which are in Basins such as Mahanadi,
Bengal, Gujarat- Saurashtra, Mumbai, Cambay, Assam-Arakan and Cauvery.
Your Company has got stake in the A-1 and A-3 blocks in Myanmar and Block
No. 56 in Oman. A beginning has been made by Company in earning revenue
from E&P activities. One of the on-land block in Cambay basin started
commercial production from February 2008 and Rs. 6.90 Crores has been
generated as revenue during Feb-Mar08.
Coal Bed Methane: Company has been participating interest in 3 Coal Bed
Methane blocks with an area of 1561 sq. km, 2 of which are in Chhattisgarh and
1 in Jharkhand. These blocks were awarded to GAIL consortium in CBM-III
bidding round.

Segment Wise Performance (Revenue)

Particulars

2008-09

2007-08

1598

1513

(Rs. In Cr.)
2006-07
% Change
over 06-07

Transmission service
a) Natural Gas

50

1448

b) LPG Transmission

221

207

164

26

Gas Trading

348

207

181

14

Petrochemicals

1210

1255

951

32

LPG & OLHC

859

896

93

863

GailTel

(5)

0.97

227

(226)

22

3855

2860

35

Unallocated
PBT

4232

Table: 1.1

Application of Revenue Generated from Different

Sources
Revenue generated from different sources can be utilized to meet different requirements
of the company. The major portion of revenue generated i.e. 85% is utilized for the
purpose of Purchase of Raw materials, Power & Fuel. And remaining 15% is utilizing
for the purpose of other operating activities such as Salary, Depreciation etc.

51

Expenditure made for the purpose of consumption of Raw Materials and stores, Spares
and Components for the year 2007-08 amounting to RS. 1920.86 Crores.
Amount of expenditure made for the different purposes can be explained with the
following table:

Expenditure Made for Raw Materials

Particulars

Year 07-08
Qty.

Year 06-07

Rs. In Cr.

Qty.

Rs. In Cr.

1167.25

1714.84

1176.00

1785.12

-Indigenous

-Imported

Sub Total
ii.) Stores, spares and
Components
consumed
-Indigenous
-Important
Sub Total
Total

1714.84

1785.12

90.04
115.98
206.02
1920.86

88.09
69.22
157.31
1942.43

Raw Materials
Consumed
a. Gas (MMSCM)

Table: 1.2

Manufacturing Transmission, Administration, Selling, Distribution

and Other Expenses
Expenditure made for other expenditure for the year ended March 2009 amounting to
Rs.

Cr. which was Rs. 1202.12 Cr. In the Year ended March 2008.

Amount of expenditure made for the different purposes can be explained with the
following table:
Rs. In Cr.
52

Particulars

Year
Ended,
March
2009

Year Ended,
March 2008

Year Ended,
March 2007

Salaries, Wages and Allowances

420.59

377.49

212.62

Contribution to Provident and other

funds
Welfare expenses

68.32

17.47

21.43

87.76

75.05

68.41

Plant and Machinery

77.95

85.41

55.55

Building

13.52

16.17

20.79

Others

23.99

22.23

19.63

Insurance

9.41

17.90

28.67

Communication Expenses

8.07

8.04

8.31

Printing and Stationery

2.68

2.63

2.76

Travelling Expenses

35.68

31.96

32.16

Books and Periodicals

0.57

1.15

0.81

Advertisement and Publicity

11.89

9.16

14.66

Payments to Auditors

0.40

0.45

0.36

Entertainment Expenses

0.11

0.45

0.18

Recruitment & Training Exp.

7.67

6.74

6.94

Vehicle hire & Running Exp.

14.09

14.68

14.54

Survey Expenses

165.55

87.65

35.24

Consultancy Charges

18.08

10.30

23.34

Data Processing Expenses

0.82

1.66

3.05

Donation

4.38

15.78

0.01

0.01

0.05

Loss on sale/written Off of asset

43.74

12.32

(0.58)

Bad Debts/claims/advances/stores
written off.
Drywell Expenses written off

0.29

0.08

1.62

199.53

284.59

241.88

26.31

(2.65)

(21.90)

(8.76)

(3.94)

10.59

0.87

1.37

1.62

Employees remuneration and benefits

Repairs and Maintenance

R & D Expenses

RDD, advances,claims,deposits and

obsolescence of stores and capital items
Excise duty on stock
Expenses on Enabling Facilities
53

Selling and distribution expenses

7.79

3.11

8.42

Discounts on Sales

20.44

16.88

11.61

Commission on Sales

14.81

13.13

11.56

Security expenses

46.24

38.04

32.25

Oil & Gas Producing Expenses

5.20

0.75

Royalty on Crude Oil

3.20

0.89

Other Expenses

28.88

35.17

70.51

1202.12

937.09

Total
Table: 1.3

54

Actual & Budgeted Financial Performance

for the year 2006-07 to 2009-10:

55

Summary of Financial Performance for Actual 2006-2008 and BE for 2008-2010

PARTICULARS

2006-07 (Actuals)

In Rs. Crore

2007-08 (Actuals)

2008-09 (RE)

2009-10 (BE)

Revenue
Sales(incl. Stock and Exice Duty)
Internal Consumption of Gas
Other Income

16,621.00
2716
545.00

18,610.00
2556
556

24,908.00
3148
530

26,617.00
3289
411

Total sales

19,882.00

21,722.00

28,586.00

30,317.00

Expenditure
Purchase of Gas
Raw Material Consumed
Sub Total(a)

11,883.00
2069
13,952.00

12517
1,976.00
14,493.00

17965
2368
20,333.00

19869
2405
22,274.00

Stores and Spares

Repairs and Maintenance
Power,Water & Fuel
Salaries and Wages
Exice Duty
Others

157
96
785
293
499
556

206
124
750
470
572
602

317
301
964
715
589
900

316
360
966
650
456
717

2386

2724

3786

3465

16,338.00

17,217.00

24,119.00

25,739.00

3,544.00

4,505.00

4,467.00

4,578.00

575.00

571

595

678

107

80

74

70

PBT
Income Tax

2,862.00
473

3,854.00
1254

3,798.00
1343

3,830.00
1225

PAT

2,389.00

2,600.00

2,455.00

2,605.00

1488

1314

1000

800

Total Other Operating Expenses(b)

Total Expenditure(a+b)
PBDIT
Depreciation
Interest

LPG and Kerosine Subsidy

Table: 1.4

Graphical Presentation of PAT

56

Figure: 1.6

2650

2600
57

SEGMENT WISE FINANCIAL PERFORMANCE

FOR RE 2006- 2007
Rs In Cr.
PARTICULARS
Sales
Internal Consumption of
Gas
in LPG/UPPC
in HBJ
Sub Total Internal
Consumption
Accretion to stock
Other Income

Gas
11,912.01

Total sales

14,654.96

LPG
&LHC
2,110.15

Petro.
2,282.76

LPG P/L
332.78

Telecom
24.58

E &P
23.17

Unallocated
-

Total
16.685.45

2,450.10
282.86

2,450.10
282.86

2,732.96

2732.96

10.00

10.49

0.62
332.78

25.19

23.17

313

334.1

313

19,752.50

2,110.15

2,293.25

12,161.73

1,403.69
1,403.69

567.26
567.26

48.58
98.04
295.28
15.26
85.95

27.39
19.34
255.13
4.51
52.8

156.89
44.23
273.4
10.11
73.53

9.23
32.12
27.17
2.31
18.04

1.36
1.93
0.17
0.03
3.38

0.27
22
5.47
30.56
97.1

243.72
217.66
856.62
62.78
330.8

8.13
3.49
10.65
17.31
2.12
77.23

2.56
0.91
3.12
7.46
0.92
20.51
145.13

2.17
0.36
5.53
5.66
3.11
55.1
312.17

2.31
0.55
3.23
6.22
0.45
9.18

0.24
0.07
0.15
0.31
0
9.12

163.27

4.05
2.62
20.77
1.85
0.66
131.44

19.46
8
43.45
38.81
7.26
465.85
457.3

662.04

539.78

942.26

110.81

16.76

163.27

316.79

2751.71

12,823.77

1,943.47

1,509.52

110.81

16.76

316.79

16,884.39

1,831.19

166.68

783.73

221.97

8.43

163.27
140.10

-3.79

2,868.11

405.23

66.87

162.89

69.38

8.26

1.89

6.26

721.00

76.90998

10.49

-10.05

2,032.94
659.95

-10.05

1,372.99

Expenditure
Purchase of Gas
Raw Material Consumed
Sub Total(a)
Consumption of Stores and
Spares
Repairs and Maintenance
Power,Water & Fuel
Insurance
Salaries
Vechicle hire and running
exp.
Communication
Travelling
Security
Horticulture
Others
Exice Duty
Total Other Operating
Expenses(b)
Total Expenditure(a+b)
PBDIT
Depreciation
Interest

12,161.73

12,161.73
1,970.95
14132.68

26.67

114.17

PBT
Tax

1,349.05

89.32

620.84

125.92

0.17

141.99

PAT

1,349.05

89.32

620.84

125.92

0.17

141.99

Table: 1.5

58

SEGMENT WISE FINANCIAL PERFORMANCE FOR BE 2007-2008

Rs.In.Cr
PARTICULARS
Sales
Internal Consumption of Gas
in LPG/UPPC
in HBJ
Sub Total Internal Consumption
Accretion to stock
Other Income

Total sales

Gas
12,135.7
8

LPG
&LHC
3,316.1
4

Petro.
2,615.0
0

LPG
P/L
330.2
9

Telecom

E &P

Unallocate
d

30.35

21.35

3,078.92
304.91
3,383.83

18448.91
3,078.92
304.91
3383.83

11.88
15,519.6
1

Total

3,316.1
4

2,626.8
8

0.91
330.2
9

31.26

21.35

272.86

285.65

272.86

25,502.22

Expenditure
Purchase of Gas

12,932.4
3
12,932.4
3
44.3
185.96
319.12
19.47
91.58
8.92
3.73
11.07
18.19
2.32

30.01
15.5
344.21
4.72
56.25
3.2
1.64
3.63
9.6
0.57

197.52
60.33
506.26
11.03
78.34
2.42
0.41
5.98
6
3.1

7.76
37.96
28.44
2.06
18.25
2.82
0.61
3.96
7.37
0.49

1.17
1.8
0.17
0.12
3.6
0.25
0.04
0.06
0.29
0

85.32

35.42
152.75

64.5
379.82

9.99

8.05

789.98

657.5

1315.71

119.7
1

13,722.4
1

2,271.3
1

1,983.3
8

119.7
1

1,797.20
419.94

1,044.8
3
67.78

643.50
181.18

210.5
8
69.8

89.47

7.59

25.88

969.46

462.32

114.9
0

462.32

114.9
0

Raw Material Consumed

Sub Total(a)
Consumption of Stores and Spares
Repairs and Maintenance
Power,Water & Fuel
Insurance
Salaries
Vechicle hire and running exp.
Communication
Travelling
Security
Horticulture
Others
Exice Duty
Total Other Operating Expenses(b)

Total Expenditure(a+b)

PBDIT
Depreciation
Interest

PBT
Tax
PAT

12,932.43
1,613.8
1
1,613.8
1

1,287.79

1,287.79

969.46

667.67

2,281.48

667.67

15213.91

59

0.36
17.38
6.84
30.61
147.87
4.75
2.87
27.39
2.22
0.73

281.12
318.93
1205.04
68.01
395.89
22.36
9.3
52.09
43.67
7.21

144.9
6

143.34

491.58
532.57

15.55

144.9
6

384.36

3427.77

15.55

144.9
6

384.36

18,641.68

15.71
12.06

123.6
1
1.89

-111.50
6.26

6,860.54
758.91
122.94

3.65

125.5
0

-117.76

2,594.86
969.98

3.65

125.5
0

-117.76

1,624.88

Table: 1.6

SEGMENT WISE FINANCIAL PERFORMANCE FOR BE 2008-09

60

Rs. In
Cr.
PARTICULARS
Sales
Internal Consumption of Gas
in LPG/UPPC
in HBJ
Sub Total Internal Consumption
Accretion to stock
Other Income
Total sales
Expenditure

Purchase of Gas

Gas
13,144.0
0

Consumption of Stores and Spares

Repairs and Maintenance
Power,Water & Fuel
Insurance
Salaries
Vechicle hire and running exp.
Communication
Travelling
Security
Horticulture
Others
Exice Duty
Total Other Operating Expenses(b)

Total Expenditure(a+b)

PBDIT
Depreciation
Interest
PBT
Tax
PAT

Petro.
2,817.0
0

1,465.0
0

9
2,826.0
0

LPG
P/L
345

Telecom

E &P

Unallocate
d

32

22

17,825.00
0.00
2,423.00
375.00
2,799.00

532

541.00

532.00

21,164.00

2,423.00
375
2,799.00

15,942.0
0

345.0
0

32.00

22.00

12,829.0
0

Raw Material Consumed

Sub Total(a)

LPG
&LHC
1,465.0
0

12,829.0
0
45
132
386
13
107
9
4
9
25
2
55

Total

12,829.00
1,164.0
0
1,164.0
0

696

1,860.00

696

14689

197
44
376
5
89
2
1
5
5
3
70
406
1203

9
23
31
2
31
4
1
3
8
0
8

11

280

0
20
8
23
167
9
5
50
2
1
231

787

33
45
289
6
63
4
2
5
11
2
27
107
594

120

20

280

516

284
269
1090
49
460
28
13
72
52
8
682
513
3520

13,616.0
0

1,758.0
0

1,899.0
0

120.0
0

20.00

280.0
0

516.00

18,209.00

12.00

258.0
0

16.00

2,955.00

10

22

710.00

2.00

280.0
0

7.00

2,169.00
650

2.00

280.0
0

7.00

1,519.00

2,326.00

-293.00

927.00

225.0
0

347.00

94

158

70

66

1,913.00

1,913.00

-393.00

767.00

-393.00
767.00
Table: 1.7

153.0
0

153.0
0

0
5
0
0
3
0
0
0
1

76.00

Cr.
61

SEGMENT WISE FINANCIAL PERFORMANCE FOR

BE 2009-2010

Rs. In.Cr
LPG
&LHC
3,082.00

Petro.
2,728.00

LPG P/L
377

Telecom
28

E &P
40

Unallocated
-

411

411.00

3,082.00

2,728.00

377.00

28.00

40.00

411.00

30,316.00

1,785.00
1,785.00

620
620.00

47
189
329
4
164
10
4
9
24
3
17

36
54
296
4
91
6
1
5
15
2
26
104

224
48
297
3
130
2
2
6
6
3
42
352

8
24
36
1
40
4
1
3
8
0
4

1
4
0
0
2
0
0
0
1
6

800
20,669.00

640
2,425.00

1115
1,735.00

129
129.00

2,981.00

657.00

993.00

331.00
66

72.00
3

PBT
Tax

2,584.00

PAT

2,584.00

PARTICULARS
Sales(Including Exice Duty)
Internal Consumption of Gas
in LPG/UPPC
in HBJ
Sub Total Internal Consumption
Accretion to stock
Other Income

Gas
20,361.00

Total sales
Expenditure

23,650.00

Purchase of Gas
Raw Material Consumed
Sub Total(a)

19,869.00

Consumption of Stores and

Spares
Repairs and Maintenance
Power,Water & Fuel
Insurance
Salaries
Vechicle hire and running exp.
Communication
Travelling
Security
Horticulture
Others
Exice Duty
Total Other Operating
Expenses(b)
Total Expenditure(a+b)
PBDIT
Depreciation
Interest

2,942.00
347
3,289.00

19,869.00

Total
26,616.00
0.00
2,942.00
347.00
3,289.00

19,869.00
2,405.00
22274

295

0
40
8
13
223
4
5
21
2
0
155

316
359
966
25
650
26
13
44
56
8
545
456

14
14.00

295
295.00

471
471.00

3464
25,738.00

248.00

14.00

-255.00

-60.00

4,578.00

175.00
1

70.00
1

10.00

1.00

19.00

678.00
71

582.00

817.00

177.00

4.00

-256.00

-79.00

3,829.00
1225

582.00

817.00
177.00
Table: 1.8

4.00

-256.00

-79.00

2,604.00

62

I&EBR Statement: Internal and External Budgeting resources statement is prepared

after the budget for different segments are prepared and compiled. This statement is
submitted to the ministry of petroleum & Natural gas in the month of October. This
statement helps in generation of source of finance i.e. whether funds can be generated by
loan or Government support. Thus I&EBR statement is essential part of Budgeting
process.

63

I&EBR statement (RE 2008-2009 and BE 2009-2010) - Part1 (Retained Profits and
Surplus)
Rs. In Cr.

Sr.
No.
1

PARTICULARS

200708Actuals

2008-09 BE

2008-09 RE.

2009-10
BE

Recipts
Gross Sales Or operating Income
Other Income

21,136.63
556.35

20,622.82
540.99

28,056.90
530.45

29,905.57
410.95

Total (1)

21,692.98

21,163.81

28,587.35

30,316.52

Operating Cost
Salaries and Wages
Maintaince Cost
Other Cost
Total(2)

469.99
329.86
16417.69
17,217.54

459.96
553.49
17,198.24
18,211.69

715.14
617.82
22515.88
23,848.84

650
676.09
24412.72
25,738.81

Depriciation and Write Offs

Depriciation
DEE/ Write Offs

571.02

710.33

595.46

678.38

Total (3)

571.02

710.33

595.46

678.38

3,934.30

2,241.79

4,143.05

3,899.33

Accretion(+)/ Decretion(-) of Stocks of Finished Products

29.88

Gross Profit Or Loss

Interest Payments TO
Centeral Govt.
Others

79.58

75.68

74.19

69.77

Total(6)

79.58

75.68

74.19

69.77

1253.54

649.83

1342.72

1225.46

Provision for Income Tax(Net)

Divedent Payments To
Centeral Govt.
Others(Based on Current Level of Disinvestment)
Divident Tax

484.94
360.71
143.72

260.85
194.03
77.31

468.99
348.85
138.99

448
333.23
132.77

Total(8)

989.37

532.19

956.83

914

1611.81

984.09

1769.3

1690.1

9
10

Investment in Securities if Obligatory due to Statutaory or

Other Req.
Retained Profits or Surplus carried Overto Part 2

Table: 1.9

64

I&EBR statement (RE 2008-2009 and BE 2009-2010) - Part2 Generated I&EBR for Plan)
Rs. In Cr.
Sr. No.

PARTICULARS

Retained surplus from part-1

2
3

200708Actuals

2008-09
BE

2008-09
RE.

2009-10
BE

1611.81

984.09

1769.3

1690.1

Add -Depriciation and write offs

571.02

710.33

595.46

678.38

71.98
-41.82
30.16

65.75
563.15
628.9

71.58
1025.02
1096.6

65.74
1340.34
1406.08

Deduct
Total Loans repayment of which GOI
Others
Net Increasing in the Margins for Working capital Requirements
Total(3)
Adjusted Internal Resources Available for Plan
Scheme(1+2+2A-3)

2,152.67

1,065.51

1,268.16

962.40

Carry Forward surplus available from Previous Year

2,660.39

1,078.47

3,463.89

1,173.09

Total Internal Resources(4+5)

4813.06

2143.98

4732.05

2135.49

Total extra Budgetary Resources(Other Than From GOI)

Gross assistance From Financial Institutes for Plan Project
Gross assistance From Financial Institutes for Plan Project Foreign
Foreign Commercial browwings or Supplier Credits
Bonds and Debentures
Inter Corporate Tranfers
OIDB
Issue of Equity to public
Others - Financial Institution or Banks
Total (7)

10

11

3000
3000

4500
4500

Total Internal and External resources

Avilable for Financing Plan
Expenditure onProjects, Renewals, And Replacement(6+7)

4813.06

5143.98

4732.05

6635.49

Plan Capital Outlay

1349.17

3413.36

3558.96

5558

3463.89

1730.62

1173.09

1077.48

Budgetary Support from Govt. For Plan Scheme(9-8) or Nill If 8

>9
External assistance through budget
Net Budgetary support
Carry Forward of Surplus for Next Year

Table 1.10

65

Notes
While Making Dividend Payments following points should be considered.
1 As 57.35 percent of Equity is held by Central Govt. thus payments must be made to
them.
2. While calculating dividend following formula is used.
30% of PAT or 20% of Equity which ever is higher is paid.
3. Dividend Tax is paid @16.95%.
4. RE: Revised Estimate
5. BE: Budgeted Estimate

66

Use of SAP in Budgeting Process & Control

What is SAP?
SAP is the leading enterprise and management package worldwide. Use of this package
makes it possible to track and manage, in real-time, sales, production, finance
accounting and human resources in an enterprise.

What makes SAP different?

Traditional computer information systems used by many businesses today have been
developed to accomplish some specific tasks and provide reports and analysis of events
that have already taken place. Examples are accounting general ledger systems.
67

Occasionally, some systems operate in a real- time mode that is, have up to date
information in them and can be used to actually control events. A typical company has
many separate systems to manage different processes like production, sales and
accounting. Each of these systems has its own database and seldom passes information
to other systems in a timely manner.
SAP takes a different approach. There is only one information system in an enterprise,
SAP. All application access common data. Real events in the business initiate
transactions. Accounting is done automatically by events in sales and production. Sales
can see when products can be delivered. Production schedules are driven by sales. The
whole system is designed to be real-time and not historical.
SAP structure embodies what considered the best business practices. A implementing
SAP adapts it operations to it to achieve its efficiencies and power. The motto of SAP is
A better return on information
The process of adapting procedure to the SAP model involves business process reengineering which is a logical analysis of the events and relationships in enterprises
operations.
Budget Preparation in SAP:
Fund Management
Investment Management

68

Fund Management

The fund management process in SAP (FI) covers the entire gamut of Budget
Management, its initiation, monitoring and control.

It enunciates the concept of responsibility areas by creating Fund Centers. This

enables the fixation of responsibility for Budget monitoring and control.

The plan estimates for the individual responsibility areas are prescribed in Funds
Management in the form of commitment Budget.

The task of funds management is:

o Safeguard the estimated values for revenue and expenditures recorded in
the financial budget.
69

o Identity impending shortage of funds or funds surpluses.

o Control payments in light of profitability and liquidity.

Features of Funds Management

Expense/ revenue of Budgeting
Procurement & Consumption Budget.
Monitoring (Availability Checks)

6000
etar
Analysis (variance)
y
Cont
rol is
the
proc
ess
of
dete
rmini
ng
vario
us
budg
eted
figur
es
for
the
Organizational Structure
ente
rpris
e for
the
futur
e
perio
d
and
then
com
parin
g
the
budg
eted
figur
es
70
with
the
actu
al

orm
ance
for
calc
Financial Management Area-GAIL
ulati
ng
5000
varia
nces
, if
4000
any.
etar
3000
y
Cont 7000
2000
rol is
7500
the
proc
1000
8000
ess
of
dete
rmini
1000
Corporate Services
ng
2000
Gas Trading
vario
3000
Gas Transmission
us
4000
E&P
budg
5000
Petrochemical
eted
6000
LPG and Other Liquid Hydrocarbons
figur
7000
GAILTel
es
7500
City Gas
for
8000
Power Sector
the
ente
rpris
e for
the
futur
e
perio
d
Figure: 1.7
and
then
com
Funds Management- Budgeting
parin
g
Budgeting The approach to Budgeting will be the
a Bottom up Approach. Budgets
budg
will be prepared at the Fund Center level, compiled
at the Location level and
eted
consolidated (for reporting purposes only) at thefigur
Corporate (GAIL) level.
es
with
Budget for Fund center/Commitment item combination:
Budgets will be drawn
the
actu item
up for a combination of Fund Center and Commitment
al
perf
orm
71
ance
for
calc

ng
varia
nces
, if
any.

Fund Center Hierarchy

The topmost node in
the Hierarchy

GAIL

Co. Code/Line of
Business

Node to ensure Budget

reporting at Company
Code Level

Node to ensure
reporting at Business
Area level

Business Area

Profit Center/Cost
Center Group/Fund
Centers

Creation of Fund
Centers- Budget
preparation and
execution level.

Figure:1.8

Maintaining Commitment Items

Before you can use Funds Management, you must create account assignment items. You
can integrate them into a summarization hierarchy, by entering the higher level
summarization item in the commitment item when you create it.

Account assignment items must have the same financial transactions and item
categories as the summarization items above them.

In a separate step, the commitment items need to be updated in the G/L account
masters.

72

Master Data

Fund center: It represents the responsibility area and is generally kept in parity
with Cost Centers. These Fund Centers are then re-grouped in the form of a
Hierarchy. There can be only one Fund Center hierarchy in an FM area. Each
node (which represents a Fund Center will have a superior Fund Center except in
the case of the Topmost node.)

List of fund centres

CITY_GAS
CO_DELHI
CO_PS
DEL_CORP
EXPLORATIO
GAIL
GAIL_TEL
GLOB_BUS
GTEL_MUMB
GTEL_NOI
GTEL_VAD
LPG_LHC
LPGP_GANDH
LPGP_LAKWA
LPGP_PATA
LPGP_VAGHD
LPGP_VIJAI
LPG_TRAN
LPGTR_JLPL
LPGTR_VSPL
LPG_USAR
NGTD_AGR
NGTD_AUR
NGTD_GUJ
NGTD_HAZ
NGTD_HAZ(NHVJ)
NG_TD_HVJ
NGTD_JHAB
NGTD_KHERA
NGTD_LAK

City Gas
Corporate Office- Delhi
Corporate Office- Project Service
Delhi Corporation
Exploration & Production (E&P)
GAIL (India) Limited
Gail Tel
Global Business
GailTel Mumbai
GailTel Noida
GailTel Vodadra
LPG & Other Liquid Hydrocarbon
LPG Gandhar
LPG Lakwa
LPG Pata
LPG Vaghodia
LPG Vijaypur
LPG Transmission
LPG Transmission-JLPL
LPG Transmission-VSPL
LPG Usar
NG Trading Agra
NG Trading- Aurangabad
NG Trading-Gujrat
NG Trading-Hazaria
NG Trading Non HVJ, Hazira
NG Trading HVJ
NG Trading Jhabua
NG Trading Khera
NG Trading-Lakwa
73

NGTD_MUM
NG_TD_NHVJ
NGTD_NOI
NGTD_PON
NGTD_RAJ
NGTD_VAD
NGTD_VAG
NGTD_VIJ
NGTR_AGRA
NGTR_AUR
NG_TRDG
NGTR_GUJ
NGTR_HAZ
NGTR_HAZ(NHVJ)
NGTR_HVJ
NGTR_JHAB
NGTR_KHER
NGTR_LAK
NGTR_MUM
NGTR_NHVJ
NGTR_NOI
NGTR_PON
NGTR_RAJ
NGTR_VAD
NGTR_VAGH
NGTR_VIJ
PETRO_CHEM
PETRO_PATA
PETRO_TRAD
POWER_SECT
TRNG_JAIPUR
TRNG_NOIDA
W1010
W1011
W1012
W1013
W1020
W1021

NG Trading-Mumbai
NG Trading Non HVJ
NG Trading-Noida
NG Trading Pondichery
NG Trading-Rajsthan
NG Trading Vadodra
NG Trading Vaghodia
NG Trading Vijaipur
NG Transmission- Agra
NG Transmission-Auria
NG Trading
NG Transmission-Gujrat
NG Transmission-Hazira
NG Transmission-Non HVZ
NG Transmission-HVJ
NG Transmission-Jhabua
NG Transmission-Khera
NG Transmission-Lakwa
NG Transmission-Mumbai
NG Transmission-Non HVJ
NG Transmission-Noida
NG Transmission-Pondichery
NG Transmission-Rajasthan
NG Transmission- Vadodra
NG Transmission- Vaghodia
NG Transmission-Vijaypur
Petrochemical
Petrochemical Pata
Petrochemical Trading
Petrochemical Sector
NGTrading-Jaipur
NGTrading-Noida
CORPORATE SERVICES
HR SERVICES- NEW DELHI
BD SERVICES- NEW DELHI
MARKETING SERVICES - NEW DELHI
TRAINING SERVICES - GTI NOIDA
TRAINING SERVICES - GTI JAIPUR

74

W1030

W1050
W1100
W1101
W1102
W1103
W1104
W1105
W1106
W1107
W1108
W1109
W1110
W1111
W2010
W2011
W2012
W2014
W2015
W2016
W2018
W2019
W2020
W2110
W2120
W2130
W2140
W2150
W2160
W3010
W3011
W3012
W3013
W3014
W3016
W3017
W3018
W3020
W3110
W3120
W3130
W3140
W3150
W3160
W3810

GLOBAL BUSINESS
PROJECT SERVICES

MKTG SERV CZF

MKTG SERV - ZO AHMEDABAD
MKTG SERV - ZO BANGALORE
MKTG SERV - ZO BHOPAL
MKTG SERV - ZO CHANDIGARH
MKTG SERV - ZO CHENNAI
MKTG SERV - ZO - NEW DELHI
MKTG SERV - ZO HYDERABAD
MKTG SERV - ZO JAIPUR
MKTG SERV - ZO KOLKATA
MKTG SERV - ZO LUCKNOW
MKTG SERV - ZO MUMBAI
NG Trading - HVJ Vijaipur
NG Trading - HVJ Hazira
NG Trading - HVJ Vaghodia
NG Trading - HVJ Auraiya
NG Trading - HVJ Agra
NG Trading - HVJ Noida
NG Trading - HVJ Vadodara
NG Trading - HVJ Jhabua
NG Trading - HVJ Khera
NG TRADING-GUJRAT(NON- HVJ)
NG TRADING - MUMBAI REGION
NG TRADING - KG BASIN
NG TRADING - CAUVERY BASIN
NG TRADING ASSAM
NG TRADING TRIPURA
NG Transmission Vijaipur
NG Transmission Hazira
NG Transmission Vaghodia
NG Transmission Jhabua
NG Transmission Khera
NG Transmission Auraiya
NG Transmission Agra
NG Transmission Noida
NG Transmission Vadodara
NGTRANSMISSION-GUJRAT(NON-HVJ)
NG TRANSMISSION- MUMBAI REGION
NG TRANSMISSION - KG BASIN
NG TRANSMISSION -CAUVERY BASIN
NG TRANSMISSION ASSAM
NG TRANSMISSION TRIPURA
LPG TRANSMISSION JLPL
75

Commitment item: It represents the Head of Revenue/Expenditure for which a Budget

is prepared, executed and controlled. eg: Type of expense (Expense on materials,
personnel etc.)

List of commitment items

CC_BOOKS
CC_CONSULT
CC_CSR_EXP

Books & Periodicals

Consultancy Charge
C S R EXPENSES
76

CC_DONATIO
CC_DP_EXP
CC_ENABLING_EXP
CC_ENTMENT
CC_HORTEXP
CC_OTH_EXP
CC_PRNTG
CC_RM_OFF
CC_RM_OTH
CC_RMPMELE
CC_RMPMINS
CC_RMPMMEC
CC_RMPMOT
CC_RMPMPL
CC_RMPMTEL
CC_RM_RES
CC_SECURIT
CC_SURVEY
CC_VEHHIRE
CN_ADTFEE
CN_ADT_PKT
CN_BANDCON
CN_COMMUN
CN_CPFCON
CN_EXDUTY
CN_FUEL
CN_INC_TEL
CN_INSURAN
CN_LFEETEL
CN_MGM_ADT
CN_MKTMLNG

CN_MKTMNG
CN_P/LONEXCHANGE
CN_POWER
CN_PR_EXP
CN_RATETX
CN_R&DEXP
CN_RECT
CN_RENTOFF
CN_RENTOTH
CN_RENTRES
CN_RMCONS
CN_ROUNDINGOFF

Donations
Data Processing Exp.
Enabling Expenses
Entertainment Exp.
Horticulture Expense
Other Expenses
Printing & Stationer
R&M-Bldg-Office
Repair &Maint Othe
R&M-P&M-Electrical
R&M - P&M- Instrumen
R&M-P&M-Mechanical
R&M - P&M- Others
R&M - P&M- Pipeline
R&M - P&M- Telecom
R&M-Buildings-Res
Security Expenses
Survey Expenses
Vehicle Hiring Expen
Audit Fee
Audit-Out of Pkt Exp
Bandwidth consumpn.
Communication Exp
CPF Contribution
Excise Duty Paid
Fuel Charges
Income from TELCOM
Insurance Expenses
Licence fee _Telecom
Management Audit
Market. margin -L NG
Mktg margin NG
Profit/Loss on Excha
Power Charges
Advt. & Publicity
Rates & Taxes
R&D Expenses
Recruitment Expenses
Rent Office Accomodn
Rent- Others
Rent- Res. Accomodn.
Consumption of NG
Rounding Off Exp.
77

CN_SALARY
CN_SALECNG
CN_SALELNG
CN_SALELPG
CN_SALENG
CN_SALEPET
CN_S&DEXP
CN_S&SCATL
CN_S&S_ELE
CN_S&S_GTL
CN_S&S_INS
CN_S&S_MEC
CN_S&S_OTH
CN_S&SPACK
CN_S&S_PL
CN_S&S_TEL
CN_TRANLNG
CN_TRANLPG
CN_TRAN_NG
CN_TRAVEL
CN_TRNG
CN_TXADT
CN_WATER
CN_WELFARE
LN_CAR_ADV
LN_FUR_ADV
LN_HB_ADV
LN_OTH_ADV
LN_PC_ADV
LN_SCOADV
OA_BANK
OA_BSHEET
OL_BSHEET
OP_ADJ_AC
OP_CNG_STK
OP_COGMF
OP_COGS
OP_DEPN
OP_DVDND
OP_DVNDREC
OP_EXP_INC
OP_FCCHGS
OP_I_CBAND
OP_INCOPOL
OP_INTCONG

Salaries & Wages

Sale of CNG
Sale of LNG
Sale of LPG
Sale of Natural Gas
Sale of Petrochem
S & D Expenses
Cons. Chem &Catalyst
S&S Electrical
Stores Spare-Gailtel
Stores & Spare-Instr
Stores & Spare-Mech
Stores & Spare Other
Packing Material
Stores & Spare- P L
S&S Telecome
Trans charges-LNG
Trans charges LPG
Trans charges-NG
Travelling Expenses
Training Expenses
Tax Audit Fee
Water Charges
Welfare Expenses
Motor Car Advance
Furniture Advance
House Building Advan
Other Advances
PC Advance
Scooter Advance
BANK ACCOUNT-Statist
Bal.sheet item-Asset
Bal.sheet item-Liab.
Adj. accounts(Statis
INVENTORY OF CNG
Cost of goods manufd
Cost of goods sold
Deprn on F.Asset
OP_DIVIDEND
Dividend
Export Incentives
OP_FINANCE CHARGES
Int consm-bandwidth
Int cons Polymer
Int. cons. N Gas
78

OP_INT_LN
OP_INTORDER
OP_INTRECD
OP_MISCINC
OP_PRDIFF
OP_PRPD_EX
OP_STK
OP_STKCNG
OP_STKLNG
OP_STKLPG
OP_STKNG
OP_STKPETR
OP_TX_PROV
PC_SS_CHEM
PC_SS_ELE
PC_SS_GTEL
PC_SS_INS
PC_SS_MEC
PC_SS_OTH
PC_SS_PACK
PC_SS_PL
PC_SS_TEL
PN_PURLNG
PN_PURNG
PN_PURPOL
SCC_RM_BLD
SCC_RM_PM
SCN_ADTEXP
SCN_EMPEXP
SCN_MKTMGN
SCN_PFW
SCN_PURCH
SCN_RATETX
SCN_RECTTR
SCN_RENT
SCN_SALE
SCN_SS_CON
SCN_TRANCH
SOP_INTCON
SOP_OTHINC
SOP_STKNG
SPC_PR_S&S

Interest on loans
Material price diff.
Int on bonds etc.
Misc. Income
Material price diff.
Prior period expense
INVENTORY ACCOUNTS
Change in StockCNG
Change in StockRLNG
Change in StockLPG
Change in StockLPG
Stock change Polymer
Provn for taxation
Proc. Chem& Catalyst
Proc. S&S Electrical
Proc.S&S GTEL
Proc. S&S Inst.
Proc. S&S Mechanical
Proc. S&S Others
Proc. Pack. Material
Proc.S&S _Pipeline
Proc. S&S Telecom
PURCHASE OF LNG
PURCHASE OF NG
Purchase of Polymers
R&M Buildings
R&M-Plant & Machiner
Audit Expenses
Employee cost
Marketing Margin
Power, water,fuel
Purchases
Rates & Taxes
Recct & Training
Rent
Sales
Stores & Spare- Cons
Transmission Charges
Internal Consumption
Other Income
Change in Stock
Proc.-Stores& Spares

79

Type of Budgeting

Both Procurement and

Consumption

Budgets are supported. Though

Procurement Budget is not a Standard Functionality, this feature is being

provided through Warehouse Fund Centers.

Budget values will be checked at the time of raising a Purchase Requisition for
unassigned PR/items to be taken to inventory.

This check will be against the Procurement Budget.

At the time of Goods issue or in case of assigned PR/PO, the availability check
will be against the Consumption Budget.

Differential/incremental values at the time of PO/GR/IR will also be checked

against the procurement or consumption Budget as the case may be.

Budget Availability check on Advances

80

There will not be any Budget availability check at the time of sanctioning of
Advances.

The availability check will only happen at the time of actual Disbursement and
the check will be against the consumption Budget.

Investment Management
Budgeting process for non Plan Expenditure
A new approval year for budgeting will be open by C&SP. All old projects and
internal orders will be carried forward or closed as the case may be.
Any proposal for capital items is called planned before it is approved, after
approval it is called budget.
Annual RE and BE will be fed in the system item wise at each location.
Changes in plan value for RE/BE is possible at each level.
After all the locations plans are finalized and approved at the corporate level,
these are entered in the SAP as budget.
Site creates internal order or project for each of the budgeted item.

81

Investment Cost Program: Planning

GAIL Non Plan

Plan
Budget
Distrib.
1500
1500
1500
1500
500
500
Gujarat Region
250
250
VAGHODIA
Plan

70
70

Appr. Request AR01

Roll-up

600
600

400
400
Mumbai Region

HVJ
200
200
VIJAIPUR

150
150
AURAIYA
80
80

Plan

Appr. Request AR02

82

80
80
Plan

50
50

Appr. Request AR03

Figure:1.9

Investment Cost Program: Budgeting top-down

83

Total Investments
Plan
Budget
Distrib.
1500
150
1500
150
00
600
600

500
500
500 500
Gujarat Region
250
250

250
250
VAGHODIA

Plan

70
70

Appr.Request AR01

600
600
HVJ

200
200 200
200
VIJAIPUR

1500
1500
600
600

130
130

8
80
80
80
80
0
Plan
Budget
Project PR02
Distrib. Allotted

60

20
WBS PR2.2

WBS PR2.1

Figure:1.10

Takeover Plan to Budget

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di Bud
the strib get v
Inv uted alu
e
es
tm dow s are
en
t H n wit
ier hin
arc
hy
.

400
400
400 400
Mumbai Region
150
150
150 150
AURAIYA
50
50
Plan

50
50
Budget
Allotted
Order
OR03

Capital Investment
Program

pla
nnn
plan
150
0

GAIL_NP
L

Gujara
t
50
0

HV
J
60
0

budge
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manual
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Mumba
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Gujara
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Figure:1.11

85

budget
150
0

GAIL_NP
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HV
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60
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Mumba
i
40
0

Investment Management
Project or internal audit cost control is done by SAP against the budget value of
the project or internal order.
This is done through
Error Messages: Here the user is disallowed from doing a transaction.
This will happen after 100% budget is utilized.
Warnings Messages: Which allowed a user to do the transaction after a
warning? This will happen after 90% budget is utilized.
In projects, budget is also checked as per each WBS aliment on overall business.
SAP checks actual cost of the project.

Budgeting
Budget checks in SAP during Purchases:
Budget checks are first done based on the estimate entered by the user for the
materials during purchases requisition.
The budget checks are again done during the creation of purchases orders. In
case the PO value results in the projects budget being exceeded, the transaction
will be disallowed by SAP.
The delivery date specified in the purchases order will govern the date in SAP
reporting for commitment.
During Goods receipts, cost is booked on to the project and this cost can be seen
in reports.
If materials are transferred from any other location or project, cost is booked on
to the project to which these materials are transferred and budget is consumed.
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 The cost booked on the project includes freight and all types of taxes except for
excise- in case where CENVAT benefit is available.
In SAP where CENVAT benefit is available on excise, this will not book cost on
the project and hence will not consume any budget.
Payment is done to supplier (called Vendor in SAP) based on invoice
verification. At the time of invoice verification, actual cost is updated, which
consume the budget accordingly.
This invoice verification may be done before or after the Goods receipts in SAP.

Budget checks in SAP during Work Orders

Work orders are called service purchase orders in SAP.

Budget check is first done based on the estimate entered by the user for the SOR
during purchase requisition.

The budget check is again done during the creation of service purchase orders. In
case the PO value results in the project budget being exceeded, the transaction
will be disallowed by SAP.

Entry of RA bill into SAP is called service entry sheet. At this point, actual cost
is booked on to the project.

This cost can be seen in Sap record.

The cost booked on the project includes taxes.

Invoice verification is done in SAP based on the service entry sheet.

Payment is made to contractors (called Vendors in SAP) based on the invoice

verification.

Cost Booked without purchase orders:

There may be cases in projects where costs are to be booked without references
to any purchases order(e.g. Land acquisition)
These will be booked in FI module and will be appear in the projects cost
reports.
Such cost will also consume the project budget.
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Original Budgeting:
Original Budget for program (IM32)
Consolidated budget for the program position.
Original budget distribution to measure (IM52)
Budget at the level of each measure (project, internal audits)
Budget Updates:
Budget Supplement
Program Budget
Plan- IMCCP1

Non plan- IM30

Measure Budget

Plan IMCCP3

Non plan- IM52

Budget return:
Measure Budget

Plan IMCCP3

Non plan-IM52

Program Budget

Plan IMCCP1

Non plan IM38

Budget updates process Scenarios

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 New investments for current year (RE)

Change budget values for continuing measures (RE)
New investments for the next fiscal year and onwards (BE)
Continuing investments in next fiscal year and onwards (BE)

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DATA ANALYSIS AND FINDINGS

DATA ANALYSIS:
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For Budgetary process and control Gail(India) Ltd takes in to consideration circular
issued by the Ministry of petroleum and natural gas and accordingly I&EBR(Internal
and External budgeting resources) statement submitted to the concerned Ministry in the
month of August. Different types of expenditures revenues are also taken in to
consideration according to the Companies Act 1956.

FINDINGS
From the study of the project entitled Budgeting Process and Control in Gail (India)
Ltd.Following points are understood:
Gail (India) Ltd is one of the key players in Indian gas industry.
PAT(profit after tax) of Gail shows a fluctuating trend as in the year 2007-08
& 2009-10 it shows increasing trend where as in the year 2006-07 & 2008-09.
Budgeting process of Gail (India) Ltd involve complexities as different steps are
involved in it
Too much time is involved in budgeting process of Gail(India)Limited

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CONCLUSION
With the project entitled Budgetary Process and Control, in GAIL (India) Ltd., we can
conclude that Budgeting is one of the essential processes in any Organization whether it
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is Public Sector Unit or Private concern. As with the help of Budgeting we can calculate
estimated expenditure Revenues and Profit for the future period of time. Thus
preparation of both type of the budget (Revenue and Capital Budget) is essential part of
Business & appropriately prepared & Control by using strong tool i.e. Fund
Management & Investment Management of SAP in Gail (India) Ltd..

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GLOSSARY
BIS: Business Information System
BSE: Bombay Stock Exchange
CAGR: Compounded Annual Growth Rate
CAPEX: Capital Expenditure
CBM: Coal Bed Metahne
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CNG: Compressed Natural Gas

CPI: Consumer Price Index.
CSR: Corporate Social Responsibility
DGH: Director General Hydro Carbon
DVPL: Dahej-Vijaipur Pipeline
E&P: Exploration and Production
EBIDTA: Earnings Before Interest, Depreciation,Tax And Amortization
ED: Excise Duty
EPS: Earnings Per Share
ERP: Enterprise Resource Planning
ESA: External safety units
GAIL: GAS Authority of India Ltd.
GDP: Gross Domestic Product
GOA: Grant of authorization
GPU: Gas Processing Units
GTI: Gail Training Institute
HDPE: High Density Polyethelyene
HSE: Health Safety Environment
HVJ: Hazira Vijaipur Jagdishpur
JLPL: Jamnagar-Loni Pipeline
JVCs: Joint Venture Companies
LLDPE: Linear Low Density Polyethelyene
LNG: Liquefied Natural Gas
LPG: Liquefied Petroleum Gas
MBTU: Million British Thermal Unit
MMSCMD: Metric Million Standard Cubic Meters Per Day
MMT: Metric Million Tone
MMTPA: Metric Million Tone Per Annum
MOP&NG: Ministry Of Petroleum And Natural Gas
MOU: Memorandum Of Understanding
MTs: Metric Tonnes
MW: Mega Watts
NELP: New Exploration And Licensing Policy
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NSE: National Stock Exchange

O&M: Operation And Maintenance
OLHC: Other Liquid Hydro Carbon
PAT: Profit After Tax
PBIDTA: Profit Before Interest, Tax, Depreciation And Amortization
PBIT: Profit Before Interest And Tax
PBT: Profit Before Tax
PNG: Piped Natural Gas
PNGRB: Petroleum and Natural Gas Regulatory Board
PSU: Public Sector Unit
QC: Quality Circle
ROCE: Return On Capital Employed
ROIC: Return On Invested Capital
RONW: Return On Net Worth
SBPS: Special Boiling Point Solvent
SCADA: Supervisory Control And Data Acquisition
TPA: Tones Per Annum
TQM: Total Quality Management
VSPL: Vizag-Secundrabad Pipeline

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97

BIBLIOGRAPHY
Books & Magazines

Internal Data
Annual Reports-6 Years
Gail India Limited Financial And Strategic Analysis Review

External Data
Guidelines For Laying Petroleum Product Pipelines, Ministry of
petroleum And Natural Gas, Government of India, New Delhi
Oil And Gas Update India-Business Market Reports
Petroleum And Natural Gas Regulatory Board
The Financial Express
The Hindu Business Line
The Infrastructure Sector Report In India
Weekender

Web Sites

Internal Data
www.Gailonline.in

External Data
www.About.com
www.Freemba.com
www.Google.com
www.Investorword.com
www.makemyproject.com
www.marketresearchreports.com
www.Ntpc.net
www.Sarkaritel.com

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