A STUDY ON CAPACITY UTILIZATION AND THE EFFICIENCY OF FINANCIAL MANAGEMENT OF NATIONAL THERMAL POWER CORPORATION LIMITED NEW DELHI Nasir Rashid* and Dr. B. Manivannan** *PhD Research Scholar, Dept. of Commerce, Annamalai University, Tamil Nadu, India **Assistant Professor, Dept. of Commerce, Annamalai University, Tamil Nadu, India ABSTRACT The aim of this study is to assess the capacity utilization and efficiency performance of NTPC. Today, most of the electricity produced throughout the world is from thermal power plants. So it is important to review with earning capacity and performance expectations, including both the behaviours are expected to exhibit and the results they are expected to achieve during the upcoming rating cycle. The capacity utilization and efficiency performance are analysed to know whether there is any impact of capacity utilization on efficiency management of the NTPC. Keywords; Earning Capacity, Capacity Utilization, Efficiency Performance, Rating Cycle. INTRODUCTION Power sector is the core engine of growth in any economy, and it is providing quality and reliable power at an affordable cost. Power is critical towards fulfilling the high growth aspins of the people electricity consumption. So it is one of the most important indices that decide the development of a nation. The Government of India is committed to improving the quality of life of its citizens through provide electricity to each household, round the clock. The Government of India implement the Programme of Power for All for fulfilment of them objectives. The Government of India will complement the efforts in bringing uninterrupted quality power to all households, industries, commercial business, public needs & any other electricity consuming entities and adequate power to agriculture as per the state policy. To strengthen its core business, the corpon has diversified into the fields of consultancy, power trading, training of power professionals, rural electrification, ash utilization and coal mining as well. The maximizing profit is a key to the success of the business of which the profit is based on capacity utilization. Capacity utilisation is an enterprise or a nation is the actually utilisation of installed productive capacity. Capacity is the relationship between output that is actually produced with the installed equipment, if capacity was fully used, planning the use of manufacturing capacity to turn out the highest production with quality products. Capacity utilization depends on market demand and on scheduling production facilities and a structured planning. Plant Capacity Factor is the key factor to estimate costing structure of the whole plant. This Article tries to explain on the Capacity Factor of the power plant of NTPC. The National thermal Power Corpon capacity factors vary greatly depending on the type of fuel that is used and the design of the plant. NTPC is India s largest energy conglomerate and it is accelerate power development in India. Since then it has established itself as the dominant power major with presence in the entire value chain of the power genen business. From fossil fuels it has forayed into generating electricity via hydro, nuclear and renewable energy sources. This foray will play a major role in lowering its carbon footprint by reducing green house gas emissions. 122
STATEMENT OF PROBLEM The Indian power sector has a problem to meet electricity shortages of public and industry sectors due to inefficiency. The Government of India is addressing this problem both through a major green field capacity augmentation programme and through rehabilitation of existing coal fired genen capacity. The plant load factor of thermal power plants of India is reported to be in poor condition with a plant load factor of about 70 per cent. Ratio analysis plays an important role in determining the financial strengths and weaknesses of a company. The analysis reveals that whether the company's financial position has been improving or deteriorating over time. A performance highlights the openal efficiency of the business concern. The operating efficiency refers to effective, profitable and nale use of available resources to the concern. METHODOLOGY The study is purely based on secondary data and the data is collected from the published annual reports and from the discussion with the official of National Thermal Power Corpon Limited. The relevant literatures for analyze the financial aspects are collected from various text book, articles, newspaper and related website. The annual reports has been analysed by various tool and techniques with a view to evaluate the capacity utilization and financial performance of the NTPC. To know the financial efficiency of National Thermal Power Corpon Limited, However the selection of used for evaluating the performance of an entity should be based on nature of its activities and objective to be achieved. OBJECTIVES OF THE STUDY The study is confined to earn the objectives of the paper, these objectives are (i) To analyse the capacity utilization and plant load factor of the NTPC. (ii) To know analyse the efficiency performance of NTPC. GROWTH OF NTPC NTPC is one of the major power producing companies in India. It has been seen that NTPC is generating 25 per cent of the overall power in India in the year 2012. Hence it can be said that NTPC is contributing for one-fourth of power production in the country. The overall installed capacity accounted for only 16 per cent of the total capacity of India. This is a significant figure which says NTPC plants are working in high efficiency. This is due to increased level of plant load factor and use of advanced tools and technologies. With increasing terms of power requirements in the country, NTPC will be having major role to play in enlightening India in the future years to come. PRESENT CAPACITY OF NTPC The company has the share of capacity of 17.73 per cent on total national capacity, and the contribution 25 per cent of the total power genen among the total power generated in India. The total installed capacity of the company is 48,028 MW (including JVs) with 19 coal based, 7 gas based stations and 1 Hydro based station. The NTPC having 9 Joint Venture stations, 8 of them are coal based and 1 gas based, while remaining are renewable energy units. Table No 1 Present Capacity of NTPC units in MW S.n Year NTPC Percentage NTPC Percentage All India Percentage o Groups 1 2011-12 32,712 17.78 37,103 17.46 199,877 16.12 2 2012-13 35,882 19.51 41,273 19.42 223,344 18.01 3 2013-14 37,107 20.18 43,108 20.28 243,029 19.60 4 2014-15 38,202 20.77 44,398 20.89 271,722 21.91 5 2015-16 40,012 21.76 46,653 21.95 302,088 24.36 Total 183915 100 212535 100 1240060 100 Source; compiled by researcher from the annual reports of NTPC from 2011-12 to 2015-16 The above Table No 1 explains the comparison of installed capacity of the National thermal power corpon limited with NTPC groups and all India. The researcher examine that there is increase in installed capacity all the three categories during the study period, and also the percentage of all the categories are increasing. The NTPC percentage of increase is higher than NTPC groups in first two years of the study period while as the remaining three years NTPC groups percentage is more than NTPC. While comparing with all India, NTPC and NTPC groups is increasing trend in first three years, remaining periods all India percentage is increasing. POWER GENERATION OF NTPC Growing Indian Economy has huge appetite for Electrical Power. Various forecasts and models project multifold growth requirement in the Electricity Genen Capacity. NTPC generates electric power and it is having a globally comparable track record 123
in terms of productivity and efficiency. The company was incorporated on 7 th November 1975 as a power generating and transmission company in the central sector. Table No 2 Genen of NTPC units in BU s S.no Year NTPC Percentage NTPC Percentage All India Percentage groups 1 2011-12 222.07 18.97 240.31 19.01 876.89 17.85 2 2012-13 232.03 19.82 249.59 19.74 912.06 18.57 3 2013-14 233.28 19.93 250.63 19.82 967.15 19.69 4 2014-15 241.26 20.61 260.47 20.60 1048.67 21.35 5 2015-16 241.98 20.67 263.42 20.83 1107.82 22.55 Total 1170.62 100 1264.59 100 4912.59 100 Source; compiled by researcher from the annual reports of NTPC from 2011-12 to 2015-16 The above Table No 2 shows that the genen of NTPC, NTPC groups and all India, the researcher examine that there is increase in the genen of power in all the three categories over the study period and percentage is also increasing. The NTPC percentage like 2012-13, 2013-14 and 2014-15 are higher than NTPC groups, but remaining years it was below the percentage of NTPC groups. While comparing the NTPC and NTPC groups with All India, the NTPC and NTPC group s percentage are more than the percentage of All India in the first three years but in remaining years the All India percentage was higher than the NTPC and NTPC groups. The researcher examine that the NTPC is alone player to compete with its groups and all India, which results that the NTPC is performing better than other categories. Plant Load Factor Plant Load Factor is a measure of average capacity utilization. It is the of actual output of a power plant over a period and its output if it had operated to full capacity over that period of time. Efficiency of power production is measured in terms of overall capacity utilization of the plant which in other words is called as the plant load factor (PLF). Measurement of PLF is a significant factor since it can be known how well the resources are utilized. The higher the plant load factor the better will be the operating efficiency of the plant. Table no 3 shows the plant load factor of different power sectors in India from year 2006-2012 Table No 3 Plant load factor (PLF) S.no Year NTPC PLF % ALL INDIA PLF % 1 2011-12 85.0 73.32 2 2012-13 83.08 69.93 3 2013-14 81.50 65.56 4 2014-15 80.23 65.11 5 2015-16 78.61 62.26 Source; compiled by the Researcher from the Annual Reports of the NTPC The Table No 3 shows the Plant Load Factor of NTPC Ltd. and rest of India. It was observed from the table that NTPCs PLF ranges from 85 per cent in 2002-12 to 78.61 per cent in 2015-16, whereas PLF of All India power producing plants ranges from 73.32 per cent to 62.26 per cent. This clearly indicates the fact that in term of production NTPC Plants far more productive than All India. It also signifies how well NTPC Plants has utilized the resources in the power production. However in terms of comparing the previous year s plant load factor of NTPC the PLF shows the decreasing trend during the study period. PLF of a plant is affected by the following factors viz, Plant conditions, Opens and Maintenance practises followed at the plant, Operating availability of plants and Vintage of Plant equipments CONCEPT OF FINANCIAL EFFICIENCY Financial efficiency is a measure of the organizations ability to translate its financial resources into mission related activities. Financial efficacy is desirable in all organization of individual mission. It measures the intensity with which a business uses it assets to generate gross revenue and the effectiveness of producing, purchasing, pricing, financing, and marketing decisions. At the micro level financial efficiency refers to the efficiency with which resources are correctly allocated among competing uses at a point of time. Financial efficiency is a measure of how well an organization has managed certain trade of risk and return, liquidity and profitability in the use of its financial efficiency. The word efficiency as defined by the oxford dictionary states that, efficiency is the accomplishment or the ability to accomplish a job with minimum expenditure of time and effort. As expressed by Peter Ducker doing the things in the right way is efficiency. 124
The management of assets can be appraised through certain s. These s are also called performance s. Activity s highlight the openal efficiency of the business concern. The term openal efficiency refers to effective, profitable and nal use of resources available to the concern. In order to examine the judicious utilisation of resources as well as the wisdom and farsightedness in observing the financial policies laid down. Turnover Ratios measure the efficiency of assets management. The efficiency in (asset utilisation) the use of assets would be reflected by the speed with which they are converted into sales. Turnover s indicate the relationship between sales and various assets of the firm. It is significant to note that these s are always expressed as or in number of times that is rate of turning over or rotation. These are also known as velocities. Efficiency Analysis of National Thermal Power Corpon Limited Turnover Ratios may be termed as Efficiency Ratio and Turnover Ratios highlight the different aspect of financial statement to satisfy the requirements of different parties interested in the business. It also indicates the effectiveness with which different assets are vitalized in a business. Turnover means the number of times assets are converted or turned over into sales. The activity s indicate the rate at which different assets are turned over. Funds of creditors and owners are invested in various assets to generate sales and profit. The better the management of assets, better the amount of sales. They are called because they indicates the speed with which assets are being converted or turned over in to involves a relationship between sales and assets generally reflects that assets are managed well. Depending upon the purpose, the following activities or s can be calculated to know the efficiency performance of the National Thermal Power Corpon limited. Year Debtors Table No 4 Efficiency Ratios of the NTPC Working capital Inventory Fixed assets Capital 2011-12 9.86 15.89 3.23 1.30 0.51 2012-13 11.82 15.88 3.98 1.01 0.50 2013-14 11.73 13.23 5.36 0.95 0.10 2014-15 8.71 10.20 13.79 0.89 0.46 2015-16 7.73 10.00-142.23 0.76 0.41 Source; Compilled by the researcher from Annual reports of NTPC The above Table No 4 examine the efficiency performance of the NTPC limited, it was observed that the debtors is increasing in the first two years of the study period where as the last three years it was decreased, this indicates that there is no strict collection policy maintained by the company between credit sales and debtors. The Table No 4 reveals the inventory of NTPC, which helps the financial management to evaluate inventory policy. The inventory shows the decreasing trend all over the study period, it indicates that sales or production of power of NTPC is declined and inventories are ideal. The working capital helps the management to assess the degree of efficiency in the use of short term fund for operating sales. During the study period the working capital are increasing except 2015-16 the researcher reveal that working capital and sales of NTPC is reduced with previous year. The fixed assets represent the efficiency of utilization of fixed assets and profitability of a business concern. It was obtained from the Table No 4 that the fixed assets of the sample company was decreased, however it is low which reveals that under utilization of available in terms of production and sales. The above Table No 4 indicates the capital of the sample company, which results the managements to know how efficiently the capital is invested in business. The capital of the firm shows the decreasing trend all over the study period except 2014-15 it was increased, but the is low which lead to in effect usage of capital. FINDINGS OF THE STUDY 1. The NTPC capacity percentage of increase is higher than the NTPC groups in first two years while remaining years NTPC groups are more than NTPC. 2. The comparison of capacity of NTPC, NTPC groups and All India shows the increasing trend in first three years of study period, but remaining years the All India are higher than other two categories. 3. The NTPC increasing percentage of genen years like, 2012-13, 2013-14 and 2014-15 are higher than the NTPC groups, but remaining years it was below the percentage of NTPC groups. 4. The comparison of NTPC, NTPC groups and All India reveals the upward trend in first three years while as remaining years the All India are higher than NTPC and NTPC groups. 5. The plant load factor of NTPC shows the decreasing trend, but it was higher than the plant load factor of All India. The Researcher found that the comparison PLF of NTPC over previous years, the PLF shows the decreasing trend during the study period. 125
6. The debtors shows increasing trend in first two years while remaining years it was decreasing. The researcher found that the NTPC is suffering by the poor credit policy. 7. The researcher found that inventory indicates the decreasing trend all over study period. 8. The working capital is increasing during the study period except 2015-16. The researcher found that there is no strategic policy for working capital. 9. The fixed asset results the decreasing trend all over the study period. The researcher examines that is inefficiency utilization of fixed assets. 10. During the study period the capital was decreasing. The researcher revealed that the investment is not used in the planned manner. SUGGESTIONS 1) The researcher found that the NTPC is power bank of the India. While comparing the NTPC with its groups and All India the performance of the NTPC is good in terms of Capacity and Genen, but it was low in last two years. So the management need to maintain adequate strategy to improve the efficiency of the company. 2) The efficiency s of the sample company are varied during the study period. Some of the s are in downward trend so the researcher suggests that the company should apply tactical policy in order to control the decreasing trend of NTPC efficiency. CONCLUSION In view of the plight of the power sector in our state in particular and in the country in general, it is very necessary to take up with all seriousness, measures to improve capacity addition to maximize power genen into balance supply. Unless power is sufficiently available to the industrial sector, the state cannot be progress of industrialization. Industrial backwardness in today s world is an indication of economic backwardness. Therefore availability of sufficient power is an index of economic development. Likewise the sufficient un-interrupted power supply to consumers is as important as power genen. Consumers expect power to be supplied at a reasonable price, a price that they can afford. Regular supply of power with required quality would in fact gain the confidence of consumers and facilitates overall economic development of the country in various dimensions. REFERENCES 1) Abhijeet Bhalla; Exploring Prospectus for Make in India and Made in India- a Study. 2) All India Region wise generating installed capacity of power; Central electricity authority, Ministry of power, Government of India, January 2013 3) I. M. Panday Financial Management, New Delhi: Vikas Publishing House Pvt Ltd, 2008. 4) Indian Power Sector, http://indianpowersector.com/home/electricityboard. 5) M. Y. Khan & P K Jain, Financial Management Text and Problems, Tata McGraw Hill Publishing Company Limited, New Delhi, 2003. 6) NTPC Ltd Annual Reports New Delhi from2011-12 to 2015-16. 7) Power sector in India, IMC- Economic Research& Training Programme. 8) Prasana Chandra; financial management- theory and practice, Tata Mc Graw Hill Publishing Company Limited New Delhi. 9) S. C. Kuchhal, Financial Management An Analytical and Conceptual Approach, Chaitanya Publishing House, Allahabad, 1993. 10) T.S. Reddy and Hari Prasad Reddy, (2010), Management Accounting, Margham Publications, Chennai 600017 126