PREAENTED BY :-SANDIP G PATEL ENRL. NO.

:-24 GIUDED BY :-SARFARAZ PATHAN

Type : PSU Industry : Oil & Gas Founded : 14 Aug. 1956 Products : Petroleum, Natural Gas Headquarter : Dehradun , India Employees : Round about 34000 Registered Office : Jeevan Bharati Bldg., Tower II, 124, Indira Chowk, New Delhi - 110 001

Statutory Auditors : M/s S. Bhandari & Co. M/s Brahmayya & Co. M/s Lodha & Co. M/s RSM & Co. M/s K. K. Soni & Co. Bankers Listed at : State Bank of India : Bombay Stock Exchange National Stock Exchange : National Securities Depository Ltd. Central Depository Services (India) Ltd.

Depositories

Company Secretary : N K Sinha Chairman : R.S.Sharma

1947 - 1960 During the pre-independence period, the Assam Oil Company in the north eastern and Attock Oil Company in northwestern part of the undivided India were the only oil companies producing oil in the country, with minimal exploration input. The major part of Indian sedimentary basins was deemed to be unfit for development of oil and gas resources. Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and the Oil India Ltd. was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored.

Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and the Oil India Ltd. was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored. Since its inception, ONGC has been instrumental in transforming the country's limited upstream sector into a large viable playing field, with its activities spread throughout India and significantly in overseas territories. In the inland areas, ONGC not only found new resources in Assam but also established new oil province in Cambay basin (Gujarat), while adding new petroliferous areas in the Assam-Arakan Fold Belt and East coast basins (both inland and offshore).

After 1990 The liberalized economic policy, adopted by the Government of India in July 1991, sought to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. As a consequence thereof, ONGC was re-organized as a limited Company under the Company's Act, 1956 in February 1994. After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by offering shares to its employees.

During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant and Gas Authority of India Limited (GAIL) - the only gas marketing company, agreed to have cross holding in each other's stock.. Consequent to this the Government sold off 10 per cent of its share holding in ONGC to IOC and 2.5 per cent to GAIL. With this, the Government holding in ONGC came down to 84.11 per cent. In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC diversified into the downstream sector. ONGC will soon be entering into the retailing business. ONGC has also entered the global field through its subsidiary, ONGC Videsh Ltd. (OVL).

MILESTONE SINCE INCEPTION August 1956 Formation of Oil and Natural Gas Commission April 1957 First well drilled in Jawalamukhi September 1958 Discovery of oil in Lunej at Cambay May 1960 Discovery of major oilfield in Ankleshwar 1962 Started Offshore exploration . 1965 Formation of Hydrocarbons India Ltd.-OVL precursor March 1970 First foray into offshore drilling at Aliabet and first offshore drilling rig Sagar Samrat ordered November 1973 ONGC got a contract to work in Iraq February 1974 Bombay High discovered March 1984 Giant onshore field Gandhar discovered

1988 HIL rechristened as ONGC Videsh Limited 1992 5 producing fields of ONGC handed over to multinational combines June 1993 ONGC incorporated as a company 1998 Phased dismantling of Administered Price Mechanism (APM) starts August 2001 Corporate Rejuvenation Campaign (CRC) rolls January 2003 First commercial production in Vietnam March 2003 OVL acquired 25% participating Interest in Greater Nile Oil Project ONGC acquired stake in MRPL August 2003 Launching of Deepwater Exploration Campaign Sagar Samriddhi March 2004 10% equity of ONGC disinvested; offer oversubscribed in 11 minutes\

VISION & MISSION VISION To be a world class Oil & Gas Company Integrated in energy business with dominant Indian leadership and global presence. MISSION Dedication towards leveraging competitive advantages in R&D and technology. Imbibing high standards of business ethics and organizational values. Abiding commitment to health, safety and environment to enrich quality of Community life. Fostering a culture of trust, openness and mutual concern to make working a stimulating & challenging experience. Striving for customer delight through quality products and services. INTEGRATED IN ENERGY BUSINESS Focus on domestic and international oil & gas exploration and production business opportunities. Provide value linkages in other sectors of energy business. Create growth opportunities and maximize shareholder value.

Oil & Natural Gas Corporation Limited (ONGC) is the premier company in the Indian upstream of Petroleum Sector and it constantly thrives to retain this position. Born in 1956 this corporation produces more than 1 million barrels daily holding a reserve base of 6 billion tons of oil and oil-equivalent gas in India. The company undertakes various activities like drilling, discovering, producing, transporting, processing and now refining, retailing and marketing of hydrocarbons

This report has been made to understand the functioning of the financial department and to know the financial strength and weaknesses of ONGC. It include Budget Formulation process in this report, which shows how to formulate budget from bottom level to top level and how to download the budget software on SAP. This report gives the reader an overview of the concept of BUDGET FORMULATION in the simplest language as far as possible.

Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying now research is done systematically. In that various steps, those are generally adopted by a researcher in studying his problem along with the logic behind them. It is important for research to know not only the research method but also know methodology. The procedures by which researcher goes about their work of describing, explaining and predicting phenomenon is called methodology.

Primary data The primary data is that data which is collected fresh or firsthand, and for first time which is original in nature. Primary data can collect through personal interview etc. to support the secondary data.

Secondary data collection method

The secondary data are those which have already collected and stored. Secondary data easily get those secondary data from records, journals, budget mannual of the company etc. It will save the time, money and efforts to collect the data. Secondary data also made available through trade magazines, company journals, books etc.

ONSHORE: (ON LAND) Northern: Dehradun (Head Quarter) Corporate Office Central: Kolkata Regional Office Western: Baroda Regional Office Southern: Rajamundry (Andhra Pradesh)

OFFSHORE (IN WATER) 1. Mumbai High 2. Heera/Ratna 3. Neelam 4. Bassein 5. Marginal/satellite fields

STRENGTH Fully integrated company in all the sectors of Oil and Gas business Exploration and Production, Refining, Sales of crude Oil and Gas and Entry in retailing sector. Market Leader in Oil and Gas Sector in India. Strong and Visionary Leadership. Strong financial position of the company with huge Oil and Gas Reserves.

Existing Product of value added products like Kerosene, Naptha, Diesel, etc.. International and National Credibility as a firm of repute. Owns equity of Oil and Gas abroad Subsidiaries as MRPL which ahs highest capacity utilization among all PSU refiners. ONGC has ISO-9001 & ISO 14001 registration.

WEAKNESS Constraints of a PSU wherein many decisions to enter downstream energy sector are adversely affected.

No major exploration except Bombay High. It needs to find out more sources like Bombay high.
Average age of regular employees is 50+. Young manpower is needed. Manpower is more than required. No experience in retail marketing of Petroleum Products.

OPPORTUNITIES The progressive removal of price controls in the Oil and Gas sectors are enabling the company to generate financial surpluses for investment.

The de-control in the Oil and Gas sector enables forward integration for ONGC and also for direct marketing of petroleum products.
Entry into CBM, Gas hydrates, Underground Coal Gasification, etc to improve the availability the availability of Gas for sale. Increase in Oil and Gas equity abroad through its overseas subsidiary, OVL. Entry into Energy sector through power generation.

THREATS Increased competitor activity in the Oil and Gas business in India and emergence of other integrated like RIL. Backward integration by Oil refining companies like ICOL, Gas and Power generating companies like GAIL and NTPC. Limited availability of fossil reserves. Continued subsidy to be provided by ONGC. Government policies affect Long Term Planning

STATUS OF CAMBAY BASIN Prospective area : 27100 Sq. Km Drilling of the First well : 1958 Discovery well: Cambay-1 /Lunej-1 (1958) No. of Structures/ Prospects drilled: 262 No. of Oil / Gas Fields: 90 : With O.N.G.C. = 68 : With Private Companies = 22 Total No. of wells Drilled: 5201 Exploratory wells: 2217 Development Wells: 2984 Oil : 1064.32 MMt Gas : 207.66 BCM Group Gathering Stations(GGS): Akholjuni Kathana Padra

WHAT IS BUDGET? Modern business world is full of competition, uncertainty and exposed to different types of risks. The complexity of managerial problems has led to the development of various managerial tools, techniques and procedures useful for the management in managing the business successfully. One of the essential features of modern business management is planning and control. There are a number of tools and devices that assist management in planning and controlling business operations. Budgeting that is budget is the most common, useful and widely used standard device of planning and control.

Objectives of Budget To get a vision or path to reach the alluring destination To get an idea regarding the future expected revenues and expenses To attain the desired ends, the policies so formed should be in accordance with the established objectives To achieve integration and coordination among the different departments and activities To serve as a guide for management decision and standard for each different department and activities To serve as a link among different departments and activities

Advantages Compels management to think about the future, which is probably the most important feature of a budgetary planning and control system. Forces management to look ahead, to set out detailed plans for achieving the targets for each department, operation and (ideally) each manager, to anticipate and give the organization purpose and direction. A budget is basically a yardstick against which actual performance is measured and assessed. Control is provided by comparisons of actual results against budget plan.

Disadvantages / Limitations Budgets can be seen as pressure devices imposed by management, thus resulting in: a)Bad labour relations b) Inaccurate record-keeping. Departmental conflict arises due to: a) Disputes over resource allocation b) Departments blaming each other if targets are not attained. It is difficult to reconcile personal/individual and corporate goals. Managers may overestimate costs so that they will not be blamed in the future should they overspend.

A method of budgeting in which all expenses must be justified for a each new period. Z.B.B. starts from a zero base and every function with in an organisation is analysed for its needs and costs.Z.B.B. allows top level strategic goals to be implemented into the budgeting process by tying them to specific functional areas of the organisation. Where costs can be first grouped,then measured against previous results and current expectations.

Activity Based Budgeting (ABB) is a technique for enhancing the accuracy of financial forecasts and increasing management understanding. ABB eliminates much of the needless rework created by traditional budgeting techniques. It analyzes the products or services to be produced, what activities are required to produce those products or services, and finally what resources need to be budgeted to perform those activities. Simply said, ABB is the reversing of the ABC process to produce financial plans and budgets. It is method of budgeting in which the activities that incur costs in every functional area of an organization are recorded and their relationships are defined and analyzed. Activities are then tied to strategic goals, after which the costs of the activities needed are used to create the budget

In ONGC, the following budgets are prepared: Revised estimate (current year) Budgeted estimate (next year) Commitment budget estimate (next to next years, may be two or more years)

Budget is prepared keeping in mind the following points:Physical targets Financial point of view Last year expenditure Inflation/deflation Zero based budgeting (ZBB) Current stock position Last purchase rate

STAGE I: INITIAL STAGE

Service Budget Coordinator

Department Head

Local Budget Coordinator (compilation)

STAGE II: BEFORE APPROVAL

Local Budget Coordinator

Corporate Budget Coordinator

Local Budget Coordinator

Service Budget Head

Local Budget Coordinator

Virtual Corporate

STAGE III:

DURING APPROVAL

Board of Directors

Non-Plan Plan (Approved by Board) (Approved by Planning Commission)

PLAN:

The Planning Commission approves it. It is distributed and allocated to different departments. It appears in Balance Sheet. The Plan budget should be increased. NON-PLAN:

The board of Directors approves it. It is neither distributed nor allocated to different departments. It can be directly transferred to production and P/L Account. The Non-Plan budget should be decreased.

STAGE IV: ALLOCATION & ALLOTMENT

Corporate Budget Coordinator

Local Budget Coordinator

Service Head

Local Budget Coordinator (Upload in SAP)

A. Final Activities 1.Survey 2.Exploratory Drilling 3.Development Drilling 4.Capital 5.R&D 6.JVs 7.Operating Expenditure (OPEX)

1.Drilling Services 2.Cementing Services 3.Mud Services 4.Work over Services 5.WSS Services 6.Well Completion Services

Instructions for Updating/loading budget software

The steps for updating the existing budget software where previous years data files are already loaded, are stated as follows:
Step 1: Copy last years budget from directory C:\Budget to a new directory with changed name. Step 2: Down load the attached Access files Master and Budget and copy it in the folder C:\Budget. The new files will overwrite the Old Master and Budget files already exist in C:\Budget directory.

Step 3: Open folder C:/Budget and execute file Budget.exe. System will prompt, Directory already exists, Press Yes to continue. Contents will be overwritten. Press Yes for as many times as the systems prompts the above message. At the end, the updated software will be loaded on your system. Step 4: Go to utility menu, select merge data and merge data All Region level.
Step 5: Go to Report menu, take summary report at All Region and All Location level to check that summary is blank to signify the deletion of last years data from the system.

The process for updating budget software for the first time on the system is as follows:-

Step 1: Corporate Budget Section will be providing the Budget software to all locations via CD/IP messenger:The budget software consist of the following files Budget 1-Budget9 Setup Setup.Ist Master Total 9 Files 1 File 1 File 1 File 12 Files

Step 2: Copy all these files in a separate folder on your computer and execute file Setup Set up will copy the new software on your PC in default directory C:\Budget.

Step 3: Go to C:\Budget and delete the file Master in C:\Budget directory. Now copy the new file Master (downloaded from the system at step 1) in the folder C:\Budget.

Step 4: Open folder C:\Budget and execute file Budget.exe to load the budget software on your PC
Budget software will be loaded on your computer. Note: 1. Budget.exe file is to be executed only after copying the new file Master in the directory C:\Budget. Otherwise, modifications made in this years budget exercise will not be updated on your PC.

Participation: The budget system in ONGC involves as many people as possible. In drawing up a budget, budget coordinators are appointed at every work centers. Comprehensiveness: Since budget is prepared at cost center level to reap the benefit of accuracy. In this way ONGC embrace the whole organization in budget preparation. Flexibility: Though the corporate budget section passes the budget for the total requirement of fund centre, internal adjustments can be made if one or the other cost centers need for funds exceeds the estimated expenditure so it allow enough flexibility to deal with changing circumstances or new requirements.

First BE is prepared for any year and thereafter RE is prepared. As BE is prepared in advance by a year there may be some limiting internal and external factors in an effective manner RE is prepared for that BE during the month of June. Feedback: Monthly utilization report facilitates constant monitoring of performance. Analysis of costs and revenues: This can be done on the basis of cost centre so before major items are included in budget Administrative Approval (AA) from Competent Authority is needed. The budget is also presented to PAC (Project appraisal committee) for sanction of large projects so that they can examine the cost benefit analysis done by different asset/basin etc.

Thus the studying the finance department of the company, I conclude that the unit is well established and running smoothly not only finance department but also other departments of company are working efficiently with full adopted all the modern techniques in their finance department. It has a prosperous future. So I conclude that Budget formulation process is important and benefits to the all enterprise and also give very important decision that how we will work and how can we earn and also how to achieved the target with available resource.