A SUMMER INTERNSHIP PROJECT REPORT

ON

“STUDY OF TENDERING PROCESS, STREAMLINING OF

PURCHASE ORDERS, BUDGETING AND RUNNING BILLS IN
THE FINANCE DEPARTMENT AT BHEL PSNR NOIDA”

Submitted in partial fulfillment of

Masters of Business Administration (MBA)

Submitted By:
JYOTI MALIK
(Roll Number: 501804060)
Batch: 2018-20
Under the guidance of:
Mr. Vipin Sagar
(Senior Accounts Officer)

L.M. Thapar School of Management

(Thapar Institute of Engineering and Technology, Patiala)

Dera Bassi Campus, Mohali – 140507

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DECLARATION

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 I Jyoti Malik (Roll Number: 501804060) of Batch 2018-2020, a full time bonafide
student of second year of Masters in Business Administration at LM Thapar School of
Management, Thapar Institute of Engineering and Technology, Patiala, Dera Bassi Campus,
hereby certify that the research project titled “Study of tendering process, streamlining of
purchase orders, budgeting and running bills accounted in BHEL PSNR Noida” submitted in
partial fulfilment of the requirements of the MBA program is an original work of mine under the
guidance of Mr. Vipin Sagar (Senior Accounts Officer) including rest of the team in Finance
Department is not based on or reproduced from any existing work of any other person. Further,
the task report did not depend on or duplicated from any before work of mine attempted at some
other time or for some other reason and has not been submitted anyplace else.

Jyoti Malik
Finance Trainee
Roll Number: 501804060

ACKNOWLEDGEMENT

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 The opportunity to work as an intern with BHEL has provided me a great scope for
learning and professional development. I feel grateful for having a chance to meet some
wonderful people and professionals, who helped me throughout. However, this could not have
been possible without the support of my respected mentors.

I am highly indebted to my Summer Internship Project mentor at my college, LM Thapar

School of Management, Mr. Amit Kumar Bhardwaj, for his valuable guidance on the various
aspects of this internship. I express my deepest gratitude to him for guiding me in all my work
and for helping me contribute effectively to the organization.

I also want to place on record, my best regards and deepest sense of gratitude, to my
company guide, Mr. Vipin Sagar, for his careful and precious guidance, which is extremely
valuable for my study, both theoretically and practically.

I will thus strive to use the skills and knowledge gained from this internship, in the best
possible way, in order to attain my desired career objectives.

Thank You

Jyoti Malik
Finance Trainee
Roll Number: 501804060

TABLE OF CONTENTS:

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 S. NO. PARTICULARS PAGE NUMBER

1. Executive Summary 6

Introduction

2. 2.1 Industry Profile 7-9

2.2 Company Profile 10-14

3. Finance Department 15

4. Process of Tendering 16-19

5. Verification of purchase orders 20

6. Verification and consolidation of running bills 21-22

7. Segregation of miscellaneous expenses 23-25

8. Budgeting 26

9. Analysis of working capital management 27-30

Bibliography
10. 31

EXECUTIVE SUMMARY

Bharat Heavy Electricals Limited (BHEL) happens to be the largest engineering and
manufacturing company of its kind in India. The establishment of BHEL in 1964 was the genesis
of heavy electrical equipment industry in India. The company is performing very well in this

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highly competitive era, earning profits consistently and paying dividends uninterruptedly. With
its top-notch performance BHEL attained the coveted ‘Maharatna’ status in 2013.

Being the largest manufacturing company operating in energy sector in India and having
its presence worldwide, it is important that the company maintains its operations in the finance
department in an efficient manner. The finance department at BHEL PSNR is divided into
various sections like works section, provident fund section, miscellaneous bills section, revenue
section, budget section, pay section etc. It is necessary that the working of each section is in an
efficient and effective manner. The project explains the working of three major sections of the
finance department that are, purchase order section, budgeting section and miscellaneous
expenses section. These are the following:

Purchase orders: BHEL is involved in electrical engineering and construction sector

which mainly designs and executes power plant projects. Thus, this requires a lot of purchases,
especially of the major raw materials cement and steel. Since it is a PSU there are a lot of
processes before the actual transaction is carried out. This poses a lot of risks, especially
counterparty risk i.e. if the supplier is using same invoices twice, or if there are some
calculations which are not as per the Purchase order.

Miscellaneous expenses: Apart from cement and steel, BHEL PSNR HQ purchases
various items for their use such as office assets, vehicle hires for various purposes etc. And since
BHEL is a Govt. company, it gets GST credit for some of the transactions based on the nature of
those transactions. Thus, a model was designed to segregate transactions based on the nature,
while also segregating the amount of taxes and the taxable value. This helped in proper
consolidation of the transactions done by the HQ.

Budgeting: This project is about understanding the budgeting process at BHEL. BHEL
follows a bottom up approach of Zero-Based Budgeting to project its financial statements for the
upcoming year. This is done by taking data from the project sites and the corporate headquarter
to arrive at targets that are to be achieved in the upcoming financial year. Also, cost targets are
also made to minimize costs and maximize the bottom line.

Working capital analysis: This project is about analyzing the working capital
management of BHEL and understanding the policies of the company relating to vendor
management, customer management, cash management etc. Generally, companies are moving
towards a negative working capital but since PSUs have a responsibility of not only thinking

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about the bottom line but also uplifting other related industries, their policies are more
conservative and relaxed towards vendors and customers.

INTRODUCTION:

INDUSTRY PROFILE

Heavy industry sector is one of the core sectors of Indian economy. Therefore, its fund
requirements are inverse keeping in view the scale and size of the industrial units in the sector,
the financial requirements are also huge. The heavy engineering sector is driving primarily by
technology. This, coupled with the fact that the initial investment required for heavy engineering
or capital goods manufacturing facilities is relatively high, creates relatively high entry barriers.

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Any business enterprises viability eventually boils down to cost – return trade off. Cost of funds
is undoubtedly, the most important determined of the viability. This becomes more crucial in
heavy engineering sectors.

The development of the Indian heavy electrical machinery industry is directly linked to
the Performance of the Power sector in India. With India’s development, the need for more and
Better Power supply has become essential for industries to grow. Thus with increasing focus on
capacity expansion in the Power sector, the heavy electrical machinery manufacturing industry is
expanding vigorously.

BACKGROUND:

Heavy Electrical Industry covers power generation, transmission and distribution and
utilization equipments. These include turbo generators, boilers, various types of turbines,
transformers, switchgears and other allied items. Majority of the products manufactured by
heavy electrical industry in the country, which includes items like transformers, switchgears etc.
are used by all sectors of the Indian economy. Some major areas where these are used are the
multi core projects for power generation including nuclear power stations, petrochemical
complexes, chemical plants, integrated steel plants, non-ferrous metal units, etc.

HISTORY:

India is the only other developing country besides China, which produces a full range of
electric power generation and transmission equipment. In fact, the history and growth of (Bharat
Heavy Electricals Ltd.), a public sector enterprise under in the country, symbolizes the overall
growth pattern of heavy electrical industry in the country. BHEL has the unique distinction of
being one of the very few companies in the world, manufacturing all major power generating
equipment under one roof .The industry has been upgrading the existing technology and is now
capable of taking up turnkey contracts also for export markets. The industry has been deli
censed. Foreign collaborations are allowed with 100 percent FDI. The country is planning to add
150,000 MW power generation capacities in the next 10 years. This will generate substantial

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demand for heavy electrical equipments. The heavy electrical industry is capable of
manufacturing transmission and distribution equipment up to 400 KV AC and high voltage DC.
The industry has taken up the work of up gradation and transmission to the next higher voltage
system of 765 KV and have upgraded their manufacturing facilities to supply 765 KV class
transformers, reactors, CTS, CVT, bushing and insulators, etc.

The investments in R & D by the electrical industry are amongst the largest in the
corporate sector in India. Large electrical equipment used in steel plants, petrochemical
complexes and other such heavy industries are also being manufactured in the country. The
domestic heavy electrical equipment manufacturers are making use of the developments of the
global market with respect to product designs and upgrading of manufacturing and testing
facilities. The heavy electrical industry has established its reference in the global arena also.
These encompass thermal, hydro and gas based power plants, substation projects, rehabilitation
projects, besides a wide variety of products like transformers, photo voltaic equipment’s,
insulators, switchgears, motors, etc.

Turbines and Generator Sets:

The capacity established for manufacture of various kinds of turbines such as steam &
hydro turbines including Industrial turbines is more than 7000 MW per annum in the country.
Apart from BHEL, the public sector unit that has the largest installed capacity, there are units in
the private sector also manufacturing steam & hydro turbines for power generation and industrial
use. The manufacturing range of BHEL includes steam turbines upto 660 MW unit rating and the
facilities are available for 1000 MW unit size. They have the capability to manufacture gas
turbines upto 260 MW (ISO) rating and gas turbine based Co-generation and Combined Cycle
Systems for the industry and utility applications. Custom built conventional hydro turbines of
Kaplan, Francis and Pelton types with matching generators are also available indigenously.

AC Generators manufactured in India are on par with international AC Generators and

consistently deliver high quality power with high performance. Domestic manufacturers are
capable of manufacturing AC Generator right from 0.5 KVA to 25,000 KVA and above with
specified voltage rating. The imports and exports of turbines and generators during 2005-06 were
Rs. 2420 crore and Rs. 565 crore respectively.

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Boilers:

Bharat Heavy Electrical Ltd.(BHEL) is the largest manufacturer of boilers in the country
(with more than 60% share) and has the capacity to manufacture boilers for Super Thermal
Power Plants apart from utility boilers and industrial boilers. The industry has the capability to
manufacture boilers with super critical parameters upto 1,000 MW unit size. The domestic
industry has the capacity to meet the indigenous requirement / demand for boilers. The imports
and exports of boilers during 2005-06 were Rs.160 crore and Rs.242 crore respectively.

Transformers:

The domestic transformer industry is well established with capability to provide state of-
the-art equipments. The industry has the capacity to manufacture whole range of power and
distribution transformers including the REC rating of 25,53,100 KVA and also the extra High
voltage ranges of 400 kV, 600 MVA. Special types of transformers required for furnaces,
rectifiers electric tract etc. and series and shunt reactors as well as HVDC transmission upto 500
kV are also being manufactured in the country. The imports and exports of transformers during
2005-06 were Rs.1800 crore and Rs.1640 crore respectively.

Switchgear and Control Gear:

In India, the entire range of circuit breakers from bulk oil, minimum oil, air blast, vacuum
to SF6 are manufactured to standard specification for the benefit of customers. The ranges of
products produced cover the entire voltage range for 240V to 800KV, switchgear and control
gear, MCBs, air circuit breakers, switches, rewire able fuses and HRC fuses with their respective
fuse bases, holders and starters. The industry is competitive in the field of design and
engineering as the skill sets available in the country are relatively less expensive. The imports
and exports of the above equipments during 2005-06 were around Rs.1690 crore and Rs. 1108
crore respectively.

Electrical Furnaces:

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 Electrical Furnaces are used in Metallurgical and Engineering industries like forging and
foundry, machine tools, automobiles etc. Adequate capacity for production of these products has
been established. The imports and exports of electrical furnaces during 2005-06 were around
Rs.186 crore and Rs. 108 crore respectively.

COMPANY PROFILE

BHEL, one of India’s largest engineering and manufacturing enterprises in the energy
and infrastructure sectors and a leading power equipment manufacturer globally, is a celebration
of India’s industrial achievements. In its journey of over 55 years, it has gained the status of
being one of the strongest pillars of Indian industry. BHEL serves the core sectors of the
economy and provides a comprehensive portfolio of products, systems and services to customers
in power, transmission, transportation, renewables, water, defence & aerospace, oil & gas, and
industry. BHEL has created value for its stakeholders due to the scale and depth of its operations,
rich experience, competent manpower, innovative ecosystem, diverse product-mix and focus on
sustainable business solutions. BHEL’s greatest asset- its highly skilled and committed
workforce of more than 35,000 employees is the cornerstone of its success. BHEL’s commitment
to nation building reflects in many waysin its contribution to the country’s installed power

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generation capacity; bringing the latest state-of-the-art technology to the country; consistent
highest expenditure of more than 2.5% of its turnover on R&D and innovation in the Indian
engineering segment; pan-India presence; establishment of world-class assets, and contribution
to the society at large through initiatives in skilling youth, health & hygiene, education,
cleanliness and environment protection, to name a few.

With a widespread network of 16 manufacturing facilities, 2 repair units, 4 regional

offices, 8 service centres, 1 subsidiary, 3 active joint ventures, 15 regional marketing centres, 3
overseas offices and current project execution at more than 150 project sites across India and
abroad, BHEL manufactures a wide range of high quality & reliable products adhering to
national and international standards. The worldwide installed base of power generating
equipment supplied by BHEL exceeds 185 GW - making it the undisputed leader amongst Indian
power plant equipment manufacturers.

Considering thermal, nuclear, hydro & gas based power plants, BHEL has installed more
than 1000 power generating sets in the country. BHEL has a widespread footprint in all the
inhabited continents of the world with references in 83 countries including Bangladesh, Bhutan,
Nepal, Indonesia, Oman, Iraq, Sudan, Afghanistan, United States and New Zealand. Till date,
BHEL has installed around 11 GW power generating capacity in overseas markets, and an
additional 6 GW is under execution.

POWER SECTOR:

BHEL is one of the few companies in the world having the capability to manufacture the
entire range of power plant equipment, with proven capabilities for executing thermal, gas, hydro
and nuclear power projects. Offerings include:

● Steam turbines, generators, boilers and auxiliary equipment for fossil-fuel applications
upto 1000 MW unit size

● Emission control equipment including Flue Gas Desulphurisation systems for SOx
emission control, high efficiency Electrostatic Precipitators for particulate emission
control and Selective Catalytic Reduction systems for NOx emission control

● Gas turbines and generators upto 297 MW unit size

● Hydro turbines and generators up to 400 MW unit size

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 ● 220/235/540/550/700 MWe nuclear turbine generator sets

● Plant performance improvement through renovation, modernization, uprating, residual

life assessment, health diagnostics and life extension of plants

INDUSTRY SECTOR:

BHEL is a name to reckon with in various sectors of the industry. More than half of the
rolling stock of Indian Railways is equipped with BHEL made traction equipment. BHEL has
commissioned 200+ electric substations and 5 major HVDC projects in the country, and is one of
the largest manufacturers and suppliers of electrical AC machines in the country.

BHEL is a leading manufacturer of a variety of Industrial Systems & Products for the core
sectors of the economy. Major areas of operation and offerings include:

● Transportation: Mostly of the trains operated by the Indian railways, including the
metro in Calcutta, are equipped with BHEL’s traction electrics and traction control
equipment. The company supplies electric locomotives to Indian Railways and diesel
shunting locomotives to various industries. Battery powered road vehicles are also
manufactured by the company. BHEL also supplies traction electrics and traction control
equipment for electric locos, diesel electric locos, and EMUs/ DEMUs to the railways. 

● Telecommunication: BHEL also caters to telecommunication sector by way of small,

medium, and large switching systems. 

● Renewable energy: Technologies that can be offered by BHEL for exploiting non-
conventional and renewable resources of energy include: wind electric generators, solar
power based water pumps, lighting and heating systems. The company manufactures
wind electric generators of unit size up to 250 KW for wind farms, to meet the growing
demand for harnessing wind energy.

● E-mobility: Electric vehicle chargers, electric power train, lithium ion battery packs,
electric vehicles, power conditioning system, emery management system, containerized
solutions for energy storage systems, EPC solutions for railway rack electrification

● Defence & Aerospace: Strategic equipment for Indian defence forces including Super
Rapid Gun Mount & Integrated Platform Management System for naval ships, Heat
exchangers for LCA, Turret castings for T72 tanks, castings for ships, and simulators etc.

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 ● Water: Complete water management solutions for power plants, industries and
municipal applications including Pre Treatment plants, Seawater Reverse Osmosis plants,
Demineralization plants, Effluent Treatment plants, Sewage Treatment plants, Tertiary
Treatment Plants and Zero Liquid Discharge systems

● Transmission: EHV & UHV substations ranging from 132 KV to 765 KV & HVDC
converter stations up to ±800 KV, power transformers, shunt reactors, vacuum & SF6
switchgear, gas insulated switchgears, ceramic insulators, Flexible AC Transmission
system devices etc.

● Industrial products: Range of industrial products including oil rigs, wellheads & Xmas
tree valves, mechanical packages, fabricated equipment & boiler feed pumps,
compressors & AC machines

● Captive Power projects: Steam and Gas Turbine based Captive Power Plants

All Indian satellites launched by ISRO are equipped with BHEL supplied solar panels
and batteries. BHEL’s solar portfolio of more than 700 MW spread across the country
includes ground mounted, rooftop, canal top and floating PV plants. BHEL is a trusted
supplier of naval guns to Indian navy for their warships.

BHEL is building on its technology capabilities and committed workforce to create new
sources of strength enabling its transformation. Company’s 35,000+ strong workforce is focusing
on new business opportunities to grow, develop and realize their full potential. One of the major
enablers of company’s success in its transformation initiatives is its focus on developing
innovative technological solutions to drive competitiveness in its businesses. BHEL is well on its
way to realize its vision of ‘Creating BHEL of tomorrow’. The journey is filled with exciting
opportunities and gruelling challenges. Company’s resolute focus and efforts towards ensuring
success of its initiatives will be the key to thrive in the future.

RECOGNITION OF EXCELLENCE:

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 Continuing its tradition of winning prestigious national/ international recognitions, the
organization and its employees won several awards during the year. Notable among these
include:

● 17 Vishwakarma Rashtriya Puraskars to 82 BHEL employees for their innovative

suggestions leading to cost reduction, improvement in quality, productivity and working
conditions, etc.

● Six National Safety Awards for outstanding achievements in terms of longest accident
free period and lowest accident frequency rate.

● Award by Ministry of MSME for supporting SC/ST Entrepreneur in Maharatna Category.

● EEPC National Award for Export Excellence in the category ‘Star Performer for the year
2016-17 in the product group – Project Exports - Large Enterprise’.

● Recognized as one of the top 12 innovators in India and conferred the Clarivate Analytics
India Innovation Award 2018 in the ‘Corporations’ category

● Dun & Bradstreet Corporate Award 2018 in the ‘Engineering Projects/Capital Goods’
category.

● CBIP Award 2019 for ‘Best Power Equipment Manufacturing Organization’ for New &
Renewable Energy & Power.

● Safety Innovation Award 2018 for performance years 2016 & 2017 from The Institution
of Engineers.

● Governance Now PSU Award 2019 for being ‘Best PSE in Strategic Performance’
among all State and Central Public Sector Enterprises, and the ‘Best PSE in
Digitalization’.

● Excellence in Manufacturing of Rolling Stock Components and New Innovations by Rail

Analysis.

● ICAI National Award for Excellence in Cost Management 2017.

● ICC PSE Excellence Award – Felicitation of CMD, BHEL for outstanding contribution
to Public Sector Industry.

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 ● Indian Chamber of Commerce (ICC) PSE Excellence Award – Runner Up Trophy for
HRM Excellence, CSR & Sustainability and R&D, Technology Deployment &
Innovation.

● SKOCH Order of Merit in the category of Corporate Excellence for Technology

Deployment in battery energy storage system.

VISION of BHEL:

“A global Engineering Enterprise providing solutions for a better tomorrow.”

The company is striving to give shape to its aspiration and fulfill the expectations of the
country to become global player. The greatest strength of BHEL is its highly skilled and
committed 47,525 employees. BHEL has Installed equipment for over 90,000 MW of power
generation for utilities, Captive and Industrial users. Supplied over 2,25,000 MVA transformer
capacity and other equipment operating in Transmission & Distribution network up to 400kv
(AC & DC).

MISSION of BHEL:

“Providing Sustainable Business Solutions in the Fields of Energy, Industry &

Infrastructure.”

STRATEGY:

Survive: After witnessing a declining performance trend up to 2015-16, the first goal of the
company during last two years was to regain profitability and growth. They gave utmost priority
to expeditious Execution of orders coupled with strict cost control, efficient utilisation of
resources through Consolidation, and enhancing speed of response through Simplification.
Strong focus on conversion of non-executable orders into executable ones; consolidation and
restructuring of corporate functions and business groups; manpower audit; simplification of
policies and procedures, and greater application of IT in business processes were some of the
initiatives your company successfully executed. This was the ‘Survival’ strategy, which enabled

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the company to not only reverse the declining performance trends, but also pursue the
momentum of improved performance.

Revive: While it has been satisfying to see the company back on growth path, the strategies
to build new sources of strength are imperative for sustained ‘Revival’ of the company. This
includes building Assertiveness to protect leadership in the core business and the grit of never
settling for anything less, holistic Development of our most important asset – our people, in
alignment with future business requirements, and maximum harnessing of Digitalization to
create new growth opportunities and improve operational excellence. Portfolio expansion in core
business; policy and structural changes for giving impetus to employee development and
motivation; development of IoT based solutions for utilities; and digitalization of all employee-
utility services are being executed. This is the key to growth in medium term and to surpass the
company’s own benchmarks.

Thrive: To take the company to the next level, where the company aspires to ‘Thrive’ and
move towards the vision of becoming a global engineering enterprise, the company continues to
focus on Globalization, and Diversification to increase business from non-coal areas, and further
strengthen their Innovation capabilities. Accordingly, the company has created and restructured
business verticals for emerging opportunities. Development of technologies such as advanced
ultra-supercritical technology for power generation, propulsion system for electric vehicles and
coal to methanol have been taken up in mission mode. The nine elements – ECS, ADD, GDI,
together named as Nine Elements for Executing Vision (NEEV), are integral part of strategic
plan ‘The Road to 2022’ of your company and are the foundation of our transformation journey
‘Creating BHEL of Tomorrow’.

COMPANY’S RELATIVE POSITION IN THE INDUSTRY:

It is an integrated power plant equipment manufacturer and one of the oldest and largest
engineering and manufacturing enterprise of India. It is world’s 12th largest power equipment
manufacturer. It is India’s ninth largest public sector undertaking. BHEL is one of the few
companies of the world who have the capability to manufacture entire range of power plant
equipment. Forbes business magazine of the year 2011 ranked BHEL as the ninth most
innovative company of the world. BHEL is the only Indian engineering company to be listed.

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2010 edition of Forbes Asia’s fabulous list placed BHEL at 4th place. BHEL has been
continuously earning profit since 1971-72.

FINANCE DEPARTMENT:

The Finance Department (Works Accounts Section) deals with various items of work as
envisaged under Works Policy like scrutiny of proposals/tenders, concurrence for award of
works/services, related post-award activities viz. passing of bills for payments and maintenance
of account, record of expenditure on works/services carried out by Executing departments
including civil, structural, erection, commissioning and all other works/services. For convenience
of operation, the section is generally divided into three groups namely:

a) Works Finance

b) Works Bills

c) Works Accounting

The broad work allotted to these groups are indicated below:

Works finance group:

a) Concurrence/Vetting of estimates and scrutiny of tenders

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 b) Scrutiny of proposals for availability of Budget

c) Scrutiny of contracts, amendments and deviation/variation orders thereto

d) Financial advice/concurrence to various proposals for works/services, their award and

amendments thereto

Works Bills Group:

a) Checking and payment of contractors’ and suppliers’ bills, checking of Measurement

Books and maintenance of contractors’ ledger.

b) Checking and recoupment of imprest accounts, payment and adjustment of departmental

advances pertaining to officers of Executing department and checking and payment of
miscellaneous bills like payments for acquisition of land, interest and maintenance
charges on railway sidings etc.

c) Maintenance of data either in electronic form or manually (data maintained in electric

form should be periodically archived and timely retrieval to be ensured) through various
registers like security deposit register, earnest money deposit register, advances registers,
contractor’s ledger or any other register/form under WAM

Works Accounting Group:

a) Accounting of payments and stores transactions relating to Executing department.

b) Maintenance of subsidiary records either in electronic form or manually (data maintained

in electronic form should be periodically archived and timely retrieval to be ensured)
relating to cost of individual works/services undertaken for construction including civil,
structural, erection, commissioning and all other works/services defined elsewhere in the
manual and deposit works.

c) Reporting on the financial progress of works as required at various levels of management.

d) Verification of completion reports/services and deviation statement of actual expenditure

vis-à-vis their awarded value.

PROCESS OF TENDERING:

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 The tender system is adopted to procure works/services at the most competitive rates and
to eliminate chances of favour to any contractor.

Two part bid system may be resorted to in line with the extant works policy. This
involves obtaining offers in two separate covers. Techno commercial bid and price bid, one
containing techno commercial details along with the required EMD including documents in
support of fulfilling qualifying requirements and the other cover containing the price bid which
will be opened subsequently for the techno-commercially qualified bidders.

Wherever bidders need to be pre-qualified first, bids can also be invited in three parts that
are, Pre-qualification, Techno-commercial and Price bids.

Requirements of Tender:

The prospective tenderers should have access to all relevant drawings, documents, Special
Conditions of Contract, General Conditions of Contract, Technical Conditions of the Contract
etc., necessary for them to furnish competitive quotations. In all cases the document should
include:

a) The type of contractors from whom tenders are invited.

b) PQ requirements/Eligibility criteria.

c) Name of the work/service.

d) Period of completion of the work/service.

e) Earnest money to be deposited as applicable.

f) Date of sale of tender form as applicable.

g) Tender fee, mode of payment and to whom it is to be paid as applicable.

h) Place of receipt of the tender, date and time.

i) Place, date and time of opening of the tender.

j) List of documents forming part of tender including GCC, SCC, TCC, applicable
drawings and documents etc.

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 k) Security Deposit in part or in full needs to be collected before start of work in line with
the extant Works Policy.

The tender should also specify the reservation of the right by the Company to cancel the
tender or reject the lowest or any tender or accept any tender in full or in part without assigning
any reasons whatsoever.

The tender form supplied to the intending tenderers should mention the applicability of the
general conditions of contract to the tender and the contract to be entered into as well as any
special conditions which the tenderer will have to take into account.

Types of Tenders:

● Open tender: An open tender is one which is opened to all vendors. A public
notification is issued via various media describing the specifications of what is
required and till when the vendors can submit their bids. The main distinction of
this type of tender is that anyone can give a bid. All the vendors submitting a bid
have to pay a fee which is which is in the range of Rs 2000-10000 (refundable).

Example: A tender for procurement of steel is a type of open tender as any steel
vendor can submit a bid for the same.

● Limited tender: A limited tender is a type of tender that is opened to a limited

number of vendors. This could be due to quality concerns about including all the
vendors. The procedure here is also similar that all the vendors submitting the bid
have to pay a fee which is refundable.

Example: The tender of catering and supplying food to PSNR HQ is a limited

tender.

● Single tender: A single tender is one which is opened to only one party. This type
of tender is used when the company has to comply with certain rules or
regulations, which may or may not be legal in nature. Example: The spare parts of
cranes used for construction are procured through single tender only, as if other

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 company’s parts are used, they may damage the machine and the warranty
becomes void.

Once it is decided what kind of tender it would be, the company arrives at the reserve
price for the tender. This is done by looking at past records if BHEL has ever subcontracted that
kind of work before, and if yes what was the final price for that. If BHEL has not done that kind
of work, they look for peers who have done similar kind of work and its price. And if the task is
completely new for the industry, the task is broken into smaller steps and again the process is
repeated. Once BHEL gets to know the price, they make various adjustments such as adjusting
for inflation etc. to arrive at the final reserve price. This final reserve price is given in the
advertisement of tender.

Opening of tenders and preparation of comparative statement of tenders:

All tenders shall be opened at a specified place and appointed date and time (or the extended
date/time, if any) in accordance with the provisions of the extant Works Policy. Bids/Quotations
to be carefully checked and countersigned by tender opening committee for:

a) Cuttings/fluid use;

b) Overwriting

c) Handwritten insertions

d) Insertions in different type/font

Proper records of tender opening, clarifications, MOMs etc, shall be kept. Also
figures/phrases indicating prices/discounts etc, should be encircled and countersigned by
tender opening committee.

e) The tender documents are complete in all respects;

f) They are accompanied by all the documents required to be submitted as per NIT as well
as prescribed earnest money deposit.

g) In case of any deficiency/shortcoming/non-clarity in any of the documents in support of

meeting any of the PQR criteria, the same may be called for from the bidders allowing a
reasonable time period for submission and considered for evaluation, subject to prior
approval of the Head of the Contracting Department.

h) Tender committee should sign on all the pages of all the offers.

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 i) Before the bid is opened, the representative of the contracting department present at the
time of opening of bids should verify that the tenders and the quotations are received only
from the agencies to whom the tender enquiry have been sent in case of single/limited
tenders. Unsolicited tenders are not to be opened.

Once the tender is floated, various parties/vendors bid for the work. BHEL goes through all
the bids and selects those who satisfy the criteria mentioned. The ones who are shortlisted at this
stage have to 2% of the total amount of the contract as Earnest Money Deposit (EMD) which is
refundable.

The EMD furnished by the agencies through DD/bankers cheques, is forwarded by the
contracted department to Finance for encashment and credit.

Price bids of only techno-commercial qualified parties shall be opened.

The rates quoted by the bidders are tabulated in the form of a comparative statement (CST)
by the contracting department. The CST shows the name of the work, reference to the estimate,
description of the items of work, quantity and rate as per the sanctioned estimate besides
indicating the rates quoted by the tenderers. The particulars regarding the representatives of
BHEL who opened the tender, the date of opening and the number of tenders received will also
be indicated at the top of the statement. The total cost of the tender work and the percentage of
variation from the estimated cost will be worked out and shown at the bottom of the column
intended for each tenderer. The CST will be checked independently by an officer of the
Contracting department along with a certificate as to the inclusion of all tenderers whose price
bids have been opened. The CST shall be vetted by Finance.

After the vendors are shortlisted after technical scrutiny, the bids of those vendors are
checked and the bid with lowest cost to BHEL is designated L1 (Lowest 1). This L1 vendor is
then called for negotiation.

After final negotiation, the vendor has to submit 10% of the contract amount as security
money. This money is divided into two parts of 5% each. The first part is to be deposited by the
vendor immediately at the award of contract as either a Bank Guarantee (BG) or Fixed Deposit
Receipt (FDR) in favor of BHEL. The second part is paid by the vendor in the form that when
each milestone of the contract is reached, BHEL cuts this money from the payment that is to be
done to the supplier.

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 This 10% is refunded when the contract is completed as per the specified conditions. In case
the specifications have not been met, BHEL keeps this money until the aforesaid work is done or
the dispute is settled in court.

VERIFICATION OF PURCHASE ORDERS:

A purchase order (PO) is a commercial document and first official offer issued by a buyer
to a seller indicating types, quantities, and agreed prices for products or services. It is used to
control the purchasing of products and services from external suppliers. Companies use purchase
orders for several reasons. Purchase orders allow buyers to clearly and explicitly communicate
their intentions to sellers. They may also help a purchasing agent to manage incoming orders and
pending orders. Sellers are also protected by POs in case of a buyer's refusal to pay for goods or
services.

Purchase orders provide benefits in that they streamline the purchasing process to a
standard procedure. Commercial lenders or financial institutions may provide financial
assistance on the basis of purchase orders.

BHEL being a construction company, the most purchased materials are cement and steel.
But there is an issue of documenting the purchases made, calculating how much is to be paid per
unit (including freight, GST etc), how much is to be paid to a supplier for a purchase order,
whether there is any delay charges etc. The process of payment to a supplier at BHEL is as
follows:

1. Once the goods receive the project site, they are entered in a Store Receipt Voucher
(SRV).

2. The invoices, test certificates, lorry/rail receipts and Material Dispatch Clearance
Certificate (MDCC) are sent to BHEL PSNR HQ and these need to verified.

3. The purchases department makes an excel file of all the invoices received along with
other relevant details such as material dispatched, material received at site, material

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 accounted for, delay and net amount payable and shares this excel with finance
department.

4. The finance department verifies this data with its own calculations for everything and by
cross referencing the documents i.e. for one invoice, its test certificate, lorry/rail receipt
and MDCC should be present. The calculations are then checked.

5. If the calculations are matched, a Debit Advice Slip (DAS) is created which is then
forwarded to General Manager, Finance to approve payment.

So all this need to be verified before making the actual payment.

VERIFICATION AND CONSOLIDATION OF RUNNING BILLS

Running account bills denote the account with a contractor when payment for work or
supplies is made to him at convenient intervals subject to final settlement of the accounts on the
completion or determination of his contract. The contractors may not be able to wait till the
entire work as per contract is completed and may like to receive payment during the progress of
work itself. With a view to avoid hardship to a contractor, arrangements in line with the contract
provision, running account bills are made for payment at periodic intervals either as prescribed in
the agreement or otherwise as may be convenient, for the quantities of work done upto a certain
period as per measurements recorded in the measurement book. The bills for such interim
payments are on account of advance payments and are prepared in the running account bill form.
As a rule, payments should be made according to the extent of work done as per measurements
taken from time to time upto the point of preparation of the bills. Payments are made after
deducting all recoveries due towards issue of materials, service charges, security deposit, income
tax, works contract tax etc.

The final bill is drawn as soon as the entire work is completed. From the final amount
due, all amounts already claimed upto the previous running bill will be deducted.

Measurement Book:

It is a permanent record to record the detailed measurement of quantity of work carried

out for the purpose of making payment and for recording details of payment. Payments for all

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works done and supplies made by contractors bills for works and secured advances are to be
made on the basis of measurements recorded in the measurement book. Measurement books are
an important basic record with regard to maintenance of which a great care should be exercised.

BHEL has many sites where some products need to be delivered for the work (for
example, to setup a power plant). The products required are in parts or we can say that some
machines are required again and again. So the bills are made on regular intervals as the products
are required and the machines are used. So a measurement book needs to be made to record the
measurement of quantity of work carried out for the purpose of making payment and for
recording details of payment.

My task was to verify the following items in the measurement book (and an excel sheet is
to be maintained for the same):

1. Arithmetical accuracy of all calculations.

2. Measurements recorded in the MB should be arithmetically checked.

3. Quantities indicated in the bill against Abstract/ Detailed MB and

correctness of total claim under each item.

4. All the dues from the contractor are effected correctly as per the contractor
ledger, register of mobilization advance, materials issued account.

5. Dates of recording of measurements and check measurements.

6. Quantity as per agreement

7. Quantity executed per date

8. Rate of the work done

9. Number of units

10. Payment on the basis of actual measurement upto date.

There were 74 running account bills in the measurement book. An excel sheet was
provided to me and I had to verify the above-mentioned items in the measurement book with
help of that excel sheet. The excel sheet contains activity number for a particular work which
needs to be matched from the measurement book, the quantity executed upto date is to be filled

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from the MB and according to this the payment upto date is calculated by multiplying the
quantity with the rate (rate is already given).

Simultaneously consolidation of the running bills was to be done in the RAB wise
payment details excel sheet which included calculation of net amount after deducting retention
(5%) and security deposit (10%) of each RAB.

SEGREGATION OF MISCELLANEOUS EXPENSES:

One part of my internship project was to develop an excel model that can be used to
document miscellaneous expenses for BHEL PSNR HQ, and segregate those transactions on the
basis of the purpose of payment, and differentiate the GST, the taxable amount, and the type of
GST that whether it is IGST or CGST and SGST. 

A model for documenting these transactions was already in place but all the segregation
was done manually which was very hassling and time consuming. So, a format was given to me
and the type of transactions were explained. I made some changes to the format and created the
model which led to automation of the segregation process. This model uses nested if formulas,
lookup formulas and data validation to segregate the transactions. 

The need for this model is because even though BHEL and the ERP is compliant with
GST, the auditors require that data in excel format. This model solves that need. 

The following are the snapshots of the GST model I designed.

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 The user has to enter the first few fields i.e. date, DAS no, vendor code, HSN code, type
of transaction, invoice number and date, quantity purchased, total amount and tax type. Various
formulas have been out in to do the rest of the task. Data validation is used for recognition of tax
types whether the tax falls under IGST, CGST and SGST and OTHERS. The tax type for

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expenses of vehicle hire are not entered under the IGST or CGST and SGST. They are included
in others and are entered under section 17 (5).

In the last column, there is a check that if the cell in that row shows a value other than 0
or N/A then there is an issue with the entry. This segregation is necessary for the company to
identify excessive administrative costs and take decisions accordingly. Further, the auditors
require this data in excel format so this is used there also.

⚫ HSN stands for Harmonized System of Nomenclature which was developed by the World
Customs Organization (WCO) with the vision of classifying goods all over the World in a
systematic manner. HSN contains six digit uniform code that classifies 5,000+ products
and which is accepted worldwide. This type of classification is used for taxation purposes
in identifying the rate of tax applicable to a product in a country. This code is also used to
determine the quantum of item traded or imported all through a nation.

⚫ SAC Code or Services Accounting Code is a classification system for services developed
by the Service Tax Department of India. Using SAC code, the GST rates for services are
fixed in five slabs namely 0%, 5%, 12%, 18% and 28%. If a service is not exempted from
GST or if the GST rates are not provided, then the default GST rate for services of 18%
would be applicable.

⚫ Reverse Charge means the liability to pay tax by the recipient of supply of goods or
services instead of the supplier of such goods or services.

BUDGETING:
A part of my project was to understand how BHEL PSNR does budgeting for its various
project sites and submits to corporate office, who consolidate the data and then make the final
forecast month wise, quarter wise, and for the full year.

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 BHEL follows the policy of Zero-Based Budgeting (ZBB) i.e. at the beginning of the
financial year, each of the heads of the income statement and cash flow statement are treated as
zero. Each head is calculated separately based on the underlying factors, and then a projected
income statement is made. This statement is made in accordance with IND AS 7 i.e. the
accounting standard for construction contracts. This income statement is made on a monthly
basis and then consolidated to make both the quarterly and yearly statements. This statement
combined with existing balance sheet is used to make a projected cash flow statement. The
company then takes its various decisions based on these projected statements. These projections
are revisited and revised quarterly to make more accurate decision for the next quarters.

The approach BHEL follows is as follows:

1. The basic format of an income statement is studied, and the actual data of previous year
in all three forms i.e. annual, quarterly and monthly.

2. Various project sites are contacted by BHEL PSNR to understand what stage of work
they are at to estimate future costs and revenues. The accounting standard says that since
revenues and costs for construction contracts fall in different accounting periods,
expected revenues should be appropriated according to costs and recognized. Differences
in actual revenue and projected revenue should be considered in the coming periods.

3. This data is consolidated and adjusted according to company policies.

4. Further, revenues and costs are broken down into months and quarters based on previous
trends i.e. by analyzing previous year’s financial statements.

5. Now that the projected monthly income statement is made, the cash flow statement is
made in accordance with company policies about trade receivables/payables;
purchase/disposal of assets etc.

6. This income statement and cash flow statement is submitted to the Corporate
Headquarters of BHEL, who then analyze this and give target revenues for the year.

7. These target revenues are shared with the project sites to achieve.

8. Cost targets are given to BHEL PSNR HQ based on the income statement.

9. The projected revenues are revised each month to get a clear picture and facilitate
decision making for future projects and plans.

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 ANALYSIS OF WORKING CAPITAL MANAGEMENT
Working capital refer to that part of total capital which is used for carrying out the routine
or regular business operation. In other words, it is the amount of funds used for financing the
day-to day operation. In short, it is the capital with which the business is worked over.
Thus, the capital invested and locked up in various current assets , such as stocks of raw material,
work in progress , stocks of finished goods account receivable and cash and bank balances
constitutes the working capital.

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 Ratio Analysis: A ratio may be defined as a fixed relationship in degree or number
between two numbers. In finance, ratios are used to point out relationship that is not obvious
from the row data. Some uses financial ratios are following:

(1) To Compare Different Companies in Some Industry: ratio can high light the factors
association with successful and unsuccessful firms. They can reveal strong firms and weak firms,
overvalued undervalued firms.

(2) To Compare Different Industries: Every industry has its own unique set of operating and
financial characteristics. These can be identified with the help of ratios.

(3) To Compare Performance in the Different Time Periods: Over a period of years, a firm or a
industry develop certain forms that may indicate future success or failure. If relationship changes
in firms data over different time periods, the ratio may provide clues and trends of future
problems.

Net Working Capital: It refers to the excess of current assets over current assets over
current liabilities. Net working capital= Current Assets- Current Liabilities

The Net Working Capital determines the firm’s ability to pay off its current obligations.
In the year 2018-19, the company had low WC . Further we notice that net working capital has
also decreased, which means that the company is moving towards less working capital and
moving to a balanced working capital management approach.

Inventory Turnover Ratio: This ratio establishes the relationship between the cost of
goods sold during a given period and the average stock holding during that period. It indicates

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the operational and marketing efficiency. It helps in evaluating inventory policy to avoid
overstocking. Inventory Turnover Ratio = Sales Average inventory

From the graph we can see that the inventory turnover ratio is high in 2018-19 but in the year
2015-16 its comedown, the reason could be, less orders which impacts in less inventory, from
2016-17 to 2018-19, there is an increase which determines the firm has got more orders. Bhel
policy is that, they start procuring inventory only once they get orders and only then they stock
raw materials, the raw materials in store is only 20% and rest will be procured once they get
orders. So the high inventory turnover determines the operating efficiency of the company.

Current Ratio: It gives the relationship between current assets and current liabilities and
indicates the extent to which short-term creditors are safe in terms of liquidity of the current
assets. Higher the value of current ratio, more liquid the firm is and more ability it has to pay its
bills but a very high ratio also indicates slackness of management practices and excessive
holding of current assets.

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 The current ratio is falling, which means either the current assets are falling or current
liabilities are increasing. On further analysis, it is found that both current assets and current
liabilities have fallen, but the current assets have fallen at higher rate than liabilities

Quick Ratio: It expresses the relationship between quick assets and current liabilities. It is more
refined rule to measure the liquidity in an organization. It represents the ability of the company
to pay its debts without relying on the sale of its inventories

The ideal ratio of quick assets is 1:1. But the firm’s Quick ratio is ranging from 1.59 to .
84 i.e., from the year 2015-2019. The firm does not pay off the debts based on the sales, because
all the projects undertaken are long term and its conversion period ranges to 3-4 years, so it is
difficult to rely on sales. So they mostly depend on corporate head office to finance from the
advances taken from the customers

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Working Capital Turnover Ratio: indicates the velocity of the utilization of net working
capital. This ratio represents the number of times the working capital is turned over in the course
of year and is calculated as follows Working Capital Turnover Ratio= Sales/ Net working capital

After 2016 the ratio start increasing. It indicates that there is efficient utilization of
working capital. There by in the following years, it has seen the decreasing amount of working
capital turnover every year, it shows that the sales has increased thereby, increase in net working
capital.

CONCLUSION:

From this evidence it can be concluded that the company is improving its operational efficiencies
and working capital management is a part of it. Thus, the company would offer higher returns to
its stakeholders in the coming time owing to improvements in its operations

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 BIBLIOGRAPHY:

●www.bhel.com/home.php

● www.economictimes.indiatimes.com/bharat-heavy-
electricalsltd/infocompanyhistory/companyid-11831.cms

●https://en.wikipedia.org/wiki/Bharat_Heavy_Electricals

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●BHEL Annual Report 2013-14 (English) from www.bhel.com

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