Summer Internship Project

Adani Electricity,
Dahanu Thermal Power Station
Introduction
• Adani Dahanu Thermal Power Station

• Adani - Dahanu Thermal Power Station (ADTPS), consisting two units of 250 MW, is one of the best power generation
plants in the country, which commenced its commercial operations in January 1996. Recognized with innumerable
awards, this power plant is known for its distinctive features that set it apart from others in terms of technological
innovation, superior performance and continuous sustainability for a longer period. ADTPS is located around 120 km
north of Mumbai along Mumbai-Ahmedabad rail line.

•The plants utilise a mix of Indian washed coal and imported coal as fuel. The general blending ratio is 80 : 20. The
indigenous fuel is received from SECL (Korba) and also imported from various countries such as Indonesia and South
Africa among others.

•Adani - Dahanu Thermal Power Station has implemented integrated management systems (IMS) in its processes and
is certified for quality management, environment management, occupational health and safety assessment studies,
social accountability management, information security management, energy management and accreditation for
ADTPS coal testing laboratory.
Our Vision
To be a world-class leader in businesses that enrich lives and contribute to the
nation in building infrastructure through sustainable value creation.

Our Mission
Adani Electricity continues the quest of providing the best quality service to
the customers entrusted into the brand motto of the Power of Service. The
company is committed to creating new & innovative approaches in operations
and services that contribute to the development of the customers.
Major Milestones:
•Unit no. 1 was synchronized on 6th January 1995
•Unit No. 2 was synchronized on 29th March 1995
•Unit no. 1 commercial operation from 1st July 1995
•Unit No. 2 commercial operation from 1st January 1996
•The power station commercially commenced its operation in 1996
•FGD Unit I and II commissioned in October 2007
•World's First Power Plant to get ISO 50001: 2018, certification for Energy Management
•ISO 9001: 2015 - Quality Management System
•ISO 14001: 2015 - Environment Management System
•ISO 45001: 2018 - Occupational Health and Safety Assessment Studies
•SA 8000: 2014 - Social Accountability Management System
•ISO 27001: 2013 - Information Security Management System
•ISO 55000: 2014 – Asset Management System
•ISO 22301: 2012 Business Continuity Management System
•ISO 27031 :2011 ICT: Information & communication technology readiness for business
continuity
•ISO 26000:2010 SR: Social Responsibility assessment & compliance.
3.1 Area of study
The project topic “Fixed Assets Accounting” clearly mentions asset accounting cycle process (from
the asset requisition stage to asset retirement stage), disbursements of vendor bills from the receipt of
all relevant/required paper as per the terms of the Contract Order / Purchase Order for procurement of
goods and services, inspecting sales tax and VAT filing details of the vendors by collecting the relevant
details.
Also disposal of such assets which are idle or not used in the production process can save money as they
can deduct the expenditures such as Repairs and Maintenance to these assets, Depreciation on these
assets, Interest charges in case the assets are acquired by borrowed capital, etc.

3.1.1 Area under Study

“Fixed Assets Accounting” mainly focuses on stages in lifecycle of fixed assets. The project also
concentrates on those assets, which are high on the maintenance cost. It mainly focuses on
identification, processes and then disposal of the assets which are idle or which are frequently under
repairs eventually increasing the operating cost for production. It also provides information about the
procedure of disposal or transfer of fixed assets.
EXECUTIVE SUMMARY

The project report comprises of asset accounting process, right from the asset
requisition stage to asset retirement stage. The report also gives knowledge about the
supplementary processes comprising of – CAPEX (Capital expenditure) for fixed asset
capitalization, purchase and procurement process (disbursements of vendor bills from
the receipt of all relevant/required paper as per the terms of the Contract Order /
Purchase Order), inspecting indirect taxes (VAT/CST) of the vendors by collecting the
relevant details.

This project gives an insight about the need and procedure for the disposal of fixed
assets. The project also provides suggestions about how to make financial savings
through proper management of the fixed assets. The proper management includes
acquisition of fixed assets, its replacement and disposal after a stipulated period. The
financial savings can be made by reducing the costs in relation to the fixed assets such
as depreciation, repairs and maintenance, operating cost, etc.

Additionally, the project consists of analysis to find out whether there is any need to
dispose off the fixed assets and investigation to find out which fixed assets can be
disposed and which need a replacement. The project report also gives us an idea about
the total amount of fixed assets that are depreciated. It also concentrates on physical
investigation of the Fixed Assets situated in the DAHANU THERMAL POWER PLANT .
OBJECTIVES OF THE PROJECT
The objectives of the study include the following as described below :

•Asset cycle process (from the asset requisition stage to asset retirement stage)
•CAPEX (Capital expenditure) for fixed asset capitalization

•Purchase and Procurement process (disbursements of vendor bills from the receipt of all
relevant/required paper as per the terms of the Contract Order / Purchase Order), inspecting
indirect taxes (VAT/CST) of the vendors by collecting the relevant details.

•Inspecting sales tax and VAT filing details of the vendors by collecting the relevant details.
 NEED FOR THE STUDY:
Items can be available for disposal because they are:
•Follow the procedures, functions or usage patterns and classify CAPEX assets;

•Requirements for disposal under a particular policy e.g. Motor vehicles;

•Reaching their optimum selling time to maximize returns;

•Beyond repair but able to be sold for scrap. Responsibilities of Head of Unit.

•Saving through disposal.

 Fixed Asset Accounting Cycle

Introduction : Fixed assets typically include the current, non-current or long lived assets, that are
expected to provide future economic benefit. They may be categorized further as tangible, intangible or
financial. Examples of these assets include PPE (Property Plant & Equipment) (Non Current Asset),
Software (Intangible Asset), etc. In DTPS, most assets fall in the category of long term/non-current
assets with economic life longer than 1 year.
The asset accounting process involves the stages as described as below :
•Acquisition :
In this stage, the asset which is expected to provide probable future economic benefit is either
capitalized or expensed depending on the period of economic life provided by it.

A key concept in accounting for expenditures related to long-lived assets is whether and when such
expenditures are capitalized (i.e., shown on the balance sheet) versus expensed (i.e., recorded on the
income statement).

In DTPS, the asset acquisition process is followed by capitalizing/expensing as per the economic benefit
provided and as per the standards followed under MERC (Maharashtra Electricity Regulatory
Commission) guidelines.

•Depreciation & Amortization :

Depreciation and amortization are effectively the same concept, with the term depreciation
referring to the process of allocating tangible assets’ costs and the term amortization referring to
the process of allocating intangible assets’ costs.

In DTPS, Straight line method for depreciation is utilized.

•Inventory :
Inventory is typically classified into three different categories: raw materials, work in progress,
and finished goods. Work-in-progress inventories are the raw materials that have started the
conversion process from raw materials but are not yet finished goods ready for sale.
Manufacturers may report either the separate carrying amounts of their raw materials, work-in-
progress, and finished goods inventories on the balance sheet or simply the total inventory
amount.
In DTPS, FIFO (First In First Out) accounting for inventory is followed.
•Reporting :
Typically three categories into which reporting activities are classified : Operating, Financing and
Investing. Business activities resulting in transactions are reflected in the broad groupings of
financial statement elements: Assets, Liabilities, Owners’ Equity, Revenue, and Expenses

In DTPS, reporting as per business activities to categorize operating, investing & financing
business operations is followed as per the guidelines of standard

Disposal :
Disposal of assets include sale of assets, to be disposed of other than by a sale (e.g., abandoned,
exchanged for another asset, or distributed to owners in a spin-off).
Fig 3.2 Asset Cash Flow
Cash Flow

Under Under
CAPEX OPEX

At DTPS, budget allocation is provided under two heads – OPEX (O&M expenditure) & CAPEX(Capital expenditure)

CAPEX Process :
Budget allocation under CAPEX process includes:
•CAPEX – Concept

•Procedure for procurement under Direct Asset

•Procedure for procurement under Project

•Other expenses booking under project

Capitalization process by F&A

 Fig 3.3 CAPEX Fund Flowchart

CAPEX Fund

MERC Approved Administration Approved

DTPS
DTPS Direct Project DTPS Direct DTPS Project
Asset Asset
(Either
(Either
Material &
(No Material & (No Services /
Seperate Services / Seperate Only
Service) Only Service) Services)
Services)
a) CAPEX – Concept :CAPEX fund should be utilized for any new installation, upgradation, old asset replacement if ;
1. Approved under MERC CAPEX project approvals
OR
2. Approved under Administrative approvals.

The two scenarios that may arise i.e. purchases under direct asset or a project as per DTPS criterion are as given below:

DTPS Direct Asset– All the material purchases in which there are no separate services cost
(No separate PR/PO for services) involved and the object can be put to use as received.
For ex: Water Cooler, executive chairs, motors, computers, equipments.

DTPS Projects– All purchases that involve either both material & services or only services
and subsequently capitalization can be carried out.
For ex- HP module servicing, Booster Fan assembly, upgradation of field instruments

b) Procedure for procurement under Direct Asset :

Following are the major steps involved:

Asset ID creation using Direct Asset details and SAP Material Code

Purchase Requisition against asset & subsequent PO creationinvolves 2 steps :

Single material code – 01 qty. – single asset code

Single material code – multiple qty. – multiple asset code

•GRN creation & Inspection Note acceptance

User has to inspect and accept the material as per stores procedure. On receipt of
material from vendor as per PO delivery date, DTPS Main stores will create Goods
Receipt Note (GRN) up to inspection level . Intimation for Inspection is given to user
through Inspection Note.
•Material issue through IOM

Once material is accepted, user has to get the material issued as soon as
possiblethrough Inter –Office- Communication (IOM)
•GRN acceptance, Capitalization & Payment

After user acceptance of material i.e. inspection note is signed by user; Stores personnel will
accept the GRN in the system & send all the documents to F&A for payment process.
OPEX Process :
PR

Need for sub contractor

Approval. Draft Purchase Order
Sign- Buyer, Head

Request for Quotation

Sign – Buyer, Finance, Head

Send to vendor for

signature
Check by Head
Technical scrutiny of DTPS.

Sign- Buyer, User, Head

FINAL PO

Purchase proposal for Finance

Sign- Buyer, Head
approval dept.
Purchase Request to Purchase Order

The above flow diagram provides the stepwise details of the purchase request to purchase order conversion :
•The requirement is raised by the user department for the material/service and the Purchase Request is
generated
•The Sub Contractor to furnish the requirement is contacted and approval is sought

•Based on the contractor, Quotations are requested and evaluated for the specifications and price

•After the Vendorisfinalizedthen theTechnical Evaluation and scrutiny is performed

•On agreement of the user-buyer-head of department, Purchase Proposalis prepared and sent for approval

•After the approval process completes, Draft POis generated and further approvals are sought from all the
related departments until consensus is reached

•The final approval for the process is sought from the Head of DTPSfor the Final POrelease
FIXED ASSET REGISTER (FAR) –
FAR is necessary to keep record of all asset of the company. Fixed Asset Register (FAR) is an accounting
method used for major resources of a business.
Fixed Assets are assets such as land, machines, office equipment’s, buildings, patents, trademarks,
copyrights, etc. held for the purpose of production of goods or rendering of services and are not held for
the purpose of sale in the ordinary course of business.
Fixed assets constitute a major chunk of the total assets in the case of all manufacturing entities. Even in
the case of service entities such as hotels, banks, financial institutions, insurers, mobile / telephone service
providers etc. it has become imperative to invest heavily in furnishing, equipment, and technology to
attract, and retain customers. Just as it is important for a person investing on the NASDAQ to know those
investments, so it is important for a business entity to have a list of its fixed assets. A Fixed Asset Register is
that list of assets.

Objectives in maintaining a Fixed Asset Register (FAR):-

A FAR must be kept in order to be in compliance with legislation governing corporations, companies, etc. It
allows a company to keep track of details of each fixed asset, ensuring control and preventing
misappropriation of assets. It also keeps track of the correct value of assets, which allows for computation
of depreciation and for tax and insurance purposes. The FAR generates accurate, complete, and
customized reports that suit the needs of management.
A FAR also allows a company to keep track of fixed assets that are not under simple, direct control of the
company. This means owned and leased assets, assets under construction, and imported assets. The FAR
can also be used to aid in capital budgeting and to keep track of amount provided for Asset Retirement
Obligation (ARO) in respect of each asset.
Making entries in the FAR:-

Not all assets are capitalized. Keeping in view the concept of materiality, a
company may have a policy to capitalize only those assets which cost more than a
specified amount. The companies are required to expense all equipment whose
value is below a threshold limit. Similarly, fixed assets which have a useful life of
less than one year are not capitalized.
In some companies, improvements or alterations made to an asset are capitalized
separately in the FAR. This is not correct. If such mistakes are made, it is highly
probable that the auditors while undertaking physical verification of assets will
notice irreconcilable differences. Where improvements or alterations made to an
existing asset justifying capitalization, such additions should be made to the cost
of the original asset.
Identification of a fixed asset:-
In a large corporation, the task of identifying and locating a specific fixed asset can be
difficult unless numbering is scientific, systematic, and up-to-date. A common
problem in most companies is the improper maintenance of the FAR. Physical
verification of fixed assets becomes a futile exercise unless the FAR is properly
maintained
It would be advisable to use a scientific numbering technique to identify fixed assets.
The process of numbering fixed assets is called tagging. An identification number
(combination of alphabets, and numbers) is written on the asset. Engraving the
identification number on the asset is advisable in the case of Plant & Machinery where
there is heavy wear and tear.
A tag verifies the existence of assets and their location, aids in maintenance, provides
a common ground for communication between the Accounts Department and the end-
users and recording the net book value of asset in case of sale / scrapping. It is not
necessary to tag all fixed assets. Land, buildings and vehicles all have independent
systems of tracking in registration papers and survey numbers.
For the functionality of fixed assets, the following setup options are available:-
Depreciation profile
Value models
Groups
Posting profiles
Parameters
Provision types
Revaluation groups
Locations
Sorting
Consumption factors
Consumption per unit
•DEPRECIATION:
In DTPS Straight Line Method Of Depreciation is used to depreciate the fixed assets. Every
business has to decide depreciation according to the Companies Act, 2013 such as-
•Electricity Business :
Fixed assets are depreciated under the straight line method as per the rates and in the
manner prescribed under Schedule XIV of the Companies Act, 2013 relating to license
business and other electricity business. The depreciation for the year has been shown after
reducing the proportion of the amount of depreciation provided on assets created against the
contributions received from consumers.
Depreciation on revalued assets is charged over the balance residual life of the assets
considering the life prescribed under Schedule XIV of the Companies Act, 2013.
•EPC and Contracts Business :
Fixed assets of EPC Business have been depreciated under the reducing balance method at
the rates and in the manner prescribed in Schedule XIV of the Companies Act, 2013.
•Other Activities :
Fixed assets of other activities have been depreciated under the straight line method at the
rates and in the manner prescribed in Schedule XIV of the Companies Act, 2013.
Leased Assets :
Depreciation on all assets given on lease up to March 31,
2001 is provided on straight line method at the higher of the
rates determined with reference to the primary period of the
lease and the rates and in the manner prescribed in Schedule
XIV of the Companies Act, 2013.
Intangible Assets :
Software’s are amortized over a period of three years.
THE ELECTRICITY (SUPPLY) ACT, 1948
Government Of India has segregated the assets of a typical electric utility into 36 types for the purpose of
setting the depreciation norms. The 36 asset types can be classified into 5 groups based on life of the asset
3 and 7 groups based on the depreciation rates. In addition, there are two asset classes on which
depreciation is either not specified in the statute or is not allowed. For instance no depreciation is allowed
on freehold land while leasehold land is depreciated based on the tenure of the lease. The asset categories
and the breakup is depicted in the chart below. Prior to the notification in 1992, assets could be classified
into 12 groups based on the fair life and 19 based on the depreciation rates. The 1992 notification reduced
the number of groups to 7 on both aspects of fair life and depreciation rates. This was done by reducing
the fair life and increasing the depreciation rates. Prior to 1992, the notified fair life ranged from100 years
for dams and roads to 5 years for temporary structures, while depreciation rates ranged from 0.9% to 18%.
In 1992, the maximum fair life was reduced to 50 years; the minimum depreciation rate was increased to
1.95% and the maximum to 21.55%. Further, in1994, the fair life of assets remained unchanged while the
depreciation rates increased. All the assets can be classified into the categories listed overleaf based on
their depreciation rate and their useful life.
THE COMPANIES ACT, 2013 [CA]
The CA fixes depreciation norms on the nature of assets, the industry or end –use of the asset and its usage rate. The
Companies Act segregates assets into four classes based on their nature
•Buildings
•Plant and Machinery
•Furniture and Fittings
•Ships
Within this broad classification assets are further categorized on the basis of end-use.
Plant and machinery is sub-divided into
•Continuous Process plant and machinery
•Non-continuous plant and machinery
•Category for which special rates are applicable
Continuous process plants have two prescribed rates; one for written down value method and one for firms that wish to
adopt the straight line method. Industries which are not continuous process plants are free to choose from a mix of
single shift, two shift or three shift rates and then apply the specified rates for each shift and choose either the SLM or
the WDV approach.
WDV SLM

Buildings (other than factory buildings) 5.00% 1.63%

Factory Buildings 10.00% 3.34%

Temporary Erections 100.00% 100.00%

Process Plant and machinery 15.33% 5.28%

Vehicles 40.00% 16.21%

Furniture and fittings 18.10% 6.33%

THE INCOME TAX ACT [I.T.ACT]
The I.T Act requires a company to choose between the Written Down Value and the Straight Line Method
of depreciation. Until FY97, electric utilities were expected to follow the rates prescribed in the Companies
Act for computing their tax liability. However from FY99 the depreciation rates for electric utilities has
been synchronized with those notified by Government Of India under the Electricity Supply Act 1948 (Refer
Annexed-II). The revised rates in the I.T Act differ from those notified in the ESA only in two areas:
•The rate for transformers having a rating of over 100 KVA under the ESA is 7.84% while it is 7.81% under
the I.T Act
•The rate for residual items (i.e. those that are not explicitly mentioned in the Schedule) is undefined in
the ESA. The I.T Act however specifies a rate of 7.69%.
Fixed Asset accounting module:-

Step1: Prepare asset disposal request form

Requesting Dept. and authorized personnel review and approve Requesting department prepares asset
disposal request documents for review and approval of authorized personnel.
Step2: Receive & review approved asset disposal documents
Asset maintenance department receives and reviews asset disposal request approved by authorized
personnel.
Step3: Contacts 3rd Party Buyer
Asset maintenance department contacts interested buyer.
Step4: Prepare Tax Invoice
Finance Personnel Asset maintenance department requests preparation of tax invoice from Finance
personnel. This applies only to sale to third party.
Step5: Submit disposal documents to Finance
Asset maintenance department submits to Finance A/A personnel all approved disposal documents*.
Step6: Verify disposal documents against tax invoice
Asset personnel verify supporting documents to ensure that there is no discrepancy between invoice
and disposal documents. This applies only to sale of assets.
Step7: Perform asset retirement
Asset personnel perform asset retirement in Asset Accounting module.
OPTIONS FOR DISPOSAL OF ASSETS

Assets identified for disposal may be dispensed with using the procedures below.
Acceptable methods of disposal are:
Sale by public tender.
Private Sale.
Donated to a community service organization.
Private sale by an agent acting for the Company.
Transfer of the asset to another unit of the Company.
Trade-in.
Junked or destroyed or cannibalized.

Choice of the most appropriate disposal option will normally be influenced by the
nature of the goods for disposal and by their location and market value.

Fixed asset is an integrated part of DTPS. It is therefore necessary to refer to issues,

which belong to modules such as General Ledger, Inventory management, Accounts
receivable, Accounts payable, and basic. These references are only explained in their
relations to Fixed Assets.
THE FUNCTIONALITY NEEDED IN ERP

Fixed Assets to register the company's Fixed Assets. The firm stores financial and
nonfinancial information about Fixed Assets. Financial information is, for example,
acquisition prices, value adjustments, depreciation, budget, or tax information.
Nonfinancial information is for example bar code, location, information about
insurance or maintenance date.

Options to record transactions during the Fixed Assets entire life cycle. ADTPS offers a
wide range of options for recording of both general Fixed Asset transactions such as
acquisition, depreciation, write up, write down, and disposal etc., but also options for
country specific asset transactions such as reserves or revaluation.

Integration to ledger and other modules.

Salient features:
•In Adani (DTPS) there is a proper system for acquisition and disposal of fixed assets.
•In Adani (DTPS) there is physical verification of fixed asset is done.
•In DTPS ERP system (SAP) is used for every day transaction.
•As DTPS is a power plant quantity of asset required is so large.
•In DTPS huge funds are incurred for depreciation.
•In 2012-13 quantity of asset retires are so high in DTPS.
•In ADANI (DTPS) some of the fixed assets are very costlier and has to be imported.
•In DTPS some retired fixed assets are sold for the purpose of getting money.
Suggestions And Recommendations
The suggestions and recommendations that I would like to give to the company management
are as follows:
•The company should think about the depreciation fund method of calculating depreciation. Where
the depreciation for every year is transferred to sinking fund account and then is invested in the
market securities, which can earn a profit.
•The Company complex is spread in over 2030 acres and to travel from one department to other
the company employees uses petrol or diesel driven vehicles, instead of these new technology
battery driven vehicles should be used. This will save the fuel cost as well as maintenance cost..
•The company has a surplus land available, which should be used for some other activities such
as giving land on hire-lease. This will produce an income for the company.
•GST implementation will have to be introduced and should replace existing VAT and CST
processing in SAP ERP systems
 Limitations of the Study
Limited access to the system.
Details of company assets are very confidential.
Conclusion
•Modern equipment in good repair, is essential for high productivity and efficiency, and hence for
profits. Fixed Assets analysis involves calculating the earnings potential, use, and useful life of
Fixed Assets. Running a successful Manufacturing plant requires a well-developed technology
and well-maintained Equipment. After analyzing and working on this project of fixed assets of
ADANI DTPS, I concluded that the company is having a huge amount of Fixed Assets.
•The company has invested huge amount in the Fixed Assets, which are having a potential of high
productivity and efficiency. It is really difficult to manage such huge amount of Fixed Assets but
the company management has successfully able to manage these assets.
•It can be also concluded that some of the assets are really obsolete and need a replacement with
new and improved technology. It was also observed that most of the plant of ADANI DTPS are
properly maintained and are working at its maximum efficiency. There are some equipment’s
which need to be disposed off or needs a replacement but otherwise the plant is well maintained.
•The fixed assets are physically verified by the Management according to a phased programmed
designed to cover all the items over a period of 3 years which, in our opinion, is reasonable having
regard to the size of the Company and the nature of its assets.
•The Company is maintaining proper records showing full particulars, including quantitative details
and condition of fixed assets.
THANK YOU

Presented By –
Neeraj Patil
210614200374
PIET- Sec :E