A study on budgetary control of shimul

“A STUDY ON BUDGETARY CONTROL OF SHIMUL”

(A STUDY CONDUCTED AT SHIMOGA Milk UNION LTD., SHIMOGA)

A Project report Submitted to the University of Mysore, Mysore.
in partial fulfillment of the requirement for the award of the
Degree in Master of Business Administration.

by
ASHWINI E.
Reg.No.08MB3704

Guide
Mr. Harish Kumar. M C

HARANAHALLI RAMASWAMY
INSTITUTE OF HIGHER EDUCATION, HASSAN
2009-10

HARANAHALLI RAMASWAMY INSTITUTE OF

HIGHER EDUCATION

HASSAN

CERTIFICATE

Certified that, the project entitled “A STUDY ON BUDGETARY CONTROL
OF SHIMUL” conducted at “SHIMOGA MILK UNION LTD.,”, SHIMOGA is a
bonafide work carried out by Miss.Ashwini E. in partial fulfillment for the
award of degree in Master of Business Administration of the University of
Mysore, Mysore during the year 2009-10.

(Harish Kumar) (Dr.S.R. Jayaram)

Guide Principal

DECLARATION

I hereby declare that, this project report entitled “A STUDY ON BUDGETARY
CONTROL OF SHIMUL” conducted at Shimoga Milk Union Ltd., Shimoga prepared by
me under the guidance of Mr. Harish Kumar, Department of Business Administration,
Haranahalli Ramaswamy Institute of Higher Education, Hassan. In partial fulfillment
of the requirement for the award Master of Business Administration.

I further declare that this project report is prepared from the information
collected from the SHIMOGA MILK UNION LTD., SHIMOGA., and that the same is
purely for academic purpose and that the report has not been submitted to any other
institution of higher learning for the award of any degree, diploma or other similar
title.

Date: 07-5-2010 Ashwini.E
Place: Hassan Reg. No. 07MB3704

ACKNOWLEDGEMENT

I, express my deep sense of gratitude and sincere thanks to Mr.
PARAMASHIVA, department of head, “SHIMOGA MILK UNION LTD” who gave me
an opportunity to conduct this Research Project. I state with great pleasure this report
would not have been possible without the wonderful help from various quarters, the
list of which is quite too long.

I will take this opportunity to express my deep sense of gratitude to Mr.

Harish Kumar. M.C. HRIHE, Hassan for his guidance, continuous encouragement

and valuable suggestions at every stage of the Project.

I would also like to extend my deep sense of gratitude to my parents and all my

family members, friends, who have directly or indirectly supported and helped me in

the completion of my project successfully

Last, but not the least I would like to extend my thanks to all the unseen hands

that have made this project possible.

Date: Ashwini E
Place: Hassan Reg. No. 08MB3704

LIST OF THE TABLES

Table No Title of the table Page No

1.6.3 Key activities of Financial 18
management

1.6.4 Organizational of the 20
financial department

1.6.5 Financial Management 21
Process

1.6.6 Decisions, Return, Risk & 22
trade off

1.7 Procedure for test & 23-24
analysis for Milk & Milk
products

1.8 Summary of last annual 26
report

1.8.2 Extract of Profit/Loss a/c 27

1.8.3 Extract of Trading & 28
Manufacturing a/c

2.3.1 Organizational structure 41

2.4 Milk & Milk products price 43
list

CONTENTS

Sl. No Particulars Page. No
Executive Summary

Chapter – 1 INTRODUCTION

1.1 Statement of the Problem 01

1.2 Objective of Study 01

1.3 Scope of the Study 02

1.4 Methodology 02

1.5 Limitations of Study 04

Chapter – 2 REVIEW OF LITERATURE 05 - 28

Chapter – 3 INDUSTRY AND COMPANY PROFILE 29 - 50

Industry Profile 29 - 36

Company Profile 37-40

Organization Structure 41

Achievements 44-49

SWOT Analysis 50

Chapter – 4 DATA COLLECTION AND 51 - 64
INTREPETATION

Chapter – 5 SUMMARY OF FINDINS, SUGGESSIONS 65 – 67
AND

CONCLUSION

BIBLIOGRAPHY 68

Budgetary control of SHIMUL

Executive Summary

“Shimoga Milk Union Limited” is a cooperative sector undertaking, engaged in
the processing of Milk & manufacturing the Milk products, it recently launched three new
variants of Nandini Milk. The Shimoga milk union is located in the central part of
Karnataka. The corporate office of the union is based at Machenalli, covering three
districts of Shimoga, Davangere and Chitradurga.

The Budgetary Control is playing a vital role in the organization. The role of
Budgetary Control is the essence of a business. The information is the blood and
Budgetary Control is the heart. In the body the hart plays the role of supplying pure blood
to all the elements of the body including the brain. The Budgetary Control plays exactly
the same role in the organization. The system ensures that an appropriate data is collected
from the various sources, processed and sent further to all the needy destinations.

The system is expected to fulfill information needs of an individual, a group of
individual, a group of financial functionaries, the managers and the top management. So
the Budgetary Control is very important in modern organizations.

Thus, I have been chosen the Budgetary Control as the specific area of the study.

Therefore, a study has been taken up on “A STUDY ON BUDGETARY
CONTOL OF SHIMUL”.

The study is taken for “Shimoga milk Union ltd” wherein an attempt has been
made to understand the Budgetary Control and a small study has been under taken. So as
to get an insight into Budgetary control.

HRIHE, Hassan Page 7


1.1 Problem statement
“A STUDY ON BUDGETARY CONTROL” was conducted through a
structured questionnaire so as to

• To analyze how Budgetary Control helps the milk union to select best course of
action.
• To provide a detailed plan of action for a business over a period of time.
• To coordinate the different units & activities of the organization with a view to
utilize the resources judiciously.
• To revise the budgets in the light of changed circumstances.
• To exercise control and on cost through comparison of actual results with the
budgeted one.
• To know the role of BC.

The purpose of the study is to estimate of receipts and payments of revenue and
capital items in future. Hence the study has been entitled as “A BUDGETARY
CONTROL OF SHIMUL”.

1.2 Objectives of the Study
• To know the role of Budgetary Control in SHIMUL.
• To analyze how Budgetary Control helps the milk union to select best
course factors.
• To exercise control and on cost through comparison of actual results with
the budgeted one.
• It shows the relationship between the actual number of working hours and
the maximum possible number of working hours in a budget period.
• A Budgetary Control department fulfill the needs of organizations



1.3 Scope of the Study
This study report will be very handy to SHIMUL in terms of understanding the
level of the Budgetary Control of SHIMUL. The study conducted on Budgetary Control
of SHIMUL is cover the all financial area of Budgetary Control department including
how it collects information’s from other department like production, sales, finance etc

How Budgetary Control support the top level of management to take a good decision, the
work of application software “SAMRUDHI”, in the financial area of Budgetary Control
department.

1.4 Research methodology
Need for the study
BUGETARY CONTROL is the essence of a business. Therefore, financial
planning is of utmost significance to a businessman. Financial planning is concerned with
raising funds and their effective utilization with a view to maximize the wealth of the
company.

In spite of good financial plan, the desired may not be achieved if there is no
effective control to ensure its implementation. A budget is an important tool for financial
planning and control. The budget represents a set of yardsticks or guidelines for use in
controlling internal operations of an organization. The management through budget can
evaluate the performance of every level of the organization. The discrepancy between
planned performance & actual performance is highlighted through budgets.

The concept therefore is a blend of principles theories and practice of the
Budgetary Control giving rise to single product known as Budgetary Control.



METHODOLOGY OF DATA COLLECTION
SOURCES OF DATA
There are 2 types of data

1. Secondary data

2. Primary data

1. Secondary data

On the other hand it includes those data which are collected from some earlier research
work and used in the study, researcher has presently undertaken.

Sources of Secondary data

 Use of internet

 Annual report of Shimoga Milk Union ltd

 Standard reference text books

 KMF website, KMF co-orp

 NDDB.com

 Data provided by Shimoga Milk Union

2. Primary data
Primary data are generated when the researcher employing mail questionnaire, telephone
surveys. Personal interviews observation and experiment investigation particular problem
at hand

Sources of primary data

 Personal interview method

In this research, researcher has conducted survey in personal interview method;
this type of survey researcher has met the department head.



Operational Definitions

OFFICE AUTOMATION SYSTEM:

Office automation system includes new hardware and software packages like
word processing, spreadsheets etc., it makes office employees more productive in
addition to the attended situation created office automation technology and the people that
use that technology.

Research Design
Research Design is the basic framework, which provides guidelines for the rest of
the research process. It is map or blueprint according to which the research has to be
conducted. The Research Design specifies the method of data collection and data
analysis.

Here the researcher has used exploratory method of research. It includes both
open end type of questionnaire. It is helpful in knowing general information about any
aspect of the organization.

1.5 Limitations of the Study

Despite of tall the effort to make the analysis more comprehensive and scientific,
a study of present kind is bound to have certain limitations. Researcher humbly requests
the respondent to submit them at this stage.

The present study is an attempt made to understand the management information
system of SHIMUL. The present study is an empirical work presented in a descriptive
manner. Since the objective of the study may be a kind of analysis. Attempt has been
made to provide more comprehensive conceptual analysis.

 The study cannot replace the managerial judgments in decision making

 The study is only limited to the available information in the department

 The study is limited to the financial area of Budgetary Control department.



Literature of Review

2.1 Budgeting & Budgetary Control:

Definition

Finance is the Life blood of a business. Therefore, financial planning is off almost
significance to a businessman. Financial planning is concerned with raising funds and
their effective utilizations with a view to maximize the wealth of the company.

In spite of good financial plan, the desired results may not be achieved if there is
no effective control to ensure its implementation. A budget is an important tool for
financial planning and control. The budget represents a set of yardsticks or guidelines for
use in controlling internal operations of an organization. The management, through
budget, can evaluate the performance of every level of the organization. The discrepancy
between planned performance & actual performance is highlighted through budgets.

Budgeting: Definition

A budget is a statement, which shows forecasts of the financial activities of a
business to achieve a specific purpose. A budget is basically an estimate of receipts and
payments of revenue and capital items in future.

2.2 Budgetary control: Objectives


• To coordinate the different units & activities of the organization with a view to
utilize the resources judiciously.


• To exercise control and on cost through comparison of actual results with the
budgeted one.



2.3 Budgetary control:

There are 5 types of budgetary control.

1. Master budget

2. Financial budget

3. Fixed budget

4. Flexible budget

5. Zero-based budgeting

1. Master budget:

Master budget (also known as summary budget or finalized profit plan)
combines all the budgets for a period into one harmonious unit and thus, it show the
overall budget plan. As profit planning is the main objective of a budget program, it is but
natural that all the subsidiary budgets should be co-ordinated and projected into a master
or summary budget, which should show the final projected results of the plan. The master
incorporates all the subsidiary functional budgets and the budgeted Profit & Loss Account
and Balance Sheet. Before the budget plan is put into operation, the master budget is
considered by the top management and revised if the position of profit disclosed there is
not found to be satisfactory. After suitable revision is made, the master budget is finally
approved and put into action.

Another view regards the budgeted Profit and Loss account and the Balance sheet
as the master budget. The Profit and Loss account is built up from the other budgets
already set, and no fresh estimates are necessary. The operating profit is obtained by
further deduction of the budgeted income and expenditure items give the budgeted net
profit.



Advantages of a forecast Profit and Loss Account are as follows:

1) It presents an overall projected profits position of the concern.

2) It enables the planning and control of the profits of the business.

3) It enables the investigation of causes for variances.

4) The accuracy of all the budgets is automatically checked.

2. Financial budget:

Financial budget is a summary statement for the future that shows the estimated
requirements of the cash inflow an outflow.

According to Walker, “A financial budget is a comparison of estimated cash
inflows and outflows for particular period i.e. a quarter or year.”

According to Guttmann and Dougal, “financial budget is an estimate of cash
receipts and disbursements for a future period of time.”

Financial budget may be prepared any of the following three methods:

1. The receipts and payment method

2. The adjusted profit & loss method

3. The balance sheet method

Receipts and payment method:

Under receipts and payment method estimate of cash receipts and cash payments
is worked out during the budgeted period. Estimated cash receipts are added to opening
cash balance and estimated cash payments are deducted out of the total. Thus, the closing
cash balance is worked out. Estimates regarding sales are indicated by the sales
department that also points out the general trend of credit allowed to customers. Purchase
department makes forecast about the cash and credit purchases and also points out the
period after which the credit purchases are met.



Adjusted Profit & Loss Method:

Financial budget under this method is also known as cash flow statement. This
method is useful for long term planning; therefore under this method cash inflow and
outflow are estimated for a year

Balance Sheet Method:

Under this method the business concern prepares a budgeted balance sheet. Cash
and Bank Balance (or overdraft) is computed with this budgeted balance sheet. Budgeted
balance sheet is prepared with all assets items (excluding cash and bank balance) and all
liabilities (excluding bank overdraft).

3. Fixed budget:

A fixed budget is designed to remain unchanged irrespective of the level of
activity. This budget is prepared on the basis of a standard or fixed level of activity. This
budget becomes an unrealistic yardstick in case the level of activity actually attained does
not conform to the one assumed for budgeting purposes. Due to the limitations of fixed
budgeting, firms whose sales and production cannot be accurately estimated have given
up the practice of fixed budgeting.

4. Flexible Budget:

A budget that is designed to change in accordance with the level of activity
attained is called a flexible budget. This budget is prepared after considering the fixed and
variable elements of cost and the changes that may be expected for each item at various
levels of operations.

Flexible is desirable in the following cases:

 Sales are unpredictable, e.g., luxury or semi-luxury products.

 The venture is new & it is difficult to foresee the demand, e.g., fashion
products.

 Where the business is subject to the vagaries of nature, such as soft drinks.



5. Zero-based budgeting:

The technique of zero base budgeting provides a solution for overcoming the
limitations of traditional budgeting by enabling top management to focus on priorities,
key areas and alternatives of action throughout the organization.

Some of the problems, which top management has to face are:

1. Programs and activities involving wasteful expenditure are not identified,
resulting in avoidable financial and other costs.

2. Inefficiencies of a prior year are carried forward in determining subsequent year’s
levels of performance.

3. Manages are not encouraged to identify and evaluate alternative means of
accomplishing the same objectives.

4. Decision-making is irrational in the absence of rigorous analysis of all proposed
costs and benefits.

5. Managers tend to inflate their budget requests resulting in more demand for funds
than their availability. This results in recycling the entire budgeting process.

2.4 Process of zero-Based Budgeting:

The following steps are involved in zero based budgeting:

Determining the objectives of budgeting:

The objective may be to effect cost reduction in staff overheads or it may be to
drop, after careful analysis, projects which do not fit into achievement of the
organizations objectives etc.

Deciding on scope of application:

The extent to which the zero base budgeting is to be introduced has to be decided,
i.e. whether it will be introduced in all areas of the organization’s activities or only in a
few selected areas on trial basis.



Developing decision units:

Decision units for which cost- benefit analysis is proposed have to be developed
so as to arrive at decisions whether they should be allowed to continue or be dropped.
Each decision unit, as far as possible should be independent of other units so that it can be
dropped if the cost analysis proves to be unfavorable for it.

Developing decision packages:

A decision package for each unit should be developed. While developing a
decision package, answers to the following questions would be desirable.

i. Is it necessary to perform a particular activity at all? If the answer is in the
negative, there is no need to proceed further.

ii. How much has been the actual cost of the activity and what has been the actual
benefit both in tangible as well as intangible forms?

iii. What should be the estimated cost of the level of activity and the estimated benefit
from such activity?

iv. Should the activity be performed in the way in which it is being performed and
what should be the cost?

v. If the project or activity is dropped, can the unit be replaced by an outside agency?

Advantages of zero based budgeting:

1. It provides the organization with a systematic way to evaluate different operations
and programs undertaken. It enables management to allocate resources according
to priority of the programs.

2. It ensures that each and every programmed undertaken by managers is really
essential for the organization, and is being performed in the best possible way.

3. It enables the management to approve departmental budgets on the basis of cost-
benefit analysis. No arbitrary cuts or increases in budget estimates are made.

4. It links budgets with the corporate objectives. Nothing will be allowed simply
because it was being done in the past. An activity may be shelved if it does not
help in achieving the goals of the enterprises.



5. It helps in identifying areas of wasteful expenditure and, if desired, it can also be
used for suggesting alternatives courses of action.

6. It facilitates the introduction and implementation of the system of ‘management
by objectives’. Thus, it can be used not only for fulfillment of the objectives of
traditional budgeting, but also for a variety of other purposes.

2.5 BUDGET:

A budget is a plan expressed in quantitative, usually monetary term, covering a
specific period of time, usually one year. In other words a budget is a systematic plan for
the utilization of manpower and material resources. In a business organization, a budget
represents an estimate of future costs and revenues.

Budgets may be divided into 2 basic classes:

Capital budget & operating budget

Capital budgets are directed towards proposed expenditures for new projects and
often require special financing.

Operating budgets are directed towards achieving short-term operational goals of the
organization, for instance, production or profit goals in a business firm. Operating
budgets may be sub-divided into various departmental of functional budgets.

The main characteristics of a budget are:

1. It is prepared in advance and is derived from the long-term strategy of the
organization.

2. It relates to future period for which objectives or goals have already been laid
down.

It is expressed in quantitative form, physical or monetary units, or both. Different
types of budgets are prepared for different purposed e.g, sales Budget, production Budget,
administrative Expenses Budget, Raw-material Budget etc. All these sectional budgets are
afterwards integrated into a master budget, which represents an overall plan of the
organization.



2.6 Advantages of Budget:

A budget helps us in the following ways:

1. It brings about efficiency and improvement in the working of the organization.

2. It is a way or motivating managers to achieve the goals set for the units.

3. It serves as a benchmark for controlling on-going operations.

4. It helps in developing a team spirit where participation in budgeting is
encouraged.

5. It helps in reducing wastage and losses by revealing them in time for corrective
action.

6. It serves as a basis for evaluating the performance of managers.

7. It serves as a means of educating the managers.

2.7 Production Budget:

This budget provides an estimate of the total volume of production distributed
product-wise with scheduling of operations by days, weeks and months, and a forecast of
the inventory of finished products. Generally, the production budget on the sales budget.
The responsibility for the overall production budget ties with works manager and that of
with departmental works managers.

Production budget may be expressed is physical or financial terms or both in
relation to production. The production budgets attempt to answer questions like

I. What is to be produced?

II. When is to be produced?

III. How is to be produced?

IV. Where is to be produced?



The production budget envisages the production program for achieving the sales
target. It serves as a basis for preparation of related cost budgets, e.g., materials cost
budget, Labour cost budget, etc. it also facilities the preparation of a cash budget. The
production budget is prepared after taking into consideration several factors like-
Inventory policies, sales requirements, production stability, plant capacity, availability of
materials and Labour, time taken in production process etc.

Production costs budgets: Basically, there are 3 elements of costs, namely direct
material, direct Labour and overheads. Separate budgets for each of there elements has to
be prepared.

The direct materials budget has 2 components,

1) Materials Requirement budget

2) Materials procurement or purchase budget. The former deals with the total
quantity of materials required during the budget period, while the latter deals with
the materials to be acquired from the market during the budget period. Materials
to be acquired are estimated after taking account the closing and the opening
inventories and the materials from which orders have already been placed.

Overhead budget:

The overheads may relate to factory, general administration, sales and distribution
function. Separate budgets may, therefore, be prepared for factory overheads,
administrative overheads and selling and distribution overheads.

Manufacturing overheads budget:

Factory or manufacturing overheads includes the cost of indirect material, indirect
Labour and indirect expenses.



Manufacturing overheads may be classified into:

1. Fixed overheads i.e., which tend to remain constant irrespective of change in the
volume of output.

2. Variables overheads i.e., which tend to vary with the output,

3. Semi-variable overheads i.e., which are partly variable and partly fixed. The
manufacturing overhead budget will provide an estimate of these Overheads to be
incurred during the budget period.

Fixed manufacturing overheads can be estimated on the basis of past
information and knowledge of any changes which may occur during the ensuring
budget period Variable.

2.8 Budgetary Control Rations:

Activity ratio: It is a measure of the level of activity attained over a period of time. It is
obtained by expressing the number of standard hour’s equivalent to the work produced as
a percentage of the budgeted hours.

Mathematically:

Standard hours for actual production X 100
Budgeted hours

Capacity Ratio:

This ratio indicates whether and to what extent budgeted hours of activity are
actually utilized. It shows the relationship between the actual number of working hours
and the maximum possible number of working hours in a budget period.

Mathematically:

Actual hours worked X100
Budgeted hours



Efficiency Ratio:

It indicates the degree of efficiency attained in production. It is obtained by
expressing the standard hour’s equivalent to the work produced as a percentage of the
actual hours spent in producing that work.

Mathematically:

Standard hours for actual production X 100
Actual hours worked

2.9 Meaning of Financial Management:

Financial management is broadly concerned with the acquisition & of funds by a
business firm. Its scope may be defined in terms of the following question.

• How large should the firm be & how fast should it grow?

• What should be the composition of the firm’s assets?

• What should be the mix of the firm’s financing?

• How the firm should analyze, plane and control its financial affairs?

Importance of Financial Management:

Financial Management is indeed the key to successful business operations.
Without proper administration and effective utilization of finance. The importance of
financial management can be ascertained from the study of the following point.

1. Successful promotion: Successful promotion of a business concern depends
upon efficient financial management. If the plan adopted fails to provide adequate
capital to meet the requirements of fixed and working capital and particularly the
latter.

2. Smooth Running: Since finance is required at each stage of the business such
as promotion, incorporation, development, expansion and management of day-to-
day expenses.



3. Decision Making: Financial management provides scientific analysis of all
facts and figures through financial tools such as ratio analysis, variances analysis,
budgets etc.

4. Solution to Finance Problem: The efficient of Finance management helps
the top management by providing solutions to the various financial problems
faced by it.

5. Measure of performance: Financial management is considered as a yard
stick to measure the performance of the firm.

2.10 Scope and function of financial management:

The approach to the scope and functions of financial management is divided, in
order to have a better exposition, into 2 board categories

a) Traditional approach

b) Modern approach

Traditional approach: The Traditional approach which was popular in early stage,
limited the role of financial manager to rising and administering of funds needed by the
corporate enterprises to meet their financial needs. It deals with the following aspects:

I. Arrangement of funds from financial institutions.

II. Arrangement of funds through financial institutions likes share, bonds etc.

III. Looking after the legal and accounting relationship between a corporation and its
source of funds.

Modern approach: According to modern approach the firm financial, management
provides a conceptual and analytical frame work for financial decision making.

The main contents of the modern approach are as follows:

i. What is the total volume of funds an enterprise should commit?

ii. What specific assets should an enterprise acquire?

iii. How should the funds required be financed?



The functions of financial management may be classified on the basis of liquidity,
Profitability and management.

 Liquidity: It is ascertained on the basis of three important considerations.

a) Forecasting cash flow: Matching the inflows against cash outflows.

b) Raising funds: Financial manager will have to ascertain the sources from
which funds may be raised and the time when these funds are needed.

c) Managing the flow of internal funds.

 Profitability: While ascerting profitability, the following factors are taken into
account.

a) Cost control

b) Pricing

c) Forecasting future profits

d) Measuring cost of capital

 Management: Assets management has assumed an important role in financial
management.

a) The management of long term funds.

b) The management of short term funds



2.11 Key Activities of Financial management:

The three board activities financial management are:

a) Financial analysis

b) Management of firm’s asset structure

c) Management of the firm’s financial structure.

These activities are related to the balance sheet of the firm:

Financial Analysis, Planning & Control

Management of Balance Sheet management of

The Firm’s Long term financing Fixed Assets the firm’s Assets

Financial structure structure
Short term financing Current Assets



2.12 Organizational of the Finance Functions

Like any functional management in a firm ‘finance’ is a vital functional organ of
the firm. If finance function does not operate well, the whole organizational activity will
be ruined. So inefficient financial management paralyses the activity of the firm.

The finance function can be broadly classified into 2 parts.

• Routine financial matters like custody of cash and bank accounts, collection or
loans, payment of cash.

• Special financial functions like financial planning and budgeting, profit analysis,
investment decision.



The following chart will give an idea about the financial department

Organizational of the Financial Department

ChiefFinance Officer

Treasurer Controller

Cash Credit Financial Cash
Manager Manager Accounting Accounting
Manager Manager

Capital Fund Raising Tax Data
Budgeting Manager Manager Processing
Manager Manager

Portfolio Internal Auditor
Manager



2.13 The Financial Management Process

Information Information

Financial Analysis
Financial Control
Financial Planning Financial
Decision Making

Information Information

1. Financial Analysis: This is preliminary, diagnostic stage and will include a
financial analysis and review to determine the current financial performance and
condition of the business. An identifical of any particular financial problem, risks,
constraints or limitations. An assessment of finance strength, weakness,
opportunities and threats.

2. Financial Decision- Making: Based on the findings of the review stage,
financial decisions and choices will have to be made.



3. Financial Planning: The essence of financial planning is to ensure that the
right amount of funds is available at the right cost for the level of risk involved.

4. Financial Control: The final stage of the process will require throughout the
organization.

2.14 Decisions, Return, Risk and Trade Off:

The inter-relationship between market value, financial decisions, risk-return and trade off
is depicted in the chart.

Finance Manager

Maximization of share
value
Financial Decisions

Funds Financing Investment Dividend
Requirement Decision Decision Decision
Decision

Return Risk

Trade Off



2.15 Procedure for Test and Analysis for Milk & Milk Products:

The purpose is to define & document a procedure for tests and analysis conducted for
milk & milk products.

The procedure is explained in the below table


Sl Product Parameter Instrument/Method
no
1 Milk a. Temperature 1. Thermometer
1. Organoleptic Evaluation 2. Sensory Organs
2. clot on boiling test 3. Boiling
3. Acidity 4. Titration
4. Fat 5. Garber/EMT
5. CLR & SNF 6. Lacto meter
6. MBRT 7. Hot Water Bath
7. Phosphates 8. Hot Water Bath
8. SPC 9. Plating
9. Chloroform 10. Plating
2 Cream Temperature Thermometer
Fat% Garber method
Acidity Titration
MBRT Ref. Wi (C.3.7)
Phosphates Hot Water Bath
SPC Plating
Chloroform Plating
3 Butter Moisture Gravimetric Method
Fat Garber method
Acidity Titration
Yeast and Moulds Plating
4 Ghee Organoleptic test Sensory Organs
Moisturey Gravmetric Test
FFA Titration
BR Index Butyrate Refractometer
Adulteration Baudin test
RM Value RM Apparatus
Polenske Titration
5 Peda Moisture Gravimetric Method
Fat% Garber method
6 Curd Physical Characteristics Titration
Acidity Plating
Coli form Plating
Yeast &Moulds

7 Lassi Sweet Fat% Gravimetric Method
SNF% Garber method
Acidity Titration
8 Lassi Khara Fat% Garber method
Acidity
HRIHE, Hassan Titration Page 31
9 Skim Milk Organoleptic test Sensory Organs
Powder Moisturey Gravmetric Test


Test and Analysis of Milk & Milk Products

Procedure for Internal Quality Audit:

The purpose of this document is to define & document internal quality audit to
ensure that OMS conforms to planned requirements and is effectively implemented and
maintained.

Procedure for Maintenance:

The purpose of this document is to define and document a procedure for
maintenance of spare parts.

Procedure for Critical Product Purchasing:

The purpose of this document is to define and document a procedure for CPC
purchasing of required materials periodically.

The procedure is limited to purchase of packing materials, consumables,
veterinary durgs, milk cans.

Procedure for Regular Purchasing:

The purpose of this document is to define and document a procedure for regular
purchasing of required materials periodically.

The procedure is limited to purchase of items require for Dairy excluding milk &
CPC purchase at Shimoga Milk Union.

Procedure of Control of Non-Conforming Products:

The purpose of this document is to define and document a procedure for control of
non conforming product to ensure the product, which does not conform to specified
requirements is identified and controlled to prevent its unintended use or delivery.



2.16 Summary of Last Annual Report

Extract of balance sheet

Balance sheet of Shimoga Milk Union Ltd As on 31-3-2009

Liabilities Amount Asset Amount

Share Capital 44029200.00 Fixed asset 325559448.58

Reserves & surplus 38028771.20 Investment 69044986.00

Loans 37573970.98 Working capital 119630375.10

Grants 198225.00 Current asset

Current liabilities Stock in hand 26895931.40

P/L A/c 6513784.72 Sundry debtors 2289252.22

Cash & bank bal 39499267.53

Loans and advances 50945923.95

Total 221231309.68 total 221231309.68



2.17 Extract of Profit and loss a/c

Profit and loss account of Shimoga Milk Union Ltd As on 31-3-2009

Expenditure Amount Income Amount
Staff expenses 48328724.73 Trade profit 91207873.65
Administrative
expenses 10822722.95 Other income 3386560.35

Transport expenses Interest on
6151235.90 investment and 4738854.21
deposits
Tax 1579683.00 Grants 930606.00
Milk sales expenses
204349015.00
Packing
4614915.00
Interest and bank
commission 1817926.45

Profit
6513784.72
Total
100263894.21 Total 100263894.72



2.18 Extract of Trading and Manufacturing A/c

Trading and manufacturing account of Shimoga Milk Union Ltd

As on 31-3-2009

Particulars Amount Particulars Amount

Milk and milk
Opening stock 16156452.85 706631645.34
products

Milk & milk products
Purchase of milk 534903008.75 112466857.39
(dairy sales)

Fodder and other
106835008.00 Closing stock 26895931.30
expend

Storage and
3963598.18
transportation exp

Processing and
manufacturing 37938944.60
expenses

Purchase packed
19689548.00
things

Trade profit 91207873.65

Total 845994434.03 Total 845994434.03



3.1 Industry Profile

The concepts of the Budgetary control have evolved over a period of time
comprising many different facts of financial functions. Budgetary control is necessity of
all the organization

The initial concept of Budgetary control was to process to data from the
organization and present it in the form of report at regular intervals. The system was
largely capable of handling the data from collection to processing. It was more
impersonal, requiring each individual to pick and choice the proposed data and uses it for
his requirements. This concept was further modified when a decision was made between
data and information the information is the product of an analysis of data. This concept is
similar to a raw material and finished products. The concepts of Budgetary control gives
high regards to the individual and his ability to use the information. A Budgetary control
gives information through data analysis.

Budgetary control study associates with the above said objectives. It is concerned
with collection of data and interpretation of data.

This Budgetary control study particularly on Shimoga Milk Union limited focuses
on mainly itsOrganizational study & a glance on all of its financial departments. This
report hopes to understand the functions of Budgetary control of Shimoga Milk Union
limited in a real working condition & give real working experience while study.

Industrial Background of the Study
The birth of milk industry In India can be traced back in 1965. At that time, the
prime minister of India, Lal Bahadur Shastri combined the wisdom & energy of farmers
with professional management to successfully capture liquid milk and milk product
markets while supporting farmer investment with input and services and it give way to
N.D.D.B. National Dairy Development Board

The N.D.D.B was formed to replace exploitation with empowerment, tradition with
modernity, stagnation with growth, transforming dairying into an instrument for the
development of India’s rural people.

N.D.D.B. began its operations with the mission of making dairying a vehicle to a
better future for Million of grassroots milk products. The mission achieved thrust and



direction with the launching of “operation flood” a program emergence as the world’s
largest milk producing nation. Operation flood’s third phase was completed in 1996 and
has to its credit a number of significant achievements.

In June 1974, an integrated project was launched in Karnataka to restructuring &
reorganizes the dairy industry on the co-operative principal 7 to lay foundation for a new
direction in dairy development.Work on the first ever, World Bank aided dairy
development project was initiated in 1975.

At the end of September 1984 the World Bank- aided project ended and the dairy
development activities were extended to cover the entire state except coastal taluks
Kannada district & the process of dairy development was continued in the second phase
from April1984.

As on March 2001, India’s 96,000 dairy co-operatives integrated through a co-
operative structure “the Anand pattern” owned by more than ten million farmers. It
procures an average of 16.5 million liters of milk everyday. The milk is processed &
marketed by 170 milk producers, co-operative unions which in turn own 15 states co-
operative milk-marketing federations.

Since its inspection, the dairy board has planned and spearheaded India’s dairy
programs by placing dairy development in the hands of milk producers and the
professionals they employ to manage their co-operative allied industries N.D.D.B also
promotes other commodity based co-operative allied industries and veterinary biological
on an national wide basis.

Functions of the Unions:
DCS are grouped at district level into co-operative milk producer’s unions. The
unions organize new DCS, assist DCS with their management including audit of
accounts, supervise, purchase, process & market the liquid milk. Provision of input
facilities are also organized by the union 7 channelised to the dairy farmers through DCS.
The input facilities include supply of cattel feed, fodder, AI, Veterinary services, training
& know how on scientific animal husbandry.



N.D.D.B and 2010 goals:

In state Milk federation & the Milk producers co-operative union in consultation with
dairy board/NDDB has drawn 2010 goals & strategies as fallows.

• Production enhancement

• Assuring quality and creating a national framework

• Setting realistic goals for strengthening co-operative business.

Origin of the Industry
In 1986, British government to meet the requirements of army personnel
established military dairy forms. In 1937, first Shimoga Milk Union “Luck now Milk
Products co-operative Union limited” has set up National Dairy Development Board
(NDDB) was established on 25 September 1965 under the society’s registration Act 1950.
It was a non-profit making organization.

Milk:
What is Milk?
Milk white liquid secreted by the mammary glands of female mammals to nourish
their young for a period beginning immediately after birth. Man has used the milk of
animals as food from before recorded history began. Now most milk is consumed by
humans as a result the cow and milk & milk products have become important articles of
commerce. Milk is a mixture of water, fat, protein, sugar and inorganic salts.

Major Constituents of Milk are:
Water
Proteins
Lactose
Mineral Constituents
Minor Constituents
Milk comprises of water, fat and solid-not-fat (SNF) Milk is nutritionally
balanced when fat and SNF are in the right proportions. SNF is made up of proteins,
lactose and minerals. Normal cow milk contains about 4% fat and 8.5% SNF buffalo milk
contains about 7% fat and 9% SNF.



What is Pasteurized Milk?

Milk is good nutritive medium for the growth of bacteria. After the milk is drawn,
from the udder. It is likely to be contaminated with bacteria during handing,
transportation, etc, pasteurization is of process which ensures the destruction of
pathogenic or disease causing bacteria and makes the milk safe for human consumption.
Loose milk sold in the market is generally not pasteurized. Sometimes un-pasteurized
milk may also be packed in sachets for sale. Consumers need to ensure that they purchase
pasteurized milk only by examining the label on the packet.

Importance of Packed Milk:

Fresh milk drawn from a healthy animal contains very few microorganisms,
improper handling subsequently results in its contamination and spoilage increased
acidity of milk, because of the activity of microorganisms, causes the milk to curdle on
heating. Milk can remain in a good condition for 24 hours it is properly handled and
pasteurized. Packed milk is procured under hygienic conditions scientifically handled,
pasteurized at 720C for 15 seconds to destroy pathogenic organisms and chilled to 40C to
restrict the growth of other organisms. Such milk is healthy and can remain good
condition for longer period when stored under refrigerated condition. Packed milk is
therefore safe and healthy, and choose only the packed milk of a name you can trust.

Butter:

Yellow to white fatty food obtained from cows milk or cream by churning it to
flocculate the fat globules into a solid emulsion that also contains some water, curd milk
sugar and inorganic salts. Butter is high-energy food containing approximately 715
calories per 100 gms and has substantial amount of vitamins A and D but is low in other
vitamins. It contains phosphorus but is low in protein. The color of butter is caused by
carotene and other fat-soluble pigments contained in the fat. Butter has been relished as a
spread and as a cooking fat. It is an important edible fat in northern Europe, North
America oceanic and other places to which Europeans have migrated.



Ghee:

Semi-fluid butterfat made by the evaporation of water and clarification of butter
from the milk of cow buffaloes, goats or sheep. It can be many months and is a stable
food on the Indian subcontinent used for cooking and medicinally and in Hindu religious
ceremonies.

Peda:

Peda refers to the partially dehydrated whole milk product prepared by direct
heating milk in a pan with constant stirring and scrapping till it reaches a semi solid
consistency under PFA rules the fat contents in Peda shall not be less than 20% of the dry
matter in the finished products. Peda constitutes a base for the manufacture of most
Indian milk sweets it has been estimated that nearly 4.5% of our milk production is
utilized for Peda making.

Milk assembly, its modernized processing into bulk and its products and efficient
selling and distribution to urban consumers. The marketing system in the rural areas and
the consumers are in urban areas. High efficiency is essential to achieve the goal set for
the dairy industry. It is an instrument of economic change. Considerable interest was
being shown by farmers in India to affect consistent economic viability in the dairy
industry through optimizing organized milk marketing process, such as procurement,
processing and distribution and various independent operations of the dairy plant, to
achieve the desired objectives. To achieve the above desired objectives and to foster the
needs of milk production and its marketing in an organization way, the following
institutions play important role.

They are:

Anand pattern dairying

Operation Flood



Anand Pattern Dairying:

In 1940, the government of India contracted a private milk dairy to purchase milk
from kariya, one of the 19 districts of Gujarat and supply pasteurized chilled milk to
Bombay. But the milk procurement price was not fixed and milk products continued to
receive low and fluctuating prices. The dairy farmers resented the system but trapped by
their own resources. The small dairy farmers, who were engaged only in these trades,
went on strike and they formed the primary level with co-operative in 1946. The co-
operative was first attempted by rural producers to reach on their own for the bulk urban
market. This gave birth to AMUL as organizational instrument that serves the rural dairy
functions both production as well as marketing. AMUL is abbreviation of Anand Milk
Union Limited.

Operation Flood:

One of the ‘aims’ of the dairy development of government of India was to flood
India with milk. One such program is the “operation Flood” designed by national dairy
development board (NDDB) to create a “vertical flood” of rurally produced milk in India.
This has been in operation since 1970.

Growth and development of the Milk Industry:

The sale of milk in the form of sachet is estimated to be 36mn MT valued at Rs
470 billion per year. The market is currently growing at round 4% pa in volume terms.
The milk surplus states in India are Uttar Pradesh, Punjab, Hariyana, Rajasthan, Gujarat,
Andrapradesh, Maharastra, Karnataka and Tamilnadu. The manufacturing of milk
products is concentrated in these milk surplus states. The top 6 states viz., Uttar Pradesh,
Punjab, Madhya Pradesh, Rajasthan, Tamilnadu, and Gujarat together account for 58% of
National production. Milk products grew by mere 1% pa between 1947 and 1970. Since
early 70’s under operation flood. Production growth increased significantly averaging
over 5% per annum. About 75% of milk is consumed at the household level, which is not
a part of commercial dairy industry. Loose milk has a larger market in India as it is
perceived to be fresh by most consumers in reality however; it poses a higher risk of
adulteration and contamination.



Although milk production has grown at a fast pace during the last 3 decades, milk yield
per animal is very low. The main reasons for the low yield are

• Lack of use of scientific practices in rearing cattle

• Inadequate availability of fodder in all seasons

• Unavailability of veterinary health services

• Not raring the hybrid cattle

Present Status of the Industry:

Dairy co-operative network

• Includes 170 Shimoga Milk Unions

• Operates in over 285 districts

• Covers nearly 103281 village level societies

• Is owned by nearly 11 million farmer members

Milk Production:

• India’s milk production increase from 21.2 million Mt in 1968 to 84.6
million Mt in 2001-02.

• Per capita availability of milk presently is 226gms per day, up from
122gms per day in 1968-1969.

• India’s 4% annual growth of Milk production surpasses the 2% growth
in population.

• The net increase in availability is around 2% per year



Study of the Functional Department of the Shimul Industry
Finance Department

Finance is the lifeblood of any organization finance mainly focuses on wealth
maximization it mainly focuses on minimizing the cost and maximizing the cost and
maximizing the profit.

Auditing

Auditing will be carried on as per co-operative audit department (government of
Karnataka) under sec rule 441, once in a year.

Monthly Audit:

Private chartered accountant will do pre-auditing once in a month appointed by
SHIMOGA MILK UNION LTD and he has to submit a monthly report to the finance
department.

Records:

Records are maintained in ledger as per the standing orders of Shimoga Milk
Union. Various accounts and details accounts are processed using an excel spreadsheet
software and all the details are stored in a computer and hard copies are stored and
maintained in the respective files.



3.2 COMPANY PROFILE

Origin of Shimoga Milk Union:

SHIMOGA MILK UNION LTD started its operations on 21st may 1971, with a
initial investment of 24.17 lakhs with the capacity of 10,000 (TLPD) thousands liters per
day. SHIMOGA MILK UNION LTD is located in Machennahalli, 12Kms from Shimoga
and 6Kms from Bhadravathi. The dairy is located in an elevated place on Survey No.72
having 25 acres of land.

The Shimoga milk Union is located in central part of the state of KARNATAKA.
The corporate office of the union is based at Machenahalli, covering three districts of
Shimoga, Davangere and Chitradurga.

Growth and Development of Shimoga Milk Union:

Shimoga dairy is one of the important dairies in Karnataka in the year 1963, first
in city a pilot project scheme was started to supply milk to consumers of Shimoga and
Bhadravathi and provide additional income to the rural farmers of district. In the initial
period, the milk used to be sold in bulk. Dairy came into existence on 21 may 1971, it
extended its operations with the help of the Government. In order to expand its business,
it started manufacturing ghee. Earlier than 1985, it was named as government dairy,
because it was control of the Government. On Feb 1985, the dairy was taken over by
KMF and named as Shimoga dairy.

In the initial stage, milk was distributed only to Shimoga and Bhadravathi cities
only. It was supplying the milk in bottles and in July 1985. It started supplying milk in
polythene bags to the consumers. In August 1985, there was a paradigm shift in the
working pattern. Dairy adopted AMUL pattern.

A new dairy was established in Jan 1991, with a capacity of (ILLKPD) was taken
over by SHIMOGA MILK UNION LTD. At the same time the chilling centers of
Davanagere, Chitradurga, Honnali and Anandapura was handed over to SHIMOGA
MILK UNION LTD. A new Dairy has been established with a capacity of 1.0 Lakhs
Liters per day under the Operation Flood II & III with NDDB assistance. The Union has
five chilling centers located at Honnali, Anandapura, Chitradurga, Hosadurga, &



Tadagani with chilling capacity of 0.95 Lakhs Liters per Day. The union has a Dairy at
Shimoga and a mini dairy at Davangere, processing, packing and selling 25,000 liters per
day. The union procures on an average 1.32 Lakhs Kgs. of milk per day and sells 0.93
Lakhs liters per day. The union, apart from selling toned milk, also produces Butter,
Ghee, Peda, Butter Milk and Curds.

Present Status of the Company:

DCS 818
Members 107369
Dairy Procurement of Milk 1, 49,500 LPD
Milk Sales 91,194 LPD
Artificial Insemination Centers 209
Artificial Insemination 679310
Vaccines 421
Fodder in Tones 14201

Organization Structure of Shimoga Milk Union Ltd:

SHIMOGA MILK UNION LTD functions same as the AMUL organization
structure. In this pattern the milk producers themselves control all the functions of
dairying milk production, procurement, processing and marketing, this structure consist
of 3- tire systems.

First Tire:

The basic unit in the Anand pattern is the village milk producers co-operative a
voluntary association of milk producers in a village, who wish to market their milk
collectively. Those who have a permanent residence and who own a milk animal can
become a member by paying a share capital to DCS.

Management:

The members of society in general meeting elect a managing committee of nine
members democratically. The chairperson of the committee retires every year. The
managing committee sets the co-operative policies and selects the society staff including
a secretary, a milk collector, a Fat Tester, a clerk, inseminator, Accountant and helper to
perform the society’s administration depending upon the size of the business.



Among the managing committee members one will be elected as a president of
DCS for one-year term that is the administrative head of the DCS.

Second Tire:

A key element in the Anand pattern DCS is that all registered village milk
societies are members of a DCS milk producers union that enable them jointly to own a
dairy processing factory and a cattle feed plant.

Management:

The union is controlled by Board of Directors consisting of 16 to 17 members of
which 12 are democratically elected from among the representative of the village
societies, the remaining five comprises of Managing Director as a member secretary, one
or two representative of the federation. There 5 members are not eligible for contesting to
the post of chairman. The chairman is elected by the board members retire every year by
rotation so that each member functions for 3 years, the board employs the Managing
Director who makes the appointment of junior staff. A sound code of conduct and the
administrators of the union.

Third tire:

The union members of a co-operative milk marketing federation by subscribing to
it at least 20,000 each as a share capital, the federation is responsible for evolving and
implementation of policies on cooperative marketing liquid milk and milk products.

Management:

The federation board consists mainly of the elected chairman of all the members
of the union and the federations managing director. Each member has voting right. The
members elect a chairman of the board. The board evaluates the federation’s policies on
all its functions.

Functions of Shimoga Milk Union Ltd:



DCS are grouped at district level into co-operative milk producers union. The
unions organize new DCS and assist DCS with their management including audit of
accounts, Purchases, processing and marketing of liquid Milk.



3.3 Organizational structure:

Board of Directors

President

Managing Director

Administrative Finance Manager MIS
Manager
Marketing
officer officer Dairy Department Procurement Officer

Deputy.Mgr Deputy.Mgr Distribution Development
Plant Quality division division

Deputy Mgr Deputy
Procuremen Mgr Input
t



3.4 Profile of the Company:

Shimoga Milk Union manufactures the following products:

1. Toned Milk

2. Double toned Milk

3. Standardized Milk

4. Full Cream Milk

5. Ghee

6. Butter Milk

7. Homogenized Milk

8. Peda

9. Curd

Shimoga Milk Union Markets the following products

1. Gulab Jamoon Mix

2. Flavoured Milk

3. Mysore pak

4. Panner

5. Badam Powder

6. Good life Milk



Milk & milk Products Price List:

Price List if Nandini Milk & Milk Products

No
Products name Kgs/Liters/grams Selling price in (Rs)

1
500 ML 8.50
Toned Milk
1000 ML 17.00
2
500 ML 9.00
Double toned milk
1000 ML 18.00
3
500 ML 10.00
Standardized Milk
1000 ML 20.00
4
500 ML 11.50
Full cream Milk
1000 ML 23.00
5
200 ML 37.00
Ghee 500 ML 82.50
1000 ML 158.00
6
Butter Milk 4.50

7 Homogenized Milk 1000 ML 15.00
8 Peda 250 ML 50.00
9 Curd 500ML 8.50
10 Gulab Jamoon Milk 200 gms 45.50
11 Flavoured Milk 200 ML 13.00
12 Mysore pak 250 gms 55.00
13 Badam powder 200 gms 40.50



3.5 Achievements

Mile Stones:

1963- A Pilot project was started to supply milk to Shimoga and Bhadravathi

1971- Government dairy at Shimoga was started with the capacity of 10,000

1985- Opening of KMF P and I wing.

1985- First milk procurement rout was started

1985-KMF has taken over the dairy.

1987-Registrations of SHIMOGA MILK UNION LTD.

90-97-NDDB funded for co-operative development program

1997-Grands from Government of India for women and Child development program

1999-Installation of LNZ distribution system

2005-Set upping of 24 ATM parlors and customer grievance cell in Chitradurga and
Davanagere

2007-Set upping of 3 ATM parlors and 687 dealers

2009-In this year 38 new societies started, in this bulk milk coolers are adopted for best
quality of milk. From each society 220 Kg milk has proposed to collect. In this year
planned to increase the milk by decreasing the amount to produced milk like artificial
insemination, fodder and providing 50% of concision to the formal.



Introduction of New products

1985- Ghee

1988- Peda

1993- Standard Milk

1997- Butter Milk and curds

1999- Lassi

2000- Introduction of tonned milk in 200ml sachet.

2006- Toned milk, Homogenized milk, sterilized milk and Full cream milk

2007- Skim milk powder, Cheese, Badam powder, Paneer and Mysore Pak

2009- Burfi, Jamoon, khova, flavored milk and Ice cream.

Chilling Centers Dairies Established

1984- Chitradurga

1991- Dairy

1991- Honnali

1991- Anandapura

1999- Tadagani

2007- Davangere

2009- Harihara



3.6 Mission Statement:

Shimoga Milk Union is provide maximum possible price for the milk supplied by
its members and provide necessary inputs to enhance milk production while ensuring
economic viability of the union and is also committed or provide quality milk and milk
products to consumers and emerge as one of the top most Milk Unions of the co-operative
dairy industry in the country.

Goals by 2008:

 Organizing 700 functional DCS.

 Procuring of LKPD of Milk.

 Marketing of 1.75 LLPD of Milk.

 Introducing concept of clean milk production.

 Collecting 6 corers as share capital Distributing 80% of the Income earned from
sales to farmers, producers, and members.

 Increasing processing capacity to 1.9 LLPD

 Reducing Recover Period from 17 days to 7 days

 Paying Payments after 14days

 Training staff to enhance QMS

 Adoption of ISOHACCP

Goals by 2009:

• Establishment of 856 milk dairys.

• 10% to 5% increase in selling.

• Dividing the milk union into four groups.

• To open 38 new societies.



• Planning to insert new bulk milk coolers to get good quality of milk.

• Tetra packing and making good milk products.

• Giving good price to the farmers.

• Planning to preserve 220kg of milk.

The Main Activities of the Union

DCS membership:

At the end of March 2008, a Network of 818 DCS have been organized and over
in 175 Taluks in all three districts of milk-shed area and there are around 107369
members of DCS out of which 50863 are women.

Milk Chilling Centers:

There are 5 chilling centers situated at Anandpura with 100 TLPD (Thousand
Liters per Day), Chitradurga with 10 TLPD, Hosadurga with 8 TLPD, Tadagani-30
TLPD, and the main dairy is situated in Machenahally having a capacity of 40,000 TLPD
and processing capacity of 5 LLPD.

There are 80 milk procurement routes operating from union and is collecting milk
on an average of 3, 50,000 KGPD during the year march-08. The Milk procurement routs
are not constant. It keeps on fluctuating according to the availability of milk.

Animal Health Facilities:

There are 7 veterinary routes operating and conducting health camps and attending
emergency cases.

Animal Breeding:

Artificial Inseminations are being done through AI centers.



Feed and Fodder Development:

Cattle feed and high yielding varieties of fodder being supplied to producer along
with technical advice.

Milk & Milk Products Marketing:

The pasteurized milk being distributed to three districts i.e., Davanagere,
Shimoga and Chitradurga through 8 parlous, 3 A.T.M parlors, 687 milk dealers. On an
average every day 1, 02,000 litter being sold in 65 towns. In addition to milk, milk
products like Peda, curds and butter milk are sold in the milk shed area.

Shimoga milk Union Ltd Objectives

 Providing remunerative and assured market for the milk product by the farmers.

 Providing quality milk to urban consumers.

 To build village level institutions in co-operative sector to manage dairy activities.

 To ensure provision of milk production inputs processing faculties and
dissemination.

Shimoga milk Union Ltd Quality Objectives:

 To train our workmen from time to time for exposure to advance technology for
efficient operations.

 To provide adequate infrastructure facility for improving the work environment.

 To set goals/targets at all level to achieve continuous improvement.

Shimoga milk Union Quality Policy:

SHIMOGA MILK UNION LTD is committed to producers’ welfare through
customer delight by adopting continuous improvement and ensures pure and hygienic
milk and milk products.



New Projects in Shimul

 30TLPD new milk chilling center cum packing center at Chitradurga

 Installation of Bulk Coolers of Chilling Centers from 20,000 LPO to 60,000LPD.

 Network based dairy into system.

 Expansion of Ice Cream Plant from 5000 Liters, to 15,000 Liters capacity at an
outlay of Rs.5.69 crores.

 Launching of New Milk Products at Nandini Milk Products Unit



3.7 SWOT ANALYSIS

STRENGTH

• Procurement and Input (Net work)

• Goodwill

• ISO 9001-2000 certified

• Second larger producer

• Vast Market

WEAK

• World trade organization standards

• Advertisement execution in its early

• Early stages of automation of computerization

OPPORTUNITIES

• Enter rural market

• Exports

THREATS

• Entry of big players

• WTO standards

• Government policies



DATA COLLECTION AND INTERPRETATION

SHIMOGA DISTRICT MILK PRODUCER’S SOCIETIES UNION
LIMITED Shimoga Dairy, Machenahalli,

Nidige Post, SHIMOGA – 577222

2007-2008, 2008-2009, & 2009-2010 Financial year Estimated
expenditure

Sl Particulars 12-09-2007 15-09-2008 10-09-2009
no 2007-2008 2008-2009 2009-2010
Lakhs Lakhs Lakhs
1 Opening products of milk products 185.6 66.75 103.29
2 Purchase of milk from milk unions 6366.25 5667.57 6184.39
3 Milk storage & transportation expenses 577.47 610.38 404.56
4 Transportation expenses (others) 22 23 19.5
5 Cattle feeds & development expenses 914.97 1009.04 1294.08
6 Milk processing & manufacturing expenses 550.41 570.83 535.57
7 Employees salary & allowances 559.66 556.45 594.9
8 Administrative expenses 72.99 76.5 101.86
9 Taxes & rates & rent 24.5 31.5 32
10 Milk distribution expenses 163.3 166.87 165.02
11 Milk & milk products packing charges 230.06 211.25 238.53
12 NDDB loan repayment with bank commission 86.34 82.5 62
13 Depreciation or asset 45 58 45
14 Cattel animal health program & expenses
26.91 36.82 34.34
income from artificial insemination
15 Program 62.04 56.19 62.73
16 Training program expenses 4.3 6.94 23.22
17 Fir staid program expenses
18.74 3.89 26.93
18 Extension of facilities for co-operatives unions 51 55.61 111.73



19 Capital investment & advances quality control
1174.45 376.75 763.15
& plant management
20 Expenses (NPCS) 376.5 345.12 324.22
21 National information system 12.8 12.8 12
22 Purchase of diesel (contractors vehicles) 135 108 108
23 Staff program expenses 84.51 11.32 49.75
24 Savings 20.5 21.07 11.58
Total 11765.3 10165.15 11308.35

4.1 Opening products of milk products

1 Opening products of milk products

200
180
160
140
120
1 Opening products of
100
milk products
80
60
40
20
0
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that opening product of milk in 2007-08, 2008-09,
2009-10 is 190 lacks, 70 lacks and 110 lacks respectively. Opening products of milk
2008-09 decreased by 118.85 lakhs. Due to the manufacturing inability and the
mismanagement in the organization. 2009 – 2010 it increased 36.54lakhs due to the
management change.



4.2 Purchase of milk from milk unions

2 Purchase of milk from milk unions

6600
6400
6200
6000 2 Purchase of milk from
5800 milk unions
5600
5400
5200
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that purchase of milk from milk unions in 2007-08,
2008-09, 2009-10 is 6350, 5670 and 6200 respectively. Purchase of milk from milk
unions 2008-09 decreased by 698.5 lakhs and 2009-10 516.82 lakhs increase.. Due to the
financial inability in 2009-10 it increases due to the financial restructuring.



4.3 Milk storage & transportation expenses

3 Milk storage & transportation expenses

700
600
500
400 3 Milk storage &
300 transportation expenses
200
100
0
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that Milk storage & transportation expenses in 2007-08,
2008-09, 2009-10 is 575, 610 and 400 respectively. Milk storage & transportation
expenses 08-09 increased 32.91 lakhs and 09-10 decreased 205.82lakhs.



4.4 Cattle feeds & development expenses

4 Cattle feeds & development expenses

1400
1200
1000
800 4 Cattle feeds &
600 development expenses
400
200
0
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that cattle feeds and development expenses in
2007-08,2008-09,2009-10 is 900, 1000 and 1300 respectively. Cattle feeds &
development expenses in the year 08-09 increased 94.1 lakhs and in 09-10 increased
285.04 lakhs.



4.5 Milk processing & manufacturing expenses

5 Milk processing & manufacturing expenses

580
570
560
550 5 Milk processing &
540 manufacturing expenses
530
520
510
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that milk processing and manufacturing expenses in
2007-08, 2008-09, 2009-10 is 550, 570 and 535 respectively. Milk processing &
manufacturing expenses in the year 08-09 increased 20.42 lakhs and in 09-10 decreased
by 35.26 lakhs.

.



4.6 Employees salary & allowances

6 Employees salary & allowances

600
590
580
570 6 Employees salary &
560 allowances
550
540
530
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that Employees salary and allowances in 2007-08,
2008-09,2009-10 is 560, 555 and 595 respectively. Employee’s salary & allowances in
the year 08-09 decreased by 3.21 lakhs and in 09-10 increased 38.45 lakhs.

.



4.7 Administrative expenses

7 Administrative expenses

120

100
80
60 7 Administrative expenses
40
20
0
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that Administrative expenses in 2007-08, 2008-09,
2009-10 is 75, 79 and 110 respectively. Administrative expenses in the year 08-09
increased 3.51 lakhs and in 09-10 increased 25.36 lakhs.



4.8 Taxes, Rates & Rents

8 Taxes & rates & rent

35
30
25
20
8 Taxes & rates & rent
15
10
5
0
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that tax, rent and rates in 2007-08, 2008-09, 2009-10 is 24, 32
and 33 respectively. Taxes, Rates & Rents in the year 08-09 increased 7 lakhs and in the
year 09-10 increased 1.50 lakhs



4.9 Milk distribution expenses

9 Milk distribution expenses

168
167
166
165 9 Milk distribution
164 expenses
163
162
161
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that milk distribution expenses in 2007-08, 2008-09,
2009-10 is 163.5, 166.8 and 165 respectively. Milk distribution expenses in the year
08-09 increased 3.57 lakhs and in the year 09-10 decreased by 1.85 lakhs.

.



4.10Milk & milk products packing charges

10 Milk & milk products packing charges

245
240
235
230
225
10 Milk & milk products
220
packing charges
215
210
205
200
195
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that milk and milk product packing charges in 2007-08,
2008-09, 2009-10 is 230, 211 and 237 respectively. Milk & milk products packing
charges in the year 08-09 decreased 18.81 lakhs and in the year 09-10 increased 27.28
lakhs.



4.11 Capital investment & advances quality control & plant management

11 Capital investment & advances quality control & plant
management

1400
1200
1000
800 11 Capital investment &
advances quality control &
600 plant management
400
200
0
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that capital investment and advance quality control in
2007-08, 2008-09, 2009-10 is 1190, 390 and 790 respectively. Capital investment &
advances quality control & plant management in the year 08-09 decreased 797.70 lakhs
and in the year 09-10 increase 386.40 lakhs.

.



4.12 Staff program expenses

12 Staff program expenses

90
80
70
60
50 12 Staff program
40 expenses
30
20
10
0
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that staff program expenses in 2007-08, 2008-09, 2009-10
is 85,10 and 50 respectively. Staff program expenses in the year 08-09 decrease 73.19
lakhs and in the year 09-10 increase 38.43 lakhs.



4.13 Grand Total

Financial Expenditure

Sl no Total

12000

11500
11000

10500 Sl no Total
10000

9500
9000
Lakhs Lakhs Lakhs

2007-2008 2008-2009 2009-2010

12-09-2007 15-09-2008 10-09-2009

The above table shows that grand total in 2007-08, 2008-09, 2009-10 is
11700,11000 and 11560 respectively. Financial expenditure in the year 08-09 decrease
1600.15 lakhs and in the year 09-10 increase 1143.2 lakhs.



Findings
5.1 Summary of Findings:

As my study conducted on the Budgetary Control of SHIMUL was finding the
following points. The department generated the following types of reports

• Section wise report

• Management report

• Board meeting report

• NDDB report

• Section head meeting report

1. The opening products of milk products 2009-10 it increased 36.54lakhs compare to
the previous year.

2. Purchase of milk from milk unions 2009-10 516.82 lakhs increase compare to the
previous year.

3. Milk storage & transportation expenses 2009-10 decreased 205.82lakhs.

4. Cattle feeds & development expenses in the year 2009-10 increased 285.04 lakhs.

5. Milk processing & manufacturing expenses in the year2009-10 decreased by 35.26
lakhs compare to the previous year.

6. Employees salary & allowances in the year 2009-10 increased 38.45 lakhs.

7. Administrative expenses in the year 2009-10 increased 25.36 lakhs.

8. Taxes & Rates & rents in the year 2009-10 increased 1.50 lakhs.

9. Milk distribution expenses in the year 2009-10 decreased by 1.85 lakhs.

10. Milk & milk products packing charges in the year 2009-10 increased 27.28 lakhs.

11. Capital investment & advances quality control & plant management in the year
2009-10 increase 386.40 lakhs.

12. Staff program expenses in the year 2009-10 increase 38.43 lakhs.


A study on budgetary control of shimul

A study on budgetary control of shimul

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