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Working capital is the life blood and nerve center of business. Working capital is very essential to maintain smooth running of a business. No business can run successfully without an adequate amount of working capital. The main advantages or importance of workingcapital are as follows:
1. Strengthen The Solvency
Working capital helps to operate the business smoothly without any financial problem for making the payment of short-term liabilities. Purchase of raw materials and payment of salary, wages and overhead can be made without any delay. Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production.
2. Enhance Goodwill
Sufficient working capital enables a business concern to make prompt payments and hence helps in creating and maintaining goodwill. Goodwill is enhanced because all current liabilities and operating expenses are paid on time.
3. Easy Obtaining Loan
A firm having adequate working capital, high solvency and good credit rating can arrange loans from banks and financial institutions in easy and favorable terms.
4. Regular Supply Of Raw Material
Quick payment of credit purchase of raw materials ensures the regular supply of raw materials fro suppliers. Suppliers are satisfied by the payment on time. It ensures regularsupply of raw materials and continuous production.
5. Smooth Business Operation
Working capital is really a life blood of any business organization which maintains the firm in well condition. Any day to day financial requirement can be met without any shortage of fund. All expenses and current liabilities are paid on time.
6. Ability To Face Crisis
Adequate working capital enables a firm to face business crisis in emergencies such as depression.
OBJECTIVES OF THE STUDY
To analyse the Current ratio of Foods Fats and Fertilizers.
To analys the Quick ratio of Foods Fats and Fertilizers.
To anlyse the Working capital ratio of Foods Fats and Fertilizers.
To analyse the Working capital turnover of Foods Fats and Fertilizers.
To analyse the Cash ratio of Foods Fats and Fertilizers.
To analyse the Inventory turnover ratio of Foods Fats and Fertilizers.
To analyse the yearwise days inventory of Foods Fats and Fertilizers.
METHODOLOGY OF THE STUDY
The data can be collected in two main ways.
One is primary data and the second one is secondary data.
Primary data : The data collected first time directly through persons is called primary data. In this documentation important information is collected for company officials.
Secondary data: The data collected through magazines, newspapers, electronic media is called secondary data.
SCOPE OF THE STUDY
The scope of the study is pertaining to the Working capital analysis w.r.t Foods Fats and Fertilizers only.This study helps for the further research investigations.
LIMITATIONS OF THE STUDY
As per the study is concerned, the time available is a major concern. Having less than two months of times is always a limitation.
Because of the non availability of important officials in the organization there was a chance of loss of some useful information for the documentation.
This study deals the financial data since 2008-09 to 2012-13 only.
PROFILE OF THE INDUSTRY
Importance of edible oils in the country’s economy:
Oilseeds and edible oils are two of the most sensitive essential commodities. India is one of the largest producers of oilseeds in the world and this sector occupies an important position in the agricultural tones of nine cultivated oilseeds during the year 2003-2004. India contributes about 8-9% of the world oilseeds production. Export of oil meals, oilseeds and minor oils has increased from 2.28 million tones in the financial year 2002-03 to 4.01 million tons in the financial year 2003-04. In terms of value, realization has gone up from Rs.2653/- crores to RS.5447/- crores. India accounted for about 6.4% of world oil meal export.
Types of oil commonly used in India: -
India is fortunate in having a wide range of oilseeds crops grown in its different agro climate zones. Groundnut, mustered/rapeseed, sesame, safflower, linseed, Niger seed/castor are the major traditionally cultivated oilseeds. Says Bean and Sunflower have also assumed importance in recent years. Coconut is most important amongst the plantation crops. Efforts are being made to grow oil form in Andhra Pradesh, Karnataka, Tamilnadu in addition to Kerala and Andaman & Nicobar Islands. Among the non-conventional oils, rice bran oil and cottonseed oil are the most important. In addition, oilseeds of tree and forest origin, which grow mostly in tribal inhabited areas, are also a significant source of oils. Figures pertaining to production of major cultivated oilseeds, availability of edible oils form all domestic sources and consumption of edible oils
(From Domestic and Import Sources) during the last few years are as under:
Net availability of edible oils: Directorate of Vanaspati, Vegetable Oils & Fat.
Consumption Pattern of Edible Oils in India: -
India is a vast country and inhabitants of several of its regions have developed specific preference for certain oils largely depending upon the oils available in the region. For example, people in the South and West prefer groundnut oil while those in the East and North use mustard /rapeseed oil. Likewise several pockets in the South have a preference for coconut and sesame oil, Inhabitants of northern plain are basically hard fat consumers and therefore, prefer Vanaspati, a term used to denote a partially hydrogenated edible oil mixture. Vanaspati has an important role in our edible oil economy. It has around 10% share of the edible oil market. It has the ability to absorb a heterogeneous variety of oils, which do not generally find direct marketing opportunities because of consumers’ preference for traditional oil such as groundnut oil, mustard oil, sesame oil etc. For example, newer oils like Soya bean, sunflower, rice bran and cottonseed and oils from oilseeds of tree and forest origin have found their way to the edible pool largely through vanaspathi route. Of late, things have changed. Through technological means such as refining, bleaching and de-odouralisation, all oils have been rendered practically colorless. Odorless and tasteless and, therefore, have become easily interchangeable in the kitchen. Never oils which were not known before they have entered the kitchen, like those of cottonseed, sunflower, palm oil or its liquid fraction (palmolein), Soya bean and rice bran. About 60-70% predominantly groundnut and mustard seeds are used to make non-refined or filtered oils. These tend to have a strong and distinctive test preferred by most traditional customers. The share of raw oil, refined oil and vanaspati in the total edible oil market is estimated at 42%, 48%and10% respectively.
Major Features of Edible Oil Economy: -
There are two major features, which have very significantly contributed to the development of this sector; one was the setting up of the Technology Mission on Oilseeds in 1986. This is a thrust to Government’s efforts for augmenting the production of oilseeds. This is evident by the very impressive increase in the production of oilseeds from about 11.3 million tones in 1986-87 to 24.8 million tons in 1998-99. There was some setback in 1999-2000 because of the unseasonable rain followed by inclement weather. The production of oilseeds declined to 20.7 million tones in 1999-2000. However, as per available information, the oilseeds production in 2003-04 is estimated to be 25.1 million tons. The other dominant feature which has had significant impact on the present status of edible oilseeds/oil industry has been the programmed of liberalization under which the government’s economic policy allows greater freedom to the open market and encourages healthy competition and self regulation rather than protection and control. Controls and regulations have been relaxed resulting in a highly competitive market dominated by both domestic and multinational players.
INDUST RY SCENARIO
In the Indian context, the term “Vegetable Oils” is almost synonymous with “Edible Oils” and land is not used as cooking media. However it is important to keep this distinction in mind not all Vegetable Oils are Edible- Some including caster oil are mostly non-edible and some of the edible oils like Ground Nut and Coconut are finding increasing industrial applications as in cosmetic, soap making etc.,
By virtue of they’re high nutritive content, Edible oils from a major source of nutrition. The body as a vehicle for carrying vitamins requires the fatty acids in Edible Oils; provide oil cakes, which are byproduct of the oil extraction process, are important source of animal nutrition. These can be processed in to Edible Flavors, which are rich in proteins.
Oil seeds occupy an important position as the agriculture map and rank second after food grains as a farm commodity crop. India accounts for a tenth of the world out put of Vegetable Oils and fats. It is the largest produces of Ground Nut, rapeseed, mustard and sesame, second in respect of castor seeds, third in coconut, fourth in cotton seed and fifth in line seed.
Our country has a highly developed oil based industry. Providing gainful employment to nearly 15 million persons besides another half a million engaged in milling and processing units. It is essential a food-oil industry accounting for four fifths of the total supply of Vegetable Oils. Soap paints and varnish industries from the bulk of non-food applications.
In spite of their national importance, production of food grains has been suffering a negative growth rate all these years. Only during the first plan period, the targets set for production were realized after this no impressive achievement was recorded. The main contributory factors are two fold, first only marginal land, in rain fed areas is being used for their cultivation resulting inevitable in low productivity, and second agriculture in India is still subject to the vagaries of monsoon, which makes for erratic production. It is little wonder therefore that the annual rate; of growth of oil-seed production for the decade 1965-1976 was a mere 1.2 percent while that of oil seed productivity, an equally dismal one percent.
Viewed in the global context, India has the dubious distinction of having the highest acreage under oil seeds and recording the highest output, and yet showing the lowest yield, at 736kg. India’s yield per hectare is lower than that of Nigeria (1616.38kg.) U.S.A (1474.58kg), Argentina (1153.49kg) and China (1148.55kg).
For the year 1980-81, target for oil-seed production had been fixed at 11 million tones, actual production however lagged behind, with provisional estimates.
Placed at 10.2 million tones. Production of live major oil seeds viz. groundnut, rare seed mustard, sesame, line seed and castor seed and is estimated to be around 90 lakhs tones, which is about 13 percent higher than the previous year’s production. Production estimates of groundnut at 57 lakhs tones however show decline of 70,000 tones. At 2 lakhs tones castor seed production has also registered a decrease of 30,000 tones. Rapeseed, sesame and line seed have however, registered increased over the previous year’s production levels.
The central government therefore took various measures to increase production of oil seeds. A centrally sponsored scheme for an intensive oil seed development programmed was operated in 14 states with a coverage target 40.6 lakhs hectors under a liberalized pattern of central, assistance. However actual coverage was only 36 lakhs hectares and the short fall was attributed to serve. Brought conditions in several states during the kharrif season.
Short falls in production persisted in the oil year 1981-82 as well. As a result, domestic industry could not meet the consumption needs respect of edible oils. The total edible and supplies from indigenous sources were estimated at about 30 lakh tones in 1981-82 (which however higher than the previous year’s levels of 25 lakes tones). The gap of 10 lakhs tones had to be filled only through imports. Consequently, the state-trading corporation was asked to import a million tones of Edible Oils during the oil year 1981-82. The allotment of imported Edible Oils was also pruned in a bid of ensure more supplies through fair price shops.
The trend of imports in expected to continue in the year to come despite the best efforts of the union agriculture ministry to raise oil seed output. The genera-based international trade center has projected import 13 million tones of Vegetable Oils in 1985. As for exports, it is anticipated that India would export 15 lakhs Tones of oil equivalent of hand picked-selected groundnut, other nuts and castor oil by 1985.
The composition of our exports is expected to under go a change palm oil and products (palm oil and RBD palm oil) will in further account for an increasing share of Indian exports soyabean oil and rapeseed oil will continue to be imported through their combined share may fall to about one third of the total imports refined rapeseeds oil could be the cheep oil for the liquid market while soyabean oil is expected to the supplied to the vanaspathi industry.
Regarding production of oils, an increase in the production of solvent extracted oils such as rice bran oil tree oils in lightly to occur the ITC reports says that the country could make significant investments in view of it’s resource for this oil and the demand for Edible Oils. The report has also forecast a rise in the de oiling of ground nuts cake and other sun cakes the country could also produce 4.5 lakes of tones seed oil per year.
PROBLEMS: -
An important feature to be taken note of in the case of seeds is that their production facilities widely from year due to seasonal conditions as only 8 percent of the total area under oil seeds is irrigated further year substantial parts of the verified areas under oils seeds consists further year substantial parts is mostly sub-optional due to the user seed of pure quality and wide spacing the triple alliance of weeds, pests and pathogens cause great deals of losses both the in the early state of plant growth as also at crop maturity. Absence of rains at critical stages also causes significant losses in yields particularly in the case of
groundnuts poor post, harvest technology including deficiency in marketing support and storage and processing also have advice on returns to grower and incentives for production.
PROJECTIONS: -
India has becoming a sizable imported of Edible Oils since the mid seventies. Annual reports are the order of the million tones costing around Rs.600 cores in foreign exchange.
It has been projected that the demand edible oils will increase at the minimum annual rates of 3.5 percent. The growth rate in oil seeds production has been then one annual a half percent per annum in the last decade avoidably import of Edible Oils will be on the rise.
At these assumed the levels, the annual import requirements will be around 1.6 millions tones by 1990. If demand grows at the higher rate, say at 5 percent, the volume of exports required will be 2.1 million tones by the same year.
Imports in the range 1.6 to 2.1 million tones will mean India absorbing 8.10 percent of the projected will export vegetable oil at the time. Such heavy dependence o India to price backs mail. That would be compounded in years of bad harvest. The foreign exchange drain on our exchange (according to World Bank estimates) could be US $3 to 4 billion annually.
At the instance of the Government of India National Dairy Development Board (NDDB) has under taken the project for restructuring the pattern of production and marketing of oil seeds and Edible Oils. The project has been designed to integration production, procurement, processing and marketing of oil seeds and vegetable oils through a two-tier co-operative structure oil seeds grower’s co-operative societies at villages level and an oil seeds growers federation at the state level.
A sum of Rs150 cores required for project investment could come from ploughing back the sale proceeds of 2.5 lakes tones of Edible Oils gifted to the NDDB by the co-operative league USA (CLUISA) NDDB by co-operative union of Canada (CUC). It is sought to involve 6 states Gujarat, Maharastra, Tamilnadu, Madhya Pradesh, Andhra Pradesh, and Orissa in implementing the project.
RICE BRAN OIL
New technology in the US has proved that rice bran oil is effective in lowering cholesterol. This has encouraged many rice millers in the US to stabilizer rice bran oil extraction. Edible grade rice brand oil is called “Heart Oil” in Japan. As demand from this oil is likely to broaden the world over and as India is the second largest producer of rice after China, the union government decision to encourage productions of this oil is welcomed in oil quarters. There is great scope, to introduce modern technology in this predominant agro-industry.
The central Government has raised the export ceiling on de oiled rice bran from 216000 tones to 324,000 tones for the oil year 1989-90 to encourage the domestic production of bran oil and the export of de oiled bran. This is a welcome step at that time when the country is poised for it’s highest level of edible imports.
It is now increasingly felt that their exists scope of arguments. The availability of Edible Oils through the application of appropriate technology and the other modernization programs in the oil-milling sector of particular interest is the interest is the vast scope of producing Edible grade oil from rice bran.
According to study by the United Nations Food and Agricultural Organization (FAO) in 1985, India is the largest producer of the rice bran oil in the world. But compared to Japan were 80 percent of all rice bran is attracted for oil, only one-fourth of all potential bran is used for oil attraction in this country. Till 1977-78, India produced about 80,000 tones of rice brand oil, but only of industrial grade, 1978-79 only 2,500 tones of Edible Oils, could be produced out of 101,000 tones of rice bran oil.
The situation steadily improved since than, thanks in part to the efforts of the solvent extractors, Association of India (SEAI). Out of 250,000 tones of the Edible grade, Production of RB Oil is likely to go up from 250,000 tones in 1986-87 to 310,000 tones in 1987-88 In 1988-89, the production is likely to go up 325,000 tones although the potential, identified by the SEAI is of 675,000 tones per annum. The development of RB oil extracts illustrates how by-product utilization can help argument Edible Oil Supplies in the country and generate economic activities as well.
The thin brown layers between the husk and kernel in a grain of paddy are called bran. These layers are barbarous in nature, indigestible and refractory to cooking. These bran layers are, therefore, indigestible, and refractory to cooking. This bran layers are, therefore removed by a process called polishing. About 6-kg’s Bran in usually obtained from polishing one quintal of rice.
The bulk of the oil of rice bran (50-80 percent of the total oil) comes into bran during it’s polishing. In row rice on an average, bran contains 12-15 percent oil, while in per- boiled rice when oil inside the grain gets deposited on the outer layer the oil content of bran is 18-20 percent consider it’s fact that half of rice productive in India is par boiled, the average oil content of rice bran could realistically be assumed to an average of about 50 percent.
The estimated production of paddy in the 1988-89 was 93 million tones. Calculated at the modest rate of 5 percent bran on each quintal of paddy for seed purpose, the potential output of oil comes to 610,000 tones out of bran of 4 million tones.
Beginning in the 1970 under private suspires oil extraction from RB has been steadily on the increasing move ever the profession of Edible grade RB oil to the total has gone up from a more 2,300 tones during 1977-78 to our 100,000 tones in 1977-9-88. The products of Edible Oil are closely related to the use of this oil the Vanaspathi Industry.
In spite of fluctuations in demand the use of RB oil is Vanaspathi manufacturing has increased steadily over the year.
With the recent decisions of the Government to reduce the allocation of imported oils to the Vanaspathi Industry, it has become more depend on indigenous oils and fats. A situation that is going to further increase its demand for RB oil in the coming year. Various Government policies like export of de oiled bran exercise rebate on the use of RB oil in the Vanaspathi units, excise in hex an on hardened RB oil for use so, and the levy on rice mills have contributed, towards the growth of the sector.
The announcement of a cash compensatory support of 10 percent on the FOB value of exported de oiled from cake for the 3 years 1986-87 to 1988-89 as further boosted the processing of the rice bran.
Andhra Pradesh processes the largest quantum of rice bran, followed, Punjab and Uttar Pradesh.
This is also due to the growth in the no of solvent extraction units. In 1987, out of 4.86 millions tones of solvent extraction capacity. Andhra Pradesh had 1.38 million tones, followed by Punjab with 86 tones Madhya Pradesh with 6 lakhs and Uttar Pradesh, with 5,80000 tones. In 1985-86 Andhra Pradesh processed 39.5 percent of all rice bran produced accounting for 50.3 percent if total Edible grade RB oil 40.2 percent of total bran and produced 70 percent of total RB oil. 5 states Andhra Pradesh, Punjab, Uttar Pradesh, Karnataka and Haryana produced 81 percent of all rice bran under produced 80.4 percent total RB oil.
As a result of the encouragement given from the use of indigenous rice bran oil particularly by the Vanaspathi Industry the processing capacity of rice bran in the country went up from a more 90 lakhs tones in 1976 to 3.4 million tones 1994 and now stands at 80 million tones.
A number of suggestions have been put forward for augmenting the production of RB oil. These include:
1) Uniform systems of rice levy for huller and Sheller millers, so that hullers can’t remain Wedded their traditional technology with perpetuates wastage and would be compelled to modernize. This would also increase the availability of rice bran for oil extraction.
2) An increase in the excise rebate on using rice bran oil in Vanaspathi manufacturing as well as for soaps and other industries.
3) Fiscal incentives for production of refined solvent extracted RB oil for direct use of cooking medium.
4) Permission for blending similar non-conventional oil with RB oils for direct consumption and
5) Minimizing the import of Palm oil so as to boost the price of indigenous oils and provide an intensive to domestic producers.
Deposit all efforts to increase the production of RB oil to major our stacks, on in built in the very structure of rice milling in India and the other natural of technology, stand in the way of the fuller development of RB oils processing. To take the farmer first, largest production no less than half of fresh rice bran accepts the extraction process is together due to the problems of collection (and stabilization of oil content). This is because no less than 80,000 hullers scatters all over the country, mostly in the rice producing and consuming states, produce these bran’s.
The technology constraints are closely related to the structural ones. Where as has the husk content of rice bran in Japan is only 3 percent, in India it is more than 12 percent. As a result, the oil content of RB in terms of value goes down. Further, when oil extraction is done, the husk leaves a deep color in the oil, when poses problems at the time of bleaching, another acute technological constraint arises from the tendency of rice bran to get dehydrated as a result exposure to the atmosphere as a result, oil contest goes down to a great extent, making it and economical per oil extraction.
The colossal waste of paddy by production including rice bran is ingrained in the structure of rice milling industry in India. The number of rice mills in India increased from 46,000 in 1993 to 107,000 in 1983 and 1,17,000 in 1987. The number of huller mills also increased from 1963 to 80,000 in 1983, before declaring to 78,300 in 1897.
The large number of huller units is a serious drawback, not only because their paddy out turns is low, but also because the bran obtained from huller mills is mixed with husk and other foreign matter. Because of the low oil content, in the rank of five to nine percent, it becomes uneconomical to extract oil from this bran.
Huller mills are improved versions of hand panders, mostly located in small towns and in interior villages mostly located process 200 to 500 tones of paddy in a year. These small hullers generally involve themselves in custom milling of paddy with fixed charges, in cash and in kind. They are excluded from paying the compulsory levy imposed on larger mills, which under take commercial milling of paddy.
The huller mills cater to the large number of landless laborers, sharecroppers and poor peasants whose output is frequently at or below subsistence level. It has been estimated that at teats a quarter of the paddy produced in the country is other land pounded or processed through huller unit custom milling. Rice bran obtained out of such paddy, estimate about a million tones, is neither pure enough not available in large enough quantities to be economically collected. Therefore, this quantum of rice bran is as good as not produced at all.
There are a number of reasons why huller mills thrive in states producing parboiled vice. First, huller mills are very cheap, and conveniently located in interior areas. Second, the investment requirement being low, under utilization of huller mills in the lean season doesn’t put the owner out of business, because he can often supplement it with other from and non from activities.
Third, the out turn of rice is not really so low when it comes to par boiled rice. And last but not the least, is the reason using a huller mill rather than a modernized Sheller mill enables the miller to avoid mill point levy of rice and associated problems.
Since about half of the paddy produced in India is par boiled, the loss of rice bran oil potential is colossal, particularly since the bran produced out of par boiled rice contains three or five percent more oil that produced our of raw rice and the oil in the bran of par boiled relatively stable and doesn’t degrade an account of free fatty acid formation (FFA).
Till such time as the mills are modernized an intermediate short-run solution could be applied. This is to use a mini-rice mill or even a modified huller in place in place of traditional huller, so as to improve the outturn of rice as well as to detain purer bran.
In order to achieve the largest or modernization, the central Government runs a huller subsidy scheme provides for 50 percent of the cost of install action to improved rice milling equipment as subsidy.
For instance, electricity heated rice bran stabilizer of various power rating and capacities (between 50 and 250kg. per hour.) as well as steam heated bran stabilities have been successfully field-tested. However, the tests of chemical stabilizers, which are simple and convenient, are yet to yield sufficient results in the field.
The Government of India has decided to install some of these stabilities in research centers like PPRC to demonstrate its advantages to the millers.
In American mills, rice is rubbed with leather straps instead of by emery, not only to get polished rice but also get good equality. Bran in Japan, rice mills have in built stabilization units. In countries like Belgium, Japan, West Germany and U.K the technology of continuous extraction of oil from rice bran is used to achieve maximum economic energy, labor and materials.
While most of these technologies are sophisticated, with a high degree of efficiency of this country, because of the specific nature of the Indian rice milling industry, Indignation of these processes, therefore is of the most importance. There are two major stages in producing edible grade oil from rice bran. The first stage consists of stabilization of bran to pressure the oil content. The second stage involves the processing and refining of rice bran oil.
A number of stabilization systems have been successfully developed in India at the central Food Technological Research Institute (CETRI) Mysore, The paddy processing Research center (PPRC) Thiruvarur (T.N), The post Harvest Technology Center (PHTC) at the Indian Institute of Technology, Kharagpur. The stabilization particularly the wet heat treatment and chemical stabilization using hydrochloric acid have opened up enormous possibilities can now store and accumulated the stabilized bran for selling it in to the solvent extractions. Even a truckload can be accumulated and stored for the sake of greater economic in transport.
By the end of this century, paddy productions expected to reach a level of 130 millions tones. Keeping a side 12.5 percent of production towards seed, the potential bran production would come to 5.7 million tones, which in turn would yield 8,50,000 tones of RB oil. The exploit this huge potential what is needed is the right perspective and a commitment towards realizing the rich possibilities in event in the agricultural by products that have conventionally been wasted.