Nivi Project.pdf

Shimoga Milk Union Limited

1. INDUSTRY PROFILE: Introduction to Indian Dairy industry: The Department of Animal Husbandry, Dairying, and Fisheries, which falls under the central Ministry of Agriculture, is responsible for all the matters relating to dairy development in the country. This department provides advice to the state governments and Union Territories in formulating programs and policies for dairy development. It also looks after all the matters relating to production and preservation of livestock farms (cattle and sheep). Milk production is important in India, as milk is one of the main sources of protein and calcium for a large vegetarian population. Dairying provides a livelihood for more than 72 million Indian farmers as well as an additional income for a large number of rural families. It is also a means for women to participate in the economic activities in the rural areas. The highest milk producer in the entire globe – India boasts of that status. India is otherwise known as the ‘Oyster’ of the global dairy industry, with opportunities galore to the entrepreneurs globally.It is the world’s largest consumer of dairyproducts, consuming almost 100% of its own milkproduction.Dairy products are a major source ofcheap and nutritious food to millions of people inIndia and the only acceptable source of animalprotein for large vegetarian segment of Indianpopulation, particularly among the landless, smalland marginal farmers and women. Anyone might want to capitalize on the largest and fastest growing milk and milk products’ market. The dairy industry in India has been witnessing rapid growth. The liberalized economy provides more opportunities for MNCs and foreign investors to release the full potential of this industry.The dairy industry plays an important role in the socio-economic development of India. The dairy industry in India is instrumental in providing cheap nutritional food to the vast population of India and also generates huge employment opportunities for people in rural places. The main aim of the Indian dairy industry is only to better manage the national resources to enhance milk production and upgrade milk processing using innovative technologies.

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Shimoga Milk Union Limited Origin of the Industry: In 1937,“Lucknow Milk Products co-operative Union limited” has set up National Dairy Development Board (N.D.D.B) was established on 25 September 1965 under the society’s registration Act 1950. It was a non-profit making organization. Operation Flood was a rural development program started by India's National Dairy Development Board (N.D.D.B.) in 1970. One of the largest of its kind, the program objective was to create a nationwide milk grid. It resulted in making India the largest producer of milk and milk products, and hence is also called the White Revolution of India. It also helped reduce malpractices by milk traders and merchants. Operation Flood has helped dairy farmers, direct their own development, placing control of the resources they create in their own hands. A 'National Milk Grid', links milk producers throughout India with consumers in over 700 towns and cities, reducing seasonal and regional price variations while ensuring that the producer gets a major share of the price consumers pay. The bedrock of Operation Flood has been village milk producers' cooperatives, which procure milk and provide inputs and services, making modern management and technology available to members. Operation Flood's objectives included: 

Increase milk production ("a flood of milk").



Augment rural incomes.



Fair prices for consumers.

Program implementation as below: Gujarat-based cooperation "Anand Milk Union Limited", often calledAMUL, was the engine behind the success of the program, and in turn became a mega company based on the cooperative approach. Tribhuvandas Patel was the founder Chairman of AMUL, while VergheseKurien was the chairman of N.D.D.B at the time when the program was implemented. VergheseKurien, gave the professional management skills and necessary thrust to the cooperative, and is considered the architect of India's 'White Revolution' (Operation Flood). The National Dairy Development Board thus was created to promote, finance and support producer-owned and controlled organizations. N.D.D.B's programs and activities seek to strengthen farmer cooperatives and support national policies that are favorable to the growth of such institutions. Fundamental to N.D.D.B's efforts are cooperative principles and cooperative strategies. The main aim to set up the board was to accelerate

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Shimoga Milk Union Limited the pace of dairy development in the country and attract new investments. In 1999 India became the largest producer of milk primarily due to the efforts of the co-operative movement initiated by the National Dairy Development Board (N.D.D.B).

Overview ofthe Indian Dairy sector: Reach: The Dairy Cooperative Network (As on March 2017) 

includes 177 milk unions



operates in over 346 districts



covers 1,33,349 village level societies



Is owned by around 13.9 million farmer members of whom 3.9 million were women.

Milk Production: 

India's milk production increased from 21.2 million MT in 1968-69 to 104.8 million MT in 2016-2017and to 110 million MT in 2017-2018(Anticipated).



Per capita availability of milk was 252 grams per day in 2017-2018increased from 241grams per day in 2015-16, up from 112 grams per day in 1968-69.



India's 3.8 percent annual growth of milk production between 1997-98 and 20162017surpasses the 1.8 per cent growth in population; the net increase in availability is around 2 per cent per year.

Innovation: 

Bulk-vending - saving money and the environment.



Milk travels as far as 2,200 kilometers to deficit areas, carried by innovative rail and road milk tankers.



Automatic Milk Collection Unit (AMCU) and Bulk Milk Cooler (BMC) at grass root level – preserve quality and reduce post-procurement losses.

Macro Impact: 

The annual value of India's anticipated milk production amounts to more than Rs.1,430 billion in 2015-16.



Dairy cooperatives generate employment opportunities for around 13.9 million farm families.



Livestock contributes about 25.6 per cent to the GDP from agriculture.

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Shimoga Milk Union Limited 

About 22.45 million people work in livestock sector, which is around 5.8% of the total work force in the country.

Source: National Dairy Development Board (N.D.D.B)as on March, 2017.

Indian (Traditional) milk products: There are a large variety of traditional Indian milk products such as: Makkhan

- unsalted butter.

Ghee

- butter oil prepared by heat clarification, for longer shelf life.

Kheer

- a sweet mix of boiled milk, sugar and rice.

Basundi

- milk and sugar boiled down till it thickens.

Rabdi

- sweetened cream.

Dahi

- a type of curd.

Lassi

- curd mixed with water and sugar/ salt.

Channa/Paneer - milk mixed with lactic acid to coagulate. Khova

- evaporated milk, used as a base to produce sweet dishes.

The market for indigenous based milk food products is difficult to estimate as most of these products are manufactured at home or in small cottage industries catering to local areas.

India's milk product mix: Fluid Milk

46.0%

Ghee

27.5%

Curd

7.0%

Butter

6.5%

Khoa (Partially Dehydrated Condensed Milk)

6.5%

Milk Powders, including IMF

3.5%

Paneer&Channa (Cottage Cheese)

2.0%

Others, including Cream, Ice Cream

1.0%

Source: www.mapsofindia.com

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Shimoga Milk Union Limited Major players of Dairy industry: Company

Brands

Major products

Nestle India Limited

Milkmaid, Cerelac, Sweetened condensed milk, malted Lactogen,

Milkfood Limited

Milo, foods, milk powder and

dairy

Everyday

whitener

Milkfood

Ghee,ice cream, and other milk products

SmithKline Beecham Limited

Horlicks,

Maltova, Malted Milkfood, ghee, butter,

Viva, Boost

powder

milk,

milk

fluid

and

otherMilk based baby foods. Indodan Industry Limited

Indana

Condensed milk, skimmed milk powder, whole milk powder, dairy milk

whitener,

chilled

and

processed milk Gujarat

Co-operative

milk Amul

Butter, Cheese and other products

Marketing Federation Limited H.J. Heinz Limited

Farex,

Complan, Infant milkfood, Malted milkfood

Gluctose, VitamilkBonniemix, Britannia

Milkman

Flavoured

milk,

Cheese,

Milk

powder, Ghee Cadbury

Bourvita

Malted food

Source: aavinmilk.com

Future prospects of the industry: India is the world's highest milk producer and all set to become the world's largest food factory. In celebration, Indian Dairy sector is now ready to invite NRIs and Foreign investors to find this country a place for the mammoth investment projects. Be it investors, researchers, entrepreneurs, or the merely curious – Indian Dairy sector has something for everyone. India contributes to world milk production rise from 12-15%& it will increase up to 30-35% by the year 2020.

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Shimoga Milk Union Limited 1.1 Statement of the Problem: Since the budget of the organization is varying from the actual income and expenditure. A suitable budgetary control system is requiredto adopt and implement so as to use the organization’s resources effectively. Hence “A Study on Budgetary Control System with special reference to SHIMUL, Shivamogga” is undertaken to analyze the budgetary items of the organization and control variances.

1.2 Objectives of the Study:  To study the budget of the organization.  To analyze individual entries in the budget for the year 2015-016,2017-2018.  To study the budgetary control system of the organization.  To compute and analyze the variances for the purpose of budgetary control.  To exercise control on cost through comparison of actual results with the budgeted values.  To control the variance in the budget and bring out an appropriate budget for the year 2016-2017.

1.3 Scope of the Study: The organization under study SHIMUL geographically, this study is limited to 3 districts that is- Shivamogga, Davangere, Chitradurga. The data undertaken for the study is from the financial year 2016-2017and2017-2018. The study was conducted

on

Budgetary Control of SHIMUL covering all the financial aspects from different departments- Finance, Marketing, Production etc.,

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Shimoga Milk Union Limited 1.4Methodology: Data collection and analysis: The data has been collected through two sources Viz., Primary and Secondary. Primary data was collected through staff members of the organization and the budgetary analysis is based on scheduled interview of 5 experts of Finance Department of SHIMUL. The sampling method used for this is Non-probability sampling, Expert opinion method. Secondary data was obtained through the company’s annual reports of the year 2015-16, 2017-2018and 2017-18 and company books and other documents.

Research design: Research design is a master plan or frame work of the action. It specifies pattern of framework for controlling the collection of data accurately and economically. It specifies methods and procedures to be followed for the research. Types of research design are as follows: 1.

Exploratory research design:It is an initial research conducted to clarify and define the nature of the problem. It does not provide conclusive evidence. It expects subsequent research.

2.

Descriptive research design:It can describe the characteristics of a group such as customers, employees, organization, market competition etc. descriptive research requires clear specifications of ‘whom?, Why?, when?, where?, what?, how?’ of the research.

3.

Causal research design:It is a research investigations in which condition are controlled. One independent variable is manipulated (sometimes more than one). Its effect on dependent variable is measured. This study is anexploratoryresearch, carried out to analyze and control the

variance.

1.5 Statistical Tools and Techniques:  Bar chart:The actual and budgeted amount of each budgetary item is represented by bar chart.  Percentage:The variation in percentage is calculated as percentage of variation amount divided by budgeted amount of the respective year.

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Shimoga Milk Union Limited  Weighted average:The weighted average variation percentage for the year 201718 is calculated taking the weights for the variation in percentage as- 2 for the recent year i.e., 2017-2018and 1 for the year 2015-16.

1.6 Limitations of the Study: 

Non-availability of audited financial data for the year2017-2018.



The study was analyzed on the basis of scheduled interview of 5 experts which is subjective.



Proposed project is limited to only one organization; hence the observation of this study cannot generalize to other district level milk unions of KMF.



No matter how well the budget is prepared, it will never be able to reflect truly the reality/complexities faced by the organization.



The study cannot replace the managerial judgments in decision making.



The study is limited to the available information in the department.



Time constraint where the study was conducted only for 10 weeks.

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Shimoga Milk Union Limited

2. COMPANY PROFILE: 2.1Introduction: Shimoga DistrictCo-operative Milk producers’ Societies’ Union Limited (SHIMUL) is located in Machenahalli, 12 kms from Shivamogga and 6 kms from Bhadravathi. The Union is located in the central part of the state of Karnataka and the milk shed has got the varied ranging from tropical to temperate. It produces about 8 dairy products and distributes or sells other products of KMF in its jurisdiction. Speciality of the Union: Union which has promoted growing herbal medicinal plants by women farmers.

2.2Background and Inception ofthe company: Under the World Bank aided Karnataka Dairy Development Projects, the activities on Dairy development were taken up in the year 1975. The SHIMUL was established on 25.11.1987 & registered under Karnataka co-operative act, having the jurisdiction to the entire Shivamogga, Davangere district, & five taluks of Chitradurga district. Later the union was extended to entire Chitradurga district. Its initial investment is 24.17 lakhs with 10 TLPD. The union undertook the work of organization of milk co-operatives in ‘AMUL Pattern’ with the main objective of socio-economic reformation of the farmers in the rural areas through dairying as subsidiary occupation. The main goal of these co-operative milk producers is to avoid the exploitation of producers, by the middlemen. Achieve economies of scale of rural milk producers by ensuring maximum returns and at the same time providing wholesale network of cooperative organization should build a strong bridge between masses of rural producers and millions of urban consumers and achieve a socio-economic revolution in the village community.

2.3Present status of the company: Dairy Co-operative Societies Members Daily Procurement of milk Milk sales

1294 1,46,239 5,17,432 LPD 1,97,492 LPD

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Shimoga Milk Union Limited 2.4Nature of business carried: 

Milk procurement: Presently thereare 182 milk procurement routes operating through which Union is procuring an average of5,17,432LPD. To increase milk production and productivity, technical input services are being provided to producer member of the union.



Manufacturing and distribution: It manufactures for about 13 products such as milk, curds, butter milk, ghee, peda, cashewburfi, kova,nandiniladdu,nandinibite,mysorepak,paneer,coconutburfi, in two production centers that is Shivamogga,Davangere and chitradurga. The production capacity of the Union in Shivamogga unit is 1,00TLPD &Davangere is 60TLPD along with seven chilling centers in Honnali with 60TLPD, Anandapurwith 30TLPD, Chitradurga 50TLPD, Tadaganiwith40TLPD each, B.G.kere 05TLPD, Challakere with 10TLPD each. It also sells other Nandini products such as Mysore pak, Good life milk, Gulabjamoon mix, Dharwadpeda, Flavoured milk, Khova, Kunda& other Nandini products by procuring from other Unions of KMF. Presently it has 1351 dealers, 13parlors, 2 A.T.M (All Time Milk)parlors, 32 franchisee parlors, 36 milk distribution vehicles, 11 day counter sales vehicles. It distributes milk with totally 46routes; 23 routes in Shivamogga,14 routes in Davangere including a adock route,09routes in Chitradurga. Milk procurement and Sales at present:  Milk procurement:5,17,432 LPD  Liquid milk sales: 1,97,492 LPD  Curds sales: 23,574 LPD  Peda sales: 1,655Kgs per day  Ghee sales: 70,365 LPD



Veterinary facilities for cattle: There are 15veterinary routes operating and attending emerging cases.



Artificial animal breeding: Artificial insemination (AI) is being done through AI centers.



Feed and fodder development programme:

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Shimoga Milk Union Limited Cattle feed and high yielding varieties of fodder being supplied to producer along with technical advice. 

Step training programme: Supportive to training and employment programmme for women- to those women who interested in dairying.

2.5 Vision, Mission and Quality Policy: Vision Statement: To consolidate the gains of dairying achieved in the state of Karnataka and with a view of efficient chill, process and market ever development and increasing milk procurement with an utmost emphasis on the quality and in the process conserve the socio-economic interest of rural milk producer, the Government of Karnataka through KMF has proposed to undertake several project with financial and technical support of N.D.D.B for which an MOU was signed between Government of Karnataka and N.D.D.B.

Mission statement: Shimoga district Co-operative Milk producers’ Societies’ Union Limited (SHIMUL) is committed to 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 to 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. SHIMUL’s Quality policy: SHIMUL is committed to producer’s welfare through customer delight adopting continuous improvement and ensures pure and hygienic milk & milk products. 2.6 Products’ profile: Brand name of products: Logo of Nandini:

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Shimoga Milk Union Limited Tag line of Nandini: “A Milk Brand Trusted by Millions” Motto of KMF products: “Quality Excellence from Cow to Consumer” Pasturised toned milk: Karnataka’s most favourite milk. Nandini toned fresh milk containing 3.0% fat & 8.5% SNF is the best choice for all purposes. Available in 200ml, 500ml and 1 litre pouches.

ShubhamMilk: Nutritious creamy milk with 4.5% fat & 8.5% SNF. Suitable for all purposes. Available in 500ml & 1 litre pouches.

Homogenised cow’s milk: Nutrient-rich homogenised milk with 3.5% fat & 8.5% SNF. Enjoy uniform thickness and extra creamy feel till the last drop, thus preparing more cups of tea/coffee out of every pack. Available in 500ml & 1 litre pouches.

Curd: Fresh curd that tastes just like traditional home-made curd. Can be consumed as such or in combination with cooked rice or added as an ingredient in certain dishes. Available in 200 gms& 500gms pouches.

Spicy Butter milk:

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Shimoga Milk Union Limited Fresh butter milk blended with quality spices to give that enlivening spicy tang of traditional spiced butter milk. A drink recommended after meals, for easy digestion. Available in 200ml tetra brick packs and 200ml pouches.

Ghee: A taste of purity, Nandini ghee, made from pure butter. It is fresh and pure with a delicious flavour. Hygienically manufactured and packed in a special pack to retain thegoodness of Pure Ghee. Available in 50ml, 100ml, 200ml, 500ml, & 1litre sachets & in 200ml standy pouches & in 200ml, 500ml, 1 litre& 5 litre pet jars& also in 15 kg tins.

Ghee in Standy Pouches

Ghee in Pet Jar

Ghee in Sachet

Milk Peda: Mouth-watering peda made from pure milk. One bite is enough to fill the heart with its creamy milk flavour. Available in 25gms, 50gms sachets and in 100gms, 250gms packs.paneer, mysorepak, Cashweburfi ,nandinibite,

Khova: Add khova to preparations like carrot halwa, gulabjamoonetc and increase the richness of its taste. Available in 200gms packs. Can be stored for 30 days when kept frozen.

Product price chart (as on December 2017):

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Shimoga Milk Union Limited Product name

MRP(Rs)

Toned milk-1000ml

35.00

Toned milk-500ml

18.00

Toned milk-200ml

9.00

Shubam-1000ml

41.00

Shubam-500ml

21.00

Curd-500gm

21.00

Curd-200gm

10.00

Butter milk-200 ml

6.00

Ghee-1000ml

450.00

Ghee-200ml

96.00

Ghee-tin(15kg)

7200.00

Nandini goodlife-1000ml

46.00

Nandini goodlife-500ml

23.00

Peda-250grams

85.00

Peda-10grams

36.00

Kova bulk Dharwadpeda

300.00 85.00

Kundha

100.00

Mysore pak-250 grams

100.00

Jamoon mix-200grams

40.00

Source: Productbrochuresof SHIMUL.

2.7 Area of operation: Although SHIMUL is predominently operting in its region. It also supplies milk to other states of India and exports some of its products to neighbouring foreign countries. Regional: SHIMUL is operating in 19 taluks of 3 districts that is 7 taluks inShivamogga, 6 taluks in Davangere and Chitradurga each. It distributes milk with totally 43 routes;16 routes in Shivamogga,13routes in Davangere including a adock route, 14 routes in Chitradurga. National:

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Shimoga Milk Union Limited On the basis of availability, the excess milk will be sent to the states like Maharastra, Goa, Andhra Pradesh and Delhi. Global: In rainy season, the milk production will convert milk into milk powder. The milk powder will be exported to the countries like Burma, Srilanka and Singapore through KMF.

2.8 Ownership pattern:

Source:www.kmfnandini.coop The dairy co-operatives were established under the ANAND pattern in a three tier structure with the Village Level Dairy Co-operatives forming the base level, the District Level Milk Unions at the middle level to take care of the procurement, processing and marketing of milk and the Karnataka Milk Federation as the Apex Body to co-ordinate the growth of the sector at the State level. KMF has 13 Milk Unions throughout the State which procure milk from Primary Dairy Cooperative Societies (DCS) and distribute milk to the consumers in various Towns/Cities/Rural markets in Karnataka. SHIMUL- a District Level Milk Union at the middle level is one among the 13 milk unions of KMF. SHIMUL is a district level milk union of 772 village level co-operative societies affiliated to it and 1,16,602number of members for the milk union.The milk producers are the members or owners of the co-operative societies’ union. 2.9 Competitors’ information:  Sri Krishna Milks Private Limited: INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited 

Situated at: Kirwatti, YellapurTaluk, Karnataka.



Established: 1989.



Own Funds: Rs. 18.80 millions (as on 31.03.2004).



Gross Block: Rs. 56.03 millions (as on 31.03.2004).



Turnover: Rs. 211.27 millions (during the year 2003-04).



Products: Branded sachet milk, Ghee, Flavored milk, Butter, Lassi, Curds, Butter Milk



Market: North Kanara, Hubli-Dharwad, Belgaum, Bagalkot, Hospet, Davangere and Goa.



Production capacity: This plant handles about 50000 liters milk per day.

 Arokya milk: 

HatsunCompany, India’s largest private dairy.



Hatsun started marketing fresh milk in pouches from 1993.



Hatsun is a USD 250 million company, listed in the Mumbai Stock Exchange.



It started as a creamy dream in 1970: Arunice-creamsin Chennai.



Hatsun handles a total 1.8 million litre a day.



Arokya milk is fortified with 4.5% butterfat.



Distribution Stockists/Agents. They have a network of 30 Distribution Stockists and over 1500 Agents in Tamilnadu / Bangalore.

 Loose milk sale: 

Market share is next to Nandini.



Sale in union junction 60 TLPD.



Majority of the milk is heavily adulterated and no uniform quality.



Flexible payment system.

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Shimoga Milk Union Limited Price comparison of milk & curds of Nandini with Private Dairies: (As printed on half litre packet-MRP in Rs) Sl no.

Type of milk

Nandini

Sri Krishna

Arokya

1

Toned milk

10.00

12.00

12.00

2

Homogenized milk

11.00

_

_

3

Shubam milk

12.00

14.00

14.00

4

Curds(200ml)

06.00

8.00

8.00

5

Curds(500ml)

12.00

15.00

15.00

Source: Price comparison chart of SHIMUL

2.10 Infrastructural facilities: SHIMUL has its corporate office at Machenahalli, Shivamogga. Its manufacturing unit is located behind the office premises. The total area of SHIMUL is 21,09,542 sq.ft being 11,26,026 sq.ft in Machenahalli, 52,272 sq.ft in Jedikatte, 2,17,800 sq.ft in Honnali, 1,43,740 sq.ft in Davangere, 1,30,680 sq.ft in Chitradurga, 2,17,800 sq.ft in Anandapur, 3424 sq.ft in Sagar and 2,17,800 sq.ft in Shikaripur. Manufacturing plant is quite spacious with different divisions in it. Namely- Milk division, Butter division, Peda making division, Ghee making division, Butter milk division.It has two cars for office use. 2.11 Achievements and awards: Milestones of SHIMUL:  A Pilot Project was started to supply milk to Shivamogga and Bhadravathi towns on 1963.  Government Dairy at Shivamogga was started on 21-5-1971.  KMF Procurement and Input (P&I) Wing was started on 1-4-1985.  1985 – KMF has taken over the dairy.  First Milk Procurement Route, Sahyadri, HonnaliTaluk was started on Aug-1985.  The Shimoga Milk Union was registered on 25-11-1987.  Co-operative Development Programme was in operation between 1990 & 1997 and it was funded by N.D.D.B.  Step (Support to Training & Employment Programme for women) a pilot project was started during Oct-1997 & it was funded by women & Child Development Dept., GOI. INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited  The installation of LN2 distribution system-Oct 1999  Launch of products: 

Ghee-1985



Peda-1988



Butter milk & Curds-1997

 Launch of Standardized Milk in 1993  Launch of Toned Milk in 200ml sachet in 2000  Chilling Centers/Dairies established: 

Chitradurga C.C – 16.09.1984



Shivamogga Dairy – 01.08.1991



Honnali C.C – 29.07.1991



Anandapur C.C – 16.04.1991



Tadagani C.C – 02.02.1999



B.G.Kere C.C – 28.08.2004



Sagar C.C – 05.01.2005

 Davangere Dairy: 

Bathi co-operative dairy

: 10.08.1969



Handing over Co-operative dairy to KMF

: 05.04.1986



Expansion of capacity to 30,000LPD

: 08.04.1993



Milk Pasteurization started from

: 11.05.1998

 MMPO Certification in 1993.  ISO 9001:2008 Certification in Nov 2008 applicable for processing, manufacturing, marketing of milk and milk products (Excluding design and development). Awards:  Best NGO award by Ministry of non-conservational energy in the year 1995-96 and also in the year 1996-97.  Excellence award by the Institute of Economic studies, New Delhi in the year 1998.  Quality mark – 2017-2018  National energy conservation award in the year 2010.  NDDB Excellence Award – 2017-2018 Shimoga Milk Union Conferred For National Energy Conservation Award

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Shimoga Milk Union Limited

Source: The Hindu e-news paper of Dec 16th,2010 Dr.G.T.Gopal, Managing Director, Shimoga Milk Union receiving "National Energy Conservation Award for the year 2010" by the union minister for power Mr.Sushil Kumar Shinde on the occasion of "National energy conservation day" in New Delhi on Dec-14th. 2.12 Work Flow Model: Flow chart of milk Chilling of Milk at 4 C to 120 C using a plate chiller 0

Pumping of chilled milk into insulated milk silo/road milk tanker Storage of chilled milk in insulated tankers, milk in silo till it is taken for pasteurization Pumping of chilled milk into Full Cooler Bulk Tanker (FCBT) Pumping of milk into Hot Temperature at Short Time (HTST) pasteurize through flow controller heating to 720C to 800C for 15 sec immediate chilling to 40C Standardization/Separation of milk to required fat and SNF using cream separator during HTST pasteurization Pumping of pasteurized milk in to insulated milk silo Quality analysis Pumping of milk in sterilized stamped pouches in FFS machines (1/2 ltr and 1 ltr) Loading of pouches into washed clean creator Storage of milk creates in cold store at 60C Quality analysis-COB and Acidity Dispatch INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited

Figure 1: Work flow model 2.13 Future growth and prospectus forthe company: The long term objective- 2015 i.e., for the five years from 2016-2017to 20172018is to increase the milk procurement by 10.97% and milk sales by 11.2%.

Goals by 2010-11:  To build 922 co-operative societies at the end of the year.  To invest Rs. 18.94 lakhs in STEP program-a training program for women.  Training program for 666 candidates with a cost of Rs.12.47 lakhs.  Provide cross-breed cattle at 25% deduction and cattle insurance worth Rs.5.18 lakhs.  To increase the artificial animal breeding to 1,13,300 during the year.  To provide animal feeding of 24000 metric tonnes.  Under the Fodder Development Program350 units of urea is scheduled to produce nutrient dry fodder.  To improve processing and quality of production it has planned to spend Rs.1483.50 lakhs.  Planned to expand the Davangere dairy capacity by 1TLPD with an expenditure of 10 crores and other programs with Rs. 1109 lakhs.  Aimed to increase the sales: Milk to 152,000 LPD, Curds to 12000 Kg per day, Peda to 210 Kg per day, Butter milk to 1100 LPD.  Aimed at establishing milk parlors in Shivamogga and Bhadravathi Railway stations.  Aimed to increase milk dealers to 169, franchisee parlors to 15and day counters to 560.

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3.

MCKINSEY’S 7S FRAME WORK WITH SPECIAL REFERENCE TO SHIMUL:

McKinsey’s 7s model: The 7s Framework of McKinsey is a management model that describes 7 factors to organize a company in a holistic and effective way. Together these factors determine the way in which a corporation operates. There are 7 basic dimensions, which represent the core of managerial activities. These are the ‘levelers’, which executes use to influence complex and large organizations. Obviously, there was a concerned effort on the part of the originators of the model to coin the managerial variables with words beginning with the letter S. So as to increase the communications power of the model.

Source:McKinsey 7-S Framework,from the book ‘In search of Excellence’ by Thomas J Peters and Robert H Waterman

Application of 7s Model: 1. Structure: The organization chart and accompanying baggage that show who reports to whom and how tasks are both divided and integrated.

Since SHIMUL is a co-operative sector unit. The structure of the organization is democratic. Major decision however is taken is at top-level management of the company. Organization Chart:

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Shimoga Milk Union Limited

Figure 2: Organization structure of SHIMUL

2. Strategy: INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited The strategies being adopted by the company:  Encouraging rural farmers to engage in dairy farming and producing more milk at less cost.  Providing market for the milk produced in rural areas by purchasing milk at a fair rate throughout the year.  Providing good quality of milk and milk products to the people of urban area by scientifically processing the milk obtained from rural area.  Creating harmonious environment where the human resources of the union can perform at its best and being a communication bridge between producers and consumers.

3. System: MIS in SHIMUL: Public enterprises like dairies are primarily meant to achieve socio-economic objectives like fulfilling social needs for efficient management an efficient information system is essential. Information is the lifeblood of an organization. Decision making and planning at every level of management requires constant information. MIS in SHIMUL performs five functions, which help the management to run the organization without any problems. The functions are as follows: 

Collection of data



Analysis of collected data



Converting data into real and meaning information



Providing all sections with necessary information

Quality system in SHIMUL: The process for continuous improvement of the quality management system: 

Management responsibility for quality improvement



Resource management



Product realization



Measurement, analysis, improvement of quality.

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Shimoga Milk Union Limited 4. Style: Style is one which top managers can use to bring about organization change. The aspects of business most emphasized by members of the top management tend to be given more attention by people down in organization. Reporting relationship may also convey the style of the organization.

The reasons to support this are as follows:  Whenever important decision are to be made, the whole staff is allowed to participative in the decision making where by suggestions are sought and if found appropriate are accepted and implemented.  In SHIMUL instead of ‘Boss-Subordinate’ relationship among the employees of the organization, superior acts as a guide and facilitator for his subordinates.  The top management always encourages changes in the organization provided they happen to be always ready to cope with different situation.

5. Staff: Presently there are about 238 in SHIMUL.Employees are the functional unit of any organization. The company contributes to the prosperity of the society as whole by providing equal opportunities to all. The company provides training to get gainful, high performance employees.

6. Skill: The qualified personnel with required skills and competency are recruited and selected for the required designation.

For example: for recruiting and selecting the manpower required by the production department the criteria would be B.Tech (Dairy Technology) and Bachelor of Engineering for maintenance of boilers, who have the capabilities and competencies to handle the functioning of work smoothly.

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Shimoga Milk Union Limited

7. Shared values: The common feeling among the people in the SHIMUL is that they are meeting the demands of the customers and fulfilling the expectations in the form of productions and its variability. The employee also have belief that they are giving at the best possible price to milk they procure from farmers. Value of SHIMUL:  Honesty  Discipline  Transparency  Cleanliness  Total quality  Self-reliance  Co-operative free politics  Respecting others opinions, emotions, thoughts, and feelings.

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Shimoga Milk Union Limited

4.

SWOT ANALYSIS:

SWOT Analysis with reference to SHIMUL:

Strength:  Good procurement potential.  Nandini products have a good brand in the market.  Better quality of raw milk.  Geographical location of co-operatives/ Dairies.  ISO 9001:2008 & MMPO certified dairy.  Wide range of operation - 19 taluks covered in 3 districts of milk shed area.  Insulated distribution vehicles.  Varied climatic conditions.

Weakness:  Wide gap between procurement and sales.  Absence of separate product block.  Poor advertisement and promotion.  Lacking in training and development programs.  Initiatives to open a separate Milk Union in Davangere district.  Has not up to World Trade Organization standards.

Opportunities:  Trappingloose milk sales.  Growing demand for full cream milk.  The Milk Union can produce still more products of KMF.  Milk Union can go for technological advancements.

Threats:  Private dairy competition in Procurement and Sales.  Increased local loose milk sales.

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5. ANALYSIS OF FINANCIAL STATEMENT ANALYSIS: 5.1 Financial Statements ofSHIMUL: Manufacturing and trading account: Purchases Opening stock

2015-16

2017-2018

2,68,95,931.40

232106655.45

Purchase of milk

74,97,79,553.91

4156765611.72

Fodder & other expenses

14,54,29,681.44

9096473770.55

Storage & transportation expenses

4,59,74,064.92

179900951.69

Processing & manufacturing expenses

8,01,73,076.90

327400002.52

Selling & distribution expenses

1,59,50,601.22

67501939.09

Trade profit

8,71,26,701.41

348233924.31

1,15,13,29,611.20

6221556455.33

Total

Sales Milk & milk products sales

2015-16

2017-2018

1,02,59,23,523.63

4894492382.76

Milk & milk products sales(through KMF)

7,75,08,594.80

1211552866.98

Closing stock

4,78,97,492.77

115511205.59

1,15,13,29,611.20

115511205.59

Total

Profit and loss account: Expenditure

2015-16

Staff expenses

6,15,42,708.10

181883854.94

Administration expenses

1,03,83,458.46

39484431.34

Taxes

31,43,808.00

38282298.51

Interest & bank commission

25,90,218.54

6352001.11

Technical expenses

67,63,239.00

38218701.50

1,21,37,958.00

39274581.00

16,27,331.98

72597691.60

9,81,88,722.08

416093566.00

Depreciation Net profit Total

2017-2018

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Shimoga Milk Union Limited

Income Trade profit

2015-16

2017-2018

8,71,26,701.41

348233924.30

Other incomes

45,88,659.67

39078033.10

Interest & dividends on investment

61,22,361.00

28781608.50

Grants

---

Total

9,81,88,722.08

416093566.00

Balance sheet: Liabilities

2015-16

2017-2018

Share capital

4,86,29,000.00

416093566.00

Reserves and surplus

3,21,63,805.64

887882277.41

Loans

3,47,05,382.36

Grants

2,97,35,604.00

3263190.19

22,44,95,391.45

761306168.81

31,28,241.94

72597691.60

37,28,57,425.39

1920412990.37

Current liabilities P & l a/c Total

Assets

2015-16

53685662.36

2017-2018

Fixed assets

12,56,45,959.11

62247090.94

Investments

6,79,16,207.00

421479960.46

17,92,95,259.28

10366859338.97

4,78,97,492.77

115511205.59

21,97,182.11

4426106.47

1,69,29,261.69

475278828.04

Loans & advances

11,22,71,322.71

441469798.87

Total

37,28,57,425.39

1920412990.37

Current assets: Stock in hand Sundry debtors Cash & bank balance

Source: Annual reports of SHIMUL

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Shimoga Milk Union Limited 5.2 Ratio Analysis:  Current ratio: Currentratio= Current assets/Current liabilities Year

Current assets

Current liabilities

Current ratio

2015-16

17,92,95,259.28

22,44,95,391.45

0.79:1

2017-2018

15,75,63,204.26

25,01,23,545.27

0.63:1

Inference: The above table shows the current ratio of the organization in the year 20162017and 2017-2018is 0.79:1 and 0.63:1 respectively. The current ratio has decreased from 2016-2017to2017-2018. Its shows the organization’sshort term solvency hasworsened dueto decrease in current assets and increase in current liabilities of the organization.  Quick ratio: Quick ratio=Liquid assets/Current liabilities Year

Liquid assets

Current liabilities

Quick ratio

2015-16

13,13,97,766.51

22,44,95,391.45

0.59:1

2017-2018

11,13,08,011.19

25,01,23,545.27

0.45:1

Inference: The above table shows the quick ratio of the company in the year 20162017and 2017-2018was 0.59:1 and 0.45:1 respectively. Thus the quick ratio of the company has declined because of the decrease in liquid assets. This shows the SHIMUL’s liquidity position has declined.  Debt Equity ratio: Debt Equity ratio=Debt/Equity Year

Debt

Equity

Debt Equity ratio

2015-16

3,47,05,382.36

4,86,29,000.00

0.71:1

2017-2018

3,73,91,513.36

5,2152,000.00

0.72:1

Inference: As per the above table the organization’s debt equity ratio has slightly increased from 0.71:1 in the year 2016-2017to 0.72:1 in the year 2016-07. It can be

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Shimoga Milk Union Limited interpreted that the organization’s financial structure is deteriorating as the increase in debt will put the companyin risk.  Gross profit ratio: Gross profit ratio=Gross profit/Net sales X 100 Year

Gross profit

Net sales

Gross profit ratio

2015-16

8,71,26,701.41

1,10,34,32,118.43

7.9%

2017-2018

9,89,22,911.14

1,37,70,57,002.01

7.18%

Inference: Theabove table depicts the company’s gross profit ratio in the year 20162017and 2017-2018is 7.9% and 7.18% respectively. There is a decline in the ratio. This shows that the SHIMUL’s ability to cover operating costs has been decreased, which in not a good sign to the company.  Net profit ratio: Net profit ratio=Net profit /Net sales X 100 Year

Net profit

Net sales

Net profit ratio

2015-16

16,27,331.98

1,10,34,32,118.43

0.15%

2017-2018

87,11,667.12

1,37,70,57,002.01

0.63%

Inference: As observed from the above tabulation the net profit ratio of the organization in the year 2016-2017and 2017-2018is 0.15% to 0.63% respectively. There is a significant increase in the net profit ratio, which is a good sign. This is an indication of decreasing indirect expenses in the company.  Operating cost ratio: Operating cost ratio=Operating cost/Net sales X 100 Year

Operating cost

Net sales

Operating cost ratio

2015-16

1,09,49,94,822.58

1,10,34,32,118.43

99.24%

2017-2018

1,36,77,41,407.67

1,37,70,57,002.01

99.32%

Inference:As observed from the above table the operating cost ratio of the organization in the year 2016-2017and 2017-2018is 99.24% and 99.32% respectively.This can be interpreted the organization is maintaining a stable operating ratio.

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Shimoga Milk Union Limited  Return on assets: Return on assets=Profit before interest and tax (PBIT)/Total assets X 100. Year

PBIT

Total assets

Return on assets

2015-16

73,61,358.52

37,28,57,425.39

1.97%

2017-2018

1,46,58,754.19

38,61,04,323.37

3.8%

Inference:It is shown in the above table that the company’s return on assets in the year 2016-2017and 2017-2018is 1.97% and 3.8% respectively. The ratio has increased due to a significant increase in PBIT. This indicates that there is an improvement in effectiveutilization of the SHIMUL’s assets to generate profit.  Return on capital employed(ROCE): ROCE=Adjusted net profit/Capital employed X 100. Year

Adjusted net profit

Capital employed

ROCE

2015-16

12,38,997.52

14,83,62,033.94

0.84%

2017-2018

78,15,781.64

13,59,80,778.10

5.75%

Inference: From the table it is known that the company’s ROCE in the year 20162017and 2017-2018is 0.84% and 5.75% which has drastically increased. This is because of the increase in adjusted net profit. This is a good sign to the organization as it is yielding more return for the capital employed in the business.  Earnings per share(EPS): EPS=Profit after tax/Number of shares. Year

Profit after tax

No. of shares

EPS

2015-16

16,27,331.98

48,629

Rs 33.46

2017-2018

87,11,667.12

52,152

Rs 167.04

Inference: As per the above table the company’s Earnings per share (EPS) in the year in 2016-2017and 2017-2018is Rs 33.46 and Rs 167.04 respectively. Thus there is a huge increase in the EPS of the company. This is a good sign to the company as the earnings of each share have been increased. This is due to significant increase in net profit of the company.

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6.

LEARNING EXPERIENCE:

 I got a practical experience about the working of an organization.  I learnthow to relate the theoretical concepts learnt in classroom to the organizational functioning.  I learnt how managerial concepts are applied in an organization.  I have observed and realized the importance of division of work among various personnel according to their skills, ability and experience.  I have learnt that unity of command is important for attainment of any task effectively. The company follows this approach whereby a subordinate receives instructions only from one superior. This ensures that the job is done with minimum confusion.  I have observed the necessity of team spirit for a successful organization. In any organization, employees have to work in unity. In this organization, a have seen employees sharing a high level of team spirit, understanding and coordinating which have contributed to its success.  I have observed how important one’s attitude is in an organizational context. If one has a positive attitude, that employee will excel in work and if one has a negative attitude, that employee will be dissatisfied and will not be successful and contribute to organizational interests.  I have realized that finance department of the organization has got the responsibility of careful planning, utilization of the financial resources, and wellstructured approach in raising funds and systematic design in undertaking several schemes, projects and investments. These activities have helped the organization in continued profit and progress.

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1.

GENERAL INTRODUCTION:

1.1 Introduction to Budgetand Budgetary Control: Finance is the life blood of a business. Therefore, financial planning is of utmost 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 and actual performance is highlighted through budgets.

Budget: A budget is a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in management accounting. In other terms, a budget is an organizational plan stated in quantitative, usually monetary terms, covering a specific period of time, usually one year. In summary, the purpose of budgeting is to: 1. Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. 2. Enable the actual financial operation of the business to be measured against the forecast. Different types of budgets are prepared for different purposed e.g. Sales Budget, Production Budget, Expenditure Budget, Revenue Budget etc. All these sectional budgets are afterwards integrated into a master budget, which represents an overall plan of the organization.

Budgetary control: Budgetary Control is defined as “The establishment of budgets, relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results either to secure by individual action the objective of that policy or to provide a base for its revision”.

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Shimoga Milk Union Limited Salient features of budgetary control: a. Objectives: Determining the objectives to be achieved, over the budget period, and the policy or policies that might be adopted for the achievement of these ends. b. Activities: Determining the variety of activities that should be undertaken for achievement of the objectives. c. Plans: Drawing up a plan or a scheme of operation in respect of each class of activity, in physical as well as monetary terms for the full budget period and its parts. d. Performance Evaluation: Laying out a system of comparison of actual performance by each person section or department with the relevant budget and determination of causes for the discrepancies, if any. e. Control Action: Ensuring that when the plans are not achieved, corrective actions are taken and when corrective actions are not possible, ensuring that the plans are revised and objective achieved.

Budgetary controltechniques: Budgetary Control is an integral part of management. It consists in comparisons between the results of actual performance and budgeted performance. Central to this kind of comparison is Standard Costing and Variance Analysis. Following explains the Budgetary Control Techniques:

a. Variance Analysis: In a well run organization the comparison between actual and budget is used as the basis for deciding the appropriate action. This document sets out how the analysis is used to highest effect. The procedure is actually part of the normal control process. Any variation from expected performance, in terms of budgets, where income or expenditure did not occur as expected. Variance analysis is the act of determining the drivers for those variations. Variances (differences between the budget and actual results) are noted and accounted for. A decision can be made to reduce expenses or reallocate resources. This technique greatly reduces the need for comprehensive review cycles.

Types of variances:

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Shimoga Milk Union Limited Variances can be divided according to their effect or nature of the underlying amounts.

When effect of variance is concerned, there are two types of variances: 

When actual results are better than expected results given variance is described as favorable variance.



When actual results are worse than expected results given variance is described as adverse variance, or unfavorable variance. In common use adverse variance is denoted by parentheses.

b. Responsibility Centers: Control systems can be created to monitor organizational functions or organizational projects. Controlling, a function involves making sure that a specified activity is properly carried out. Controlling a project involves making sure that a specified end result is achieved. There are four types of responsibility centers:  Revenue Center  Cost Center  Profit Center  Investment Center c. Forecasting: The most important budgetary technique is forecasting, or the ability to set out a detailed plan for the future. This forecast is a dialogue about what to look for in the future. Predicted income and expenditure, split over periods of the financial year, based upon known, or expected activity. The forecast gives an indication as to the financial position at the year end.

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2.ANALYSIS AND INTERPRETATION OF DATA: Budgetedincome and expenditure for the period 2016-2017and2017-2018: (Rupees in lakhs)

Sl. No.

Expenditure

1.

Opening stock of milk and milk products

2.

Milk purchase from D.C.S

3.

Milk procurement, processing and production

2016-17

2017-2018

360.06

284.25

9,141.37

9,577.79

expenses

1,499.74

1,339.66

4.

Cattle feed & fodder development expenses

1,980.45

2,595.35

5.

Administration expenses & staff salary

803.23

852.61

6.

Taxes

90.05

83.94

7.

Milk sales distribution & transportation expenses

223.05

269.55

8.

Milk & milk products’ packing expenses

291.34

275.53

9.

N.D.D.B loan repayment and bank commission

56.50

69.00

10.

Depreciation

48.00

45.00

11.

Cattle health program expenses

62.02

73.23

12.

Expenses of A.I, first aid & training programs

117.79

122.35

13.

Expansion program to D.C.S and Quality

fund(M.P.C.S)

593.14

322.57

14.

Investment and advances

948.80

921.20

15.

Diesel purchases

100.00

140.00

16.

National information program & STEP program 48.18

49.36

300.00

299.28

18.16

19.36

control and plant management program

expenses 17.

Integrated Dairy Development Program(I.D.D.P) expenses

Surplus

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Shimoga Milk Union Limited Source: Annual reports of SHIMUL Variance analysis of incomes:

Table 1: Milk and milk products sales: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

12,129.74

11,809.72

(320.02)

(2.64)

2017-

12,522.54

12,471.89*

(50.65)

(0.40)

2018 Note:* represents unaudited financial data of the respective year.

Figure 1: Milk and milk products sales

Rs in lakhs

15000 10000 Budgeted amount Actual amount

5000 0

Year 2017--2018

Reason/s for the trend variance in budget: The increase in milk and milk products sales in the budget is because of the expectation of reduced competition and organization of new Dairy Co-operative Societies (DCS). This trend is expected to continue for the next year that is2017-2018. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-2018is as below:

As per the trend milk and milk products sales is (Rupees in lakhs)

12,915.34

Weighted average variation in the budget (in percentage) The corrected budget is (Rupees in lakhs)

(1.15) 12,766.81

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 2.64 and 0.40 respectively and hence the weighted average variation percentage is unfavorable that is 1.15. As the trend is expected to INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited remain same for the year2017-2018. The corrected budget for the year 2017-2018is Rupees 12,766.81 lakhs. Table 2: Income from Cattle feed, fodder sales & A.I programs: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

2,033.17

1,764.71

(268.46)

(13.2)

2017-

2,664.49

2,653.42*

(11.07)

(0.42)

2018 Note:* represents unaudited financial data of the respective year.

Figure 2: Income from Cattle feed, fodder sales & A.I programs 3000

Rs in lakhs

2500 2000 1500

Budgeted amount

1000

Actual amount

500 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in Income from Cattle feed, fodder sales & A.I programs in the budget is because of the expectation of implementation of many Government Schemes for purchase of Cross-breed cows, Widow Scheme, Vidharba package, etc., The trend is expected to remain unchanged for the next year that is2017-2018. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-2018is as below:

As per the trend Income from Cattle feed, fodder sales & A.I programs is (Rupees in lakhs)

3,295.81

Weighted average variation in the budget (in percentage) The corrected budget is (Rupees in lakhs)

(4.68) 3,143.57

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 13.2 and 0.42 respectively and hence the weighted INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited average variation (in percentage) percentage is unfavorable that is 4.68. As the trend is expected to remain same for the year2017-2018. The corrected budget for the year 20172018is Rupees 3,143.57 lakhs. Table 3: Other incomes: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

70.95

50.63

(20.32)

(28.64)

2017-

69.10

56.06*

(13.04)

(18.87)

2018 Note:* represents unaudited financial data of the respective year.

Figure 3: Other incomes 80 70

Rs in lakhs

60 50 40

Budgeted amount

30

Actual amount

20 10 0

Year

2016-17

2017-18

Reason/s for thetrend variance in budget: The decrease in other incomes in the budget is because of the expectation of decrease in scrap and its sales. This trend is expected to remain samefor the next year that is2017-2018, Hence considering the weighted average percentage variation the appropriate budget for the year 2017-2018is as below:

As per the trend other incomes is (Rupees in lakhs) Weighted average variation in the budget (in percentage) The corrected budget is (Rupees in lakhs)

INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

67.25 (22.13) 52.37

39

Shimoga Milk Union Limited Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 28.64 and 18.87 respectively and hence the weighted average variation percentage is unfavorable that is 22.13. As the trend is expected to remain same for the year2017-2018. The corrected budget for the year 2017-2018is Rupees 52.37 lakhs. Table 4: Interest on depreciation reserves: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

50.00

56.41

6.41

12.82

2017-

55.00

62.78*

7.78

14.15

2018 Note:* represents unaudited financial data of the respective year.

Figure 4: Interest on depreciation reserves 70

Rs in lakhs

60

50 40

Budgeted amount

30

Actual amount

20 10 0

Year

2016-17

2017-18

Reason/s for thetrend variance in budget: The increase in interest on depreciation reserves in the budget is because of the expectation of increase in interest rates for the reserves. This trend is expected to remain unchanged for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

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Shimoga Milk Union Limited As per the trend interest on depreciation reserves is (Rupees in lakhs)

60.00

Weighted average variation in the budget (in percentage)

13.70

The corrected budget is (Rupees in lakhs)

68.22

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017and 2017-2018that is 12.82 and 14.15 respectively and hence the weighted average variation percentage is favorable that is 13.70. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 68.22 lakhs. Table 5: Issue of new shares: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

35.69

35.23

(0.46)

(1.29)

2017-

39.42

33.29*

(6.13)

(15.55)

2018 Note:* represents unaudited financial data of the respective year.

Figure 5: Issue of new shares

Rs in lakhs

45 40 35 30 25 20

Budgeted amount Actual amount

15 10 5 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in issue of new shares in the budget is because of the expectation of organization of new Dairy Co-operative Societies (DCS) and increased milk producers in the societies. The trend is expected to continue for

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41

Shimoga Milk Union Limited the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend issue of new shares is (Rupees in lakhs)

43.15

Weighted average variation in the budget (in percentage)

(10.80)

The corrected budget is (Rupees in lakhs)

38.49

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 1.29 and 15.55 respectively and hence the weighted average variation percentage is unfavorable that is 10.80. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 38.49 lakhs. Table 6: Income from cattle health programs: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

6.66

3.13

(3.53)

(53.00)

2017-

7.10

7.49*

0.39

5.49

2018 Note:* represents unaudited financial data of the respective year.

Figure 6:Income from cattle health programs

Rs in lakhs

8

6 Budgeted amount

4

Actual amount 2 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in income from cattle health programs in the budget is because of the expectation of increase in schemes funded by

INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

42

Shimoga Milk Union Limited government and increase in input activities. This trend is expected to remain same for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend income from cattle health programs is (Rupees in lakhs)

7.54

Weighted average variation in the budget (in percentage)

(14.01)

The corrected budget is (Rupees in lakhs)

6.48

Analysis and interpretation:Since the percentage variance is unfavorable for the year 2016-2017and favorable for the year 2017-2018that is 53 and 5.49 respectively and hence the weighted average variation percentage is unfavorable that is 14.01. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 6.48 lakhs. Table 7: D.C.S material sales: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

120.91

63.96

(56.95)

(47.10)

2017-

181.53

174.51*

(7.02)

(3.87)

2018 Note:* represents unaudited financial data of the respective year.

Figure 7: D.C.S material sales 200

Rs in lakhs

150 Budgeted amount

100

Actual amount 50 0

Year

2016-17

2017-18

INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

43

Shimoga Milk Union Limited Reason/s for the trend variance in budget: The increase in D.C.S material sales in the budget is because of the expectation of organization of new Dairy Co-operative Societies (DCS). This trend is expected to continue for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18is as below:

As per the trend D.C.S material sales is (Rupees in lakhs)

242.15

Weighted average variation in the budget (in percentage)

(18.28)

The corrected budget is (Rupees in lakhs)

197.88

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 47.1 and 3.87 respectively and hence the weighted average variation percentage is unfavorable that is18.28. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 197.88 lakhs. Table 8: Income from quality control and plant management programs: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

248.21

215.30

(32.91)

(13.26)

2017-

84.00

79.00*

(5.00)

(5.95)

2018 Note:* represents unaudited financial data of the respective year.

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Shimoga Milk Union Limited Figure 8: Income from quality control and plant management programs 300

Rs in lakhs

250 200 Budgeted amount

150

Actual amount

100 50 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The decrease in income from quality control and plant management programs in the budget is because of the expectation of nonavailability of many government schemes. The trend is expected to change for the next year that is 2017-18 as it is expected that the organization is funded by government for some schemes. Hence considering the change in the trend as per the experts’ opinion the appropriate budget for the year 2017-18 is as below:

The corrected budget is (Rupees in lakhs)

150.00

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2017-18 and 2017-2018that is 13.26 and 5.95 respectively. As the trend is expected to change for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 150.00 lakhs.

Table 9: Grants from government, Zillapanchayath, STEP and N.D.D.B: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

466.35

443.91

(22.44)

(4.81)

2017-

555.35

550.35*

(5.00)

(0.90)

2018 Note:* represents unaudited financial data of the respective year.

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Shimoga Milk Union Limited

Figure 9: Grants from government, Zilla panchayath, STEP and N.D.D.B 600

Rs in lakhs

500 400

300

Budgeted amount

200

Actual amount

100 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in Grants from government, Zillapanchayath, STEP and N.D.D.B in the budget is because of the expectation of sufficient funds available by government, Zillapanchayath, STEP and N.D.D.B. The trend is expected remain same for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2010-11 is as below:

As per the trend Grants from government, Zillapanchayath, STEP and N.D.D.B is (Rupees in lakhs) Weighted average variation in the budget (in percentage) The corrected budget is (Rupees in lakhs)

644.35 (2.20) 630.17

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 4.81 and 0.9 respectively and hence the weighted average variation percentage is unfavorable that is 2.20. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 630.17 lakhs.

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Shimoga Milk Union Limited Table 10:Union revolving fund and depreciation fund: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

598.64

352.30

(246.34)

(41.15)

2017-

77.00

78.00*

1.00

1.30

2018 Note:* represents unaudited financial data of the respective year.

Figure 10: Union revolving fund and depreciation fund 700 600

Rs in lakhs

500 400 Budgeted amount 300

Actual amount

200 100 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The decrease in Union revolving fund and depreciation fund in the budget is because already many facilities are fulfilled for the Dairy Co-operative Societies (DCS). This trend is expected to change for the next year that is 2017-18 as it is estimated that some facilities are required to be funded. Hence considering the experts’ opinion the appropriate budget for the year 2017-18 is as below:

The corrected budget is (Rupees in lakhs)

74.00

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and favorable for the year 2017-2018that is 41.15 and 1.30 respectively. As the

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Shimoga Milk Union Limited trend is expected to change for the year 2017-18. The corrected budget for the year 20172018is Rupees 74.00 lakhs. Table 11: Closing stock of milk and milk products: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-06

386.56

341.42

(45.14)

(11.68)

2017-

313.00

288.53*

(24.47)

(7.82)

2018 Note:* represents unaudited financial data of the respective year.

Figure 11: Closing stock of milk and milk products 500

Rs in lakhs

400 300

Budgeted amount 200

Actual amount

100 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The decrease in closing stock of milk and milk products in the budget is because of the expectation of increase in sales and also in demand for the products. This trend is expected to remain same for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend closing stock of milk and milk products is (Rupees in lakhs) Weighted average variation in the budget (in percentage) The corrected budget is (Rupees in lakhs)

INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

239.44 (9.10) 217.65

48

Shimoga Milk Union Limited Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 11.68 and 7.82 respectively and hence the weighted average variation percentage is unfavorable that is 9.10. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 217.65 lakhs. Table 12: Diesel expenses recovery: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

100.00

100.00

--

--

2017-

140.00

143.00*

3.00

2.14

2018 Note:* represents unaudited financial data of the respective year.

Figure 12: Diesel expenses recovery 160 140

Rs in lakhs

120 100 80

Budgeted amount

60

Actual amount

40 20 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in diesel expenses recovery in the budget is because of the expectation of hike in diesel rates and increase in the number of transportation vehicles. This trend is expected remain unchanged for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

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Shimoga Milk Union Limited As per the trend diesel expenses recovery is (Rupees in lakhs)

180.00

Weighted average variation in the budget (in percentage)

1.43

The corrected budget is (Rupees in lakhs)

182.57

Analysis and interpretation: Since the percentage variance for the year 2016-2017is nil and favorable for the year 2017-2018that is 2.14 and hence the weighted average variation percentage is favorable that is 1.43. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 182.57 lakhs. Table 13: N.D.D.B’s loan and interest: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

435.00

311.48

(123.52)

(28.39)

2017-

631.50

627.45*

(4.05)

(0.64)

2018 Note:* represents unaudited financial data of the respective year.

Figure 13: N.D.D.B’s loan and interest 700 600

Rs in lakhs

500 400

Budgeted amount

300

Actual amount

200 100 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in N.D.D.B’s loan and interest in the budget is because of the expectation of requirement of funds for the purchase of new plant and machinery and for the expansion of dairies. The trend is expected to continue for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

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Shimoga Milk Union Limited

As per the trend N.D.D.B’s loan and interest is (Rupees in lakhs)

828.00

Weighted average variation in the budget (in percentage)

(9.89)

The corrected budget is (Rupees in lakhs)

746.11

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 28.39 and 0.64 respectively and hence the weighted average variation percentage is unfavorable that is 9.89. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 746.11 lakhs. Variance analysis of expenditures: Table 14: Opening stock of milk and milk products: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

360.06

380.20

(20.14)

(5.59)

2017-

284.25

341.42*

(57.17)

(20.11)

2018 Note:* represents unaudited financial data of the respective year.

Figure 14: Opening stock of milk and milk products

Rs in lakhs

400 300 Budgeted amount

200

Actual amount 100 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The decrease in opening stock of milk and milk products in the budget is because of the expectation of increased demand for products and increase in sales. This trend is expected to remain unchanged for the next

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Shimoga Milk Union Limited year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend opening stock of milk and milk products is (Rupees in lakhs)

208.44

Weighted average variation in the budget (in percentage)

(15.27)

The corrected budget is (Rupees in lakhs)

240.27

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 5.59 and 20.11 respectively and hence the weighted average variation percentage is unfavorable that is 15.27. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 240.27 lakhs. Table 15: Milk purchase from D.C.S: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

9,141.37

9,140.53

0.84

0.01

2017-

9,577.79

9,541.97*

35.82

0.37

2018 Note:* represents unaudited financial data of the respective year.

Figure 15: Milk purchase from D.C.S 12000

Rs in lakhs

10000 8000 Budgeted amount

6000

Actual amount

4000 2000 0

Year

2016-17

2107-18

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Shimoga Milk Union Limited Reason/s for the trend variance in budget: The increase in milk purchase from D.C.S in the budget is because of the expectation of increase in rates by the government and other milk unions. This trend is expected to remain same for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend milk purchase from D.C.S is (Rupees in lakhs)

10,014.21

Weighted average variation in the budget (in percentage)

0.25

The corrected budget is (Rupees in lakhs)

9,989.17

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017and 2017-2018that is 0.01 and 0.37 respectively and hence the weighted average variation percentage is favorable that is 0.25. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 9,989.17 lakhs.

Table 16: Milk procurement, processing and production expenses: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

1,499.74

1,485.48

14.26

0.95

2017-

1,339.66

1,442.15*

(102.49)

(7.65)

2018 Note:* represents unaudited financial data of the respective year.

Figure 16:Milk procurement, processing and production expenses

Rs in lakhs

2000 1500 Budgeted amount

1000

Actual amount 500 0

Year

2016-17

2017-18

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Shimoga Milk Union Limited

Reason/s for the trend variance in budget: The decrease in milk procurement, processing and production expenses in the budget is because of the expectation of use in high-level advanced technology. The trend is expected to remain unchanged for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend milk procurement, processing and production expenses is (Rupees in lakhs)

1,179.58

Weighted average variation in the budget (in percentage)

(4.78)

The corrected budget is (Rupees in lakhs)

1,235.96

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017that is 0.95 and unfavorable for the year 2017-2018that is 7.65 and hence the weighted average variation percentage is unfavorable that is 4.78. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 1,235.96 lakhs. Table 17: Cattle feed & fodder development expenses: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

1,980.45

1,751.30

229.15

11.57

2017-

2,595.35

1,994.32*

601.03

23.16

2018 Note:* represents unaudited financial data of the respective year.

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Shimoga Milk Union Limited Figure 17: Cattle feed & fodder development expenses 3000

Rs in lakhs

2500 2000 Budgeted amount

1500

Actual amount

1000 500

0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in cattle feed & fodder development expenses in the budget is because of the expectation of organization of new Dairy Co-operative Societies(DCS) and increase in demand for their products. This trend is expected to continue for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend cattle feed & fodder development expenses is (Rupees in lakhs)

3,210.25

Weighted average variation in the budget (in percentage) The corrected budget is (Rupees in lakhs)

19.30 2,590.67

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017and 2017-2018that is 11.57 and 23.16 respectively and hence the weighted average variation percentage is favorable that is 19.30. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 2,590.67 lakhs.

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Shimoga Milk Union Limited Table 18: Administration expenses & staff salary: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

803.23

844.06

(40.83)

(5.08)

2017-

852.61

966.43*

(113.82)

(13.35)

2018 Note:* represents unaudited financial data of the respective year.

Figure 18: Administration expenses & staff salary 1200

Rs in lakhs

1000 800

Budgeted amount

600

Actual amount

400 200 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in administration expenses & staff salary in the budget is because of the expectation of increase in Dearness Allowance, Interim Relief, House Rent Allowance, etc., as per government order. This trend is expected to continue for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend administration expenses & staff salary is (Rupees in lakhs)

901.99

Weighted average variation in the budget (in percentage)

(10.59)

The corrected budget is (Rupees in lakhs)

997.51

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 5.08 and 13.35 respectively and hence the weighted INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited average variation percentage is unfavorable that is 10.59. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 997.51 lakhs. Table 19: Taxes: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

90.05

32.00

58.05

64.46

2017-

83.94

25.43*

58.51

69.70

2018 Note:* represents unaudited financial data of the respective year.

Rs in lakhs

Figure 19:Taxes

100 90 80 70 60 50 40 30 20 10 0

Budgeted amount Actual amount

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The decrease in taxes in the budget is because of the expectation of change in tax structure by the Government of Karnataka. This trend is expected remain unchanged for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend taxes is (Rupees in lakhs)

77.83

Weighted average variation in the budget (in percentage)

67.96

The corrected budget is (Rupees in lakhs)

24.94

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Shimoga Milk Union Limited Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017and 2017-2018that is 64.46 and 69.70 respectively and hence the weighted average variation percentage is favorable that is 67.96. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 24.94 lakhs. Table 20: Milk sales distribution & transportation expenses: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

223.05

248.50

(25.45)

(11.41)

2017-

269.55

280.96*

(11.41)

(4.23)

2018 Note:* represents unaudited financial data of the respective year.

Figure 20: Milk sales distribution & transportation expenses 300

Rs in lakhs

250 200 Budgeted amount

150

Actual amount

100 50 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in milk sales distribution & transportation expenses in the budget is because of the expectation of hire of more vehicles for transportation and increase in sales. This trend is expected to remain same for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

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Shimoga Milk Union Limited As per the trend milk sales distribution & transportation expenses is (Rupees in lakhs)

316.05

Weighted average variation in the budget (in percentage)

(6.62)

The corrected budget is (Rupees in lakhs)

336.97

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 11.41 and 4.23 respectively and hence the weighted average variation percentage is unfavorable that is 6.62. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 336.97 lakhs. Table 21: Milk & milk products’ packing expenses: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

291.34

251.69

39.65

13.61

2017-

275.53

305.23*

(29.70)

(10.78)

2018 Note:* represents unaudited financial data of the respective year.

Figure 21: Milk & milk products’ packing expenses

Rs in lakhs

400 300 Budgeted amount

200

Actual amount 100 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The decrease in milk & milk products’ packing expenses in the budget is because of the expectation of decrease in scrap packing materials and procurement of good quality packing materials at a reasonable rate. This trend is expected to continue for the next year that is 2017-18. Hence considering the

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Shimoga Milk Union Limited weighted average percentage variation the appropriate budget for the year 2017-18 is as below: As per the trend milk & milk products’ packing expenses is (Rupees in lakhs)

259.72

Weighted average variation in the budget (in percentage)

(2.65)

The corrected budget is (Rupees in lakhs)

266.60

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017that is 13.61 and unfavorable for the year 2017-2018that is 10.78 and hence the weighted average variation percentage is unfavorable that is 2.65. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 266.60 lakhs. Table 22: N.D.D.B loan repayment and bank commission: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

56.50

96.74

(40.24)

(71.22)

2017-

69.00

67.00*

2.00

2.90

2018 Note:* represents unaudited financial data of the respective year.

Figure 22: N.D.D.B loan repayment and bank commission

120

Rs in lakhs

100 80 60

Budgeted amount

40

Actual amount

20 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in N.D.D.B loan repayment and bank commission in the budget is because of the expectation of non-repayment of a INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited part of N.D.D.B loan and increase is bank commission. This trend is expected to remain unchanged for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend N.D.D.B loan repayment and bank commission is (Rupees in lakhs)

81.5

Weighted average variation in the budget (in percentage)

(21.81)

The corrected budget is (Rupees in lakhs)

99.28

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017that is 71.22 and favorable for the year 2017-2018that is 2.90 and hence the weighted average variation percentage is unfavorable that is 21.81. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 99.28 lakhs. Table 23: Depreciation: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

48.00

65.63

(17.63)

(36.73)

2017-

45.00

79.78*

(34.78)

(77.29)

2018 Note:* represents unaudited financial data of the respective year.

Figure 23: Depreciation 90 80

Rs in lakhs

70 60 50

Budgeted amount

40

Actual amount

30

20 10 0

Year

2016-17

2017-18

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Shimoga Milk Union Limited

Reason/s for the trend variance in budget: The decrease in depreciation in the budget is because of the expectation of replacement of old machinery and purchase of new machinery. This trend is expected to remain same for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend depreciation is (Rupees in lakhs)

42.00

Weighted average variation in the budget (in percentage)

(63.77)

The corrected budget is (Rupees in lakhs)

68.78

Analysis and interpretation: Since the percentage variance is unfavorable for the year 2016-2017and 2017-2018that is 36.73 and 77.29 respectively and hence the weighted average variation percentage is unfavorable that is 63.77. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 68.78 lakhs.

Table 24: Cattle health program expenses:

Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

62.02

52.02

10.00

16.12

2017-

73.23

64.94*

8.29

11.32

2018 Note:* represents unaudited financial data of the respective year.

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Shimoga Milk Union Limited Figure 24: Cattle health program expenses 80 70

Rs in lakhs

60 50 40

Budgeted amount

30

Actual amount

20 10 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in cattle health program expenses in the budget is because of the expectation of implementation of many schemes sponsored by the government to purchase of more cross-breed cows. The trend is expected to continue for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend cattle health program expenses is (Rupees in lakhs)

84.44

Weighted average variation in the budget (in percentage)

12.92

The corrected budget is (Rupees in lakhs)

73.53

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017and 2017-2018that is 16.12 and 11.32 respectively and hence the weighted average variation percentage is favorable that is 12.92. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-118is Rupees 73.53 lakhs. Table 25: Expenses of A.I, first aid & training programs: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

117.79

74.47

43.32

36.78

2017-

122.35

95.27*

27.08

22.13

2018 INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited Note:* represents unaudited financial data of the respective year.

Figure 25: Expenses of A.I, first aid & training programs 140

Rs in lakhs

120 100 80

Budgeted amount

60

Actual amount

40 20 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in expenses of A.I, first aid & training programs in the budget is because of the expectation of organization of new A.I centers for procurement of more milk. The trend is expected to remain unchanged for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend expenses of A.I, first aid & training programs is (Rupees in lakhs)

126.91

Weighted average variation in the budget (in percentage)

27.01

The corrected budget is (Rupees in lakhs)

92.63

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017and 2017-2018that is 36.78 and 22.13 respectively and hence the weighted average variation percentage is favorable that is 27.01. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 92.63 lakhs. Table 26: Expansion program to D.C.S and Quality control and plant management program fund:

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Shimoga Milk Union Limited Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

593.14

462.50

130.64

22.03

2017-

322.57

337.63*

(15.06)

(4.67)

2018 Note:* represents unaudited financial data of the respective year.

Figure 26: Expansion program to D.C.S and Quality control and plant management program fund

Rs in lakhs

800 600 400

Budgeted amount

200

Actual amount

0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The decrease in expansion program to D.C.S and Quality control and plant management program fund in the budget is because of the expectation already many facilities are fulfilled for Dairy Co-operative Societies (DCS). This trend is expected to remain same for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below: As per the trend expansion program to D.C.S and Quality control and plant management program fund is (Rupees in lakhs) Weighted average variation in the budget (in percentage) The corrected budget is (Rupees in lakhs)

52.00 4.23 49.80

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017that is 22.03 and unfavorable for the year 2017-2018that is 4.67 and hence the weighted average variation percentage is favorable that is 4.23. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 49.80 lakhs. Table 27: Investment and advances: INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

948.80

300.00

648.80

68.38

2017-

921.20

415.11*

506.09

54.94

2018 Note:* represents unaudited financial data of the respective year.

Rs in lakhs

Figure 27: Investment and advances 1000 900 800 700 600 500 400 300 200 100 0

Budgeted amount Actual amount

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The decrease in investment and advances in the budget is because of the expectation of decrease in advances. This trend is expected to continue for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend investment and advances is (Rupees in lakhs) Weighted average variation in the budget (in percentage) The corrected budget is (Rupees in lakhs)

893.60 59.42 362.62

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017and 2017-2018that is 68.38 and 54.94 respectively and hence the weighted average variation percentage is favorable that is 59.42. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 362.62 lakhs. INSTITUTE OF MANAGEMENT STUDIES DAVANAGERE UNIVERSITY, DAVANAGERE

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Shimoga Milk Union Limited Table 28: Diesel purchases: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2015-16

100.00

100.00

--

--

2017-

140.00

143.00*

(3.00)

(2.14)

2018 Note:* represents unaudited financial data of the respective year.

Reason/s for the trend variance in budget: The increase in diesel purchases in the budget is because of the expectation of hike in diesel rates and increase in the number of transportation vehicles. This trend is expected to remain unchanged for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend diesel purchases is (Rupees in lakhs)

180.00

Weighted average variation in the budget (in percentage)

(1.43)

The corrected budget is (Rupees in lakhs)

182.57

Analysis and interpretation: Since the percentage variance for the year 2016-2017is nil and unfavorable for the 2017-2018that is 2.14 and hence the weighted average variation percentage is unfavorable that is 1.43. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 182.57 lakhs. Table 29: National information program & STEP program expenses: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2016-17

48.18

42.12

6.06

12.58

2017-

49.36

44.58*

4.78

9.68

2018 Note:* represents unaudited financial data of the respective year.

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Shimoga Milk Union Limited Figure 29: National information program & STEP program expenses 60

Rs in lakhs

50 40 Budgeted amount

30

Actual amount

20 10 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: The increase in National information program & STEP program expenses in the budget is because of the expectation of increase in grants by government. The trend is expected to continue for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

As per the trend National information program & STEP program expenses is (Rupees in lakhs)

50.54

Weighted average variation in the budget (in percentage)

10.64

The corrected budget is (Rupees in lakhs)

45.16

Analysis and interpretation: Since the percentage variance is favorable for the year 2016-2017and 2017-2018that is 12.58 and 9.68 respectively and hence the weighted average variation percentage is favorable that is 10.64. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is Rupees 45.16 lakhs.

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Shimoga Milk Union Limited Table 30: Integrated Dairy Development Program (I.D.D.P) expenses: Year

Budgeted amount

Actual amount

Variation amount

Variation

(Rupees in lakhs)

(Rupees in lakhs)

(Rupees in lakhs)

(in %)

2016-17

300.00

---

300.00

100.00

2017-

299.28

---*

299.28

100.00

2018 Note:* represents unaudited financial data of the respective year.

Figure 30: Integrated Dairy Development Program (I.D.D.P) expenses

Rs in lakhs

400 300 Budgeted amount

200

Actual amount

100 0

Year

2016-17

2017-18

Reason/s for the trend variance in budget: There is aslight decrease in Integrated Dairy Development Program (I.D.D.P) expenses in the budget is because of the expectation of same amount of funds requirement to conduct Integrated Dairy Development Program. This trend is expected to remain unchanged for the next year that is 2017-18. Hence considering the weighted average percentage variation the appropriate budget for the year 2017-18 is as below:

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Shimoga Milk Union Limited As per the trend Integrated Dairy Development Program (I.D.D.P) expenses is (Rupees in lakhs)

298.56

Weighted average variation in the budget (in percentage)

100.00

The corrected budget is (Rupees in lakhs)

000.00

Analysis and interpretation: Since the percentage variance is favorable that is 100 for both the years that is 2016-2017and 2017-2018and hence the weighted average variation percentage is favorable that is 100. As the trend is expected to remain same for the year 2017-18. The corrected budget for the year 2017-18 is nil.

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Shimoga Milk Union Limited

3. FINDINGS OF THE STUDY:  The actual incomes and expenditures are varying from the budgeted incomes and expenditures.  Some of the actual incomes and expenditure are far away from budgeted one in the organization.  There is no effective budgetary control system in the organization.  It is found that milk and milk products sales is having the unfavorable percentage of variance for the year 2016-2017and 2017-2018i.e., 2.64% and 0.40% respectively.  It came to light that income from cattle feed, fodder sales & A.I programs is having unfavorable percentage of variance for the year 2016-2017and 20172018that is 13.2% and 0.42% respectively.  It is found that actual other income is varying from the budgeted other incomes unfavorably in the year 2016-2017and 2017-2018by 28.64% and 18.87% respectively.  It is found that Interest on depreciation reserves is having favorable percentage of variance for the year 2016-2017and 2017-2018i.e., 12.82% and 14.15% respectively.  It came to light that issue of new shares is having unfavorable percentage of variance for the year 2016-2017and 2017-2018that is 1.29% and 15.55% respectively.  It is found that actual income from cattle health programs is varying from the budgeted income from cattle health programs unfavorably for the year 20162017by 53% and favorably for the year 2017-2018by 5.49 %.  It is found that D.C.S material sale is having unfavorable percentage of variance for the year 2016-2017and 2017-2018that is 47.1% and 3.87% respectively.  It came to light that income from quality control and plant management programs is having unfavorable percentage of variance for the year 2016-2017and 20172018that is 13.26% and 5.95% respectively.  It is found that actual grants from government, Zillapanchayath, STEP and N.D.D.B is varying from budgeted amount unfavorably for the year 20162017and 2017-2018by 4.81%and 0.9% respectively.

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Shimoga Milk Union Limited  It is found that union revolving fund and depreciation fund is having unfavorable percentage of variance for the year 2016-2017and favorable for the year 20172018that is 41.15% and 1.30% respectively.  It came to light that closing stock of milk and milk products is having unfavorable percentage of variance for the year 2016-2017and 2017-2018that is 11.68% and 7.82% respectively.  It is found that actual diesel expenses recovery is varying from the budgeted diesel expenses favorably for the year 2017-2018by 2.14% and found nil for the year 2015-16.  It is found that N.D.D.B’s loan and interest is having unfavorable percentage of variance for the year 2016-2017and 2017-2018that is 28.39% and 0.64% respectively.  It came to light that opening stock of milk and milk products is having unfavorable percentage of variance for the year 2016-2017and 2017-2018that is 5.59% and 20.11% respectively  It is found that actual milk purchase from D.C.S is varying from the budgeted milk purchase from D.C.S favorably for the year 2016-2017and 2017-2018by 0.01% and 0.37% respectively  It is found that milk procurement, processing and production expenses is having favorable percentage of variance for the year 2016-2017that is 0.95% and unfavorable for the year 2017-2018that is 7.65%.  It came to light that Cattle feed & fodder development expenses is having favorable percentage of variance for the year 2016-2017and 2017-2018that is 11.57% and 23.16% respectively.  It is found that actual administration expenses & staff salary is varying from the budgeted administration expenses & staff salary unfavorably for the year 20162017and 2017-2018by 5.08% and 13.35% respectively.  It is found that taxes are having favorable percentage of variance for the year 2016-2017and 2017-2018that is 64.46% and 69.70% respectively.  It came to light that milk sales distribution & transportation expenses is having unfavorable percentage of variance for the year 2016-2017and 2017-2018that is 11.41% and 4.23% respectively.

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Shimoga Milk Union Limited  It is found that actual milk & milk products’ packing expenses is varying from the budgeted milk & milk products’ packing expenses favorably for the year 20162017by 13.61% and unfavorably for the year 2017-2018by 10.78%.  It is found that N.D.D.B loan repayment and bank commission is having unfavorable percentage of variance for the year 2016-2017that is 71.22% and favorable for the year 2017-2018that is 2.90%.  item, a scheduled interview was undertaken. Based on the data so collected and analyzed, It came to light that depreciation is having unfavorable percentage of variance for the year 2016-2017and 2017-2018that is 36.73% and 77.29% respectively.  It is found that actual cattle health program expenses is varying from the budgeted cattle health program expenses favorably for the year 2016-2017and 2017-2018by 16.12% and 11.32% respectively.  It is found that expenses of A.I, first aid & training programs is having favorable percentage of variance for the year 2016-2017and 2017-2018that is 36.78% and 22.13% respectively.  It came to light that expansion program to D.C.S and Quality control and plant management program fund (M.P.C.S) is having favorable percentage of variance for the year 2017-2018i.e., 22.03% and unfavorable for the year 20172018i.e.,4.67%.  It is found that actual Investment and advances is varying from the budgeted Investment and advances favorably for the year 2016-2017and 2017-2018by 68.38% and 54.94% respectively.  It is found that diesel purchases are having unfavorable percentage of variance for the 2017-2018that is 2.14%.  It came to light that National information program & STEP program expenses is having

favorable percentage of variance for the year 2016-2017and 2017-

2018that is 12.58% and 9.68% respectively.  It is found that Integrated Dairy Development Program (I.D.D.P) expenses were not at all incurred in both the years that is 2016-2017and 2017-2018and hence the percentage of variance is favorable that is 100%.

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Shimoga Milk Union Limited

4. SUGGESTIONS AND CONCLUSION: Suggestions:  The organization can adopt an effective budgetary control system that is variance analysis so as to minimize the variance of budgeted income and expenditure from actual income and expenditure.  Thus an appropriate income and expenditure budget suggested for the year 20172018considering variance analysis is as follows:

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Shimoga Milk Union Limited Conclusion: SHIMUL (Shimoga DistrictCo-operative Milk producers’ Societies’ Union Limited) - a District Level Milk Union at the middle level is one among the 13 milk unions of KMF. It islocated in Machenahalli, 12 kms from Shivamogga and 6 kms from Bhadravathi. It is ISO 9001:2008 and MMPO certified dairy. It has thejurisdiction to 3 districts that is Shivamogga, Davangere and Chitradurga. It produces about 8 dairy products under the brand name- ‘Nandini’ and distributes and sells other dairy products of KMF. The budgetary control system plays an important role in the organizations to control the income and expenditure of the organization so as to utilize it resources effectively. As the income and expenditure budget of the organization is varying from actual income and expenditure. The study undertaken in SHIMUL to analyze and control the variances to a greater extent. Thusthe income and expenditure budget of the organization of 2 financial year i.e., 2016-2017and 2017-2018were analyzed based on the secondary data available in the organization and a study was conducted on budgets under the budgetary control system namely, variance analysis to analyze the variance and predict the future trend of income and expenditure for the following financial year i.e., 2017-18. To know the reasons for the variances and predict the trends of each budgetary ca new budget for the year 2017-18 was prepared to control variance of the budget from the actual income and expenditure. To conclude the study was brought out to introduce an effective budgetary control system in the organization which helps the organization in controlling the variances and bring out a budget which is almost nearer to the actual income and expenditure.

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