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Hindustan Aeronautics Limited (HAL) came into existence on 1st October 1964. The
Company was formed by the merger of Hindustan Aircraft Limited with Aeronautics India
Limited and Aircraft Manufacturing Depot, Kanpur.
The Company traces its roots to the pioneering efforts of an industrialist with extraordinary
vision, the Late Seth Walchand Hirachand, who set up Hindustan Aircraft Limited at
Bangalore in association with the erstwhile princely State of Mysore in December 1940. The
Government of India became a shareholder in March 1941 and took over the Management in
1942.
Now, HAL is a leading public sector organization coming under the ministry of defence,
Government of India, with 16 Production Units and 9 Research and Design Centers in 7 locations
in India and is one of the largest aerospace complexes in Asia and fourth largest aircraft
manufacturer in the world. It is one of the few corporate giants in Asia whose capabilities span
the entire range of activity from product conception to after sale support. The Company has an
impressive product track record - 12 types of aircraft manufactured with in-house R & D and 14
types produced under license.
It is pride of honor for the HAL, as it was conferred with “NAVARATNA” status in
the year 2007. Last year, an US based popular magazine Defence News released the list of
Top 100 Defence Companies in the World with HAL shining at 34th rank, climbing 11 notches
up as compared to the last year. HAL has been assessed as an “Excellent” company under the
MOU criteria of the Govt. of India for the 8th year in succession. It has also been the
recipient of the “Top Exporters Shield” from EEPC (Engineering Export Promotion Council)
for the Eighth consecutive year.
HAL
Bangalore complex has six divisions and one service center that are:
• Aircraft Division
• Overhaul Division
• Aerospace Division
• Engine Division
• Helicopter Division
The beginning of the manufacture of Helicopters in HAL dates back to June 1962,
when the license agreement was signed with M/s. SNIAS (formerly M/s. SUD Aviation). The
first firm order for 60 Chetak Helicopters (Alouettee-III) was placed by IAF in January 1965
and the first Chetak received in ‘Fly Away’ condition was delivered to IAF in December
1965. The deliveries of Chetak Helicopters manufactured from raw materials commenced
during 1969-1970.
In the initial stages of Helicopter manufacturing except for assembly departments, all
other shops were common with the Aircraft Division. Consequent to the re-organization of
Bangalore Complex, a separate division for manufacture of Helicopters was established in
July 1970.
Indian Air force, Indian Army, Indian Navy, Indian Coast Guard, civil operators like
ONGC are customers in our country. The division has also exported helicopters to countries
like the USSR, Nepal, Bangladesh, Seychelles, Mauritius, and Myanmar. The Chetak and
Cheetah helicopters are well-established helicopters in the Indian as well as export markets.
The division is engaged in series production of multi roles, multi mission, and medium
weight class helicopter named Advanced Light Helicopters (ALH).
ORGANISATION CHART – HELICOPTER DIVISION
FINANCE & ACCOUNTS DEPARTMENT
Chief Manager
(Finance)
CHART NO. 4
DY.Manager
DY.Manager
(Costing) (Material
Accounts)
CSD gets the project or orders from the customer, and then IMM department plans
and procures the materials as per the requirements of the orders/projects from various
suppliers. Production department performs the needed work to complete the order/project
successfully.
All the monetary dealings with the suppliers to the ultimate customers are taken care
by the Finance and Accounts Department. This department is sub-divided in 8 sections. Each
section has its own role to play in controlling the money flow in a project from getting a
project to delivering the product to customer fulfilling his requirements. The sections of
Finance and Accounts departments are:
• Finance or Auditing.
• Bills payable – Local.
• Bills payable – Foreign.
• Bills receivable.
• Book-keeping.
• Material accounting.
• Costing.
• Payroll.
Audit section is like a check-post for all the transactions where the control over
money flow is needed, so that wastage of material etc can be controlled and the company can
be saved form losses. The auditing sections functions in such a way that they always consider
the following: Compliance with Companies Act: Relevant rules and regulations of the
company: General policy lay down by the board.
Senior manager heads this section. The main functions of this section are:
This section deals with the aspects of bills payable for the services rendered by the
local or inland suppliers. Helicopter division procures 5% of its total materials indigenously
from the indigenous materials. Hence all the payments, as per the terms and conditions, pre-
determined and agreed by both of them (HAL and inland suppliers) is taken of by the bills
payable (Inland) section.
Senior manager heads this section. The Bills payable – inland deals with the aspects
like:
The materials procured by HAL comprises of 80% - 95% imported material procured
from the foreign vendors all over the world. In view of the huge payments to foreign vendors,
helicopter division felt the need of a separate section to look after the transactions and
payments to foreign vendors, alone.
Senior manager heads this section. This section deals with the aspects of suppliers and
services rendered to the company, by foreign vendors like:
• Payment and accounting of contractual fees and advances to the suppliers and
to services obtained from collaborators and others.
• Payment and accounting of final bills
• Opening of letter of credit and dealings with banks for obtaining foreign
exchange release and payment thereof.
• Maintenance of deferred liabilities accounts and commitment registers for
budgetary purpose.
The mode of payment to the foreign supplier/contractors is in their respective
currencies through sight drafts, letter of credit, direct payment and demand draft. The
payment terms / conditions are: advance payments, payment after receipt and acceptance of
goods, payment after delivery and payment through bank.
The payment term depends on the type of invoices raised i.e., the invoice is based on
cost plus or FPQ pricing.
Booking keeping is the traditional way of writing down all the expenses and incomes
incurred by the division during a financial year. All the other sections are liable to book
keeping, to keep track of all the transactions and inflows of money.
Senior manager heads book keeping section. The main aspects of this section:
The material accounts section maintains the material ledger and other relevant ledgers
for the material purchase occurred during a year. This section accounts the costs of materials
consumed from the stores and the costs of materials rejected and other materials relevant
costs, verifying various issue vouchers and material procurement documents/bills.
Senior manager heads the material accounts section. The main functions of
this section are:
• Maintenance of material ledger cards for all material held in stores, which
contains an account for every item of the stores and makes a record of the receipts,
issues and the balances both in quality and value.
• Accounting of the receipts of all the materials by various classes and issues of
all materials drawn on work orders and expenses account.
• Reconciliation of the balances with the general ledger.
• Quality reconciliation bin card balances with material ledger balances.
• Scrutiny of slow moving, non-moving, and redundant inventory
• Accounting of interdivisional transfers of material and its reconciliation.
• Raising debt advises against contractors and others for materials issue/sold or
accounting thereof.
• Maintenance of loan registers for materials issued on loan and follow up for return.
COSTING SECTION:
The helicopter division’s costing section mainly deals with the cost of materials of
ALH, cheetah and Chetak and with the cost of repairs and overhaul of cheetah and Chetak.
Full pledged cost accounting system is essential for effective cost monitoring and cost
control.
Deputy Manager heads this section, which is directly under the chief manager of
finance department. The main function of the costing section is determined the cost incurred
in the production/servicing/ repairs etc., works done in the division. Costing section looks
after the pricing methods adopted by the helicopter division, for pricing the material and
Labour used for performing the projects.
The accounting procedure of this section is as such. Based on the work orders and
time dockets all the relevant information relating the costing are codified and entered into the
computer and the computer generated the Labour cost journal and material cost journal. This
is generated from the computer on monthly basis.
Based on the Labour cost journal and material cost journal cost ledgers are prepared
manually with the information like Labour hours, Labour cost, material cost, sundry direct
charges and the total cost.
PAYROLL SECTION:
By the name it is evident that this section looks after the payment of
salaries, wages, loans, medical activities etc. payroll section is responsible for all statutory
dues recovered from employees salaries/wages, employees attendance and leave particulars
and thus his pay for each month, recoveries like LTC, bonus etc, deductions and many other
details related to the employees.
Senior manager heads this section. All the below given information are entered in
computer. The main functions of this section are:
In HAL the budgetary exercise will commence in mid June at divisional /complex levels.
Revised Estimates (R.E) represents Projections under current year. Estimates will be
revised considering the Budgeted projections approved in the previous year for the current
year and actual for the first five or six months of current year.
Budgeted Estimate represents Projections for succeeding year to the RE current year.
In the process of budgeting, it is essential that the concerned managers in charge of
production and support Departments are involved from the very beginning of the preparation
of the budgets to the point of finalization.
This type of root budgeting is essential so that all the managers who initiate and incur
expenditure in respect of activities included in the budget will be involved and they feel
responsible for achievement of the physical and monetary targets laid down for them in the
budgets and thus the process of monitoring and review will be facilitated.
Types of budgets
The Budget is classified into two types, based on the nature of the expenditure.
They are:
Capital Budget -- A plan for creation of facilities
Budget committee
The budgeting, monitoring and review is a continuous process. It is therefore
essential that there is a specific group to supervise the preparation and submission of
budgets at appropriate times, monitoring and review of budgets at periodical intervals either
monthly or quarterly. For this purpose, a Budget committee is constituted in the Division.
Production Planning
Project Management
Product Assembly
Finance
Purchase
IT and Stores
Introduction
The company will have a long term perspective plan of not less than five years,
spelling out their production and allied resources for the on-going projects and for the
possible new lines. The Budget meant for this type of facilities is called as capital budget. In
other words, this budget is for planning of the commitments for the various capital facilities,
i.e. Land and Development, Road and Drains, Water Supply, Buildings, Plant and Machinery,
Furniture and Equipment, Transport Vehicles and other infrastructure services need to
achieve the performance objectives. All the above capital expenditure requirements are
shown separately for different projects under different activities. The capital budget will be
prepared both for customer funded project as well as company-funded projects.
• New Projects
• Existing Projects
• Improvements/ Rationalization
• Replacement
• Welfare
• IT Plan
Preparation of the Capital budget is the responsibility of the Finance Section of the
Accounts Department of the Division.
In this head approvals for creation of facility will be projected on the basis of
facilities. It covers existing sanctions, addition/ deletions and fresh sanctions.
Commitments
• Implication on Manpower-savings
• Return on Investment
• Term loans
• Budget Heads.
• Existing sanctions.
• Fresh sanctions.
• Justifications.
• Commitment plans.
• Expenditure plans.
• Board approval.
• Items required for timely execution of projects and smooth operation of the
company are considered.
Budget Heads
• New projects
• Existing projects
• Replacements
• Welfare
• Information Technology
• Codification of divisions/complexes/CO/HAL
Existing sanctions
• Current year.
• Sanction for non project items will lapse after three years from
• Items fully committed and expended could be deleted from the budget
Fresh sanctions
• New items added in the budget first time.
• replacement head.
Justifications
• Capacity utilization
• Mode of financing
• Item wise detail justification of all fresh items and incremental sanctions
projected in the budget.
• Cost benefit analysis for plant & machinery items above Rs.1 cr each
• Total projections under IR, replacement, welfare, IT are within the overall
ceiling circulated by CO based on internal generation
• Buildings
• Furniture
• Transport vehicles
Commitment plans
Expenditure plans
Board approval
• Preparation of board paper
• Schedule of savings/surrender
• Justifications
It was firmly understood that Budget reflects not only the Plan of Action for different
levels of Management, but are also widely used as a target for monitoring the activities of the
Company and initiating midcourse corrective action.
It was understood from the above Report that budgeting is a comprehensive system of
planning and control, covering all segments of the Company. And that the budget should be
such that it makes it imperative for management to establish goals and objectives, define
policies, develop programs, and allocate resources, measure performance against the targets
and in the process, revise the objectives and policies, if found necessary.
Budgeting System in HAL was analyzed in the report in detail. Budget period in
HAL, Concepts of RE & BE are understood through this report.
Detailed Analysis of Capital Budget and Performance Budget have been analyzed in
detail covering the formats used in each case also.
The importance of Budget Committee in preparation of Budgets, the members in that
committee along with their activities etc are analyzed through the report.
HAL being an organization having more than 33,000 persons being employed and
involved in all diversified areas of aerospace Industry from Designing of Aircraft/Helicopter
to MRO of Aircraft/Helicopter, Budgeting exercise can’t be taken lightly.
It is therefore essential that the budgets are prepared with attention and care and
reflect reasonably accurate program of activities. They should also be synchronized with the
physical activities and programmes and the accounts of the Company.
To conclude