Background

The internal audit (IA) team conducted the production & maintenance audit of a leading chemical company plant, having a turnover of about Rs. 1,000 crore. The average monthly production capacity of the plant was 100 tonnes.

Observations

• The plant used furnace oil (FO) as the fuel to produce steam.

• The FO cost was on the uptrend, which was constantly increasing the cost of utilities, and the cost of production.

Recommendations

• The IA team recommended that the plant should replace the current fuel (FO) by an alternate fuel (natural gas) available in the market. The alternate fuel was cheaper as compared to FO. Further, the alternate fuel (natural gas) was also environmentally friendly as compared to FO.

Value-Add

• A cost benefit analysis revealed that recurring savings would be achieved, of Rs. five million by opting for LDO, Rs. eight million by opting for brickets & Rs. 12 million by opting for natural gas. The pay back period was also calculated, which ranged from six months to one year, depending upon the replacement opted for.

• The Management of the Company opted for fuel replacement at all of its plant locations, depending upon the fuel availability at the respective plant location.