Challenges Faced By The Select Urban Public Sector Bank Customer’s While Using Atm/ Debit Card –

A Descriptive Analysis

* S.Bulomine Regi.,

ABSTRACT

“Banking is essential, banks are not”. It is noted that, traditional bank branches (bricks and mortar) are going to vanish through innovative banking services i.e. electronic banking and plastic cards which continue to attract new users. The main objective focused in this paper is to measure the challenges faced by the customers’ using ATM/Debit Card offered by selected public sector banks i.e. State Bank of India and Canara Bank. 360 respondents were selected using purposive stratified random sampling. This paper mainly focused on the challenges faced by the customers using ATM/Debit card.

KEYWORDS: ATM, Debit Card, ATM user, Challenges, Public Sector Banks

INTRODUCTION

ATMs are now a routine part of banking transactions but when they were introduced in 1960s, they were the high- tech technology. The Automated Teller Machine (ATM) is now such a normal part of daily life that it’s strange to think it was ever cutting-edge technology. But in 1960s, when the first cash-dispensing ATM was installed at a branch of Barclays Bank in London, it was innovative and revolutionary. What’s more, over the decades, ATMs have become much more than just cash dispensers. They also allow customers to carry out a range of banking activities, including deposits and mobile phone top-ups. Given that the ATM is such a prominent feature in people’s lives, it’s important to understand its background, technical development and its capabilities. Here’s a quick introduction to the ATM and its global significance.

While the first card-accepting ATM was introduced by Barclays in London in 1968, this was not in fact the very first incarnation of the automated teller. CitiBank, then known as First National City Bank, launched a version of the ATM called the Bankograph in American branches in 1960. This machine did not let customers withdraw money but instead allowed them to pay bills without the assistance of bank staff. Moreover, Barclays’ 1968 addition was not foolproof and cards were regularly swallowed by these early ATMs.

Following these early developments, growth in North America and Western Europe was rapid. In 1969, the first machine to use magnetically encoded plastic was installed at Chemical Bank in New York, although initial take-up was slow as the running costs for these machines, known as Docutellers, outstripped the cost of hiring a human teller. However, as the modified Total Teller was introduced in the early 1970s, ATMs began spreading in banks across the two continents.

Today, ATMs have been popularised across the globe. Experts estimate that developed countries like the USA, Canada, the UK and Japan have a high concentration of ATMs per capita, while steady economic growth in India and China has meant that the number of bank machines in these countries has been growing in the last decade. However, it’s not just the number of ATMs throughout the world that has increased but also its functions. As well as withdrawing and depositing cash, modern ATMs also allow you to put credit on a mobile phone just by entering your phone number of the keypad. What’s more, some machines will let pay money into a beneficiary’s account, while others will print mini bank statements of your last few transactions.

However, as software changes, it does concern over ATM security. Today’s biggest worry for ATM industry professionals is how to maintain the security of global systems beyond the traditional advice to consumers to keep their PIN secret. The development of chip cards and Chip and Pin technology has helped to combat ATM fraud but there are still advances to be made.

STATEMENT OF THE PROBLEM

            Nowadays majority of the customers are using ATMs to withdraw cash from their account. The debit cards are used in very occasion for payments made through online, payments for purchases in shopping mall and so on. The use of ATM is increasing day-by-day, it is important to study the challenges towards use of ATM services. The customers were facing different types of problems with which ATM is directly related. Machine complexity, machine breakdown, poor quality notes, network failure, unsuitable location, forgot ATM pin number, High frequency of use, safety and security are the major problems of ATM users. Customers do not like ATMs because of impersonality, vision problem, fear of technology and reluctance to change and adopt new mode of delivery of service.

 

 

OBJECTIVES OF THE STUDY

The following are the objectives of the study:

  1. To study the socio-economic conditions of the respondents using ATM/Debit Card from select public sector banks in Tirunelveli District.
  2. To identify the challenges faced by the customers while using ATM/Debit Card from select public sector banks in Tirunelveli District.
  3. To give suggestions for the improvement of using ATM/Debit Card.

METHODOLOGY

Research design

A  research  design  is  a  plan  of  the  research  project  to  investigate  and  obtain answers  to research questions. Three types of research designs identified from the literature are exploratory, descriptive and explanatory design.[1] In  the  beginning  of  the  study, an  exploratory research  was  undertaken by an  in-depth review of literature in order to identify the research  problem,  constructs  and  to formulate hypotheses. Descriptive  research design  was  used  in  the  next  stage  of  the research for the purpose of describing the profile of the respondents and to determine the frequencies,  percentages, mean and standard  deviation  of  the  measures  and constructs used  in  the  study. Descriptive research could not explain the relationship among the variables [2] and therefore, to establish relationship and association between variables used in the study, explanatory research was used.

Survey  method  using  a  pre-structured  interview schedule was  used  for  collecting  primary data from the respondents because it offers more accurate means of evaluating information about  the  sample  and  enables  the  researcher  to  draw  inferences about  generalising  the findings  from  a  sample  to  the  population.[3]  The study  also  made  use  of secondary  data  collected  from  published  sources  such  as  records  and  reports of RBI and IRDBT, books, bank official websites, bank magazines, reports, newspapers, journals and websites.

Two banks were selected for the study and 180 customers were selected from each bank purposively those who are using innovative banking services namely ATM/Debit Card, Credit Card, Internet Banking and Mobile Banking. Two banks were selected based on IBA Banking Technology Awards 2014-2015.[4] The select banks are State Bank of India and Canara Bank which are public sector.

Sample design

Details of customers using innovative banking services (IBS) could not be obtained from the banks due to banks’ privacy issues and topic sensitivity. Therefore, the researcher decided to contact the respondents from ATM outlets of the select banks and other urban ATM outlets in the district. Simple random sampling method was adopted to select the ATM outlets and purposive sampling method was adopted to select the respondents. Customers who are using innovative banking services (IBS) visiting ATM outlets on the days of survey were selected as sample respondents. The respondents were selected after having ensured that they have account with any of the two banks and they are using all the two selected IBS. It was also ensured that the respondents have been using IBS for a minimum period of two years.

 Determination of Sample Size

Where

         Z       =       Standardized value corresponding to a confidence level of 95% = 1.96

         S       =       Sample SD from Pilot study of 60 sample = 0.484

         E       =       Acceptable Error =5% = 0.05

         Hence, Sample size = n = (ZS/E) 2

                                                = (1.96*0.484/0.05)2

                                                = 359.96

Hence, Sample Size n= 360

360 respondents who were selected for the study out of those 180 respondents are from State Bank of India and 180 respondents are from Canara Bank. The collected data were analysed with the help of SPSS 21 and AMOS. In order to obtain the score of the attitude of customers Likert Five Point Scaling Technique was used.

Results of Reliability Test Using Cronbach’s Alpha

Variables No. of Items Cronbach’s Alpha
Measuring  level of attitude of  the customers’ towards IBS 28 0.892

LIMITATIONS OF THE STUDY

Each research work is subjected to certain limitations and this study is also not an exception. The present study has the following limitations:

  • The responses for the study have been solicited from the District of Tirunelveli in Tamilnadu alone. The expectation and attitude of the customers in Tirunelveli may vary from those of the rest of the Districts in Tamilnadu and other states in India.
  • The study may suffer from the element of biasness.
  • The customers of two banks were selected for the study to study the attitude towards IBS. As a result, the generalisation of the findings of the present research has to be done with utmost care.
  • Furthermore, the sample was restricted to commercial banks. The other major banks like private, co-operative banks and foreign banks are excluded from the study.
  • The analysis of innovative banking services offered to corporate banking customers are excluded from the study.
  • No published data were available on number of customers availing all the four select services and no banks provided much data.
  • As regard users of card, no categorisation has been done such as users of classic, platinum and alike.
  • The study was restricted to urban customers only.

ANALYSIS AND INTERPRETATION

MILIEU OF THE RESPONDENTS- A DESCRIPTIVE ANALYSIS

  • Majority (61.4%) of the customers using innovative banking services (IBS) are male.
  • Majority (31.7%) of the respondents using innovative banking services (IBS) belongs to the age group of 31-35.
  • Majority (75.3%) of the customers using innovative banking services (IBS) are married.
  • Majority (45.8) of the IBS users are graduates.
  • Majority (44.7) of the respondents are employed.
  • In public sector, customers using innovative banking services (IBS) are earning above
  • Overall 78.3 per cent of the respondents are having savings account.
  • Majority (47.2%) of the respondents are having account with the bank between 2-5 years.

 

Problems faced by the customers while using ATM/Debit Card

         Customers are using maximum ATM/Debit Card service at the maximum in their day to day transactions. It is evident that, majority of the customers are using Debit Card up to 5 times. While using ATM/Debit Card customers are facing problems in performing their task. The below table shows the major problems faced by the customers while accessing ATM/Debit Card.

Table No. 1

Mean of Problems Faced by the Respondents while using ATM/Debit Card

ATM/DEBIT CARD Public Sector of Bank
Poor network 2.05
Lack of infrastructure 1.99
Long waiting queue 3.40
Machine out of service 2.52
Out of cash 1.81
Limited ATM centres 2.52
Unable to print statement 2.41
Letters printed in the statement disappear after few days 3.62
Card blocked 2.58
Misuse of card and frauds 2.27
Lack of confidence 2.18
Swiping is difficult 1.86
ATM centre doors are always open 3.67
Without security guards 3.44
Non-availability of CCTV  (Inside and Outside ATM centre) 2.37
Damaged Currency 2.23
Reduction of balance without cash disposal 2.36
Over/Under value of withdrawal amount 2.29
Location of ATM centre  is safety 2.56
No proper Air Conditioner 1.74
No parking  facilities in front of ATM centres 3.60
2 or more people in a single machine 3.57
Not giving proper intimation about charges 3.54
Magnetic Strip easily damaged 1.89
If misplaced, blocking card is difficult 2.29
Prompt service to get new card and PIN 3.12
Time Consuming 2.29
ATM premises are full of Receipts on the floor. 3.17
Shoppers also charging for using card 2.76

    Source: Primary Data

            Based on the mean score, public sector customers using ATM/Debit Card services are facing problems like ATM outlet doors are always open (3.67), letters in printed statement disappear after few days (3.62), no parking facilities in front of ATM outlets (3.60), two or more people tend to use a machine at a time (3.57), banks are not giving proper intimation about charges (3.54), lack of security guards (3.44) in the ATM outlets and long waiting in queue (3.40).

Inference: It is inferred that, public sector customers are facing the similar problems i.e. lack of infrastructure facilities and not proper maintenance of ATM outlets. It is evidence that, urban ATM outlets in the study area are accurately having these types of problems cited by the sample respondents.

SUGGESTIONS

  • Nowadays, there is sufficient number of ATMs but no proper facilities to access the ATM outlets like parking, shed to stay in queue, paper free ATM center, Air Conditioner, Security guards and CCTV camera in and out of ATM outlets to avoid physical attack and theft occurred in the place of ATM outlet. So, proper care should be given to maintain ATM outlets.
  • The banks should instruct the outsourcing agents to put quality paper for printing receipt. Because, the letter in the printed receipt disappear after few days.
  • The customers should follow the security guidelines given by the banks while accessing ATM/Debit Card.
  • The customers should not disclose the PIN to anybody.
  • The customers should avail ATM/Debit Card with utmost care.

CONCLUSION

Banking sector plays a vital role in the growth of economic development in India. Banking is still under evolutionary stage as it is adopting new technologies to facilitate further the customer convenience in the secured environment. IBS is becoming popular amongst customers who are familiar with the technology up graduation but it is gradually spreading to mass especially at metropolitan and urban cities. Few banks have taken an early lead by introducing technology based banking services. The study on the customers’ attitude towards innovative banking services (IBS) in banking sector reveals that customers are satisfied in some aspects and they want to continue with their respective banks. The shift from cutomerised service to personalized services is highly essential to satisfy all groups of customers. The findings of the study stress upon the importance of the security and safety expected by the customers especially in the case of innovative banking services (IBS) like ATM/Debit Card. The future of internet banking lies in offering personalized internet based services that are not only valued by their customers but are also unique to them. This would help distinguish themselves in the crowd. This would also help them evolve continuously to meet customers’ needs, capitalizing on new technology to build stronger customer relationship.

REFERENCES

  1. Eugine, F. D. C. & Regi, S. B., “Advantages and Challenges of E-Commerce Customers and Businesses: In Indian Perspective” International Journal of Research–Granthaalayah,4(3), 7-13.
  2. Golden, S. A. R. (2015). Regional Imbalance affecting quality of e-banking services with special reference to Tuticorin District-An Analysis.International Journal of Research2(3), 788-798.
  3. Golden, S. A. R., & Regi, S. B. (2014). Attitude of Rural People Towards Technology Inclusion In Banking Services At Tirunelveli District, IGJAE – Indo Global Journal Of Applied Management Science, 2(2).
  4. Golden, S. A. R., & Regi, S. B. (2014). Customer Preference Towards E- Channels Provided By State Of Bank Of India, Kongunadu College Of Arts And Science, Special Edition 1(1).
  5. Golden, S. A. R., & Regi, S. B. (2015). Satisfaction of Customers towards User Friendly Technological Services offered by Public and Private Sector banks at Palayamkottai, Tirunelveli District.International Journal of Research2(3), 775-787.
  1. http://ezinearticles.com/?A-Brief-Introduction-to-the-Automated-Teller-Machine&id=5397483
  2. http://worldwidejournals.com/paripex/file.php?val=July_2013_1374047900_e453d_54.pdf
  1. Regi, S. B., & C. Eugine Franco, “MEASURING CUSTOMERS’ ATTITUDE TOWARDS INNOVATIVE BANKING SERVICES OF PUBLIC AND PRIVATE SECTOR IN TIRUNELVELI DISTRICT” International Journal of Research – Granthaalayah, Vol. 4, No. 5: SE (2016): 58-66.
  2. Regi, S. B., & Golden, S. A. R. (2014). Customer Preference Towards Innovative Banking Practices Available In State Bank Of India At Palayamkottai.Sankhya International Journal Of Management And Technology, 3 (11 (A)), 3133.
  3. Regi, S. B., & Golden, S. A. R. (2014). Customer Preference Towards E-Channels Provided By State Of Bank Of India.
  4. Regi, S. B., and Dr.C. Eugine Franco, “MEASURING CUSTOMERS’ ATTITUDE TOWARDS INNOVATIVE BANKING SERVICES OF PUBLIC AND PRIVATE SECTOR IN TIRUNELVELI DISTRICT” International Journal of Research – Granthaalayah, Vol. 4, No. 5: SE (2016): 58-66.
  5. Regi, S. B., Golden, S. A. R., & Franco, C. E. (2014). ROLE OF COMMERCIAL BANK IN THE GROWTH OF MICRO AND SMALL ENTERPRISES.Golden Research Thoughts, 3 (7), 15.

[1] Cooper, D.R. and Schindler, P.S. (2001).  Business Research Methods (7th edition). Singapore: McGraw-Hill- Irwin.

[2] Zikmund, W.G. (2000).  Business Research Methods (6th edition). Chicago: The Dryden Press.

[3] Creswell,J.W.  (1994). Research Design: Qualitative and Quantitative Approaches. Thousand Oaks: Sage Publication

[4] http://www.iba.org.in/Documents/FINAL_AWARDS.pdf dated 10/04/2015 time 23.59 p.m

Econometric Models  to Water Use Estimation in Power Plants: An Experiential Analysis

 PERINI PRAVEENA SRI

 

ABSTRACT

The purpose of this paper is to examine water use estimation in hydel and thermal electric power plants in selected regions i.e. Coastal, Rayalaseema and Telangana regions of Andhra Pradesh. The study primarily focuses on the realistic fundamental premise that thermal electric and hydro electric energy generation is responsible for the largest monthly volume of water withdrawals in four seasons (i.e. summer, rainy, winter and post monsoon season) of a year. These enormous water withdrawals by these hydel and thermal power plants can have significant influence on local surface water resources. However there are very few studies of determinants of water use in hydel and thermal electric generation. Analysis of hydel and thermal electric water use data in the existing power plants clearly indicates that there is wide variability in unitary hydel and thermal electric water use within the system. The multivariate regression procedures were used to identify the significant determinants of thermal and hydel water withdrawals in various power plants i.e. five hydel and four thermal power plants. The estimated regression coefficients indicate that the best explanatory variables for the total quantity of hydel water withdrawals are storage capacity, tail water level and actual generation and thermal water withdrawals are condenser cooling and ash disposal. The unit variability of unit water usage indicates that there is significant potential for water conservation in existing power plants.

Keywords:

Thermal water withdrawals, hydel water withdrawals, storage capacity, tail water level, actual generation, condenser cooling and ash disposal.

  • INTRODUCTION

Water has become a growing source of tension especially in power sector in many parts of the World. For India hydro and thermal power projects are vital to fill in the serious electric energy shortfalls that crimp its economy. About 40 percent of India’s population is off the power grid and due to this the welfare of the economy was badly affected. The main stumbling block for this kind of worse situation are a genuine water shortage problem in India and the country’s inability to properly manage large quantities of water during rainy season has made matters worse, exposing it to any small variation in rainfall or river flow. Though the country has invested heavily on nuclear power to generate 30,000 MW and $ 19 billion to produce factories of major thermal, hydro and nuclear power stations, the electric energy shortages were very much prevalent in most parts of the country. For this the first and foremost thing is to judiciously manage the vital resource “water”. The country also planned for setting up of 20,000 MW solar power by 2020. The Government of India has an ambitious mission of Power for All By 2012. This would require an installed generation capacity of atleast 20,000 MW by 2012 from the present level of 144,564.97 MU. However the power requirement will double by 2020 to 400,000 MW. How India is able to meet this target with the on-going water shortage plight in Electricity Generation Industry is a matter of great concern. However the Electricity Generation Industry strategy should primarily focus on this invisible culprit “Water” causing huge generation losses through better water efficiency techniques and lay emphasis on technology up gradation and massive utilization of renewable sources of energy.

The purpose of this paper was to examine water use estimation at hydel and thermal electric power plants in selected regions i.e. Coastal, Rayalaseema and Telangana regions of Andhra Pradesh. The study primarily focuses on the realistic fundamental premise that thermal electric and hydro electric energy generation is responsible for the largest monthly volume of water withdrawals in four seasons (i.e. summer, rainy, winter and post monsoon season) of a year. These enormous water withdrawals by these hydel and thermal power plants can have significant influence on local surface water resources. Water use at the power station level (by fuel type) can be estimated indirectly by using multiple regression analysis. In regression models, water use relationships are expressed in the form of mathematical equations, showing water use as a mathematical function of one or more independent (explanatory) variables. The mathematical form (eg. Linear, multiplicative and exponential) and the selection of the Right hand side (RHS) or independent variables depend on the category and on aggregation of water demand represented by Left Hand side (LHS) or dependent variable.

2.0  THEORETICAL AND CONCEPTUAL REVIEW OF LITERATURE: DIFFERENT APPROACHES OF WATER USE ESTIMATION

The various studies relating to water demand for thermal power plants and its significant determinants are reviewed for explicit understanding of thermal electric energy water use. Cootner, Paul and George O Golf (1965) have build upon a systematic model for estimating water demand in conventional steam electric utility industry. They have regarded   water as a common factor input along with fuel. Here

TWD= f (Qf, Cw, EHe, CWH )

Where in TWD = Thermal water withdrawal demand,    Qf = Quantity and cost of fuel,   Cw = Cost of water,  EHe = Economics of heat exchange and recycle and  CWH= other costs of thermal power plant associated with the disposal of waste heat.

In other words the quantity of the fresh water withdrawals depends upon the above mentioned factors. In another study Wollman and Bonem (1971) found that the quantity of fresh water withdrawals for steam electric power generation depends upon (1) Thermal efficiency (with higher thermal efficiency less heat will be dissipated. Due to this smaller amount of cooling water are needed) (2) The extent to which sea or brackish water can substitute for fresh water (3) The rate of recirculation. Recirculation is a function of price of water availability. Young and Thompson (1973) in their study identified three factors that affect water use   in thermal electric energy generation. They can be listed as water pricing, change in generation, technology, price of electricity, price of substitutes used in electricity i.e. oil and gas, population and level of general economic activity. The other factors include waste and heat discharge to water and the changes in cooling technologies.

Gleick (1993) in his study reviewed the water requirement of electric energy. Taking as base of earlier studies, he estimated the consumptive water use in Electricity Generation Industry using different technologies. The system efficiency for conventional coal combustion (Once through Cooling Towers), natural gas combustion (Once Through Cooling Towers) and nuclear generation (CTs) stood at 35 percent, 36 percent and 40 percent. The estimates specifies that with the help of Once Through Cooling Technologies, the average consumptive use ranges from  1.2 m3/MWH  in case of conventional coal, for oil and natural gas consumption the average consumption use is less by 1.1 m3/MWH  , where as with cooling towers it was 2.6 m3/MWH. For nuclear power generation the average consumptive use of water with the aid of CTs was more that stood at 3.2 m3/MWH. There is a need for use of high efficient technology in cooling towers for water conservation. Electric Power Research Institute 2002, estimated the evaporation water loss from recirculating towers i.e., roughly 480 gal/MWH for a coal fired power plant. Mortenson, 2006 in his study have provided a technological breakthrough i.e. small scale tests of one technology (that uses cross-currents of ambient air for condensation) as a counteracting measure for these evaporation losses. By this technology the evaporation losses can be reduced to about 60-140 gallons/MWH (that can be applied even to hotter climates). In value terms, EPRI 2004 notified that the savings from reduction of evaporation losses will be $870,000.

There are very few studies of determinants of water use in hydel and thermal electric generation. The literature available relating to water use estimations is very few. Water use experts have to opt for estimation methods for many of the water withdrawals classes i.e. domestic, agriculture and industry because of the true fact that many legal, financial and political constraints limit for getting the hard data. For instance water withdrawals in domestic and live stock water use are usually estimated by multiplying population figures by coefficient. In case of agricultural sector, the irrigation water withdrawals are often estimated by multiplying the acreage by assumed water requirements of the crop rather than by measuring actual water pumped and applied.

Snavely (1986), explicitly details the water use data collection programs and maintaining regional data base of the Great Lakes St. Lawrence River Basin States.  The results are very much appealing indicating as how broad the range of estimation coefficient for water use can be within a geographic area with similar water availability. Mostly the estimated coefficients used for agriculture and domestic use vary by a factor of 10. The econometric studies relating to water use estimation in public supply use and thermo electric power use have the potential to explain temporal and geographic variability across USA. The aggregated water use estimates were provided by the National water Use Information Programme. These estimates primarily focus on measuring total water withdrawals (that includes annual extraction of fresh  surface water and ground water) for the period 1980-1985 to 1990-1995 in each of 48 states of USA for public supply water withdrawals , domestic, commercial, irrigation and live stock. The saline water withdrawals were estimated for industrial, mining and thermal electric categories. The public supply water withdrawals are estimated within geographical area i during year t using a set of explanatory variables that includes air temperature, precipitation, price of water, median household income and others.

Cohn et.al (1989) and Christensen et.al (2000) have used examples of such kind by using statistical techniques. The shorter time period used has the advantage of highlighting the recent trend of declining water use since the 1980 compilation. The mean withdrawal for the period (1980-1995) clearly indicates that it was 183.7 gallons per capita per day. This average water withdrawals would decrease by 7.8 gpcd, if the state GDP per capita increased by $1000. The inclusion of this state GDP captures the effects of relative volume of non residential uses (along with their ability to pay for water). The model also indicates that US was able to withdraw 17.2 gpcd, because of its surface water rights in comparison with riparian law states. The inclusion of temperature and precipitation variables also clearly shows the effect of weather on water withdrawals and can be used in normalizing water use for weather. The model indicates that average per capita demand for water in the state decreases by 2.1gallons per day per one inch increase in precipitation and vice versa i.e. water demand increases during summer months. i.e. average temperature.

Billings and Jones, 1996 employed indirect estimation of water use in urban and municipal planning using coefficient based methods. It calculates water use for commercial, residential and industrial categories. They assume constant water use rates and ignores trends i.e. changes in water use due conservation, technological change or economic forces. Mullusky et.al (1995), Wood Well and Desjardin (1995) for Washington D.C. metropolitan area have employed this water use coefficients for three categories of water users i.e. simple family homes, multiple family homes and employment water use.   Another approach of estimating National Water Use in USA includes Stratified random sampling followed by Census of Agriculture. They employed various methods of collecting data such as telephone, mail survey instruments to develop detailed country level estimates of national agricultural activities. According to Hutson et.al 2004 the thermo electric power water use refers to water that is removed from the ground or diverted from surface water sources (that includes fresh water and saline water) for use in the process of generating electricity with steam driven turbine generators. In this paper the term water withdrawals is used more often precisely. The term designates the amount of water that is extracted from natural water sources. Again it is essential to demarcate between water withdrawals and discharge as consumptive use. Water consumption is the quantity of water with drawn that is evaporated, transpired, incorporated in to crops, consumed by human or live stock.

At the end it can be said that different authors have notified different methods for estimation of water use for various uses of the economy. This paper employs multivariate models of water use for estimation of significant determinants of thermal and hydel water withdrawals.

Objectives of the paper

The objective is to determine if multiple regression models of unit hydel and

thermo electric water use have the potential

To identify significant determinants of total hydel and thermo electric water withdrawals across selected region wise power plants in AP using aggregated category wise water use estimates.

To estimate the future water withdrawals for hydel and thermal electricity generation plants expressed as cubic meters per second. (Cumecs) and cubic meters using the growth rate phenomenon.

The types of data used for estimation are monthly water withdrawals data (For surface fresh water resources)

Region level models for hydro and thermo electric water withdrawals

The potential dependent and independent variables for water withdrawals are identified for estimation purpose. Regional level data for thermal and hydel water withdrawals are more accurate data. The underlying reason being water withdrawals are usually metered.

Dependent Variable: Total Hydel Water Withdrawals

     Total Thermal Water Withdrawals

Independent Variables of Hydel Power Plant:

(a) Reservoir levels, (b) Inflows, (c) Storage capacity, (d) Evaporation losses, (e) Tail water level and (f) Gross Head

Independent Variables of Thermal Power Plant:

(a) Demineralised water, (b) Boiler Feedback, (c) Condenser Cooling (d) Ash disposal, (e) Others include colony domestic, drinking, sanitation, fire fighting, back wash filter, (f) Installed generation capacity, (g) Actual electric energy production (h) Total no. of cooling towers, (i) Water temperatures in summer, rainy and winter.

Multiple Regression analyses were performed using the data related to category wise water use in power plant, generating facility and weather conditions from month wise 1995-96 to 2008-09 data in respective thermal and hydel power plants. The effect of variables such as quantities of water used exclusively for the production of electricity i.e. Boiler feed, Demineralised water, Condenser cooling, Ash Disposal, colony domestic (Drinking, Sanitation, Fire Fighting, Back wash filter ), installed capacity generation, number of cooling towers, cooling temperature and electric energy generation on total water withdrawals of thermal power plants are explicitly analyzed. In addition to this, the effect of variables such as reservoir elevation, storage capacity, tail water level, evaporation losses, inflows, gross head, actual generation on total hydel withdrawals have also been looked in to. This paper explores the structure of power plant level aggregated water use data based on corresponding and routinely collected economic and climatic data. The purpose of this enquiry is to determine if multiple regression models have the potential to explain the temporal and climatic variability across various thermal and hydel power plants in Andhra Pradesh using aggregated water use estimates and most importantly to identify significant determinants of total water withdrawals of thermal and hydel power plants. The statistical models examined here are derived using data estimates of total water withdrawals for hydel and thermo electric power use.

Specification of Mathematical Model

WHEim = a +∑ bj Xj

                    j

Where WHEim  = Fresh water withdrawals for Hydel Electric Energy within region wise i during particular months m in a year.

     Xj is a set of explanatory variables. (Mentioned above)

WTEim = a +∑ bj Xj

                    j

WTEim = Fresh water withdrawals for Thermal Electric Energy within region wise i during particular months m in a year.

      Xj is a set of explanatory variables. (Mentioned above Coefficients a and bj can be estimated using multiple regression model.

Specification of the Econometric Model:

In Linear forms, these equations can be estimated as follows

Yt = B1+B2X2+B3X3+B4X4+B5X5+B6X6+B7X7+ µ

Model: 1 WTEim = B1+B2 CT+B3DB+B4CD+B5AS+B6WT+B7AG+µ ……… (1)

Where, WTEim = Water withdrawals for thermal electric energy in region i for particular months m.

CT = Condenser cooling (with Cooling Towers), DB = Demineralized water and Boiler Feed

CD = Colony Domestic, AS = Ash Slurries, WT= Water Temperature, AG= Actual generation

µ= random error term

Condenser Cooling: Water required for cooling hot turbines and condensers

Demineralized Water:  Water that is, free of minerals and salts. Water runs through active resin beds to remove metallic ions and filtered through sub micron filter to remove suspended impurities.

Colony Domestic: Water that is used for the purpose of colony maintenance, drinking purpose and plantation.

Ash Slurries: As coal burns, it produces carbon –di-oxide, sulphur –di-oxide and nitrogen oxides. These gases together with lighter ash are called fly ash. The electro static precipitators remove all the fly ash and are mixed with water to make in to ash slurries.

Water temperature: Recording the temperature of water during summer, rainy and winter seasons.

Actual Generation: The generation of electricity that is actually generated apart from installed generation.

Model 2: WHEim = B1+B2 RE+B3SC+B4 TW+B5GH+B6WT+B7AG+µ ……. (2)

Where WHEim= Water withdrawals for hydel electric energy in region i for particular months m.

RE = Reservoir Elevation, SC= Storage Capacity ,TW= Tail water level, El= Evaporation losses, GH= Gross Head, WT= Water Temperature, AG= Actual Generation,µ= random error term

Reservoir Elevation: This is defined as the foot of the dam. i.e. the level from which the reservoir storage level and the height of the dam are measured.

Storage Capacity: This corresponds to the flood level usually designated as the upper limit of the normal operational range, above which the spill gates come in to operation

Tail water Level:  Water immediately below the power plant. Tail water elevation refers to the level that water which can rise as discharges increase. It is measured in the feet above sea level.  1 foot = 0.305 meters.

Inflows: The inflow may be monsoonal rains or lakes, rivers. The average volume of incoming water, in unit period of time.

Evaporation Losses: Conversion of liquid to vapor state by latent heat. Water gets saturated in the form of vapor due to rise in water temperature.

Discharge: Volume of water released from power dam at a given time measured as cubic feet per second.

Gross Head: A dam’s maximum allowed vertical distance between upper stream’s surface water fore bay elevation and the down stream’s surface water (tail water) elevation at the tail race for reaction wheel dams.

Actual Generation: The amount of electricity actually generated apart from installed generation.

The collection of data includes a monthly time series data analysis during the period (1995-96 to 2008-09). Analysis of hydel and thermal electric water use data in the existing power plants clearly indicates that there is wide variability in unitary thermal and hydel electric water use within the system. The multi- variate regression  procedures were used to identify the significant determinants  of thermal and hydel water withdrawals in various power plants i.e. five hydel and four thermal power plants. The unit variability of unit water usage indicates that there is significant potential for water conservation in existing hydel and thermal electric power plants.

3.0 Approach and Methodology

 The study includes three main components. (a) A series of site visits and interviews with power plant personnel. (b) Field surveys of selected hydel and thermal power plants of Andhra Pradesh (c) The multiple regression analysis of power generation data and other associated information.

Summary of site visits: Site visits for selected five hydel namely Nagarjuna Sagar Main Power House, Nagarjuna Sagar Left Canal Power House, Nagarjuna Sagar Right Canal Power House, Srisailam Left canal power house and Srisailam right Canal Power House and four thermal namely Rayalaseema Thermal Power Plant, Kothagudaem Thermal Power Station O & M, Kothagudaem Thermal Power Station Stage V and Narla Tata Rao Thermal Power Plant have been made to assess the overall performance scenario of power plants and also to examine the extent of water irregularities .Appraisal of Power Plant Survey:  The research estimates of hydel and thermal Electric Energy water withdrawals are based upon the authenticated sources of data provided by respective hydel and thermal power plants of Andhra Pradesh Generation Corporation of India Limited. In order to transparently clarify the way that power generation officials responded to this kind of field survey in practice and to solicit information from them on factors responsible for water use at power generation facilities, site visits have been taken up.  At various Power plants several personal interviews with power plant officers helped to identify the types of onsite water uses, the measurement of these uses and provision of information on various types of cooling systems and water use procedures employed by hydel and thermal electric energy generation facilities.

The purpose of conducting a series of personal interviews with power plant officials can be listed as follows:

(a)    Scrutinize and examine the power generation water use and water withdrawals from intake (surface water) to discharge in various types of facilities.

(b)   Observing the fact that all the water with drawals (hydel and thermal) are metered.

(c)    Detailed analysis about important onsite uses of water and its significant determinants

(d)      To obtain feedback on the cooling system level of water use in power stations.

Multiple Regression Models of Water Use

The principal sources of data used in the multi variate analyses of thermal and hydel power plants are most accurate and provides a fairly comprehensive review of plant characteristics, power generation and water withdrawal details. The data in electronic format and in official records was available for the years 1996-97 to 2008-09. The weather data i.e. especially related to water temperatures during summer, rainy and winter was collected in order to examine the influence of it on total thermal and hydel water withdrawals.

At the end it can be concluded that the site visits and field surveys helped to identify important concerns about water measurement and use at thermal and hydel electric power plants. Added to this, these factors have received attention in the development of models to describe hydro and thermal electric water use. All the above mentioned information proved very much useful in the design of data analysis that was used to develop water use bench marks.

4.0 RESULTS AND DISCUSSION: ESTIMATION AND INTERPRETATION OF MODEL SPECIFICATIONS

Hydel based Electric Energy Power Plants

Model Specification I Nagarjuna Sagar Main Power House

 (Appendix table: A1)

In model 1 the estimated regression equation for total hydel water withdrawals is in the linear form as follows:

*              * *                          *

WHE = -146.238-0.080RE-0.258SC+0.350TW+0.133GH+50.67AG

                                               (-3.96)         (3.144)                      (119.87)

N= 154, R2 =0.99, f= 5543.05

  • The estimated equation indicates that the total hydel water withdrawals are inelastic with respect to storage capacity. This kind of negative relationship indicates that the hydel water withdrawals are somewhat in responsive to changes in the storage capacity. The coefficients are statistically significant at 1 % level.
  • The total hydel water withdrawals are elastic with tail water level and actual generation that hold a positive relationship. The coefficients are statistically significant at 5 % and 1 % level.
  • The t-ratio of regression coefficients is highly significant for three independent variables namely SC, TW and AG. As the t ratio value is greater than 2.58 indicates that the relation between dependent variable and independent variables observed in the sample holds good.
  • The t- ratio of regression coefficient is not at all significant for other independent variables such as reservoir elevation and gross feet, as the t- value is very small.
  • The R2 (coefficient of determination) is 0.99. It means that the independent variables tail water level, actual generation and storage capacity can explain 99 percent of variation in the dependent variable (WD) and remaining 1 percent variation is unexplained by the model. As R2 is very high, the estimated equation is considered as an equation of very good fit.
  • The overall model is statistically significant as f value is higher and more significant at 1% level. This clearly indicates that the regressors are significantly associated with dependent variable.

Model SpecificationII Nagarjuna Sagar Left Canal Power House

         (Appendix Table: A2)

*                                 *            *                    *

WHE = 1660.770-3.516RE-21.705SC+9.653TW+491.286AG+0.130EL

            (3.314)                       (4.16)        (3.84)         (15.67)

 N= 166, R2= 0.78, f = 116.22

  • The estimated regression coefficients indicate that the best independent that have significant effect are storage capacity and actual generation with significant levels at 1 % for each of independent variables.
  • The t-ratio of regression coefficients is highly significant with two independent variables namely storage capacity and actual generation. As t ratio value is greater than 2.58, it indicates that the relation between Hydel Water withdrawal and independent (SC) and (AG) observed in the sample holds good.
  • The R2 is 0.78. It means that the independent variables SC and AG can explain 78 percent variation in the dependent variable and the remaining 22 % variation is unexplained by the model. The estimated equation is considered as an equation of very good fit.
  • The overall model is statistically significant as f value is higher (116.22) and more significant at 1 % level. This indicates that the regressors SC and AG are significantly associated with dependent variable.

Model Specification III Nagarjuna Sagar Right Canal Power House 

         (Appendix Table: A3)

             *                                      *                                                     *

WHE = 6133.252+0.628 RL-58.029 SC+0.414EL+37.493TW+486.057 AG

          (7.314)                        (6.063)                                          (16.232)

N= 166, R2= 0.78, f value = 116.22

  • The estimated regression coefficients indicate that the best independent variables that have significant effect are storage capacity and actual generation with significant levels at 1 % for each of independent variables.
  • The t-ratio of regression coefficients is highly significant with two independent variables namely storage capacity and actual generation. The relation between water withdrawals and Storage capacity and actual generation in the sample holds good as the t-value is greater than 2.58.
  • The t-ratio of regression coefficients is not at all significant for other independent variables such as reservoir level, storage capacity and evaporation losses.
  • The R2 is 0.78. It means that the independent variables SC and AG can explain 78 % variation in the dependent variable and remaining 22 % variation is unexplained by the model. The estimated equation is considered as the equation of very good fit.
  • The overall model is statistically significant as f value is higher (116.22) and more significant at 1 % level. This indicates that the regressors are significantly associated with dependent variable (WD)

Model Specification IV Srisailam Left Bank Power House

                  (Appendix Table: A4)

                                                                *                          *

WHE = -2243.501-0.766RE+1.195SC+57.47AG+0.592EL+4.24TW+0.000IF

                              (-2.27)                         (18.81)                     (2.69)

N= 58   , R2= 0.96, f value = 221.872

  • The estimated regression coefficients indicate that the best independent variables that have significant effect are actual generation and tail water level with significant levels at 1 % and 10 % for independent variables.
  • The t-ratio of regression coefficients is highly significant with three independent variables namely reservoir elevation, actual generation and tail water level. The t-ratio value is greater than 1.96 value for reservoir level and greater than 2.58 value for actual generation and tail water level. This indicates that the relation between WD and independent variables AG and reservoir elevation observed in the sample holds good.
  • The t- ratio of regression coefficients is not at all significant for other independent variables such as evaporation losses and inflows.
  • The R2 is 0.96. It means that the independent variables reservoir level, actual generation and tail water level can explain 96 % of variation in the dependent variable and remaining 4% is unexplained by the model. Thus the estimated regression coefficient is considered as an equation of very good fit.
  • The overall model is statistically significant as f value is higher (221.872) and more significant at 1 % level. This indicates that the regressors AG and TW are significantly associated with dependent variable. (WD)

 

Model Specification V Srisailam Right Bank Power House

                   (Appendix Table: A5)

                 *                        *        *

Y = -7630.380-1.78RE+0SC+56AG+0.051EL+0.627TW+0.289GH

              (-4.199)             (-4.3)  (122.65)

  N= 138    , R2    = 0.99 and f value = 4.59

  • The estimated regression coefficients indicate that the best independent variables that have a significant effect are storage capacity and actual generation with significant levels at 1 % level each of independent variable.
  • The t-ratio of regression coefficients is highly significant with two independent variables namely storage capacity and actual generation. The t- ratio value is greater than 2.58 for SC and AG that indicates that the relation between WD and independent variables SC and AG holds good.
  • The t- ratios of regression coefficients is not at all significant for other independent variables such as evaporation losses, tail water level and gross head.
  • The R2 is 0.99. It means that the independent variables such as storage capacity and actual generation can explain 99 % variation in the dependent variable and remaining 1 % is unexplained by the model. Thus the estimated regression coefficient is considered as an equation of very good fit.
  • The overall relationship was statistically significant as f value is 4.59 and more significant at 1 % level. This indicates that the regressors SC and AG are significantly associated with WD.

Thermal based Electric Energy Power Plants

Model Specification VI Kothagudaem Thermal Power Plant O &M

      (Appendix Table: A6)

                                                     *                                                     *   

Y= -787978.047 + 1.021CC-2.130DB-12.190CD+146.699 OT +1.152 AD+4616.497 CT-817.112AG

                              (3.259)                                                        (3.841)

N= 84, R2 = 0.55, f value = 13.710

  • The estimated regression coefficients indicate that the best explanatory (independent) variables with significant effect on quantity of water with drawals per Kilowatt hour are condenser cooling with cooling towers (Natural Draft cooling system) and ash disposal with significant levels of 5 % and 1 % level.
  • The estimated equation indicates that the total thermal water withdrawals are elastic with respect to condenser cooling and ash disposal. This kind of positive relationship indicates that the thermal water withdrawals are responsive to changes in condenser cooling and ash disposal.
  • The t-ratio of regression coefficients have expected signs and is highly statistically significant for two independent variables namely condenser cooling with Natural Draft CTs and Ash Disposal. The t ratio value is greater than 2.58.
  • This indicates that the importance of technological alternatives (i.e. Condenser Cooling with natural draft CTs) is the significant determinant of water withdrawals. Next ash disposal takes second place as significant determinant of total thermal water withdrawals.
  • The t-ratio of regression coefficient is not at all significant for other independent variables such as DM and Boiler feedback, colony domestic, others (Drinking, Sanitation, Fire fighting, Back Wash Filter), cooling temperature and actual  electric energy generation.
  • The R2 is 0.55. It means that the independent variables such as condenser cooling and ash disposal can explain 55 % of variation in the dependent variable and remaining 45 % variation is unexplained by the model. The estimated equation is considered as good fit.
  • The overall model is statistically significant as f value is higher (13.710) and highly significant at 1 % level. This indicates that the regressor’s condenser cooling with Natural Draft CT’s and Ash Disposal are significantly associated with dependent variable WDs.

Model Specification VII Kothagudaem Thermal Power Station Stage V

          (Appendix Table: A7)

                                   *                *

Y= 98233.879+0.873 CC+1.186AD+0.111 DB-1688.373CT+32.019 AG

                               (20.91)       (15.247)

              N= 83, R2= 0.97, f value = 706.164

  • The estimated regression coefficients indicate that the best independent variables with significant effect on quantity of WD per million tonnes are Condenser cooling and ash disposal with significant levels at 1% level each.
  • The t-ratio of regression coefficients have expected signs and is highly statistically significant for two independent variables namely Condenser cooling with natural draft CT’s and Actual Generation. The t- ratio value is greater than 2.58. Here the significant determinant of WD’s are CC with natural draft CT’s. Next comes ash disposal as second good determinant.
  • The t- ratio of regression coefficient is not at all significant for other independent variables such as BF & DM, cooling temperature and Energy Generation.
  • The R2 is 0.97. It means that independent variables such as CC and AD can explain 97 % of variation in the dependent variable (Water withdrawal) and remaining 3 % variation are unexplained by the model. Thus the estimated equation is considered as an equation of very good fit.
  • The overall model is statistically significant as f value is higher (706.164) and highly significant at 1 % level. This indicates that the regressors condenser cooling with NDCT’s and Ash Disposal are significantly associated with Water withdrawal’s (Dependent Variable)

Model Specification VIII Rayalaseema Thermal Power Plant

          (Appendix Table: A8)

                           *

Y = 10334.674+0.745 CC+8.725 BF+0.847 AS-4.143 AG-145.408 CT

     (2.677)                (3.007)

N= 35, R2 = 0.87 and f value = 33.145

  • The estimated regression coefficients indicate that the best independent variables with significant effect on quantity of Water Withdrawal Condenser cooling with significant levels at 5%.
  • The t-ratio of regression coefficients have expected signs and is highly statistically significant for one independent variables namely Condenser cooling with natural draft CT’s .The t- ratio value is greater than 2.58. Here the significant determinant of WD’s are CC with natural draft CT’s.
  • The t- ratio of regression coefficient is not at all significant for other independent variables such as BF & DM, Ash Disposal cooling temperature and Energy Generation.
  • The R2 is 0.87. It means that independent variables such as CC can explain 87 % of variation in the dependent variable (WD) and remaining 13 % variation are unexplained by the model. Thus the estimated equation is considered as an equation of very good fit.
  • The over all model is statistically significant as f value is higher (33.145) and highly significant at 1 % level. This indicates that the regressors condenser cooling with NDCT’s are significantly associated with WD’s (Dependent Variable)

Model Specification IX Narla Tata Rao Thermal Power Plant

                     (Appendix Table: A9)

                          *                               *   

Y = 139993.709 + 1.002CC -0.863CD + 1.031 AS- 373.483 CT- 56.843 AG

                                    (1277.966)                 (19.88)

N=      R2 = 1.00, f value = 907849.564

  • The estimated regression coefficients indicate that the best explanatory (independent) variables with significant effect on quantity of water with drawals per Kilowatt hour are condenser cooling with cooling towers ( Induced l Draft cooling system) and ash disposal with significant levels of 1 % and 1 % level.
  • The estimated equation indicates that the total thermal water withdrawals are elastic with respect to condenser cooling and ash disposal. This kind of positive relationship indicates that the thermal water withdrawals are responsive to changes in condenser cooling and ash disposal.
  • The t-ratio of regression coefficients have expected signs and is highly statistically significant for two independent variables namely condenser cooling with Induced Draft CTs and Ash Disposal. The t ratio value is greater than 2.58.
  • This indicates that the importance of technological alternatives (i.e. Condenser Cooling with Induced draft CTs) is the significant determinant of water withdrawals. Next ash disposal takes second place as significant determinant of total thermal water withdrawals.
  • The t-ratio of regression coefficient is not at all significant for other independent variables such as, colony domestic, cooling temperature and actual electric energy generation.
  • The R2 is 1.00. It means that the independent variables such as condenser cooling and ash disposal can explain 100 % of variation in the dependent variable. This shows that we have accounted for almost all the variability with the variables specified in the model. The estimated equation is considered as very good fit.
  • The overall model is statistically significant as f value is higher (907849.564) and highly significant at 1 % level. This indicates that the regressor’s condenser cooling with Induced Draft CT’s and Ash Disposal are significantly associated with dependent variable WDs.

The pertinent conclusion of this study is there may be significant potential for water conservation after having identified the significant determinants of total thermal water withdrawals i.e. condenser cooling and ash disposal. The choice of explanatory variable for eg: Induced draft and natural draft technological innovation was able to address the significant changes of water withdrawals.

5.0  CONCLUSION AND RECOMMENDATION

The thermal and hydel power plants sustenance is very much under stake due to major reason of fresh water shortages in power generation. The most sophisticated technology followed in advanced countries namely Concentrated solar thermal power integrated with combined system of conventional steam plant, Fresnel Solar Collector and  Solar Flower Tower can be used as a replica even in developing countries like India though not cost effective in order to counteract the water shortage problem

REFERENCES

Benedy Kt Dziegielewski, Thomas Bik (August 2006), “ Water Use Bench Marks for Thermo Electric Power Generation” Project report, Southern Illinois University, United States

Geological Survey, 2004, USGS National Competitive Grants Program.

Gbadebo Oladosu, Stan Hadley, Vogt D.P. and Wilbanks J.J. (September, 2006), “Electricity

Generation and Water Related Constraints: An Empirical Analysis of Four South Eastern

States”, Oak Ridge National Laboratory, Oak Ridge Tennessee.

Sitanon Jesdapipat and Siriporon Kiratikarnkul, “ Surrogate pricing of water: The Case of micro Hydro –Electricity Co-operatives in Northern Thailand”.

 Xiaoying Yang & Benedy Kt Dziegielewski (February,2007), “ Water Use by Thermo Electric power plants in the United states” Journal of the American Water Resources Association, Vol 43, No.1.

“Estimating Water Use in United States: A new Paradigm for National Use Water Use Information Programme”(2002),

http://books.nap.edu/openbook.php?record_id=10484&page=95

 

Data Sources

Annual Report on the Working of SEBs and Electricity Departments, Planning Commission, Various Issues

Administrative Reports of Andhra Pradesh Generation Corporation of India Limited (APGENCO),Various Issues. Field Level data of selected thermal and hydel power stations authenticated  by APGENCO.

Econometric Models  to Water Use Estimation in Power Plants: An Experiential Analysis

 PERINI PRAVEENA SRI

Department of Social Science, Faculty of Economics

 Ethiopia, Aksum University

ABSTRACT

The purpose of this paper is to examine water use estimation in hydel and thermal electric power plants in selected regions i.e. Coastal, Rayalaseema and Telangana regions of Andhra Pradesh. The study primarily focuses on the realistic fundamental premise that thermal electric and hydro electric energy generation is responsible for the largest monthly volume of water withdrawals in four seasons (i.e. summer, rainy, winter and post monsoon season) of a year. These enormous water withdrawals by these hydel and thermal power plants can have significant influence on local surface water resources. However there are very few studies of determinants of water use in hydel and thermal electric generation. Analysis of hydel and thermal electric water use data in the existing power plants clearly indicates that there is wide variability in unitary hydel and thermal electric water use within the system. The multivariate regression procedures were used to identify the significant determinants of thermal and hydel water withdrawals in various power plants i.e. five hydel and four thermal power plants. The estimated regression coefficients indicate that the best explanatory variables for the total quantity of hydel water withdrawals are storage capacity, tail water level and actual generation and thermal water withdrawals are condenser cooling and ash disposal. The unit variability of unit water usage indicates that there is significant potential for water conservation in existing power plants.

Keywords:

Thermal water withdrawals, hydel water withdrawals, storage capacity, tail water level, actual generation, condenser cooling and ash disposal.

  • INTRODUCTION

Water has become a growing source of tension especially in power sector in many parts of the World. For India hydro and thermal power projects are vital to fill in the serious electric energy shortfalls that crimp its economy. About 40 percent of India’s population is off the power grid and due to this the welfare of the economy was badly affected. The main stumbling block for this kind of worse situation are a genuine water shortage problem in India and the country’s inability to properly manage large quantities of water during rainy season has made matters worse, exposing it to any small variation in rainfall or river flow. Though the country has invested heavily on nuclear power to generate 30,000 MW and $ 19 billion to produce factories of major thermal, hydro and nuclear power stations, the electric energy shortages were very much prevalent in most parts of the country. For this the first and foremost thing is to judiciously manage the vital resource “water”. The country also planned for setting up of 20,000 MW solar power by 2020. The Government of India has an ambitious mission of Power for All By 2012. This would require an installed generation capacity of atleast 20,000 MW by 2012 from the present level of 144,564.97 MU. However the power requirement will double by 2020 to 400,000 MW. How India is able to meet this target with the on-going water shortage plight in Electricity Generation Industry is a matter of great concern. However the Electricity Generation Industry strategy should primarily focus on this invisible culprit “Water” causing huge generation losses through better water efficiency techniques and lay emphasis on technology up gradation and massive utilization of renewable sources of energy.

The purpose of this paper was to examine water use estimation at hydel and thermal electric power plants in selected regions i.e. Coastal, Rayalaseema and Telangana regions of Andhra Pradesh. The study primarily focuses on the realistic fundamental premise that thermal electric and hydro electric energy generation is responsible for the largest monthly volume of water withdrawals in four seasons (i.e. summer, rainy, winter and post monsoon season) of a year. These enormous water withdrawals by these hydel and thermal power plants can have significant influence on local surface water resources. Water use at the power station level (by fuel type) can be estimated indirectly by using multiple regression analysis. In regression models, water use relationships are expressed in the form of mathematical equations, showing water use as a mathematical function of one or more independent (explanatory) variables. The mathematical form (eg. Linear, multiplicative and exponential) and the selection of the Right hand side (RHS) or independent variables depend on the category and on aggregation of water demand represented by Left Hand side (LHS) or dependent variable.

2.0  THEORETICAL AND CONCEPTUAL REVIEW OF LITERATURE: DIFFERENT APPROACHES OF WATER USE ESTIMATION

The various studies relating to water demand for thermal power plants and its significant determinants are reviewed for explicit understanding of thermal electric energy water use. Cootner, Paul and George O Golf (1965) have build upon a systematic model for estimating water demand in conventional steam electric utility industry. They have regarded   water as a common factor input along with fuel. Here

TWD= f (Qf, Cw, EHe, CWH )

Where in TWD = Thermal water withdrawal demand,    Qf = Quantity and cost of fuel,   Cw = Cost of water,  EHe = Economics of heat exchange and recycle and  CWH= other costs of thermal power plant associated with the disposal of waste heat.

In other words the quantity of the fresh water withdrawals depends upon the above mentioned factors. In another study Wollman and Bonem (1971) found that the quantity of fresh water withdrawals for steam electric power generation depends upon (1) Thermal efficiency (with higher thermal efficiency less heat will be dissipated. Due to this smaller amount of cooling water are needed) (2) The extent to which sea or brackish water can substitute for fresh water (3) The rate of recirculation. Recirculation is a function of price of water availability. Young and Thompson (1973) in their study identified three factors that affect water use   in thermal electric energy generation. They can be listed as water pricing, change in generation, technology, price of electricity, price of substitutes used in electricity i.e. oil and gas, population and level of general economic activity. The other factors include waste and heat discharge to water and the changes in cooling technologies.

Gleick (1993) in his study reviewed the water requirement of electric energy. Taking as base of earlier studies, he estimated the consumptive water use in Electricity Generation Industry using different technologies. The system efficiency for conventional coal combustion (Once through Cooling Towers), natural gas combustion (Once Through Cooling Towers) and nuclear generation (CTs) stood at 35 percent, 36 percent and 40 percent. The estimates specifies that with the help of Once Through Cooling Technologies, the average consumptive use ranges from  1.2 m3/MWH  in case of conventional coal, for oil and natural gas consumption the average consumption use is less by 1.1 m3/MWH  , where as with cooling towers it was 2.6 m3/MWH. For nuclear power generation the average consumptive use of water with the aid of CTs was more that stood at 3.2 m3/MWH. There is a need for use of high efficient technology in cooling towers for water conservation. Electric Power Research Institute 2002, estimated the evaporation water loss from recirculating towers i.e., roughly 480 gal/MWH for a coal fired power plant. Mortenson, 2006 in his study have provided a technological breakthrough i.e. small scale tests of one technology (that uses cross-currents of ambient air for condensation) as a counteracting measure for these evaporation losses. By this technology the evaporation losses can be reduced to about 60-140 gallons/MWH (that can be applied even to hotter climates). In value terms, EPRI 2004 notified that the savings from reduction of evaporation losses will be $870,000.

There are very few studies of determinants of water use in hydel and thermal electric generation. The literature available relating to water use estimations is very few. Water use experts have to opt for estimation methods for many of the water withdrawals classes i.e. domestic, agriculture and industry because of the true fact that many legal, financial and political constraints limit for getting the hard data. For instance water withdrawals in domestic and live stock water use are usually estimated by multiplying population figures by coefficient. In case of agricultural sector, the irrigation water withdrawals are often estimated by multiplying the acreage by assumed water requirements of the crop rather than by measuring actual water pumped and applied.

Snavely (1986), explicitly details the water use data collection programs and maintaining regional data base of the Great Lakes St. Lawrence River Basin States.  The results are very much appealing indicating as how broad the range of estimation coefficient for water use can be within a geographic area with similar water availability. Mostly the estimated coefficients used for agriculture and domestic use vary by a factor of 10. The econometric studies relating to water use estimation in public supply use and thermo electric power use have the potential to explain temporal and geographic variability across USA. The aggregated water use estimates were provided by the National water Use Information Programme. These estimates primarily focus on measuring total water withdrawals (that includes annual extraction of fresh  surface water and ground water) for the period 1980-1985 to 1990-1995 in each of 48 states of USA for public supply water withdrawals , domestic, commercial, irrigation and live stock. The saline water withdrawals were estimated for industrial, mining and thermal electric categories. The public supply water withdrawals are estimated within geographical area i during year t using a set of explanatory variables that includes air temperature, precipitation, price of water, median household income and others.

Cohn et.al (1989) and Christensen et.al (2000) have used examples of such kind by using statistical techniques. The shorter time period used has the advantage of highlighting the recent trend of declining water use since the 1980 compilation. The mean withdrawal for the period (1980-1995) clearly indicates that it was 183.7 gallons per capita per day. This average water withdrawals would decrease by 7.8 gpcd, if the state GDP per capita increased by $1000. The inclusion of this state GDP captures the effects of relative volume of non residential uses (along with their ability to pay for water). The model also indicates that US was able to withdraw 17.2 gpcd, because of its surface water rights in comparison with riparian law states. The inclusion of temperature and precipitation variables also clearly shows the effect of weather on water withdrawals and can be used in normalizing water use for weather. The model indicates that average per capita demand for water in the state decreases by 2.1gallons per day per one inch increase in precipitation and vice versa i.e. water demand increases during summer months. i.e. average temperature.

Billings and Jones, 1996 employed indirect estimation of water use in urban and municipal planning using coefficient based methods. It calculates water use for commercial, residential and industrial categories. They assume constant water use rates and ignores trends i.e. changes in water use due conservation, technological change or economic forces. Mullusky et.al (1995), Wood Well and Desjardin (1995) for Washington D.C. metropolitan area have employed this water use coefficients for three categories of water users i.e. simple family homes, multiple family homes and employment water use.   Another approach of estimating National Water Use in USA includes Stratified random sampling followed by Census of Agriculture. They employed various methods of collecting data such as telephone, mail survey instruments to develop detailed country level estimates of national agricultural activities. According to Hutson et.al 2004 the thermo electric power water use refers to water that is removed from the ground or diverted from surface water sources (that includes fresh water and saline water) for use in the process of generating electricity with steam driven turbine generators. In this paper the term water withdrawals is used more often precisely. The term designates the amount of water that is extracted from natural water sources. Again it is essential to demarcate between water withdrawals and discharge as consumptive use. Water consumption is the quantity of water with drawn that is evaporated, transpired, incorporated in to crops, consumed by human or live stock.

At the end it can be said that different authors have notified different methods for estimation of water use for various uses of the economy. This paper employs multivariate models of water use for estimation of significant determinants of thermal and hydel water withdrawals.

Objectives of the paper

The objective is to determine if multiple regression models of unit hydel and

thermo electric water use have the potential

To identify significant determinants of total hydel and thermo electric water withdrawals across selected region wise power plants in AP using aggregated category wise water use estimates.

To estimate the future water withdrawals for hydel and thermal electricity generation plants expressed as cubic meters per second. (Cumecs) and cubic meters using the growth rate phenomenon.

The types of data used for estimation are monthly water withdrawals data (For surface fresh water resources)

Region level models for hydro and thermo electric water withdrawals

The potential dependent and independent variables for water withdrawals are identified for estimation purpose. Regional level data for thermal and hydel water withdrawals are more accurate data. The underlying reason being water withdrawals are usually metered.

Dependent Variable: Total Hydel Water Withdrawals

     Total Thermal Water Withdrawals

Independent Variables of Hydel Power Plant:

(a) Reservoir levels, (b) Inflows, (c) Storage capacity, (d) Evaporation losses, (e) Tail water level and (f) Gross Head

Independent Variables of Thermal Power Plant:

(a) Demineralised water, (b) Boiler Feedback, (c) Condenser Cooling (d) Ash disposal, (e) Others include colony domestic, drinking, sanitation, fire fighting, back wash filter, (f) Installed generation capacity, (g) Actual electric energy production (h) Total no. of cooling towers, (i) Water temperatures in summer, rainy and winter.

Multiple Regression analyses were performed using the data related to category wise water use in power plant, generating facility and weather conditions from month wise 1995-96 to 2008-09 data in respective thermal and hydel power plants. The effect of variables such as quantities of water used exclusively for the production of electricity i.e. Boiler feed, Demineralised water, Condenser cooling, Ash Disposal, colony domestic (Drinking, Sanitation, Fire Fighting, Back wash filter ), installed capacity generation, number of cooling towers, cooling temperature and electric energy generation on total water withdrawals of thermal power plants are explicitly analyzed. In addition to this, the effect of variables such as reservoir elevation, storage capacity, tail water level, evaporation losses, inflows, gross head, actual generation on total hydel withdrawals have also been looked in to. This paper explores the structure of power plant level aggregated water use data based on corresponding and routinely collected economic and climatic data. The purpose of this enquiry is to determine if multiple regression models have the potential to explain the temporal and climatic variability across various thermal and hydel power plants in Andhra Pradesh using aggregated water use estimates and most importantly to identify significant determinants of total water withdrawals of thermal and hydel power plants. The statistical models examined here are derived using data estimates of total water withdrawals for hydel and thermo electric power use.

Specification of Mathematical Model

WHEim = a +∑ bj Xj

                    j

Where WHEim  = Fresh water withdrawals for Hydel Electric Energy within region wise i during particular months m in a year.

     Xj is a set of explanatory variables. (Mentioned above)

WTEim = a +∑ bj Xj

                    j

WTEim = Fresh water withdrawals for Thermal Electric Energy within region wise i during particular months m in a year.

      Xj is a set of explanatory variables. (Mentioned above Coefficients a and bj can be estimated using multiple regression model.

Specification of the Econometric Model:

In Linear forms, these equations can be estimated as follows

Yt = B1+B2X2+B3X3+B4X4+B5X5+B6X6+B7X7+ µ

Model: 1 WTEim = B1+B2 CT+B3DB+B4CD+B5AS+B6WT+B7AG+µ ……… (1)

Where, WTEim = Water withdrawals for thermal electric energy in region i for particular months m.

CT = Condenser cooling (with Cooling Towers), DB = Demineralized water and Boiler Feed

CD = Colony Domestic, AS = Ash Slurries, WT= Water Temperature, AG= Actual generation

µ= random error term

Condenser Cooling: Water required for cooling hot turbines and condensers

Demineralized Water:  Water that is, free of minerals and salts. Water runs through active resin beds to remove metallic ions and filtered through sub micron filter to remove suspended impurities.

Colony Domestic: Water that is used for the purpose of colony maintenance, drinking purpose and plantation.

Ash Slurries: As coal burns, it produces carbon –di-oxide, sulphur –di-oxide and nitrogen oxides. These gases together with lighter ash are called fly ash. The electro static precipitators remove all the fly ash and are mixed with water to make in to ash slurries.

Water temperature: Recording the temperature of water during summer, rainy and winter seasons.

Actual Generation: The generation of electricity that is actually generated apart from installed generation.

Model 2: WHEim = B1+B2 RE+B3SC+B4 TW+B5GH+B6WT+B7AG+µ ……. (2)

Where WHEim= Water withdrawals for hydel electric energy in region i for particular months m.

RE = Reservoir Elevation, SC= Storage Capacity ,TW= Tail water level, El= Evaporation losses, GH= Gross Head, WT= Water Temperature, AG= Actual Generation,µ= random error term

Reservoir Elevation: This is defined as the foot of the dam. i.e. the level from which the reservoir storage level and the height of the dam are measured.

Storage Capacity: This corresponds to the flood level usually designated as the upper limit of the normal operational range, above which the spill gates come in to operation

Tail water Level:  Water immediately below the power plant. Tail water elevation refers to the level that water which can rise as discharges increase. It is measured in the feet above sea level.  1 foot = 0.305 meters.

Inflows: The inflow may be monsoonal rains or lakes, rivers. The average volume of incoming water, in unit period of time.

Evaporation Losses: Conversion of liquid to vapor state by latent heat. Water gets saturated in the form of vapor due to rise in water temperature.

Discharge: Volume of water released from power dam at a given time measured as cubic feet per second.

Gross Head: A dam’s maximum allowed vertical distance between upper stream’s surface water fore bay elevation and the down stream’s surface water (tail water) elevation at the tail race for reaction wheel dams.

Actual Generation: The amount of electricity actually generated apart from installed generation.

Selected power plants in three regions of Andhra Pradesh

Power Plant by

Fuel Type

Rayalaseema Region Telangana Region Coastal Region
Thermal Rayalaseema Thermal Power Plant .Kothagudaem Thermal Power Station  O & M

 

.Kothagudaem Thermal Power Station Stage V

 Narla Tata Rao Thermal Power Plant
Hydel Nagarjuna Sagar Main Power House

 

Nagarjuna Sagar Left Canal Power House

 

Nagarjuna Sagar Right Canal Power House

Srisailam Left canal power house

 

Srisailam right Canal Power House

 

 

The collection of data includes a monthly time series data analysis during the period (1995-96 to 2008-09). Analysis of hydel and thermal electric water use data in the existing power plants clearly indicates that there is wide variability in unitary thermal and hydel electric water use within the system. The multi- variate regression  procedures were used to identify the significant determinants  of thermal and hydel water withdrawals in various power plants i.e. five hydel and four thermal power plants. The unit variability of unit water usage indicates that there is significant potential for water conservation in existing hydel and thermal electric power plants.

3.0 Approach and Methodology

 The study includes three main components. (a) A series of site visits and interviews with power plant personnel. (b) Field surveys of selected hydel and thermal power plants of Andhra Pradesh (c) The multiple regression analysis of power generation data and other associated information.

Summary of site visits: Site visits for selected five hydel namely Nagarjuna Sagar Main Power House, Nagarjuna Sagar Left Canal Power House, Nagarjuna Sagar Right Canal Power House, Srisailam Left canal power house and Srisailam right Canal Power House and four thermal namely Rayalaseema Thermal Power Plant, Kothagudaem Thermal Power Station O & M, Kothagudaem Thermal Power Station Stage V and Narla Tata Rao Thermal Power Plant have been made to assess the overall performance scenario of power plants and also to examine the extent of water irregularities .Appraisal of Power Plant Survey:  The research estimates of hydel and thermal Electric Energy water withdrawals are based upon the authenticated sources of data provided by respective hydel and thermal power plants of Andhra Pradesh Generation Corporation of India Limited. In order to transparently clarify the way that power generation officials responded to this kind of field survey in practice and to solicit information from them on factors responsible for water use at power generation facilities, site visits have been taken up.  At various Power plants several personal interviews with power plant officers helped to identify the types of onsite water uses, the measurement of these uses and provision of information on various types of cooling systems and water use procedures employed by hydel and thermal electric energy generation facilities.

The purpose of conducting a series of personal interviews with power plant officials can be listed as follows:

(a)    Scrutinize and examine the power generation water use and water withdrawals from intake (surface water) to discharge in various types of facilities.

(b)   Observing the fact that all the water with drawals (hydel and thermal) are metered.

(c)    Detailed analysis about important onsite uses of water and its significant determinants

(d)      To obtain feedback on the cooling system level of water use in power stations.

Multiple Regression Models of Water Use

The principal sources of data used in the multi variate analyses of thermal and hydel power plants are most accurate and provides a fairly comprehensive review of plant characteristics, power generation and water withdrawal details. The data in electronic format and in official records was available for the years 1996-97 to 2008-09. The weather data i.e. especially related to water temperatures during summer, rainy and winter was collected in order to examine the influence of it on total thermal and hydel water withdrawals.

At the end it can be concluded that the site visits and field surveys helped to identify important concerns about water measurement and use at thermal and hydel electric power plants. Added to this, these factors have received attention in the development of models to describe hydro and thermal electric water use. All the above mentioned information proved very much useful in the design of data analysis that was used to develop water use bench marks.

4.0 RESULTS AND DISCUSSION: ESTIMATION AND INTERPRETATION OF MODEL SPECIFICATIONS

Hydel based Electric Energy Power Plants

Model Specification I Nagarjuna Sagar Main Power House

 (Appendix table: A1)

In model 1 the estimated regression equation for total hydel water withdrawals is in the linear form as follows:

*              * *                          *

WHE = -146.238-0.080RE-0.258SC+0.350TW+0.133GH+50.67AG

                                               (-3.96)         (3.144)                      (119.87)

N= 154, R2 =0.99, f= 5543.05

  • The estimated equation indicates that the total hydel water withdrawals are inelastic with respect to storage capacity. This kind of negative relationship indicates that the hydel water withdrawals are somewhat in responsive to changes in the storage capacity. The coefficients are statistically significant at 1 % level.
  • The total hydel water withdrawals are elastic with tail water level and actual generation that hold a positive relationship. The coefficients are statistically significant at 5 % and 1 % level.
  • The t-ratio of regression coefficients is highly significant for three independent variables namely SC, TW and AG. As the t ratio value is greater than 2.58 indicates that the relation between dependent variable and independent variables observed in the sample holds good.
  • The t- ratio of regression coefficient is not at all significant for other independent variables such as reservoir elevation and gross feet, as the t- value is very small.
  • The R2 (coefficient of determination) is 0.99. It means that the independent variables tail water level, actual generation and storage capacity can explain 99 percent of variation in the dependent variable (WD) and remaining 1 percent variation is unexplained by the model. As R2 is very high, the estimated equation is considered as an equation of very good fit.
  • The overall model is statistically significant as f value is higher and more significant at 1% level. This clearly indicates that the regressors are significantly associated with dependent variable.

Model SpecificationII Nagarjuna Sagar Left Canal Power House

         (Appendix Table: A2)

*                                 *            *                    *

WHE = 1660.770-3.516RE-21.705SC+9.653TW+491.286AG+0.130EL

            (3.314)                       (4.16)        (3.84)         (15.67)

 N= 166, R2= 0.78, f = 116.22

  • The estimated regression coefficients indicate that the best independent that have significant effect are storage capacity and actual generation with significant levels at 1 % for each of independent variables.
  • The t-ratio of regression coefficients is highly significant with two independent variables namely storage capacity and actual generation. As t ratio value is greater than 2.58, it indicates that the relation between Hydel Water withdrawal and independent (SC) and (AG) observed in the sample holds good.
  • The R2 is 0.78. It means that the independent variables SC and AG can explain 78 percent variation in the dependent variable and the remaining 22 % variation is unexplained by the model. The estimated equation is considered as an equation of very good fit.
  • The overall model is statistically significant as f value is higher (116.22) and more significant at 1 % level. This indicates that the regressors SC and AG are significantly associated with dependent variable.

Model Specification III Nagarjuna Sagar Right Canal Power House 

         (Appendix Table: A3)

             *                                      *                                                     *

WHE = 6133.252+0.628 RL-58.029 SC+0.414EL+37.493TW+486.057 AG

          (7.314)                        (6.063)                                          (16.232)

N= 166, R2= 0.78, f value = 116.22

  • The estimated regression coefficients indicate that the best independent variables that have significant effect are storage capacity and actual generation with significant levels at 1 % for each of independent variables.
  • The t-ratio of regression coefficients is highly significant with two independent variables namely storage capacity and actual generation. The relation between water withdrawals and Storage capacity and actual generation in the sample holds good as the t-value is greater than 2.58.
  • The t-ratio of regression coefficients is not at all significant for other independent variables such as reservoir level, storage capacity and evaporation losses.
  • The R2 is 0.78. It means that the independent variables SC and AG can explain 78 % variation in the dependent variable and remaining 22 % variation is unexplained by the model. The estimated equation is considered as the equation of very good fit.
  • The overall model is statistically significant as f value is higher (116.22) and more significant at 1 % level. This indicates that the regressors are significantly associated with dependent variable (WD)

Model Specification IV Srisailam Left Bank Power House

                  (Appendix Table: A4)

                                                                *                          *

WHE = -2243.501-0.766RE+1.195SC+57.47AG+0.592EL+4.24TW+0.000IF

                              (-2.27)                         (18.81)                     (2.69)

N= 58   , R2= 0.96, f value = 221.872

  • The estimated regression coefficients indicate that the best independent variables that have significant effect are actual generation and tail water level with significant levels at 1 % and 10 % for independent variables.
  • The t-ratio of regression coefficients is highly significant with three independent variables namely reservoir elevation, actual generation and tail water level. The t-ratio value is greater than 1.96 value for reservoir level and greater than 2.58 value for actual generation and tail water level. This indicates that the relation between WD and independent variables AG and reservoir elevation observed in the sample holds good.
  • The t- ratio of regression coefficients is not at all significant for other independent variables such as evaporation losses and inflows.
  • The R2 is 0.96. It means that the independent variables reservoir level, actual generation and tail water level can explain 96 % of variation in the dependent variable and remaining 4% is unexplained by the model. Thus the estimated regression coefficient is considered as an equation of very good fit.
  • The overall model is statistically significant as f value is higher (221.872) and more significant at 1 % level. This indicates that the regressors AG and TW are significantly associated with dependent variable. (WD)

 

Model Specification V Srisailam Right Bank Power House

                   (Appendix Table: A5)

                 *                        *        *

Y = -7630.380-1.78RE+0SC+56AG+0.051EL+0.627TW+0.289GH

              (-4.199)             (-4.3)  (122.65)

  N= 138    , R2    = 0.99 and f value = 4.59

  • The estimated regression coefficients indicate that the best independent variables that have a significant effect are storage capacity and actual generation with significant levels at 1 % level each of independent variable.
  • The t-ratio of regression coefficients is highly significant with two independent variables namely storage capacity and actual generation. The t- ratio value is greater than 2.58 for SC and AG that indicates that the relation between WD and independent variables SC and AG holds good.
  • The t- ratios of regression coefficients is not at all significant for other independent variables such as evaporation losses, tail water level and gross head.
  • The R2 is 0.99. It means that the independent variables such as storage capacity and actual generation can explain 99 % variation in the dependent variable and remaining 1 % is unexplained by the model. Thus the estimated regression coefficient is considered as an equation of very good fit.
  • The overall relationship was statistically significant as f value is 4.59 and more significant at 1 % level. This indicates that the regressors SC and AG are significantly associated with WD.

Thermal based Electric Energy Power Plants

Model Specification VI Kothagudaem Thermal Power Plant O &M

      (Appendix Table: A6)

                                                     *                                                     *   

Y= -787978.047 + 1.021CC-2.130DB-12.190CD+146.699 OT +1.152 AD+4616.497 CT-817.112AG

                              (3.259)                                                        (3.841)

N= 84, R2 = 0.55, f value = 13.710

  • The estimated regression coefficients indicate that the best explanatory (independent) variables with significant effect on quantity of water with drawals per Kilowatt hour are condenser cooling with cooling towers (Natural Draft cooling system) and ash disposal with significant levels of 5 % and 1 % level.
  • The estimated equation indicates that the total thermal water withdrawals are elastic with respect to condenser cooling and ash disposal. This kind of positive relationship indicates that the thermal water withdrawals are responsive to changes in condenser cooling and ash disposal.
  • The t-ratio of regression coefficients have expected signs and is highly statistically significant for two independent variables namely condenser cooling with Natural Draft CTs and Ash Disposal. The t ratio value is greater than 2.58.
  • This indicates that the importance of technological alternatives (i.e. Condenser Cooling with natural draft CTs) is the significant determinant of water withdrawals. Next ash disposal takes second place as significant determinant of total thermal water withdrawals.
  • The t-ratio of regression coefficient is not at all significant for other independent variables such as DM and Boiler feedback, colony domestic, others (Drinking, Sanitation, Fire fighting, Back Wash Filter), cooling temperature and actual  electric energy generation.
  • The R2 is 0.55. It means that the independent variables such as condenser cooling and ash disposal can explain 55 % of variation in the dependent variable and remaining 45 % variation is unexplained by the model. The estimated equation is considered as good fit.
  • The overall model is statistically significant as f value is higher (13.710) and highly significant at 1 % level. This indicates that the regressor’s condenser cooling with Natural Draft CT’s and Ash Disposal are significantly associated with dependent variable WDs.

Model Specification VII Kothagudaem Thermal Power Station Stage V

          (Appendix Table: A7)

                                   *                *

Y= 98233.879+0.873 CC+1.186AD+0.111 DB-1688.373CT+32.019 AG

                               (20.91)       (15.247)

              N= 83, R2= 0.97, f value = 706.164

  • The estimated regression coefficients indicate that the best independent variables with significant effect on quantity of WD per million tonnes are Condenser cooling and ash disposal with significant levels at 1% level each.
  • The t-ratio of regression coefficients have expected signs and is highly statistically significant for two independent variables namely Condenser cooling with natural draft CT’s and Actual Generation. The t- ratio value is greater than 2.58. Here the significant determinant of WD’s are CC with natural draft CT’s. Next comes ash disposal as second good determinant.
  • The t- ratio of regression coefficient is not at all significant for other independent variables such as BF & DM, cooling temperature and Energy Generation.
  • The R2 is 0.97. It means that independent variables such as CC and AD can explain 97 % of variation in the dependent variable (Water withdrawal) and remaining 3 % variation are unexplained by the model. Thus the estimated equation is considered as an equation of very good fit.
  • The overall model is statistically significant as f value is higher (706.164) and highly significant at 1 % level. This indicates that the regressors condenser cooling with NDCT’s and Ash Disposal are significantly associated with Water withdrawal’s (Dependent Variable)

Model Specification VIII Rayalaseema Thermal Power Plant

          (Appendix Table: A8)

                           *

Y = 10334.674+0.745 CC+8.725 BF+0.847 AS-4.143 AG-145.408 CT

     (2.677)                (3.007)

N= 35, R2 = 0.87 and f value = 33.145

  • The estimated regression coefficients indicate that the best independent variables with significant effect on quantity of Water Withdrawal Condenser cooling with significant levels at 5%.
  • The t-ratio of regression coefficients have expected signs and is highly statistically significant for one independent variables namely Condenser cooling with natural draft CT’s .The t- ratio value is greater than 2.58. Here the significant determinant of WD’s are CC with natural draft CT’s.
  • The t- ratio of regression coefficient is not at all significant for other independent variables such as BF & DM, Ash Disposal cooling temperature and Energy Generation.
  • The R2 is 0.87. It means that independent variables such as CC can explain 87 % of variation in the dependent variable (WD) and remaining 13 % variation are unexplained by the model. Thus the estimated equation is considered as an equation of very good fit.
  • The over all model is statistically significant as f value is higher (33.145) and highly significant at 1 % level. This indicates that the regressors condenser cooling with NDCT’s are significantly associated with WD’s (Dependent Variable)

Model Specification IX Narla Tata Rao Thermal Power Plant

                     (Appendix Table: A9)

                          *                               *   

Y = 139993.709 + 1.002CC -0.863CD + 1.031 AS- 373.483 CT- 56.843 AG

                                    (1277.966)                 (19.88)

N=      R2 = 1.00, f value = 907849.564

  • The estimated regression coefficients indicate that the best explanatory (independent) variables with significant effect on quantity of water with drawals per Kilowatt hour are condenser cooling with cooling towers ( Induced l Draft cooling system) and ash disposal with significant levels of 1 % and 1 % level.
  • The estimated equation indicates that the total thermal water withdrawals are elastic with respect to condenser cooling and ash disposal. This kind of positive relationship indicates that the thermal water withdrawals are responsive to changes in condenser cooling and ash disposal.
  • The t-ratio of regression coefficients have expected signs and is highly statistically significant for two independent variables namely condenser cooling with Induced Draft CTs and Ash Disposal. The t ratio value is greater than 2.58.
  • This indicates that the importance of technological alternatives (i.e. Condenser Cooling with Induced draft CTs) is the significant determinant of water withdrawals. Next ash disposal takes second place as significant determinant of total thermal water withdrawals.
  • The t-ratio of regression coefficient is not at all significant for other independent variables such as, colony domestic, cooling temperature and actual electric energy generation.
  • The R2 is 1.00. It means that the independent variables such as condenser cooling and ash disposal can explain 100 % of variation in the dependent variable. This shows that we have accounted for almost all the variability with the variables specified in the model. The estimated equation is considered as very good fit.
  • The overall model is statistically significant as f value is higher (907849.564) and highly significant at 1 % level. This indicates that the regressor’s condenser cooling with Induced Draft CT’s and Ash Disposal are significantly associated with dependent variable WDs.

The pertinent conclusion of this study is there may be significant potential for water conservation after having identified the significant determinants of total thermal water withdrawals i.e. condenser cooling and ash disposal. The choice of explanatory variable for eg: Induced draft and natural draft technological innovation was able to address the significant changes of water withdrawals.

5.0  CONCLUSION AND RECOMMENDATION

The thermal and hydel power plants sustenance is very much under stake due to major reason of fresh water shortages in power generation. The most sophisticated technology followed in advanced countries namely Concentrated solar thermal power integrated with combined system of conventional steam plant, Fresnel Solar Collector and  Solar Flower Tower can be used as a replica even in developing countries like India though not cost effective in order to counteract the water shortage problem

REFERENCES

Benedy Kt Dziegielewski, Thomas Bik (August 2006), “ Water Use Bench Marks for Thermo Electric Power Generation” Project report, Southern Illinois University, United States

Geological Survey, 2004, USGS National Competitive Grants Program.

Gbadebo Oladosu, Stan Hadley, Vogt D.P. and Wilbanks J.J. (September, 2006), “Electricity

Generation and Water Related Constraints: An Empirical Analysis of Four South Eastern

States”, Oak Ridge National Laboratory, Oak Ridge Tennessee.

Sitanon Jesdapipat and Siriporon Kiratikarnkul, “ Surrogate pricing of water: The Case of micro Hydro –Electricity Co-operatives in Northern Thailand”.

 Xiaoying Yang & Benedy Kt Dziegielewski (February,2007), “ Water Use by Thermo Electric power plants in the United states” Journal of the American Water Resources Association, Vol 43, No.1.

“Estimating Water Use in United States: A new Paradigm for National Use Water Use Information Programme”(2002),

http://books.nap.edu/openbook.php?record_id=10484&page=95

 

Data Sources

Annual Report on the Working of SEBs and Electricity Departments, Planning Commission, Various Issues

Administrative Reports of Andhra Pradesh Generation Corporation of India Limited (APGENCO),Various Issues. Field Level data of selected thermal and hydel power stations authenticated  by APGENCO.

APPENDIX TABLES

Table: A1: Nagarjuna Sagar Main Power House

Variables Entered/Removed  
Model Variables Entered Variables Removed Method  
1 acutal_generation, tail_water_level, Reser_elevation, Gross_feet, Storage_capacitya . Enter  
a. All requested variables entered.    
b. Dependent Variable: water_discharge_cums  
Model Summary  
Model R R Square Adjusted R Square Std. Error of the Estimate  
1 .997a .995 .995 512.92868  
a. Predictors: (Constant), acutal_generation, tail_water_level, Reser_elevation, Gross_feet, Storage capacity  
ANOVAb
Model Sum of Squares df Mean Square F Sig.
1 Regression 7291771208.745 5 1458354241.749 5543.053 .000a
Residual 38675087.446 147 263095.833    
Total 7330446296.191 152      
a. Predictors: (Constant), acutal_generation, tail_water_level, Reser_elevation, Gross_feet, Storage capacity
b. Dependent Variable: water_discharge_cums      
 

Coefficientsa

 
Model Unstandardized Coefficients Standardized Coefficients t Sig.  
B Std. Error Beta  
1 (Constant) -146.238 1555.816   -.094 .925  
Reser_elevation -.080 .093 -.012 -.865 .389  
Storage capacity -.258 .065 -.091 -3.966 .000  
tail_water_level .350 .111 .031 3.144 .002  
Gross_feet .133 .094 .026 1.419 .158  
acutal_generation 50.669 .423 1.041 119.869 .000  
a. Dependent Variable: water_discharge_cums        

Table: A 2 Nagarjuna Sagar Left Canal Power House

Variables Entered/Removedb  
Model Variables Entered Variables Removed Method  
1 evaporation, energe_bus, twl_ft, storage capacity, reservior_levela . Enter  
a. All requested variables entered.    
b. Dependent Variable: water_drawals  
Model Summary  
Model R R Square Adjusted R Square Std. Error of the Estimate  
1 .864a .747 .739 2350.84646  
a. Predictors: (Constant), evaporation, energe_bus, twl_ft, storage capacity, reservior_level  
 

ANOVAb

Model Sum of Squares df Mean Square F Sig.
1 Regression 2626964399.664 5 525392879.933 95.068 .000a
Residual 889763133.646 161 5526479.091    
Total 3516727533.310 166      
a. Predictors: (Constant), evaporation, energy bus, twl_ft, storage capacity, reservior_level  
b. Dependent Variable: water_drawals        
Coefficientsa  
Model Unstandardized Coefficients Standardized Coefficients t Sig.  
B Std. Error Beta  
1 (Constant) 1660.770 501.102   3.314 .001  
reservior_level -3.516 3.411 -.157 -1.031 .304  
storage capacity -21.705 5.219 -.538 -4.159 .000  
twl_ft 9.653 2.510 .394 3.846 .000  
energy bus 491.286 30.765 .987 15.969 .000  
evaporation .130 .508 .015 .255 .799  
a. Dependent Variable: water_drawals        

Table: A3 Nagarjuna Sagar Right Canal Power House

Model Variables Entered      
1 generation bus, reservior_level, evaporation, storage capacity, tailwaterlevela      
b. Dependent Variable: water_drawals

Model Summary

 
Model R R Square Adjusted R Square Std. Error of the Estimate  
1 .885a .784 .777 3767.05581  
a. Predictors: (Constant), generation bus, reservior_level, evaporation, storage capacity, tailwaterlevel  
ANOVAb
Model Sum of Squares df Mean Square F Sig.
1 Regression 8246365913.182 5 1649273182.636 116.222 .000a
Residual 2270513515.133 160 14190709.470    
Total 10516879428.315 165      
a. Predictors: (Constant), generation bus, reservior_level, evaporation, storage capacity, tailwaterlevel  
b. Dependent Variable: water_drawals        
Coefficientsa  
Model Unstandardized Coefficients Standardized Coefficients t Sig.  
B Std. Error Beta  
1 (Constant) 6133.252 838.604   7.314 .000  
reservior_level .628 7.571 .016 .083 .934  
storage capacity -58.029 9.570 -.832 -6.063 .000  
Evaporation .414 .810 .027 .511 .610  
Tailwaterlevel 37.493 21.598 .263 1.736 .084  
generation bus 486.057 29.945 1.045 16.232 .000  
a. Dependent Variable: water_drawals        

Table:  A4 Srisailam Left Canal Power House

Variables Entered/Removedb  
Model Variables Entered Variables Removed Method  
1 inflow, Reservoir, evaporat, Actual generation, Tail water, storage_capacitya . Enter  
a. All requested variables entered.    
b. Dependent Variable: water_withdra  
Model Summary  
Model R R Square Adjusted R Square Std. Error of the Estimate  
1 .981a .963 .959 1454.18057  
a. Predictors: (Constant), inflow, Reservoir, evaporat, Actual generation, Tail water, storage capacity  
                                                                                   ANOVAb  
Model Sum of Squares df Mean Square F Sig.  
1 Regression 2815082375.894 6 4.692E8 221.872 .000a  
Residual 107846697.597 51 2114641.129      
Total 2922929073.491 57        
a. Predictors: (Constant), inflow, Reservoir, evaporat, Actual generation, Tail water, storage capacity    
b. Dependent Variable: water_withdra          
Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) -2243.501 2527.275   -.888 .379
Reservoir -.766 .337 -.239 -2.272 .027
storage capacity 1.195E-6 .000 .000 .004 .997
Actual generation 57.476 3.055 .953 18.814 .000
evaporat .592 .939 .081 .631 .531
Tail water 4.237 1.572 .248 2.695 .010
inflow .000 .002 -.017 -.339 .736
a. Dependent Variable: water_withdra        

Table: A5 Srisailam Right Canal Power House

Model Variables Entered Variables Removed Method  
1 Gross head, Tailwaterlevel, actual generation, Evaporation, storage, Reservoir . Enter  
a. All requested variables entered.    
b. Dependent Variable: water withdrawals  
 

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate
1 .998a .995 .995 631.39218
a. Predictors: (Constant), Gross head, Tailwaterlevel, actual generation, Evaporation, storage, Reservoir

ANOVAb  
Model Sum of Squares df Mean Square F Sig.  
1 Regression 1.099E10 6 1.832E9 4.596E3 .000a  
Residual 5.222E7 131 398656.090      
Total 1.105E10 137        
a. Predictors: (Constant), Gross head, Tailwaterlevel, actual generation, Evaporation, storage, Reservoir  
b. Dependent Variable: water withdrawals        
Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) -7630.380 1817.341   -4.199 .000
Reservoir -.178 .322 -.027 -.553 .581
storage .000 .000 -.068 -4.288 .000
actual generation 56.314 .459 1.022 122.651 .000
Evaporation .051 .139 .005 .365 .716
Tailwaterlevel .627 .334 .059 1.874 .063
Gross head .289 .320 .036 .904 .368
a. Dependent Variable: water withdrawals      

Table: A6 Kothagudaem Thermal Power Plant O &M

Variables Entered/Removedb  
Model Variables Entered Variables Removed Method  
1 energy generation , cooling temp, DM Water & Boiler Feed back , Ash Disposal , Condenser Cooling , Colony domestic , (Drin, Sani, Firefigh, Backwarhfiler) a . Enter  
a. All requested variables entered.    
b. Dependent Variable: Total water consumption  
 

Model Summary

 
Model R R Square Adjusted R Square Std. Error of the Estimate  
1 .747a .558 .517 289298.132  
a. Predictors: (Constant), energy generation , cooling temp, DM Water & Boiler Feed back , Ash Disposal , Condenser Cooling , Colony domestic , (Drin, Sani, Firefigh, Backwarhfiler)  
ANOVAb  
Model Sum of Squares df Mean Square F Sig.  
1 Regression 8.032E12 7 1.147E12 13.710 .000a  
Residual 6.361E12 76 8.369E10      
Total 1.439E13 83        
a.     Predictors: (Constant), energy generation , cooling temp, DM Water & Boiler Feed back , Ash Disposal , Condenser Cooling , Colony domestic , (Drin, Sani, Firefigh, Backwarhfiler)  
       
Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) -787978.047 1.334E6   -.591 .557
Condenser Cooling 1.021 .313 .551 3.259 .002
DM Water & Boiler Feed back -2.130 5.717 -.038 -.373 .710
Colony domestic -12.190 15.642 -.250 -.779 .438
(Drin, Sani, Firefigh, Backwarhfiler) 146.699 201.477 .467 .728 .469
Ash Disposal 1.152 .300 .409 3.841 .000
cooling temp 4616.497 10000.955 .039 .462 .646
energy generation -817.112 1096.318 -.295 -.745 .458
a. Dependent Variable: Total water consumption      

Table:  A7 Kothagudaem Thermal Power Plant Stage V

  Variables Entered/Removedb  
  Model Variables Entered Variables Removed Method  
  1 Energy Generation, ASH DIS-POSAL (MT), Cooling Temperature , Boiled Feed and DM plant Regeneration, COOLING TOWER MAKEUP        (MT)a . Enter  
  a. All requested variables entered.    
  b. Dependent Variable: TOTAL CONS.  (MT)  
  Model Summary  
  Model R R Square Adjusted R Square Std. Error of the Estimate  
  1 .989a .979 .977 64726.513  
  a. Predictors: (Constant), Energy Generation, ASH DIS-POSAL (MT), Cooling Temperature , Boiled Feed and DM plant Regeneration, COOLING TOWER MAKEUP        (MT)  
 

ANOVAb

Model Sum of Squares df Mean Square F Sig.
1 Regression 14792454121098.932 5 2958490824219.786 706.164 .000a
Residual 322593153570.889 77 4189521474.947    
Total 15115047274669.820 82      
a. Predictors: (Constant), Energy Generation, ASH DIS-POSAL (MT), Cooling Temperature , Boiled Feed and DM plant Regeneration, COOLING TOWER MAKEUP        (MT)
b. Dependent Variable: TOTAL CONS.  (MT)      
  Coefficientsa  
  Model Unstandardized Coefficients Standardized Coefficients t Sig.  
  B Std. Error Beta  
  1 (Constant) 98233.879 76676.230   1.281 .204  
  COOLING TOWER MAKEUP        (MT) .873 .042 .577 20.912 .000  
  ASH DIS-POSAL (MT) 1.186 .078 .484 15.247 .000  
  Boiled Feed and DM plant Regeneration .111 .978 .003 .114 .910  
  Cooling Temperature -1688.373 2158.260 -.014 -.782 .436  
  Energy Generation 32.019 115.619 .005 .277 .783  
  a. Dependent Variable: TOTAL CONS.  (MT)          

Table: A 8 Rayalaseema Thermal Power Plant

  Variables Entered/Removedb  
  Model Variables Entered Variables Removed Method  
  1 Cooling Temp, Ash slurry, Actual Generation, Power Generation, Boiler feed, Condenser cooling, BCWa . Enter  
  a. All requested variables entered.    
  b. Dependent Variable: Water consumption  
  Model Summary  
  Model R R Square Adjusted R Square Std. Error of the Estimate  
  1 .934a .873 .846 1324.085  
  a. Predictors: (Constant), Cooling Temp, Ash slurry, Actual Generation, Power Generation, Boiler feed, Condenser cooling, BCW  
  ANOVAb  
  Model Sum of Squares df Mean Square F Sig.  
  1 Regression 3.487E8 6 5.811E7 33.145 .000a  
  Residual 5.084E7 29 1753200.788      
  Total 3.995E8 35        
  a. Predictors: (Constant), Cooling Temp, Ash slurry, Actual Generation, Power Generation, Boiler feed, Condenser cooling, BCW  
Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) 10334.674 3861.078   2.677 .012
Condenser cooling, BCW .745 .248 .432 3.007 .005
Boiler feed 8.725 4.628 .244 1.885 .069
Ash slurry .847 .501 .230 1.692 .101
Power Generation -.595 .388 -.138 -1.532 .136
Actual Generation -4.143 5.478 -.077 -.756 .456
Cooling Temp -145.408 94.141 -.109 -1.545 .133
a. Dependent Variable: Water consumption        

Table : A 9 Narla Tata Rao Thermal Power Plant

  Variables Entered/Removedb  
  Model Variables Entered Variables Removed Method  
  1 Energy Generation, Condenser cooling & BCW (KL), Cooling Temperature , Ash slurry water (KL), Colony Domestic (KL)a . Enter  
  a. All requested variables entered.    
  b. Dependent Variable: Totalwaterconsumption  
  Model Summary  
  Model R R Square Adjusted R Square Std. Error of the Estimate  
  1 1.000a 1.000 1.000 50290.302  
  a. Predictors: (Constant), Energy Generation, Condenser cooling & BCW (KL), Cooling Temperature , Ash slurry water (KL), Colony Domestic (KL)  
ANOVAb
Model Sum of Squares df Mean Square F Sig.
1 Regression 11480277367590772.000 5 2296055473518154.000 907849.564 .000a
Residual 42994946072.977 17 2529114474.881    
Total 11480320362536844.000 22      
a. Predictors: (Constant), Energy Generation, Condenser cooling & BCW (KL), Cooling Temperature , Ash slurry water (KL), Colony Domestic (KL)
b. Dependent Variable: Totalwaterconsumption      
  Coefficientsa  
  Model Unstandardized Coefficients Standardized Coefficients t Sig.  
  B Std. Error Beta  
  1 (Constant) 139993.709 137540.088   1.018 .323  
  Condenser cooling & BCW (KL) 1.002 .001 .987 1277.966 .000  
  Colony Domestic (KL) -.863 .584 -.001 -1.476 .158  
  Ash slurry water (KL) 1.031 .052 .018 19.879 .000  
  Cooling Temperature -373.483 3763.081 .000 -.099 .922  
  Energy Generation -56.843 138.469 .000 -.411 .687  
  a. Dependent Variable: Totalwaterconsumption        

Econometric Competencies and Entrepreneurship Development 

Adebayo G ADEBAYO

Department of Accountancy

Rufus Giwa (Formally Ondo State) Polytechnic.

Owo, Ondo State, Nigeria

Abstract

This study is designed specifically to demonstrate the application of econometrics or quantitative analysis especially in helping the numerous small and medium enterprises in Nigeria in critical decision making. An Agro-business labour saving fabricating firm in Nigeria was selected as a case and pilot study for all other small or medium enterprises fabricates labour saving machines such as the cassava frying machine (CFM) and palm-oil extracting machine (PEM). The agro-business firm also fabricate cassava grater (GRT) and appliances (APP). The entrepreneur is worried on some critical problems. First, whether these special offers would affect the sale of the major products CFM and PEM since the same customers buy the major products and the special offers. This implies that money spent on special offers will not be spent on CFM and/or PEM. An increase in the sales of special orders may correspond to a decrease in the sale of CFM and PEM. Second is what would be the total sales taking into consideration especially the seasonal fluctuations and third how to identify existing customers who are most likely to respond to proposed improved offer on CFM and PEM. This is important as the Firm fabricates these products on demand. Three models were designed to find solution to each of the problems. The first model was the two-stage least square regression. Findings revealed that the special offer sales GRATER and APPLIANCES) had no negative effect on the sales of the major products (CDM and PEM). All the products significantly contributed to the total sales. The second model was forecasting. The model satisfied forecasting requirements and was able to forecast total sales from April to December 2016 taking into consideration seasonal variations referred to as fluctuations. The third model is the recency, frequency and monetary (RFM) analysis. This marketing tool is used to classify customers according to how recent they patronize, how often and how much is involved in individual customer’s cumulative patronage. The RFM analysis carried out on the customers identified the firm’s customers that would likely respond to new offer. An RFM score of 300 and above qualified a customer to be selected. Part of the recommendations was that entrepreneurs should avail themselves of the decision making tools for better management of their enterprises.

 Keywords: 

 Introduction

The world is facing many economic challenges and issues. These do not isolate the developed economies. Both are debt ridden, with regional economic imbalances and geo-political challenges. There is general economic meltdown in the world market. The Nigeria economy has been acutely affected because of the fall in the price of crude oil in the world market as a result of these economic imbalances and trade policies that are not conducive to Nigerian oil market. Since revenue from crude oil takes about 90% of the Federal government total revenue, there is the critical need to raise non-oil revenue to ensure fiscal sustainability while maintaining infrastructure and social spending.

The Federal government has taken a bold step towards revamping agriculture and overhauling its solid mineral resources. From an entrepreneurial perspective, the present economic meltdown in Nigeria would eventually be a blessing in disguise. The Central Bank of Nigeria has been instructed by President Buhari to create a “synergy” and organize soft loans to agro-based industries and other export businesses.

The main objectives of the 2016 Buhari government’s budget are to make the “synergy” work among all the different players in the country’s economy. These include the banking system, financial institutions, government entities, regulators and other arms of the government.

  • Entrepreneurial Development.

The credibility of the Buhari government among the Nigerian populace as a result of his zero tolerance to corruption and his “Big Bang” [a rapid reform which is economically necessary as a result of severe macroeconomic imbalances (Gelb, Jefferson and Singh 1993) such as this period of economic crisis in Nigeria] approach to major economic reforms, has spurred many investors into agro-based industries. They believe that the government meant business.

One of these respondents is a medium scale firm in Nigeria that fabricates machines to boost agricultural produce. The Firm has recently reactivated two of its machines-the Cassava Frying Machine (CFM) and the Automated Palm oil Extracting Machine (PEM)

  • Objectives of the Firm

The major objectives of the Firm in fabricating these labour saving machines is the issue of health hazard on the one hand. Many local manual cassava frying and palm oil producers especially women, had been subjected to untimely death due to incessant heat from the local frying system and the palm oil production. These machines would reduce drastically the feminine life wasted on daily basis. On the other hand, these machines will boost agricultural produce of “GARI”(a local name for the fine grain output from the frying process of cassava) and palm oil to contribute to increase the recent low GDP rate in Nigeria. [Economic growth in the last quarter of 2015 was 2.1% while total growth in the year was 2.8%, the slowest since 1999 to date (NBS, 2016). This statistics seems to toe the line of the global GDP growth projection of 2.5% which is 0.3% point less than November 2015 outlook (GEO, 2016)]. Therefore any entrepreneurial effort to boost the Nigerian GDP at this trying period is a right decision in the right direction.

  • The Cassava Frying Machine

The CFM is powered by electricity and is capable of frying about 5-10-kg of already peeled, washed and had been cut into smaller sizes and loaded into the machine drum. The machine grinds the cassava, presses it cause fermentation and fry the cassava into very fine grains. Adjustments by the use of some special appliances sold by the firm to its customers may cause the machine to dry cassava from the normal “GARI” into smoother form or into powder. It is an automated machine with 100% local components. A single CFM costs N45, 000 ($225)

  • The Automatic Palm oil Extracting Machine..

The PEM is an automated machine that produces fine, clear, well heated palm oil. Palm fruits are removed from the bunch after some period for partial fermentation, washed and then loaded into the machine tank or drum to the brim. The machine twists and separate kernels from tissues, extract the paste and heat into fine glossy oil. The slag is released from an outlet. It is also powered by electricity. The machine is made with 90% local components, that is, 10% components have to be imported. A single machine costs N50, 000 ($250), about N5000 ($25) more than CFM probably as a result of the cost of the imported components.

  • Statement of the Problem.

The two machines fabricated by the firm are the Cassava Frying Machine (CFM) and Palm oil Extracting (PEM) and are sold to customers on demand. Apart from these machines, there are two special offers that are also sold. These are grater (GRT) and appliances (APP). The APP is a device to enhance either the CFM or PEM, especially as a power saving device, at the customers’ option and is sold at the rate of N12, 000 per unit. These appliances are capable of making adjustments possible to CFM and PEM and other agro-based machines.  The GRT powered by electricity, the pealed, and washed cassava are loaded into its receptor and it grinds cassava very well. This is sold at the rate of N15, 000 per unit. Every month the Firm makes these special offers to customers who need the APP on previously bought machines or on a proposed purchase of CFM and /or PEM. The GRT is mostly purchased by customers who could not afford CFM. The firm is now concerned about the following problems:

  1. Whether these special offers would affect the sale of the major products CFM and PEM since the same customers buy the major products and the special offers. This implies that money spent on special offers will not be spent on CFM and/or PEM. An increase in the sales of special orders may correspond to a decrease in the sale of CFM and PEM.
  2. How to make a good forecast of the total sales from major products and the special offers.
  3. How to identify existing customers who are most likely to respond to proposed improved offer on CFM and PEM. This is important as the Firm fabricates these products on demand.
  • Objectives of the Study.

The primary objective of this study is to underscore the importance of econometric or quantitative analysis in solving most of the problems of entrepreneurs and hence enhance entrepreneurship development in Nigeria. In realization of this objective, the study had focused on helping to collect all relevant data on the Firm’s customers. These include each customer’s date of transactions with the Firm, amount of purchases each time, total number of transaction and the most recent transaction. There will also be collection of data on total monthly sales on CFM, PEM, APP and GRT for the past 51 months. Other secondary objective, in addition are:

  1. To create compactible models to find solution to each of the Firm’s area of concern.
  2. To discuss the findings and give expert recommendations on the findings.

  1. Review of Related Literature

2.1 The Nigerian Cassava

Cassava is well known as manihot esculenta or manilot utilissima (Yakasi, 2010). In Nigeria, cassava is grown in all the ecological zones andit is planted all the year round on the availability of moisture (Odoemenem and Otanma, 2011). Production is vital to the economy of Nigeria as the country is the world’s largest producer of the commodity. The crop is produced in 24 of the country’s 36 states. In 1999, Nigeria produced 33 million tonnes, while a decade later, it produced approximately 45 million tonnes, which is almost 19% of production in the world. The average yield per hectare is 10.6 tonnes.(Wikipedia, n.d.)

In Nigeria, cassava production is well-developed as an organized agricultural crop. It has well- established multiplication and processing techniques for food products and cattle feed. Cassava is processed in many processing centres and fabricating enterprises set up in the country. Cassava is used in the preparation of several household foods and derivatives such as paste, biscuits, bread sagos and sauce. Its starch is for industrial use such as baby food, jelly, custard poeders and confectioneries (Echebiri and Edeba, 2008).  Roots or leaves are made into flours. Flours are of three types, yellow garri, white garri, or intermediate colour. These varieties are a matter of choice and traditional attachment. Therefore it may be erroneous to classify any type as the best product in Nigeria. Its other products are as dry extraction of starch, glue or adhesives, modified starch in pharmaceutical as dextrines, as processing inputs, as industrial starch for drilling, and processed foods.

 2.2 Palm Oil in Nigeria

 

Palm oil is as old as Nigeria itself and has been an important subsistence, but until recently a supportive factor in the diet of many Nigerians. Palm oil is the world’s largest source of edible oil, accounting for 38.5 million tonnes or 25% of the global edible oil and fat production (MPOC, 2007). Palm oil is a product extracted from the fleshy mesocarp of the palm fruit (Elaeis guineensis). The global demand for palm oil is growing thus, the crop cultivation serves as a means of livelihood for many rural families, and indeed it is in the farming culture of millions of people in the country. Akanbge et al (2011), referred to this product as capable of having multiple values, a feature that underscores its acclaimed economic importance. Eventually oil graduated from domestic use to industrial application which had appreciated its production geometrically (Omereji,2005). Ekine and Onu(2008) estimated palm oil consumption of about two litres per a family of five per week for cooking. Today, consumption must have tripled since Nigerian house hold now uses palm oil beyond normal consumption. Palm oil is also an essential multipurpose raw material for both food and non-food industries (Armstrong, 1998). Palm oil is used in the manufacturing of margarine, soap candle, base for lipstick, waxes and polish bases in a condense form, confectionary (Embrandiri et at., 2011; Aghalino, 2000), and other uses in pharmaceuticals.

2.3 Forecasting

Because economic and business conditions vary over time, managers must find ways to keep abreast of the effects that such changes will have on their organizations. One technique that can aid in plan­ning for future needs is forecasting. Although numerous forecasting methods have been devised, they all have one common goal—to make predictions of future events so that projections can then be incorporated into the planning and strategy process.

2.3.1 Time-series forecasting meth­ods involve the projection of future values of a variable based entirely on the past and present obser­vations of that variable. Examples of economic or business time series are the monthly publication of the Consumer Price Index, the quarterly statements of gross domestic prod­uct (GDP), and the annually recorded total sales revenues of a particular company.(Levine et al, 2005)

2.3.2 Least-Squares Trend-Fitting and Forecasting. The component factor of a time series most often studied is trend. Trend is studied as an aid in making intermediate and long-range forecasting projections. As depicted in Figure 1 to obtain a visual impression of the overall long­term movements in a time series, a chart is constructed in which the observed data (dependent variable) are plotted on the vertical axis, and the time periods (independent variable) are plotted on the horizontal axis.(See figure 1 below)

The Forecasting add-on module provides two procedures for accomplishing the tasks of creating models and producing forecasts.

The Time Series Modeler procedure estimates exponential smoothing, univariate Autoregressive Integrated Moving Average (ARIMA), and multivariate ARIMA (or transfer function models) models for time series, and produces forecasts. The procedure includes an Expert Modeler that automatically identifies and estimates the best-fitting ARIMA or exponential smoothing model for one or more dependent variable series, thus eliminating the need to identify an appropriate model through trial and error. Alternatively, one can specify a custom ARIMA or exponential smoothing model.

AR(1)        = a first-order autoregressive to correct for residual serial correlation. It is regressing the dependent variable(s) with linear combination of its past values or lagged values.

MA(1)       = a first-order moving  average model ,i.e., regressing the dependent error with linear combination of its past error or lagged error. It also corrects serial correlation.

2.4 Research Questions.

The following research questions are formulated by the researcher

  1. What are the total monthly sales of the Firm for 51 months?
  2. How many are the numbers of customers of the Firm are their variable such as name, address, city, state- province, post code, gsm numbers, country, gender, age category are available?
  3. How can customers that would respond to new offer be identified?
  4. What is the forecast total sales from April to December 2016?

2.5 Research Hypotheses.

The following research hypotheses are formulated by the researcher at 5% level of significance.

  1. There will be no significant relationship between total sales of special offers and CDM sales.
  2. There will be no significant relationship between total sales of special offers and POE sales.
  3. There will be no significant relationship between total sales of special offers and APP sales.
  4. There will be no significant relationship between total sales of special offers and GRTsales.

 

  1. Methodology

 3.1 Data Collection

The data collected for this study is a demonstrative data only on behalf of the firm. It is characteristic of most small and medium enterprises of nearly the same status. This case study Firm is having about 90 customers. Sales records on CFM, PEM, APP and GRT were collected for 51 months (January 2012 to March 2016). In the Table below, the author computed the total sales for CFM, PEM, APP and GRT and special offer total sales (SPSALES). Others computed are discount on CDM at 3.5% from records and discount on PEM at 4.8%. A log discount on CFM and PEM and their lagged variables are automatically computed in the SPSS 21 and E-View 7.1 work files. The data are presented in Table 1 below.

 Table 1    Company Data for 51 Months – from January 2012 to March 2016

tsales cfm pem spsales grt app discfm dispem
N N N N N N N N
109.50

123.50

130.00

147.00

154.10

174.00

166.50

178.00

166.50

153.20

132.50

132.70

148.80

167.80

180.50

192.50

192.00

202.50

193.50

183.20

196.70

198.80

179.10

169.80

193.10

194.10

213.00

241.40

231.80

226.40

226.50

245.70

231.20

207.50

219.90

214.00

241.30

265.00

267.50

246.90

237.00

234.20

251.20

266.00

270.80

264.80

258.00

243.80

244.00

246.50

263.30

57.50

60.00

62.50

67.50

75.00

78.00

75.00

73.00

58.00

55.00

56.00

57.00

58.00

65.00

84.00

78.00

77.50

74.50

62.50

68.00

83.00

87.50

78.50

73.00

71.00

73.00

83.00

95.00

92.50

82.00

87.00

95.00

100.00

97.00

100.00

95.00

103.00

112.00

113.00

110.00

105.00

97.00

94.00

95.00

94.00

93.00

100.00

103.00

102.00

102.50

103.00

40.00

50.00

52.50

65.00

64.00

60.00

75.00

86.50

87.50

77.50

60.00

52.00

65.00

73.00

67.00

85.00

85.00

97.50

100.50

85.00

83.00

80.00

68.00

60.00

82.50

80.00

90.00

110.00

108.00

105.00

100.00

110.00

90.00

80.00

78.00

72.00

90.00

105.00

107.50

90.00

85.00

90.00

108.00

120.00

125.00

120.00

105.00

85.00

86.00

85.00

100.00

12.00

13.50

15.00

14.50

15.10

16.00

16.50

18.50

21.00

20.70

22.50

13.70

25.50

29.80

29.50

29.50

29.50

30.20

30.20

30.70

30.70

31.30

32.60

36.80

39.60

41.10

40.00

39.40

39.30

39.40

39.50

40.70

41.20

40.50

41.90

47.00

48.30

48.00

47.00

46.90

47.00

47.20

49.20

51.00

51.80

51.80

53.00

55.50

57.00

59.00

60.30

4.00

5.00

6.00

6.00

7.00

8.00

8.50

10.00

12.00

11.50

13.00

14.00

16.00

20.00

19.50

19.00

18.50

18.50

18.50

17.80

18.00

18.80

19.60

20.00

20.80

21.40

22.00

22.40

22.80

23.00

22.50

22.00

21.20

21.50

23.50

26.00

26.30

26.00

26.00

26.10

26.50

27.00

27.20

28.00

27.00

26.80

27.00

29.00

29.00

29.20

29.30

8.00

8.50

9.00

8.50

8.10

8.00

8.00

8.50

9.00

9.20

9.50

9.70

9.80

9.80

10.00

10.50

11.00

12.00

12.00

12.40

12.70

12.50

13.00

16.80

18.80

19.70

18.00

17.00

16.50

16.40

17.00

18.70

20.00

19.00

18.40

21.00

22.00

22.00

21.00

20.80

20.50

20.20

22.00

23.00

24.80

25.00

26.00

28.80

28.00

29.80

31.00

2.01

2.10

2.19

2.36

2.63

2.73

2.63

2.56

2.03

1.93

1.96

1.99

2.03

2.28

2.94

2.73

2.71

2.61

2.19

2.38

2.91

3.06

2.77

2.56

2.49

2.56

2.91

3.33

3.24

2.87

3.04

3.33

3.50

3.40

3.50

3.33

3.61

3.92

3.96

3.85

3.68

3.40

3.29

3.33

3.29

3.26

3.50

3.61

3.57

3.59

3.07

1.92

2.40

2.52

3.12

3.07

2.88

3.60

4.15

4.20

3.72

2.88

2.50

3.12

3.50

3.22

4.08

4.08

4.68

4.82

4.08

3.98

3.84

3.26

2.88

3.41

3.50

4.32

5.28

5.84

5.04

4.80

5.28

4.32

3.84

3.14

3.46

4.32

5.04

5.16

4.32

4.08

4.32

5.18

5.76

6.00

5.76

5.04

4.08

3.57

4.08

4.80

       *The average Sales discount on CFM is 3.5% and on PEM is 4.8%. No discounts for APP and GRT.

            The LAG variable for CFM and LAG for PEM are automatically Created Series in the SPSS 21 and E-                           View 7.1 work files.

    Figure 1    Graph of the Relationship between Total Sales, and the sales from Cassava Frying Machine, Palm oil Extracting Machine, Appliances and Grater

3.2 Models Specification

Three models are specified to the three major problems faced the Firm as stated under the statement of the problem. These are (1) Two-Stage Least Squares Regression (2) Forecasting Models and (3) The RFM Customer Analysis

 

3.2.1 Model 1.Two Stage Least Square Regression

A careful observation of the relationship between CFM, PEM and the special offers shows that there is a feedback loop between the response and the two major products which are predictors. One of the basic assumptions of the ordinary least-squares (OLS) regression model is that the values of the error terms are independent of the values of the predictors. When this “recursivity assumption” is broken, the two-stage least-squares (2SLS) model can help solve these problematic predictors. The 2SLS model assumes that there exist instruments, or secondary predictors, which are correlated with the problematic predictors but not with the error term.

Given the existence of instrument variables, the 2SLS model:

  1. Computes OLS models using the instrument variables as predictors and the problematic predictors as responses.
  2. The model-estimated values from stage 1 are then used in place of the actual values of the problematic predictors to compute an OLS model for the response of interest.

Fifty two months of sales information is collected. The file also includes a variable, special offer, displaying each month’s special offer, which has also been recorded into two indicator variables, Appliances offer and Grater offer that can be used as predictors in the regression procedures. Lastly, the monthly discounts (and log-discounts) offered to customers are also listed. Since the monthly discounts are chosen independent of special offer sales but do not affect CDM and POE sales, they should make good instrument variables. Additionally, the lagged CDM and POE should also make good instruments. The independent, predictors and instrumental variables are in the model description as in Table 2 below.

Table 2: Model Description

   Variables Type of Variable
SpecialOfferSales Dependent
CDM Predictor
POE Predictor
Appliances predictor & instrumental
Grater predictor & instrumental
Logdiccfm Instrumental
Logdispoe Instrumental

Special Offer Sales = α0 + α1CFM + α2POE + α 3APP + α4GRT + ε                                                        Eq 1

where

α 0             =    the intercept or constant term

α      α 4   =    the coefficients of both the predictors and instrumental variables

 ε            =    the stochastic error term

All other variables are as described in the model description in Table 2 above.

3.2.2 Model 2. Forecasting Models

The Model of Forecasting from an Equation, can be dynamic or Static. The static model is chosen because the static forecasting model performs a series of one-step ahead forecasts of the dependent variable:

For each observation in the forecast sample:

 yg+k = c(l) + c(2)xs+k+c(3)zs+k+c(4)ys+k1                                                         Eq 2

Such equation is always using the actual value of the lagged endogenous variable. This is translated into sales forecast of the Firm:

Total Sales    = βo + β1Total Sales (-1) + β2Pm Ar(1) + µi                                                 Eq 3

Where:

Total Sales        =     the total sales from CFM, POE, APP and GRT for 51 months. This is the dependent variable.

Total Sales (-1) = a lagged variable of the dependent variable. This is a one step ahead static forecasts that makes the static forecast more accurate than the dynamic forecast since, each period, the actual value of Total Sales(-1) is used in forming the forecast of Total Sales.

Pmi                  =     the period expressed in months with a total of 51 months. This is the independent variable.

  β 0                            =     the constant term or the model intercept.

  β1                   =     the coefficient of the lagged variable.

  β2                    =     the coefficient of the independent variable.

 µi                    =     the stochastic or error term

The tolal sales above is transformed into:

tsalesFp+k = Ф0 + Ф1 tsalesFp+k-1 2PMp+k + AR(1) +  ε                                                    Eq 4

after being subjected to the static forecasting model

where

tsalesF = total sales forecast

 tsalesFp+k-1 =   the previous month’s (lagged) sales to be added to current sales forecast.

Ф I              = constant and coefficients.

p                 = the base period (month) of start of forecast.

k                 = any month from the forecasting period (April to December 2016)

AR(1)        = a first-order autoregressive to correct for residual serial correlation. It is regressing the dependent variable(s) with linear combination of its past values or lagged values.  .

ε i               = the error term.

For seasonal adjustment of the forecast (fitted) sales.

tsalesfSA  = ⨍i(tsalesFi)                                                                                                     Eq 5

where

⨍i = multiplicative scoring factor for a 12 month period.

tsalesFi = total sales forecast for April to December.

The tsalesfSA  = the seasonally adjusted tsalesF for months (p52-60) i.e. 52, 53, 54, 55, 56, 57, 58, 59 and 60 for April, May, June, July, August, September, October, November and December.

The actual trend base is P51. In Table 1 the total sales corresponding to P51 is N263300. A forecast for p52-60 is required; i.e. April – December 2016.

Figure 3.  Graphical Relationship between Total Sales (tsales) and Fitted Sales (tsalesF)

3.2.3 Model 3.  RFM Analysis         

RFM (Recency, Frequency and Monetary) analysis is a direct marketing option that provides a set of tools designed to improve the results of direct marketing campaigns by identifying demographic, purchasing, and other characteristics that define various groups of consumers and targeting specific groups to maximize positive response rates.

It is a technique used to identify existing customers who are most likely to respond to a new offer. This technique is commonly used in direct marketing. RFM analysis is based on the following simple theory:

The most important factor in identifying customers who are likely to respond to a new offer is RECENCY. Customers who purchased more recently are more likely to purchase again than are customers who purchased further in the past.’The second most important factor is FREQUENCY. Customers who have made more purchases in the past are more likely to respond than are those who have made fewer purchases.

The third most important factor is total amount spent, which is referred to as MONETARY. Customers who have spent more (in total for all purchases) in the past are more likely to respond than those who have spent less.

How RFM Analysis Works

Customers are assigned a recency score based on date of most recent purchase or time interval since most recent purchase. This score is based on a simple ranking of recency values into a small number of categories. For example, if you use five categories, the customers with the most recent purchase dates receive a recency ranking of 5, and those with purchase dates furthest in the past receive a recency ranking of 1. The recency ranking for this Firm is based on the past 20 months as below:

Month Interval Ranking
Jan to Apr 2016 5
Sept to Dec 2015 4
May to Aug 2015 3
Jan to Apr 2015 2
Sept to Dec 2014 1

In a similar fashion, customers are then assigned a frequency ranking, with higher values representing a higher frequency of purchases. For example, in a five category ranking scheme, customers who purchase most often receive a frequency ranking of 5.

 

The number of times a customer made purchases up to a maximum of 5,(or simply, the Transaction Counts) represent frequency ranking for the Firm.

 

Finally, customers are ranked by monetary value, with the highest monetary values receiving the highest ranking. Continuing the five- category example, customers who have spent the most would receive a monetary ranking of 5. The monetary ranking for the firm is:

Naira Value of Purchases Ranking
N120,000 and above 5
N100,000 to N120,000 4
N75,000 to N100,000 3
N40,000 to N75,000 2
Less than 40,000 1

The result is four scores for each customer: recency, frequency, monetary, and combined RFM score, which is simply the three individual scores concatenated into a single value. The “best” customers (those most likely to respond to an offer) are those with the highest combined RFM scores. For example, in a five-category ranking, there is a total of 125 possible combined RFM scores, and the highest combined RFM score is 555.

 Results and Discussion

The results of the models had produced numerous tables in their outputs. The option of  table by table explanation and discussion had been taken.. Where appropriate, results had been discussed. Only the summary points need be discussed further. .Summary of the findings revealed that the special offer sales did not affect the sales of CFM and PEM. The assumption that there exist instruments, or secondary predictors, which are correlated with the problematic predictors but not with the error term may not hold. When CFM, PEM GRT AND APP were regressed on the total sales, they were all significant at less than 5%.

A multiplicative scoring factor to produce the total sales forecast with seasonal adjustments from April to December 2016.

The RFM analysis produced a combined RFM score for each customer at the concatenation of the three individual scores, computed as (recencyx100) + (frequencyx10) _ monetary. The recency, frequency, monetary score is 5 5 5 respectively. A customer must score at least 3 points for recency to qualify for customers that are likely to respond to new offer on CFM and PEM.

 

Conclusion and Recommendations

This study had been able to highlight the importance of econometric applicaton in business decision making especially for small and medium scale enterprises. Decision making is a prerogative of the entrepreneur but using the tools would help the effective management of their enterprises. I is important to add a caveat that professionals should be used and that the outcome of decision making tools are to assist entrepreneur only and should not be forced on them.

Notwithstanding, entrepreneurs are advised to avail themselves of the decision making tools from professionals with econometric competences. The present day business environment needs the sixth sense which business decision making tools afford entrepreneurs.

 

APPENDIX: (Al, A2 and A3 for Models 1, 2 and 3 respectively.)

 MODEL 1: TWO-STAGE LEAST SQUARES REGRESSION*

 

Table Al-1 The Lagged Variable Infusion into the Model

Series Name Case Number of Non-Missing No of Valid Creating
Values Cases Function
First Last
1 cfm_1 2 51 50 LAGS(cfm,1)
2 pem_1 2 51 50 LAGS(pem,1)

 

 

Table A1-2 Model Description

Type of Variable
                          Spsales Dependent
                                Cfm Predictor
                                Pem Predictor
Equation 1              Grt predictor & instrumental
                               App predictor & instrumenta  l
                       Logdiscfm instrumental
                      Loadispem instrumental

The model description table gives a summary of the model being fit. Variables specified as predictor will be regressed on the instrumental variables, and the model- estimate4d values will then be used in place of the actual values of these problematic predictors when computing the model for the dependent

 

Table A1-3 Model Summary

                                          Multiple R .995
                                           R Square .990
Equation 1
                             Adjusted R Square .989
                    Std. Error of the Estimate 1.410

The model summary table reports the strength of the relationship between the model and the dependent variable.

Multiple R, the multiple correlation coefficient, is the linear correlation between the observed and model- predicted values of the dependent variable. Its relatively high value indicates a very strong relationship.

R Square, the coefficient of determination, is the squared value of the multiple correlation coefficients. It shows that about 99 percent of the variation in Special offer sales is explained by the model.

Adjusted R Square is an r-squared statistic that is “corrected” for the complexity of the model, and is useful for comparing competing models. The larger values of the statistic indicate better models. It showed that the predictors were able to explain 98.9% of the variations in special offer sales.

Std. Error of the Estimate is the standard error in estimates of Special offer sales based on the model. The value this standard error of estimate compare to the standard deviation of 13.649 of Special offer sales shows that the model has reduced the uncertainty in the “best guess” for next month’s sales.

TableA1-4 ANOVA

Sum of Squares Df Mean Square F Sig
Regression 9221.545 4 2305.386 1160.333 0.000
Equation 1 Residual 91.394 46 1.987
Total 9312.940 50

The ANOVA table tests the acceptability of the model from a statistical perspective

The Regression row displays information about the variation accounted for by the model

The Residual row displays information about the variation that is not accounted for by the model

The regression sum of squares is considerably higher than the residual sum of squares, which indicates that about most of the variation in Special offer sales is explained by the model

The significance value of the F statistic is less than 0.05, which means that the variation that is explained by the model is not simply due to chance.

While the ANOVA table is a useful test of the model’s ability to explain any variation in the dependent variable, it does not directly address the strength of that relationship

Table A1-5 Coefficients

Unstandardized Coefficients Beta T Sig.
B Std. Error
(Constant) -3.237 8.202 -.395 .695
cfm .032 .202 .039 .158 .875
Equation 1 pern .026 .030 .036 .857 .396
grt .916 .146 .484 6.276 .000
app .988 .254 .481 3.892 .000

Dependent Variable  Special Sales

This table shows the coefficients of the regression line. It states that the expected special offer sales is equal to : -3.237 + 0.032CFM + 0.026PEM = 0.916GRT + 0.988APP.

The significance value for GRT and APP are less than 0.05, indicating that the effect of GRT and APP distinguishable from sales of CFM and PEM. In other words, the sales of GRT and APP may not be affecting sales from CFM and PEM. When CFM, PEM GRT and APP are regressed against Total Sales, in Table A1-6, all the variables are significant at 1% level. This shows that they all contribute and no “special sales’’ is limiting the sales of CFM and PEM.

 

 Table A1-6 Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients T Sig.
B Std. Error Beta
1 (Constant) -.193 3.180 -.061 .952
cfm 1.054 .053 .404 19.745 .000
pem .991 .036 .437 27.209 .000
grt .812 .173 .133 4.702 .000
app 1.000 .176 .151 5.683 .000
a. Dependent Variable: tsales

Table A1-7 Coefficient Correlation

cfm Pem Grt App
Equation 1 Correlations cfm 1.000
pem -.866 1.000
grt -.885 .661 1.000
app -.966 .843 .757 1.000

*SPSS 21 OUTPUT

 

 

MODEL 2: FORECASTING MODELS**

TableA2-1 Sales Forecast and Seasonally Adjusted Trend

S/N p MONTHS Tsalesf (rounded to a whole number) N’000 Multiplicative scoring Factor(𝒇i) TsalesfSA (rounded to a vhole number) N’000
1 0.89
2 0.99
3 51 MARCH 1.02
4 52 APRIL 269 1.05 282
5 53 MAY 273 1.06 289
6 54 JUNE 275 1.02 281
7 55 JULY 278 1.02 284
8 56 AUGUST 280 1.01 283
9 57 SEPTEMBER 283 1.05 297
10 58 OCTOBER 286 1.02 292
11 59 NOVEMBER 288 0.96 276
12 60 DECEMBER 291 0.91 265

The model equation is: tsalesF = 93.79 + 0.341tsalesf (-1) + 1.64pm +[(AR(1)= 0.233]

  For example April Forecast: tsalesF 52 = 93.79 + 0.341tsalesF51 + 1.64(Mouth 52) + 0.233      (See Eq 4)

                                                     = 93.79 + 0.341(263.3 = March Total Sales) + 1.64(52) + 0.233

                                                     = 93.79 + 89.78 + 85.28 + 0.233

                                                     = 269.09

                                    tsalesF53  = 93.79 + 0.341(269.08) + 1.64(53) + 0.233

                                                    = 272.7  e.t.c

Table A2-2     Augumented Dickey-Fuller Unit Root Test
Test Statistics Coefficients
Variable Intercept Intercept &Trend None Intercept Intercept& Trend None
At Level Tsalesf(Total Sales Forecast) -1.53 -4.152 1.183 -0.065 -0.577 0.0095
1st Diff -6.59 -6.557 -6.385 -0.982 -0.989-1 -0.939
2ndDiff -7.34 -7.253 -7.426 -1.835 -1.835 -1.834
Critical

Value

1%    -3.59

 

5%    -2.93

 

10%    -2.6

1%     – 4.18

 

5%     -3.51

 

10%    -3.19

1%        -2.62

 

5%        -1.95

 

10%       -1.61

TsalesF is stationary at First Difference in Table A2-2 above. This satisfies its expected forecasting property.

   Table A2-3 Model is Stationary at the First and Second difference:

 

 

 

AR Root(s)

  0.233330  0.233330
 No root lies outside the unit circle.
 ARMA model is stationary.
MA Root(s) Modulus Cycle
 -0.236191  0.236191
 No root lies outside the unit circle.
 ARMA model is invertible.

 

 

      **E-View 7.1 OUTPUT

MODEL 3: THE RFM ANALISIS

 

The Firm is having a total of about 90 customers on records. A random sample of 14 customers were made using Random Numbers, but customer ID-01 was purposive. RFM Analysis was limited to customers who made purchases between September 2014 and March 2016.

Table A3-1 Transaction Data

ID DATE AMT N’000 ID DATA AMT N ‘000
01 08/24/2014 212 16 03/15/2015 15
16 09/09/2014 50 83 03/20/2015 105
75 09/30/2014 12 30 04/12/2015 15
75 10/15/2014 15 01 04/14/2015 50
39 10/20/2014 50 72 04/15/2015 30
72 11/15/2014 15 35 05/18/2015 15
28 11/20/2014 50 16 05/25/2015 12
24 11/22/2014 12 89 07/16/2015 45
28 11/25/2014 12 16 07/18/2015 45
24 12/03/2014 15 49 07/25/2015 195
28 12/14/2014 15 08 08/10/2015 12
77 12/18/2014 15 01 18/18/2015 15
16 12/20/2014 15 72 08/20/2015 30
75 12/22/2014 12 35 08/22/2015 30
77 01/15/2015 15 81 09/14/2015 27
02 01/19/2015 62 08 10/20/2015 12
02 03/04/2015 69 08 01/13/2016 12
30 03/10/2015 15 89 01/20/2016 12

When you compute RFM scores from transaction data, a new dataset is created that includes the new RFM scores.

By default, the dataset includes the following information for each customer:

  • Customer ID variable(s)
  • Date of most recent transaction
  • Total number of transactions
  • Summary transaction amount (the default is total)
  • Recency, Frequency, Monetary, and combined RFM scores

The new dataset contains only one row (record) for each customer. The original transaction data has been aggregated by values of the customer identifier variables. The identifier variables are always included in the new dataset; otherwise you would have no way of matching the RFM scores to the customers.

 

Table A3-2 Customers with Transaction Summaries

ID DATE AMT N’000 ID DATE AMT N’000
01 08/24/2014 12 30 10/202014 50
01 04/14/2015 50 30 03/10/2015 15
01 08/18/2015 15 30 04/12/2015 15
02 01/19/2015 62 35 05/18/2015 15
02 03/04/2015 69 35 08/22/2015 30
08 08/10/2015 12 49 07/25/2015 195
08 10/20/2015 12 72 11/15/2014 15
08 01/13/2016 12 72 04/15/2015 30
16 09/09/2014 50 72 08/20/2015 30
16 12/20/2014 15 75 09/30/2014 12
16 03/15/2015 15 75 10/15/2014 15
16 05/25/2015 12 75 22/12/2014 12
16 07/18/2015 45 77 12/18/2014 15
24 11/22/2014 12 77 01/15/2015 15
24 12/03/2014 15 81 09/14/2015 27
28 11/20/2014 50 83 03/20/2015 105
28 11/25/2014 12 89 07/16/2015 45
28 12/14/2014 15 89 01/20/2016 12

The dataset must contain variables that contain the following information:

  • A variable or combination of variables that identify each case (customer).
  • A variable with the date of each transaction.
  • A variable with the monetary value of each transaction.

Table A3-3 RFM Analysis from Transaction Data -The New Data Set.

ID Date Most Recent Transa

ction

Counts

Amount

N’000

Recency Frequency Monetary

Score

RFM

Score

Customer with High Response to an Offer
01 08/18/2015 3 77 3 3 3 333 ü
02 03/04/2015 2 131 2 2 5 225
08 01/13/2016 3 36 5 3 1 531 ü
16 07/18/2015 5 137 3 5 5 355 ü
24 12/03/2014 2 27 1 2 1 121
28 12/12/2014 3 77 1 3 3 133
30 04/12/2015 3 80 2 3 3 233
35 08/22/2015 2 45 3 2 2 322 ü
49 07/25/2015 1 105 3 1 5 315 ü
72 08/20/2015 3 75 3 3 3 333 ü
75 12/22/2014 3 39 1 3 1 131
77 01/14/2015 2 30 2 2 1 221
81 09/14/2015 1 27 4 1 1 411 ü
83 03/20/2015 1 105 2 1 4 214
89 01/20/2016 2 57 5 2 2 522 ü

The combined RFM score for each customer is simply the concatenation of the three individual scores, computed as: (recency x 100) + (frequency x 10) + monetary.

For example, the RFM score for ID-16 is (3×100 + 5×10 + 5) = 300 + 50 + 5 = 355

The marked customers are those that are likely to respond to new offer on CFM and PEM. To qualify, a customer must score at least 3 points for recency.

 

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