Management Discussion and Analysis Report
DEVELOPMENTS IN THE ECONOMY AND THE OIL SECTOR
The slowdown in the Indian economy persisted in 2012-13. The GDP growth in 2012-13 was5% compared to 6.2% in 201112. Growth in agriculture was affected by less than normalrainfall in the early phase of the monsoon. The agriculture sector is estimated to grow at1.9% in 2012-13 as against 3.6% in 2011-12. Industry registered a growth rate of only 2.1%in 2012-13. Manufacturing growth is estimated to be even lower at 1.0%.The services sectorhas been the mainstay of growth in the last decade, contributing to about 65% of thegrowth. The growth rate in the services sector declined to 7.1%in 2012-13 from 8.2% in2011-12. Monetary tightening to contain inflation, slowdown in investment, and a weakglobal economy has contributed to moderation in growth.
International oil prices averaged above USD 100 per barrel during 2012-13. Higher oilprices coupled with only a partial pass through to consumer prices resulted in higher thanbudgeted subsidy outgo. The deterioration in the fiscal balances pushed the government totake fiscal consolidation measures. One of the measures undertaken was to increase dieselprice by Rs. 5 per liter in September 2012. In January 2013, OMCs were authorized toincrease diesel prices in small increments at regular intervals till prices reachinternational parity. Also, bulk diesel sales directly to consumers are to be made atnon-subsidized market determined price. Number of subsidized LPG cylinders has been cappedat nine. Rising fuel prices did add to fuel inflation. However, wholesale price indexmoderated in the second half of the 2012-13 on account of declining non-food manufacturinginflation.
Global economy continues to grow at a sluggish pace. As per IMF, world output growth in2012 was 3.2% with advanced economies growing at mere 1.2% while growth rate for emergingeconomies was 5.1%. This weakness was reflected in declining exports by India. Non-oil andnon-gold imports also declined due to weak domestic demand. However, higher oil importsoffset the decline in non-oil imports. The net invisibles balance (exports of services andremittances) failed to cover the trade deficit completely. India's current account deficitwas 4.8% of GDP in the third quarter of 2012-13. However, net capital flows were able tofinance the current account and there was even a marginal accretion to foreign exchangereserves in the third quarter. The rupee per US dollar fluctuated significantly,depreciating from Rs. 51 per dollar at the end March 2012 to touch a low of Rs. 57 perdollar in June 2012, appreciating between July 2012 and September 2012 to reach Rs. 51.62per dollar in October 2012 and depreciating again to fluctuate betweenr 53-55 per dollarduring October 2012 to March 2013.
Consumption of petroleum products increased to about 155 million tons in 2012-13 from148 million tons in 2011-12, an increase of about 5%. Diesel, the largest component ofdemand barrel, was the main driver of the growth with an increase of 7% over previousyear. Diesel accounted for 60% of the incremental demand in 2012-13. Petcoke consumptionincreased by 49%, accounting for 40% of the incremental demand in 2012-13. Naphtha andPetrol consumption increased by 9% and 5% respectively. Bitumen and LPG consumptionincreased marginally at 0.7% and 1.6% respectively. Consumption of ATF, FO/LSHS, LDO andSKO declined.
In the near term, recovery in advanced economies is likely to be slow and a number ofuncertainties remain, though global economic prospects have improved. Thus, main impetusfor growth in India has to be domestic demand. The Government of India has taken a numberof steps to stem the slowdown such as setting up of Cabinet Committee on Investment (CCI)to fast track mega investment projects, a scheme for restructuring debts of the statediscoms, and permitting FDI in a number of areas. Oil prices are expected to soften innear term as supply growth is expected to slightly exceed growth in demand. This wouldreduce pressure on India's current account deficit and also reduce thesubsidy/under-recovery burden on the government and OMCs.
The 2011-12 performance of the Corporation has qualified for 'Excellent' rating interms of the MOU signed with the Government of India with an MOU score of 1.037. This isthe best score amongst all the PSUs under MOP&NG during the year.
The Gross Sales of the Corporation (inclusive of excise duty) for the year ended 31stMarch, 2013 was Rs. 2,15,675 Crore as compared to Rs. 1,88,131 Crore in the previous year.The total sale of products (including exports) for 2012-13 was 30.32 MMT as against 29.48MMT during 2011-12.
Profit Before Tax
The Corporation has earned a Profit before Tax of Rs. 1,475 Crore in 2012-13 ascompared to Rs. 1,219 Crore in 2011-12.
Provision for Taxation
An amount of Rs. 570 Crore has been provided towards income tax for 2012-13 consideringthe applicable income tax rates as against Rs. 308 Crore provided during 2011-12.
Profit after Tax
The Corporation has earned a Profit after Tax of Rs. 905 Crore during the currentfinancial year as compared to Rs. 911 Crore in 2011-12 mainly due to higher provision fortax.
Depreciation and Amortisation
Depreciation for the year 2012-13 was Rs. 1,984 Crore as against Rs. 1,713 Crore forthe year 2011-12
The borrowings of the Corporation were Rs. 33,789 Crore as on 31st March, 2013 ascompared to Rs. 29,831 Crore as on 31st March, 2012. Borrowings during the year weremainly through short term foreign currency loans and commercial paper. Long Term Loanswere borrowed at competitive rates. Non-Convertible Debentures were issued in November2012and March 2013 for Rs. 545 Crore and Rs. 975 Crore respectively and External CommercialBorrowings (ECB) of Rs. 2,175 Crore were taken in March 2013 for on-going projects. Thelong term debt to equity ratio stands at 0.75:1 as on 31st March, 2013 as against 0.66: 1as on 31st March, 2012.
Net Fixed Assets (including Capital Work in Progress) increased from Rs. 25,294 Croreas on 31st March, 2012 to Rs. 27,722 Crore as on 31st March, 2013. During the year, HPCLincurred Rs. 2883.65 Crores on Plan Projects.
Investments as on 31st March, 2013 were Rs. 10,627 Crore as compared to Rs. 10,371Crore as on 31st March, 2012.
Gross Refining Margins (GRMs)
Gross Refining Margin of Mumbai Refinery averaged at US $ 2.08 /bbl during the year asagainst US $ 2.83/bbl for the year 2011-12.
Gross Refining Margin of Visakh Refinery averaged at US $ 2.08/bbl during the year asagainst US $ 2.95/bbl for the year 2011-12.
Earnings Per Share
Earnings per share for the current year is Rs. 26.72 as compared to Rs. 26.92 in2011-12.
Dividend of Rs. 8.50 per share has been proposed for the year 2012-13. The dividendwould result in total payout of Rs. 337 Crore, including Dividend Distribution Tax.
IEA estimates global oil demand to have increased from 88.9 MBPD in 2011 to 89.8 MBPDin 2012. The growth was mainly from Asia Pacific with demand in Europe declining. Poormacroeconomic outlook, high oil prices and improvements in energy efficiency have limiteddemand.
Crude oil prices averaged above the key 100 $/bbl, required by Saudi Arabia to financetheir public spending. However, this provided incentives for marginal cost producers tomaximize their production of alternate crude supplies like Canadian Tar Sands.
Year 2012-13 also witnessed the highest ever production of tight oil (shale) in the USwhich reduced its dependency on West African crude. This contributed in pressurizing Brentand diverting oil flows to Asia.
On the supply side there were disruptions in oil production in South Sudan, Yemen,Syria, and the North Sea. The uncertain political situation in Libya & Syria, attackson Oil facilities in Nigeria and the Iran sanctions increased the downside risk on supply.Iran being one of the major term contract suppliers, the sanctions on Iran and its aftereffects impacted the security of crude supply to HPCL. This was effectively managed byincreased term upliftment from other suppliers and spot purchases.
As per IEA, gasoline, rather than middle distillates, led global demand growth lastyear. Middle distillate demand was affected by lower industrial activity worldwide whereasstrong requirement by Saudi Arabia and China for gasoline supported demand. Keeping inmind the increased gasoline demand the strategy of maximization of naphtha conversion togasoline was continued. World LPG and residual fuels demand in 2012-13 contracted whileJet/Kerosene demand remained at the same level as last year. Indian LPG demand grew at aslower pace due to changes in government policy, however domestic production continued tofall short of demand. Indian refineries were required to maximize LPG production to reduceimport dependence and minimize shortfall. The residual fuel demand continued to fall yearon year in India and refineries adapted by increasing Bitumen production.
Benchmark crudes Brent and Dubai, were trading at their highest level during the yearin April'12. From the high of 119.52 $/bbl witnessed in April'12, Brent declined month onmonth to 94.84 $/bbl by June affecting refining margins and inventories. Crude oil pricesfell during Q1 in part, due to concerns about falling oil demand with a sluggish globaleconomy. The deepening euro zone crisis, slowdown in Chinese growth and rising global oilsupplies due to increasing U.S. shale oil production added to the list of concerns. Thevolatility in prices has affected refinery margins in spite of inventory management acrossthe value chain.
Product cracks mirrored crude with Naphtha differentials falling by 10.86 $/bbl duringApril to June on weak petrochemical demand and lower cracker runs. Gasoline was also notsupported and fell by 7.34 $/bbl from April to June reflecting weak demand from Indonesiaand Vietnam. Middle distillate cracks in Asia were relatively stable helped by strongdemand from Australia, India and Sri Lanka. Fuel Oil cracks was the only bright spot at astrong (2.45) $/bbl level helped in part by refining maintenance in Europe and Russialimiting supplies.
The Reuters Singapore margin for a cracking refinery was pressured by the weakness inlight distillates to settle at 6.67 $/ bbl. However, only a few Indian refineries wereable to post this margin due to the month on month fall in crude and product pricesdevaluing both finished goods and Intermediate Stock Differential (ISD). This wascompounded by reduced margins in processing higher priced crude of previous month for saleat lower prices in the next month. Planned turnarounds during the quarter also impactedmargins.
Brent strengthened significantly in Q2 supported by shutdowns in Norwegian fields,shrinking European refining capacity and steep product draws. Considering the improvedoperating environment and ensuing monsoon season, HPCL increased its procurement /processing of low sulphur and light crudes. This enabled HPCL to reduce fuel oil exportson back of lower bitumen demand during this period.
Q2 saw firmer petrochemicals margins and tight feedstock supply pulling up naphthacracks while alternative feedstock LPG surprised, falling below crude in July &August. European gasoline cracks were capped due to weak demand in the US. However,Singapore gasoline market was supported by healthy demand during Ramzan and tight suppliesdue to refinery turnarounds. Gasoil crack spreads strengthened in Q2 led by strong demandin Europe due to refinery closures, import demand from Australia and outages in Asia. Fueloil however weakened marginally due to subdued demand for bunkers and from Chinese tea potrefineries.
Reuters Singapore refining margins strengthened to a high of 9.12 $/bbl in Q2 due inpart to the strong middle distillate cracks. On the back of improved cracks and inventorygains HPCL also experienced stronger margins. HPCL refineries undertook various marginimprovement initiatives like upgrading naphtha to gasoline with PyGas thereby reducingnaphtha export. Increased focus on sale of surplus naphtha to end users by way of termcontracts assisted in improving margins.
Crude prices stabilized at 110.02 $/bbl in Q3 as persistent concerns about the economyand the looming US fiscal cliff kept a cap on prices. The downside was limited bygeopolitical concerns and reduced exports from Iran.
Naphtha cracks continued to improve in Q3 due to support from petrochemical demand.Gasoline however weakened on the back of improved supplies and end of driving season inUS. Gasoil cracks in Asia were also supported by an unusually cold winter. This was offsetby fuel Oil crack spreads plunging to its lowest level for the year on higher inventories,reduced demand and increased supply from Middle East.
Q3 Singapore refining margins reflected the frail heavy ends market and settled at 6.47$/bbl. However, month on month fall in crude prices for the HPCL's basket again impactedinventories and realizations. The fall in crude prices was overshadowed by weakeningproduct cracks resulting in lower margins for refineries. Traditionally lube refiners havebenefited from higher margins than standalone fuel refiners. However, the weak worldeconomy resulted in poor demand for lubricants and lower LOBS margins, thereby impactingMumbai refinery's margins.
Q4 saw crude oil futures prices scaling nine month highs in early February at 116.28$/bbl. Expectations of a better economic outlook for China and the US, robust financialmarket activity and seasonal winter demand were drivers for the strong crude prices.2012-13 concluded with steeply lower prices on back of weak global demand outlook and highcrude oil inventories.
Naphtha, Gasoline and Middle Distillate cracks posted their best run during the year inQ4 on the back of heavy refinery maintenance and strong demand. However, cracks fellacross all regions in March with Kerosene (SKO) affected the most, as seasonal winterdemand for heating faded in the Northern Hemisphere. Fuel oil cracks firmed up mainly dueto reduced fuel oil imports from Middle East, lower inventory and rise in Chinese importdemand.
Supported by strong light and middle distillates, Singapore refining margins settled at8.7 $/bbl. The month on month volatility in prices with crude falling 8 $/bbl in March'13continued to pose a challenge to refineries overshadowing operating performance. Weak lubebase oil prices on account of declining demand in OECD countries and reduced growth inAsia capped HPCL Mumbai refinery's margins. However, HPCL refineries posted improvedmargins compared to previous quarters on account of improved yield and 100 % servicefactor of all units. Efforts were made to minimize bottoms by optimizing crude selectionand maximizing higher margin bottoms like bitumen.
Crude has been averaging above 110 $/bbl for the past three years, as compared to the75 $/bbl levels seen in the earlier period. This has resulted in higher fuel costs forrefineries solely on account of higher feed costs. Product crack spreads not keeping pacewith crude has resulted in a scenario of reduced margins for refineries.
HPCL imported 12.02 MMT of crude oil in 2012-13 as compared to 12.54 MMT in 2011-12.Lower imports were mainly due to planned shutdown of crude distillation units in the year2012-13. The Free on Board (FOB) cost of imported crude oil amounted to USD 9726 million (Rs. 53165 Crore) in 2012-13 as compared to USD 10409 million ( Rs. 50941 Crore) in2011-12.The average cost of crude oil imported in 2012-13 stood at USD 109.48 per barrelas compared to USD 112.85 per barrel in 2011-12.
The Brent Dubai spread in 2012-13 of 3 $/bbl favoured increase in sweet crudeprocessing. HPCL refineries responded by increasing low sulphur crude processing to 34.5%for the year 2012-13 as against 31.7% in 2011-12, when Brent Dubai spread was 4.55 $/bbl.This has resulted in higher spot purchases of imported crude of 7% in 2012-13 vis a vis 3%in 2011-12.
HPCL uplifted 3.39 MMT of indigenous low sulphur crude oil (Mumbai High, Ravva andKGB). HPCL was allocated the entire production of Ravva Crude Oil of FY 12-13. The priceof Ravva is linked to regional markers like Tapis and Minas crude which is disconnectedfrom comparable markers on account of declining production. This has resulted inindigenous crude price being higher than imported crude and has impacted HPCL's marginadversely. This has been taken up with the government for resolution.
The balance crude requirement of 12.02 MMT was mainly met through term imports and spotpurchases. Total high sulphur crude oil procurement of 10.02 MMT was procured through termcontracts from the Gulf region. Main suppliers included Saudi Arabia, United ArabEmirates, Iraq, Iran and Kuwait. Total low sulphur crude oil procurement amounted to 2.00MMT which was sourced through term and spot purchases. Low sulphur crude fromMediterranean - Saharan Blend was processed for the first time in the Visakh refinery.
HPCL expanded it crude basket by adding 4 new crudes to its basket of 104 crudes,taking the number of crude oils that can be processed in our refineries to 108. New termcontracts with MNCs/NOCs were also entered into, in order to source additional low sulphurcrude. Term contract with SOCAR (National Oil Company (NOC) of Algeria for Azeri LightCrude oil) and Petronas (NOC of Malaysia, for purchase of selected Nigerian grades at adiscount to declared Official Selling Price) were entered during the year.
HPCL's refineries maximized crude processing in 2012-13, achieving a combined refiningthroughput of 15.78 MMT with a capacity utilization of 107%.
Mumbai Refinery has achieved crude throughput of 7.75 MMT as against installed capacityof 6.50 MMT with a capacity utilization of 119%. This was the highest ever crudethroughput recorded surpassing the previous best of 7.51 MMT during 2011-12. VisakhRefinery achieved crude throughput of 8.03 MMT as against installed capacity of 8.30 MMTwith a capacity utilization of 96% due to planned shutdown of larger capacity CDU unit.
In respect of distillates Mumbai refinery achieved 73.5% vs. target of 73.0%, andVisakh refinery has attained 72.6 % vs. target of 73.0%. The specific energy consumption(MBN) was also at MOU Excellent level for both the refineries with 82.6 vs. target of 86.0for Mumbai Refinery, while Visakh refinery recorded its lowest ever specific energyconsumption (MBN figures) during the year 2012-13 with 84.0 MBTU/Bbl/NRGFvs. target of86.0. The energy conservation measures have made possible to restrict fuel and loss forMumbai and Visakh refineries to 7.5% and 7.6% which is better than the target of 8.0% and8.1% respectively. This high level of energy efficiency was made possible by consistentefforts of both the refineries by controlling and optimizing the fuel consumption at microlevel for each and every process/equipment consuming energy.
The energy conservation measures undertaken by both refineries during the year 2012-13have resulted in a savings of 42,157 SRFT/year (standard refinery fuel tonnage per year).This translates to savings of Rs. 165 Crore approximately
Mumbai and Visakh refineries also achieved highest ever annual production of LPG (817.6TMT against previous best of 809.4 TMT), MS (2619 TMT against previous best of 2540 TMT)and bitumen (1042.5 TMT against the previous record of 946 TMT).
The Bureau of Indian Standards revised the bitumen quality norms from the hitherto'Penetration Grades' to 'Viscosity Grades'. Both Mumbai and Visakh refineries areproducing this more stringent quality bitumen products viz. VG-10 and VG-30. The totalbitumen production of HPCL refineries was 1043 TMT during the year surpassing the previousbest of 946 TMT in the previous year.
Lubes refinery achieved an annual production of 361.9 TMT of base oils comprising of319.6 TMT of Gr I base oils and 42.3 TMT of Gr II base oils. Going forward higherconversion of value added lubes to Gr II will yield better margins to lubes refinery.
The State of the Art Integrated Effluent Treatment Plant (IETP) at Mumbai refinery hasreduced intake of fresh water from the municipal corporation by purifying and recycling610 TKL treated water for refinery consumption thus contributing significantly to NaturalResource conservation. Also, in Visakh Refinery 714 TKL of water was purified throughdesalination RO Plant.
HPCL refineries are committed towards conservation of energy and minimization oflosses.In this endeavour, the refineries have taken part in the benchmarking studiesorganized by CHT in collaboration with M/s Solomon Associates, USA. The outcome of thisstudy brought to light, the refineries performance in comparison to other refineriesworldwide bearing similar configuration. In order to address the gaps identified, shortterm measures were implemented which yielded in better energy efficiencies and long termstrategies have been developed with a time bound action plan.
HPCL endeavoured to utilize the period of scheduled turnaround of units to implementyield improvement/ capacity augmentation initiatives. Mumbai Refinery installed andcommissioned Cat Cooler facility in NFCCU in May 2012 which has now made it possible toprocess heavier feed, like lubes extract, VBO, DAO & old FCC resid thereby partiallyupgrading the bottom streams. Visakh Refinery has tapped the opportunity during CDU-IIIturnaround and carried out augmentation jobs resulting in throughput enhancement. Changeof soaker drum internals in VBU has improved conversion in VBU by 2%. To improvedistillate yield of cracked product, FCCU I GCU revamp was completed in September 2012 atVR. This has allowed reactor temperature to increase from 512 OC to 527OC resulting inbetter distillate yields.
To meet the requirements of the BS-IV quality diesel as laid down in the Auto FuelPolicy, both Mumbai and Visakh refineries are setting up Diesel Hydrotreater Units of 2.2MMTPA each with associated facilities. The DHT projects at both the Refineries weremechanically completed and are expected to be commissioned in 2013.
HPCL refineries are continuing their efforts for capacity augmentation and improvementin flexibility of the refineries in handling different varieties of crude oil therebyaligning themselves towards HPCL's overall objective for bridging the gap between refiningcapacity and the marketing demand of petroleum products.
Presently, HPCL Mumbai and Visakh refineries are capable of meeting about 52% of itstotal market sales volume. The balance demand is met through domestic purchases fromstand-alone refineries and through imports. Commissioning of HMEL, Bathinda Refinery hasincreased HPCL's overall self-sufficiency to 80% of market demand.
Keeping in view, the growing marketing demand in the coming years this gap wouldfurther widen and the demand is projected to be more than 42 MMTPA by the end of 2016-17.In order to bridge this deficit and to attain self-sufficiency of petroleum products, itis vital for the corporation to enhance its refining capacity in line with marketingdemand. In that direction the existing refineries at Mumbai and Visakh are scheduled foraugmentation to 10 MMTPA and 15 MMTPA respectively. Additionally, Corporation plans to setup a new 9 MMTPA grass root refinery-cum-petrochemical complex at Barmer District,Rajasthan. The proposed refinery will process the locally available Rajasthan crude aswell as other crudes and the proposed complex will be the first such complex specificallydesigned to produce petrochemicals from the indigenous Rajasthan crude oil owing to itsspecific characteristic properties.
The Corporation continued to record robust physical sales growth during the financialyear by implementing effective marketing strategies. The Corporation has registered atotal Products sale of 30.32 MMT during FY 2012-13 vis-a-vis sales of 29.48 MMT during thepreceding year 2011-12. It has indeed been a significant year for the Corporation, withthe growth being 4.7% in Marketing Sales over the sales volume of previous year. Thisperformance has enabled the Corporation to improve its market share amongst Public SectorOil companies to 20.19% during the current year 2012-13 against 19.96% in 2011-12.Individual Marketing SBUs performance is covered in the sections below.
As in the past, Retail continues to occupy prime position for the country's publicsector oil marketing companies, accounting for a majority share of the physical salesvolume for each of them. The Corporation's strategy remains unchanged towards Retailmarketing, with focus on continuous improvement in physical presence across geographicalareas combined with enriching the customer experience. These are the key elements forensuring out of the ordinary performance gains on a long term basis.
Several initiatives taken during the year 2012-13 for improvement in Retail performancehave borne fruit. Retail has crossed 20 MMT mark in sales for the first time. Thesustained focus on customers has led to continued market share gains in combined Petroland Diesel for 9th consecutive year. The total Motor Fuel market share now stands at25.20%, with increase of 0.14 % during FY 2012-13.
Individually, Petrol (Motor Spirit) sales has recorded a growth of 5.2 % in the year2012-13 vis-a-vis preceding year, which compares favourably against PSU oil industrygrowth of 5.1% for the year. Similarly, Diesel (High Speed Diesel) also registered betterthan PSU oil industry growth at 9.9 % which is 0.8 % higher than PSU oil industry growth.These numbers are a result of continuous thrust in enlarging the Corporation's Retailfootprint across geographies in the country, by commissioning 1018 new Retail Outletsduring the year. These include 318 outlets in rural areas which is a special focus area,for tapping the business volumes generated by the government's efforts to ensure atrickledown effect of the GDP gains. The Corporation has crossed the 12000 retail outletslandmark, with the year end of Retail Outlet number standing at 12173.
The Corporation continued with the various productivity enhancement initiatives likeStandard Operating Practices (SOP), Outlet Diagnostic Monitoring Tool (ODMT) which wererolled out in 4700 outlets and 4500 outlets respectively and had helped in improved MS andHSD sales performance during Financial Year 2012-13.
A key element in the Corporation's strategy for enhancing the customer experience isproduct quality assurance, for which Retail Automation is an important part. RetailAutomation system was installed at 265 Retail Outlets during the year which have motorfuel sales exceeding 100 KLPM, taking the total all India number of automated outlets to1948 by the year end.
Retail has continued to leverage Information Technology for enhancing customersatisfaction levels. One more in this chain is the Retail Outlet Maintenance ManagementSystem (ROMMS), which is aweb based multiuser application for providing real time trackingand managing the maintenance of Dispensing Units (DUs) at Retail Outlets for ensuringmaximisation of equipment uptime. This solution enables retail dealers to log theircomplaints and then track the action on them onreal time basis. It also helps to realizevalue from the comprehensive Annual Maintenance Contracts for these front end equipmententrusted to business associates.
Technology has been leveraged for the first time in the industry for rolling out a webbased Pricing Tool Kit for calculation of RSP for all variants of Petrol and Diesel. Thisapplication provides instant communication to the retail dealers and field officers onprice changes through SMS alerts and emails. Concurrently, all retail outlets have beenmapped into Google Map, through which any customer can ascertain the price of Petrol andDiesel at each Retail outlet on the route in which he or she is travelling and stop tofuel at the most suitable outlet.
The focus on technology utilization for retail business pursuit has resulted inrecognition by industry and trade forums. The Corporation was conferred with Loyalty Awardunder the category "Best use of Technology in a Loyalty Program"at the 6thLoyalty Summit for the 'DriveTrack Plus' programme. This programme is Retail's flagshiployalty program with monthly spends of over Rs. 500 Crore with 3200 retail outletsparticipating in the same. Technology is the key in managing this massive programme, inwhich a unique online-offline architecture based on smartcards was deployed which enablesusers to transact even in the remotest of locations. DriveTrack Plus customers can managetheir funds through electronic payments, and access from both internet and mobileplatforms for ensuring that their user staff can fuel at the designated outlets in atrouble freeway.
The Retail business environment continues to be challenging with a shift to marketdriven pricing. Petrol price has become market driven during the year and is mostly netpositive, even though there have been few situations of under recovery caused by crudeprice volatility combined with weakening of the Indian rupee vis-a-vis the US dollar. Thecalibrated approach taken for moving the Diesel price towards market driven price islikely to take some time to yield results, but is unavoidable considering thesensitivities involved which have to be carefully handled. The Corporation believes thatthe motor fuels business would become excellent in the foreseeable future, and focus isrequired for recording customer gains and retention, which will hold it in good stead whenthe changed environment attracts other players into the market.
MOU 2012-13 with MOP&NG:
During 2012-13, as part of MOU with Government of India, the following were achieved:
Achieved (Market effectiveness) against the target of 0.950.
Commissioned 318 new rural retail outlets against the target of 160.
Automation at 265 Retail outlets (sales > 100 KL/Month) against the target of200.
Maintained Uptime of 98.16 % at Automated Retail outlets against the target of95%.
3rd party audit of retails outlets selling > than 100 KL/month - targetachieved was 106%
238 dealers covered under Management Development Program against the target of150.
Achieved Electrical Safety Audit at 1609 retail outlets as against target of1000.
Direct Sales - Industrial & Consumer
I&C encountered one of the most challenging business environment during the year,consequent to the impact of slowing of the Indian economy and reduced industrial fuelsdemand. This adverse business environment was addressed by sharp focus on the segmentswhich had a healthy demand. This strategy paid off for the Corporation with I&Crecording best in industry growth amongst PSU oil companies for all major I&Cproducts.
During the year 2012-13, I&C also was significantly impacted by the shift of usersto other fuels or by their downsizing of their operations, consequent to theimplementation of market aligned pricing for Diesel for majority of bulk consumers from18th January 2013 onwards. As informed in preceding para, this drop in demand for Dieselin industries and consumer sector was addressed by focus on strong demand in other sectorse.g., infrastructure sector. In addition to robust bitumen demand resulting from thegovernment's sustained thrust for road network expansion, the addition of large newcapacities in the Power Sector (Thermal) had a beneficial impact by creating demand forliquid start up fuels, which the Corporation tapped effectively.
The Corporation has implemented a clear strategy for balancing the often conflictingrequirements of ensuring evacuation of Refineries production in a depressed market whileensuring maximum financial realizations from the same. A cornerstone of this strategy wascontinuous customer engagement and enhancing their delight which had a salutary effect onI&C profit numbers. The Corporation continued to focus on governmental businessopportunities for gaining from the relatively stable demand for petroleum products in thissegment.
Strategic thinking described in preceding paras has resulted in I&C business linerecording a sales volume of 4.02 MMT during the year, corresponding to YOY growth of 0.4%.The success of the strategy clearly comes out when seen in the context of the de-growth of2.3% experienced by other marketing companies during the same period.
The Corporation has successfully tapped the strong demand for Bitumen from roadinfrastructure projects across the country, resulting in Bitumen sales surpassing the 1Million MT landmark for the first time. The success in customer engagement strategy, whichincluded strengthening the bulk bitumen storage and logistics in key markets has enabledthe Corporation to increase the market share by a significant 2.6 % during the year.
Marine trade worldwide has come down, consequent to depressed demand for commoditiesespecially in China. This has led to lower marine fuel demand in India and elsewhere.I&C addressed this adverse business environment by improving customer engagement andby strengthening logistical infrastructure at major port locations. Similarly, I&Cvolumes in Naphtha segment was tapped successfully, specially from gas based power plantswhich were called back by some state governments for meeting power shortfalls. Thissuccessful strategy had a beneficial spinoff in enabling the Corporation to restrictexports of these two products.
In addition to motor fuels upliftments from JV refinery at Bathinda (HMEL), theCorporation has commenced upliftment and marketing of Hexane from this refinery which alsoprovides a locational advantage for the North India markets.
Direct Sales - Lubes
India retains its importance as the third largest lubes market in the world after USand China, constituting nearly 6% of the total world demand. According to marketinformation, finished lubes market size in India is 2800 TMT approx. which includesTransformer Oils and White Oils. While the all India lube demand remained under pressureas a result of factors affecting GDP growth, the Corporation has recorded remarkable lubessales during the year 2012-13, registering value added lube products sales of 305 TMTplacing the Corporation at the 2nd position amongst the Indian lubes marketers. Thistranslates to a significant growth of 11% over the previous year, which contrasts with thelow single digit growth numbers recorded by the industry.
The Corporation is placed at a commanding position in the Indian lube market, being theowner of India's largest lube base oil refinery, designed to produce Group II and GroupIII base oils, in addition to continued production of Group I base oil from the legacyunit. Contrary to common perception, certain categories of products perform at their bestwhen made from Group I base oils. These three base oils complement each other and form acomplete bouquet from the lube manufacturer's perspective.
An increasing number of individual customers and other buyers such as car andmotorcycle mechanics prefer to buy their lube requirements from a shop in their vicinity,who can serve their brand of choice from the many fast moving lube brands stocked by them.The Corporation has created a 213 strong Distributors Network across all geographicalareas, who feed the bazaar retail shops numbering over 38000. During the year 2012-13, thesuccessful targeted marketing initiatives and promotional programmes has resulted in YOYgrowth for this segment which is significantly better than industry peers.
Alongside the lube bazaar market development detailed in preceding sections, constantengagement with HPCL Retail Outlet dealers (petrol/diesel stations) now numbering over12000 remained the cornerstone in the Corporation's lubes strategy. A series ofinitiatives and promotional programmes for retail dealers has paid off handsomely duringthe year, with this segment successfully overcoming the constantly reducing demand for 2stroke two wheeler engine oils resulting from the shift by OEMs to 4 stroke engines.
Complementing the thrust in the individual Auto lube buyers segment, the Corporationhas also strategically focused on enlarging the portfolio of Automotive OEMs genuine oils.HPCL cobranded lubes and associated OEM brands are now entrenched in a large number of OEMservice establishments across India, approaching the 2000 number by the year end.
Traditionally, the Corporation enjoys pride of place amongst Indian lube marketers inthe Institutional sales segment. Individual industrial buyers have very high expectationsfrom lubes suppliers, for the quality and technological performance levels of the lubesproducts concerned, as well as the service quality from the marketer. The Corporationduring the year 2012-13 has developed and implemented short term strategies for greaterpenetration into this large volume but highly competitive market. These have recordedsignificant success during the year, with the Corporation being placed at the top inindustry ranking by growth in the institutional sales segment. The Corporation, as part ofcontinuing strategy, further deepened its network of lube CFAs who cater to the MSMEsegment. This network has enlarged the Corporation's access to more than 12000 MSMEsacross the country, with satisfying outcomes.
The Corporation lubes marketing strategy lays emphasis on continuous innovations inlubes packaging, for keeping pace with customers' expectations. These efforts have led tothe Corporation receiving awards such as World Star Packaging Award and India StarPackaging Award for TamperGard Seal (industry first for oil drums tamper evident seals).
A keystone for the Corporation's lubes marketing structure is its highly talented groupof R&D professionals working on critical projects important to technologicallyadvanced industrial sectors. More than 40 papers on the new developments have beenaccepted till date for publication / presentation in International Seminars/ Conferencesand 7 patents filed. Collaborative projects with premier academic institutions includingNIT, IISc, IIT Agriculture Universities, Indian Institute of Petroleum are underway formutually beneficial activities in their individual area of specialization.
The Corporation has always endeavored to continuously raise the bar on qualityassurance for its products. During the year the Quality Control department implementedin-depth training programmes numbering 11 for our officers and staff as well as forcustomers' representatives for their engaging in this activity in a well-informed manner.Laboratory instruments, skills and processes validation through accreditation agenciesbeing a key to successful QC outcomes, three more labs at Tikrikalan, Kandla andVisakhapatnam White Oil Terminal (new) underwent the rigorous process and obtained NABLaccreditation. For enlarging the physical presence of QC labs across markets, theCorporation has commissioned three new labs at Jabalpur, Rewari and Mughalsarai during theyear serving MP, Haryana and UP markets. In addition to products, the Corporation hasdeveloped laboratory facilities for evaluating the quality of various packages in whichLubes is marketed, and the labs at Mumbai, Kolkata, Chennai and Silvassa engaged in thisactivity diligently during the year.
MOU 2012-13 with MOP&NG:
During 2012-13, as part of MOU with Government of India, the following were achieved:
Successfully set up 3 Nos. New Stationary QC Labs at Jabalpur, Mughalsarai andRewari
2 CFR Engines were commissioned at Irumpanam (Kochi) and at Betkuchi (Guwahati).
As part of R & D for sustained & continuous innovation, we havedeveloped Hydraulic Gear, Transmission Oils for JCBs and CJ-4 engine oil.
Achieved value added lubes sales of 305 TMT against MOU target of 250 TMT
LPG business remains one of the toughest business in the domestic downstream oil andgas sector on account of the under-recoveries on the sale of LPG to domestic households.
Nevertheless, this is a segment which is important to oil marketing companiesconsidering the substantial market volumes involved, and the measures initiated by thegovernment to progressively shift to disbursal of subsidy payouts to individual domesticcustomers on the 'Aadhaar' card platform. It is expected that this method will improve thedelivery and remove anomalies present in the existing system. The new system may alsopermit oil marketing companies to carry on domestic LPG business in a profitable manner,in due course of time, as the full Indian market shifts to direct benefit transfer on the'Aadhaar' card platform.
The Corporation is seized of the current situation as well as the potential turnaroundin the financials of this business line. Accordingly, the Corporation has continued tostress on enhancing customer satisfaction levels by timely delivery of refill at thecustomer's premises. The business line calls for highest levels of logistic skills,considering that a significant part of LPG is from foreign sources, movement of bulk LPGfrom refineries and ports of import to the bottling plants spread across the country andthe last mile connectivity to the individual customer's doorstep.
The established mastery of this complex trade has enabled the Corporation to post acommendable performance this year also. The Corporation has maintained its No. 2 positionin overall LPG Sales with 26.77 % share in the Indian market. Market sales during 2012-13were 4020 TMT as compared to sales of 3899 TMT the previous year, corresponding to agrowth of 3.10 % over historical period. The LPG business driver being bottlingcapability, the bottling plant assets were utilized in a systematic manner during the yearresulting in an all-time high bottling of 3847 TMT LPG during the year.
Domestic LPG marketing is similar to many other consumer products, calling forcontinuous enhancement of customer service quality and engagement. The Corporation hasleveraged technology for addressing this aspect in an efficient manner. The LPGTransparency Portal, the 'LPG Portal' for monitoring last mile delivery of domestic LPGcylinders, the IVR /SMS based 'HP Anytime'' refill booking system are some of theinitiatives in this category.
Constant stress on Health and Safety in LPG operations has resulted in theCorporation's performance being acknowledged with Golden Peacock Award for OccupationalHealth and Safety for the Mangalore facility.
The HSE platform in the Corporation was strengthened during the year with IT enabledunique modules for Online HSE Index calculation, Online Accident Reporting Module tomanage data on incidents involving LPG cylinders, and a well-designed training module forLPG Mechanics who are the key links in the LPG safety chain. The Corporation's unrelentingemphasis on this critical aspect has resulted in one of the major LPG plants being awardedfor 'Excellence in Safety Management' during the year.
LPG SBU continues to maintain its market leadership position in the highly competitiveND Bulk Segment, with 44 % market share. This part of the LPG business line is built uponcustomer service levels and strength of the relationships built with customers bothinstitutional and commercial. Product price being market driven and many marketers wooingthese customers, the Corporation's performance in this segment is significant. As acontinuing business strategy, 3 new dedicated Non-Domestic distributorships have beencommissioned during the year for enhanced service quality for this discerning set ofusers.
The Corporation has leveraged the plans created as part of Vision 2015 strategy ofMOP&NG for increased penetration of domestic LPG in the rural areas with commissioningof 243 new rural LPG dedicated distributorships for serving this segment. Combined with 54new regular distributorships across India, the Corporation has finished the year with asizeable total of 3194 LPG distributorships. With the enrolment of 32.17 lakh customersduring the year, the Corporation now has a total of 3.95 Crore domestic LPG customers. Thefine performance in customer service has led to acknowledgement by marketing professionalsresulting in Superbrands 2012-14 trophy award to HP GAS, figuring in the list of India's86 strongest consumer brands.
As in other petroleum business lines, infrastructure is the key for sustained marketgrowth and has remained a major action area for the Corporation. Augmentation of bottlingcapacity was carried out resulting in addition of 180 TMT LPG bottling capacity during theyear.
Continuous innovation is the formula for continued success in any business includingLPG. The in-house customization and deployment of the Supervisory Control and DataAcquisition System (SCADA) in a bottling plant has received praise in the Industry, withthe Corporation awarded the Golden Peacock Innovative Product/Service Award 2012 in theOil & Gas Category. This innovative streak has also led to the PETROFED InnovatorAward during the year.
MOU 2012-13 with MOP&NG:
During 2012-13, as part of MOU with Government of India, the following were achieved:
LPG Plant at Anantpur (AP) was mechanically commissioned in Dec 12
Achieved 98.40% (SHE Index) at LPG Plants against the target of 92%
Total Bottling achieved at all the Plants stood at 3680 TMT (target 3400 TMT)
326 LPG dealers covered under Management Development Programs (Target100dealers)
Achieved 100% redressal under the parameter "Toll Free Number ComplaintsRedressal"
Award of RGGLVY issue of LOI 87.9 % vs. target of 80%
LPG connections released to underserved area. 52.9% achieved vs.target of 40%
The Aviation fuel sector in India has registered a negative growth of 4.9 % in the Year2012-13, in tandem with the lower GDP growth of the country. The adverse businessenvironment impacted the performance of airline companies with one of the major playershaving to suspend its operations. The Sector has also witnessed relaxation in the policiesby the government for independent import of ATF by airline companies and rethink on policyof FDI in this sector.
The Corporation recorded sales of 568 TMT during the year in this business line. Thefocus remains managing volume growth while protecting revenues in this volatile sector.HPCL commissioned new Aviation Service Facility at Juhu Airport to cater to the growingrequirements of the non- scheduled Aviation segment. To build uniform and speedyoperational parameters across all working locations, ASF management software wasintroduced at all Aviation Service facilities.
During 2012-13, HPCL expanded CNG retailing network in Ahmedabad by adding 1 daughterbooster station taking the total CNG network at Ahmedabad to one mother station and 20daughter stations.
The Corporation is a late entrant into Natural gas sector in the country, havingadopted a measured strategy while engaging in this high return but high risk sunrisesegment. Gaining from the experience in pilot projects, the Corporation has ventured intojoint ventures with many petroleum industry majors, for development of cross countrynatural gas pipelines. These include GSPL India Gasnet Limited (GIGL) and GSPL IndiaTransco Limited (GITL) for laying, building and operating three gas pipelines (a) Mehsana- Bathinda Pipeline; (b) Bathinda-Srinagar Pipeline; and (c) Mallavaram - BhilwaraPipeline. The target completion date of these projects is 2014.
To give impetus and build in the area of Natural Gas, HPCL Board has approved settingup a 5 MMTPA LNG regasification terminal on the West Coast at Charra, Gujarat as a JointVenture Company (JVC) with the port developer M/s S.P! Ports Pvt. Ltd.
Operations & Distribution
The key to success in petroleum marketing worldwide is efficient and effectivemanagement of its logistics and distribution across markets. The Corporation has alwayslaid stress on this critical aspect, with the distribution facility recording a thruput of41.4 MMT during 2012-13, which includes substantial product quantity from sources otherthan own refineries.
These volumes were handled with enhanced levels of Safety, Security, Service andEfficiency in operations through automation and improved operating processes. Technologywas leveraged for rollout of critical IS Tools customized for strengthening the safetysystems of oil installations. These include e-Inspection Tool, Online Near Miss Reportingand Online MOC Tool (Management of Change).
The last link in the petrol and diesel distribution chain is the large fleet of TankTrucks belonging to business associates. The Corporation has rolled out a unique CSRinitiative titled Rs. Fit for the Road' campaign to provide basic health check-up of TTcrew thereby covering a total of 7343 crew members across the country.
The Corporation was in the forefront for implementing safety enhancement measuresidentified by the M B Lal Committee at terminals / installations.Focus on this activityhas led to 91 of the 113 committee recommendations being complied with by the year end,which positions the Corporation at the top of the PSU oil industry table.
Product management on the eastern seaboard was a focus area for the Corporation, forefficiently handling the large production quantity of Visakhapatnam refinery. A newstate-of-the-art white oil terminal was commissioned at a green-field site during the yearat Visakhapatnam, which has led to a spinoff benefit for Visakhapatnam refinery gettingthe valuable acreage occupied hitherto by the now decommissioned legacy Terminal facility.
Environmental and green initiatives remain a focus area for the Corporation inpetroleum logistics. Continuous thrust on this front has enabled the Corporation tocomplete the Carbon Footprint Assessment according to GHG global protocols at 25 POLInstallations across the country, followed by rollout of measures for carbon footprintreduction. A parallel initiative for addressing the depletion of groundwater resources wasthe initiative for Rain Water Harvesting at 22 POL locations.
MOU 2012-13 with MOP&NG:
During 2012-13, as part of MOU with Government of India, the following were achieved:
Rain water harvesting completed at 22 locations (Target 22 locations)
Electrical Energy audit completed at 10 POL locations (Target 10 locations)
25 locations successfully covered under Carbon Footprint Assessment versustarget of 25 locations
Implementation of HSE Index at POL locations completed at 25 locations versustarget of 25 locations
Surveillance Safety Audits successfully completed at 50 locations versus targetof 50
Projects & Pipelines
It is widely recognized in petroleum industry that long term growth of a petroleumorganisation depends on efficient and cost effective movement of products from producingcentre's to consumption areas. The most efficient and least cost option being pipelines,the Corporation has laid special emphasis on development of a varied set of cross countryproduct pipelines and acquiring high level of competency in managing these effectively formaximum revenue gains.
The Corporation achieved remarkable successes on this front with a record combinedthruput of 14.04 MMT during the financial year 2012-13, for Mumbai-Pune-Sholapur Pipeline,Vizag-Vijayawada-Secunderabad Pipeline, Mundra-Delhi Pipeline and theRamanmandi-Bahadurgarh Pipeline. During the financial year 2012-13, MPSPL and VVSPLachieved highest ever annual thruput of 4.05 MMT and 4.38 MMT against thruput target of3.5 MMT and 4.0 MMT respectively. The standards followed in this function has beenconfirmed by ISO 9001, 14001 and OHSAS 18001 accreditation. VVSPL is the first pipeline inthe world to achieve Level 8 in ISRS 8th edition Baseline assessment, the latest andtoughest protocol of DNV. MDPL received OISD "1st Rank in Cross country pipeline -Product category" safety award for the 4th consecutive year. GGSRPEP receivedPetrofed Project Management ( Rs. 500 - Rs. 2000 crores) Company of the Year Award, 2011.
New pipeline projects on the anvil include the Rewari-Kanpur Pipeline (440 KM) and Awa-Salawas Pipeline (92 KM) for transporting white oils and the Mangalore-Hassan-Bangalore-Mysore LPG Pipeline (309 KM). PNGRB Authorization for these projects wasissued in November 2012 and project completion is envisaged to be 36 months.
A critical part of petroleum logistics is the last mile connectivity which isundertaken from a large network of major Terminals and Inland Relay Depots spread acrossconsumption centers. These locations play the crucial role of reaching the product to thecustomers and dealers by Tank Trucks loaded at them. The physical handling of productrequire commensurate infrastructure planned and developed for managing the largequantities involved, in a safe and secured manner, with supporting Information Technologyenabled automation systems being a main driver. Quality Control being paramount,facilities both new and existing are strengthened with on-site fully equippedlaboratories.
The Corporation has during the year, as part of long range products logisticsperspective planning, undertaken projects and commissioned state of the art facilities atvarious locations across India. These include additional product tankages at Loni Terminal(Pune) and new Tank Truck gantries in Depots located at Raipur, Bathinda, Ajmer and Jaipurand QC laboratory infrastructure at Bathinda, Irumpanam (Kochi) and Loni Terminal (Pune).A project targeted at creating a high capacity greenfield facility in the state of Biharachieved fruition with the mechanical completion of Bihta (Patna) project, with anaggregate storage capacity of 61.3 Million Litres. A similar capacity enhancement projectachieved mechanical completion at Tikrikalan (Delhi) which is to receive inputs from HPCLJV refinery HMEL, Bathinda.
RESEARCH & DEVELOPMENT (R & D)
Research & Development is envisaged to provide support to the Refineries andMarketing divisions for operational improvement, absorption of new technologies,developing innovative & path breaking technologies, license technologies and supportexternal organizations and develop over long term into a knowledge hub.
To realize this objective HPCL is putting up a R&D Centre at Bengaluru with aninvestment of Rs. 312 Crore and this centre will be involved in carrying out Research& Development activities in refinery technologies, nano-technology applications andalso bio-fuels.
The R&D Centre will be conforming to eco-friendly design norms and will consist ofNine Research Labs covering Crude Evaluation & Fuels Research, Hydro processing,Catalytic Cracking (FCC/RFCC), Catalysis, Process Modelling & Simulation,
Bio Processes, Standard Testing, Analytical Lab and Centre for Excellence inNano-Technology. Statutory approvals have been obtained and Construction is in progress.
An offsite lab & pilot plant facility has been set up at Bengaluru and DSIRRecognition also has been obtained for the HPCL Corporate R&D center.
HPCL R&D has also undertaken collaborative R&D projects with various premierinstitutes like IISc-Bangalore, IIT-Delhi, IIT-Madras,TERI-New Delhi, CIMFR-Dhanbhad,GITAM University-Visakhapatnam, Jawaharlal Nehru Centre for Advanced ScientificResearch-Bangalore, Poorna Prajna Institute of Scientific Research (PPISR) and Jointcollaboration projects with IIT-Kanpur & Chevron-USA. The areas of research undertakenare related to Process intensification, Nano Catalysts, CO2 Capture & Utilisation,Hydrogen production, purification & storage, Residue upgradation, Improved Lubricants,Bio Fuels development and Development of catalysts for Refinery processes.
MOU 2012-13 with MOP&NG:
During 2012-13, milestones against the following projects as per MOU 2012-13 with GOIwere achieved:
An integrated approach for Bio-hydrogen production through Combined Dark andPhoto-Fermentative process
Nano catalysts for Hydrodesulphurization
Design and Construction of Metal-Organic Framework (MOF) materials for Storageof Hydrogen.
QUALITY CONTROL (QC)
HPCL has put in place Quality Management System for ensuring continuous vigil on allinputs and protecting the product quality at every stage of handling so that qualityproducts are supplied to the customers all the time. Regular Quality Control (QC) auditsof POL installations have been carried out for improving the QC practices. Continuoustraining is being provided to the operating people for ensuring protection of productquality at all stages.
HPCL has a dedicated Quality Assurance department which is independent of Refining& Marketing functions reporting to the Human Resources function. The Quality Assurancedepartment carries out carries out surprise inspections covering Retail Outlets, SKOAgencies, LPG Distributorships and Depots / Terminals in compliance with the MarketingDiscipline Guidelines (MDG of Retail & LPG) and HQO directives and acts as animportant nodal agency for ensuring supply of Quality & Quantity products to all thecustomers.
HEALTH, SAFETY & ENVIRONMENT
As an integral part of its business, HPCL believes that no work or service or activityis so important or urgent that safety be overlooked or compromised. HPCL endeavours topromote the health of vital "Human Resource", essential for productivity andeffectiveness of the corporation and conduct its operation in such a manner as compatiblewith environment and economic development of the community. All the major locations acrossthe country and the two refineries are ISO 14001, ISRS & OHSAS 18001 certified andmaintain highest standards of Occupational Health, Safety and Environment protection andcomply with all applicable Laws & requirements.
HPCL focuses on achieving excellence in occupational and personal health of employeesat all manufacturing sites as well as at its offices. HPCL has set up state-of-the-artOccupational Health Centers (OHC) at refineries. Besides emergency medical services, theOHCs also offer preventive and curative health services to its employees. These OHCs areequipped with state-of-the-art diagnostic and therapeutic equipment and are manned byqualified occupational health specialists. The OHC's also carry out health, education andawareness sessions and diagnostic camps for the benefit of employees and community. AllHPCL employees undergo regular periodic medical examinations. The medical emergencyfacilities are also extended to Contractor's employees at the Refinery sites. The resultsare analysed to provide targeted interventions at the individual and group levels. Theemployees are also supported for hospitalization by regular liaison and cashless admissionfacilities in pan-India hospitals.
Regular and periodic medical check-ups are done for all the employees, especially forthose who are engaged in adverse working conditions. Awareness programs on maintaininghealthy lifestyles, heart-care, Yoga, meditation, work-life balance are conducted on aregular basis not only for the employees but also for their family members.
HPCL is committed to provide a safe workplace to its employees and contractors andsafety to the communities where it operates. In pursuit of the same, HPCL continues towork towards its aim of zero incidents. HSE Management systems across all businesslocations are vital, striving continually to strengthen HSE governance and compliancesystems across all businesses and functions thru surveillance audits and benchmarking.While ensuring the HSE standards, major focus areas are targeted to include process safetyand construction safety in upcoming projects across the corporation. All critical jobsundergo Job Safety Analysis to ensure safety of personnel and property. HPCL believes thatcontinuous learning and upgrading of systems and processes are indispensable as we moveahead with our vision of achieving best-in-industry status with respect to safety systemsand culture. HPCL recognises that personnel competency is a key area to ensure safe andefficient operations.
HPCL continued to build its culture of safety and improve its performance. Safetytalks, trainings and case studies form a part of the daily activities of all the personneldirectly or indirectly engaged in the refining process. Safety training programs conductedfor contractors together in both the refineries were 235 during the year. Out of 284 OISDrecommendations (given upto 2011), both the refineries have completed implementation of278 OISD recommendations. Also, 1815 out of 1838 internal audit safety recommendations(given upto March 2011) have been completed.
HPCL is committed to ensure environmentally sustainable and responsible operations toachieve highest standards of environmental excellence. HPCL major installations arecertified with Environmental Management System based on ISO-14001 and all pollutionabatement facilities e.g. effluent treatment plants at our refineries, air emissioncontrol and waste disposal facilities are maintained and operated in line with theindustrial best practices. HPCL commissioned Flue Gas Desulpharisation projects at bothrefineries to reduce particulate matter and sulphur emission. Continuous ambient airquality monitoring at our refineries installed to ensure air quality. HPCL has established'Environmental Audit' surveillance, to ensure continuous environmental performanceimprovement as well as environmental compliance. This concerted effort has providedopportunities to continuously improve for better environmental management.
Rain Water Harvesting: Initiative of rain water harvesting planned during the yearreduced the fresh water dependency on Municipal Corporation. Mumbai Refinery hasconstructed necessary infrastructure and harvested about 74 TKL of rainwater for the year2012-13. Further augmentation of rain water management facility is in progress as a partof Natural Water Resource Conservation and sustainable development Project includingreduction in refinery carbon foot print. Implementation of rain water harvesting forA-Block of Visakh Refinery was completed in December 2012.
Plantation Project: Visakh refinery has conducted a "Green Visakha"program with a plantation of 86965 saplings in the city. These initiatives demonstrateHPCL's commitment to a cleaner, greener and sustainable environment.
Emissions Control: As a part of their commitment to protection of environment, boththe refineries are implementing Flue Gas Desulphurization (FGD) projects for removal ofsulphur from the flue gases of the Fluidized Catalytic Cracking Units. FGD facilities atMumbai refinery was commissioned in March 2011 and at Visakh refinery project mechanicallycompleted and commissioning activities are expected to complete in second quarter of 2013.
Hazardous Waste Management: Mumbai refinery has bio-remediated around 3000 m3 oflow oily silt using oil zapper technology. Oil sludge and spent catalyst from both Visakhand Mumbai refineries were disposed to CPCB authorized recyclers.
HPCL commenced annual sustainability reporting on its triple-bottom-lineperformancefrom the Financial Year 2011-12. Sustainable development (SD) Policy for the corporationwas prepared and approved by the Board of Directors and a Board level SD committee wasformulated.
The maiden report published 'in-accordance' status with Global Reporting Initiative(GRI) guidelines and externally assured and GRI application level checked 'GRI G3 CheckedA+' application level report. The report also aligns with the National VoluntaryGuidelines on Social, Environmental and Economic Responsibilities for Business. Theprogress of the SD initiatives is monitored by a Board sub-committee periodically.
During 2012-13, HPCL completed sustainable development projects such as 10 locationsElectrical Energy audits, 22 Rain water harvesting at POL locations rain water harvestingat Visakh Refinery, improved treated water output at Mumbai Refinery, 773 lakh KWH Powergeneration through Wind Mills and carbon foot assessment at 25 POL locations. In addition,465 Employees across 15 locations and both the refineries were trained by conductingcapacity building workshops. During the year key internal and external stakeholders havebeen mapped and were engaged thru structured consultation process. During the year2012-13, HPCL has spent Rs. 6.17 Crores on various sustainable development projects.
EXPLORATION & PRODUCTION (E & P)
PPCL, a wholly owned subsidiary has become the upstream arm of HPCL. In the year2012-13, HPCL/PPCL, have integrated the activities and restructured the organisation of HPE&P and PPCL to achieve overall organisation efficiency and focussed attention. Strongfoundation and Balanced Asset Portfolio are the key focus areas for the future upstreamstrategy of HPCL.
In the Year 2012-13 HPCL/PPCL have focused their attention on acquisition of producingor near to producing assets to balance the portfolio. The results of these efforts will bevisible in the near future.
During the year, two new exploration blocks MB-OSN-2010/2 and AA-ONN-2010/1 have beenawarded to HPCL and PPCL respectively under NELP IX bidding round and the Productionsharing contracts (PSCs) for the same were signed in August 2012 with GOI.
As on 31.3.2013, HPCL has participating interests in 15 active domestic onshore andoffshore blocks and relinquishment process is on for 5 blocks. There is a marginaldiscovery in one of the blocks CB-ONN-2002/3 in Cambay for which Commerciality ofDiscovery is approved and Final Development Plan is submitted. Out of three overseasblocks which HPCL has, PSC is to be signed for two blocks in Egypt. One block in Australiahas been relinquished. The details of the blocks are given in the section of"Statement of Significant Accounting Policy and Notes forming parts ofAccounts."
PPCL has plans for building strong internal capability through developing competent andexperienced manpower having expertise in all domains of upstream operations. PPCL hasdeveloped a state-of-the-art infrastructure, equipped with advanced G&G software andlearning center. As a part of continuous development of internal capabilities, a trainingprogram on "Play Fairways Analysis & Prospect Evaluation" was conducted inAugust, 2012 by world's leading Oil & Gas technical consulting company M/s FugroRobertson, UK. The program received enthusiastic participation from senior Geologists andGeophysicists from other PSUs as well, in addition to the G&G team of PPCL. The teamhas been reorganized into focused areas to concentrate and develop capabilities inspecific areas.
The cumulative expenditure on HP E&P activities till 31/03/2013 has been Rs. 666Crore out of which Rs. 56 Crore was spent during the year 2012-13.
The cumulative crude oil production by PPCL as on 31.3.2013 from its Sanganpur fieldawarded under Pre-NELP period and Hirapur field on service contract with ONGC has been329669 barrels out of which 34271 barrels were produced during 2012-13.
Further details on PPCL have been elaborated under the section Joint Ventures &Subsidiaries.
As concerns about rising fossil fuel prices, energy security, and climate changeincrease, renewable energy can play a key role in producing local, clean, andinexhaustible energy to supply nation's growing demand for electricity and transportationfuel.
HPCL has undertaken to put up 100 MW of Wind Farm project to tap the vast windpotential in the country. HPCL has planned to implement the same in two phases. Under thefirst phase, a total capacity of 50.5 MW has been commissioned in two parts. The windpower generation during the year was 774 Lakh KWH and earned a Revenue of Rs. 30.35 Crore.Going forward HPCL will be implementing the second phase of 50 MW of Wind Farm project.
HPCL has ventured into bio-diesel segment by incorporating a subsidiary companyCREDA-HPCL Biofuel Ltd (CHBL) with State Government of Chhattisgarh, thru an organisationChhattisgarh State Renewable Energy Development Agency (CREDA). CHBL is already in processof undertaking cultivation of jatropha plant, an energy crop used for production ofbio-diesel. The cultivation is scheduled to be on total 15,000 hectares of leased landfrom the Government of Chhattisgarh. As on 31.03.2013, CHBL has acquired 6,728 hectares ofland.
Information systems support all business processes of the Corporation. Businesstransactions are carried out in Enterprise Resource Planning (ERP) system. ERP system isconnected to various other applications for transactions processing as well as Decisionsupport.
Over the last few years, ERP system has been helping us close our accounts quickly andaccurately. From management control perspective, ERP helps us by way of standardization ofbusiness processes. On-line & accurate information is available in the system whicheases operational decision making. Cost of operations can be tracked easily in the systemwhich helps the managers in controlling them.
In order to enhance the competencies of employees to manage Information systems, acomprehensive training plan was put in place. Over1600 man days of training have beenprovided during the year to the end users of the system covering the functional andoperational areas of the system.
Information Systems Center
Information Systems Center (ISC) at HITEC City, Hyderabad hosts all servers, as well asthe development team. ISC is spread over 1.3 acres with state-of-art facilities that host200+ servers that run various IT systems, Network & Operations Control Center,Security Operations Center, Development Center & Training center. ISC has been madesecure with Infrastructure facilities that include Integrated Building Management Systemwith access controls, Very Early smoke detection system, waterless fire systems and leakdetection system.
A multitude of IT enabled solutions have been rolled out to increase effectiveness ofbusiness functionaries. ERP platform has made possible development of real time interfacesto the IT enabled systems of our various business partners. Various such new initiativeshave been implemented and sustained efforts continue to bring in more of these to reality.
HPCL has further strengthened an application to plot all our retail outlets using GISmapping technology. This has enabled us to set default route from supply location &accurately measure distance which in turn has resulted in improving accuracy ofcalculation of freight payments.
HPCL has introduced Distributor Consumer Management System (DCMS) for managing LPGdistributors operations such as enrolling new consumers, providing new connections,recording & completing refill requirements, recording consumer termination etc. Thissoftware has been integrated with HPCL's ERP system for data exchange.
Consequent to implementation of Government of India's policy on monitoring the supplyof subsidised LPG cylinders to consumers, HPCL has introduced Transparency Portalinitiative for facilitating complete transparency and visibility in this regard. ThisPortal provides information on the number of HP Gas consumers with each Distributor, thenumber of subsidized as well as non-subsidized Domestic LPG cylinders availed by each HPGas consumer and amount of Subsidy for LPG supplies. Consumers can view the delivery timeperformance, refill clearance and quarterly performance rating derived from the deliverytime of distributor thus indicating best performing distributor. Facility has beenprovided to view the current waiting list number for new connections. This Portal can alsobe accessed from mobile phones.
LPG consumer subsidy has been planned to be transferred to consumer bank account usingDirect Benefit Transfer for LPG Consumers (DBTL) scheme to the Aadhaar (UID) - Linked bankaccount of consumers who are Cash Transfer Compliant (CTC). Every Consumer has to link theAadhaar Number to the LPG connection as well as link the Aadhaar number to his bankaccount. The bank seeding details are obtained from NPCI (National Payment Corporation ofIndia) by oil companies and Aadhaar verification from UIDAI. After verification, Aadhaar,details are updated in DCMS Software and consumer becomes CTC compliant. Consumers arepaid one time advance towards LPG subsidy and paid refill subsidy for subsequentdeliveries for eligible number of subsidised cylinders. DBTL Software module receives datafrom DCMS Module on regular basis and generates payments which are remitted to NPCI usinga payment gateway. The payment is credited to consumer's account and same is displayed onthe Transparency Portal for benefit of the consumers. This payment module has beenimplemented at 18 districts on June 1, 2013.
HPCL has put in place a business intelligence system. This system extracts data fromvarious transactions systems, processes the same and stores it in the data warehouse. Thisprocessed information is made available to the business for informed decision making.
In procurement function, e-procurement platform is being used for bringing intransparency. HPCL has developed & implemented e-procurement process wherein tenderare floated on-line & the responses are obtained from the vendors also on-line usingdigital signatures. Tender opening & evaluation is being done in this application&orders are placed in ERP system. e-tenders through this system currently constitute closeto 50% of total tender value.
B2B integration with Oil Marketing Companies (OMC) has been completed. Traditionallyproduct exchange data was settled between two Oil PSUs through manual joint certificates.With OMCs being ERP capable, ERP has been leveraged to develop an efficient, accurate andon-line product exchange accounting and settlement mechanism.
Activity of processing indents received from the dealers and customers into the loadshas been automated. An Indent Management System (IMS) has been implemented through whichdealers & customers are being able to send indents by SMS. Facility for placingindents through web-based customer portal has also been made available to institutionalcustomers. The system has enabled stage-wise tracking of indents. This has facilitatedeffective planning, monitoring and execution of indents ultimately leading to enhancedcustomer satisfaction.
HPCL has been able to achieve a high percentage (94.5%) of on-line fund transfer in theSales process. The corporation has been receiving on-line fund transfers in the excess ofRs. 13000 Crore a month. Customers directly make e-payment thru their bank to theCorporation's designated bank. The bank account is credited immediately and Cash Receipt(CR) is generated automatically thereupon and email sent to the customer advising details.At the end of the day the bank forwards a consolidated receipt to the Corporation which isused for control purposes and for carrying out reconciliation. The reconciliation processis also totally automated. This initiative has enabled in faster collection & hencebetter funds management.
E-banking initiative has been expanded to cover all payments to outside parties such asvendors& contractors and even our employees. We have tied up with multiple banks tooffer the service to the various categories of payees. Payment information flowsseamlessly as ERP server communicates directly with the bank servers without any manualintervention. The payment is effected by the bank through ECS, account transfer, EFT or bycheque. E-payment is helping the Corporation to bring about transparency in the paymentprocess and also ensure timely payment to all vendors. Over 97 % of payment made to thevendors, other than that for crude purchasesisbeing made by electronic fund transfers.
A customer portal is being maintained which provides complete visibility to the directcustomers, dealers & distributors on their transactions with the Corporation.Similarly a portal for the transporters enables them to access information pertaining totheir transactions with the Corporation. A number of work flow based applications havebeen implemented for employee self-service so as to speed up the process of benefitsadministration. Capital budgeting process for Non-plan projects as well as revenuebudgeting process has been captured in the system through workflow based application.
On HR front, 2 initiatives: Samavesh (meaning 'Inclusion': Personal, professional andcultural integration of new recruits) & Santushti (meaning 'Complete satisfaction':e-enabled final settlement process for separating employees) have been furtherstrengthened. Both these are electronic work-flow processes & integrate with ERP aswell as other on-line systems.
Communication Infra-structure & Security
HPCL has implemented 802.1 X IEEE standard access controls, which has given us thecapability to permit or deny network connectivity. After deployment of this mechanismevery employee has to authenticate by putting his ADS username and password to get networkaccess into HPCL network. 802.1X authentication has enabled us to secure our corporatenetwork from unauthorized access.
Security of information systems continues to be a key consideration and HPCL has takena number of steps to address this critical area. Security Operations Center has been setup for continuous monitoring of systems for any security related incidents. Identitymanagement system has been implemented. To enforce segregation of duties, implementationof GRC (Governance, Risk & Compliance) solution for ERP systems has been started.Microsoft SCCM (Systems Center Configuration Manager) has been implemented for ensuringall PCs & laptops are patched with latest security patches to protect them.
HPCL is committed towards achieving operational excellence and enhancing productivitythrough optimum utilization of resources available. The corporation focuses on developmentof its key resources both personally and professionally through systematic interventionsand robust HR strategies. HPCL recognizes the importance of strategic and customer centricHR initiatives based on well-defined HR strategy aligned to overall organizationalstrategy.
During the year 2012-13, the Corporation has undertaken various initiatives forimprovement of employee engagement, capability building, leadership development andpromotion of industrial harmony for meeting strategic objectives of the corporation andenhancing the value to various stakeholders.
HR Visioning and development of HR strategy execution plan
In view of the corporation's business strategy for the year 2016-17, the HR team atHPCL underwent the visioning process to discover its role as an integral part of BusinessStrategy and define for itself a set of operating values for achieving the means to anend.
The vision and its essence along with the HR strategy and specific deliverables andactionables have been documented comprehensively in-order to build a robust communicationstrategy. The HR Strategy Execution Plan titled STRATEX is a robust and comprehensive planwhich details the HR deliverables and focus areas for the future in line with thecorporation's aspirational strategy, Target Shikhar and long term plan, Udaan 2030.
HPCL had launched a leadership development initiative Project - Akshay in the year 2011to build a strong leadership pipeline which would mobilize the rank and file of theemployees towards the common corporate aspiration and vision.
In a continuing effort, a total of 108 mid-level Officers were mentored by 27 seniormanagement Officials in teams of four with one mentor per team during the year 2012-13.
The program has benefited the corporation immensely in-terms of the overall developmentof leadership level executives for ensuring robust succession for critical positions. Inaddition, the Corporation also nominated the Officers in senior management grades forAdvance Management Programs in India and abroad on regular basis.
Training department at HPCL has been rechristened as Capability Building departmentthis year. Apart from enabling employees to realize their full potential throughinnovative initiatives and progressive learning techniques, the key focus areas of thecapability building include enhancement of competencies, strengthening the leadershippipeline, cultural interventions to enhance collaboration and leveraging technology forLearning and Training.
HPCL co-hosted EQ leadership summit which was conducted by one of the top 10 mostinfluential International thinker Dr. Richard Boyatzis, senior faculty at Case WesternReserve University. HPCL co-hosted Kaplan Norton workshop on Balanced Score Card. Apartfrom this HPCL also hosted HR Symposium for both Public Sector and Private Sector to bringout best HR practices for training and development.
HPCL achieved all time high figures of 5.66 man-days per employee (29446 man-days) oftechnical & behavioural training programs for the management employees and thetraining man-days for the Non-Management employees stood at 3.12 (19270 man-days).Specific behavioural & leadership training programs were conducted for 1214middle/senior level managers. In addition, 533 officers under-gone development centretowards assessment of behavioural and technical competencies. Further, 12 nos. of wellnessprograms were conducted through in house and external faculty. The training expenditure asa percent of employee cost was 0.356% ( Rs. 9 Crores) against the MOU target of 0.3%during the year.
Certified Petroleum Manager Program
As part of efforts to build a talented pool of Officers who can be groomed for takingup key middle management positions within the Corporation, the Corporation has implementeda special one year certification course titled "Certified Petroleum Manager" whichcovers all aspects of the Petroleum Industry and formulated by incorporating the right mixof technical, functional and behavioural competencies to ensure that their full potentialis utilized and participants are groomed to become future leaders of the Corporation.
Project "Utthan", developmental program for employees promoted from Labour toClerical cadre was conducted in 2012-13. Training concentrates on attitudinal andbehavioural development providing overall understanding of organizational culture andtargets, IT orientation, Customer focus & Internal processes competencies.
Project Ji Haan Samarth & Samvad - LPG SBU
HR department in association with LPG BU conducted training for LPG Deliverymen and LPGCustomer Service Staff during FY 2012-13. The programme is being conducted in 8 languagesthru HR Officers all across the Corporation and aims at behavioural and technicalenhancement of the trainees apart from imparting them training on healthy life styles,savings habit etc. Over 5000 LPG Deliverymen and 2700 LPG Distributor staff were trainedduring the year.
Talent Sourcing and Acquisition
Apart from flagship Officer Trainee recruitment, HPCL during the year undertookrecruitment for other professionals for various streams like experienced Refineryprofessionals in S/G B & C, Information systems Officers, Chartered Accounts. Thetotal recruitment figure for the FY 2012-13 stood at 298.
Further, HPCL also adopted Graduate Aptitude Test in Engineering (GATE) scores as ashortlisting tool in recruitment of Officer Trainees in Engineering Disciplines for theyear 2012-13.
Performance Management initiatives seek to enforce a performance oriented culture inthe company. Hence it is the continual endeavour of the department to establish systemsand processes which are robust, transparent and user- friendly. Towards this end, thefollowing initiatives were undertaken:
Benchmarking exercise was undertaken during the year. Amendments were madeto the Performance Appraisal process in order to bring objectivity and inclusivity to thePerformance Appraisal process and hence robust behavioural feedback and review mechanismswere incorporated into the process.
Saajhi- an e-platform was launched for consolidating the entire process ofpromotions and re-assignments. The platform seeks to make the transition to new rolesimple, convenient and expeditious for the employees as well to ensure the timelycompletion of the process by an effective tracking and monitoring mechanism.
Improvement in Industrial Harmony
Industrial Relations across the Corporation remained positive and constructive, markedby mutual trust and industrial harmony. During the year around 68 nos. of structuredmeetings were held with the employees' representatives across the Corporation. Unionleadership and workmen played a significant role in achieving performance objectives attheir work units/ locations across the country through their collaboration in introductionof new technology, acceptance of cost management practices, and rationalisation ofmanpower through internal redeployment to fill vacant positions.
HPCL also has a robust grievance redressal system in-place for all its employees and itis noteworthy to mention that 100% of employees grievances were settled during the year2012-13.
HPCL has taken an unique initiative to form an "IR Council" consisting ofsenior officials from various SBUs, senior office bearers from each of the representativeUnions and HR functionaries with a view to create synergy to collaborate for "HPFirst" culture, enhance employee engagement levels and ensure achievement ofCorporate objectives.
Memorandum of Settlements (LTS) was signed for Mumbai Refinery (effective 1.10.2008),Visakh Refinery (effective 1.7.2007) and Marketing Division (Effective1.10.2008) for 10years from respective effective dates. Revised Salary including Cafeteria Allowance as perLTS also implemented during FY2012-13. Career Development Policy (CDP) for thenon-management employees was implemented for the Marketing Division.
Employee Engagement Initiatives
HP ICON People Manager Award 2012
The Second Edition of the HP ICON - People Manager Awards, was held in December 2012wherein 17 officers working in the middle management cadre were bestowed with theprestigious HP ICON People Manager Award.
Outstanding Achievement Awards 2012
Outstanding Achievement Awards are given every year to Officers in Junior Managementwho lived and displayed corporate Values, displayed extraordinary commitments and achievedoutstanding results. During the current year 51 Officers were given outstandingachievement awards after a rigorous multi-stage evaluation process.
HP Gaurav Awards 2012
HP Gaurav Awards are given every year to Non-Executive employees who have put inoutstanding efforts and exemplary performance in furtherance of the Corporationobjectives. During the current year 78 non-executive employees in the Marketing Divisionwere selected after a rigorous multi-stage evaluation process.
In-addition to the formal reward and recognition mechanisms, the Corporation alsorewards its employees on continual basis for the suggestions and inputs received throughvarious forums. During the year around 3152 suggestions were received from employees. Toenable creativity and innovation, HPCL had also sent 11 nominations of its employees forvarious national awards like PM Shram awards, Vishwakarma Rashtriya Puraskar.
Productivity Enhancement Initiatives
Project Utkarsh (LPG)
Project Utkarsh uses frontline production management concepts at LPG Plants towardsbuilding employee engagement simultaneously on various dimensions and introduction of arenewed LPG incentive scheme which redefined productivity norms as well as incentives.Consequently; a 42% increase in productivity was recorded during 2012-13. Project Utkarshis today implemented at all 44 LPG Plants of the Corporation.
Project Utkrisht (O&D)
Buoyed by the success of Project Utkarsh, a productivity development initiative forO&D locations - Project Utkrisht was piloted at five identified locations on keyparameters. Energized by its success; the project was replicated in 82 O&D locationsstarting from July 2012. The Project is under implementation and till date 18% Improvementin productivity over base line- i.e. July 2012 is recorded. The expected savings inoperating expense are pegged at Rs. 3.90 Crore annually.
Technical Papers on Project O&D Utkrisht and Project LPG Utkarsh were selected forpresentation at the 54th Annual Convention and International Conference of IndianInstitution of Industrial Engineering (IIIE) held at Bangalore on Oct 30-31, 2012.
Other Highlights and Initiatives:
Centralized HR Services
With a view to enhance efficiency and bring more transparency in to processes, HRdepartment has taken an initiative towards centralizing various HR services throughleveraging technology. The phase I of this initiative which was implemented during themonth of April 2013 will also enable HR functionaries to focus on strategic partner roleto business.
Launch of 'HP FIRST' as renewed cultural identity
This year HPCL undertook various initiatives towards Organization culture building. Thecall for 'HP FIRST' as the renewed cultural identity was given under Top ManagementSponsorship.
'HP FIRST' at one level is a CREDO to direct the behaviours of all the employeestowards giving preference to the Corporation in all their dealings. It calls for puttingCorporation's interests first in all events of interpersonal or interdepartmentalconflicts. 'HP FIRST' is also an acronym where 'F' stands for Free, Frank and Fair - adimension of our existing culture which needs to be sustained, 'I' stands for Integrity,'R' for Respect for Individual, 'S' for Sustainable Performance and 'T' for Team Spirit.
SC/ST WELFARE & LIASONING
HPCL has undertaken a number of significant activities for the welfare of SC/ST in thefinancial year 2012-13. Some of the major highlights are:
A health camp was organized & provisions were made for food on theoccasion of Ekveera Devi Yatra on April 9-10, 2012; at Deeksha Bhoomi, Nagpur on October23, 2012; at Chaitya Bhoomi, Dadar during Dec 4-6, 2012; provision of food at BhimaKoregaon, Pune on January 1, 2013; provision of water and food at Mahad on March 20, 2013.
Scholarships were granted to 1563 SC/ST & PWD students from weakersections of society.
HPCL also supported 275 SC youth from Maharashtra, Rajasthan, Bihar andVisakhapatnam for undertaking resource lined vocational training.
The roster inspection has also been completed till 2011 for all zones andrefineries of HPCL.
A documentary on HPCL's and SC/ST Employees' Welfare Association's years ofcontribution to the welfare activities at Chaitya Bhoomi, Dadar was made.
A seminar conceptualized as "Accelerate to Excel" was organizedfor 145 office bearers of the Association providing platform to collaborate and developfor excellence.
OVERVIEW OF SPORTS ACTIVITIES AT HPCL
During the year 2012-13, HPCL organised four tournaments namely All India Inter UnitIndoor Games tournament, All India Inter Unit Cricket tournament, All India Annual SportsMeet and the PSPB Inter Unit Bridge Tournament.
HPCL team finished at the top in unrated teams and won prize for the Best Team inNon-Professional Category in XXIV PSPB Inter Unit Chess Tournament held at Puducherry fromDecember 15-19, 2012. HPCL team was Runners-up in Team Championship and Field Events inXXXIII PSPB Inter Unit Athletics Tournament held at Guwahati, Assam from January 28-30,2013. HPCL Team won 5 Gold, 4 Silver and 5 Bronze Medals.
HPCL also provides assistance to the youngsters belonging to the weaker sections of thesociety in-order to enable them to accomplish their goal in sports. HPCL takes promisingand deserving boys/girls and nurture them to grow to the international standards byproviding them financial assistance. This is done as a part of Corporation's commitment tohelp transform the raw talent into medal winners who can keep the tri-color flying atinternational arena. HPCL also conducts Cricket Coaching Camp to impart professionaltraining for the employees' children to enable them to make a career in this sport.
RIGHT TO INFORMATION (RTI)
HPCL as a PSU Organization with large public interface has successfully ensuredcompliance with the provisions of Right to Information Act, for providing information tothe Indian Citizen, when he seeks information from this public authority.
During the year, a total of 4403 applications were processed. HPCL effectively followsthe guidelines of Centralized Public Grievances Redress & Monitoring - CPGRAMS -online Grievance handling mechanism (complaints received and transferred by President'sSecretariat, PMO, MOP&NG, DPG & DARPG instituted by Government of India,inter-alia, adhering to the time line norms as advised by DARPG (Department ofAdministrative Reforms and Public Grievances).
CORPORATE SOCIAL RESPONSIBILITY
HPCL has always worked towards being a model of excellence in meeting our commitment tosociety with which we engage and interact, and beyond. HPCL has been consciously strivingtowards this commitment. Initiatives of our corporation are broadly classified under FocusAreas: Child-Care, Education, Health Care, Skill Development and Community Development.Interventions in these areas make a meaningful and long-term impact on the community.
In the above areas the following are the Major Projects that were undertaken in theyear 2012-13.
Children with Special needs (ADAPT)
To ensure equal opportunities and dignity to Persons with disability requires effort,awareness and mobilization beyond just the addressing their medical needs. It is in thespirit of this endeavor that HPCL through this programme supported the InclusiveEducation, therapeutic needs and vocational training 300 children.
By supporting rescue vans in three major metropolitan cities in the country - Delhi,Kolkata and Mumbai for 1098 helpline - responsible for rescue of children in distress inIndia, we have been able to enhance and ensure the impact of the project in rescuinggroups of children in risk situations like trafficking, child labour, dangerouscircumstances, etc.
Muskan has been providing rehabilitation of destitute and neglected street children andunderprivileged children. The two centres supported by HPCL aims at addressing thefundamental needs of care, protection, clothing, food, education, health etc, along withvocational training and counseling services for 200 children.
Through following initiatives we have tried to target the most needy and vulnerablegroups of the community in the area of health care.
Dil without Bill
Sai Heart Hospital is one of the very few medical institutions in the country which canboast of heart surgeries being performed every single day. What makes this achievementstand apart even still is the fact that these are conducted at free of cost for allpatients with a monthly family income of less than Rs. 10,000, giving preference tochildren. Awareness and follow-up camps conducted at various cities and towns, during theyear is also an initiative to reach out to the most needy patients.
Our interventions through the Khushi Clinics for Long Distance Truckers (LDT) who areamong the high risk category for AIDS were set up at various retail outlets on thehighways.
Sushrut hospital a Multispeciality hospital and charity institute at Chembur, Mumbai isbeing supported by HPCL for the past many years.
HPCL CSR partnering with ground-level NGOs is running three Mobile Medical Vans instates of Odisha, Bihar and Rajasthan. These Vans provide basic medical attention to ruralpopulace in 75 villages.
HPCL's initiatives in the field of education have been manifold with a larger impact onvarious sections of society.
Mid-Day Meal Programme
HPCL CSR is providing hygienic and nutritious food to students from rural areas ofVisakhapatnam and Guwahati through specialized agencies. This programme has addressed avital requirement of young children form rural areas belonging to economicallymarginalized section. During the year, 5000 students have been benefitted through AkshayaPathra programme.
Our intervention to the growing issue of decreasing girl child education includesproviding material support to first generation girl child learners from communities whichare educationally and economically backward. During the year, 7552 girl children have beenbenefitted under this programme.
HPCL has partnered with specialized agencies to provide computer awareness and basiceducation to first generation computer learners of Class VI to Class IX in semi-urban andrural areas. Further, ten computers each are also installed at each of these schools wheretraining is imparted, so as to ensure continued practice for the students. During theyear, 4100 students have been benefitted under this programme.
HPCL through various partners have also been exploring diverse options to build thecapacity and employability of the youth, especially the underprivileged.
It is in line with the demand based needs that diverse training skills like electrical,welding, hospitality, driving, tailoring, beautician course etc. are identified andimparted to 2850 Nos. underprivileged youth in these areas through our Swavalambanprogramme.
STeP(Smile Twin e-learning Programme)
This programme aims at providing job-oriented skills to underprivileged youths.Training in IT, functional English, Personality Development- elements which have becomeimportant factors for employability are provided, along with career-counselling, placementsupport and follow-up.
OFFICIAL LANGUAGE IMPLEMENTATION
Office Language Implementation (OLI) Official Language Implementation has been giventhe utmost importance in the Corporation. To promote implementation of Official Language,Hindi Pakhwada was observed at all locations of the Corporation; All India Hindi Mahotsav2013 was organized; Vishwa Hindi Diwas was celebrated at all locations and HindiConference was held under the chairmanship of Director - HR, HPCL under the aegis of TOLICwherein various PSUs, Government Offices, Banks, Institutions working towards progress ofHindi, Autonomous Institutions and 175 people participated in the Conference. A workshopwas also organized by HPCL North Zone for Hindi Officers of member PSUs of TOLIC.
HPCL continues to head the Town Official Language Implementation Committee (TOLIC) inMumbai for Government Undertakings/ Corporations since its formation.
HPCL was conferred with the "Indira Gandhi Rajbhasha Award" for the fifthconsecutive year for best official language implementation among Public Sector Enterprisesin India. The award was for outstanding achievements of the Corporation in the realm ofOfficial Language Implementation in 'B region".
HPCL has received the PETROFED Project Management - Company of the year awardfor Guru Gobind Singh Refinery Products Evacuation Project (GGSRPEP) from the Hon'bleMinister of Petroleum on June 8, 2012 at New Delhi.
HPCL was declared the winner among the Public Sector Category at the 8th Editionof BML Munjal Awards 2013 towards Excellence in Learning & Development during theMindmine summit held at New Delhi on 4th April 2013. The prestigious award was handed overby Hon'ble Minister of State for Human Resource Development at the annual flagship eventorganized by the Hero Group.
HP Gas was recognized as the most respected brand and awarded the Super brandtrophy 2012-14 by Superbrands UK in December 2012.
HPCL was conferred with the prestigious SCOPE Meritorious Award for CorporateSocial Responsibility & Responsiveness Commendation Certificate for the year 2010-11by Standing Conference of Public Enterprises (SCOPE).
HPCL has been awarded the Greentech Gold Award for Outstanding Achievement in'Best HR Strategy' by Greentech Foundation at 3rd Annual Greentech HR and CorporateGovernance Conference 2013 held on 19th April 2013 at Goa
HPCL received the Indira Gandhi Rajbhasha Puraskar for the fifth consecutiveyear for best official language implementation among Public Sector Enterprises in Indiafor outstanding achievements of the Corporation in the realm of Official LanguageImplementation in 'B region'.
HPCL has been honored by Associated Chambers of Commerce and Industry of India(ASSOCHAM) with the "CSR Excellence Award" 2012-13 for the immense contributionand relentless efforts towards Socially and Environmentally Sustainable growth from HisExcellency Dr A.PJ. Abdul Kalam, Former President of India.
HPCL was conferred with the Golden Peacock National Training Award for the Year2012 for its contribution towards training initiatives for its employees.
HPCL was honoured with the "Golden Peacock Innovative Product/ ServiceAward 2012" for the innovative development of Supervisory Control and DataAcquisition System (SCADA) for LPG Bottling Plant Operations under Oil & Gas category.
HPCL has been conferred with INDIASTAR 2012 Award, as recognition of excellencein Packaging for 'TamperGard Security Labels on 210 Litres Lube Oil Metal Barrels' fromthe President - World Packaging Organization at the International Summit for PackagingIndustry held in Mumbai.
HPCL has been honoured with the PSE Excellence Awards for its contributiontowards Corporate Social Responsibility, by Indian Chamber of Commerce [ICC] and Dept. ofPublic Enterprises [Govt. of India] during the Summit on "Indian Public Sector Agenda@ 2020" at New Delhi under Maharatna & Navratna category.
HPCL has been conferred with Loyalty Award at the 6th Loyalty Summit under thecategory "Best use of Technology in a Loyalty Program" at Mumbai.
HPCL has been conferred with three awards at the Corporate Social ResponsibilityAwards 2012 conferred jointly by the Institute of Public Enterprise (IPE) & Subir RahaCentre for Corporate Governance, viz., 1) Best Overall Corporate Social ResponsibilityPerformance 2) Support and Improvement in Quality of Education and 3) CommunityDevelopment.
HPCL has been honored with the prestigious Civic Award for "SustainableEnvironmental Initiative" by Bombay Chamber of Commerce and Industries in June 2012for the best corporate practices that promote and enhance the interests of the Society andEnvironment.
HPCL has been conferred Safety Awards in the following categories by OilIndustry Safety Directorate [OISD] under the aegis of Ministry of Petroleum & NaturalGas, viz 1) "Best Performer" under POL Marketing Organizations category the year2009- 10 2) "Best Performer" under Most Consistent Performer category for theyear 2009-10 3) "Best Performer" for Mundra Delhi Pipeline Division under CrossCountry Pipeline (Product Pipeline) category for three years 2008-09, 2009-10 and 2010- 11and 4) "Best Performer" for LPG SBU for the year 2009-10 for the Most ConsistentSafety Performer in Oil Marketing Company (LPG & POL combined).
HPCL was conferred with the Global CSR Excellence & Leadership Award2013 byWorld CSR Congress on World CSR Day. HPCL won awards in the three categories of 1) BestCorporate Social Responsibility Practices 2) Support and Improvement in Quality ofEducation and 3) Most Caring Company of India.
HPCL's Mangalore LPG Import Facility (MLIF) has been conferred with theprestigious Golden Peacock Award 2012 for Occupational Health and Safety.
Mangalore LPG Import Facility (MLIF) has been honoured with the First Prize inSafety at the State level by the Department of Factories, Boilers, Industrial Safety &Health, Govt. of Karnataka, for the year 2012.
HPCL was honored by CRY with the prestigious 'CRY Child Rights Champion 2012-13'Gold Award for demonstrating extraordinary commitment to the Rights of Children in India.
HPCL's Mysore LPG Plant has been conferred the Prashansa Patra by NationalSafety Council of India in recognition of developing and implementing effective ManagementSystems and Procedures.
HPCL has won the Best Overall Display Runners Up Trophy for the Exhibition Stallat the Petrotech 2012 Exhibition at New Delhi.
HPCL has bagged the Internal Communication Excellence Award, (ICE Award),instituted by Shailaja Nair Foundation, Mumbai.
HPCL has been honored with 2 Awards by Asia Pacific HRM Congress in 1) HRPractices in CSR and 2) Outstanding Contribution to the Cause of Education.
Visakh refinery was conferred with TOLIC award.
HP MDI received the Best Maintained Garden from Pimpri - Chinchvad MunicipalCorporation in April12.
HPNE Housing Complex and Vashi Terminal have received Best Maintained Gardensfrom Municipal Corporation of Greater Mumbai.
A separate segment on Corporate Governance forms part of this Annual Report. However,it would be relevant to point out here that the Corporation is giving utmost importance tocompliance with Corporate Governance requirements including compliance of regulations,transparent management process, adherence to both internal and external value norms andhas implemented a robust grievance redressal mechanism.
The Corporation has complied with "Integrity Pact" (IP) to enhance ethics /transparency in theprocess of awarding contracts. A MOU has been signed with"Transparency International" onJuly 13th, 2007. HPCL has implemented theIntegrity Pact with effect from September 1st, 2007. The Integrity Pact has now become anintegral part of procurement process for all tenders above Rs. 1.0 Crore.
HPCL has put in place a properly defined Risk Management framework. This system isimplemented as an integral part of our business processes across the entire HPCL'soperations and includes recording, monitoring, and controlling internal enterprisebusiness risks and addressing them through informed and objective strategies. The Companyhas engaged the services of independent experts to facilitate the detailed exercise andensuring the effectiveness by adopting best practices in Risk Management.
As part of effective implementation of the Risk Management framework, Risk ManagementSteering Committee (RMSC) continues to provide direction and guidance. The Company has inplace mechanism to inform Board Members about the risk assessment and minimizationprocedures and periodical review to ensure that executive management controls risks bymeans of a properly defined framework.
HPCL is also a member of the Global Compact Society of India which is the India Unit ofthe UN Global Compact, the largest voluntary corporate initiative in the world. It offersa unique platform to engage companies in responsible business behavior through theprinciples of Human Rights, Labour Standards Environment norms and Ethical practices. InHPCL, all these areas receive constant attention of the management to ensure continuouscompliance.
In the near term, though global economic prospects have improved, a number ofuncertainties remain. Thus, main impetus for growth has to be domestic demand. Currenteconomic environment in the country is stagflationary- slowing growth and high inflation.The Government of India has taken a number of steps to stem the slowdown such as settingup CCI to fast track mega investment projects, a scheme for restructuring debts of thestate discoms, and permitting FDI in a number of areas. Low growth will impact fuel demandthough supply constraints in other energy sources could shift the demand to oil products.
Global crude oil prices are expected to soften in near term as supply growth isexpected to slightly exceed growth in demand. This should reduce pressure on India'scurrent account and also reduce the subsidy/under-recovery burden on the government andOMCs. However, this may be counteracted by depreciation of the rupee due to a high currentaccount deficit and volatile capital flows. High and rising petroleum subsidies anddeterioration in the fiscal position of the government has made fuel pricing reformcrucial. However, impact of rising prices on growth in a slowing economy and on inflationmeans that process would be difficult.
JOINT VENTURES & SUBSIDIARIES
The Joint Venture companies and subsidiaries of HPCL have performed well during theyear 2012-13.
HPCL-Mittal Energy Ltd. (HMEL)
HPCL-Mittal Energy Ltd (HMEL) is a joint venture between Hindustan PetroleumCorporation Ltd and Mittal Energy Investments Pte Ltd (MEI), Singapore, an L N MittalGroup Company. The Company was incorporated on 13th December 2000 and name changed to HMELon 31st December 2007. The initial authorized share capital was Rs. 200 Crore andsubsequently enhanced to Rs. 10,000 Crore. HPCL has 48.82% equity participation in HMEL.As of 31st March 2013, paid up capital of HMEL is Rs. 6,592.70 Crore. HMEL has built aGreenfield refinery of 9 MMTPA capacity called the Guru Gobind Singh Refinery (GGSR) atBathinda in the State of Punjab. The refinery was dedicated to the nation by the Hon'blePrime Minister of India on 28th April 2012.
GGSR has stabilized its integrated commercial operations during the year and thefinished liquid products are being evacuated by HPCL to meet the demand of Northern andNorth-Western part of the Country. The Refinery, with a high Nelson Complexity Index,provides flexibility to process heavy and acidic crudes and produce petroleum productscompliant with Euro IV emission norms and other value added product such as Polypropylene(under the brand name 'Polysure').
The Refinery consists of various units, associated utilities and a fuel based CaptivePower Plant of 165 MW. Apart from various state of the art infrastructure facilities, HMELhas set up a self-sustained township for the employees within the vicinity of Refinery.
During 2012-13, HMEL achieved crude thruput of 4.91 MMT with a turnover of Rs. 7,789Crore. The Company is in the process of stabilization and consolidation of its operationsduring 2013-14 by buying high sulfur heavy grades of crude oil, reducing costs, increasein volumes and enhanced monitoring and controlling mechanism with better mix of productsand its marketing.
HMEL has a wholly owned subsidiary company HPCL-Mittal Pipelines Ltd, engaged inreceipt, storage and cross country transportation of crude oil to GGSR. HMPL has built a1,017 km cross-country pipeline and associated facilities for transportation of crude fromMundra to Bathinda, crude receiving facilities [including Single Point Mooring (SPM)],sub-sea pipelines and Crude Oil Terminal (COT) at Mundra and receipt terminal at Bathinda.
South Asia LPG Co Pvt Ltd (SALPG)
South Asia LPG Co Pvt Ltd (SALPG), a Joint Venture Company with M/s Total Gas and PowerIndia (a wholly owned subsidiary of Total, France) was incorporated on 16th November 1999with an authorized share capital of Rs. 1 Crore which was subsequently enhanced to Rs. 100Crore. HPCL has 50% equity participation in SALPG. As of 31st March 2013, paid up capitalof SALPG is Rs. 100 Crore.
SALPG has commissioned an underground Cavern Storage of 60 TMT capacity and associatedreceiving & despatch facilities at Visakhapatnam in December 2007. SALPG Cavern is thefirst of its kind in South and South East Asia and ranks among the deepest Caverns in theWorld. The commercial operations commenced in January 2008.
During 2012-13, SALPG received 977 TMT of LPG into the Cavern through 49 Vesselsincluding 46 Very Large Gas Carriers (VLGC). This has resulted into easing-out the productmovement constraints across the east coast and ensured smooth availability of LPG in thesupply and surrounding zones. Also, propane-butane blender at the Cavern Terminal hashelped Oil Marketing Companies to maximise the propane inputs into Visakhapatnamconsidering the limited availability of butane and price advantage of propane in theinternational market.
During 2012-13, SALPG achieved 6.55% higher turnover at Rs. 155.16 Crore and earned2.36% higher profits (PAT) at Rs. 75.51 Crore compared to the previous year turnover ofRs. 146 Crore and PAT of Rs. 74 Crore.
The Cavern cum Marine Terminal achieved 1,462,895 Safe Man-hours since commencement ofcommercial operations in January 2008 without a Lost Time Accident. SALPG won BritishSafety Council International Safety Award 2012 with distinction and secured second placein medium scale category in the EHS awards from Confederation of Indian Industry (CII)during 2012-13.
Prize Petroleum Company Ltd. (PPCL)
HPCL, in partnership with ICICI and HDFC, had formed a Joint Venture E & P Companycalled Prize Petroleum Company Ltd (PPCL) on 28th October 1998 for participation inexploration and production of hydrocarbons. The initial authorised share capital of PPCLwas Rs. 20 Crore which was subsequently enhanced to Rs. 720 Crore. As on 31st March 2013the paid up equity capital of the company is Rs. 72.50 Crore. Over the years, PrizePetroleum Company Limited (PPCL) has built up a portfolio of 2 producing fields and oneexploration block. During 2011-12, HPCL acquired the entire equity shareholdings of ICICIGroup and HDFC in PPCL and thus PPCL became wholly owned subsidiary of HPCL.
PPCL had signed Service Contract with ONGC for development of Hirapur Marginal Field inCambay Basin with 50% holding in the consortium. PPCL is operator for the field. During2012-13, 33,384 barrels of crude oil (cumulative production of 316,534 barrels sinceinception) has been produced. PPCL had also entered into a Production Sharing Contract(PSC) with 50% Participating Interest in Sanganpur Block as Joint Operator. During2012-13, 887 barrels of crude oil (cumulative production of 13,135 barrels from inception)has been produced. The crude produced is benchmarked to Bonny light crude. During 2012-13,PPCL had a turnover of Rs. 7.66 Crore.
The company was awarded South Rewa Block in Madhya Pradesh under NELP-VI, a biggestonshore exploration Block with 13,277 sq. km area. PPCL is the Operator for this block andhas completed all the activities under Minimum Work Program. One of the major highlightsof the year was drilling of first well at South Rewa (AA ONN 2004/1) on February 28, 2013pursuant to interpretation of seismic 2D and 3D data and release of well locations. PPCLis the operator in this block and drilling activities are in progress.
PPCL has bagged onshore exploration block (401 sq. kms area) in Tripura along withconsortium partner ABG Energy Limited (ABG) in NELP IX. PPCL is the operator for thisblock with a participating interest of 20% and will be "carried" during theinitial exploration phase. In the event of commercial discovery and consortium enteringthe Development phase, PPCL will pay only 10% for the past cost (which will be recoveredby ABG from 'profit petroleum') and will continue to hold 20% participating interest.
PPCL is actively pursuing acquisition of producing/discovered assets to enhance itsportfolio.
Hindustan Colas Ltd. (HINCOL)
Hindustan Colas Ltd. (HINCOL) is a joint venture company promoted by HPCL and ColasS.A. of France and was incorporated on July 17, 1995 with an authorised share capital ofRs. 10 Crore which was subsequently enhanced to Rs. 30 Crore. HPCL has 50% equityparticipation in HINCOL. As on 31st March 2013, paid up capital of HINCOL is Rs. 9.45Crore.
HINCOL has grown steadily over the years to establish itself as the clear market leaderin manufacturing and marketing of Bitumen Emulsions, Modified Bitumen and other valueadded bituminous products. HINCOL presently has eight manufacturing plants across India.HINCOL products find extensive use in the road construction industry.
During 2012-13, HINCOL has commissioned its first portable plant for site manufacturingof modified bitumen at the customer premises. HINCOL has implemented new processes andformulations to improve safety, efficiency, quality, energy saving and profitability. Theenvironment friendly cold mix technology for construction and repairs of roads is alsobeing promoted through carrying out various trials in coordination with regulatoryagencies as well as Government and other customers. HINCOL is also getting into a newapplication technology for road surface rejuvenation viz. Micro-surfacing with state ofart equipment imported specifically for the said application. During 2012-13, HINCOLrecorded a production of 177.44 TMT The turnover was increased by 46% to of Rs. 619.18Crore compared to Rs. 422.43 Crore in the previous year and increased net profit (PAT) by30% to Rs. 34.42 Crore, during the year compared to Rs. 26.44 Crore in the previous year.
HINCOL has been continuously paying dividend for last 13 years. For 2012-13, HINCOLpaid an interim dividend of 157% and has further declared a final dividend of 124%, makingthe total dividend to 281% which is highest ever dividend declared by HINCOL.
HPCL Biofuels Ltd. (HBL)
In line with Government's policy for blending of ethanol in petrol, a new wholly ownedsubsidiary company HPCL Biofuels Ltd (HBL) was incorporated on 16th October 2009 toproduce ethanol with an authorized share capital of Rs. 250 Crore. As on 31st March 2013paid up equity capital of HBL is Rs. 205.52 Crore.
HBL has built integrated plants with cane crushing capacity of 3,500 TCD withDistillery of 60 KLPD for manufacturing Ethanol and co-gen plant of 20 MW each at Sugauliand Lauriya in East and West Champaran Districts in the State of Bihar.
The year 2012-13 has seen full season operations at HBL with production of 24.345 TMTof Sugar, 6.947 TKL of Ethanol and 50.173 Million KWH of power compared to 15.514 TMT ofSugar, 4.558 TKL of Ethanol and 25.497 Million KWH of power during 2011-12.
During the year, crushing of Sugarcane started at Sugauli on 17th December 2012 andLauriya on 6th December 2012. Sugauli plant was declared highest producer of CertifiedCane Seed (640 acres) by the Joint Director (Sugarcane), the State of Bihar.
During the year 2012-13, operations at HBL were significantly higher than previouscrushing season with accident free operations. Being in the early years of the operationsand going thru the process of stabilisation, the company achieved a turnover of Rs. 92.05Crore. HBL plants were operated with the designed capacity of 50% juice for sugarmanufacture and 50% juice directly for ethanol manufacture. To improve the performance ofthe plants substantially, ethanol is proposed to be manufactured from molasses instead ofdirectly from sugar cane juice. HBL has embarked on expansion of the sugar boiling housecapacity in both plants to process 100% juice for production of sugar. Resultant molasseswill be used for production of ethanol.
Consequent to deregulation of marketing of sugar and ethanol pricing, HBL has apositive outlook for the years ahead.
CREDA-HPCL Biofuel Ltd. (CHBL)
CREDA-HPCL Biofuel Ltd. (CHBL) was incorporated on 14th October 2008 as a subsidiarycompany of HPCL with an authorized share capital of Rs. 200 Crore. As on 31st March 2013,paid up equity capital of CHBL is Rs. 10.58 Crore with equity shareholding of 74% by HPCLand 26% by Chhattisgarh State Renewable Energy Development Agency (CREDA). The company'sobjective is to venture into alternate fuels.
CHBL is in the process of undertaking cultivation of jatropha plant, an energy cropused for production of bio-diesel. The cultivation is scheduled to be on total 15,000hectares of leased land from the Government of Chhattisgarh. Production of bio-diesel andits blending with normal diesel will help in meeting domestic demand. HPCL shall haveexclusive rights over the producing and marketing of biodiesel and bi-products from theproduce.
As on 31st March 2013, CHBL has acquired 6,728 hectares of land. Acquisition of balanceland is expected to be completed by next year. Maintenance of jatropha seedlings/nurseryplants is currently being carried out on 3,100 hectares of land out of which 1300 hectaresare under the JCC (Jatropha Care Centre) Model. JCC has been introduced with an objectiveto achieve huge savings in water and costs in the first year. Plantation on the balanceland shall be undertaken in a phased manner.
During 2012-13, the turnover (interest on deposits) was Rs. 0.47 Crore compared to Rs.0.25 Crore in the previous year. The company has started the process of planting HighYielding Varieties (HYV) of Jatropha. These HYV hybrids give higher yield and oil contentare pest resistant and sturdier. Operational Trials conducted with these HYVs are showingpromising results.
Petronet MHB Ltd. (PMHBL)
HPCL, along with Petronet India Limited (PIL) promoted Petronet MHB Limited (PMHBL) forconstruction of Mangalore-Hassan- Bangalore Pipeline at a cost of Rs. 667 Crore with debtequity ratio of 3:1. The joint venture company was incorporated on 31st July 1998 with aninitial authorised share capital of Rs. 1 Crore which was subsequently enhanced to Rs. 600Crore. HPCL has 28.77% equity participation in PMHBL. As on 31st March 2013, paid upcapital of PMHBL is Rs. 548.71 Crore.
During 2012-13, PMHBL achieved 1.4% higher throughput at 2.81 MMT as compared to 2.77MMT in 2011-12. The turnover was increased to Rs. 103.17 Crore compared to Rs. 86.02 Crorein the previous year and earned net profit (PAT) of Rs. 27.31 Crore during the yearcompared to Rs. 36.50 Crore in the previous year.
Initially PIL and HPCL contributed 26% each towards equity of the company. In April2003, ONGC joined as a strategic partner in PMHBL by taking 23% equity. Post debtrestructuring of PMHBL, the equity holding of HPCL and ONGC increased to 28.766% each andPIL's holding decreased to 7.90%.The Pipeline is meeting the transportation needs betweenMangalore-Hassan-Bangalore.
PMHBL Integrated Management System is certified by DNV covering Quality ManagementSystem-ISO-9001-2008, Environmental Management System-ISO-14001-2004 and OHSAS-18001-2007.GPRS based Security Tracking System (STS) was commissioned for monitoring movement ofsecurity line walker's movement on PMHBL Right of Use (ROU) land. Telecom Systemup-gradation & CCTV camera installation were carried out at PMHBL Main Stations.
Bhagyanagar Gas Ltd. (BGL)
Bhagyanagar Gas Limited (BGL) was incorporated on 22nd August 2003 as a Joint VentureCompany by GAIL (India) Ltd and HPCL for distribution and marketing of environmentalfriendly fuels (green fuels) viz. CNG and Auto LPG for use in the transportation,domestic, commercial and industrial sectors, in the state of Andhra Pradesh.
BGL has been authorized to set up City Gas Distribution networks in Hyderabad,Vijayawada and Kakinada by MOP&NG and PNGRB.
The initial authorised share capital of BGL was Rs. 0.10 Crore, which was subsequentlyenhanced to Rs. 100 Crore. As on 31st March 2013, HPCL has 25% equity participation in theJV company with an equity investment of Rs. 0.01 Crore in BGL.
During 2012-13, BGL commissioned 5 CNG Stations in the twin cities of Hyderabad andSecunderabad. At present, BGL has a network of 29 CNG stations spread over three cities inHyderabad, Vijayawada and Kakinada. BGL has provided 1784 Domestic, 14 Commercial and 1Industrial PNG connections across these cities. CNG sales recorded by BGL was at 24,617 MTregistering a growth of 61% over previous year.
During 2012-13, BGL increased the turnover by 99% to Rs. 83.65 Crore compared to Rs.42.02 Crore in the previous year and earned net profit (PAT) of Rs. 2.98 Crore during theyear compared to loss of Rs. 0.88 Crore in the previous year.
Aavantika Gas Ltd. (AGL)
Aavantika Gas Ltd (AGL) was incorporated on 7th June 2006 as a Joint Venture Company byGAIL and HPCL for distribution and marketing of environmental friendly fuels (green fuels)viz. CNG and Auto LPG for use in the transportation, domestic, commercial and industrialsectors in the State of Madhya Pradesh.
The authorised share capital of AGL is Rs. 100 Crore. As on 31st March 2013, HPCL has25% equity participation with an investment of Rs. 0.01 Crore in AGL.
AGL has been authorized by MOP&NG as well as PNGRB for carrying City GasDistribution (CGD) operations at Indore, Ujjain and Gwalior. The company commencedcommercial operations in the year 2008.
During 2012-13, the company commissioned Mother Station at Gwalior and two onlinestations at Indore. With this AGL now operates 14 CNG stations - 7 daughter stations (5 atIndore and 2 at Ujjain), 5 online stations (4 at Indore and 1 at Gwalior) and 2 motherstations (1 at Indore and 1 at Gwalior). AGL has started supplying PNG at Palda Industrialarea, Indore to cater to the needs of big industrial customers. AGL has started supplyingPNG at Palda Industrial area, Indore to cater to the needs of big industrial customers.AGL recorded sales volume of CNG/PNG at 21,441 MT registering a growth of 62% overprevious year.
During 2012-13, AGL increased the turnover by 93% to Rs. 97.64 Crore compared to Rs.50.47 Crore in the previous year and earned net profit (PAT) of Rs. 0.21 Crore during theyear compared to loss of Rs. 0.19 Crore in the previous year.
GSPL India Gasnet Ltd (GIGL) and GSPL India Transco Ltd (GITL)
GSPL India Gasnet Limited (GIGL) and GSPL India Transco Limited (GITL) was incorporatedon 13th October 2011 as a subsidiary of Gujarat State Petronet Limited (GSPL) with anauthorised share capital of Rs. 220 Crore.
HPCL has signed two Joint Venture Agreements on 30th April 2012 with Gujarat StatePetronet Limited (GSPL), IOCL and BPCL (Equity holding: GSPL- 52%; IOCL- 26%; HPCL - 11%and BPCL - 11%) and has become an equity partner in GIGL and GITL. As on 31st March, 2013,paid up capital of GIGL and GITL was Rs. 67.79 Crore and Rs. 48.59 Crore respectively.
GIGL will lay two cross country gas pipelines viz 1,611 KM Mehsana to Bathinda Pipeline(with initial capacity of 43 MMSCMD to final capacity of 77 MMSCMD) and 750 KM Bathinda toSrinagar Pipeline (with initial capacity of 32 MMSCMD to final capacity of 43 MMSCMD).
GITL will lay 1,712 KM pipeline Mallavaram to Bhilwara (with initial capacity of 53MMSCMD to final capacity of 77 MMSCMD).
The above JV Companies will facilitate HPCL to source gas and market it to customersalong the pipeline route independently. It will also help HPCL to enter into direct gassourcing and marketing to protect and retain the marketing share in future.
MANGALORE REFINERY AND PETROCHEMICALS LTD. (MRPL)
HPCL holds an equity of 16.95% in the 9 MMTPA Mangalore Refinery and petrochemicalsLtd. (MRPL). HPCL and MRPL have been exchanging intermediate process streams between theirrefineries to supplement efforts to meet new environmental norms in respect of productslike MS and HSD on mutually agreed terms. MRPL has not declared any dividend during2012-13
Matters covered in the Management Discussion and Analysis Reports describing theCompany's Objective, Projections, estimates, expectations may be "forward lookingstatements' within the meaning of applicable securities laws and regulations. The actualperformance could vary from those projected or implied. Important or unforeseen factorsthat could make a difference to the Company's operations include economic conditionsaffecting demand / supply and price conditions in the domestic market in which the companypredominantly operates, changes in regulations and other incidental factors.