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