Chennai Petroleum Corporation Ltd Management Discussions

Macroeconomic Environment - Global Trends

The global economy is navigating an increasingly turbulent environment, shaped by disruptive policy changes, persistent trade tensions, longstanding structural imbalances, and geopolitical issues. The international economic landscape has undergone a fundamental reset, driven in large part by widespread tariff fluctuations and an uncertain policy climate. What was once a trajectory of cautious post-pandemic recovery has now given way to slower growth, elevated inflation pressures, and fragmented global trade.

Global growth is projected to slow from 3.3% in 2024 to 2.8% in 2025, before a modest recovery to 3% in 2026—both figures revised downward from earlier forecasts well below the prepandemic average of 3.7%. The marginal improvement to 3% envisaged in 2026 is overshadowed by the broader economic drag of policy uncertainty and declining investment confidence.

Growth in advanced economies is projected to slow to 1.4% in 2025, down from 1.8% in 2024. The United States will see a slowdown to 1.8 % in 2025 from 2.8% in 2024, reflecting the negative influence of trade policies and subdued domestic demand. The euro area, grappling with energy price volatility and weak manufacturing output, is expected to grow at just 0.8%. Emerging Markets and Developing Economies (EMDEs) are projected to grow at 3.7% in 2025 and 3.9% in 2026, marking a decline from 4.3% in 2024, with notable downward revisions for China and other export-driven economies due to added pressures due to commodity price volatility, geopolitical tensions, and domestic structural challenges.

Towards a Stronger and Inclusive Global Economy

The steepest cuts to growth have been recorded in the wake of the United States sweeping imposition of tariffs on its major trading partners. The ripple effects of these actions have caused a chain reaction of retaliatory measures, raising effective global tariff rates to levels not seen since the early 20^th century. These trade distortions have affected global supply chains, reduced consumer and investor confidence, and dampened trade and industrial activity across multiple regions.

The global economy in 2025 will undergo a delicate balancing act. After years of resilience through a pandemic and geopolitical turmoil, the recovery is now being tested by trade fragmentation, inflation volatility, and mounting debt pressures. While the risks are real and immediate, the path forward remains open. Through strategic reforms, enhanced global cooperation, and prudent macroeconomic management, the world economy can navigate this moment of uncertainty and lay the foundation for inclusive and sustainable growth in the years ahead.

Indias Economic Outlook: Resilient Growth Amid Global Headwinds

Indias GDP growth, which stood at 6.5% in 2024, is projected to moderate slightly to 6.2% in 2025 before improving to 6.3% in 2026, reflecting a steady and sustainable growth trajectory. This growth is underpinned by strong domestic demand, robust investment activity, and a thriving services sector. This remarkable performance comes against a backdrop of subdued global growth, rising trade tensions, and declining cross-border investments.

Private consumption, a key driver of the economy, is estimated to grow by 73% year-on-year, contributing 60.3% to GDP in 2024—the highest share since FY 2003. This indicates a healthy appetite for goods and services among consumers, likely supported by rising incomes, urbanization, and improved employment conditions. Investment trends also remained positive, signalling confidence in the economys long-term prospects and a continued push in infrastructure and capitalintensive sectors. Though the sector-wise analysis reveals a mixed outlook the industrial and manufacturing sector is very likely to expand by 6.2% but faces headwinds from subdued global demand and supply chain uncertainties. However, policy measures like the Production-Linked Incentive (PLI) schemes are expected to provide some cushion and drive medium-term recovery.

Another major focus is the transition towards a green economy, which demands large-scale financing, innovation, and public-private partnerships to meet clean energy targets and adapt to climate risks.Current scenario presents both the opportunities and the challenges for the Indian economy. While growth is expected to remain robust in the medium term, structural reforms, targeted fiscal interventions, and improved governance are essential for achieving sustained, inclusive, and climate-resilient development. By leveraging its demographic advantage, expanding digital infrastructure, and pursuing macroeconomic stability, India stands poised to navigate global headwinds and solidify its position as a leading global economic powerhouse.

Global Energy in 2024: A Defining Year of Transition

The year 2024 stood out as a defining point in the global energy narrative—a year where rising energy demand met accelerating clean energy deployment, and where the foundations of a future energy system became more visible amidst continued climate and geopolitical challenges. The global energy landscape evolved, shedding light on shifting demand patterns, fuel- specific trends, technological breakthroughs, and the ongoing march toward decarbonization.

The global primary energy demand rose by 2.2% in 2024, a notable uptick compared to the decade-average of 1.3%. Electricity demand grew even faster, at 4.3%, driven by three main trends: increasingly severe heatwaves, the electrification of end-use sectors (especially transport and heating), and the rapid growth of digital infrastructure including data centres and AI systems.

Emerging and developing economies contributed over 80% of the global increase in energy demand. China, despite experiencing a slowdown in energy demand growth to under 3% (half its 2023 rate), remained the worlds largest contributor. The United States registered the third-largest absolute increase in energy use, followed by demand recoveries in the EU and Southeast Asia.

The global oil demand rose by 0.8% in 2024, significantly lower than the 1.9% growth observed in 2023. This slowdown reflects structural shifts in global mobility and industry. Notably, oils share of global energy consumption fell below 30% for the first time in 50 years, after peaking at 46% in the 1970s. The deceleration in oil use was most evident in the road transport sector, where demand declined in both advanced economies (-0.3%) and China (-1.8%) due to rising electric vehicle (EV) adoption, greater fuel efficiency, and teleworking.

Renewables Lead Global Power Expansion in 2024

The year 2024 was a record-setting year for renewable energy. Global capacity additions reached approximately 700 GW—the 22^nd consecutive record-breaking year—with solar PV making up 550 GW or nearly 80% of the total. Wind additions were stable at around 120 GW, while hydropower grew significantly due to projects commissioned in China, Africa, and Southeast Asia.

Renewables supplied 32% of global electricity, and combined with nuclear, provided 40%—the highest ever. In the EU, solar and wind generated more electricity than coal and gas combined. In the U.S., their combined share overtook coal, and in China, they reached nearly 20% of total generation. Hydropower also recovered from prior-year droughts, contributing an additional 190 TWh globally. Overall, renewables accounted for three- quarters of the growth in global electricity generation.

Electrification Accelerates Across Transport and Tech

The electrification of end-use sectors was a hallmark of 2024. Global EV sales crossed 17 million units, making up 20% of all car sales. China accounted for nearly two-thirds of this market, while the U.S. and emerging markets also saw robust growth. Plug-in hybrids (PHEVs) grew faster than Battery Electric Vehicles (BEVs), especially in China.

In the digital realm, energy demand from data centres soared. Global capacity expanded by approximately 20%, adding around 15 GW—mainly in the U.S. and China. This trend is expected to continue as AI technologies proliferate. Despite this, much of the additional demand was met by renewable sources, helping to moderate the emissions impact.

Decoupling of Emissions from Economic Growth Strengthens in 2024

Global CO₂ emissions from the energy sector rose by 0.8% to reach a new record of 37.8 gigatonnes. However, this rate of growth was slower than GDP growth, reaffirming the decoupling of emissions from economic output. If not for record high temperatures, which drove much of the increase in cooling-related energy use, emissions growth would have been halved. Emissions from natural gas rose the most (+2.5%), followed by coal (+0.9%), while oil-related emissions increased only marginally (+0.3%). Notably, emissions in advanced economies declined by 1.1%, falling to levels last recorded in the early 1970s.

The global energy system in 2024 showed clear momentum towards decarbonization. Clean energy technologies expanded rapidly, and emissions growth slowed despite record energy demand. Yet, challenges persist. Fossil fuels still dominate the mix—coal, oil, and gas accounted for around 70% of global energy supply. Energy efficiency improvements are slowing, and climate-sensitive energy demand is rising. Regional disparities, technology access, and investment gaps between advanced and emerging economies remain significant.

Nonetheless, 2024 may be remembered as a turning point—a year when low-carbon technologies proved capable of meeting growing energy needs at scale. The world now faces the critical task of accelerating this transition further, ensuring it is not only fast and far-reaching but also inclusive and resilient.

Powering Indias Growth: Energy Trends and Transformation

Expanding Energy Demand and Fuel Mix Dynamics

Indias energy sector in 2024 was marked by rapid growth in both demand and supply, reflecting the countrys strong economic momentum and its expanding industrial and consumer base. Energy demand in India grew by nearly 5%, one of the highest globally, driven by rising urbanization, industrial output, transport sector expansion, and increased electricity use in buildings for cooling and digital devices. India emerged as the second-largest contributor to global energy demand growth in absolute terms, with power generation increasing across all segments. Electricity consumption alone grew significantly, supported by record-high temperatures, rural electrification, and expansion in manufacturing. Coal remained the backbone of Indias power sector, with demand increasing by 5.5% in 2024, fuelled by growth in coal-fired power generation and robust industrial consumption in steel and cement sectors. Coal-based electricity still accounts for nearly 75% of total generation, underscoring its central role despite policy focus on diversifying energy sources.

Natural gas demand rose sharply by 10%, reflecting the countrys push to develop a gas-based economy. This was enabled by expanding city gas distribution networks, increased use in power and fertilizer sectors, and competitive international LNG prices in the early part of the year. Oil demand also grew strongly, with India being the largest source of global oil demand growth in 2024. Petrol consumption rose by about 7.5%, led by rising vehicle ownership and increased passenger mobility. However, there was also visible progress in electric vehicle adoption, particularly in two-wheelers and passenger cars, aided by government incentives and rising fuel prices.

In line with its long-term climate and sustainability goals, India has set an ambitious target of achieving 500 GW of renewable energy capacity by 2030. As of 2025, the country has reached around 232 GW, reflecting consistent growth in the sector. India made substantial progress, adding around 30 GW of renewable capacity in 2024, predominantly solar. This marked a near tripling of the previous years additions, driven by large utility-scale projects and continued roll-out of distributed solar under government schemes. The share of renewables in power generation crossed 20%, although coal continues to dominate the mix. Hydropower also rebounded, contributing to increased clean energy output. Indias progress in renewables signals a strong commitment to a cleaner energy future.

Indias Strategic Role in the Global Clean Energy Transition

Indias growing role in the global energy transition was evident not only in the scale of its domestic developments but also in its leadership in platforms like the International Solar Alliance. While the nation continues to balance its developmental energy needs with its decarbonization ambitions, challenges remain in securing affordable energy imports, reducing dependence on fossil fuels, and improving energy efficiency. The energy intensity of the Indian economy improved in 2024 but remains below pre-COVID levels. Nevertheless, Indias trajectory shows a determined march toward cleaner energy, supported by strong policy signals, infrastructure investments, and increasing private sector involvement. With one of the fastest-growing energy markets globally, India is expected to play a central role in shaping the future contours of global energy demand and sustainability.

Assessing CPCLs Strategic Landscape

Success Drivers:

CPCL enjoys a strategic advantage with its Manali refinery, which is well-positioned to meet the energy demands of southern India while benefiting from efficient logistics through its proximity to major ports. The company benefits significantly from being a subsidiary of Indian Oil Corporation Ltd., Indias largest oil refining and marketing company. This association provides CPCL with financial stability, assured crude supply, and marketing support. Operationally, CPCL has demonstrated excellence with high-capacity utilization, consistent product quality, and a commitment to energy efficiency. Moreover, the company maintains a diversified product slate, including fuels, lubricants, waxes, and petrochemical feedstocks, catering to a wide array of customer needs. Successfully diversified into high-demand products such as pharma-grade hexane and sustainable aviation fuel, leveraging existing infrastructure without requiring additional capital investment. Its proactive CSR and ESG efforts have further strengthened stakeholder trust and corporate reputation.

Capability Gaps:

Despite its strengths, CPCL faces some structural limitations. Like most Indian refiners, it is heavily reliant on imported crude oil, making it susceptible to international price and supply fluctuations. Its operations are largely concentrated in Tamil Nadu, which limits geographic diversification and exposes it to localized risks. Additionally, compared to leading global integrated players, CPCL currently has a modest presence in the petrochemicals segment, though this is expected to improve with upcoming Projects and Joint Ventures.

Growth Prospects:

CPCL is well-positioned to tap into multiple growth avenues. Its entry into the fuel retailing sector offers significant potential for brand visibility, improved margin realization, and stronger customer engagement. As India accelerates its energy transition, CPCL has the opportunity to diversify into emerging green energy segments such as biofuels, green hydrogen, and solar power. Additionally, deeper integration into petrochemicals and speciality products through strategic partnerships can drive higher value creation.

Market Challenges:

CPCL, like other players in the industry, must navigate the global shift towards renewable energy and electric mobility, which could moderate long-term demand for conventional fuels. However, Indias energy consumption is expected to remain robust in the medium term, offering continued relevance for refining operations. Regulatory changes and environmental norms may require ongoing investment in emission controls and compliance technologies, although these are also opportunities to innovate and lead in sustainable practices. The refining sector is becoming increasingly competitive with private and global players expanding their footprint in India, but CPCLs domestic linkages and established infrastructure provide a competitive edge.

Insights into Segment and Product Performance

Indias petroleum sector continues to reflect the countrys economic resilience and evolving energy demand patterns. The fiscal year 2024-25 witnessed significant developments in consumption trends across key petroleum products, influenced by growth in transportation, industrial activity, domestic energy needs, and the ongoing energy transition.

In FY 2024-25, India recorded its highest-ever petroleum product consumption at 239.17 Million Metric Tonnes (MMT), reflecting a growth of 2.1% over the previous year. Petrol (Motor Spirit) consumption rose sharply by 7.5% to 40.01 MMT, driven by rising private vehicle ownership, growth in tourism, and shifting preferences from diesel to petrol and CNG vehicles. High-Speed Diesel (HSD) remained the largest contributor at 91.41 MMT, growing modestly by 2.0%, supported by industrial, mining, and logistics activity, although its share is gradually declining due to electrification in sectors like agriculture. LPG consumption rose by 5.6% to 31.32 MMT, with domestic usage accounting for over 88% of total LPG demand-boosted by PMUY connections and affordability. Aviation Turbine Fuel (ATF) registered an impressive 8.9% growth, reaching a record 8.99 MMT, indicating strong recovery and expansion in both domestic and international aviation traffic. Bitumen consumption declined by 5.4%, and Kerosene (SKO) continued its structural decline with a sharp 14.9% drop to just 0.41 MMT, reflecting LPGs near-complete replacement as a household cooking fuel. The ethanol blending program progressed significantly, achieving 18.4% blending during the Year and 16.8% over the fiscal year, with a major portion sourced from non-sugarcane feedstocks. Additionally, natural gas consumption (including internal use) rose by 7.1% to 72,293 MMSCM, indicating growing usage in the industrial and transportation sectors.

These trends underscore the dynamic nature of Indias energy landscape, where traditional fuels continue to play a central role even as the country progressively adopts cleaner alternatives. The rising consumption of petrol, LPG, ATF, and natural gas, along with successful ethanol blending, highlights a balanced trajectory-one that supports economic growth while moving towards greater energy sustainability and diversification.

Seamless Market Reach via IOCL

CPCLs petroleum products are marketed exclusively through Indian Oil Corporation Ltd. (IOCL), under a strong strategic collaboration within the group. This integrated supply chain ensures consistent market reach, product quality, and nationwide availability of CPCLs outputs, including motor fuels, LPG, and other value-added products. The synergy between CPCLs refining capabilities and lOCLs extensive marketing network supports the nations growing energy demands efficiently. This collaboration also facilitates alignment with evolving fuel quality standards, energy transition goals, and government initiatives such as ethanol blending and PMUY. The partnership reinforces group-level agility in responding to market shifts and sustainability imperatives.

Milestone Year for Niche Product Sales

CPCL continued to demonstrate strong performance in the marketing of niche and high-value products during FY 2024-25, reflecting its strategic focus on product diversification and margin enhancement. Sales of directly marketed products (excluding Petcoke and Sulphur) rose by approximately 7% year-on-year, reaching 234.18 TMT. Although these products constituted only about 2% of the total product basket, they contributed a substantial margin of Rs399 crore, an improvement over Rs389 crore in the previous fiscal year. The year also witnessed the highest-ever monthly sale of MTO at 8.7 TMT in March 2025, with annual MTO sales reaching a record 54.5 TMT, surpassing the previous best of 40.2 TMT achieved in FY 2023-24. In addition, CPCL recorded the highest-ever annual sales of Hexane at 29.8 TMT-including 4.3 TMT of Pharma Grade and 25.5 TMT of Food Grade-and Lean Butene at 6.4 TMT. A new record for Lean Butene despatch was achieved, with 787 MT dispatched in March 2025, exceeding the earlier best of 768 MT in November 2024. Petcoke dispatches by rake also reached an all-time high, with 54 rakes totalling 200 TMT dispatched during the year, a sharp rise from 40 rakes in FY 2023-24. Additionally, CPCL commenced supply of Ultra-Low Sulphur Naphtha via tanker trucks to customers beyond ISRO from 6^th December 2024.

These achievements underscore CPCLs focus on operational excellence, customer-centric marketing, and enhanced value creation from speciality and directly marketed products.

Strengthening core operations through innovation and sustainability

Your company have set a bold target to achieve net zero emissions by 2046, aligning with the vision of our parent company, IOCL. To reach this goal, we have developed a comprehensive roadmap that encompasses a range of strategies, including expanding the use of renewable energy, enhancing reliance on cleaner fuels such as natural gas, and implementing robust energy conservation measures. As part of our decarbonization efforts, your company plans to commission a 10 KTPA green hydrogen production facility by 2030 and capture approximately 400 tons of CO₂ per day from the existing Grey Hydrogen Generation Unit. Furthermore, the company intends to expand its green belt initiatives to help offset additional emissions. By steadily increasing the share of green hydrogen and renewable energy in our operations, your

company remains committed to reducing its carbon footprint and supporting a more sustainable future.

Your company has made significant strides in enhancing operational efficiency, resource optimization, and community engagement. A major achievement has been the reduction in freshwater dependency through the successful operation of Asias first 5 MGD City Sewage Reclamation Plant and a 5.8 MGD Sea Water Desalination Project. These efforts have led to a notable decrease in water consumption from 6.6 MGD to 5.4 MGD in FY 2024-25, reflecting improved resource management.

On the energy front, your company has diversified its power sources by installing 22 windmills generating 17.6 MW and deploying 2.3 MW of solar capacity across its facilities. Further strengthening its renewable portfolio, a 1.1 MW floating solar plant is set to be installed in the open reservoirs within the Manali refinery premises. Floating solar systems are particularly efficient as they reduce water evaporation, make use of underutilized space, and benefit from the natural cooling effect of water, which can improve energy yield.

These initiatives, along with process optimizations, have resulted in the company achieving its lowest-ever Energy Intensity Index of 87.4 and reducing fuel and loss to a record low of 8.51%. Cleaner fuel usage has also increased by approximately 20%. Environmental conservation remains a focus, with 15,000 trees planted and a 176-acre green belt developed to enhance biodiversity.

Inclusive Growth and Strong Governance

Your company has also demonstrated strong community engagement and workforce development. In FY 2024-25, it invested Rs49.5 crores in initiatives spanning health, education, skill development, and infrastructure. The company has promoted inclusive procurement, with around 56% of purchases from MSMEs, including significant contributions from SC/ST and women-owned enterprises. Safety and workplace well-being are also prioritized, with over 65 million safe man-hours recorded and more than 2,000 accident-free days achieved. Governance and operational transparency have been reinforced through robust internal controls, proactive vigilance measures, and the establishment of a Cyber Security Operation Centre to protect critical infrastructure. These efforts have earned your company multiple industry accolades, affirming its commitment to excellence and innovation.

Strengthening Resilience Through Robust Risk Management

Your company has established a comprehensive and dynamic risk management framework that plays a pivotal role in

ensuring safe, efficient, and reliable refinery operations. This framework is designed to systematically identify, assess, and mitigate a wide spectrum of risks—ranging from operational disruptions and financial volatility to environmental and cybersecurity threats. By categorizing risks into high, medium, low, and "on radar,” the company ensures a structured and multidisciplinary approach to risk prioritization and response.

Key operational risks such as crude supply insecurity, port disruptions, unplanned shutdowns, and project cost/time overruns are closely monitored due to their direct impact on capacity utilization and refinery margins. Financial risks like crude price fluctuations, product mix variations, and volatile crack spreads are also evaluated for their potential to erode profitability. Medium and low risks—including data security, environmental compliance, policy changes, and macroeconomic factors—are managed through continuous monitoring and compliance strategies. Emerging risks, such as statutory levies and liabilities, are kept "on radar” to ensure preparedness.

Safety remains a cornerstone of the companys risk philosophy. Through rigorous training programs, emergency drills, and proactive safety initiatives like Behavior-Based Safety (BBS) and the use of fire-retardant gear, the company has maintained a strong safety record. This commitment to safety, combined with adaptive strategies and continuous improvement, reinforces the companys resilience amid evolving challenges, including the global energy transition, water availability concerns, and regulatory shifts.

Other information

Details concerning the companys Corporate Social Responsibility (CSR) initiatives, internal control systems and their adequacy, financial and operational performance, human resources and industrial relations, and other material developments are comprehensively addressed in the Directors Report.

Cautionary Statement

This Management Discussion and Analysis contains forwardlooking statements relating to the companys objectives, expectations, or forecasts, as defined under applicable securities laws and regulations. Actual outcomes may differ materially from those anticipated due to various critical factors. These include fluctuations in global and domestic demand and supply conditions affecting product prices, availability and cost of inputs, changes in government policies or tax laws, macroeconomic developments, litigation, and industrial relations.