ANNEXURE - H
1. Economic Overview 1.1 Global Economy
The global economy was resilient despite ongoing trade tensions, in ationary pressures and the geopolitical conditions wia growof around 3%. The growwas divergent and wiuncertainty across the regions and countries. US continue to be the largest economy of the world followed by China and Germany.
While the largest economy of the world has shown better than expected growth, there was weak and slower growdue the post pandemic recovery and slowdown in the European regions, primarily in the manufacturing sector of Europe and Asia on account of supply chain disruptions and the weak external demand. The service sector performed better, supporting growin many countries.
Going forward, global growis projected to stabilize around the current levels. The growforecast remains below the pre-pandemic growrate of around 3.7%. Policy uncertainties, immigration and private investment destination uncertainties continue to remain. While the challenges to the growof the world economy include factors such as ongoing con icts, tensions in the Middle East, global trade route disruptions, cross-border investment and cyber threats, the overall growis projected to be primarily driven by the emerging economies.
1.2 Indian Economy
Despite global uncertainty, India continues to be the worlds fastest-growing major economy. India has crossed
Japan to become the 4 largest economy in the world. India is projected to become third largest economy by 2030. The real GDP growrate has maintained at the decadal average of about 6.4 %. Strong domestic consumption, robust services sector, Governments investments in infrastructure and digital front, resilience against global and economic shocks, improved investor con dence due to policy reforms and macroeconomic stability contributed to the growth.
The growhas been ably supported by stability on fronts such as in ation, scal healand external sector balance. The year saw a strong rural consumption withe private consumption expenditure growing. The services sector growwas driven by healthy activity in nancial and professional services, real estate, public administration and Defence. The industrial sector grew by about 6.2%. Strong growin construction, electricity, gas, water supply supported industrial expansion. Despite challenges India continues to register fastest growin the Purchasing Managers Index (PMI), withe trend well within the expansionary zone. Agricultural growremained steady during the nancial year. Healthy Kharif production, above normal monsoons and an adequate reservoir level supported agricultural growth. On the in ation front, food in ation showed an overall increase, primarily driven by food items such as vegetables and pulses. The retail in ation softened.
Going ahead the headwinds to growinclude elevated geopolitical uncertainties and possible commodity price shocks. India is primarily a domestic demand driven economy and fourlargest consumer market. Nearly 70% of the GDP growis driven by domestic consumption. Factors such as relatively large domestic market, large population base, strong consumer spending, diversi ed economy that is not heavily dependent on any speci c exports are likely to provide resilience against global uncertainty and ensure continued economic progress.
2. Overview of Energy Industry 2.1 Global scenario
The global oil consumption is projected to rise to around 120 million barrels per day by 2050 from the current levels of around 100 million barrels per day wia CAGR of approx. 0.7%. Overall global energy demand surged due to the increase in the consumption of power and ongoing rise in the electri cation of various sectors.
The fossil fuels saw varied growacross di erent fuel types. Natural gas saw the strongest demand for growamong fossil fuels. The overall demand for fossil fuel, especially oil, remained upbeat. The growin the liquid fuel was largely fuelled by the consumption in the non OCED countries and the future growis projected to be driven from these economies. While the demand of oil is projected to maintain modest growth, the future growwill be impacted by the rise of renewable fuels and Electric Vehicles due to advancements in battery technology.
Although the fossil fuel still dominates the energy mix, the share of Renewable sources is seen to be increasing. The world still remains reliant on fossil fuels for energy needs despite renewables. While renewable energy has expanded, fossil fuels (coal, oil and gas) maintained an 80% share of total primary energy consumption. Nevertheless, share of fossil fuels in primary energy mix is projected to drop to around 70% by 2030 driven by energy transition, nevertheless conventional fossil fuels are projected to remain part of the energy mix beyond 2050 wiregional di erences. Fossil fuels will be the bridge to a just and orderly transition to clean energy.
2.2 Indian scenario
Indias energy demand is directly linked to its economic growth. Hence the need for oil and gas is projected to rise supporting the overall economic growand rising population. India imported approximately 4.84 million barrels per day (bpd) of crude oil during FY 2024-25, marginally higher than previous year. The country signi cantly diversi ed its crude oil sourcing basket, wiRussia accounting for around 35% of total imports by volume, driven by favorable pricing amidst geopolitical sanctions. OPECs share stood at around 50%, as Indian re ners optimized their procurement strategies to minimize landed costs. Geopolitical risks, including prolonged con ict in Ukraine, unrest in Red Sea region, and tight shipping capacity through the Suez Canal, led to increased freight premiums and voyage delays. India e ectively managed supply side risks by adopting a diversi ed sourcing strategy, optimizing its global crude mix, and enhancing procurement exibility.
Indias energy demand continued its reliance on fossil fuels, while also marking the growing trend towards Renewable Energy sources driven by Government policies and enhanced awareness of climate change. Government of India, through the Ministry of Power, has o cially expanded its Renewable Purchase Obligation (RPO) now termed Renewable Consumption Obligation (RCO) trajectory from FY 2024-25 to FY 2029-30. These mandates require designated entities like DISCOMs, captive power users, and open-access consumers to source increasing shares of electricity from non-fossil source. Also during FY 2024-25, BEE rolled out the Detailed Procedure for Compliance Mechanism of Carbon Credit Trading Scheme (CCTS) to reduce the emission of greenhouse gases. WiRCO and CCTS becoming mandatory, this will accelerate the transition from fossil fuel to non-fossil fuel and electri cation of Industrial energy consumption. The Indian energy market is experiencing dynamic changes in response to demographic and economic factors. The rise in the ownership of vehicles, the growing middle class and increasing urbanization wirising disposable incomes continue to shape the consumption pattern.
Indian Electric Vehicle sector is experiencing a rapid growth. The impetus of the government by providing policy support and the aspiration of reaching 30% electric mobility by 2030, rising environmental concerns and technological advancements is supporting the rise of the EV segment.
Inspite of the continued rise in the EV segment, the consumption of petroleum products continues to grow. The oil demand in India is projected to double to about 11 million barrels per day by 2045, wiHSD (High Speed Diesel) and MS (Petrol) covering 58% of Indias oil demand by 2045. Indias crude oil re ning capacity has registered and increase from 215 MMTPA to 257 MMTPA in the past decade. Additional crude oil re ning capacity addition of over 50 MMTPA is expected by 2028. India is expected to be one of largest contributors to the non OCED Petroleum consumption growglobally. The domestic re ning sector maintained stable utilization rates averaging 96%, supported by consistent product demand.
3. Oil Market
During the year, the crude oil prices were very volatile and have declined sharply from about USD 90 per barrel at the start of the scal year 2024-25 to around USD 70 per barrel by the end of Q4. The occasional increase in prices is due to the Middle East are ups and decrease is due to the combination of subdued demand from China and non-OPEC+ output and OPEC+ output restraint. Overall, the FY 2024 25 period has been dominated by a weak demand backdrop and strong non OPEC+ supply, anchoring prices lower. However, geopolitical shocks have intermittently triggered sharp, though eeting, price reversals underlining oils enduring sensitivity to global instability.
The year FY 2024-25 also saw a sharp drop in the demand for key products along wiits cracks. The cracks (di erence between crude oil & re ned product price) of HSD, ATF and MS dropped down by 42%,36% and 33% respectively.
HSD (10 PPM AG) crack spreads for FY 2024-25 were lower as compared to 2022-23 & 2023-24.This is attributed to slow down of Chinese economy coupled wigrowof alternative clean fuels. The decline accelerated in Q2 of FY 2024-25, driven by ramp up of diesel output from newly operational re neries in Kuwait and China and Weaker global diesel demand, particularly from key markets in Europe.
The post-pandemic travel surge, which signi cantly boosted ATF (MOPS) crack spreads during FY 2022 23 and FY 2023 24, eased in FY 2024 25 as global air travel demand normalized. In the early part of the scal year, re neries increased ATF yields to capitalize on favourable margins and this led to an oversupply in certain regions.
The reduction in MS-AG (petrol) crack spreads during Q2 of FY 2024 25 was less severe compared to the same period in FY 2023 24 and FY 2022 23. Flat to subdued margins were primarily driven by a weaker-than-expected U.S. driving season, reducing global gasoline demand, rising electric vehicle (EV) adoption in China, impacting gasoline consumption growand additional product supply from newly commissioned re neries, contributing to regional oversupply. MS cracks coming down was another connotation. Thought the demand of products remained fast growing in India, the cracks are coming down due to Global scenario. This enigma "Local market Global Prices" poses challenges in long term view of economics of India.
4. Performance of MRPL
MRPL has processed highest ever 18.04 MMT of crude during the year, which translates to 120% of capacity utilization wia distillate yield of 81.93 %. Earlier best was 17.116 MMT (114% capacity utilization) during FY 2022-23. MRPL has once again become the single largest PSU re nery at a single location based on the crude processed during the year. MRPL also surpassed its own milestones on production of MS, Reformate, ATF and HSD and sales of Polypropylene.
MRPL has launched Toluene, a new product during the year for the supply in the domestic market. Introduction of Toluene enhances the value addition to product portfolio and realising higher margin.
During the last year MRPL has commissioned 66 retail outlets wiretail sales volume touching 229.8 million liters. MRPL has made its retail presence in Tamil Nadu and now operates its retail outlets in Karnataka, Kerala and Tamil Nadu. Going ahead, increasing its presence in other states and consolidating the presence in the existing states will continue. MRPL has also achieved 15.5 % ethanol blending as part of EBP during the year. The Marketing Terminal Infrastructure Project at Devangonthi was successfully commissioned, providing the required infrastructure to market our products HSD, MS and ATF from its own marketing terminal at Devangonthi. MRPLs leadership position in its region of operations for polypropylene sales continued.
5. Crude Basket
MRPL is capable of processing various grades of crude oil and has 273 di erent types of crude in its basket from various regions. Till date MRPL has processed 104 di erent types of crude from various parts of the globe. Crudes have been sourced from Asia, SouAmerica, Africa, USA and Russia. Crude was sourced from various National Oil Companies of exporting countries on term basis and from open market on spot basis.
Following new crudes were processed during the year: a) Kaliningrad (Russia, API-39.4) b) Varandey (Russia, API-37.6) c) Eocene (Neutral Zone, API-18.1) d) Peregrino (Brazil, API-14.4) e) Sandibinskaya (Russia, API-31.8) f) Merey-16 (Venezuela, API-15.69)
6. Products
The production details are given below:
| Crude | MT |
| Crude Processed | 18043580 |
| Products | MT |
| HSD (Diesel) | 66,79,905 |
| ATF (Jet Fuel) | 27,21,671 |
| MS (Petrol) | 20,06,812 |
| LPG | 11,87,054 |
| Pet coke | 9,44,729 |
| Reformate | 7,97,890 |
| MS -95 (Petrol) | 4,82,841 |
| Polypropylene | 4,54,641 |
| Sulphur | 2,10,897 |
| Benzene | 2,08,836 |
| MS -92 (Petrol) | 1,99,781 |
| Bitumen | 1,67,065 |
| VGO (Vacuum Gas Oil) | 79,485 |
| Naphtha | 68,079 |
| SKO (Kerosene) | 53,582 |
| Xylol (Mixed Xylene) | 23,913 |
| MTO (Mineral Turpentine Oil) | 5,870 |
| Toluene | 777 |
| Exports | |
| Product MT | |
| ATF (Jet Fuel) | 21,34,360 |
| HSD (Diesel) | 20,26,645 |
| Reformate | 8,65,082 |
| MS 95 (Petrol) | 4,33,481 |
| Benzene | 2,16,711 |
| MS 92 (Petrol) | 1,89,579 |
| Naphtha | 93,941 |
| VGO (Vacuum Gas Oil) | 79,485 |
| Total | 60,39,284 |
7. Key Financial Ratios are presented below:
Major Reasons for Signi cant Change in Ratio (i.e. 25% or more from previous year):
1. Interest Service Coverage Ratio (ISCR): Mainly due to decrease in EBIDTA during the current nancial year.
2. Operating Pro t Margin: Mainly due to decrease in Operating Pro t (Pro t before Exceptional Item and Tax + Finance Cost - Other Income) during current nancial year as compared to previous nancial year.
3. Net Pro t Margin: Mainly due to decrease in Pro t after Tax (PAT) during current nancial year as compared to previous nancial year.
4. Return on Net Worth: Mainly due to decrease in Total Comprehensive Income (TCI) during current nancial year as compared to previous nancial year.
8. Opportunities and Threats:
Although the global demand of fossil fuels has been sluggish, from Indias point of view, the opportunity and demand come from its growing internal requirement. Although we are the fourlargest economy in terms of GDP, our per capita consumption is still lower. As we move towards the target of Vikasit Bharat, the per capita consumption is projected to rise, and this will translate into demand for petroleum products.
The transportation sector is at the forefront of energy transition to renewables. Inspite of the growing trends and disruptive projections of the alternate fuels, immediate impact due to transition is far from reality due to strong underlying economic growand the technological maturity.
A burgeoning middle class and increasing rural and urban consumption creates high demand for petrochemicals. The present petrochemical consumption of India is lower than the global average. Opportunities continue to exist for the re neries that are well integrated wipetrochemicals.
Demand for re nery streams rich in Ethylene and Propylene molecules will continue to grow wirising wealth, as these are primarily used in the production of polymers for plastics, synthetic bers, and other petrochemical intermediates. MRPL is working on options available and exploring calculated investment opportunities in petrochemicals to embrace the rising demand. MRPL is well placed by virtue of inherent exibility for petrochemical integration. The presence of re ning and petrochemicals at a single location provides an added advantage to the re nery to realize production of petrochemical intermediates at a low cost compared to the full cracker route.
Re nery streams having certain key molecules can serve as a feedstock for creating high-value (Active
Pharmaceutical Ingredients) APIs through complex chemical synthetic processes, adding value to traditional re ning operations. APIs are used to prepare drug formulations. Valorizing such molecules enables the conversion of petrochemical molecules into pharmaceutical ingredients, driving sustainability and diversi cation in the re ning industry. MRPL is setting up a demo plant for Isobutyl Benzene (IBB) and its production is expected by the beginning of third quarter for FY 2026. MRPL is further working on various others APIs for production from captive streams.
India has set the Net Zero target year as 2070 for the country. India has targeted for reducing its emission intensity per unit of GDP by 33 - 35% from 2005 levels by 2030 in line withe commitment given during the COP 21 meeting at Paris. Meeting the net zero targets shall involve huge capex and necessity to diversifying into other segments such as Biofuels apart from the Green/ Renewable Energy. However, the company cannot a ord to ignore these developments and has taken calculated steps towards its adoption. MRPL has set the target for meeting the Scope-1 and 2 net zero target by 2038 aligning wiparent company ONGC. A consultant has been appointed to study and recommend road map to meet this target.
In todays emerging Renewable Energy market, opportunities exist for diversifying into and for capitalizing on this source as an alternative to the power derived from the fossil fuel. Governments mission to reach to the target of 500 GW RE power by 2030 and reaching EV mobility to 30% by 2030 is creating the required supply and demand side infrastructure for tapping this resource.
Energy costs are signi cantly a ected by crude costs. Global uncertainty in the supply and demand of crude oil poses challenges to this imperative requirement of the industry. Re neries are currently heavily dependent on the fossil fuel for their energy needs, and this poses a threat to the shrinking GRMs of the re ners. MRPLs grid power infrastructure augmentation project is a step towards creating infrastructure to decouple from variations in its energy costs by sourcing green power from the grid. This will also help MRPL to meet the RCO obligations mandated by Government of India.
As a part of UN plan to o set aviation emissions, Carbon O setting &Reduction Scheme for International Aviation (CORSIA) is being implemented to address increase in CO2 emission from International civil aviation above 2020 levels by ICAO. India will be participating in the second mandatory phase of CORSIA from 2027. Government has indicated 1%, 2% and 5% SAF blending in ATF from 2027, 2028 and 2030 respectively for all international ights from India. Considering the same, MRPL is setting up a 20 KLPD Bio-ATF plant based on the indigenous technology from CSIR-IIP & EIL. The production from this plant is expected to be started in early 2027. Further, plans are being worked out for production of SAF from existing Re nery units.
MRPL is in the process of setting up a Green Hydrogen plant wia capacity of 500 TPA. In line withe National Green Hydrogen Mission, MRPL has initiated action for procurement of Green Hydrogen on BOO mode under SIGHT-2B Scheme. The transition to the future by the company will include well researched e orts in clean energy, carbon footprint reduction, sustainable initiatives and e ective deployment of capital resources towards diversifying into these future markets for sustained growin coming years.
9. Risks
9.1 Crude Supply and Price Risk
Re ning due to its inherent nature of Business, is exposed to potential disruptions in crude oil supply, particularly from the Middle East, which constitutes a major portion of our import basket. Geopolitical tensions, port congestion, freight volatility, or logistical chokepoints such as the Strait of Hormuz may impair the timely arrival of crude cargoes. Although strategic diversi cation e orts basis qualitative, quantitative & commercial evaluation, it is our constant & consistent endeavor to remain balanced amidst various regions & domestic producers. This approach enables e ective opportunity capture and signi cant risk mitigation, provided that crude availability, quality compatibility, voyage economics, and operational challenges remain balanced and satisfactorily aligned for processing. The company maintains an agile crude procurement strategy supported by a mix of term contracts and opportunistic purchases, coupled wiadequate inventory bu ers to ensure continuity of re ning operations.
MRPLs linear programming model is regularly updated to re ect the evolving availability, quality and price of various crude oils for helping in decision making and arriving at the most optimum slate for procurement. This has been valuable for MRPL to tap into opportunity crudes quickly and secondary feedstock based on economics. The SPM facility ably supports crude procurement in large quantities for freight advantage.
9.2 Re nery Margin Risk
Re nery margins are inherently volatile and driven by a complex interplay of crude di erentials, product cracks, and regional demand-supply balances. Margins are particularly sensitive to Asian middle distillate and MS economics, seasonal demand patterns, and export competitiveness. While periods of strong cracks in diesel and MS markets support margins, episodes of feedstock price spikes or product oversupply exerts downward pressure. The company actively manages margin risk through dynamic crude slate optimization, & calibrated run-rate adjustments to align wimarket signals, thereby safeguarding pro tability.
MRPL has been improving the physical parameters by achieving high capacity utilization, accessing low cost feedstock, diversifying the sourcing of crude, addition of new value added products to its portfolio and increasing its retail foot print. However, owing to external factors such as sharp drop in cracks, price uctuations in short durations has impacted the operating margins. It may also be noted that Singapore benchmark margin was also dragged by over 40% during the nancial year due to similar reasons.
10. Internal Control Systems
MRPL has a well-established internal control mechanism which ensures an e ective internal control environment. MRPL is constantly improving and upgrading its system of internal control towards ensuring management e ectiveness and e ciency, reliable reporting on operations and nances and securing high level legal compliance and risk management. Adequate systems of internal control are in place to commensurate withe Companys size and nature of its operations. These have been designed to provide reasonable assurance wiregard to recording and providing reliable nancial and operational information, complying wiapplicable statutes, safeguarding assets from unauthorized use or losses, executing transactions wiproper authorization and ensuring compliance of corporate policies.
The Internal Audit is supervised by the Audit Committee which continuously monitors the e ectiveness of the internal control systems wian objective to provide to the Board of Directors, an independent, objective and reasonable assurance on the adequacy and e ectiveness of the organizations risk management control and governance process. The Audit Committee reviews the audit and e ectiveness of the Companys internal control environment and monitors the implementation of audit recommendations and follow up actions.
MRPL is also covered by regular compliance and performance audits by the Comptroller and Auditor General of India. CAG has deputed a Resident auditor to the company. The company is also under the jurisdictional oversight of the Central Vigilance Commission and has a full- edged Vigilance Department headed by a Chief Vigilance O cer.
11. Joint Ventures
11.1 Shell MRPL Aviation Fuel Services Limited (SMAFSL)
The Company has Joint Venture viz. Shell MRPL Aviation Fuel Services Limited (SMAFSL) wiShell B.V. Netherlands wherein your Company holds 50% of share capital and the balance is held by Shell Gas BV, The Netherlands. The accounts of SMAFSL have been consolidated wiMRPLs Accounts.
SMAFSL supplies Aviation Turbine Fuel (ATF) to bodomestic and international airlines at several Indian airports and acts as a contracting Company for Indian carriers International Aviation Fuel requirements. The total income for FY 2024-25 is 2576.47 Crore as against 2112.16 Crore in FY 2023-24 wiPre-tax pro t of 70.82 Crore (Previous Year 40.90 Crore) and post-tax pro t of 53.62 Crore (Previous Year 30.80 Crore).
11.2 Mangalam Retail Services Limited (MRSL)
During 2017-18, the Company reduced its shareholding in Mangalam Retail Services Limited (MRSL) to 18.98% and accordingly MRSL presently is not an associate Company of MRPL. MRSL has not yet started commercial operations.
12. Conclusions
The physical performance of MRPL in FY 2024-25 was one of its best ever. Its once again the largest, single location PSU re nery. The company is well placed in key metrics of Capacity Utilization and Leverage. The company is focused additionally on improving product margins through operational e ciency, launch of new value products and marketing expansion. MRPL has commissioned 167 Retail Outlets covering Karnataka, Kerala and has made a presence in Tamil Nadu. These will be further expanded, and new outlets will be rolled out in adjoining states.
13. Forward Looking Statements
All statements that address expectations or projections about the future, but not limited to the Companys strategy for growth, product development, market position, expenditures and nancial results, are forward-looking statements. Since these are based on certain assumptions and expectations of future events, the Company cannot guarantee that these are accurate or will be realized. The Companys actual results, performance or achievements could thus di er from those projected in any forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events. The Company disclaims any obligation to update these forward-looking statements, except as may be required by law.
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