| Communication Meeting held on 22.1.2003 |
| The Quarterly Communication Meeting for the
period Oct.-Dec. 2002 was held at Northern Regional Office, New Delhi,
on 22nd January 2003. Presided over by the Chairman, the meeting was attended
by all Functional Directors, Departmental Heads in Divisional Headquarters,
and unit heads of Refineries, Marketing, Pipelines and R&D Centre.
The exercise was aimed at sharing information across Divisions, primarily focussing on issues concerning profitability and bottom line, and systems improvements effected by the Divisions in their respective areas. Chairman welcomed all the participants to the Communication Meeting. While once again conveying his New Year greetings to the IndianOilPeople and their families through the forum, he asked them to make a firm resolve in 2003 that they shall contribute their utmost to ensure that IndianOil maintains its dominant position in the hydrocarbon sector by successfully overcoming all obstacles. The following are excerpts from the observations made by the
Chairman and Functional Directors at the meeting: Chairman Kelkar Committee Report: The run-up to the Union Budget presentation in February 2003 is eliciting much discussion, particularly the Kelkar Committee report and BJP’s recommendations on the same. In the petroleum sector, the committee had recommended that customs duty on petroleum products (POL) should be brought down to 15% while the duty on crude oil should be maintained at 10%. The Government may also go for specific rate of excise duty for individual products. In our opinion, this will put pressure on the already shrinking refinery margins, which are based on import parity. We have written to Dr. Kelkar asking for continuance of the duty differential between crude and petroleum products at 10%, without which it will be a losing proposition for not only North-East refineries but others elsewhere as well. Gas Finds in AP, Myanmar: Reliance have announced
discovery of in-place reserves of 7 tcf / 40 mmscmd of natural gas in
the Krishna-Godavari basin. Viewed against the current supply of 60
mmscmd of natural gas in the country, this find shall have implications
on the POL demand on the East Coast being replaced by gas, especially
on Paradeep Refinery Project and Chennai Petroleum Corporation Ltd.
which is completing 3 mtpa expansion in the next three months. The OVL-Daewoo-GAIL
consortium has also reported discovery of large gas finds in Myanmar,
which may also impact East Coast refineries in the long run. BusinessWorld Survey: IndianOil has been ranked No.2 in the petroleum sector in the latest BusinessWorld Survey of the Most Respected Companies in India. While acknowledging this public perception, we should work together to prove that we are second to none in the industry. IndianOilPeople have consistently proved their mettle over the years, in war and peace. The Government looks to us for leadership in the downstream sector. Our crisis management skills are considered to be the best in the industry. It is, therefore, imperative that we take stock of where we have lost our grip, take immediate corrective measures and demonstrate to the world that we are not only India’s No.1 company but are perceived as such by the people on the street. It is time for us to see ourselves through the eyes of other people. McKinsey Study: M/s McKinsey & Co., appointed as consultant to the Corporation, are currently looking at ‘strategy-structure-people’ oriented picture of IndianOil to ensure that our dominant position with respect to our competitors is maintained in the coming years. Senior management representatives, including Directors, have spent considerable time with the consultants on the study, which covers a wide range of issues, including profitability of refinery operations, new investments and several marketing issues. We propose to implement certain structural changes, especially in the Marketing Division, in the current round of promotions/postings. Subsidiaries: IBP, as a pure marketing company, is in a difficult position with regard to absorbing subsidies in LPG and kerosene, which are not being adequately compensated. Though the issue may be of a temporary nature, we have taken it up strongly with MOP&NG for quick corrective action. The profitability of BRPL has improved due to the proactive action taken by us in obtaining excise duty concession and also allocation of 1.5 mtpa of Ravva crude. On the whole, we expect the profitability of Northeast refineries to improve further. IndianOilPeople: As I had said on several occasions in the past, wherever I go on my field visits, I find tremendous enthusiasm among IndianOilPeople -- to achieve more, to stretch themselves to exceed targets. I urge senior colleagues and HODs in this forum to channelise this power of positive thinking to post better results for their units as well as for the Corporation. They must continuously communicate down the line the developments in the industry and how they impact us, IndianOil’s vision of the future and the initiatives being taken at the corporate, division and unit levels to realise this vision. I welcome Shri N.R.Raje, who is attending the Communication Meeting
for the first time in his new capacity as Director(R&D), and also
Shri Anjan Ghosh, IPS, who has recently joined us as Advisor (Security).
He is, however, away in the Northeast to investigate a pipeline blast.
I also take this opportunity to bid a fond farewell to Shri C.B.Satpathy,
Chief Vigilance Officer, who shall be leaving IndianOil by the month
end to take up assignment at ONGC. Shri Satpathy has brought many laurels
to the Vigilance Department and to IndianOil with path-breaking initiatives
in proactive vigilance. He has been a constant source of strength, support
and inspiration to IndianOil, and we hope we shall continue to benefit
from his guidance in the future. Director (Refineries) Pipeline Blast: A blast occurred on the Digboi-Tinsukia pipeline in the early hours of 21.1.2003, ripping off the pipeline into two, which again goes to show how vulnerable our infrastructure is for security breaches. We need to be alert round-the-clock, round the year to safeguard our installations and people. Mathura Hospital: The Supreme Court, after a hearing on 21.1.2003, has allowed IndianOil to continue operating the 50-bed hospital it had set up at Mathura through an NGO, without any definite time limit for extension. PX/PTA Plant at Panipat: The PX/PTA plant proposed at Panipat is now being set up within the refinery premises as a cost-cutting measure. Ministry of Environment & Forests has cleared the proposal for change of site. Integration of the project with Panipat Refinery will bring in substantial savings. Entry Tax on Crude Oil: Based on IndianOil’s representation to the Chief Minister of Orissa on the Paradip-Haldia crude pipeline project, the State Government has confirmed that no entry tax shall be levied on transit crude. The project will include an SBM, a submarine line to the coast, and crude oil tankage to reduce the cost of positioning crude at Haldia and Barauni refineries. Further, based on a Kerala High Court order, a plan of action has been initiated to minimise the drain on the revenues of refineries from entry tax imposed on crude by State Governments. An appeal has already been filed in Allahabad High Court in this regard. McKinsey Study: The study on supply architecture is in final stages of completion, focussing on least delivered cost, taking into account the total cost of the supply chain, productivity of assets, and input costs, so as to remain competitive in the market place. A savings opportunity of at least $1.5 per barrel of crude has been identified. Stretched Target: All refineries have identified and
begun working on stretched targets w.e.f.20.12.03. With Reliance FCC
shutdown in Dec. 2002, IndianOil refineries went for maximisation of
LPG production, achieving 9,000 mt higher production than target. Stretched
target is expected to bring Rs. 173 crore to the Corporation’s kitty
during Jan-Mar. 03 period compared to RE. Initial data for the first
12 days of January appears good. Since disruptions in operations cut
down our profitability, we should maintain continuous M&I audit
to ensure reliable operations. Teams at locations are now fully committed
to cost reduction. Director (Finance) High Crude Prices: The international crude prices continue to remain high with speculation on the impending attack on Iraq. Product prices in the country, however, have not moved in tandem. The oil workers strike in Venezuela has further worsened the situation, in spite of OPEC countries raising their output. In these circumstances, refinery operations may come under further squeeze. Oil Bonds: The Govt of India oil bonds of Rs. 5,216 crore were offloaded to SBI, thereby reducing the Corporation’s outstanding loans from Rs. 19,000 crore to Rs. 13,000 crore. Our debt: equity ratio has improved from 1.25:1 to 0.7:1, improving our borrowing capacity. On the capital expenditure front, we should now push to complete our approved projects faster so as to be profitable. Subsidies: Continuing subsidy on LPG and kerosene is a major area of concern, with IndianOil absorbing Rs. 2,000 crore on unrealised subsidies up to Dec. 2002. Till now we have been getting Rs. 49 per cylinder out of Rs. 189, while the Govt. proposal is to subsidise only Rs. 67 - 69 per cylinder, leaving around Rs. 120 per cylinder subsidy to be borne by IndianOil. Interim Dividend: We have received a request from the Government of India for payment of interim dividend, which shall be taken up for consideration in the Board Meeting on 29.1.2003, along with the third-quarter financial results. Tax Compliance & Savings: M/s Ernst & Young have been appointed as consultants to advise the Corporation on tax compliance and savings. Action has already been initiated on the interim report submitted to us, and the results are excellent. Marketing and Refineries divisions should take immediate action to clear excise/customs duty cases, and bring major areas of concern to the notice of the Management during Jan-March. In view of the impending specific excise duty on individual products, we have postponed KBPL conversion from bonding to non-bonding. Central Government notification on ATF supplies to international airlines prohibits levy of duties and taxes by Central Government an State Governments. Marketing Division to take action on the same. Project Manthan: Progressing well, with 39 sites having
gone live on SAP as on date. More sites are preparing to go live in
March & April. The project site has shifted to our own Data Communication
Centre at IIPM. The add-ons component of the project has been awarded
to M/s Tata Honeywell and is progressing well. Director (Pipelines) Petroleum Pipelines Policy: According to the new policy announced by the Government of India recently, all pipelines less than 300 km from a refinery do not need Government approval. Captive pipelines (to customers, for instance) also do not need approvals. Other pipeline proposals, such as those originating from ports, need prior Government approval and should also fulfil the condition of 25% additional capacity, over and above planned capacity, for use by others. We have written to the Government that this clause for additional capacity will not only push up project costs but also benefit latecomers to the project. MOP&NG is examining the issue and will revert to us. Paradip-Haldia Pipeline: Stage-I clearance of the Board received in Dec. 2002. There has been some resistance from the Kolkata Port Trust and the West Bengal State Government to the proposed project since it would bring down movement of crude through Haldia port substantially. We have made it clear to them that we shall be making substantial savings by positioning crude at Haldia and Barauni refineries through the pipeline route and, hence, need to be compensated to that extent to maintain the status quo. A group with representatives of KPT and IndianOil has been formed to study and quickly come up with their recommendations on the issue. Power Supply Integration: As part of integration of power between Pipelines and Refinery at Panipat, a second 6-KV feeder was commissioned in Dec. 2002. KBPL is now drawing power from the refinery, resulting in refund of Rs. 48.87 lakh as deposit with State Electricity Board. The monthly electricity bill of approx. Rs. 8 lakh will now be paid to the refinery. Improved Operations: Both crude oil and product pipelines have met or exceeded their pro-rata MoU thruput targets for the period under review. Viramgam-Chaksu section of SMPL achieved an average thruput of 50,000 kl in Nov-Dec. 2002 to meet the increased needs of Panipat refinery. Acoustic emission testing of 10 tanks at Vadinar, Viramgam and Chaksu has been carried out. MOEF Clearance: Ministry of Environment & Forests clearance has been obtained for Viramgam-Koyali Crude Oil Pipeline and Sidhpur-Sanganer and Panipat-Rewari pipelines. It is suggested that for new projects, EIA/RA studies should be started early after in-principle approval, without waiting for Board approval. Divisional Directors are competent to approve these studies so as to save on time. Business Development: The technical bid of the consortium
led by IndianOil for the Iraq-Jordan Crude Oil Pipeline was adjudged
the best among the four offers received. Since our price bid is not
the lowest, we may be called for further negotiations. Oman Gas. Co
has also short listed us for consultancy services for gas transportation
facilities. Director (Marketing) Market Share: A major area of concern is the loss of 1.1% market share during the period under review, mainly on account of potential losses in Naphtha and FO. We have already initiated steps to overcome this. There has been increase in market share in MS (retail), ATF, HSD (direct & retail). Our market share went down in LPG, Naphtha, LSHS and lubes. However, from September onwards, the negative trends have been reversed, and we now have positive trends in FO and bitumen also. Marketing Initiatives: The following measures have been put in place to beat competition:
Commercial bottling has begun at LPG bottling plants in Jhunjhunu and
Leh. LPG bottling plant at Port Blair has been piped for supplies. Director (HR) Study on Organisational Issues: The McKinsey study on organisational issues, which began in August 2002, is in an advanced stage. Several of their recommendations are being discussed at the EC and Board level for implementation. Expected recommendations relating to HR will include organisational structure, key performance indicators and key result areas of pivotal positions, and rewards for group and individual performance. SABF Scheme: The fund position had deteriorated due to lowering of interest rates on investments, upward revision of annuity rates by LIC, and hike in salary of employees due to long term settlements. The trustees in their meeting on 3.1.2003 have decided that salary increase beyond 1.1.03 will be limited to a maximum of 7%. It was also decided to review the fund position every six months and after the Court’s decision for reviewing our case for exemption from EPS- 1995. Campus Recruitments: In line with our policy of keeping a constant flow of qualified professionals into the Corporation, we are in the process of recruiting 100 engineers and 30 management graduates from reputed institutes, to be available by Sept. 2003. The induction of officers is planned keeping in view, among other things, the attrition of officers at a given period of time. Global Compact: United Nations has announced the formation of Global Compact as a forum to address critical issues pertaining to the interface between organisations and society, in the areas of human rights, labour standards and environment. Global Compact has invited examples from member organisation for posting on its website, and one IndianOil case is already posted. Divisional HR heads are requested to provide us specific case studies in the areas of health care, education, women’s welfare, child welfare, empowerment of villages, rehabilitation, involvement of collectives in environment awareness, drinking water, eco-friendly initiatives, green belts, etc. Access Control: Access control system has been implemented
at Gujarat and Panipat refineries for all employees on 16.1.03 and 16.12.02
respectively, with the cooperation of all concerned. This has set the
pace for fast implementation of ACS at other units. Director (Planning & Business Development) Sri Lanka: The first Board Meeting of Lanka IOC Pvt.
Ltd, IndianOil’s wholly-owned subsidiary, was held on 3.12.02. Two agreements
have been signed with Sri Lankan authorities since then:
Bangladesh: Concept paper on privatisation/deregulation of Bangladesh petroleum sector, along with IndianOil’s proposal for participation, submitted to Bangladesh Govt., and is under their consideration. No objection certificate has been received from Bangladesh Petroleum Corporation for setting up 3 LPG bottling plants. Exports: MoP&NG has granted permission for export of imported LPG to SAARC countries.1887 kl of SERVO lubricants were exported during April-Dec.02 as against total export of 1570 kl during entire 2001-02. LNG: 64% progress on Petronet LNG Ltd’s Dahej Terminal by Dec. end, gas supplies to begin by first quarter of next year. Multipronged approach adopted to boost marketing efforts and tie up customers. Joint Collaboration Agreement executed for Kakinada LNG Project on 8.1.2003. E&P: Consortium of OVL–OIL–IOC has been awarded the Farsi Exploration Block in Iran. Exploration Service Contract was signed on 25.12.02. ONGC-IOC consortium has been awarded one NELP-III block in Mizoram. Consultancy: Technical Services Agreement and Manpower
Secondment Agreement with ENOC have been renewed for one more year.
Consultancy in "Integrated Management System” to Oman Refinery
Company was bagged against stiff international competition. Director (R&D) Applied R&D: 70% of R&D efforts will henceforth
focus on ‘Applied R&D’ to meet the needs of operating divisions
in the following areas: As part of applied R&D, about 105 R&D projects have been identified in association with Marketing Division in Aug. 2002 with time-bound action plan by identified teams on both sides. Similarly, 29 projects have been finalised jointly with Refineries Division, the thrust areas for which include catalysts/ chemicals evaluation, enhancement of LPG production, product quality improvement, process optimisation, value addition, software/process model development, sludge treatment and fuel additives. Futuristic R&D: 30% of R&D efforts will be on ‘Futuristic Initiatives’ to support the long term business needs of the Corporation in new technologies, alternative energy sources, in-depth understanding of product /process performance, etc. Alternative Fuels: 5% ethanol-blended petrol 9gasohol) was formally launched on 1.1.2003. The Hon’ble Minister of Petroleum on 14.11.02 formally released the final report on the study conducted by the R&D Centre on 5% and 10% ethanol-gasoline blends. The R&D Centre is working closely on this project with Railways, who have used bio-diesel prepared by the Centre as 5%, 10% & 15% blend with diesel, and no operational problems or power loss has been observed. The Delhi-Amritsar Shatabdi Express was also run on 5% bio-diesel blend. An MoU will be signed with Railways for production of bio-diesel on a large scale after Board clearance. Premium Fuels: Most Original Equipment Manufacturers have welcomed introduction of premium fuels by IndianOil in the market, and many of them are willing to endorse our products, especially 91-Octane IOC Premium petrol. The products need to be propagated more intensely among potential users through innovative advertising and sales promotion campaigns. PETROTECH-2003: IndianOil R&D team managed the
Technical Committee of PETROTECH-2003 Conference, including selection
of papers in downstream areas, session planning, and preparation of
booklet covering downstream R&D institutes of India. Chief Vigilance Officer Vigilance is meant for IndianOil and not vice versa. It is not a faultfinding
but a fact-finding agency. It is proactive and not reactive. This has
been my mission in IndianOil ever since I joined this organisation in
1998. And the Vigilance Department achieved exactly what it had set
out to do five years ago, thanks to IndianOil’s culture of healthy acceptance
of experiments for overall development. The Department now has a healthy
mix of insiders and outsiders, and the corporate culture allows even
outsiders to effortlessly settle and feel at home in the Corporation,
and learn a great deal about its business. Very few companies can do
this. As I leave IndianOil, I have the satisfaction of having documented
the history of the Vigilance Department in IndianOil since its origin
in 1970. Unit heads of Refineries Division Panipat Refinery Mathura Refinery Barauni Refinery Haldia Refinery Gujarat Refinery
AOD Regional heads of Marketing Division Northern Region Eastern Region Western Region Southern Region Regional heads of Pipelines Division Northern Region Pipelines: Mathura-Tundla pipeline
pumps trial run was conducted on Jan 9th and 10th 2003. Pilferage on
Kandla-Bhatinda pipeline was averted because of alertness of line patrolmen.
Instrumented pig survey is in progress in Mathura-Jalandhar pipeline Eastern Region Pipelines (DGM-O): MoU target for Haldia-Barauni
pipeline achieved on 14.1.2003, Haldia-Mourigram-Rajbandh pipeline also
likely to achieve target soon. Region well below limits with respect
to energy consumption by optimising operations. First workshop on safety
of pipelines organised jointly by OISD and ERPL-Kolkata on 14-15, Nov.
2002 at Kolkata. Western Region Pipelines: SMPL throughput, which
was below target till the quarter ending Sept. 2002, has been made up
during the Oct-Dec. 2002 quarter. SMPL is now operating above the internal
target and is confident of meeting the thruput target fixed for the
year. Viramgam-Chaksu section registering over 50,000 kl per day throughput
since Nov. 2002 against 48,000 kl per day design capacity, which itself
was difficult to achieve in earlier months. SMPL-Sendra received all-round
appreciation for readily making available AFFF foam to extinguish fire
in an aluminium foil manufacturing company at nearby Pipaliyakalan village Concluding remarks of Chairman and Directors
Awards, accreditations and certifications - Gold Trophy of “SCOPE Award for Excellence and Outstanding Contribution
to the Public Sector Management - institutional Category’ for the year
2001-02. |
The
maiden launch of branded fuels – IOC Premium (petrol) and Diesel Super
– took place in Delhi on Sept. 24, 2002. Subsequently, IOC Premium has
been launched in 14 markets as on date, and Diesel Super in 25 markets.
We have plans to extend marketing of IOC Premium to 80 markets and Diesel
Super to all potential markets by March 2003.