Director (Pipelines)

• As mentioned by Chairman, the operational performance of Pipelines Division during the year was good with the total network and capacity increasing to 9,273 km and 61.72 MMTPA respectively. Pipelines throughput this year was 51.22 MMT (crude: 32.43 MMT and product: 18.79 MMT).
  
• The Mundra-Panipat crude pipeline and branch pipeline to Chittaurgarh from the Sidhpur-Sanagner product pipeline have been commissioned recently. With the Paradip-Haldia Crude Oil Pipeline and Koyali-Ratlam pipeline likely to become operational soon, our pipeline network will cross the 10,000 km figure. One of the highlights was the pumping of the longest ever ATF batch of 24.80 TKls in Panipat-Bijwasan section.
  
• As an innovative procedure, simultaneous pumping of products was carried out in the Panipat-Bijwasan and Panipat-Ambala-Jalandhar sections with delivery at four tap-off points. This is useful since it helps to pump both sides simultaneously. However, this may create operational problems w.r.t to proper handling of all products.
  
• In an example of how small beginnings lead to big achievements, the 3700th tanker berthed at Vadinar since its commissioning in 1978. On 9th Feb 2007, MT Dorado carrying 2,92,771 MT of Kuwait crude oil became the first tanker with the highest quantity of cargo to discharge at Vadinar since inception.
  
• We need to be quick on the maintenance & inspection front. The present completion schedule of 7.5 months for tanks at Vadinar needs to be brought down to 6.5 months.
  
• Chairman visited BARC (Bhabha Atomic Research Centre) to review the Instrumented Pig Project. The 12" Instrumented Pig has been running successfully in the Patna-Mughalsarai pipeline. The 14" Instrumented Pig has been developed and tested and will be soon launched in the Delhi - Panipat section of the Pipeline.
  
• Regarding ongoing projects, we have overcome problems in horizontal directional drilling (HDD) in Mahanadi river in laying the Paradip-Haldia crude oil pipeline. M/s. OES, Australia, has been mobilised at Paradip water to execute the balance offshore work. It is hoped to commission the pipeline before monsoon.
  

Area of concern:
a) There have been repeated pilferage attempts in WRPL. Through Advisor (Security) and police authorities, we are investigating this. Night patrolling, surprise checks, and latest technology are being deployed to control such attempts.

b) To prevent safety lapses, we need to be vigilant and also sensitise vendors and contractors.

Director (Finance)

• For the three quarters ended December 2006, we posted good profits mainly due to the sale of ONGC shares. Merger with IBP would translate into merging the balance sheets of the two companies too. Consequent to this merger, we have to provide for the differential between the acquisition cost of IBP shares and their market value on 31.3.07, which would dip the profit by about Rs. 1,300 crore.
  
• The financial results for the year 2006-07 are currently under consolidation. Board would adopt the accounts in its meeting scheduled on 28th May 2007.
  
• RIL has given notice that they would reduce the supply of LPG by 1 MMTPA from July 2008. LPG group should ensure that necessary infrastructure and facilities are in place for imports in coordination with GAIL / industry.
  
• We have received Government of India oil bonds totaling Rs. 12,649 crore during 2006-07, a portion of which we had disposed of. Coupled with discounts from upstream PSUs, I am confident that we shall post good results for the year 2006-07.
  
• Thanks to appreciating rupee and proceeds from sale of ONGC shares, our borrowings are at manageable levels. We are looking to dispose of more Govt. oil bonds to further streamline our borrowings position. Along with Chairman, we were recently in the US for private placement to raise funds (USD 200 million) for a 10-year duration, which are cheaper than syndicated loans. The US investors are currently conducting due diligence. We have an option to retain the extra subscription. The option of private placement in US money markets has earlier been exercised by RIL and IRFC (Indian Railways Finance Corporation).
  
• The CFOs of all oil PSUs met in Shimla recently to exchange / share best practices. GAIL (India) has a very good system on e-procurement, which IndianOil can consider emulating.
  
• As shared by Chairman, we met the Finance Minister as part of our continued dialogue with the Government on an improved tax structure. Our pre-budget meeting with the Finance Minister was fruitful in that it ensured the partial reduction of customs duty on MS and HSD in the Union Budget 2007, which could otherwise have reduced refining margins.
  

Director (HR)

• IBP Merger - As shared by Chairman, IBP Co. Ltd. has been formally merged in IndianOil w.e.f.2.5.07. From the same date, IBP has been made a separate Division of IndianOil. IBP has three Business Groups, viz., Petroleum, Cryogenics and Explosives. The total manpower strength of IBP as on 31.03.07 is 2,076 (Officers 877 and non-officers 1199). Out of the three businesses, the Petroleum Business is the main business. Detailed plan has been made for integrating the Petroleum marketing business of IBP with Marketing Division. This plan is now getting implemented and shall result in physical integration of business and people to achieve optimum utilisation of resources. However, the other two businesses, i.e., Cryogenics and Explosives, would continue as it is for the time being.
  
• Promotions/Placements - The annual exercise of promotions/placements in all grades of officers was completed by 31st March '07 as per schedule. I compliment all HR functionaries connected with the exercise in Corporate Office and Divisions for this achievement. In IBP Division also, the DPCs for officers in grades 'A' to 'F' have been held. Promotions and placement orders would be issued shortly.
  
• IIPM - During 2006-07, IiPM recorded the highest ever training man-days of 15,719 as compared to 13,445 and 10,454 during 2005-06 and 2004-05 respectively. I compliment ED (IIPM) and his team for this achievement. Some of the highlights of IIPM during 2006-07 are
  
  • Seven long-duration development programmes - Cutting Edge (4), Threshold (2), Senior Management Programme (1), conducted
    
  • The first batch of 47 officers completed the Hybrid Certificate Programme on Project Management in association with Universitas-21 Global. The second batch of 51 officers, which includes senior officers from PDRP Group, has started on 1st May 2007
    
  • To strengthen the people-related skills of senior executives, a unique four-day programme was conducted for DGMs/GMs/EDs. The second programme in the series is scheduled from 27th May '07
    
  • A series of programmes were conducted for senior executives at the level of DGMs and above as a follow-up of competency building exercise.
    
• IOOA - After following a multi-layer election process, a body of 51 members of the All India Central Executive Committee (AICEC), including eight apex-level office bearers, was in place on 24.1.07. We believe the new body will play a very constructive role like the previous body for the benefit of the organisation and the officers. A meeting with the AICEC of IOOA has been planned at Corporate Office on 10th May with participation of Chairman, all functional Directors and Divisional HR Heads.
  
• VRS - The Voluntary Retirement Scheme (VRS) is on during the period 1st April '07 - 31st July '07. A special attraction for employees seeking VR during this phase is that they would be entitled for arrears on ex-gratia amount on revised salary.
  
• Pay Revision Committee - The Govt. has constituted the second Pay Revision Committee for PSUs under the Chairmanship of Mr. Justice MJ Rao to give recommendations for pay revision of the Board level and below Board level executives w.e.f. 1.1.2007. The Committee will make its recommendations in 18 months from the date of its constitution in November '06. As desired by the Pay Committee and the DPE, IndianOil made a presentation on ESOPs (Employee Stock Options) before the Committee and Secretary, DPE on 4th May 2007. IndianOil would also make a separate presentation before the Committee in its next meeting on behalf of the Oil Industry on a special study conducted through Hewitt Associates.
  
• Felicitation of Senior Retired Employees - To recognise the contribution made by our senior colleagues in building this great Corporation, it has been decided to felicitate all those senior retired employees, who have completed the age of 75 years, on IndianOil Day.
  
• Conveyance facility for officers in grade 'H' and 'I' - In view of the unsatisfactory experience of hiring cars for GMs/EDs from transport agencies, it has been decided to take cars on lease from reputed leasing companies. The new scheme also provides for buying the car at depreciated value at the time of superannuation of the officer.
  
• Housing perquisite - As you are aware, since 2005-06, housing perquisite on company owned/leased accommodation is charged @ 15% for cities up to a population of 4 lakh and @ 20% for others. Prior to 2005-06, these rates were 7.5% and 10% respectively. This issue was taken up by the oil companies with the Finance Minister through Minister of Parliamentary Affairs. SCOPE also took up the issue with the Finance Minister separately. The Finance Minister has kindly considered and announced the relief on housing perquisites with retrospective effect from the year 2005-06. The revised rate of housing perquisite would be: 7.5% in cities with population up to 10 lakh, 10% in cities with population between 10-25 lakh, and 15% in cities with population over 25 lakh.
  
• e-PMS - For the year 2005-06, e-PMS was used for the first time in the DPCs of 2007. The Performance Appraisal process for the second year, i.e. 2006-07 will start from 15th May '07. All are requested to use the system diligently. You may take the assistance of HR functionaries wherever required.
  
• Recruitment - In 2006, we recruited a total of 490 officers - 377 engineers & MBAs through open recruitment, 94 through campus and 19 from the Institute of Chartered Accountants. These officers have completed their induction training and reported on the job. During 2007, we plan to recruit 500 officers - 350 through open recruitment and 150 through campus. In addition, we will also be recruiting 50 CAs. The advertisement for open recruitment has come out in newspapers during first week of May and the written test is to be conducted on 8th July. These officers will report for the induction training on 5th November. The officers who were selected from campuses last year (about 120) will be inducted some time in July/August 2007 .
  

Director (Marketing)

• The year 2006-07 has been generally a satisfying year for Marketing Division w.r.t several factors such as sales performance, reseller group expansion, emergence of KSK as a potent vehicle for penetrating rural markets, a good beginning showed by agricultural oil, XtraPremium joining XtraMile and AutoGas as a market leader in the category, automation of ROs finally taking off, and good realisation of non-fuel revenues, with LPG group contributing Rs. 17 crore in the first year. IndianOil's 16th State Office - UPSO II - has started functioning w.e.f.1st April 2007.
  
• SERVO brand received Superbrand status during March '07. IndianOil was listed as India's `Most Trusted Brand' in the `gasoline category in the Readers Digest' - AC Neilson Survey during the year.
  
• Merger of IBP is a significant milestone. This, along with RIL converting its Jamnagar unit into an EOU, would certainly impact our policies and plans progressively.
  
• MOU Performance - Bihar State Office has topped the list. Along with BSO, I compliment the top five states, viz., Orissa, Punjab, Kerala, Gujarat and UP, for achieving excellent MoU scores.
  
• Sales Performance - During the period 2006-2007, IndianOil has achieved a sales growth of 2.8 MMT i.e. approx. 6 % w.r.t 5 MMT (4.6%) growth in industry sales. This growth is primarily driven by HSD, where our sales have grown by 1.9 MMT during the year. IndianOil ended the year with a market share of 44% (a gain of 0.5%) including private players. However, among PSUs, market share stands at 50%, with a loss of -0.3%.
  
• Retail - IndianOil registered a 7.5% growth in MS (R) volume and 12.2% growth in HSD(R) volume. XtraPremium has emerged as the largest selling branded petrol in the country with a market share of around 39.5% and is available at 4100 ROs. XtraMile diesel retained its leadership status with a market share of 54.6% in March 2007 and is available at 8000 ROs.
  
• During 2006-07, 1185 Retail Outlets were commissioned out of which, 738 were Kisan Seva Kendras (KSK). Presently, there are 1317 KSKs. The average PPT (per pump throughput) for a KSK is 47KL (MS: 9 kl and HSD: 38 kl) against our projection of 25 kl. We plan to commission 1000 KSKs in 2007-08.
  
• XtraPower fleet card loyalty program reached a new high with total transaction over Rs. 7800 crore during the last year. This is the highest among all loyalty cards in the country. Presently 1.2 million XtraPower card customers are benefiting from this loyalty program and over 4200 retail outlets are accepting this card for transaction round the year. Sales accruing through XtraPower card have jumped to 15% from 8% last year.
  
• Lubes - IndianOil continued to dominate the lube market and registered over 4% volume growth in 2006-07.
  
• Consumer - During 2006-07, we have registered growth in HSD (D) (9%), Naphtha (3.2%), Bitumen (5.8%) and ATF (19.7%). Non-Domestic and Bulk LPG sales grew by 50%. However, this area needs to remain under focus as a potential revenue earner. IndianOil's AutoGas sales grew by 87% and its market share touched 44%.
  
• Supplies - A new supply agreement has been signed with Nepal Oil Corporation on 30th March '07 for supply of petroleum products for period of 5 years. NOC has agreed to pay Rs.15 crore each month over regular payments for clearing the outstanding dues which stand at Rs. 303 crore as on 1st May 2007.
  
• The Ethanol-blended Programme (EBP) has been fully implemented in the states of Uttar Pradesh, Uttarakhand, Delhi, Goa, Bihar, Jharkhand, Karnataka and Tamil Nadu, and partially in Andhra Pradesh and Maharashtra. Balance states are awaiting the revision of export and import duties on ethanol.
  
• At the initiative of MOP&NG, Delhi State Office is working on a pilot project for introduction of White Kerosene in small packs (1 litre glass bottles).
  
• Auto LPG - 36 new ALDS were commissioned during the year taking their number to 107 in 47 cities selling average 6500 MT/month. During 2007-08, we plan to commission another 100 ALDS.
  
• Aviation - The 15th International Aviation conference was organised at Cochin in February 2007. New aviation business was secured during the period.
  
• HR - A comprehensive reward scheme for motivating team performance in the locations and State Offices has been rolled out for 2007-08. To bring focus on HR activities, a programme for "indexing all locations on HR parameters" has been launched.
  
• Business Initiatives - An agreement has been signed with IRCTC for sale of Railway tickets from Retail Outlets and LPG Distributorships. It is targeted to cover about 450 Retail Outlets and about 500 LPG Distributorships under the programme.
  
• ServoXpress, a one-stop shop for quick, easy and convenient auto care, was recently launched at a mall in Central Mumbai. It is planned to set up nearly 250 such ServoXpress outlets across the country during the current fiscal.
  
• It is aimed to fully automate all ROs selling over 200 KL per month while 187 Retail Outlets have been automated so far.
  
  
  • Performance of subsidiaries
    
    
  IOML: IOML closed year 2006-07 with a growth of 26.5% over last year. Lube sales have also registered a growth of 23.5% over the same period last year. A significant milestone was achieved with the inauguration of an international level product quality testing laboratory by Hon'ble Prime Minister of Mauritius in the presence of Chairman, IndianOil. The laboratory has already earned its first revenue from M/s. Chevron Mauritius Ltd.
  
  LIOC: As shared by Chairman, the Lube blending plant in Sri Lanka is in advanced stages of development. LIOC is also looking at retail expansion plans and bunkering activities.
  
  IOC Middle East FZE: It has completed one year since its registration in April 2006 and has achieved turnover of Rs.16.89 crore. Lube distributors have already started operating in Oman and Bahrain and have been supplied 120 KL lubricants. 500 barrels of lubricants have also been supplied to LIOC. Efforts have commenced to appoint distributors in Yemen, UAE, Kuwait and Qatar. IOME also plans to focus on trading activities from Dubai.
  
  

Director (Refineries)

• IndianOil refineries clocked the highest ever crude throughput of 44 MMT, which is 14% higher than previous year. The capacity utilization during 2006-07 was 102.7% against industry capacity utilization of 104.3%.
  
• To improve profitability, highest ever 43.7% of high sulphur crude was processed against previous highest of 38.7% in 2005-06. We should continue this to maximise processing of cheaper crude for better margin. To diversify supply sources and improve margin, five new grades of crude oil viz. Bonga, Seria Light, Erha, Arab Mix and Nemba, were processed. We have started monitoring the weighted oAPI of crude oil at each refinery to assess the improvement made in crude selection.
  
• The new projects completed during the year viz. PREP and PX/PTA unit have fully stabilized and operating at full capacity.
  
• Our refineries face an entry tax on crude in various states, which has been challenged by us in the courts on constitutional grounds. Recently, Hon'ble Supreme Court has decided the case in our favour for Mathura (5%) & Panipat (4%) refineries and we have stopped making payment of entry tax at these refineries, which will result in a saving of Rs.1000 crore per annum.
  
• An initiative to identify the gaps in fireproofing & fire fighting facilities has been taken. As discussed in previous Communication Meetings, reporting of near-miss incidents has been encouraged. The number of near-miss incidents has gone up considerably to 2210 against 543 reported last year. We must continue to investigate all the high potential near miss by a multi- disciplinary group and share the lessons learnt to avoid major accidents.
  
• We are moving fast w.r.t Clean Development Mechanism (CDM). The estimated Carbon Emission Reduction (CER) from the first phase is 1,55,000 per year. CDM projects generate substantial benefit in terms of saving environment and presenting a positive image for IndianOil.
  
• Progress of work is as per schedule in Residue Upgradation & Quality Improvement project at Gujarat, Panipat Naphtha Cracker project, and PDRP. In order to complete these projects within approved schedule, a number of initiatives have been taken such as formation of a Centralised Procurement Cell at Refineries HQ, Project Implementation Plan, and identification of risks and developing their mitigation plan, etc.
  

Areas of concern

• Though there has been a decline in our accident frequency rates in the last fiscal, the fatal accident frequency (FAR) at 5.0 per 100 million man-hours is still very high in comparison with 1.9 of European countries. Compromising on safety system and procedures, short cuts at work and violation in safety procedures are still a cause of worry.
  
• M/s E I DuPont India Pvt. Ltd. has been engaged to conduct safety culture survey & evaluate effectiveness of Implementation of the existing systems at Gujarat, Haldia & Mathura refineries. It is matter of concern that there is a big gap in the safety perception of the top management and the lower level at these refineries. This needs to be addressed.
  
• MS Quality Improvement Projects at Mathura, Panipat, Barauni, Digboi & Guwahati are being implemented. Lack of responses from the prospective bidders for PMC as well as from the LSTK bidders due to inadequate time left for completion and overheated market, is a cause of worry. In this backdrop, we are examining options for project execution by conventional / unconventional methods.
  
• Though, we have achieved crude throughput of 44 MMT in 2006-07, this was 0.3 MMT less than our stretched target of 44.3 MMT. The target for the year 2007-08 is 46.15 MMT. We all have to closely monitor our progress and take necessary steps so that we achieve our target. Marketing and Optimisation groups have to work in tandem to ensure these stretched targets are met through proper evacuation plan. In this regard, we should look into the feasibility of turning Haldia and Gujarat Refineries into export refineries so that other refineries can be operated at full potential.
  
• With four unplanned shutdowns so far in this financial year, plant interruptions continue to be an area of concern. In order to study the present system and identify gaps, 3 task forces were constituted on Shutdown Management, Mechanical Reliability and P & U and Instrumentation systems reliability. Around 80% of the recommendations have been implemented and balance are under implementation. The number of shutdowns in 2006-07 was brought down to 58 against 67 in 2005-06.