| Minutes Of Communication Meeting held on 20.01.04 |
| The Quarterly Communication Meeting at IIPM,
Gurgaon on January 20, 2004, presided over by the Chairman, was attended
by all Functional Directors, Advisor (Security), CVO, Departmental Heads
in Divisional Headquarters, unit heads of Refineries, Marketing, Pipelines
and R&D Centre, and State Office Heads of Marketing Division. The participants shared information on common organisational issues, systems improvements and value addition to the bottom line effected by the Divisions in their respective areas. Topics of common interest were also discussed in an Open Forum. The meeting, webcast live across the Corporation, began with the Chairman conveying his New Year greetings to the participants. The following are excerpts from the observations made by the participants at the meeting: Chairman Chairman The IndianOil Board had met at Udaipur on January 16-17, 2004 to take time off from routine matters and focus on issues facing the Corporation -- to assess where we are, and to plan where and how to proceed further. We reviewed our current strategies, progress achieved in initiatives launched, where we are lagging, and further action that needs to be taken. It is a valuable exercise that needs to be done once in a while. Post- deregulation, there are no standard rules for doing business. Beyond April 1, 2004, this “no-holds-barred” trend will be much more pronounced. The Strategy Meet discussed several issues in this context – issues concerning refineries, organisational optimisation, HR, marketing, and globalisation-integration-diversification. The Board took note of the initiatives made by the Refineries
Division to maximise margins and reduce costs. We have done
competitive mapping of IndianOil as well as other refineries. The country’s
surplus refining capacity is bound to put pressure on margins, and only
the least cost supplier companies will be successful. We have to cut
costs across the chain. An internal study has shown that we need to
reduce costs or increase our margins by more than a dollar per barrel
to remain profitable. Our target is $ 1.29 to 1.30 per barrel. Refineries
Division has done a good job in this direction, and the Board will track
the progress every month. In HR, our focus is on performance management. Our people need new skills to face new situations. We have taken up several new activities like branding. RPMS package (Refinery & Petrochemicals Modelling Software) is a new skill. Our HR group is identifying gaps in the skill sets and evolving programmes to bridge those gaps. We need to do competency mapping of our senior executives. Till now, HR initiatives got bogged down in routine IR issues. I find that information is not percolating freely to junior levels. We need to improve our communication with them to avoid misunderstandings. We are doing our supply chain management (SCM) ourselves. We have now convinced the Government that we are capable of doing tanker chartering ourselves. To take over this job, our officers and staff need new, hi-tech skills, which will add value to the Corporation. Our Marketing Division and AOD should gear up to ensure smooth POL
supplies in the coming elections. Security issues too gain significance
in such times, especially in North-East installations. We should make
sure that we control access to our units. The other issue concerns accidents
at our units in the recent past, most of which have occurred due to
the supervisory staff not following manualised instructions. Human life
is precious. It is our bounden duty to follow and make others follow
safety rules and procedures. I request all unit heads to take special
steps to see that 2004 is accident free. Director (Finance) As you are aware, the interim dividend has been distributed among shareholders. This year, even though we may not have the huge inventory gains we had last year, our profitability should be approximately at the same level. The debt:equity ratio has come down from 0.77 (as on 1.4.2003) to 0.47, and we expect it to go down further. We also have a good mix of foreign (53%)and Indian (47%) currency loans, which enables us to get better advantage on interest costs. An additional $ 150 million foreign currency loan being worked out will further improve this position, while at the same time the overall loan amount shall not increase. Global crude prices are currently very, very high, that is above $ 30. Fortunately, the international prices of gasoline/gas oil are also high, which translates into good refining margins for us. Last fortnight went without petroleum product price increase; our marketing margins will be under pressure if this trend continues. I see tough times ahead, where we may have to depend more on marketing margins. Overall, inflation has gone up, with petroleum products quoted as one of the contributors. As the Chairman had mentioned, IndianOil should be able to do ship chartering on its own, especially for crude voyages, by March 2004. Manthan project has picked up pace with more service providers joining the implementation. Units which are one year old have stabilised, and overall, users are satisfied. There has been good progress in implementation of optimisation packages too, that is integration model and distribution model. The demand forecasting module is also being fine-tuned. However, we need to improve the three-tier connectivity in some States. Director (Pipelines) For the first two quarters of 2003-04, the overall operational performance was below the MoU target. By the end of the third quarter, however, we have exceeded the target in product throughput. It has been a landmark year in commissioning of new pipeline projects. These include Koyali-Navagam pipeline, Koyali-Viramgam-Sidhpur pipeline, Kurukshetra-Roorkee-Najibabad product pipeline, and a new 28” Viramgam-Koyali crude pipeline, in addition to converting the oil 18” crude oil pipeline to product service. The Pipelines Division will go all out to commission the Paradeep-Haldia crude pipeline, which will provide us savings of Rs. 400 crore annually. The West Bengal Government too has accepted the project in the commercial interest of IndianOil. We shall also identify more and more pipeline projects and seek Board approval. I am also happy with the progress achieved on integration issues. For instance, the Hashimara pump station on GSPL Division is being operated by Marketing Division. We have also been able to arrive at common security at KBPL TOPs, with reduction in the number of CISF personnel. We were also able to re-deploy 25 people from non-core areas, and convert 24-hour shifts to day shits wherever possible. About 5,000 kl of sludge was disposed of from the lagoons at Viramgam and Vadinar, which is a remarkable achievement in environment protection. Similarly, pipelines teams were able to re-route lines at 6 places in Assam without much disturbance. Director (HR) On November 3, 2003, our Chairman had held a communication meeting with Union representatives, where he appraised them about the disinvestment issue and the support received from one and all, including the collectives, in this regard. He also shared his concern over the lower growth achieved by IndianOil vis-à-vis the industry. Collectives reiterated their full support to the Management. Meeting with Core Group of Officers’ Association was held on November 21, 2003. Various important developments were shared. Discussions were held on various points. From our end also a few points were raised, such as bulge in the middle management because of the percentage system adopted for promotions in 1999, which had continued although it was to tackle the problem arising out of enhancement of retirement age. This would need to be discontinued and would need to revert to pre-1999 system. Another issue being that of location in-charges holding positions in the Officers’ Association resulting in conflict of interest. The HBA limit has been increased, and the interest rate reduced to 5%. Also, there would be decrease in redemption charges. Ex-gratia payment scheme has been put in place for retired employees retired prior to introduction of Superannuation Benefit Fund Scheme. Differential amount would also be paid to those drawing lesser pension under SBF scheme Final decision of Supreme Court on EPS 1995 was communicated. Nomination of hospitals has been decentralised to Divisions. Psychometric tests would be carried out in campus recruitments from this year. The last date for VRS scheme has been extended up to March 2004; 310 applications have been received so far, 61 of them in January 2004. There has been an overall reduction of 5% in overtime costs. Increase in medical and telephone expenses observed in third quarter, specially in case of Refineries Division. Director (Planning & Business Development) Downstream Opportunities have been identified in Nepal for formation of JV for retail marketing of LPG and transport fuels, and also a JV for product pipeline. On initiatives of Ministry of External Affairs, Govt. of India and ADB, BD team visited Afghanistan to identify opportunities for product export, repairs, operation and maintenance of product storage facilities owned by the government of Afghanistan, and retail marketing of transport fuels and LPG. Indian Oil is evaluating the option of forming a JV with the Government of Afghanistan in this regard. IndianOil is also looking at opportunities to buy some BP assets on sale in Malaysia (240 ROs) and Singapore (36 ROs) through the bidding process. We are also looking at new opportunities for downstream marketing in Ghana, Uganda, Tanzania and Philippines. Our exports too registered high growth, with lubes exports rising by as much as 126%. There has been a 35% increase in manpower secondment jobs over the previous year. Gas IndianOil is currently in discussion for import of 5 million tonnes of LNG from Iran jointly with GAIL. In this IndianOil’s share will be 2.5 million tonnes. We shall also participate in the city gas projects in Agra, Ferozabad, Bareilly and Lucknow jointly with GAIL. Petrochemicals IndianOil has reiterated its continued interest for equity participation and management control of HPL, to the promoters and the lenders. Recently, discussions have been held with Government of West Bengal, wherein IndianOil has also indicated the prospect of setting up other downstream projects linked to streams from HPL, subject to obtaining management control of HPL, which can inter-alia lead to creation of a chemical hub in Haldia. IndianOil executed an MOU with National Petrochemical Co. (NPC), Iran
for joint cooperation in petrochemical projects, primarily in Iran.
Director (R&D) IndianOil has begun its forays into marine oils with field trial clearance from MAN B&W as well as Wartsila-Sulzer in their ships. With successful completion of these trials, IndianOil will join the select league of five global oil majors that possess own marine oil technology. A trial batch of 50 MT polymer-modified bitumen has been successfully prepared at our CRMB plant at Panipat for market seeding. Similarly, based on R&D know-how, 157 metric tonnes of needle coke was produced on trial basis at Guwahati Refinery, which has properties superior than the customer’s requirements. MOP & NG has made IndianOil R&D the nodal agency within the oil companies to take up Hydrogen research in the country. R&D has been actively involved in sub-groups on Hydrogen energy set up by Planning Commission. In order to kick start activities, an International Workshop on Hydrogen Energy was organised in December 2003 with over 300 participants, which was inaugurated by the Hon’ble Minister of Petroleum & Natural Gas. The pilot project for implementing Total Knowledge Management solution has been completed. The Knowledge Management portal has been made operational and was inaugurated by Smt. Sumitra Mahajan, Hon’ble Minister of State, Petroleum & Natural Gas, on January 14, 2004 during her visit to the R&D centre. IndianOil Technologies Limited has bagged orders for Oilivorous-S and CFC technologies, and has also received a number of enquires - from ADNOC-Abu Dhabi, Petronas-Malaysia, IMC-Egypt and ISG Refinery-Egypt. We are in discussion with UOP for licencing & worldwide marketing of Indmax technology. We are also considering a plant of 1.7 MMTPA capacity at our Gujarat refinery. Discussions are also taking place for setting up units in Iran and Egypt. As part of our collaboration with Axens/IFP France, two projects have
been identified. Six Indian and three foreign patents were earned during
the last three months. Director (Refineries) IndianOil refineries registered 9.6 million tonnes throughput during the third quarter of 2003-04. Five parcels of diesel and four parcels of MS were exported from Haldia refinery. The gross refining margins have been very good, $ 7.2/bbl in December 2003, and may go up to $ 9/bbl in January 2004 as against $ 7/bbl last year. This trend is expected to continue in the near future. Refineries Division is aiming at a stretched target of 37.8 million tonnes for 2003-04 as against actuals of 35.3 mt last year. This should be possible with the trend of better product demand. Of course, a lot depends on uninterrupted operations of our refineries. With RPMS packages in place in five refineries, I request the Unit Heads to fully exploit their potential and share their findings in the subsequent Communication Meetings with all. Safety is a major area of concern. There have been accidents in all
refineries, some of them fatal. The safety system in place at our units
is of international standard, but there has been violation of safety
procedures. We need to take immediate corrective actions. A soft approach
will not yield the desired results. Director (Marketing) As the Chairman had pointed out time and again, Marketing Division is in the line of fire, and I can assure you that Marketing people are themselves on fire to achieve the targets. The top 6 State Offices that performed well as per MoU targets are Kerala, Tamil Nadu, Gujarat, Delhi & Haryana, Maharashtra and Rajasthan. Kerala, AP, Karnataka, Maharashtra, Gujarat have tied up with local STUs; Punjab and Delhi & Haryana to also move forward for similar tie-ups. Our market share has gone up 0.2%. The top five scorers on increase in market share are Kerala, West Bengal, UP, TN and Rajasthan State Offices. As part of image-building initiatives, we held major press conferences in Mumbai, Chennai and Lucknow besides Mauritius, and garnered excellent media coverage about our new initiatives in customer service and satisfaction. The number of markets for XtraPremium has been increased from 394 to 565, and for XtraMile from 596 to 730. 5-kg LPG cylinders were introduced in 335 markets during the third quarter, bringing their total tally to 1,084. During April-December 2003, we commissioned 726 ROs, 253 of them during the third quarter. Our target for the current financial year is 924. We have declared 2004 as Customer Care Year in Marketing Division. Customer ambassador programme was celebrated on New Year Day all over the country. We have created a ‘Listening post’, a web-based intranet site for seeking feedback from the field, cutting across layers and generating ideas. Chief Vigilance Officer The Vigilance Department has been able to effectively convey to all employees that there is no reason for apprehension on account of vigilance. This has been mainly due to the stand taken by our Department that all commercial decisions/business losses should not be treated as vigilance cases. However, we are of the view that wherever lapses have been found, the punishment must be commensurate with the gravity of the situation. In this context, I request all senior management representatives to encourage their subordinates to give their clear views and opinions on issues. It is, after all, their duty to give the rules position. The Vigilance department has done system studies on contracts for lining up of tanktrucks for POL transport on book binding method as well as zonal contracts in Marketing Division. We have also sent a system study report on custody & maintenance of documents (like agreements, MoUs, etc.) to the Management. News from Refinery Units: Gujarat:
Panipat:
Barauni:
Mathura:
Haldia:
Guwahati:
News from Pipelines Units WRPL : Received 7 VLCCs (2.1 million tonnes) in January 2004. ERPL: HBCPL achieve 4.5 mt MOU target on January 15, 2004 News from Marketing Units
Treasury
Project Manthan
Issues discussed in the Open Forum:
Chairman's Concluding Remarks
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