| Minutes
of Communication Meeting held on 28.7.2004 (For the period April-June 2004) |
The
Quarterly Communication Meeting was held at IIPM, Gurgaon, on 28thst
July 2004. Presided over by the Chairman, the meeting was attended by
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 exercise, webcast live through the intranet, was aimed at sharing information across Divisions, primarily focussing on common organisational issues, systems improvements and value addition to the bottom line effected by the Divisions in their respective areas. The meeting began with the Chairman welcoming the participants
to the Communication Meeting. The following are excerpts from the
observations made by the participants at the meeting:
Chairman Chairman: All of you may be aware that IndianOil has improved its Fortune ranking for the second consecutive year this year – from 226 to 191 last year and then to 189 this year. It is a matter of pride for all of us. Our aim should now be to break into the first 100 in the listing. We are now joined by three more Indian companies, BPC (450), HPC (462) and Reliance (482) in the listing. After the general elections, a new Government has taken over the reins at the Centre. We now have a new Minister of Petroleum & Natural Gas (Mr. Mani Shankar Aiyar) and a new Petroleum Secretary (Mr. SC Tripathi). There have been many other changes in the Government. The Corporation has made detailed presentations to the Minister and the Secretary to put across IndianOil’s point of view on various current issues. We are maintaining constant communication – vertical, horizontal and lateral – with all concerned. It has been our endeavour to drive home the point till the person(s) concerned assimilates our communication. In the past, this has ensured a number of positive decisions in our favour – excise duty concessions for Northeast refineries, additional crude allocation for IndianOil group companies, pricing, etc. We have asked for a few more things now. Our Quarter-1 performance has been very good. Our Refineries team has registered 100.3% capacity utilisation. The team now has to worry about net margins. To get higher gross refining margins, we should increase the value of our products and reduce costs. While the use of sour crude has gone up, we should not let the middle distillate yield suffer. Even though use of Naphtha/LSHS has become expensive, for instance for fertiliser companies, IndianOil has a disposal plan for naphtha/LSHS. Hence throughput should not get affected. A lot of work has already been done on optimising the yield. Another area that needs a critical look is our transportation link, where we are paying increasing amounts over the last few years. In my assessment, if the finished product costs Rs. 100, crude price would be Rs. 90-91 out of this, and Rs. 7-8 is going as transport cost (almost Rs. 2,000 crore annually). We should bring down freight costs. We are hedging product prices; why not freight rates? Our proposal for handling shipping on our own is awaiting the approval of the Cabinet. This was the main purpose of shifting the Shipping group to Refineries Headquarters. We should develop skills in this area. I am happy to share with you that IndianOil has won the technology award of the Ministry of Science & Technology, Government of India, for successful commercialisation of INDMAX technology through a 100,000 TPA plant at Guwahati refinery. We have a vision of developing our R&D subsidiary, IndianOil Technologies Ltd, on the lines of Shell Global Solutions. The R&D Centre will induct engineers from Refineries Division to develop refining solutions on the pattern of Engineers India Ltd. It is important that we have technologies that have global acceptance. We are in the process of forming a JV with a global firm to commercialise our catalyst technology. On the pricing front, SKO and LPG are still being sold below market prices. Till June 15, 2004, there were huge under-recoveries on MS and HSD too. It is a good thing that upstream companies are also sharing in these under-recoveries. Earlier, in the case of SKO & LPG, one-third of the net loss was made up through cross-subsidy from MS and HSD, while the downstream and upstream companies bore the remaining two-thirds equally. Such cross-subsidy is not available for the first half of 2004. Hence we have proposed that either the prices of SKO and LPG are increased proportionately or the downstream and upstream companies should bear the net under-recoveries equitably. In case of MS and HSD, the price band of + 10% announced by the Government recently is a step in the right direction, in that it gives us some temporary respite. On the marketing front, my concern is with the delivery mechanism, i.e., the implementation part. Let us do things that give significant results with minimum effort, and abandon strategies that do not work. In a competitive scenario, we have to be totally market savvy. In Business Development, we have recently signed an MoU with the Haryana Government for setting up a mega Naphtha Cracker polymer unit at Panipat. The decision was strictly based on economic considerations plus the intrinsic advantages of the location. Even though the current demand for petrochemicals in India is very low, this sector has excellent prospects in future. We want to be a leading petrochemical player by the time this happens. Our LAB project is due for inauguration by August 15th this year. We are also undertaking a feasibility study for a poly-propylene unit at CPCL. We have signed an MoU with HPC for cooperation in many areas. HPC are concerned with product availability in the Northwest, while our concern is product offtake from our refinery. This works well for both the companies. We have never denied products to any OMC from any of our refineries. In fact, we should not lose on capacity utilisation since refining margins are high. IndianOil has started lube blending operations at Jebel Ali, the free trade zone of Dubai. As part of our branding initiatives, IndianOil was the title sponsor of the Asia Cup cricket tournament in Sri Lanka. We have also signed up Irfan Pathan, Yuvraj Singh and Anil Kumble as our Brand Ambassadors. The IBP merger issue is progressing well. We have appointed a Financial Advisors for facilitating the merger and I am hopeful that we should be able to complete the job by the end of this calendar year. In conclusion, I would like to see more suggestions
from the senior management colleagues gathered here on ways to improve
our bottomline – both in the short-term and long-term. We have to become
multi-disciplinary, multi-tasked. In our MoUs, we only set operational
targets. It is time we discussed and debated business strategies too.
I would also like to see more response for my Straight Talk column from
colleagues across the Company. Director (Pipelines): Quarter-1 has been very good for Pipelines Division – for both crude oil and product pipelines. The performance of crude oil pipelines has been 17.6% more than the MoU target and 4% above the stretch target. IndianOil’s pipelines network now gives a lot of flexibility for pumping crude oil and products at the least landed cost and best refining margins. I would request the Refineries and Optimisation groups to look into how best we can optimise our pipelines throughput to improve our bottomline. HBCPL recorded 7 million tonnes monthly throughput during the fist quarter, setting a new record. Due to the floods in the Northeast, we had some anxious moments concerning GSPL but we were also able to complete horizontal drilling across two rivers. For the first time, we have tried out polyurethane coating of our pipelines of the Vadinar coast to provide better protection against corrosion. Most of the pipelines projects are on (or ahead of) schedule. The Mundra-Kandla pipeline is likely to be commissioned ahead of the Panipat refinery expansion schedule. The Panipat-Rewari pipeline will be ready by August 2004 and we should start using it immediately. Work will start shortly on the Chennai-Trichy-Madurai pipeline. In the case of the Paradip-Haldia pipeline, major orders have been issued/under process. Pipelines Division achieved cost reduction of about Rs. 2 crore on insurance of line-fills. About 53 VRS applications were received against a target of 25. During the first quarter, 9 staff have been re-deployed from non-core to core areas. Engineers from Sudan were trained at our Bijwasan pipelines installation. They now want us to make a blue print of M&I system for them. Two fires, at Rajbandh terminal and Baitalpur terminal,
have generated bad publicity for the Company. Besides tightening safety
measures, I request all unit heads to report all accidents, including
those involving contract labour, happening in the premises of IndianOil
locations. Director (HR): The one-year post-graduate programme in management in association with IIM-Ahmedabad is to begin from September 2004. The written test for selection of candidates is planned on August 8, 2004. We have begun competency mapping of senior management positions (DGM, GM and ED) from August 2004 and hope to complete the same by January 2005. The exercise will cover identification of unique roles, role profiling, KRA/KPIs for the roles, functional & managerial competency requirements, gaps between the available and required competencies to enable bridging the same. The details of best HR practices from our Refineries Division have been received and we are in the process of compiling the same for sharing across the organisation. I would urge other Divisions also to submit the details of the best HR practices being employed by them. The suggestion scheme has been modified with two new annual awards: namely, Most Frequent Suggestor Award and Functional Group Award. There has also been considerable increase in the award amount. Panipat Refinery conducted a ‘festival’ for suggestions and received many good suggestions, an example worthy of emulation by other units. Under the VRS scheme, the Corporation has received 486 applications overall, out of which 461 have already been processed. The Productivity Linked Incentive bonus will be paid along with the salary for August 2004. Several simplifications have been brought about in rules, including a) automatic encashment of EL above 300 days via salary b) notebook PCs allowed under the home desktop PC scheme c) restoration of Rs. 5,000 limit per cycle of two months for home/mobile phones and reimbursement of Rs. 4,000 for instrument (mobile phone) and c) revision of conveyance maintenance in line with petrol price hike. Several new features and links have been added in IndianOilXpress internal communication portal, including comprehensive details of HR policy on various subjects like pay, allowances, TA rules, VRS scheme, etc. Policy circulars are also being hosted on the portal for quick and transparent communication. IndianOil won the NPMP Award for Excellence in Internal
Communication instituted for the first time for the year 2002-03. Director (Refineries): IndianOil refineries have registered over 100% capacity utlisation for the first quarter of 2004-05, and processed 1.8 million tonnes more crude vis-à-vis Q1 of the previous year. Haldia refinery will now have more opportunity for maximising throughput due to bitumen exports. Both Barauni and Haldia need to operate to their fully capacity of 6-mtpa capacity each. Refining margins have been robust at US $ 6.87, partly due to tariff protection and other tax concessions. We need to benchmark our margins with those of Singapore refineries for cost-competitiveness as well as margins. Gujarat refinery team is working on a study to suggest ways to maximise gross margins with a consultant, and its findings have to be implemented at all refineries. As a sequel to the TPM initiatives, a decision has been taken to introduce ‘Six-Sigma’ quality system in all our refineries. We are currently in the process of lining up consultants to train our people for green and black belts. Inspection of a large number of tanks in various refineries is overdue, which needs to be taken up using advanced methods for tank cleaning to reduce downtime The LAB unit at Gujarat Refinery, IndianOil’s first
major petrochemicals project, is under commissioning and product out
is expected by August 15, 2004. Director (R&D) The first quarter has been very eventful for R&D Centre. Apart from the two technology awards mentioned earlier by Chairman, we also bagged the National Research Development Corporation Award (again for INDMAX technology) and two NPMP awards (in team and individual categories). The INDMAX technology is being improved further. Meanwhile, the R&D Centre developed another technology (INCOPEX) for furfural extraction. The SERVO marine oil shipboard trials have crossed the halfway mark (2,500 hours). The Petroleum Secretary has again reiterated that IndianOil R&D will spearhead research on Hydrogen as fuel, and OIDB is offering one-third of the required funds. We have recently signed a Memorandum of Collaboration with the Minda group, who are sole suppliers of CNG systems in India, for developing Hydrogen+CNG mixture. We have converted 20 buses of Haryana Roadways at Rewari terminal to 5% bio-diesel blend and are also trying out 10% blend. We are attempting to convert one full depot to bio-diesel soon. Jatropha oil used for bio-diesel production is currently scarce and is available at Rs. 40-50 per litre and it would take a couple of years before the prices come down. OIDB is bearing the differential cost in case of bus trials. As per the MoU with the Railways, IndianOil will do the plantation of Jatropha on 80 acres of land given by Railways and the bio-diesel will be supplied to the Railways at cost. IndianOil Technologies Ltd. (ITL) has received confirmed
orders of over Rs. 50 lakh in the first quarter of 2004-05 from non-IOC
firms. We shall be assisting BRPL in putting up a 0.25 MTPA INDMAX unit.
The R&D subsidiary will be strengthened by induction of marketing,
costing and engineering professionals from other Divisions. Director (Marketing): IndianOil market share has gone up by 0.1% during the first quarter of 2004-05. All products, barring LPG, ATF and LDO, gained market share. Volumes have gone up by 1,105 TMT (9.8%) as against OMC growth by 1,018 TMT (9.4%). Six State Offices have improved their market share while 14 State Offices gained in volumes. IndianOil commissioned 174 new retail outlets during the first quarter. The Marketing Division has been able to tie up business with 30 State Transport Undertakings, which account for 86% of STU business. Winter stocking for Leh & Kargil commenced on May 15, 2004. IndianOil’s 95th AFS was commissioned at Purnea on July 1, 2004. A new depot was commissioned in the premises of our Along AFS on May 18, 2004. Nine flagship ROs under the brand name “Aaram” have been completed in June 2004, with six more in the offing in July. In Delhi, XTRA PREMIUM has overtaken SPEED, and is already leading in Chennai, Bengaluru, Surat and Lucknow. The Indane Star Distributors programme has been rolled out at Kolkata and Bengaluru, covering six cities as on date. POL supplies were maintained in the flood-affected areas in the Northeast and Bihar through alternatives sources and routes and road-bridging. IndianOil received appreciation of the district administration and IAF for its refuelling operations in the rescue operations at Joshimath affected by landslides. IndianOil targeted to promote corporate, XTRA PREMIUM and SERVO as title sponsor of the IndianOil Asia Cup. TV spots featuring the three brand ambassadors were produced and aired to coincide with the event. TNSO KeSO, MSO, UPSO and DSO launched associated sales campaigns. Marketing Division devised and launched the scheme of Appreciation Cheques for instant recognition of employees for excellent job done. Eight IndianOil People are representing India in
the Olympic Games commencing in Athens this month. Chief Vigilance Officer: Suggestions: · Preparation of a checklist for scrutiny of high-value proposals/contracts · Revised guidelines on appointment of consultants so that judgement on requisite selection can be exercised in a transparent manner Vigilance group invites suggestions for improvement of selection of RO/LPG dealers and selection of land for new ROs. Vigilance assessment of e-procurement being aggressively
pursued by IndianOil is that it has brought down costs and improved
transparency Core/critical issues identified by participants: 1. Self-sufficiency in crude oil (procurement) 2. Look out for opportunities for acquisitions (like in the case of IBP) 3. Diversify into shipping (esp. bitumen ships) 4. Acquire power distribution company 5. Create a strong IT group and diversify /launch IT business 6. Projects group can be formed into a separate cell and nurtured for business development 7. Dichotomy in retail trade (encouraging MS/HSD sales, discouraging LPG customers & new connections) needs to be resolved Chairman’s concluding remarks: · Corporate optimisation is all-important. If importing of a product is cheaper than buying from our own refineries, Marketing should demand the same price from Refineries Division · Optimisation group to give a detailed presentation of their working for the understanding of the participants of the Communication Meeting · In RO expansion, IOC and IBP plans should be seen as one to achieve synergy in the marketing plan · Divisional Directors to nominate a three-member inter-divisional group to suggest ways to improve the tendering system, especially time-lag issue, within a month’s time. There should be one procedure for the Corporation, including in e-procurement, e-tendering and reverse auction. · Marketing Division to study how to provide value
in LSHS sales to customers so as to benefit both IndianOil and CPCL
since availability of LSHS at Manali and Narimanan is an issue. CRMB
availability in Orissa State Office area to be improved. · Bio-diesel is an important issue due to
the Common Minimum Programme of the new UPA Government at the Centre.
Jatropha can be grown in the vast tracts of arid land available in the
country. In the CSIR meeting recently, I had proposed bio-diesel as
a significant development of the future. Pricing is a small issue, considering
the extensive use of (rapeseed) oil abroad. India shall use non-edible
oils. R&D to give a paper on how to popularise/commercialise bio-diesel
use, suggesting what the Government should do. Director (HR): · IndianOil should go for reverse auction
for all standard items |