IndianOilXpress :: Meetings

The Communication Meeting for the period Oct. 04 – Jan. 05 was held at the new Corporate Office building, Sadiq Nagar, New Delhi, on 23rd Feb. 2005. Presided over by the then Chairman, the meeting was attended by Functional Directors, Advisor (Security), Departmental Heads in Divisional Headquarters, unit heads of Refineries, Marketing, Pipelines and R&D Centre, and State Office Heads of Marketing Division.

The exercise 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 then Chairman welcoming the participants to the Communication Meeting.

Chairman:

On comparing the performance of the first nine months of 2004.05 vis.à.vis the corresponding period of the previous year, the turnover (Rs. 1,10,169 crore) has increased by 17.18%, mainly because of growth in sales and increase in product prices. While our refinery thruput (27.61 MMT) increased by 1.28%, capacity utilisation has gone down to 89%. Mathura refinery is up and running, processing over 100%. This is not so in the case of Gujarat Refinery, where the FCCU is still down with repairs. We should be able to come back to normalcy by March/April 2005. There has been a 4.8% increase in sales (as against 3.8% by the industry). We have not only been able to reverse the trend of declining sales but also achieved growth this time, in spite of sharp reduction in Naphtha sales. This is gratifying and commendable.

The Profit After Tax has gone down by 22% (Rs. 3,999 core this year as against Rs. 5,155 crore last year). The Refinery Gross Margin improved to US $ 6.61/bbl (April.Dec. 04) from US $ 3.99/bbl (April.Dec. 03).

There have been many other developments in the recent past. The Board of HPL has approved IndianOil’s entry into HPL through a Board resolution. We have already paid Rs. 150 crore equity money. IndianOil will have a Director on the HPL Board now.

On the issue of under.recoveries suffered on MS, HSD, LPG and SKO, the Government has advised the petroleum marketing companies to collectively bargain with crude oil and products suppliers for concessions. The intention is to make such companies also share the subsidy burden. IndianOil alone suffered Rs. 7,376 crore loss till the end of Feb. 05 on account of subsidies.

The Government has allotted crude oil production from Rajasthan fields to IndianOil. This crude is more viscous than many types of crude. While the Government’s production.sharing agreement guarantees international prices, we need to work out the costs involved in transportation, especially if it is through a heated pipeline, and seek compensation in price to that extent.

The IndianOil.OIL consortium has bagged the block No. 086 in the highly prospective Sirte block in Libya, being the only Indian consortium to do so. The consortium has plans to bid for a couple of more blocks in Libya and also in Myanmar. The master plan for development of the gas block in South Pars in Iran is being submitted to NIOC by the end of Feb. 05. We are currently working out the project economics. Meanwhile, Director (Finance) and Director (P&BD) are making visits to some countries o acquire a midsize E&P company. A number of issues are being looked into.

. IndianOil has been ranked 4th in the TNS India poll on “Corporate Reputation (Business Today, Dec. 2004); IndianOil is the only petroleum company among the top 25

. IndianOil is the only Asian oil & gas company to figure in the “top global stock picks” recommended by Deutsche Bank for 2005

. IndianOil emerged as the ‘most trusted petrol pump‘ brand in the country (Economic Times Brand Equity Survey, Dec. 2004); about 15,000 people have been interviewed in the survey

All these would not have been possible without the dedication and hard work of each and every colleague at IndianOil, including the functional directors.

In the Strategy Meet held at Jodhpur during Feb. 13.15, 2005, several issues were discussed. Director (Finance) was optimistic that the Company’s net worth, which is approx. Rs. 25,000 crore today is likely to reach Rs. 99,000 crore by the year 2011.12. Similarly, Director (P&BD) has projected that our Company’s turnover is likely to go up to Rs. 250,000 crore by 2011.12 if our E&P initiatives fructify.

. The increasing average age of employees, especially workmen, and decreasing competency levels is an area of concern. We need to make drastic changes in our HR policies, which is not easy

. There has to be a collective understanding of the various issues facing the Company and how we should tackle them together. This understanding has to percolate down to the level of the average employee so that they are convinced and normal operations are not affected.

In conclusion, I can say that it was the tremendous support, cooperation and hard work of IndianOilPeople, which ensured a very strong foundation for the Corporation, while at the same time enabling it to win the many accolades.

There are many problems on the SKO front, which we are now importing. Discussions are on with other companies for sharing the burden, and we expect some kind of directives from the Government on this issue.

The profits for this year may not be as good as those of last year, even though sales volumes and refinery throughput have picked up. While refining margins are not that good, crude oil prices are again going up and are averaging at $ 42.43 against the average of $ 28 for the previous fiscal. Bankers are appreciating our dealing (treasury) room operations.

The April 1 deadline for BS.II and BS.III products is also creating problems. While the IT group has been busy hunting for Euro.II and Euro.III quality HSD for the last three months, we have asked for certain exemptions and a Cabinet note is under preparation to approach the Supreme Court.

The implementation of the Manthan project is complete. We have now begun extensive training programmes on ERP operations for the Finance group (D to F grades). A, B and C grades will also be trained thereafter. However, it is now the turn of the Divisional groups to train active SAP users to enable them to mine the data and reports already available on SAP. The issue is how best we can use such data to our advantage.

The Optimisation Group has worked out the details of the product exchange agreements for the first quarter of the next financial year. We are working out the details for the other three quarters also, keeping all the commercial aspects in mind. If we plan for the future, which we have done already, the 2011.12 target is quite achievable. I am confident that our ongoing projects and those on the drawing board would enhance our profitability.

The interaction between the Divisions has improved. I feel that it can and must improve further. Points decided upon in the IDCM must be actioned immediately to get the desired benefits. “I have tried this much and this is all I can do,” is not the right attitude. Instead, I would advise you to put such unresolved issues back to the management for a solution. Wherever Government’s intervention is required, let us go out and ask the Government for a solution. Such an attitude would not only benefit IndianOil but the country as a whole.

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. The current capacity of the BKPL pipeline (1.8 mtpa) is an area of concern, even though we have almost crossed 2.3 mtpa at times. With the setting up of one more booster pump between Patna and Mughalsarai, we hope to go up to 2.7 to 2.8 mtpa.

. HBCPL recorded the highest ever daily throughput of 30,629 kl on Nov. 25, 2004 surpassing the previous record of 27,465 kl. Its monthly throughput in Jan. 2005 was also the highest ever at 646.51 tmt.

. Following pilferage attempt on the Viramgam.Chaksu section of SMPL pipeline, the issue was taken up at the highest level for immediate follow.up. Such incidents are on the rise.

. HMRB pipeline has been shortlisted for the safety award of NSCI, while HBCPL received the award for the year 2003.

. As a continuous process in the Division, staff in non.core areas is being redeployed in core areas of operations, maintenance, etc., for gainful utilisation. 17 such staff belonging to non.core areas have been redeployed in core areas in BKPL during the third quarter. A help desk has been set up at Pipelines HO for EPS queries.

. All pipeline projects are on schedule. In the case of the Mundra.Kandla crude oil pipeline and conversion of Kandla.Panipat section of KBPL to crude oil service, mainline welding and hydrotesting has been completed for all crude oil storage tanks. The Sidhpur.Sanganer product pipeline is ready for commissioning. We are making brisk progress on the Chennai.Trichy.Madurai product pipeline, the Koyali.Dahej and Koyali.Ratlam pipelines.

. IndianOil is a partner along with GAIL in the proposed India.Iran pipeline. Both Pipelines and BD groups will be part of this project and we hope to get some pipeline contracts in this project.

. We shall be putting up the Chennai.Bengaluru pipeline proposal to the IndianOil Board on Feb. 25 for approval. I would once again request the Pipelines, Refineries, Marketing and Optimisation groups to work out feasibility of new product pipelines for improved economy in transport costs.

. Casualties on the contract labour front are increasing, especially on the Marketing front. We should ensure that this does not happen.

The recent Tsunami waves caused widespread destruction in Andaman & Nicobar Islands, Tamil Nadu, Kerala and Andhra Pradesh. In IndianOil, we lost a few family members. True to tradition, we stepped in wholeheartedly with relief work in the affected areas in distributing food packets, blankets, medicines, clothes and utensils, free fuel, LPG cylinders, etc. In addition, we had donated Rs. 15 crore to the Prime Minister's National Relief Fund. Our employees have also donated a day’s salary earnings amounting to Rs. 2.11 crore to the fund. The PMO has informed us that the Hon’ble Prime Minister has appreciated this “thoughtful gesture” and has conveyed “his gratitude” for this. Lanka IOC, our subsidiary, has also donated Sri Lankan Rupees (SLR) 20 Million (approximately INR 1 crore) for relief and rehabilitation work in Sri Lanka, which is one of the countries badly affected by the Tsunami.

Orders for appointing 250 officers for various divisions of the Corporation have been issued. We are also going in for campus recruitment of 15 Chartered Accountants.

The VRS scheme, which was closed on 30th June 2004, had elicited good response. It has been decided to reintroduce the VR scheme, with minor modifications, for a limited period from 18th Feb. to 30th June 2005.

The salient features are:

. VRS is also available to those due to superannuate within one year from the date of application.

Medical benefits on VR:

. Medical facilities through insurance up to the age of 50 years

. Medical facilities under PRMS after attaining 50 years.

. Service in case of AOD employees who joined before the takeover of AOC (14.10.1981) will be reckoned for the purpose of calculation of ex.gratia.

. Undertaking necessary from employees seeking VRS that they will not join any PSU until notional date of superannuation. In case they join any PSU before the notional date of superannuation, they will be required to return the VRS compensation.

M/s Hewitt Associates have been engaged to design and implement a Performance Incentive Scheme based on individual & small team performance. This assignment includes:

. Role profiling of all unique roles in grades “A” to “F” to draw up KRAs and KPIs along with weightages

. To design and implement an e.enabled performance management system

. To develop an incentive scheme for incentivising performance

The scheme is to be implemented w.e.f. 2005.06. The consultant will also suggest ways and means to motivate high performers.

The Competency Mapping exercise, being conducted by M/s Ernst & Young, will be completed by March 2005. All General Managers and Dy. General Managers have undergone the Development Centres and the reports are under preparation. All the participants of the Development Centres will receive individual feedback from the consultant on a one.to.one basis. We will also be drawing up development plans for individual officers based on the competency gaps.

As per rules, the payment of HRA & CCA is admissible at the prescribed rate as per the classification of place of duty. The existing provisions on payment of HRA & CCA have been modified as under:

1. An employee may draw HRA either related to the place of his residence or place of work, whichever may be beneficial to him subject to the conditions that:

a. Such an employee resides with his family as one unit at a city nearby or in proximity to the place of duty, due to absence of basic facilities at the work location, and

b. The employee has not retained his family at a station other than the place of posting because of his transfer.

2. CCA would continue to be linked with the classification of the place of duty only. However, on resitement from the place of higher classification to a place of lower classification, the rate of payment of CCA to such employees may be protected till they continue to be posted at the resited location.

It has been decided that while on tour, officers in Grade ‘G’ would be provided with AC car.

Mode of travel on tour:

As per rules, the officers in Grades ‘A’, ‘B’ & ’C’ can travel by 2nd AC by rail while on tour. However, Divisions had internally modified this provision and allowed their officers to travel by air in certain sectors. This varied from Division to Division. In order to bring uniformity, the list of identified sectors has been approved, where the officers in Grades ‘A’, ‘B’ & ’C’ can perform journey by air while on tour.

Collectives: Memorandum of Settlement on work.related allowances / benefits has been signed on 15.16.10.04 with recognised unions for a period of four years w.e.f. 1.10.2001.

Communication meeting with recognised unions: A communication meeting of the recognized unions with Chairman and Directors was held on 7.2.2005 to share developments on organisational issues.

Strike Notice by IOOA: A strike notice has been served by IOOA vide letter dated 10.2.2005. On the same issues, the Oil Sector Officers’ Association (OSOA) has also served a notice of 48 hours’ complete strike starting from 6 a.m. on 8.3.2005 to the Hon’ble Minister for Petroleum & Natural Gas.

Petroleum Minister launches IndianOil Lecture Series

. Hon’ble Union Minister of Petroleum & Natural Gas & Panchayati Raj, Shri Mani Shankar Aiyar, launched the IndianOil Lecture Series, which coincided with the official inauguration of the new Corporate Office building at Sadiq Nagar, New Delhi, on Feb. 11, 2005

. The topic of the First IndianOil lecture was 'The Public Sector in our Oil Economy . Prospects & Issues'.

. The IndianOilXpress internal communication portal, till now available only through Internet (www.indianoilxpress.com), is now accessible to all employees connected to the Corporation’s LAN network through the Intranet route. Now, employees who do not have Internet access can also access the portal. The number of registered users of the portal has now crossed 4,660.

. IndianOil continued to be one of the top 10 “Best Employers of 2004” as per the survey conducted by Hewitt Associates & CNBC. TV18. We were the only company from the oil and gas sector in the top ten. 272 companies had participated this year in this survey.

. IndianOil won the HT Power jobs award for Innovative HR practices.

. IndianOil also won the Best performing enterprise award – 2nd position, from WIPS (functioning under the aegis of SCOPE), for women development

. IndianOil's corporate website (www.iocl.com) has won the second prize in the prestigious Annual ABCI Awards of the Association of Business Communicators of India in the digital communications category for the first time.

. IndianOil's display of industrial photographs of its various refineries, pipelines, retail outlets, LPG and other marketing installations bagged the second prize at the corporate photographic competition.cum.exhibition at Vigyan Bhavan during the recently concluded PETROTECH.2005 (January 15.19, 2005) exhibition.

As you are aware, I am superannuating from the services of the Corporation on Feb. 28, 2005. I would like to take this opportunity to focus on the key activities on the R&D front during the last two years since I took over as Director, and which I am proud and privileged to be associated with.

Refining Technology

. INDMAX technology developed by the R&D Centre was successfully commercialised in June 2003 at Guwahati Refinery.

. INDALIN+ process for converting Naphtha to higher yield of LPG and high.octane gasoline is also undergoing commercialisation at Panipat Refinery and in Oil India Ltd. The process scheme has been modified to meet Euro III/IV specifications for MS.

. Technology for production of needle coke and the award.winning additive catalyst I.MAX are earning us substantial royalty.

. Commercialisation of Oilivorous.S technology for bioremediation of oily sludge was very successful at various Marketing and Refinery locations, as well as at ADNOC, Abu Dhabi.

. Instrumented PIG developed in collaboration with BARC has been successfully launched and tested in the Mughalsarai.Allahabad pipeline section in Dec. 2004.

. Based on field evaluation in MT Suvarna Swarajya, an SCI vessel, MAN B&W. Denmark has approved our newly developed SERVO Marine 0530 system oil. Servo Marine 7050 cylinder oil is also likely to be approved soon. With this, IndianOil will soon join the select league of five global oil majors who possess marine oil technology.

. As part of a national consortium, IndianOil is developing a synthetic gas turbine engine oil for Kaveri engine of Light Compact Aircraft.

. MoPNG has designated IndianOil’s R&D Centre as the nodal agency within the oil & gas sector for the implementation of the Hydrogen energy programme in the country.

. A detailed road map has been prepared with in.principle approval from MoPNG, to undertake both short.term and long.term R&D activities.

. A corpus fund of Rs. 100 crore has been created with contributions from PSU oil & gas companies and OIDB.
. In the first phase, we plan to operate a demonstration fleet of buses and three.wheelers running on a blend of 10.30% H2 along with CNG, utilising the existing CNG infrastructure in Delhi.

. Under an MoU with Indian Railways, one lakh Jatropha saplings have been planted in 70 hectares of land in Surendranagar district of Gujarat.

. Under a collaborative pilot project with Haryana Roadways, 20 buses are running successfully on 5% biodiesel blend with diesel for the last 8 months. It is now proposed to convert the entire Gurgaon depot of Haryana Roadways to 5% biodiesel blends.

. Gujarat Government has also agreed to carry out trials with biodiesel in Gujarat State Transport Corporation.
. There is also a proposal to initiate biodiesel use at 10% level in employees’ buses of Tata Motors in the near future.

. During the last one year, ITL has been able to publicise the capabilities of R&D not only in India but abroad too.

. ITL’s efforts resulted in revenue of Rs. 151 lakh to R&D from non.IndianOil customers. Several proposals are in progress.

. 29 new patents have been filed, while 27 patents have been granted in the last year itself.

. Eight major collaborative research agreements have been entered into, including those with TOTAL, Zeolyst, Mahindra & Mahindra, Minda Corporation, Intercat.USA, TATA Motors, etc.

Awards

. As many as 14 prestigious awards were bagged by the R&D Centre in the last two years. Prominent among them were:

. Department of Science & Technology (DST) Award from Hon’ble President of India, Dr. APJ Abdul Kalam, for INDMAX technology

. Department of Scientific and Industrial Research (DSIR.2004) Award for Indmax and I.MAX additive technology presented by Shri Kapil Sibal, Minister of Science & Technology, in Nov. 04

. FICCI.2004 award for IndeTreat, IndeSweet technology, presented by Shri P. Chidambaram, Hon’ble Finance Minister of India, in Dec. 04

. All these achievements were solely due to the innovative hard work put in by my R&D colleagues and the constant support R&D received from its sister divisions, for which I am thankful to all the Directors.

. I am especially thankful to Shri M.S. Ramachandran who had always been a father figure for R&D, examining very critically all the developments and providing much needed guidance and encouragement.

. I will cherish the memories of my long association with this great organisation and many of the successful missions accomplished.

. Now, when I am formally parting with the organisation, my wife Mangal joins me in conveying our sincere thanks to each one of you for your support and strength, and we wish you all a great time ahead.

. Refineries performance has improved during the third quarter. Barauni refinery achieved 6 mtpa.installed capacity because of better product evacuation with assistance from Pipelines and Marketing divisions.

. Supplies of BS.II/Euro.III grade MS and HSD have started from all refineries (except Mathura) as per industry plan. To absorb additional Assam crude oil at BRPL, tank wagon movement facility to Guwahati and Barauni has been created.

. Six Sigma was launched at all the refineries and a total of 138 projects in areas related to process, shipping, administration, contract management, energy optimisation, P&U operations, etc., have been taken up. There will be altogether 44 black belt and 94 green belt projects.

. During the Strategy Meet at Jodhpur, Refining Vision 2011.12 was presented to the Board. We hope to increase the current combined capacity of 41.35 mtpa to 47.35 mtpa later this year, and thereafter to 66.85 mtpa by 1.4.2011. Maximisiation of high.sulphur crude processing from the present level of 40% to 75% has been planned keeping in view all the future product quality requirements. Overall distillate yield is also projected to improve to 80% by then. With all the above activities, we have targeted an improvement of about US$ 2 per barrel above the margin of 2003.04 ($ 5.5/bbl) by 2011.12 based on MoU prices 2005.06. However, to achieve these plans, concerted efforts by all concerned will be required in planning and implementation of various projects/other initiatives.

. The Refineries Division has taken up several steps to review and improve safety and operating systems after comprehensive deliberations with all refineries, including CPCL and BRPL. Two HAZOP training programmes were conducted by external experts for a cross.section of officers. More such programmes are in the offing. We are lining up external teams to revisit hazop of plants of existing plants and those under commissioning; this exercise will be completed in two years’ time. All refineries are also undertaking ISRS loss control training sessions. Best practices and shortcomings of individual refineries have been shared amongst all refineries to enable bench.marking and catching up on better safety techniques.

. I would like to begin by thanking the Chairman for his good words on the achievements of the Marketing Division. I can only say that this was possible due to the support of the Corporate Office, Finance Department and all Divisions.

. I am glad to report that we were able to maintain the overall market share at last year’s level; volumes have gone up by 1,397 thousand tonnes (3.6%) as against OMC growth of 3.4%. We have gained market share in all products (except LPG, ATF and LDO). This is in spite of losing FO share in nine States. Compared to last year, there has been an increase in market share in MS and HSD.

. For the period April. 04 . Jan. 05, the five top PSUs in MOU scores are DSO, OSO, UPSO, KASO and GSO.

. Market share has gone up in six State Offices: KESO, WBSO, MPSO, UPSO, DSO and NESO.

. Thirteen State Offices gained in sales volumes, the top five being UPSO, DSO, WBSO, MPSO and MSO. As can be seen from above, UPSO and DSO feature in all the three parameters.

. All Marketing units have improved their QC index. However, I would expect all AFSs to improve their score to 99. Maurigaram and Siliguri terminals registered a QC index of 100 for three consecutive years.

. Locations achieving safety index of 100 now total 87. Jodhpur terminal achieved a safety index of 100 for the last six years. We have instituted awards for locations that maintain a safety index of 100 for over three years.

. Since April 2003, the industry retail outlet network has gone up by 32%. For the year 2004.05, IndianOil has put up 853 ROs so far, while the corresponding numbers for BPC and HPC are 559 and 920 respectively. IndianOil will be crossing the 10,000 mark this month (Feb. 2005).

. Among the major marketing initiatives, the Xtracare brand was launched on Dec. 18, 2004 covering 400 ROs, and their number will go up to 500 by March 2005. About 50 Swagat (large format) ROs were commissioned till Feb. 05 and we hope to commission 52 more by March 2005.

. About 2.9 lakh customers have been enrolled under the XtraPower fleet card, with transactions of over Rs. 4 crore per day. About 1,363 ROs have been covered under this scheme. We are also making brisk progress in setting up Kisan Sewa Kendras in association with ICICI.

. We have tied up longterm business with 35 STUs, which accounts for almost 98% of STU business of IndianOil. Volumes have also been tied with major lubes customers. We have introduced SERVO Synco E.100 at ONGC’s Uran site replacing imported synthetic oil, accounting for Rs. 10 crore savings per annum by ONGC.

. We are developing 14 major AFSs as model AFSs. These AFSs not only have high visibility and high volume but also account for about 70% of our aviation business.

. Taking the ‘India Inspired’ corporate theme forward, Marketing Division has brought out the ‘IndianOil Inspired’ brochure highlighting the achievements of select IndianOilPeople who won ‘appreciation cheques’ for exemplary deeds. A booklet detailing benefits provided by the Corporation to officers was also brought out.

. Badminton ace P Gopichand became the first IndianOil employee to be nominated for the prestigious Padma Shri award of the Government of India.

. Our Indane bottling plant at Cuddapah and Jaipur terminal received the National Safety Award of the Ministry of Labour for 2003. Our Wadala terminal, IOBL.Vashi and Indane bottling at Salem received the NSCI safety awards for 2003.

. Going by a recent incident in which an intruder was assaulted by security guards, the question arises whether our private security guards are fully briefed about what powers they can exercise within the limitations of the law of the land. When an intruder is detected, he should be overpowered with the least amount of force and kept confined till the police arrive – this is the right procedure under the law.

. We have recently introduced marks for inspection of security measures at various locations so as to arrive at a security index as in the case of QC and safety indexes. This would enable us to objectively assess where each location stands in terms of adherence to security procedures and practices. The Security Dept. has also submitted a formal proposal for institution of awards for locations with best security index.

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Chairman’s concluding remarks:

. IndianOil is putting in a lot of efforts in retail initiatives. IBP should also take action to assimilate, modify and replicate these initiatives in its retail structure.

. There has to be an integration of brand strategy between IndianOil and IBP; IBP should have an organisation within to carry out this exercise.

. In branding, apart from strategy, the mechanism for delivery, implementation and monitoring is equally important. These are matters of detail, which need to be thought through fully.

. The Government has expressed serious concern about the process of direct recruitment of dealers by OMCs. The percentage of land.owners who have been awarded dealerships directly and not based on applications received through newspaper ads appears to be over 50%, which could be true for both IndianOil and IBP.

. The Committee of Secretaries has recommended that IndianOil be allowed to charter ships on its own. With our Corporation set to import about 40 million tonnes of crude oil in 2005.06, this is a good development and would not only help in large scale savings on freight but also provide our people with the much.needed experience in shipping operations. The proposal will now go to the Cabinet Committee on Economic Affairs for approval.