| Minutes
of Communication Meeting held on 4.11.2004 (For the period July-September, 2004) |
The Quarterly Communication Meeting was held at IIPM, Gurgaon, on 4th November 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 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
Our refineries throughput increased by 6.3%, with capacity utilisation at 91%. Our pipelines throughput too increased by 4.3%. In marketing, we grew by 6.2% as against industry growth of 5%. For the first half of 2004-05, our sales turnover rose by 17% while the profits declined by 1.42%. The profits are even lower if you consider Quarter-2 alone. Robust refining margins of about 7.15 $/barrel vis-a-vis 3.63 $/barrel for April-Sept. 03 ensured that our Corporation stayed in profits. As all of you are aware, the price of crude oil reached
unprecedented heights during the last quarter. We had to pay higher
prices for imported as well as domestic crude. Our refining margins,
however, were good because product prices exceeded crude price by a
substantial amount. Our working capital requirements increased substantially
forcing us to go on a borrowing spree. Another negative factor was our
not being able to increase product price, leading to substantial under-recoveries
for both IndianOil and IBP. We are constantly ‘agitating’ this issue
of growing under-recoveries at the highest levels in the Government.
In response, the Government is taking up rationalisation of duties and
taxes, coupled with some increase in prices too. IndianOil, along with MOP&NG, is holding a buyer-seller meet in January 2005 with representation from South Africa, Indonesia, Kuwait (co-host), Qatar, Iran, UAE, etc. The buyers will be represented by Korea, Japan, Philippines, Thailand, etc. The meeting will discuss energy security in the region, and investment opportunities in the upstream and downstream sectors in producing countries; as well as participation of producing countries in downstream projects. You are aware of our petrochemicals vision. As part of this, the 130,000 tpa LAB project in Gujarat Refinery got off to a start on Independence Day. By Aug/Sept. 2005, we shall be have the PX/PTA project coming up at Panipat, which is now shaping into a ‘petrochemicals hub.’ Our Naphtha cracker and polymer units will also be ready by 2007. The Paradip Refinery Project has been re-configured and a new Detailed Feasibility Report (DFR) is under preparation. The earlier low-cost refinery of 9 mtpa is now being replaced by a larger refinery tailor-made for petrochemicals, to be ready by 2009. We are also in the process of preparing a DFR for a polypropylene unit at Chennai. The day before yesterday, IndianOil has been invited by HPL to come on board with a Rs. 150 crore investment. All this presages our unassailable, strong position in petrochemicals in the coming years. Quoting these developments, M/s Solomon, Smith & Barney Associates have said, “These actions have isolated IndianOil from retail under-recoveries.” Our Petroleum Secretary himself is also happy with the progress of IndianOil projects. In Marketing, we have signed an MoU with JK Tyres and Mahindra & Mahindra. Another one with ICICI is in the offing. The IndianOil Board had discussions with merchant bankers on the issue of merger of IBP; we are following this up with one more round of discussions. On the operations side, close on the heels of the Mathura delay (90 days for turnaround, which attracted adverse criticism), there has been an unfortunate explosion in Gujarat refinery. Haldia refinery too was shut down due to power tripping. These incidents happened in spite of our constant emphasis on safety, security and online factor of our units. This clearly shows that our current levels of supervision are inadequate and need to be drastically improved, so as not to compromise on safety. Currently, there is a debate on rationalisation
of the petroleum sector on two models. In the first, the argument is
for merging all petroleum companies into a single entity. In the second
model, there are to be two vertically integrated entities, led by IndianOil
and ONGC. In the deregulated scenario, every company wants to do several
things at the same time so as to become vertically integrated. The Government
is perturbed about companies not putting in their best in their areas
of core competency. For instance, in the upstream sector, the Sudan
proposal came to IndianOil and we gave it to ONGC-VL, which has a fast
track mechanism for project approvals. However, we couldn’t benefit
from this deal, and hence asked for a similar fast track mechanism for
ourselves. Similarly, in the downstream sector, ONGC and NRL want to
put up ROs. The Government does not see much logic in so many Government-owned
companies competing in the marketing sector. Hence the current thinking
on rationalisation. Director (Finance): The under-recoveries on MS, HSD and LPG have put a strain on our cash flows. In three months’ time, our borrowings have gone up by Rs. 6,000 crore, from Rs. 10,000 crore in June 2004 to Rs. 16,000 crore as on date. International price of LPG reached unprecedented heights of 475 $ per tonne. In spite of these developments, we have been able to contain our interest rates. One more syndication is in the offing this month end ($ 20 million) for our capital projects. On the international scenario, the crude oil prices have been the highest ever last quarter. The Indian basket too went up to $45 per barrel as against $28 last year. We were to some extent compensated by the robust refining margins. We have made some adjustments in receipt of crude oil and re-allocation of crude parcels in Nov.-Dec. 2004. The new specifications for MS and HSD next year would need further adjustments in crude procurements. Three Marketing Regions went live on SAP during
the last quarter. With Eastern regional Office likely to go live by
Dec. 1, 2004, ERP implementation in our company is likely to reach completion
by the year end. We are in the process of upgrading the existing central
servers at Gurgaon with new and superior ones during the Diwali holidays.
The switchover servers in Jaipur disaster recovery site are also likely
to be commissioned soon. Director (Pipelines): Till Oct. 04, product pipelines achieved a cumulative throughput of 9,47 tmt, which is 39% higher than MoU target and 1.2% higher than the stretched target. Similarly, crude oil pipelines achieved a cumulative throughput of 15,500 tmt, which is 7.92% higher than MoU target but 5.44% lower than stretched target. The low throughput is mainly due to prolonged shutdown of Mathura refinery. The combined throughput, therefore, works out to over 18% higher than the MoU target but 2.78% lower than the stretched target. Among the other major highlights, the Panipat-Rewari pipeline was commissioned on 30th Sept. 04, giving relief to these areas as well as enabling savings on taxes to Haryana. Reverse pumping on the Panipat-Bijwasan section commenced on Sept. 17, 04 really helped during the Mathura shutdown. The Sidhpur-Sanganer pipeline should be ready in two to three weeks’ time. Four engineers from GNPOC, Sudan were trained in Pipelines Division. They now want IndianOil to study their O&M system and make recommendations. HMRBPL and KBPL received the prestigious Greentech
Foundation awards. SMPL received the Oil Industry Safety Award for 2002-03.
MJPL won the commendation certificate for Rajiv Gandhi National Quality
Award for the year 2003. ERPL team stood third in the national final
of the 13th National Management Games conducted by AIMA. Director (HR): The Government guidelines on Expenditure Management - fiscal prudence and austerity have been sent to all Divisions for compliance. Approval for recruitment of 250 engineers/officers and 49 GAEs for IndianOil, and 12 engineers/officers for CPCL has been conveyed to Refineries Division. Interviews of short-listed candidates have commenced. Psychometric test has been included in open recruitments for the first time this year. Division-specific attributes will be brought out in this test, to make selection more scientific for different Divisions. Work order has been issued to M/s Hewitt for design of
Performance Incentive Scheme. The scope of work covers the following: The IndianOil-leadership competency model has been finalised. Accordingly, unique role-profiles in ‘G’, ‘H’ and ‘I’ grades are under finalisation. M/s Ernst & Young have conducted the first two Development Centres during November '04 so far as per plan. Access Control System has been mechanically completed at most of the locations (except 8 NE locations which are disturbed or affected by floods) under Phase I. Presently card personalisation and finger print enrolment is being done. E-Mail/ Internet usage policy has been issued with the
following salient features: Ø In case any employee is observed to be violating the guidelines, his/her email/internet access will be barred without assigning any reason, besides taking appropriate action as deemed fit. Among the HR policy modifications, medical facilities for dependent parents would now be uniform for both male and female employees. Similarly, Post-Retirement Medical Scheme would now be uniform for male and female employees. The entitlement of furniture for office at residence for GMs & EDs has been revised w.e.f. 16.08.04 from Rs. 20,000 to Rs. 40,000 (for GMs) and from Rs. 25,000 to Rs.50,000 (for EDs). The IOOA elections for electing office-bearers for 2004-06 were over on 30.08.04 and the new body has taken over on 27.9.04. A Communication Meeting of the AICEC of IOOA with Chairman and Directors was held on 13th Oct. 04. Director (HR) On behalf of Director (Marketing): The sales volume went up by 1.3 million tonnes during April-Sept '04, registering a 6% growth, higher than the industry growth. Five State Offices, namely UPSO, DSO, TNSO, MPSO and GSO contributed 65% of this increase. Market share now stands at 50%, up by 0.2%. KESO, WBSO, MPSO, UPSO, DSO, MSO and NESO have done well in respect of market share. Loss in market share in ATF and LDO is an area of concern. IndianOil has commissioned 472 ROs so far this year, equivalent to 35% of the industry's commissioning. 51 locations achieved QC Index of 100 vis-a-vis 41 at the end of the first quarter. Similarly, 81 locations achieved Safety Index of 100 as compared to 69 at the end of 1st quarter. Leakage incident occurred on 1st Oct '04 at Vasco. When a vessel was under discharge at Vasco, smell of SKO was reported from the fishing jetty area, approx. 1 km away from the IndianOil Terminal at Vasco. Leakage was detected in 10 metre long underground portion of the water-flush pipeline. After replacing it with an over-ground pipeline, pressure testing the line, and seeking clearance of local authorities, operations were resumed. Pressure testing is in progress for all dock lines. Goa Police is investigating this case. However, no case has been established against any of our employees so far. As a long-term measure, the entire Vasco Terminal needs to be revamped; a detailed road map for the same is being worked out. Supplies Group along with the Corporate Communications, HO and GM, MSO, carried out boundary management well. As regard business initiatives, in Retail, MOP&NG has advised a number of steps with regard to dealership selection, which are being undertaken w.e.f 1st Nov. 2004. These include bringing out a brochure containing complete guidelines on Dealership Selection Process to be made available at all company offices at a nominal price of Rs.50. This would also be displayed on the Company Website. Besides, marks obtained by each candidate would be displayed on notice boards as well as on the website. Following complete revamp of Fleet Card programme and creation of an independent Fleet Card marketing organisation, approx. 2.10 lakh applications have been obtained in the last 3-4 months. Against these, 94,000 cards have already been issued. It is targeted to have a customer base of 4.6 lakhs in the current financial year. To pro-actively involve dealers in creation of Sales strategies and motivate high-selling dealers and generate competition, Platinum and Gold Circles of Retail outlets have been launched in October 2004. These dealers are short-listed based on MS, HSD and Lube sales. All the Gold Circle Dealers were felicitated by the respective State Offices. The top 22 of them were felicitated as Platinum Circle Dealers in a function in Mumbai on 16.10.04. Discussions were held with these dealers to receive feedback and suggestions. The first Flagship retail outlet branded “Swagat” was inaugurated on October 2, ‘04 at Perundurai, in a glittering function, widely covered by the media. It is planned to have 113 such ROs by March 2005 on major highways in the country. These would be covered under the net of Fleet Card, besides other non-fuel services. 15 such ROs have already been commissioned. LPG – The first reticulated system of LPG supply to housing complexes was commissioned in Pune in Sept. ‘04. To further standardise and render a market- savvy appearance to Indane marketing, a new set of standards was launched on Oct. 6, ‘04 with regard to showroom visual identity and uniforms of distributor staff in showroom and salesmen, delivery vehicles for all Indane distributorships, etc. A new hydraulic trolley for unloading of cylinders at Indane godowns has been launched on pilot basis. The initiative is a part of programme to improve the life of cylinders. An MOU has been signed for sale of Racold Gas Geysers through Indane distributors. Indane mobile vans, for rendering Emergency assistance, have been put in place in 20 major cities in the country. Lubes - SERVO Sadbhavna Programme has been launched with effect from July ‘04 to promote sale of lubes. As per the programme, loyalty points would accrue to resellers, i.e., ROs, bazaar trade operators and SSAs, towards purchase of SERVO lubricants/ petro-coupons. The scheme would last until March ‘05. Major business tied-up during the last quarter is: Fuels - Tie-up with MSRTC (EYC: 310 TMT). With this, 95% of STU volumes, covering 31 STUs, are covered. Agreement signed with Western Coal Fields, Nagpur, for 29 TMT of HSD, volume taken away from HPC. Agreement signed for 120 TMT of FO, with Ultratech Cemco (L&T Cements). Hitherto, 85% of the volumes were being supplied by OMCs. Tied up business of 14.4 TKL of ATF business with International Airlines during the 2nd quarter to an incremental business of 4.9 TKL per annum. Branding - IndianOil sponsored ICC Champions Trophy held in England in Sept.’04 as Official Sponsor worldwide and was also the main sponsor on DD for TV coverage during the entire tournament. Extensive coverage was given to XTRAPREMIUM and SERVO during the tournament. Cost reduction - An annual saving of Rs.4.25 crore was generated by replacement of CISF security by DGR-sponsored agencies at Shakurbasti Terminal and Tikrikalan Bottling Plant. HR Initiatives - HO Marketing has started novel idea of screening movies after office-hours for education on management. Milestones - Land taken over at Raipur and Iliayangudi for LPG bottling plants. Commercial bottling commenced at Shimoga plant on 27.9.04. Advance winter stocking for Leh/Ladakh area completed. Accolades/appreciations - “Good Corporate Citizen”
Award conferred by Bombay Chamber of Commerce & Industry, on IndianOil.
Inter-company competition on Corporate Social Responsibility, organised
as a part of annual business festival of IIT, Mumbai, won by IndianOil
Team. Devesh Chauhan, IndianOil Hockey Player, was conferred the Arjuna
Award. MOP&NG appreciated IndianOil’s efforts in meeting POL demand
in Tripura during floods in July 2004. Hyundai has appreciated IndianOil
for the Best vendor Performance for the year 2003. M/s Vikram Ispat
(Aditya Birla Group Company) rated IndianOil with “A” vendor rating
(90% +). The rating is based on evaluation of a number of criteria,
including delivery, price, service, quality. Director (P&BD): During the last quarter, IndianOil has successfully launched itself as a LAB marketer and we have been able to tie-up the current production rate with customers despite surplus situation in the country. Most of the leading detergent manufacturers have tied up with us for supply of LAB. We have also tied up nearly 25% of the Paraxylene capacity likely to be available from Panipat from Sept. 2005. We are also exploring opportunities to export PTA to Pakistan, and the response has been very encouraging. We have tied up the technology provider for the Naphtha Cracker/Polypropylene Units at Panipat. With regard to Petronet LNG Ltd, IndianOil has been able to tie up for our entire share of re-gassified LNG of 5.26 mmscmd commencing from April 2005. We are rather in a situation where demand is outstripping the supplies available with us. We have drawn up a plan to market 50 mmscmd of natural gas by 2011-12. This will be approximately 25% of the overall natural gas market in India by that time. Our portfolio of natural gas will comprise both indigenous and imported natural gas. We have already farmed in Cachar block in the North-East and we will shortly farm in PY-1 field in South. IndianOil will have capacity access in the proposed expansion of PLL’s Dahej terminal for import of its own LNG. The IndianOil Board has approved acquisition of a mid-size E&P company to give significant thrust to our upstream initiatives. Towards that, IndianOil is in the process of evaluating various available E&P companies/assets. Recently, IndianOil pursued an opportunity for acquiring indirect interest in an Indonesian E&P company, M/s Medco. However, some other bidder was selected as the single preferred bidder. The IndianOil Board in its meeting held on Sept. 24, 04 accorded in-principle approval for acquiring stakes in a European upstream company. The company has E&P assets in Congo, Cuba, Vietnam, Gabon and Tanzania. At present, appointment of advisors to carry out due diligence is in progress. LIOC is in the process of diluting IndianOil’s holding to a level of 76%. The balance 24% is proposed to be offered to local public and financial institutions by way of IPO. The offer size would be of 100 million shares with a green shoe option of up to around 30 million shares. The price range of the share shall be between SLR 23 to SLR 27 per ordinary share of face value SLR 10. The issue will hit the market on Nov. 29, 04. LIOC has registered a net half yearly profit of Rs. 48.5 crore during the current year. An MoU has been signed with Nepal Oil Corporation
(NOC) on Sept 9, 04 for laying a product pipeline between IndianOil’s
Raxaul Depot and NOC’s Amlekhganj Depot. Another MoU has been signed
between the Government of Edo State, Nigeria and IndianOil for setting-up
a new oil refinery in Edo State, in joint venture with the State Government.
Towards this, the Government of Edo State has agreed for a number of
significant fiscal incentives sought by IndianOil. IndianOil is in the
process of initiating a Feasibility Study to ascertain commercial viability
of the project. Director (Refineries): The LAB unit has been commissioned at Gujarat refinery in 24 months’ time. 6,000 tonnes of product has already been sold. The product has a significant edge over others in terms of quality. The overall refining capacity utilisation has been over 100% in Quarter-1 of 2004-05 but was down to 81% in Quarter-2 due to prolonged shutdown of Mathura refinery. However, in overall terms, the performance in the first half of the current year is better than that of the same period the previous year. Although we partly made up the throughput loss at Mathura by operating our Gujarat and Panipat refineries at higher levels, the overall loss has been quite significant. However, we have many lessons to learn from the Gujarat explosion, which is a major setback for a few months till the FCCU is back on stream. All efforts are being made to link the operations of Gujarat-Mathura-Panipat refineries to maintain smooth product supplies. Higher levels of HSD evacuation from Barauni can also increase its capacity utilisation. There is no need to add that maximisation of throughput will add to our bottomline significantly. I do sincerely hope that all operating units take
steps to improve safety and security in their operations. Let us continuously
review our operating systems and procedures to remove anomalies in accordance
with the laid-down guidelines. Advisor (Security) As a maiden attempt to provide training facility for security supervisors, the Security Dept. has conducted a 5-day intensive course in August 2004. The response has been very positive. We propose to conduct four such courses every year, with 30 persons in each course, to ensure a critical mass in the next three to four years. I would request the Divisions to take full benefit from this course and nominate only selected officers. The security film is being dubbed into six regional languages and will be reached to the units in due course. The Security Week was observed in the first week
of October 2004. The Management may think of special incentives to officers
assigned security as an additional duty. Awards may also be instituted
for excellence in security operations and awareness. Chief Vigilance Officer The Vigilance Dept. conducted 21 workshops
during the second quarter of 2004-05. Modified transportation contracts
have been finalised in Marketing Division and pilot tenders are on the
way. Revised guidelines for appointment of consultants have been circulated
among Divisions. Certain improprieties in procedures at Ajmer and Udaipur
have been brought to the notice of the Management. Vigilance Awareness
Week is being observed from Nov. 1-6, 2004. Manthan: A
total of 404 IndianOil sites are on SAP as on date, including 339 Marketing
sites. The balance sites to go live on SAP are 55, including 16 NESO
and 22 AOD sites. State Offices already on SAP were able to finalise
their half-yearly accounts on SAP in record time (8 to 12 days). SAP
clones are being implemented at 101 locations, including AFSs. New database
and central instance servers are proposed to be commissioned at IIPM,
Gurgaon during Nov. 2004. The disaster recovery site at Jaipur is to
be ready for commissioning by New Year day. As part of project management
consultancy, the Manthan team implemented the go-live at Petronet LNG
Ltd. Chairman’s concluding remarks: · CVO’s observations on inadequate quality checks/seals on LPG bullet trucks need to be taken seriously. Policy on transport time, sealing of trucks needs to reviewed for further improvement. · A system for pre-qualification of contractors should be put in place by Marketing Division. · The new colour scheme at IndianOil ROs needs to be executed attractively to bring in customers. · Marketing Division should validate SAND model using own, earlier model; the same case with Refineries Division. · IT and Optimisation groups should take future prices for crude and major products for SAND model calculations · Refineries to position trained officers in all refinery units to achieve full benefit of optimisation models. · Advisor (Security) to put up formal proposal for security (appreciation) awards. · D (F): Manthan group to evolve action plan for linking Jubilee ROs/COCOs/ROs to SAP in Phase-II. · D (PL): Marketing needs to expedite action at their end for Koyali-Dahej pipeline for which construction activities have already been taken up by Pipelines. |