AnnualReport2004-05 HPCL

Our vision.....
HPCL delights customers by superior understanding and fulfilling their stated and latent needs with innovative product and services. HPCL commands highest reputation and is known for its sensitivity and responsiveness for concerns of its customers and other stakeholders. HPCL always acts faster than the competitors in the most cost effective way. HPCL is the highest performer in Rate of Growth and Return on Investment. HPCL is a Learning and Innovative Organization. HPCL provides an environment of trust, pride and camaraderie
Our Anthem.....
Our Corporate Headquarters at Mumbai
At a Glance
Dear Shareholder It gives me pleasure to present before you the following significant details of your Corporation : HOW YOUR CORPORATION PERFORMED : Area of Performance Crude Thruput (MMT) Market Sales (MMT) Gross Sales (Rs. Crores) Gross Profit (Rs. Crores) Net Profit (Rs. Crores) Dividend (%age) Net Worth (Rs. Crores) Earnings Per Share (Rs.) 2004-05 13.94 20.09 64,690 2,382 1,277 150 8,828 37.69 2003-04 13.70 19.53 56,333 3,643 1,904 220 7,743 56.18
YOUR CORPORATIONS INFRASTRUCTURE : Refineries of Mumbai & Visakhapatnam Product Pipelines *Mumbai-Pune *Visakh-Vijayawada-Secunderabad Regional Offices 85 Terminals/Installations/TOPs - 36 Depots - 100 ASFs - 10 Retail Outlets - 6667 SKO/LDO Dealers - 1648 LPG Distributors - 2153 LPG Customers - 2.17 Crores
CURRENT MAJOR PROJECTS : Upgradation of facilities of Mumbai & Visakh Refineries of an expenditure of Rs. 2800 Crores. New Pipeline between Mundra & Delhi and Extension of Mumbai Pune Pipeline to Solapur of an expenditure of Rs. 1960 Crores. Upgradation, Automation and New facilities for the Marketing Division to strengthen marketing infrastructure at an expenditure of Rs. 1400 Crores. Expansion and Diversification on own and through ventures and tie-ups. Important current activities, future plans and detailed overview of HPCL as well as Petroleum Sector have been covered by me separately (Page No. 4) Your Corporation would continue to perform strongly and thereby instill confidence in you to continue your association for a long time.
M.B.Lal
53rd Annual Report 2004-05
Recent Events
Signing of Deed of Assurance and relaunch of Sri Guru Gobind Singh Refineries. Seen in the picture are Hon'ble Minister of Petroleum & Natural Gas and Panchayati Raj, Shri Mani Shankar Aiyar, Hon'ble Chief Minister of Punjab, Shri Amarinder Singh and Shri M.B. Lal, C&MD Distribution of Mobile PCOs by the Corporation to Physically Challenged persons below poverty line - Seen in the picture are Hon'ble Chief Minister, Smt. Sheila Dikshit, Government of Delhi and Shri M. B. Lal, C&MD
Hon'ble Minister of Petroleum & Natural Gas and Panchayati Raj Shri Mani Shankar Aiyar presenting the NPMP Award of Excellence for Project Management to Shri M. B. Lal, C&MD. Also, seen in the picture is Shri S.C. Tripathi, Secretary to Government of India, Ministry of Petroleum & Natural Gas (MOP&NG)
Hon'ble Minister of Home Affairs Shri Shivraj V. Patil presenting the Excellence Award for outstanding contribution to the Petroleum Industry to Shri M.B.Lal, C&MD at a function of Telugu Academy, New Delhi
Contents
Chairman's Message...................................................... 04 Our Directors .................................................................. 09 Functional Directors ........................................................ 10 Senior Corporate Officers............................................... 11 Offices, Auditors & Bankers............................................ 12 Notice of AGM ................................................................ 13 Performance Profile ........................................................ 20 Directors' Report ............................................................ 30 Annexure to Directors' Report ......................................... 34 Management Discussion & Analysis Report ................... 47 Special Focus Areas ...................................................... 90 Human Resources Accounting ...................................... 105 Auditors' Report ........................................................... 106 Balance Sheet .............................................................. 112 Profit & Loss Account ................................................... 113 Schedules to Accounts ................................................. 114 Cash Flow Statement ................................................... 132 Statement Pursuant to Section 212 .............................. 135 Social Welfare .............................................................. 136 C & AG's Comments .................................................... 137 Review of Accounts by C & AG..................................... 138 Joint Venture Companies ............................................. 142 Consolidated Financial Statements .............................. 143 Corporate Governance Report ..................................... 159 Annual Report of Guru Gobind Singh Refineries Limited (Subsidiary Company) .................... 178
Dear Shareholder, The financial results of your Corporation for the 12 months period April 2004 March 2005 have already been published and I am sure you must have seen the same. I am also sure that you must have noticed that despite significant physical performance in terms of increased refinery thruputs, increased refinery margins and increased sales volume, the Corporation recorded a lower net profit of Rs.1277 crores as compared to the net profit of Rs.1904 crores for the financial year 2003-04. I am sure that the reason for the lower profit may also be known to you considering the fact that the hydro carbon sector is constantly in the news. It may be relating to the new oil and gas finds in our country or the surging crude oil prices and the constant speculation whether the product prices especially that of LPG, Kerosene, Petrol and Diesel would be raised or not. The one significant reason for HPCLs lower profit for the year was due to the wide mismatch between the crude and product prices and the need for the Corporation to bear the burden of subsidies on products like Kerosene and LPG. A portion of the subsidy was also shared by the upstream companies. Physical Performance The physical performance of the Corporation however has been significant. The turnover during 2004-05 is Rs.64690 crores as compared to Rs.56333 crores in 2003-04 showing 14.8 % increase. The marketing volumes achieved were the highest ever at 20.09 MMT as compared to 19.53 MMT for the previous year. Our Mumbai Refinery and Visakh Refinery together recorded the highest ever thruput of 13.94 MMT, as compared to 13.70 MMT for the previous year. On the refining front the average margins for the year have gone up to $ 5.30 per barrel from the earlier years of $ 4.45 per barrel. The growth trend in MS/HSD, our main product line have been successively increasing by registering highest growth rates in the industry. Similarly the Aviation and Lubes business line have also made distinct impact in terms of value and growth in the market.
Chairman's Message
Growth Strategy
(Contd.)
In the context of continuing pressure on margins, HPCL aims not only to increase value from its core business operations but also look for new avenues for growth, expansion and diversifications. In the Marketing segment, the endeavour is to achieve not only increase in sales volumes but also increased contributions thereon and look for new avenues of growth. In the Refining Operations, we are aiming for thruput maximization, capacity augmentation through de-bottlenecking, improved yield of products, improved units reliability etc. which could contribute to higher GRM. Risk Management initiatives have been commenced to stabilise the impact of market / price volatilities. Reduction in operating costs is aimed in all activities across the Corporation. I would like to highlight the steps taken in each of these areas. Refining Both Mumbai Refinery and Visakh Refinery have recorded not only higher thruput but also increased GRMs during 2004-05, as compared to the previous year. With the refining segment continuing to record positive contributions, steps are being taken to enhance the current infrastructure at both Mumbai Refinery and Visakh Refinery. Both the Refineries are currently implementing the Green Fuel Projects at a total cost of Rs.2800 crores which when completed would enable them to produce Motor Spirit and High Speed Diesel Oil to meet the new Euro Specifications. Visakh Refinery and Mumbai Refinery are also de-bottlenecking the existing facilities and adding certain new facilities whereby our crude processing capacities would be enhanced from existing 13 MMTs to 16.2 MMTs. Marketing Downstream oil marketing scenario is witnessing intense competition from not only the PSUs but also private companies, some foreign companies who have entered the segment. Every company is making aggressive marketing efforts to gain market share and in this process are offering several value added services to the customers to gain their loyalty. HPCL on its part is giving total focus on Quality and Quantity aspects to gain the trust and loyalty of its customers by which HPCL would be seen as a preferred Company to meet their fuel needs. This is being achieved by our constant endeavour to provide quality products and services, vehicle care, combating adulteration through a process of monitoring, control, automation of activities and striving for reaching global standards in operation. Customers visiting the retail outlets are also being given added facilities like convenient stores, ATM centres, information kiosks, food centres and reward schemes. The other strategy has been to reach out and consolidate in the highway segment which is expected to be the new growth area with the cross country road construction projects nearing completion in several areas. Concerted thrust by all the SBUs of the Marketing Division has now resulted in the greater visibility of your Corporation in each of the segment. The State-of-art Club-HP Retail outlets stands out distinctly in the urban market. Rural Focus Rural India presents untapped opportunities. Continuing with our thrust on the rural segment, we have set up number of low cost retail rural outlets during the year for supply of quality diesel which are called Hamara Pumps. This has also been improvised as a multipurpose Kisan Vikas Kendras, offering a Single Window supply point, for the farmers to source their fuel, seeds, pesticide needs etc. Our Rasoi Ghar, the community kitchen has made a deep impact
Chairman's Message
(Contd.)
in the rural market by making LPG available at affordable price. During the year HPCL opened additional Rasoi Ghars all over the country bringing the total to over 1350. Lubes & Aviation Business The Lubes segment which is not price regulated, has potential to contribute considerably to the profitability of the Corporation. The facilities at the Lubes Unit of the Mumbai Refinery are therefore being enhanced to produce superior Grade II Lubricants which has good market demand, both in India and abroad. The Aviation business line has been registering impressive growth and profitability. This SBU is continuing with aggressive plans to enhance market share in the aviation segment. Value Addition, Efficiency, Productivity In order to mitigate the impact of negative margins on the main product lines, the Corporation has been taking many initiatives oriented towards value additions and operational improvements in its core lines of refining and marketing. Improving unit service factors, improving the yield of value added products through process improvements in the Refineries and stabilizing the impact of price fluctuations through oil price risk management have been the focus areas during the year as detailed in the Management Discussions Analysis Report. In addition, we are also enhancing the supply side infrastructure through new Pipeline Projects. Further, setting up of Single Buoy Mooring for receipt of crude through very large crude carriers (VLCC) at a suitable location is also being explored. Our cost control and cost reduction measures include optimizing crude procurement costs, enhancement of energy efficiencies, optimizing product distribution and transportation costs, savings in financing and operating costs etc. which receive focussed attention resulting in savings to the Corporation. Diversification To sustain growth and profitability in the coming period, it is essential that the Corporation not only retains and consolidates its current position but also look for new areas of business opportunities. It is in this context that the Corporation has started taking steps for entering the segments of Exploration & Production, sourcing supply of LNG/CNG to meet increasing demand for Gas. Both these segments being capital intensive , the Corporation is weighing the option of entering these segments in association with reputed Indian and foreign companies, details of which have been covered in the report. Prize petroleum, our joint venture has struck its first own crude oil in its on shore marginal field at Gujarat which is a small beginning for a big step ahead. This was achieved by Prize petroleum in association with M/S Aban Llyod in the development of 3 marginal oil fields at Gujarat. It has also acquired a 50% stake in a producing oil well at Sanganpur and has taken further developmental steps in the field. HPCL in consortium with Oil India Limited have also quoted for oil fields currently offered by Government of India under NELP V and is hopeful of getting some blocks. Crude Price and Impact on Margins Crude oil prices witnessed the most dramatic rise in the past year, with the average price per barrel of the Indian Basket crude rising from around $32 per barrel in March 2004 to about $49 per barrel in March 2005. The international crude oil markets have witnessed fundamental change in the demand supply scenario. The huge increase in demand across the globe and
Chairman's Message
(Contd.)
inability of reserve supply capacity to keep up to demand played a major role in the rise of the crude oil prices. Price movements were amplified by the concerns about the insecurity of supply due to natural calamities (like Hurricane Ivan in Gulf of Mexico) and geo-political tensions including terrorism and strikes in oil producing countries. The inventory levels in the industrialized nations have also been a major concern which during the past one year have been close to the lowest in the past and thus impacting crude price volatility. There has been a rapid rise in the demand for oil from Asia, especially China and India. In the current scenario, ensuring uninterrupted supplies has assumed importance. Product Pricing Non-revision in the prices of the major finished product lines in tandem with increase in crude oil prices have caused significant impact on the profitability of oil companies including HPCL operating as an integrated refining and marketing company. Despite the growth in volume, the reduced margins on prime products like MS and HSD, as well as the need to bear the impact of subsidies on SKO and LPG has had a direct effect on the profitability. The Government is seized of the issue and is trying to evolve a suitable scheme to minimize the impact on oil companies, including HPCL. The current gap between the cost of production and quantum of realisation would continue to impact the future margins unless crude prices comes down considerably. The outlook for the short and medium term on the crude oil prices indicate continued high level of crude prices due to changes in the supply/demand scenario, political uncertainities, stretched production capacities of producing nations and the limited complexities of Asian refineries. HPCL is actively exploring use of various innovative tools to cushion the volatilities of such market forces and introduce appropriate risk management practices. Initiatives like own sourcing of crude, crude transportation through VLCC, widening basket of crude purchased, efficient treasury management have all started showing positive contributions. HR Initiatives In our organisation pyramid, the base is our employees who continue to serve with dedication. Our thrust has been to Empower, Enable and Enhance capabilities of our employees to meet the requirement of changing market dynamics and environments. It is also our endeavour to ensure that all the activities of different functions are aligned with the overall corporate objectives. The ongoing HR initiatives such as Competency Mapping to enhance employee capabilities and Balanced Scorecard approach to fix performance targets and evaluation are addressing the core of the above requirements. The other initiative of Six Sigma approach to quality improvement has helped us to clearly identify the action areas on each segment of study and as more and more employees are introduced to these concepts the efficiency level of the organisation will improve further. Encompassing all these initiatives, the organisation transformation exercise for achieving continuous excellence is also progressing well and a large segment of employees have already gone through this change management process. An important aspect that is being highlighted in the change management process is the need for SBUs to look constantly for other avenues of growth and profitability while endeavouring to improve physical performance. The need to support line functions in their activities, improving efficiency, achieving reduction in costs are being emphasized to all other functions across the Organization.
Chairman's Message
Way Forward
(Contd.)
To summarise, the initiatives to consolidate in the downstream segment and slowly but steadily enter upstream segment would enable your Corporation to meet the emerging challenges of increased competition, changing energy mix and need for operational excellence and growth. In our current area of downstream activities which mainly form refining and marketing petroleum products, the Corporation is enhancing its capabilities in both the segments. The Marketing Division is implementing two major product pipeline projects connecting Mundra and Delhi and Loni and Solapur at an estimated cost of Rs.1960 crores which when completed will enhance the supply capabilities to meet the consumer demand in the northern sector. The Marketing division will spend further nearly Rs.1400 crores towards upgradation, automation and modernization of retail outlets and other facilities. It is consolidating its market position in the urban segment through the process of various initiatives aimed at delighting the customers for their continued loyalty and look at HPCL as a preferred company to meet their fuel needs. All these activities, including the expenditure required for the initiatives under the exploration and production segments, entering the gas segments etc would entail a capital expenditure of about Rs.11000 crores to be incurred during the next 3-4 years. Corporate Social Responsibilities We recognise our obligations to the society, both in area of environmental protection and social development. HPCL has taken several initiatives and is implementing schemes aimed towards upliftment of weaker sections of the society. The Corporation spent about Rs.5 crores during 200405 on several welfare measures. We also made a special contribution of Rs.7.5 crores to the Prime Ministers National Relief Fund to provide relief to the tsunami affected people. I would also draw your attention to our special focus area relating to the Corporate Social Responsibilities. Conclusion Last year, I began my message stating that Customer is the King and the definition of Customer by our immortal father of the Nation, Mahatma Gandhi who said The Customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption of our work. He is the purpose of it. He is not an outsider to our business. He is part of it. We are not doing a favour by serving him. He is doing us a favour by giving us the opportunity to do so.. I have repeated this because this definition will hold good forever for every organization. Our customers include you the esteemed shareholders and the stakeholders like our dealers, vendors, contractors, business associates and others who have reposed faith on HPCL. We, on our part, would continue to endeavour to take HPCL further towards growth and profitability by meeting the challenges that we face and grabbing the opportunities that arise. We look forward to your continued support in this ongoing process. Thank you,
M. B. LAL
Our Directors
Shri M. B. Lal Chairman & Managing Director
Shri M. S. Srinivasan Director (Till 20.06.2005)
Shri T. L. Sankar Director
Shri Arun Balakrishnan Director - Human Resources
Shri A. K. Srivastava Director (Till 07.03.2005)
Shri Raja G. Kulkarni Director
Shri C. Ramulu Director - Finance Shri Prabh Das Director (From 03.05.2005) Shri Rajesh V. Shah Director
Shri S. Roy Choudhury Director - Marketing Shri C. B. Singh Director (From 03.05.2005) Shri M. Nandagopal Director
Dr. B. Mohanty Director (Till 29.10.2004)
Shri M. A. Tankiwala Director - Refineries (From 01.06.2005)
Shri D. S. Mathur Director - Refineries (Till 31.05.2005)
Functional Directors
Shri M.B.Lal, C&MD with his team of Functional Directors - Shri Arun Balakrishnan, Director - HR, Shri C. Ramulu, Director - Finance, Shri S. Roy Choudhury, Director - Marketing & Shri M. A. Tankiwala, Director - Refineries
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Senior Corporate Officers
Smt. Parminder H. Mathur, Chief Vigilance Officer
Shri S.K. Mukherjee, Executive Director Safety, Health & Environment
Shri K. Murali, Executive Director Research & Development
Shri N.R. Narayanan, Company Secretar y
Shri R.N. Sharma, Executive Director Internal Audit & JVCs
Shri A.K. Bhide, Executive Director Corporate Finance
Shri K.S.R. Prasad, Financial Controller
Shri S.P. Gupta, General Manager Payroll, Treasur y & Reimbursement
Shri V. Vizia Saradhi, Executive Director Industrial Relations
Shri B. Mukherjee, General Manager Human Resources
Shri Sandeep Joseph, General Manager Human Resources, (Special Activities)
Shri C.N. Rao, Executive Director Information Technology & Planning
Shri S.M. Palav, General Manager Information Technology
Ms. Nishi Vasudeva, General Manager Enterprise Resource Planning
Shri O.P. Pradhan, General Manager Strategy
Shri A.S. Tulaskar, General Manager Upstream
Shri G. Hariharan, General Manager Legal
Shri Ajit Singh, Deputy General Manager - I/C, DCO
Shri D.K. Hota, Head - Internal Coaches
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Offices, Auditors & Bankers
Registered Office and Headquarters Office

Petroleum House, 17, Jamshedji Tata Road, Mumbai - 400 020. e-mail: corphqo@hpcl.co.in website: www.hindustanpetroleum.com
Zonal Offices East Zone

6, Church Lane, Post Box No. 146, Kolkata - 700 001.
West Zone Marketing Headquarters

Hindustan Bhavan, 8, Shoorji Vallabhdas Marg, Ballard Estate, Mumbai - 400 001. R&C Building, Sir J.J. Road, Byculla, Mumbai - 400 008.
North Zone
6th & 7th Floor, Core 1 & 2, North Tower, Scope Minar, Laxmi Nagar, Delhi - 110 092.
Mumbai Refinery
B.D. Patil Marg, Chembur, Mumbai - 400 074.
South Zone Visakh Refinery

Post Box No. 15, Visakhapatnam - 530 001. Thalamuthu Natarajan Building, 4th Floor, 8, Gandhi Irwin Road, Post Box No. 3045, Egmore, Chennai - 600 008.
Statutory Auditors
G.P. Kapadia & Co. Chartered Accountants Mumbai N.M. Raiji & Co. Chartered Accountants Mumbai
Bankers
State Bank of India Union Bank of India Punjab National Bank Standard Chartered Bank Bank of Baroda Bank of India Citibank N.A. Corporation Bank ICICI Bank HDFC Bank
Branch Auditors
B.V. Rao & Co. Chartered Accountants Visakhapatnam
Company Secretary
Shri N.R. Narayanan
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Notice of Annual General Meeting

HINDUSTAN PETROLEUM CORPORATION LIMITED (A Government of India Enterprise) REGISTERED OFFICE : 17 JAMSHEDJI TATA ROAD, MUMBAI 400 020 NOTICE NOTICE is hereby given that the 53rd ANNUAL GENERAL MEETING of the Members of Hindustan Petroleum Corporation Limited will be held on Wednesday, September 21, 2005 at 3.00 P.M. at Y. B. Chavan Auditorium, General Jagannath Bhosale Marg, Next to Sachivalaya Gymkhana, Mumbai - 400 021, to transact the following business : ORDINARY BUSINESS : 1. 2. 3. 4. 5. 6. To receive, consider and adopt the Balance Sheet as on March 31, 2005, Profit and Loss Account for the year ended on that date and Reports of the Board of Directors and Auditors thereon. To declare equity dividend for the financial year 2004-2005. To appoint a Director in place of Shri T. L. Sankar, who retires by rotation and is eligible for reappointment. To appoint a Director in place of Shri Rajesh V. Shah, who retires by rotation and is eligible for reappointment. To appoint a Director in place of Shri C. Ramulu, who retires by rotation and is eligible for reappointment. To approve payment of Rs.11 Lakhs as remuneration to the Statutory Auditors of the Company to be appointed by the Comptroller and Auditor General of India for auditing the Accounts of the Company for the Financial Year 2005-06.
SPECIAL BUSINESS : APPOINTMENT OF DIRECTORS : 7. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution. RESOLVED that Shri Prabh Das who was appointed as an Additional Director of the Company by the Board of Directors under Article 112 of the Articles of Association of the Company with effect from May 3, 2005 and who holds office under the said Article and pursuant to Section 260 of the Companies Act, 1956 only upto the date of this Annual General Meeting, and who is eligible for re-appointment under the relevant provisions of the Companies Act, 1956, and in respect of whom the Company has received a notice in writing from a member signifying his intention to propose him as a candidate for the office of the Director, be and is hereby appointed as a Director of the Company liable to retire by rotation. 8. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution. RESOLVED that Shri C. B. Singh who was appointed as an Additional Director of the Company by the Board of Directors under Article 112 of the Articles of Association of the Company with effect from May 3, 2005 and who holds office under the said Article and pursuant to Section 260 of the Companies Act, 1956 only upto the date of this Annual General Meeting, and who is eligible for re-appointment under the relevant provisions of the Companies Act, 1956, and in respect of whom the Company has received a notice in writing from a member signifying his intention to propose him as a candidate for the office of the Director, be and is hereby appointed as a Director of the Company liable to retire by rotation. 9. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution. RESOLVED that Shri M. A. Tankiwala who was appointed as Additional Director holding charge of Office of Director-Refineries of the Company by the Board of Directors under Article 112 of the Articles of Association of the Company with effect from June 1, 2005 and who holds office under the said Article
13
(Contd.)
and pursuant to Section 260 of the Companies Act, 1956 only upto the date of this Annual General Meeting, and who is eligible for re-appointment under the relevant provisions of the Companies Act, 1956, and in respect of whom the Company has received a notice in writing from a member signifying his intention to propose him as a candidate for the office of the Director, be and is hereby appointed as a Director of the Company liable to retire by rotation. INCREASE IN THE BORROWING POWERS OF THE COMPANY : 10. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as a Special Resolution. RESOLVED THAT in supersession of the ordinar y resolution passed by the shareholders in the Extraordinary General Meeting of the Company held on July 23, 1985, the consent of the Company be and is hereby accorded to the Board of Directors under Section 293(1)(d) and all other applicable provisions, if any, of the Companies Act, 1956 including any statutory modification or reenactment thereof for the time being in force read with Article 67 of the Articles of the Association of the Company to borrow any sum or sums of money from time to time notwithstanding that the money or moneys to be borrowed together with the moneys already borrowed by the Company (apart from temporary loans obtained from the Companys bankers in the ordinary course of business) may exceed, the aggregate of the paid up share capital of the Company and its free reserves that is to say, reserves not set apart for any specific purpose, provided however, the total amount so borrowed and outstanding at any one time shall not exceed Rs.5,000 crores (Rupees Five Thousand Crores only) over and above the paid up share capital and free reserves of the Company notwithstanding that it may be beyond the limit of debt equity ratio as provided in Article 67 of the Articles of Association of the Corporation. RESOLVED THAT the consent of the Company be and is hereby accorded in terms of Section 293 (1) (a) and all other applicable provisions, if any, of the Companies Act 1956 (including any statutory modification or re-enactment thereof, for the time being in force), to the Board of Directors of the Company to create/provide Security for the sums borrowed on such terms and conditions and at such form and manner and with such ranking as to priority as the Board in its absolute discretion thinks fit on the assets of the Company, as may be agreed to between the Corporation and lenders so as to secure the borrowings by the Company, together with interest costs , charges, expenses and all other monies payable by the Company to the concerned Lenders/Institutions, under the respective arrangement entered into / to be entered by the Company. RESOLVED further that the Securities to be created by the Company for its borrowings as aforesaid may rank with the security already created in the form of mortgage and / or charges already created or to be created in future by the Company as may be agreed to between the Company and concerned parties. RESOLVED further that for the purpose of giving effect to this Resolution, the Board or any Committee or person authorised by the Board, be and are hereby authorised to finalise, settle and execute such documents/ deeds / writings/ papers / agreements as may be required and to do all acts, deeds, matters and things as it may in its absolute discretion deem necessary, proper or desirable and to settle any question, difficulty or doubt that may arise in regard to creating security as aforesaid or otherwise considered to be in the best interests of the Company. INCREASE IN THE EQUITY HOLDING OF FIIS IN HPCL: 11. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as a Special Resolution. RESOLVED THAT pursuant to applicable provisions, of the Foreign Exchange Management Act, 1999 (FEMA), the Companies Act, 1956 and all other applicable rules, regulations, guidelines and laws (including any statutory modification or re-enactment thereof for the time being in force) and subject to all applicable
14
(Contd.)
approvals, permissions and sanctions and subject to such conditions as may be prescribed by any of the concerned authorities while granting such approvals, permissions, sanctions, which may be agreed to by the Board of Directors of the Company and/or a duly authorized Committee thereof for the time being exercising the powers conferred by the Board of Directors (hereinafter referred to as the Board), the consent of the Company be and is hereby accorded for investments by Foreign Institutional Investors including their sub-accounts (hereinafter referred to as the FIIs"), in the shares of the Company, by purchase or acquisition from the market under the Portfolio Investment Scheme under FEMA, subject to the condition that the total holding of all FIIs put together shall not exceed 40% of the paid up equity share capital as may be applicable. RESOLVED FURTHER THAT the Board or any person/s authorized by the Board be and is hereby authorized to do all such acts, deeds, matters and things and execute all documents or writings as may be necessary, proper or expedient for the purpose of giving effect to this resolution and for matters connected therewith or incidental thereto. BY THE ORDER OF THE BOARD N.R. Narayanan Company Secretary Date : August 10, 2005 Regd. Office : 17, Jamshedji Tata Road, Churchgate, Mumbai - 400 020. NOTES : 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND SUCH PROXY NEED NOT BE A MEMBER OF THE COMPANY. Proxies in order to be effective, must be deposited at the Registered Office of the Company not less than 48 hours before the time of the meeting. The Explanatory Statement made pursuant to Section 173(2) of the Companies Act, 1956 in respect of the Item Nos. 6 to 11 of the Notice is annexed herewith. Dividend on Equity Shares as recommended by the Directors for the year ended March 31, 2005, if approved at the meeting, will be payable to those eligible members whose names appear : (1) As Beneficial owners, as on September 05, 2005 as per the list to be furnished by National Securities Depository Ltd. and Central Depository Services (India) Ltd. in respect of shares held in electronic form, and (2) As Members in the Register of Members of the Company after giving effect to all valid share transfers in physical form lodged with the Company on or before September 05, 2005. 4. 5. Members are requested to bring their copies of the Annual Report to the Meeting. Members/Proxies attending the Meeting should bring the Attendance Slip, duly filled, for handing over at the venue of the meeting. (a) Members holding shares in physical form are requested to advise immediately change in their address, if any, quoting their Folio number(s), to M/s. MCS Ltd., the Registrars at their address given below. (b) Shareholders holding shares in dematerialised form are requested to advise immediately change in address, if any, quoting their respective Client ID/DP ID Nos., to their respective Depository Participants and not to M/s. MCS Ltd. or to the Company. 6. (a) Members holding shares in physical form, who have not given the Bank Particulars/Mandate, ECS Mandates earlier or if there is any change in the details, are requested to send the same quoting the Folio number(s), to our Registrars M/s. MCS Ltd. on or before September 05, 2005.
2. 3.
15
(Contd.)
(b) All Shareholders who are holding shares in Dematerialised form are requested to advise change, if any, in details of their bank account/ECS mandates to their respective Depository Participants immediately to enable the Company to pay the dividend accordingly. 7. Members are hereby informed that Dividends which remain unclaimed/unencashed over a period of 7 years have to be transferred by the Company to Investor Education and Protection Fund constituted by the Central Government under Section 205A and 205C of the Companies Act, 1956.
We give below the details of Dividends paid by the Company and their respective due dates of transfer to the Fund of the Central Government if they remain unencashed. Date of declaration of Dividend 21.09.1998 09.09.1999 30.03.2000 08.09.2000 28.09.2001 28.08.2002 30.01.2003 24.09.2003 22.12.2003 09.09.2004 09.12.2004 Dividend for the year 1997-98 1998-99 1999-2000 (Interim) 1999-2000 (Final) 2000-2001 2001-02 (Final) 2002-03 (Interim) 2002-03 (Final) 2003-04 (Interim) 2003-04 (Final) 2004-05 (Interim) Month and year of transfer to the Fund Nov. 2005 Oct. 2006 May 2007 Oct. 2007 Oct. 2008 Sep. 2009 Feb. 2010 Oct. 2010 Jan. 2011 Oct. 2011 Jan. 2012
It may please be noted that no claim can be made by the shareholders for the unclaimed Dividends which have been transferred to the credit of the Investor Education and Protection Fund of the Central Government under the amended provision of Section 205B of the Companies (Amendment) Act, 1999. In view of the above regulation, the shareholders who are yet to encash the dividend are advised to send requests for duplicate dividend warrants in case they have not received the Dividend Warrants for any of the above mentioned financial years and/or revalidation of unencashed Dividend Warrants still held by them to the Registrars and Transfer Agents of the Company so that dividends can be encashed. 8. The address of Registrars and Transfer Agents of the Company is as follows : M/s. MCS Ltd. Unit : Hindustan Petroleum Corporation Ltd., Sri Venkatesh Bhavan, Plot No. 27, Road No.11, MIDC Area, Andheri (East), Mumbai - 400 093.
16

9. Appointment/Re-appointment of Directors
(Contd.)
At the ensuing Annual General Meeting, S/Shri T. L. Sankar, Rajesh V. Shah and C. Ramulu retire by rotation and being eligible, offer themselves for re-appointment. Shri Prabh Das, Shri C. B. Singh and Shri M.A. Tankiwala who were appointed as Additional Directors during the year are being recommended for appointment as Directors liable to retire by rotation. Details of the abovementioned Directors are given in Annexure to the Notice of the Annual General Meeting. EXPLANATORY STATEMENT IN PURSUANCE OF SECTION 173(2) OF THE COMPANIES ACT, 1956. 6. HPCL is a Government Company within the meaning of Section 617 of the Companies Act, 1956. In terms of the provisions of Section 619 of the Companies Act, 1956, Statutory Auditor/s for a Government Company is/are appointed by the Comptroller and Auditor General of India (C&AG). In terms of Section 224 (8) (aa) of the Companies Act, 1956, the remuneration of the Auditors is required to be fixed by the Company in a General Meeting or in such a manner as the Company in a General Meeting may determine. The Board of Directors of the Company have recommended a remuneration of Rs.11 lakhs plus out of pocket expenses to the Statutory Auditors (including Joint/Branch Auditors, if any) of the Company to be appointed by the C&AG for auditing the Accounts of the Company for the Financial Year 2005-06 for the approval of the shareholders. The Corporation will shortly submit an application to the Comptroller and Auditor General of India, regarding appointment of Statutory Auditors. 7. Shri Prabh Das was appointed as an Additional Director on the Board effective 3.5.2005. In terms of Section 260 of the Companies Act, 1956 and Article 112 of the Articles of Association of the Company, he holds office upto the date of next Annual General Meeting and is eligible for re-appointment. The Company has received a notice proposing the candidature of Shri Prabh Das for the office of Director in terms of Sections 255 and 257 of the Companies Act, 1956. Shri Prabh Das is Joint Secretary in the Ministry of Petroleum and Natural Gas, New Delhi. The Board recommends appointment of Shri Prabh Das. None of the Directors other than Shri Prabh Das are interested in the resolution. 8. Shri C. B. Singh was appointed as an Additional Director on the Board effective 3.5.2005. In terms of Section 260 of the Companies Act, 1956 and Article 112 of the Articles of Association of the Company, he holds office upto the date of next Annual General Meeting and is eligible for re-appointment. The Company has received a notice proposing the candidature of Shri C. B. Singh for the office of Director in terms of Sections 255 and 257 of the Companies Act, 1956. Shri C. B. Singh is Joint Advisor in the Ministry of Petroleum and Natural Gas, New Delhi. The Board recommends appointment of Shri C. B. Singh. None of the Directors other than Shri C. B. Singh are interested in the resolution. 9. Shri M. A. Tankiwala was appointed as Director (Refineries) of the Corporation. He was appointed as an Additional Director on the Board effective 1.6.2005 and in terms of Section 260 of the Companies Act, 1956 and Article 112 of the Articles of Association of the Company, he holds office upto the date of the next Annual General Meeting and is eligible for re-appointment. The Company has received a notice proposing the candidature of Shri M. A. Tankiwala for the office of Director in terms of Sections 255 and 257 of the Companies Act, 1956. Shri M.A. Tankiwalas association on the Board will be beneficial to the Company. The Board recommends appointment of Shri M.A. Tankiwala. None of the Directors other than Shri M.A. Tankiwala are interested in the resolution.
17
(Contd.)
10. In terms of Section 293(1)(d) of the Companies Act, 1956, the Board of Directors shall not borrow moneys where the moneys to be borrowed together with moneys already borrowed (other than the temporary loans obtained from the Companys bankers in the ordinary course of business) exceed the aggregate of the paid up capital and free reserves of the Company except with the consent of the shareholders obtained in a General Meeting. The shareholders of the Company at the Extraordinary General Meeting held on July 23, 1985 have accorded their consent to the board to borrow moneys in excess of the paid up capital and free reserves, provided, the aggregate of such borrowings together with moneys already borrowed and outstanding at any one time, shall not exceed Rs.500 crores over and above the paid up share capital and free reserves. Taking into consideration, the investment that would be required in the next 2 to 3 years in ongoing projects in the Refineries (GFEC) and at Marketing division (new Pipeline projects) as well as new projects like grass root Refinery at Visakh, grass root Refinery at Punjab being set up by the Subsidiary Company GGSRL, Exploration and Production initiatives of the Joint Venture Company, Prize Petroleum etc., the Board of Directors of the Company have considered it desirable to enhance the borrowing powers from Rs.500 crores over and above the paid up share capital and free reserves to Rs.5000 crores over and above the paid up share capital and free reserves. The Corporation would be required to provide security for the borrowings. Hence approval under Section 293(1)(a) of the Companies Act is being taken. Accordingly, the resolutions are placed before the shareholders for their approval. None of the Directors are interested in the resolution except to the extent of their shareholdings in the Corporation. The Directors recommend the resolution to be adopted as a Special Resolution by the shareholders. 11. The Reserve Bank of India, by amending the Foreign Exchange Management (Transfers or Issue of Security by a Person Resident Outside India) Regulations, 2000, has raised the limit of investments by Foreign Institutional Investors of the paid up equity capital of Indian Companies, subject to the approval of the Board of Directors and approval of members of the Company by way of a special resolution. The increase in the FIIs limit to 40% will result in increased weightage of the Companys share in benchmarking international stock market indices. Large number of FIIs direct their investment on the basis of these benchmark indices. Increase the limit for FIIs investment would therefore enable to meet the demand of FII to invest in HPCL shares and thereby resulting in a positive impact in the capital market. None of the Directors are interested in the resolution, except to the extent of their shareholding in the Corporation. The Directors recommend the resolution to be adopted as a special resolution by the shareholders.
BY THE ORDER OF THE BOARD N.R. Narayanan Company Secretary Date : August 10, 2005 Regd.Office : 17, Jamshedji Tata Road, Churchgate, Mumbai - 400 020.
18
(Contd.)
ANNEXURE TO ITEMS 3 TO 5 AND 7 TO 9 OF THE NOTICE Details of Directors seeking appointment/reappointment at the 53rd Annual General Meeting (in pursuance of Clause 49 of the Listing Agreement) Name of the Director T. L. Sankar Rajesh V. Shah C. Ramulu Prabh Das C. B. Singh M. A. Tankiwala
Date of Birth 21/03/1934 01/10/1951 10/01/1948 30/10/1957 03/01/1960 25/01/1949 Nationality Date of Appointment on the Board Indian Indian Indian Indian Indian Indian
21/01/1999 21/01/1999 14/08/2003 03/05/2005 03/05/2005 01/06/2005
Qualifications M.Sc. Degree in ACA., ACS, (Chemistry), Mathematics, MBA (Leeds, MA (Dev. MBA UK) Eco.), IAS List of Rain Directorships Calcining held in other Ltd. Companies KSK Energy Ventures Ltd. GGSRL Delhi Power Co. Ltd. Small Scale Sustainable Infrastructure Development Board Mukand Ltd. Mukand Engineers Ltd. Fusion Investments & Financial Services Ltd. Catalyst Finance Ltd. Conquest Investments & Finance Ltd. Kalyani Mukand Ltd. Bengal Port Ltd. Jeewan Ltd. India Thermal Power Ltd. ONGC Prize Petroleum Co. Ltd. GGSRL HINCOL SALPG
IAS, M.A. (Eco.) B.Tech. (Hons), MBA MBA IOC EIL CPCL Oil India Ltd.
B.E. (Mech.)
GGSRL
19
Performance Profile
Market Sales (incl. Exports)
22 CAGR : 4.78% 20 18 16 14 12 FY96
mmt
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
Turnover
70000 CAGR : 17.11% 60000
Rs./Crores
50000 40000 30000 20000 10000 FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
Gross Profit (PBDIT)

4000 CAGR : 10.66% 3500
Rs./Crores
3000 2500 2000 1500 1000 FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
20
Performance Profile
2004-05 FINANCIAL GROSS SALES Gross Profit Depreciation Interest Tax (Incl. Def. Tax) NET PROFIT Dividend Tax on Distributed Profits Retained Earnings INTERNAL RESOURCES GENERATED VALUE ADDED WHAT CORPORATION OWNS Gross Fixed Assets Depreciation Net Fixed Assets Capital Work in Progress Investments - JVCs & Subsidiary - Others Net Current Assets Misc. Exps. (Public Issue exps. to the extent not written off) Deferred Tax Liability Total WHAT CORPORATION OWES Net Worth Share Capital Reserves Borrowings Total PHYSICAL CRUDE THRUPUT Mumbai Refinery Visakh Refinery PIPELINE THRUPUT MARKET SALES 13.94 6.12 7.82 6.05 20.09 13.70 6.11 7.59 6.14 19.53 12.93 6.08 6.85 6.11 18.84 1,919 77 1,842 497 2,416 8,440.85 338.93 8,101.92 2,185.35 10,626.20 7,742.81 338.90 7,403.91 1,700.80 9,443.61 6,678.85 338.83 6,340.02 1,365.93 8,044.78 5,897.68 338.81 5,558.87 3,171.54 9,069.22 6,486.27 338.77 6,147.50 3,569.52 10,055.79 2,818 1,239 1,579 179 188 212 572 (313) 2,416 12,393.17 5,449.53 6,943.64 786.84 825.76 931.08 2,513.63 (1,374.75) 10,626.20 11,387.43 4,809.32 6,578.11 496.14 817.34 1,231.08 1,775.02 (1,454.08) 9,443.61 10,754.32 4,319.12 6,435.20 347.68 784.14 1,231.08 646.72 (1,400.04) 8,044.78 10,244.85 3,759.87 6,484.98 304.38 652.34 1,481.08 1,319.49 (1,173.05) 9,069.22 9,166.67 3,239.70 5,926.97 587.81 502.84 0.08 3,037.24 0.85 10,055.79 US$ Million 14,709 542 150 19 83 290 116 16 159 290 1,184 64,689.51 2,381.83 659.59 81.64 363.27 1,277.33 509.00 71.15 697.18 1,277.44 5,208.06 56,332.57 3,642.66 606.58 55.65 1,076.49 1,903.94 746.81 95.65 1,061.48 1,722.10 6,061.19 52,698.99 3,139.06 574.25 153.02 874.43 1,537.36 678.66 78.26 780.44 1,375.76 5,115.14 45,309.67 2,046.69 529.47 294.74 434.50 787.98 339.33 448.65 1,112.56 4,101.87 2004-05 2003-04 2002-03 2001-02 2000-01 Rs./ Crores 47,117.50 2,140.91 433.38 387.33 232.19 1,088.01 339.33 34.61 714.07 1,147.45 3,912.06
Million Tonnes 12.33 5.63 6.70 6.47 18.02 11.98 5.57 6.41 6.37 18.39
1. Previous year figures regrouped/reclassified wherever necessar y 2. 1 US$ = Rs. 43.98 (Exchange Rate as on 31.03.2005)
21
Performance Profile
Contribution to Ex-chequer
8000 7000
Rs./Crores
6000 5000 4000 3000 2000 1000 0 FY01 FY02 Excise Duty FY03 Customs Duty FY04 Income Tax FY05 Sales Tax
Distribution of Earnings 2004-2005

Raw & Packing Material
51.4%
Purchase of Products For Re-sale Duties Transhipping Expenses Employees Depreciation & Interest Other Operating Expenses
31.5% 1.1% 0.9% 0.6% 2.1% 1.9% 1.1% 1.1% 8.4%
Taxation Dividend Transfer to Reserves
EPS-DPS Comparison
60 50 40
Rs.
30 20 10 0 FY01 FY02 EPS FY03 DPS FY04 FY05
22
Performance Profile
2004-05 FUND FLOW STATEMENT Sources of Funds : Profit after Tax Depreciation LPG Deposits Borrowings (Net) Share Capital Share Premium Redemption of Oil bonds Redemption/Sale of Investment Prov. for Deferred Tax Adj. on account of sale/ deletion of Assets & Prov. for diminution in Investment Total Utilisation of Funds : Dividend Tax on Distributed Profits Capital Expenditure Working capital : Increase/(Decrease) Repayment of Loans (Net) Investment - JVCs (Incl. Adv. towards Equity & Share app. Money pending allotment) Investment- Others Misc. Exps. (Public Issue exps.) Total CONTRIBUTION TO EXCHEQUER Excise Duty Customs Duty Sales Tax Service Tax Income Tax Total RATIOS Gross Profit/Sales (%) Net Profit/Sales (%) Earnings Per Share (Rs.) Cash Earnings Per Share (Rs.) Avg. Sales/Employee (Rs. Crores) Avg. Net Profit/Employee (Rs. Crores) Debt Equity Ratio MANPOWER (NOs.) US$ Million 290 150 40 70 68 (18) 1,277.33 659.59 175.92 307.37 0.03 0.83 300.00 (79.33) 1,903.94 606.58 172.12 382.32 0.07 2.41 0.21 54.04 1,537.36 574.25 177.87 0.02 0.70 250.00 9.00 226.99 787.98 529.47 272.72 1.34 134.44 2004-05 2003-04 2002-03 2001-02 2000-01 Rs./Crores 1,088.01 433.38 380.60 1,095.78 0.50 85.28
2 602 116 16 301 168
6.81 2,648.55 509.00 71.15 1,322.63 738.65
43.37 3,165.06 746.81 95.65 941.32 1,347.07
7.92 2,784.11 678.66 78.26 577.58 699.82 640.91
(11.68) 1,714.27 339.33 790.43 (1,580.42) 574.20
141.30 3,224.85 339.33 34.61 993.76 1,730.50
2 602 1,407 318 1,814 2 143 3,684
7.12 2,648.55 6,189.05 1,397.73 7,977.27 6.74 629.82 16,200.61 3.68 1.97 37.69 54.81 6.13 0.12 0.02:1 10,561
34.21 3,165.06 6,128.99 1,139.70 6,986.11 0.15 617.70 14,872.65 6.47 3.38 56.18 75.67 5.08 0.17 0.05:1 11,088
108.88 2,784.11 5,661.39 872.57 6,168.46 433.91 13,136.33 5.96 2.92 45.37 62.94 4.70 0.14 0.09:1 11,213
110.58 1,481.00 (0.85) 1,714.27 4,667.00 768.11 5,318.10 493.40 11,246.61 4.52 1.74 23.26 42.85 3.99 0.07 0.19:1 11,357
127.50 (0.85) 3,224.85 4,172.67 1,136.30 5,144.74 279.76 10,733.47 4.54 2.31 32.12 44.91 4.08 0.09 0.23:1 11,549
23
Performance Profile
2004-05 VALUE ADDITION Income: Gross Sales/Income from operations Add : Increase/(Decrease) in Inventory 14,829 8 14,837 Cost of Raw materials: Raw Material Consumption Purchase for resale Packages Stores & Spares Utilities 4,679 7,657 21 16 26 12,399 20,576.22 33,677.05 90.38 70.77 114.34 54,528.76 14,940.83 30,304.41 79.15 67.87 104.10 45,496.36 14,366.80 29,936.30 68.60 52.88 107.40 44,531.98 10,719.31 24,379.88 55.39 48.31 93.36 35,296.25 11,624.88 28,403.60 62.54 38.44 117.39 40,246.85 65,218.33 34.87 65,253.20 57,511.13 357.50 57,868.63 54,259.48 1,187.90 55,447.38 44,456.98 (258.47) 44,198.51 48,504.42 (367.97) 48,136.45 US$ Million 2004-05 2003-04 2002-03 2001-02 2000-01 Rs./Crores
Duties applicable to products: Total Value added Operations Operating & Service Costs Employees Benefits Providers of Capital Interest on borrowings Dividend Income Tax Re-deployment in Business Retained Profit Depreciation Total Value distributed
1,254 1,184
5,516.38 5,208.06
6,311.08 6,061.19
5,800.26 5,115.14
4,800.39 4,101.87
3,977.54 3,912.06
481 162
2,113.82 712.41
1,848.97 569.56
1,429.95 546.13
1,502.56 552.62
1,242.76 528.39
19 132 83
81.64 580.15 363.27
55.65 842.46 1,076.49
153.02 756.92 874.43
294.74 339.33 434.50
387.33 373.94 232.19
159 150 1,184
697.18 659.59 5,208.06
1,061.48 606.58 6,061.19
780.44 574.25 5,115.14
448.65 529.47 4,101.87
714.07 433.38 3,912.06
24
Performance Profile
2004-05 SALES VOLUME * Light Distillates Liquified Petroleum Gas Naphtha Motor Spirit Hexane Propylene Sub-total Middle Distillates Mineral Turpentine Oil Aviation Turbine Fuel Superior Kerosene Oil High Speed Diesel JBO/WO Light Diesel Oil Sub-total Lubes & Greases Heavy Ends Furnace Oil Low Sulphur Heavy Stock Bitumen Others Sub-total Total * Including Exports MARKETING NETWORK Regional Offices Terminals/Installatns./TOPs Depots LPG Bottling Plants ASFs Retail Outlets SKO/LDO Dealers LPG Distributors LPG Customers (in crores) 85 36 100 40 10 6667 1648 2153 2.17 81 36 89 40 10 5502 1647 1993 1.99 76 35 92 40 10 4863 1644 1898 1.77 76 35 90 39 10 4729 1638 1822 1.60 Numbers 76 32 87 37 10 4600 1631 1601 1.44 1,726.04 457.25 574.31 131.53 2,889.13 20,088.64 1,429.23 554.14 656.79 108.00 2,748.16 19,526.17 1,425.61 570.86 506.42 77.07 2,579.96 18,843.96 1,389.21 531.25 404.30 54.70 2,379.46 18,021.14 1,390.76 773.60 518.41 79.40 2,762.17 18,395.06 56.74 409.34 1,766.41 7,632.80 6.91 289.98 10,162.18 254.25 47.96 277.95 1,792.98 7,453.77 8.50 309.69 9,890.85 334.08 47.68 224.55 1,840.18 7,539.97 8.24 342.78 10,003.40 329.23 48.86 224.01 1,920.26 7,508.61 7.85 299.60 10,009.19 259.67 55.32 215.67 2,046.97 7,803.94 15.81 342.46 10,480.17 253.60 2,510.97 2,160.90 2,035.96 42.64 32.61 6,783.08 2,282.47 2,245.74 1,948.79 44.50 31.58 6,553.08 2,025.44 1,966.02 1,873.63 36.28 30.00 5,931.37 1,817.93 1,727.74 1,765.62 40.27 21.26 5,372.82 1,617.63 1,565.35 1,653.30 38.33 24.51 4,899.12 2003-04 2002-03 2001-02 2000-01 000 Tonnes
25
Performance Profile
Combined Gross Refining Margins
6 5
5.65
US$ / bbl
4 3
2.87
4.30
2
1.82 1.84
1 0 FY01
FY02
FY03
FY04
FY05
Crude Thruput - MR
5 4 3 2 1 0 FY01
mmt
FY02
FY03
FY04
FY05
Imported
Indigenous
Production Volume - MR
5 4 3 2 1 0 FY01
mmt
FY02 Light Distillate
FY03 Middle Distillate
FY04 Heavy Ends
FY05
26
Performance Profile
2004-05 PRODUCTION VOLUME - MUMBAI REFINERY Light Distillates Liquified Petroleum Gas Naphtha Motor Spirit Hexane Propylene Solvent 1425 Sub-total Middle Distillates Mineral Turpentine Oil Aviation Turbine Fuel Superior Kerosene Oil High Speed Diesel JBO/WO Light Diesel Oil Sub-total LOBS/TOBS Heavy Ends Furnace Oil Low Sulphur Heavy Stock Bitumen Others (Incl.input of BH Gas) Sub-total Total Intermediate Stock Differential Fuel & Loss Total 933.50 192.60 324.80 49.50 1,500.40 5,719.70 (3.90) 402.20 6,118.00 976.20 174.60 338.30 47.10 1,536.20 5,708.70 (0.60) 400.20 6,108.30 1,046.70 202.70 273.40 39.00 1,561.80 5,664.30 (3.20) 418.20 6,079.30 904.70 125.30 246.40 42.10 1,318.50 5,226.00 21.80 383.80 5,631.60 946.00 137.30 298.10 40.80 1,422.20 5,178.30 13.70 383.20 5,575.20 54.00 492.30 335.90 1,608.90 241.50 2,732.60 214.00 50.80 475.70 392.10 1,518.70 287.70 2,725.00 277.60 44.80 435.40 491.80 1,427.30 282.70 2,682.00 305.50 44.10 412.20 453.20 1,392.70 269.20 2,571.40 274.40 50.30 379.00 438.10 1,317.70 280.60 2,465.70 272.80 172.20 744.30 308.40 38.90 8.90 1,272.70 161.50 695.40 259.00 42.80 11.20 1,169.90 154.50 659.80 253.40 36.10 11.20 1,115.00 164.20 585.50 263.20 36.90 11.90 1,061.70 141.10 603.10 220.90 37.80 14.70 1,017.60 2003-04 2002-03 2001-02 2000-01 000 Tonnes
27
Performance Profile
Crude Thruput -VR
7 6 5
mmt
4 3 2 1 0 FY01 FY02 FY03 FY04 FY05
Imported
Indigenous
Production Volume - VR
5 4 3 2 1 0 FY01
mmt
FY02 Light Distillate
FY03 Middle Distillate
FY04 Heavy Ends
FY05
Combined Crude Thruput

12 10 8
mmt
6 4 2 0 FY01
FY02
FY03
FY04
FY05
Imported
Indigenous
28
Performance Profile
2004-05 PRODUCTION VOLUME - VISAKH REFINERY Light Distillates Liquified Petroleum Gas Naphtha Motor Spirit Hexane Propylene Solvent 1425 Sub-total Middle Distillates Mineral Turpentine Oil Aviation Turbine Fuel Superior Kerosene Oil High Speed Diesel JBO/WO Light Diesel Oil Sub-total Heavy Ends Furnace Oil Low Sulphur Heavy Stock Bitumen Others Sub-total Total Intermediate Stock Differential Fuel & Loss Total 926.45 266.50 240.09 11.68 1,444.72 7,337.58 7.01 477.59 7,822.18 848.47 384.63 288.51 11.32 1,532.93 7,145.02 (18.86) 465.32 7,591.48 623.00 388.40 220.90 11.10 1,243.40 6,385.60 58.20 407.50 6,851.30 624.60 404.10 106.70 7.00 1,142.40 6,333.60 (36.20) 408.90 6,706.30 481.80 600.30 70.00 3.30 1,155.40 5,986.10 25.50 393.70 6,405.30 37.90 715.32 3,226.13 5.38 89.21 4,073.94 1.71 94.94 731.81 2,729.32 7.75 110.54 3,676.07 1.10 51.70 637.30 2,742.90 7.30 113.80 3,554.10 7.60 33.00 676.00 2,784.20 8.10 50.50 3,559.40 6.30 22.20 603.30 2,589.90 7.50 28.90 3,258.10 296.81 812.59 677.37 32.15 1,818.92 323.55 845.98 734.83 31.66 1,936.02 279.40 602.70 676.30 29.70 1,588.10 293.10 601.50 715.00 22.20 1,631.80 229.40 681.50 637.20 24.50 1,572.60 2003-04 2002-03 2001-02 2000-01 000 Tonnes
29
Directors' Report
TO THE MEMBERS On behalf of the Board of Directors, I present the Fifty third Annual Report on the working of the Company, together with the Audited Accounts for the year ended 31st March, 2005. HIGHLIGHTS FINANCIAL (Rs./Crores) Sales Turnover Profit before Depreciation, Interest and Tax Depreciation Interest Profit before Tax Provision for Current Tax Provision for Deferred Tax Provision for taxation of earlier years written back Profit after Tax Transfer from Debenture Redemption Reserve Appropriations: General Reserve Debenture Redemption Reserve Proposed Dividend : Interim Final Tax on distributed profits Balance carried forward PHYSICAL (Million Tonnes) Market Sales (incl. Exports) Crude Thruput : Mumbai Refinery Visakh Refinery SHAREHOLDER VALUE (Rupees) Earnings per Share Cash Earnings per Share Book Value per Share DIVIDEND Your Directors, after taking into account the financial results of the Company during the year, have recommended dividend of 150% for the year 2004-05 (including interim dividend of 50%)as against 220% dividend paid for the year 2003-04. The dividend for 2004-05, including dividend tax provision will absorb Rs. 580.15 crores (2003-04 : Rs. 842.46 crores). TURNOVER Your Company has achieved a sales turnover of Rs. 64,689.51 crores as compared to Rs. 56,332.57 crores in 2003-04. PROFIT Your Company has earned gross profit of Rs. 2,381.83 crores as against Rs. 3,642.66 crores in 2003-04 and profit after tax of Rs.1,277.33 crores as compared to Rs.1,903.94 crores in 2003-04. 37.69 54.81 249.04 56.18 75.67 228.47 20.09 6.12 7.82 19.53 6.11 7.59 (127.73) (169.67) (339.33) (71.15) 669.45 (190.39) (25.00) (203.88) (542.93) (95.65) 846.09 2004-05 64,689.51 2,381.83 (659.59) (81.64) 1,640.60 (589.71) 79.33 147.11 1,277.33 100.00 2003-04 56,332.57 3,642.66 (606.58) (55.65) 2,980.43 (1022.45) (54.04) 1,903.94
30
Directors' Report
INTERNAL RESOURCES GENERATION The Internal Resources generated were Rs.1,277.44 crores as compared to Rs.1,722.10 crores in 2003-04. CONTRIBUTION TO EXCHEQUER Your Company has contributed a sum of Rs.16,200.61 crores to the exchequer by way of duties and taxes, as compared to Rs. 14,872.65 crores in 2003-04. DIRECTORS RESPONSIBILITY STATEMENT In terms of Section 217(2AA) of the Companies Act, 1956, your Directors state that : (i) In the preparation of the Annual Accounts, all the applicable Accounting Standards have been followed along with proper explanation relating to material departures.
(ii) The Company has selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the State of Affairs of the Company as on 31st March, 2005 and of the Profit and Loss Account of the Company for the year ended on that date. (iii) The Company has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (iv) These Accounts have been prepared on a going concern basis. MEMORANDUM OF UNDERSTANDING WITH GOVERNMENT OF INDIA The Corporation has been achieving an all round Excellent rating vis--vis MOU targets for thirteen consecutive years upto 2003-04 as a result of the concerted efforts of all the employees. The performance of the Corporation of the year 2004-05 also qualifies for Excellent rating basis self assessment. The details of performance vis--vis MOU 2004-05 targets are enclosed (Annexure I). REFINERY PERFORMANCE HPCL refineries achieved the highest ever combined crude thruput of 13.94 MMT as against previous best of 13.70 MMT achieved during 2003-04. Mumbai Refinery achieved a Crude thruput of 6.12 MMT against installed capacity of 5.5 MMT, which represents a capacity utilization of 111.20%. The Fuel and loss at Mumbai refinery was 6.57%, which is better than the MOU target of 7.20%. Visakh Refinery achieved the highest ever crude thruput of 7.82 MMT against previous best of 7.59 MMT achieved during 2003-04, which corresponds to 104.30% capacity utilization of installed capacity (7.5 MMTPA). The Fuel and loss at Visakh refinery was 6.12%, which is also better than the MOU target of 6.50%. Gross refining margins of Mumbai Refinery averaged at $ 5.60 per barrel as against $ 4.26 per barrel for the year 2003-04. Gross refining margins of Visakh Refinery averaged at $ 5.06 per barrel as against $ 4.61 per barrel for the year 2003-04. Both the refineries have initiated steps to put up new facilities to produce fuels to meet future specifications. MARKETING PERFORMANCE Your Company achieved the highest sales growth of 3.5% vis--vis 3.9% for the industry in the year. The market sales (including exports) registered 20.09 MMT corresponding to Rs. 64,689.51 crores during the year as against 19.53 MMT corresponding to Rs. 56,332.57 crores during 2003-04. VIGILANCE The raison dtre of Vigilance activity is not to reduce but to enhance the level of managerial efficiency and effectiveness in the organisation. (- CVC circular dated 13.04.04).
31
Directors' Report
The above dictum of the Central Vigilance Commission is the principal determinant as far as functioning of the Vigilance department is concerned. Adherence to the same was ensured in the various activities undertaken by the depar tment during the year. Vigilance wing has been striving to enhance transparency levels in the Organisation, through advocating extensive use of e-governance. Tender notices and forms are made available on the website. Initiatives like e-payments, e-procurements, computerised file tracking system etc. are under various stages of implementation across the Organisation. In critical areas like dealership selection, the results are being published on the website.
A Vigilance Conference in progress
Preventive vigilance activity was stepped up through inspections, workshops and awareness programmes. Special Q & Q (Quality and Quantity) campaigns were organised during the Vigilance Awareness Week, wherein demonstrations for enhancing awareness with respect to the issues related to adulteration were given to the customers across the country. Vigilance department will continue to bolster the efforts of the Management in striving towards making this Organisation a World Class Energy Company, and enhancing value for all stakeholders. INDUSTRIAL RELATIONS The Industrial Relations climate during the year 2004-05 continued to be generally harmonious in the Corporation. OFFICIAL LANGUAGE IMPLEMENTATION Progressive use of Hindi in the Corporation continues to receive due importance. More details are given in the Management Discussion and Analysis Report. SC/ST LIAISON The overall representation of SC/ST employees in the Corporation is 27.85%. During the year, your Corporation has carried out a number of Welfare/Development activities. More details are given in the Management Discussion and Analysis Report. CORPORATE GOVERNANCE The Corporation has complied with the various requirements of Corporate Governance. The details in this regard form part of this Annual Report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT This report has been given separately. PARTICULARS OF EMPLOYEES A statement providing the information as required under Section 217 (2A) of the Companies Act, 1956 is annexed herewith (Annexure IV). The details regarding the number of women employees vis--vis the total number of employees in each group is also annexed (Annexure V). DIRECTORS Shri B. Mohanty, Joint Advisor, MOP&NG, ceased to be Director with effect from 29.10.04 consequent to his reassignment in the Ministry of Petroleum and Natural Gas. Shri A.K. Srivastava, Jt. Secretary, MOP&NG, ceased to be Director with effect from 07.03.05 after his completion of tenure in MOP&NG. Shri Prabh Das, Joint Secretary, MOP&NG and Shri C. B. Singh, Joint Advisor, MOP&NG, were appointed as Directors with effect from 03.05.05 who have been co-opted as Additional Directors, liable to retire at the next Annual General Meeting and are eligible for re-appointment. Shri N. K. Puri, Director-Marketing of the Corporation retired on April 30, 2004 upon attaining the age of superannuation and after serving the Corporation for a period of 40 years.
32
Directors' Report
Shri M.S. Srinivasan, Additional Secretary, MOP&NG, continues to be ex-officio part time Director of the Corporation. S/Shri T.L. Sankar, Raja G. Kulkarni, Rajesh V. Shah and M. Nandagopal continue to be part time non-official Directors of the Corporation. S/Shri M.B. Lal, C&MD, D.S. Mathur, Director (Refineries), A. Balakrishnan, Director (Human Resources), C. Ramulu, Director (Finance) and S. Roy Choudhury, Director (Marketing) continue to be the whole time Directors of the Corporation. Shri D.S. Mathur will superannuate effective June 01, 2005. As per the provisions of Section 256 of the Companies Act, 1956, S/Shri T.L. Sankar, Rajesh V. Shah and C. Ramulu will be the Directors, who will retire by rotation at the next AGM and are eligible for reappointment. The Board of Directors place on record their sincere appreciation of the valuable services rendered by S/Shri A.K. Srivastava, B. Mohanty and N.K. Puri during their tenure on the Board. ACKNOWLEDGEMENTS The Directors gratefully acknowledge the valuable guidance and support extended by the Government of India, Ministry of Petroleum and Natural Gas, other Ministries, Petroleum Planning & Analysis Cell and the State Governments. The Directors also acknowledge the contribution made by the large number of dealers and distributors spread all over the country towards improving the service to our valued customers as well as for the overall performance of the Company. The employees of the Corporation have continued to display their total commitment towards the pursuit of excellence. Your Directors take this opportunity to place on record their appreciation for the valuable contribution made by the employees and look forward to their services with zeal and dedication in the years ahead to enable the Company to scale even greater heights. Your Directors are thankful to the shareholders for their faith and continued support in the endeavours of the Corporation. For and on behalf of the Board of Directors M. B. LAL Chairman & Managing Director
May 26, 2005
Shri M.B.Lal, C&MD handing over the Dividend cheque to the Hon'ble Minister of Petroleum & Natural Gas and Panchayati Raj, Shri Mani Shankar Aiyar. Also, seen in the picture are Shri S.C.Tripathi, Secretary to Government of India, Ministry of Petroleum & Natural Gas & Shri M.S. Srinivasan, Special Secretary, MOP&NG and the Functional Directors.
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Annexure to Directors' Report

ANNEXURE - I MOU TARGETS VERSUS ACTUAL PERFORMANCE : 2004-05 CRITERIA COMMON PARAMETERS (A) I. STATIC FINANCIAL PARAMETERS : a) Financial Performance Indicators : i) Gross Margin/Gross Block ii) Net Profit/Net Worth iii) Gross Profit/Capital Employed b) Financial Indicators (size) : i) Gross Margin ii) Gross Sales c) Financial Returns : i) PBDIT/Total Employment ii) Added Value/Gross Sales II. DYNAMIC PARAMETERS i) Quality : ISO Certification LPG Plants ii) Customer Satisfaction iii) Employee Training & Motivation : Competency Profiling Finalisation of Strategy for SBUs thru Shared Vision Exercise Implementation of Six Sigma (Mktg. & Refineries) iv) R & D Efforts : No. of Products Launched v) Project Implementation/Modernisation Green Fuels & Emission Control Project MR Clean Fuels & Emission Control Project VR Terminal Automation : 35 Locations vi) Capex/Greenfield Investments/JVs Green Fuels & Emission Control Project MR Clean Fuels & Emission Control Project VR vii) Extent of Globalisation (International, foreign JVs etc.) HINCOL - Commissioning of Blending Plants Visakh Mangalore SALPG - Completion of Access Shaft Sinking UNIT Target Excellent Level Actual Achieved
% % % Rs. Crores Rs. Crores Rs. Lakhs % Wt. Mks. % Wt. Mks. Wt. Mks. Wt. Mks. Nos. Wt. Mks. Wt. Mks. Wt. Mks. % of Outlay % of Outlay
13.87 8.65 11.66 1811.00 61525.00 16.09 1.45 4 98.00 1 1 1 7 2 2 3 80 80
19.22 15.13 18.21 2382.00 64690.00 22.55 2.37 4 98.00 1 1 1 7 2 6 15 19 50
Wt. Mks. Wt. Mks. Wt. Mks.
1 1 2
1 1 10
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CRITERIA SPECIFIC PARAMETERS (B) I. Sector Specific : Distillate Yields : Mumbai Refinery Visakh Refinery Fuel and Loss : Mumbai Refinery Visakh Refinery Market Share : MS - Retail HSD - Retail II. Enterprise Specific and Efficiency Parameters : No. of Reportable Accidents in Refineries Cu. Mtrs. of Process Effluents Discharged Control on Retail Outlets Addition of Retail Outlets Addition of LPG Distributorships Branding of Retail Outlets (Club HP) OVERALL RATING (A) + (B) Wt. Mks. Wt. Mks. % % % Nos. 1 1 76.00 70.00 70.00 2200 1.48 1 80.00 72.00 79.00 2247 EXCELLENT % % 25.52 23.45 25.22 23.19 Wt% Wt% 7.20 6.50 6.57 6.12 Wt% Wt% 68.20 75.50 69.39 76.37 UNIT Target Excellent Level Actual Achieved
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ANNEXURE - II Particulars with Respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earning/ Outgo as per Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988. ENERGY CONSERVATION AND TECHNOLOGY ABSORPTION 1) CONSERVATION OF ENERGY a) Energy conservation measures undertaken and additional investment/proposals for implementation on conservation of energy Mumbai and Visakh Refineries accord highest priority to energy conservation and have undertaken several Encon measures by operational improvements & implementing Encon projects. Various Encon measures undertaken during 2004-05 are as follows : Mumbai Refinery i. Optimized GTG load and reduced Specific energy consumption from 0.373 to 0.365 (Kg of fuel per unit power generation in CPP).
ii. Modified PDU steam condensate recovery system and reduced process steam consumption by 2 tons/hr. iii. Organized Oil Conservation Fortnight during January 15 to 31, 2005 to generate mass awareness in public for conservation of petroleum products. During the fortnight, several activities like free PUC check up for vehicles, display of oil conservation posters and slogan/quiz drawing competitions in various schools of Chembur area were conducted. iv. Installation of Secondary seals in 18 nos. of floating roof storage tanks to reduce tank emission losses. v. Replacement of FR-CDU/VDU/FRE-CDU rotary Air Pre-heater with stationery Air pre-heaters to improve the furnace efficiency by about 4%.
vi. Conversion of FRE and LR -VDU natural draft furnaces to balance draft furnaces for efficiency improvement by 9 %. vii. Recovery of LR units condensate (24 T/hr) for usage in Captive Power Plant as boiler feed water. viii. Optimization of the FR/FRE units crude preheat exchangers network to improve the preheat temperature by 20 Deg C. ix. Firing of FR vacuum column off gas (low calorific value) in heaters. x. Ceramic coating in SEU-II furnace and Hydrogen Reformer to improve the thermal efficiency by 2%. Visakh Refinery i. Carried out comprehensive refinerys compressed air survey by engaging an external agency. Per formance of all refinery compressors was studied in detail and survey identified 3000 Nm3/h air leaks in the compressed air system. Identified air leaks arrested and spared one compressor operation.
ii. Reduced specific steam consumption to 292 MT/TMT of crude processing during the year as compared to 305 MT/TMT crude processing in 2003-04 by periodic surveying and arresting steam leaks.
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iii. Steam leaks Joint survey was carried out by CHT nominated team during the Oil Conservation fortnight in January 2005. b) Impact of above measures on energy conservation and consequent impact on cost of production of goods. Various measures undertaken during the year 2004-05 would result in estimated energy savings of about 32221 SRFT, which is equivalent to Rs. 34 crores. c) Total energy consumption and energy consumption per unit of production : Please refer Form-A of the Annexure to the Directors Report.
2) TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION a) Efforts made towards technology absorption, adoption & innovation Information with respect to above is given below in Form-B b) Imported Technology (Imported during last 5 years) : Technology Imported Flexi cracking of Vacuum Gas Oils (FCCU) at MR Flexi cracking of Vacuum Gas Oils (FCCU) at VR Merox Treatment Facilities at VR Bitumen Blowing at VR Diesel Hydro De-sulfurisation at both MR and VR Hydrogen Units at both MR and VR Sulfur Recovery Units at both MR and VR Diesel Hydro De-sulfurisation 2nd Reactor at MR 3) FOREIGN EXCHANGE EARNING AND OUTGO a) Activities relating to exports : Various initiatives has been taken to increase exports and for development of new Exports markets for products and services. Efforts are on to access international Markets and to tap export potential for free trade products and lubricants. b) Total Foreign Exchange used and earned : Please refer Notes to Accounts Schedule 20 B, Note. 10 G, H, I & J. Year of Import 1999 2000 2000 2000 2000 2000 2000 2004 Whether fully If not absorbed absorbed Reasons Yes Yes Yes Yes Yes Yes Yes Yes
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FORM - A FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY MUMBAI REFINERY (A) Power and Fuel Consumption 1. (a) Electricity Purchased Units (Million KWH) Total Amount (Rs. Crores) Rate Per Unit for energy charges (Rs./KWH) Maximum Demand Charges (Rs. Crores) (b) Own Generation Through Steam Turbine/Generator Units (Million KWH) Units per tonne of fuel Cost per unit (Rs./KWH) 2. Furnace oil/LSHS Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 3. Naphtha Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 4. LPG Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 5. Refinery Gas Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 6. BH Gas Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 7. Coke Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) (B) Consumption per Unit of Production Electricity (KWH/Ton of crude) Liquid Fuel (Tons/TMT of crude) Gas Fuel (Tons/TMT of crude) Coke Fuel (Tons/TMT of crude) 2004-05 10.47 12.36 3.90 8.28 2003-04 7.35 12.95 4.51 9.63
279.89 2636.02 5.82 152.37 153.31 10062.00 126.70 217.87 17196.00 5.08 9.54 18777.00 41.81 42.06 10062.00 9.99 4.35 4455.00 28.70 28.88 10062.00 47.46 45.61 9.30 4.69
293.16 2624.61 4.33 168.73 161.22 9555.00 131.82 180.69 13707.00 10.29 16.30 15848.00 27.09 25.88 9555.00 6.58 2.81 4275.00 25.67 24.53 9555.00 49.20 49.20 7.20 4.20
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VISAKH REFINERY (A) Power and Fuel Consumption 1. (a) Electricity purchased Units (Million KWH) Total amount (Rs. Crores) Rate Per Unit for Energy charges(Rs/KWH) Electricity Exported (Million KWH) Maximum Demand charges (Rs. Crores) (b) Own Generation (CPP) Units (Million KWH) Units Per Ton of Fuel Cost Per Unit (Rs./KWH) 2. Furnace Oil/LSHS Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 3. CPP Fuel Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 4. Naphtha (DHDS) Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 5. Refinery Gas Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) 6. Coke Quantity (TMT) Total amount (Rs. Crores) Average rate (Rs./Ton) (B) Consumption per unit of production : Electricity (KWH/Ton of Crude) Liquid fuel (Tons/TMT of Crude) Gas fuel (Tons/TMT of Crude) Coke Fuel (Tons/TMT of Crude) 2004-05 3.38 4.87 14.42 0.21 2.43 252.42 2460.15 5.26 140.12 146.26 10438.17 102.60 199.81 19474.05 26.46 51.22 19356.54 85.63 89.57 10460.79 71.28 74.54 10456.34 2003-04 1.47 4.66 15.17 0.01 2.43 246.62 2441.90 3.25 110.88 107.02 9651.79 100.99 141.09 13970.35 21.41 30.00 14012.36 68.60 66.32 9668.43 86.51 83.79 9685.08
32.67 34.41 10.95 9.11
32.68 30.73 9.04 11.40
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FORM B FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION 1. RESEARCH AND DEVELOPMENT (R & D) A. COLLABORATIVE R&D PROJECTS MoU have been finalized with Research collaborators for the following projects : a. Up-gradation of FCCU recycle oil through solvent extraction using NMP as solvent (with IIP, EIL & CPCL) The project aims at extraction of aromatics from the FCCU feed using NMP as solvent. The raffinate so obtained would be superior quality FCCU feed stock and would result in better yields of Light and Middle distillates. The benefit expected from this project is approx. Rs. 3 crores/ annum. During the year 2002-03 and 2003-04, test runs were conducted for low Sulphur feed stock in MR-FCCU and high Sulphur feed stock at CPCL-FCCU. The samples of side streams and residue were analysed by IIP. Subsequently, a successful plant run was undertaken in Solvent Extraction Unit of Mumbai Refinery during February 2004, which resulted in raffinate yield of approx. 75-80% and same was routed to FCC unit as feed stock. During 2004-05, physico-chemical characterization and analysis of Test Run samples was done by IIP and mass transfer studies on Glass Packed Extraction Column has been completed. b. Energy efficient Deasphalting process using supercritical solvent recovery (with IIP, EIL & CHT) In the energy efficient super-critical approach the solvent recovery in the unit is done under supercritical process conditions, resulting in an over all energy savings of about 20 to 40 percent (mainly in utilities) and lower solvent losses. The project was initiated during 2002-03 and is scheduled to be completed by 2006. The benefit expected is approximately Rs. 2 Crores/annum. During the year, test runs were conducted in MR-PDA unit and relevant samples were analyzed by IIP. Site selection, PFDs & P&IDs has been finalized in consultation with M/s EIL to implement the facilities. The same is expected to be implemented by 2006. c. Optimization studies of Hexane manufacturing unit and feasibility study for producing polymer-grade hexane (with IIP) Study has been initiated along with IIP during 2004-05 for optimizing the existing Hexane plant operating conditions to explore the possibility to produce WHO and Polymer grade Hexane, which have more stringent quality specification with respect to sulfur and benzene content. d. Optimization studies of NMP Lube Extraction Unit (with IIP) Study has been initiated along with IIP during 2004-05 to optimize operating parameters to obtain specific product quality and thruput maximization. Improvement in colour, sulfur and saturates in products is also expected by increasing severity of hydrofining and thru usage of suitable catalyst. e. Improvement of Propylene Purity (with IICT Hyderabad) Proposal has been signed with IICT Hyderabad to improve the purity of Propylene through membrane separation. f. MOU has been signed between Chevron, IIT Kanpur and Advanced Refining Technologies for various R&D activities.
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B. EXPENDITURE ON R & D Capital Expenditure : Rs.0.47 crores Revenue Expenditure : Rs.1.28 crores 2. UPGRADATION INITIATIVES Mumbai Refinery Commissioned DHDS second reactor and commenced EURO-III grade HSD supply in line with Auto Fuel policy during the year. Altered CDU-II process parameters suitably to maximize ATF pool by blending BH ATF to PG ATF. It has improved ATF production substantially. Refinery also has planned to further augment ATF treating facilities during 2005-06 through minor modifications in ATF network.
Visakh Refinery Carried out Gasoline Sulphur Reduction Additives evaluation and usage commenced to reduce CRN Sulphur content to meet BS-II & Euro-III MS demand . Increased DHDS operation severity to meet BS-II & EURO-III HSD demand. Commissioned LPG merox caustic regeneration facility to reduce chemical consumption and to improve product quality. Commenced 380 cst Viscosity Furnace oil production for export. Carried out 48 crudes evaluation with assay TBP and refinery laboratory TBP Distillation.
ANNEXURE - III Environmental Protection Measures Mumbai and Visakh Refineries have been meeting the statutory regulations and standards set by State Pollution Control Boards and Ministry of Environment and Forest, Govt. of India. Both the Refineries have been certified as ISO 14001. Visakh Refinery 1. Solid Waste Management : Bioremediation of low oily sludge : Refinery is remediating biologically ETP sludge generated. Insitu Chemical Cleaning of Crude Tank bottom sludge : Crude tank 01B insitu chemical cleaning carried out and oil recovery from sludge is in progress. Processing of oily Sludge from Sludge Lagoons : Global Tender floated and order has been placed on M/S. Balmer Lawrie. The equipment installation is in progress. Integrated Hazardous Solid Waste Management Plan Project : Restructuring of the agreement is in progress for continuing the Phase III, IV and V of the project. Vermicomposting of canteen waste : Aerobic Vermi Bacterial (AVB) system based composting activity for treating canteen waste is under continuous operation. Treatment Storage and Disposal Facility (TSDF) : Proposal for Refinery Hazardous solid Waste disposal to TSDF at Hyderabad is under process of approval. Ground water monitoring network development study draft report received from EIL.
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2. AIR Pollution Control : Sulphur Dioxide emission guidelines are being followed for monitoring and achieving the sulphur dioxide emissions norm on day to day basis. T&I of SRU-1 was taken up and Hardware modifications were carried out in SRU-1 for further improvement in the unit performance. 3 Nos. New Continuous Ambient Air Monitoring Stations ( CAAMS ) along with a Weather monitoring station were installed and commissioned successfully. This has enhanced Refinery capability for continuous monitoring of Air Quality for SO2, NOX, HC, CO, SPM, RSPM and Noise level. Weather Monitoring station indicates Humidity, Rainfall, Wind Velocity and Direction. Volatile organic compounds inventorisation study taken up with M/S. EIL assistance. Final report is awaited. 3. Liquid Effluent Management : Oil Ingress Study by M/S. EIL : Tender floated for carrying out hardware modifications for the inlets of existing ETPs as per recommendations of the study. Technical Bid evaluation is completed and project implementation is planned as part of NPCB 2005-06. Feasibility study for Zero discharge study : Phase I/II of the study completed and Draft report received from EIL. Feasibility Study and process design of dedicated collection and reprocessing system for Sour water streams : Study initiated in December 2004. Data collection is in progress. Expected to be completed by June 2005. Equipment procurement proposed in NPCB 2005-06. 4. Environment Management System : Visakh Refinery has a comprehensive Environment Management System (EMS) and is a ISO 14001 certified Refinery. Surveillance Audit was conducted and ISO 14001 certification received in 2002 is being maintained. Initiative has been taken for upgradation to 2004 edition of the ISO 14001 standard. VR is implementing Process Safety Management system conforming to Occupational Safety and Health Administrations Process Safety Management (OSHA PSM) and Environmental Protection Agencys Risk Management Program (EPA RMP) guidelines of USA. Consultant has been appointed. A batch of 18 officers of VR were trained by EIL for conducting Risk Analysis studies and Hazard and operability studies. ( HAZOP ) 5. Other Activities : Gasoline Sulphur Reduction Additives evaluation was carried out at IOC, Faridabad and usage of same commenced from December 2004 to achieve reduction in CRN Sulphur to meet demand of BS - II and Euro III MS. FCCU-IR E-Cat addition was carried out in FCCU-II. This has resulted in minimisation of Catalyst cost and reduction in Hazardous Solid wastes generation. Necessary changes in DHDS operation severity made to achieve BS - II and Euro - III HSD production ex-existing DHDS.
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Mumbai Refinery 1. In a major thrust to the solid waste management, Mumbai Refinery has processed 11,450 M3 (approx.) of sludge during the year 2004-05 by M/s. Mid Content, Singapore using mechanical separation method and recovered about 5670 M3 of oil in the sludge. As of now most of the land fills have been treated. The left over sludge cake of 2000 M3 (having oil content less than 10%) is being treated by Bio-Remediation method by M/s. Terra Consultant India Pvt. Ltd. and the same is expected to be completed by July 2005. Mumbai Refinery has taken initiative for treating the tank sludge in an environmental friendly manner without removal of the sludge from tank and with reduced tank down time. In this direction, in-situ cleaning by M/s. Balmer Lawrie & Co. Ltd. using BLABO technology has been started in Crude Tank-115 during March 2005 for recovering the potential oil from the sludge. The complete cleaning of the tank is expected to be completed by June 2005 for facilitating the maintenance repair jobs. Refinery has a comprehensive Environment Management System (EMS) & ISO 14001 certification and has been renewed by external Surveillance Auditor M/s. SGS during July 2004. M/s. EIL has conducted a training program on Hazards and Operability (HAZOP) for Refinery Engineers and M/s. SGS has conducted a refresher training program on ISO-14001 as a part of Environmental Management System (EMS). Inline with the Solid Hazardous Waste Management Rules, 2003 and Honorable Supreme Court directive, Mumbai Refinery has become a member of M/s. Mumbai Waste Management Ltd. and disposed off about 226 Mts of various hazardous wastes such as spent catalyst from FCCU, DHDS, Lube Hydrifiners & SRU and other wastes have been disposed off and complied with the statutory requirement. The present Ambient Air Analyzers (SO2, NOx, SPM & CO) which have become obsolete are being replaced with new ones. Order has been placed on M/s. Environmental S.A. France and the same are expected to be received shortly. Refinery has entered into an agreement with M/s. RCF for locating Ambient air Monitoring Station in RCFs residential colony premises, Chembur. Procurement of Analyzers is being taken up. A Feasibility study has been carried out by M/s EIL for replacing the existing ETP-I & ETP-II with new Integrated ETP by adopting Cyclic Activated Sludge treatment followed by Membrane Bio-Reactor for meeting the proposed CPCB standards on MINAS. The project is being implemented at a cost of Rs. 50 crores.
2.
3.
4. 5.
6.
7.
8. 9.
10. Action initiated for improving the underground sewer system based on the recommendations of in-house survey carried out last year for better monitoring and control/operation of ETP-II/API Separators. Various sewer streams of under ground sewer system were flushed to facilitate free flow of oily water, routing of the system was checked and drawings were updated accordingly. Presently, repairs/correction of the junction boxes as per OISD standards are in progress. 11. As a part of Green Fuels and Emission Control Project, Flue Gas Desulfurisation Unit (Wet Gas Scrubber) is being put up in FCCU Unit for reducing the SO2 emission and Particulate Matter.
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ANNEXURE - IV Information as per Section 217(2A), read with Companies (Particulars of Employment) Rules, 1975 and forming part of the Directors Report for the period 1st April, 2004 To 31st March, 2005.
Sr. No. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 Name Designation/ Nature of Duties 3 SR. MGR SALES-MIS PQS SR. MOBILE OPT(SG) DY. MGR FINANCE DY. MGR FINANCE CH MGR LPG EX OPRNS OFFICER EXE OPS OFFICER SR. MANAGER AUDIT MAINT. TECH. CHIEF ADMIN. ASST. CH MANAGER CS & P SR MGR DEALER MGMT BOILER ATTENDANT (SG) MANAGER ADMINISTRATION SR RO MANAGER MGR-LPG DY MGR VIGILANCE DY MGR SR PLANT OPERATOR(SG) JR ADMIN. ASST. MANAGER INSTALLATION DY MGR ENGG & PROJECTS DY MGR FIN S. MGR PIPELINE OPERAT CHIEF ADMIN. ASST. SR PLANT OPERATOR DY MANAGER-PROJECTS SR PLANT OPERATOR SR MANAGER-VREP OPNS. CHIEF RG-MGR SR REGIONAL MANAGER MGR RETAIL SR ACCOUNTS OFFICER CHIEF ADMIN. ASST. SR ADMIN ASST. CHIEF ADMIN. ASST. DY MANAGER OPERATIONS SR OPNS OFFICER DY MANAGER FIN IT ASSISTANT SR MOBILE OPT(SG) SR MGR SECURITY SR PLANT OPERATOR CH ADMINISTRATIVE ASST DY MANAGER EX OPNS OFFICER SR MOBILE ASST. SR MOBILE OPT(SG) DEPOT MANAGER DY MANAGER DGM LPG PROJECTS SR TECH OPT(SG) EX SALES OFFICER RETAIL SR PLANT OPERATOR(SG) SR MGR ERP DY MGR ACCOUNTS MGR QUALITY CONTROL CHIEF MANAGER HR MANAGER SH & E DY MGR FIN SR MOBILE ASST (SG) DY MGR CORPORATE MGR INSPECTION DY MANAGER OM & S CHIEF ADMIN. ASST. SR PLANT OPERATOR(SG) PRINCIPAL MDI NIGDI Remuneration Qualifications (Rupees) 4 5 3,214,795 2,049,837 1,874,224 2,004,699 1,286,516 1,121,851 3,158,380 2,707,752 1,815,175 2,044,064 3,016,939 2,418,716 1,884,050 3,106,425 2,811,290 2,954,658 2,048,599 3,015,179 1,972,773 1,800,881 2,533,567 2,092,202 2,856,370 2,516,475 1,987,927 750,229 2,037,839 1,974,771 3,177,012 2,423,164 3,092,927 2,688,426 290,488 658,253 1,990,914 1,900,215 2,467,872 2,566,486 2,291,481 544,512 2,024,886 3,078,702 513,601 2,039,002 2,362,245 2,813,321 471,057 308,818 3,054,455 2,398,026 3,377,948 2,120,646 2,052,156 1,938,273 2,966,433 3,252,751 2,458,102 3,212,516 1,891,537 2,326,395 494,137 1,820,212 2,195,825 2,083,955 1,901,126 1,826,460 3,150,345 BSC NON SSC BCOM, ACA BSC, ACA BE (MECH) BSC BA BCOM, ACA MATRIC NTC (BLACKSMITH) SSC BE (ELCT & ELC & TELE COMM) MBSc DBM, MMS NON SSC DME DEE BSC ENGG (CHEM), MBA LIC MECH ENGG BE ELEC BCOM SSC SSC BA BE CIVIL BCOM DME DIP IN IND/ FAC MGT(C) BSC NON SSC B TECH MECH SSC BSC DIP IN ELCT & TELE COMM B.E (MET) BE (MECH), MMM B COM, ACA SSC SSC BA BSC ENGG (MECH) BA SSC/SSLC SSC SSC M.SC, M PHIL SSC SSC BE (MECH), MASTER IN INTL BUSS BA NON SSC NON SSC MSC BE (INSTRU) DME HSC/INTER/PUC M SC SSC BE (MECH) ME(IE) BCOM BSC MA BE (MECH) BA, LLB NON SSC BA BE (MECH) HSC/INTER/ PUC, BA BA SSC/SSLC BSC, PG (PM & IR) Experience (Years) 6 35 33 14 15 35 35 31 15 37 32 30 34 33 30 24 23 15 29 31 28 22 16 33 30 31 40 15 33 27 23 22 20 6 41 31 24 20 29 33 21 33 25 36 30 19 28 33 30 32 20 26 31 15 33 21 27 28 23 20 23 31 19 15 26 24 30 21 Date of Joining 7 1-Dec-69 4-Nov-71 4-Jan-91 5-Jul-89 26-Dec-69 24-Nov-69 17-Oct-73 5-Jul-89 9-Feb-68 19-May-72 1-Feb-75 13-Jul-70 15-Nov-71 1-Feb-75 24-Jun-80 24-Aug-81 21-Jan-90 1-Dec-75 24-Dec-73 1-Apr-76 17-May-82 9-Jan-89 22-Jan-72 1-Feb-75 17-Sep-73 23-Sep-64 20-Oct-89 11-Oct-71 1-Jul-77 10-Nov-81 1-Sep-82 8-Oct-84 17-Aug-98 23-Jan-64 1-Oct-73 24-Oct-80 8-Oct-84 24-Mar-76 1-May-71 5-Oct-83 15-Dec-71 9-Oct-79 26-Aug-68 1-Oct-74 3-Oct-85 5-Jul-76 4-Nov-71 1-Oct-74 1-Nov-72 5-Nov-84 3-Aug-78 17-Sep-73 2-Jan-90 6-Sep-71 16-Jan-84 1-Mar-78 1-Jul-76 9-Mar-82 8-Oct-84 7-Aug-81 1-Aug-73 12-Jun-85 2-Jan-90 20-Dec-78 12-Mar-81 1-Oct-74 7-Feb-84 Age Last Employment
2 ADVANI R I AHIRE RAMESH N ALPANA VIDYADHAR DESHPANDE ANANDA PADMANABAN A APTE K V ARORA SURINDARPRAKASH J B K SAWANT B R S NARAYANA RAO BABU RAO S BADLANI L N BALAN T K BALASUBRAMANIAN V BENWAL M C BHATIA R G BINAWADE M J BISWAS JANAKI B CHANDRA SEKHAR K V CHITNIS P V CHODANKAR H D DALAL V R DEORI MAHESWAR DHAMODARAN J DSOUZA CHARLES L DSOUZA H B DUBEY R R DUTTA SUBHASH CH DVS RAVIKUMAR FERNANDES JOSEPH V GHODKE B S GOPALAN SAKULAN GOYAL RAM KUMAR GUNSEKARAN V GUPTA ALOK GUPTA M L HAROLD BORGES HORO LUCY ISAAC JACOB V JOSEPH G JOSHI SUBHASH EKNATH JOSHUA K V JYALA MANOHARSINGH S KADOLKAR M D KEDARE SHANTARAM C KELSHIKAR S H KOHLI RAKESH KOLI R M KOTIAN HARISHCHANDRA C KOTIAN P C KRISHANKUMAR KRISHNAMURTHY V KRISHNAN R KULKARNI R B KUMAR ALOK M K HAYATKHAN MAHADEV GUMMA MALEKJEE N T MHATRE U N MICHAEL M MOHINDER SINGH AULAKH S R WAGH N S BALA NARENDRANATH S NARESH KUMAR PATEL NAVAROJI N NAYAK SHUBHADA K NUNES P T PADHI BALAKRISHNA
8 56 54 39 41 56 60 55 41 55 56 56 57 53 56 45 36 50 52 53 43 40 56 58 54 60 38 54 55 49 45 44 29 60 54 48 44 55 56 60 54 53 60 50 41 55 52 56 56 44 56 55 38 52 48 49 57 51 43 45 60 43 38 58 50 51 51
9 KOMAL MANUFATURING CO. LTD. BHARAT HEAVY ELECTRICALS LTD. KOSAN GAS CO. LTD. G. B. M. S. WORLI DAIRY BEST & CROMPTON ENG LTD. UNPAID BLACKSMITH APPRENTICE GREAVES COTTON & CO. LTD. BOMBAY FOOTWEAR PVT. LTD. BOMBAY TEXTILE RESARCH ASSN. V.D. STEEL ROLLING MILL SHRI DNYANESHWAR SAHAKARI KHANDSARI UTPADAK SANSTHA LTD. JANAKI BROTHERS INDUSTRIAL & AGRI. ENGINEERING CO.
M SUBRAMANYAM CHEMO PHARMA LABS LTD.
STERLING STEELS & WIRES LTD. THE MEHSANA DIST CO-OP MIL PRODN.
WATER & WASTE WATER AUTHORITY M/S. DISTILLERS TRADING CORPN LTD.
ASHOK LEYLAND LTD.
HYDERABAD ALLWYN LTD. M/S. SAVITA CHEMICALS PVT. LTD. DREDGING CORPORATION LTD. GOETZE (INDIA) LIMITED M/S. ISHWARLAL & CO. LTD.
CHIDAMBARAN MULRAJ & CO. LTD. THE TATA IRON & STEEL CO. LTD.
44

Sr. No. 1 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 Name Designation/ Nature of Duties 2 PADMANABHA S PANDHARE S L PANDIT AMAL K PANIKAR V P PAWAR W S P K DAMODARAN PRADHAN MANOJKUMAR SADA PUNEGAR J Y PURI N K RAMNATH K RAMNATH R RANI DASARI USHA RANJIT KUMAR DASH RATHOD J T S CHANDEKAR SAHA SUSAN PAUL SAILESH COUSIK SAWILANI B V SEBASTIAN ARUN SHAH V M 3 CHIEF INSTALATION MGR SR ACCOUNTS OFFICER SR MAINT TECH EXEC CUSTOMER CELL OFF MANAGER MANAGER HR SR ACCOUNTS OFFICER DGM - SAFETY&INSP DIRECTOR MARKETING DGM - DS LUBES PHARM./COMPOUNDER EX SALES OFFICER DY MGR FIRE & SAFETY CHIEF ADMIN ASST MANAGER FINANCE EXECUTIVE SALES OFFICR CHIEF MANAGER CHIEF PROJECTCOORD MGR EX SALES OFFICER CH MANAGER - ADMIN Remuneration Qualifications (Rupees) 4 3,411,513 1,935,019 345,040 2,405,308 2,868,372 3,441,089 237,647 3,079,170 1,415,175 2,963,979 2,131,846 2,227,296 2,108,926 1,880,657 3,559,334 2,035,384 3,043,082 3,576,280 2,242,958 2,395,454 2,970,112 2,093,751 748,891 2,220,200 1,911,527 2,471,167 764,708 2,006,675 2,352,981 2,534,312 2,651,783 3,228,296 2,034,263 2,279,335 2,238,770 2,350,198 2,733,604 3,004,599 890,076 949,074 3,216,824 1,927,086 2,234,510 5 Experience (Years) 6 Date of Joining 7 30-Aug-78 18-Mar-85 3-Oct-83 9-Dec-74 1-Feb-78 6-Dec-78 7-Dec-98 1-Feb-75 3-Feb-64 31-Oct-75 11-Jun-73 9-Jan-89 13-Feb-89 7-Apr-80 11-Dec-75 10-Oct-85 24-Mar-87 12-Nov-75 25-Aug-75 18-Nov-68 16-Oct-80 1-May-79 13-Mar-89 5-Nov-84 21-Apr-83 19-Oct-78 12-Nov-82 20-Oct-89 17-Jul-85 19-Nov-85 10-May-69 1-Sep-82 17-Jul-80 14-Jul-69 20-Jan-86 1-Sep-82 23-Apr-72 29-Jun-82 1-Jun-63 16-Jan-84 20-Sep-76 20-Nov-81 5-Jan-79 11-Aug-82 28-Feb-86 28-Dec-87 14-Oct-68 6-Jan-71 6-Jan-71 6-Jan-71 3-Jun-72 3-Jun-72 3-Jun-72 3-Jun-72 3-Jun-72 3-Jun-72 3-Jun-72 16-Aug-72 18-Dec-72 15-Dec-72 9-Nov-74 11-May-75 11-May-75 17-Nov-75 17-Nov-75 27-Jan-76 7-Jan-77 Age Last Employment
8 56 43 60 57 51 54 30 57 60 55 55 38 39 50 54 43 41 55 52 58 52 57 39 45 56 55 45 37 42 49 57 45 52 58 44 45 55 48 60 45 50 50 51 51 59 40 60 59 58 59 57 55 54 53 56 56 59 59 59 55 54 57 54 57 53 53 53
BSC, M.TECH (MECH) 26 BCOM, L L B 20 NON SSC 21 BSC 30 BA 27 MA, BL, DPM 26 BCOM, ACA 6 LEE 30 DME 41 BTECH (CHEM) 29 SSC, DIP IN PHARM 31 B COM, MBA (FIN) 16 BSC, BE (FIRE) 16 BSC 24 BSC 29 BTECH (CHEM) 19 BCOM, ACA 18 BE (MECH) 29 MA 29 DME 36 BSC 24 MA 25 B TECH (CHEM) 17 BSC ENGG (MECH 20 MA 21 BA 26 BSC, DBM 22 B TECH CHEM 15 BE (CHEM) 19 BSC 19 B.SC, M.SC 35 BSC 22 BSC 24 B.COM 35 B TECH (CHEM) 19 BSC 22 BCOM 32 MA 22 SSC/SSLC 41 B TECH (ELECT) 21 B.COM 28 BA 23 BA,DIP IN HOTEL 26 MGMT & CATERIN BE (MEHANICAL) 22 BSC, LLB,PG (PM&IR) 19 BE (MECHANICAL) 17 BSC,DIP IN ORM 36 BSC 34 34 34 33 33 33 33 33
EASTERN PETROLEUM PVT. LTD. K S AIYER & CO. RALLIES INDIA LTD. PLASTIPEEL CHEM & PLASTICS PVT. LTD. WOCK HARDT PHARMACEUTICAL
FOOD CORPOATION OF INDIA LOVELOCK & LEVIS HINDUSTAN STEEL CORPN. UNICORN INDUSTRIES M/S. NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD. ESSO CAR CARE CENTRE INDUSTRIAL ENTERPRISES ASIAN PAINTS DIRECTOR C.H.D. (M/EDUCATION)
SHIRISKAR A S MGR INSTLLN SHRIVASTAVA A K EX SALES OFFICER SINGH B P MANAGER-TECH SINGH PRABHAT KR EXEC OPRNS OFFICER SINGH RAM DY MANAGER SINGH SUMER EXEC OPRNS OFFICER SISAUDIA SANJEEV SR REG MGR SRINIVASARAO K DY MANAGER-TECH SRIRAM S DY MGR SUHAS KATE MGR-F&S SULE DILIP VINAYAK MGR INSTALLATION TOMY VARGHESE SR REG MGR TULASIRAO I S SR SUPDT QC VASUDEVAN V MGR SHARES VIDYA SAGAR Y EXEC OPRNS OFFICER VIJAYAKUMAR P EX OPRNS OFFICER VIJAYAN T V DY MGR INSTALLATION VIJAYARAM K MGR LPG SALES VINAYAKARAO P MANAGER-SHIFT CO-ORD VINOD B S DY MGR I&G WAGLE M H MGR FINANCE AND ACOUNT WORLIKAR BHARATI S CHIEF ADMIN ASST MAINKAR PURNIMA PRASHANT MANAGER ADMN PATIL BHASKAR SOMAJI PATHROSE A G M SHANMUGAM DIVEKAR B V REGE SATISH VINAYAK
WESTERN RAILWAY
UDC OF CENTRAL EXCISE INDIAN COTTON MILLS FEDERATION CHETTINAD CEMENT CORPN., MADRAS M/S SHRI VENKAT RAGHAVA RICE CO. M/S STANDARD BATTERIES LTD. TATA VIDYUT KARAYALAYA NEW EVEREST ENGG WORKS HOTEL CENTAUR M.S.E.B., KARADI SKOL BREVERIES LTD. M/S. POLYOLEFINS INDUSTRIES LTD. NATIONAL PEROXIDE LTD. M/S. POLYOLEFINS INDUSTRIES LTD. POLY OLEPHINS INDUSTRIS LTD. CARBIDE CHEMICALS CO. ANIK AIR INDIA LTD KAMLAKAR ELECTRIC WORKS STANDARD REFINING COMPANY F.C.I. LTD., TROMBAY UNIT, MARVLI SAURSHTRA ENGG. PVT. LTD. NATIONAL ORGANIC CHEMICAL LTD. BELL PHARMA NATIONAL RAYON CORP. LTD. LUBE INDIA LTD. CALICO CHEMICALS LUBRI CHEMICAL INDUSTRIES RAI. BHAYANDER (W. RLY) BHARAT BIJLEE FRAMROZE, CAMA & CO. M/S. KONKAN MINERALS RADIO INDUSTRIES
116 SHENOY U U 117 WAGLE SUBHASH BHALCHANDRA 118 MHATRE DINESH DHARMAJI 119 BUDDHISAGAR A D 120 BHIDE VILAS BALKRISHNA 121 KHEDKAR VIJAYKUMAR VISHVANATH 122 KANEKAR VIKAS SHRIKANT 123 MANKAR D M 124 AMRE MADHUSUDAN DOULATRAO 125 CHAUGULE GAJANAN KASHINATH 126 KARDILE SHIVAJI DHARMAJI 127 WADEKAR DIVYAKANT DATTATRYA 128 PATANKAR V D 129 SUNDARAM R 130 PAI V G 131 MATHURE M P 132 MINOCHER BEJAN 133 KUBAL Y S 134 PANCHAL JITENDRA HARKISHAN
MANAGER - MINOR PROJECTS 2,951,985 DGM-HR (MR) 2,313,109 MGR - GAGE/SCRAP DIS 2,228,079 DGM-OPNS (LR) 2,251,802 SENIOR MANAGER 2,032,412 T&D & PLANNING CH MGR-PRODN 2,945,049 BSC DY MGR-PRODN 2,095,022 BSC MANAGER - PROJECTS SENIOR ENGINEER MAINTENANCE MGR-ROTARY SR ENGR-MNTC DEPUTY MANAGER MAINTENANCE DY MGR-MNTC (ONSITE) DY MGR-PRODN DY MGR-PURCHASE MANAGER - MATERIALS SR MGR-W/SHOP CHIEF MAINT TECHNICIAN SR MGR-LR UNITS DY MANAGER - CANTEEN SENIOR ENGINEER MAINTENANCE MGR-PRODN CHIEF ACCOUNTS ASST DY MGR-OM&S
2,869,117 SSC/SSLC,ITI/ NCTVT MACHINIST 3,018,477 SSC/SSLC,ITI 3,902,034 SSC/SSLC 2,930,919 SSC/SSLC,ITI/ NCTVT MACHINIST 3,249,291 SSC/SSLC,ITI
3,259,471 SSC/SSLC 33 2,054,020 SSC/SSLC,ITI/ 33 NCTVT-ELECTRICAL 1,833,433 BSC,DMM 33 1,914,243 DME 3,929,805 DME 2,025,895 HSC/INTER/PUC 3,248,440 BSC 3,015,561 BSC 2,360,068 ITI/NCTVT MACHINIST 2,929,351 BSC 2,066,898 B.COM 3,184,468 BSC,CERT PROGRAMME (COMP APPLN) 32 32 31 29 29 29 29 29 28
45

Sr. No. 1 Name Designation/ Nature of Duties 2 3 CHIEF ACCOUNTS ASST DY MANAGER - PROD DY.MGR.- MNTC MANAGER - FINANCE MANAGER - UTILITIES SENIOR MANAGER SHIFT CO-ORDINATOR FORKLIFT OPTR/DRIVER DEPUTY MANAGER MAINTENANCE CHIEF MAINT TECHNICIAN CAR DRIVER CHIEF DRAFTSMAN CHIEF MAINT TECHNICIAN ENGINEER - MAINT Remuneration Qualifications (Rupees) 4 5 Experience (Years) 6 Date of Joining 7 7-Mar-78 4-May-82 7-Jan-82 17-Jul-72 7-Jan-68 7-Aug-68 9-Mar-73 1-Jan-74 3-Jan-74 3-Jan-74 2-Mar-75 4-Jul-75 5-Feb-75 7-Jan-75 15-Sep-75 21-Sep-75 10-Jan-75 12-Jan-75 28-Feb-77 7-Jan-76 3-Nov-77 6-Jan-77 7-Mar-78 12-Mar-79 2-Feb-81 6-May-81 24-Aug-81 1-Sep-89 8-Feb-67 18-Nov-68 8-Jun-68 11-Sep-74 27-Mar-72 20-Dec-78 16-Sep-85 12-Nov-81 10-Oct-74 11-Oct-71 11-Nov-68 2-Oct-72 Age Last Employment
8 52 51 53 58 58 59 53 55 56 56 55 55 57 53 56 51 57 54 56 55 57 58 53 50 51 58 47 39 56 60 60 52 54 49 60 48 53 52 56 60
9 ECONOMIC CONSTRUCTION COMPANY TUBE WELD ENGG, WORKS (P) LTD. M.H.SABOO SIDDIK POLYTECH KIRLOSKAR OIL ENGINES LTD.
135 GANESAN R 136 KARGUTKAR RAVINDRANATH MANOHAR 137 SHETTY D V 138 DABADGHAV S V 139 VAIDYA PRAKASH UDHAV 140 PATTEKAR VILAS V 141 BABAR S B 142 GAIKAR B V 143 SANGARE D D 144 MENEZES W 145 GORE P M 146 RANE D S 147 PATEL B C 148 RANADIVE KIRANCHANDRA DATTATRAY 149 MAZGAONKER J N 150 KHADTARE S M 151 D'SOUZA H 152 CHAUHAN S R S 153 SHAH SHIRISHKUMAR BHOGILAL 154 BANDEKAR SUBHASH SAKHARAM 155 SUVARNA SANJEEVA KADYA 156 VARTAK S D
1,928,876 BSC 27 2,566,802 SSC/SSLC, 23 BOILER PROFICIENCY 2,516,436 SSC/SSLC,DME 23 2,264,242 B.COM 33 1,966,863 BSC 37 2,351,644 BSC 37 1,990,305 NON SSC 3,262,209 SSC/SSLC,ITI/ NCTVT MACHINIST 2,063,453 NON SSC 1,841,166 NON SSC 2,265,214 SSC/SSLC 2,215,588 2,446,314 SSC/SSLC 32 31 31 31 30 30 30
MANAGER MAINTENANCE 3,253,480 SSC/SSLC, 30 LICENSIATE IN ELEC. CHIEF DRAFTSMAN 2,391,221 DME 30 CHIEF PROCESS TECHNICIAN 2,088,056 SSC/SSLC 30 CHIEF ACCOUNTS ASST. 1,837,974 BA 29 CHIEF PROCESS TECHNICIAN 2,172,083 SSC/SSLC CH MGR-PROJS MTLS 3,545,785 BE (MECHANICAL) SENIOR MANAGER NEW PROJECTS DEPUTY MANAGER MAINTENANCE CHIEF DRAFTSMAN 3,508,951 BSC 2,203,004 SSC/SSLC 1,852,083 ITI/NCTVT DRAFTSMAN 2,582,449 BSC 2,553,902 BSC 2,687,641 BSC,LLB,Dip in PRODUCTION ENGG 2,599,764 BA,DME 3,039,143 BE (MECHANICAL) 2,049,666 BSc Engg (MECH.) 1,964,258 1,265,382 1,056,777 727,027 1,908,171 2,122,058 251,840 343,570 2,089,272 2,106,143 2,005,447 1,094,642 SSC DME BA, LLB SSC BSC CHEMISTRY BSC SSC,EME BA BA SSC SSC SSC, ITI/ NCTVT MACHINIST 29 28 29 28 28 27 25 24 24 24 16 38 36 36 30 33 26 19 23 30 33 36 32
ESSO STANDARD REFINARY CO. OF INDIA LTD ESSO COOP. STORES, ESSO NAGAR (WEST) ESRC CANTEEN HUMPHREYS & GLASGOW CONSULTANTS PVT. LTD. HINDUSTAN PETROLEUM PUMP M/S. ECONOMIC CONSTRUCTION COMPANY PLA - ELECTRO APPLIANCES INDUSTRIAL CONSULTING BUREAU S.O.M.C. LUBE REFINERY MR. WILLIAM SERRAO, WILLIAMS CLASSES H.P.C. LUBE REFINERY SWASTIK H & J P LTD.
S. DIAS & COMPANY I.C.B. LTD. P2 & ASSOCIATES CADICO CHEMICALS PLASTIC DIVISION, ANIK INDIAN AIR FORCE M/S. HINDUSTAN ORGANIC CHEMICALS LTD.
157 SAWANT D S DEPUTY MANAGER - P&A 158 PRADHAN SANJAY SURYAKANT DY MGR-QUALITY CONT 159 KASHID D M DY MGR - QC 160 DESHMUKH ANIL MADHUKAR 161 RAJARATHINAM T 162 163 164 165 166 167 168 169 170 171 172 173 174 1. 2. 3. 4. MANAGER - SECURITY SENIOR MANAGER CES CONSTRUCTION PANCHBHAI RAJENDRA B DEPUTY MANAGER MAINTENANCE ALMEIDA LYDIA A CHIEF SECRET. ASST. BHAT P S MANAGER MATERIALS CHAUDHARY V R DY MANAGER FINANCE CHOUDHARI H R DY MANAGER PRODUCTION CHOUGULE P A LPG OPERATOR(SG) DSA DINA CHIEF ACCOUNTS ASST. MANIKPURI RUKDEO DAS MAIN TECH PATIL B V CHIEF ADMIN. ASST. PATIL SURGONDA MALGOND SR. ADMIN ASST. SANDHI MOHAMMED HUSSAIN SR ACCOUNTS ASSISTANT SHANBHAG D R CHIEF ADMIN. ASST. TATKARE L P SR ENGG MAINT
THE INDIAN SMELTING & REFINING CO. LTD. CENTURY SPINNING & MFG. CO. LTD.
INDIAN ARMY KURLA RUBBER FACTORY INDIAN AIR FORCE
Employees listed in the statement were employed for part of the year and were in receipt of remuneration at the rate of not less than Rs. 2,00,000/- per month. Employment in the corporation is non-contractual. Employment provides for termination of services by either party giving one months notice. None of the employees are related to any of the Directors.
ANNEXURE - V Statement showing Women Employees as on March 31, 2005 Group A B* C D Total Total No. of Employees 3562 6348 651 10561 No. of Women Employees 219 419 27 665 % of Women Employees 6.15 6.60 4.15 6.30
*HPCL has no posts classified under group B as the entr y in non-management grades has been re-classified in group C effective 1.1.1994.
46
Management Discussion & Analysis Report

ECONOMIC SCENARIO The Indian economy recorded a growth of 6.9% in 2004-05, a commendable per formance given that it registered the decades highest growth rate of 8.5% in 2003-04. The Economy had to contend with a deficient South-West monsoon, hardening commodity prices as well as damage caused by the tsunami on the east coast of the country. Crude oil prices witnessed the most dramatic rise in the past year, with the average price per barrel of the Indian Basket crude rising from $32.2 per barrel in March, 2004 to $49.3 per barrel in March, 2005. The international crude oil markets have witnessed fundamental change in the demand-supply scenario. The demand of the Asia Pacific Region continued to surge ahead of the demand of western nations. The huge increase in demand across the globe and inability of supply to keep up to the demand played a major role in the rise of the crude oil prices. Price movements were impacted further by the concerns about the insecurity of supply due to natural calamities (like Hurricane Ivan in Gulf of Mexico) and geo-political tensions including terrorism and strikes in producing countries. The Stock Market Sensex moved from 5655 points in April 2004 to a peak of 6493 points in March, 2005. This reflected the confidence of the investing public on the corporate sector and the buoyancy of capital markets boosted the avenues for mobilisation of resources from investing public. Agriculture sector growth is expected to be at 1.1% in 2004-05 against almost 10% growth in 2003-04. Deficient rainfall to the tune of 12% below long period average was the main reason for this poor performance. Advance estimates indicate that Industry grew at 7.8% in 2004-05, the highest growth recorded in the last eight years. In the industr y sector, manufacturing GDP is estimated to have expanded by almost 9% in 2004-05 against 6.9% growth in 2003-04. The Services sector is projected to have maintained its growth momentum at 8.9% compared to 9.1% growth in 2003-04. Petroleum product consumption increased by 3.7% in 2004-05 maintaining almost the same growth rate as last year. Diesel consumption grew by 7% against a marginal growth of only 1% in 2003-04. Petrol demand continued to grow at about 4% as in 2003-04. Naphtha and ATF were two of the fastest growing products in 2004-05. Naphtha consumption increased by 18% on the back of new petrochemicals capacity. Naphtha consumption had actually declined in 2003-04. ATF consumption had grown at 9.4% in 2003-04, in the backdrop of airline industr y growth and continued to grow in 2004-05, registering a growth of 14.2%. Bitumen consumption declined substantially dropping from 13% growth in 2003-04 to 1% decline in 2004-05. SKO and LDO consumption too continued to decline in 2004-05. On the external front, exports recorded a growth of 24.1% in 2004-05 on top of 21% growth seen in 2003-04. Iron ore, manufactures of metals, primary and semi-finished iron and steel, transport equipment, plastic and linoleum products and petroleum and crude products were the key drivers of exports growth. Exports of petroleum products increased by 20% in 200405, rising from 14.6 MMT in 2003-04 to 17.5 MMT in 2004-05. In value terms, petroleum product exports went up by 75% in 2004-05. Realisation was $6.3 billion in 2004-05 against
47
Management Discussion & Analysis Report (Contd.)

$3.6 billion in 2003-04. Imports went up by 37% in 2004-05 with POL imports increasing by 45%. Foreign exchange reserves stood at $135.14 billion at the end of the financial year, an accrual of $27.4 billion over reserves in 2003-04. The inflation rate was higher at 6.7% in 2004-05 compared to 5.4% in 2003-04. Fuel group exhibited an inflation rate of 10% due to increase in prices of coal and petroleum products. Projections indicate that the economy is likely to grow at around 6% in 2005-06. The continued upward trend in the capital market would support further growth in economic activity. The industrial sector is expected to lead the growth followed by services. The Agricultural sector may not do so well due to delay in onset of monsoon. The Oil sector is, therefore, expected to fare well next year also. SECTOR OVERVIEW Downstream oil sector in the countr y faces a positive demand environment basis a good economic growth. Petroleum products consumption in the country was around 111 MMT in 2004-05, a growth of 3.7% over 2003-04. On the supply side, however, refining capacity, at around 132 MMT, continues to outstrip demand. As a result, nearly 18 MMT petroleum products were exported. Despite this surplus, refining margins have been good due to tight demand-supply balance in Asian region. China has been the growth story in the region with oil demand growing at 8% and accounting for almost 80% of incremental demand in the Asian region in 2004. Oil consumption in Asia in 2004 was around 23.4 million barrels per day (mb/d) vis--vis refining capacity of 22 mb/d. A corollary of high demand has been high oil prices. In 2004, the global demand for oil rose by 2.46m barrels a day an increase of 3.4 per cent. This is both the fastest rate of growth and the largest absolute increase since 1978. High demand coupled with tight supply chain, alongwith factors such as speculative funds, stretched production capacities, limited complexities of Indian Refineries etc. caused prices to rise above $50/bbl. Oil Marketing PSUs recorded lower profits due to wide gap between the crude and product prices, lower margins on Diesel and Petrol and had to bear the burden of subsidies on products like LPG and Kerosene. It must be noted that these four products constitute 70% of the Indian petroleum product basket. This has af fected the revenue realisations of the marketing companies. The private oil companies have gained a market share of around 2.6% in retail sales of diesel and petrol. The gain has been larger in the diesel segment as private companies have concentrated largely on highway sales. Private oil companies accounted for 1 MMT of the 2.5 MMT incremental retail sales of MS and HSD in 2004-05. The countrys second LNG terminal was commissioned by Shell in Hazira, Gujarat. This has augmented the availability of gas in the western region of the country. Naphtha consumption in the western region has gone down in 2004-05 due to greater gas availability.
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The new auto-fuel policy announced by the Government of India mandated Euro-III emission norms for eleven major cities with effect from April, 2005. These emission norms require changes in petrol and diesel quality including reduction in sulphur limits. Indian refiners are investing heavily in projects to produce products that conform to new standards. All these developments point to an increasingly competitive industry that has to attain a fine balance between high raw material costs, increasing costs relating to environmental compliance, greater expenditure to meet new competition and lower realisation from finished goods. HPCL has been following a differentiation strategy to retain and expand its sales. Branded fuels like Power and Turbojet have been introduced. Customer experience at the retail outlet is sought to be improved under the aegis of Club HP. Attention is being focused on hither to relatively neglected rural markets. New oppor tunities opened through expansion in sectors such as aviation are being pursued vigorously. Projects are underway to improve efficiency of the supply chain so as to optimise costs. MOU PERFORMANCE : The Corporation each year signs a Memorandum of Understanding (MoU) with Government of India through its Administrative Ministr y. MOP&NG regarding per formance targets that are to be achieved by various functions in the Corporation for each financial year. The Corporation has been achieving an all round Excellent rating on its performance vis--vis MOU targets for thirteen consecutive years upto 2003-04 as a result of the concerted efforts of all the employees. The performance of the Corporation in the year 2004-05 also received Excellent rating. PHYSICAL AND FINANCIAL PERFORMANCE The turnover during 2004-05 is Rs. 64690 crores as compared to Rs. 56333 crores in 2003-04 showing 14.8% increase. The marketing volumes achieved were the highest ever at 19.27 MMT as compared to 18.62 MMT for the previous year and our Mumbai Refinery and Visakh Refinery together recorded the highest ever throughput of 13.94 MMT as compared to 13.70 MMT for the previous year. On the refining front the average margins for the year have gone up to $5.30 per barrel from the earlier years of $4.45 per barrel. The growth trend in MS/HSD our main product line have been successively increasing by registering highest growth rates in the industry. Similarly the Aviation and Lubes business line have also made distinct impact in terms of value and growth in the market. Despite significant physical performance in terms of increased Refinery thruputs, increased Refiner y margins, increased Refiner y Sales Volume, the Corporation recorded a lower net profit of Rs. 1277 crores as compared to the net profit of Rs. 1904 crores for the financial year 2003-04. The main reason for HPCLs lower profit for the year was due to the wide mismatch between the crude and product prices and the need for the Corporation to bear the burden of subsidies on products like Kerosene and LPG. A portion of the subsidy impact was also shared by the upstream companies. The various initiatives of our different SBUs as highlighted herein are aimed towards sustaining profitability and future growth.
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REFINERIES
Refineries Team
Shri V.D. Mahajan, Executive Director Refiner y Coordination
Shri G.A. Shirwaikar, Executive Director International Trade & Supplies
Shri D.K. Deshpande, Executive Director Mumbai Refiner y
Shri A.B. Sathe, General Manager International Trade
Shri A.S. Rao, General Manager (I/C), Visakh Refinery
Shri P.A.B. Raju, General Manager Operations, Visakh Refiner y
Shri B.K. Namdeo, General Manager Projects, Mumbai Refiner y
Shri K.V. Rao, General Manager Finance, Visakh Refiner y
Shri S.C. Mehta, General Manager Operations, Mumbai Refiner y
Crude thruput and Capacity utilisation HPCL refineries achieved the highest ever combined crude thruput of 13.94 MMT as against previous best thruput of 13.7 MMT achieved during 2003-04. Mumbai Refinery (MR) Mumbai Refinery achieved a Crude thruput of 6.12 MMT as against its installed capacity of 5.5 MMT, which represents a capacity utilisation of 111.2%. It achieved highest ever FCCU thruput and production of LPG, MS, ATF and MTO during the year. The distillate yield was 68.96% as compared to 68.30% during 2003-04. It also achieved highest ever GRM of $5.29/bbl against previous best of $4.26 per barrel in 2003-04. Fuel & loss recorded was 6.57%, which was better than the MOU target of 7.2%.
Sulphur Recovery Unit at Mumbai Refinery
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Mumbai Refinery undertook debottlenecking of FCCU to improve thruput as well as distillate yields. It has also initiated various steps like change in crude mix, optimisation of GTG firing/Boiler operations to improve refiner ys profitability.
Golden Jubilee celebrations at Mumbai Refinery
Visakh Refinery (VR) VR achieved highest ever crude thruput of 7.82 MMT as against the previous best thruput of 7.59 MMT during 2003-04, which corresponds to 104.3 % capacity utilization of installed capacity (7.5 MMTPA). It achieved highest ever DHDS thruput and production of Propylene and HSD. The distillate yield was 75.3 % as compared to 73.9% for the year 2003-04. It also achieved lowest Specific Energy Consumption of 100.8 MBTU/BBL/NRGF during the year as compared to previous best of 101.5 MBTU/BBL/NRGF during 2003-04. Specific Energy Consumption has improved consistently during the last 5 years. VR also achieved highest ever GRM of $5.09/bbl against previous best of $4.61 per barrel in 2003-04. Fuel and loss recorded was 6.12%, which was better than the MOU target of 6.5%. Visakh Refinery has also initiated steps to improve GRM like change in crude mix, optimisation of VBU operations, De-bottlenecking of LPG Merox Unit treating facility and crude receipt through VLCC to improve profitability. Mumbai Refinery Green Fuels & Emission Control Project (MR-GFECP) MR has undertaken this mega project at a cost of Rs. 1152 Crores (October 02 price) to produce the MS/HSD of EURO-III grade for supplies in Metro/Mega cities and Bharat stage II grade for supplies in the rest of the country. The project when completed will also enhance the refining capacity from current level of 5.5 to 7.9 MMTPA. The major facilities proposed under this project are NHT/CCR, Isomerization unit, FCC Gasoline Hydrotreater unit with associated auxiliaries and revamp of existing CDU-I/VDUs and FCC Units.
Shri S.C. Tripathi, Secretary to Government of India, MOP&NG inaugurating the Refinery Technology Meet. Also seen in the picture is Shri M.B. Lal, C&MD
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MR has already commenced production of BIS-II MS/HSD and EURO III HSD from January, 2005 and May, 2005 respectively. EURO-III MS production/supply is expected to commence from the last Quarter of 2006, after implementation of on-going GFEC project. In the meanwhile, the Corporation is procuring EURO-III MS from industr y sources for meeting the Mumbai regions demand till completion of GFEC project.
CDU MeroxTreating Unit at Visakh Refinery
Visakh Refinery Clean Fuels Project (VRCFP) Visakh Refiner y is currently implementing this project at an approved cost of Rs. 1635 crores (April '03 price) to produce the MS/HSD of EURO-III grade for supplying to Metro/ Mega cities and Bharat stage II grade for the rest of the country. Major facilities proposed under this project are NHT/CCR/NIU/FCC NHT in MS block, Flue gas Desulphurization project and revamp of existing FCCU-II & DHDS Units. VR has commenced production of BIS-II MS/HSD & EURO III HSD from 1st Januar y, 2005 onwards. EURO-III MS production is expected to commence from the last Quarter of 2006, after implementation of this project. In the meanwhile Euro-III MS demand of Hyderabad region is being met from the refiner y by utilizing appropriate crude mix and blending of streams.
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Major Maintenance initiatives by the Refineries : Both the Refineries accord highest priority to preventive maintenance to avoid unplanned and emergency shutdowns. The following major initiatives were taken by both the Refineries in this area :
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Improved reliability of equipment through strict adherence to Preventive Maintenance (PM) schedules. Root Cause Failure analysis for the critical equipment Erection of a column at Visakh Refinery and taken cor rective measures to improve service factor of equipment. In-house Training Programs for Operation and Maintenance Crew on Pumps and Mechanical Seals to enhance pumps reliability. Detailed study of the rotar y equipment sealing system and measures were taken to improve the reliability.
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Safety Awards Mumbai Refinery

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Prestigious Oil Industr y Safety Award (OISD) for the year 2002-03 for Best Overall Safety Performance amongst Refineries for the 2nd year in a row. National Safety award 2003 for the lowest average weighted accident frequency rate for the 3rd consecutive year (2001/2002/2003). National Safety award 2003 for achieving the largest number of Manhours without a Fatal/Non-Fatal Accident/Total Permanent Disability.
Achievements
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MR commissioned the DHDS second reactor in ser vice & commenced HSD production confirming to EURO-III norms. VR received ISRS Level-8 (International Safety Rating System) from M/s. DNV France.
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Star ting from June 2004 received four parcels of crude through VLCC with Lighterage operations during 2004-05 and realised freight savings of approximately $0.7/bbl. VR improved crude basket by processing new Crudes viz. EA, Belayam, Seria Light and Benchmas. Commenced production of Euro-III, MS-HSD.
CRUDE OIL PROCUREMENT HPCLs two refineries at Mumbai and Visakhapatnam processed 13.94 MMT of cr ude oil during 2004-05. Of this 3.75 MMT was from indigenous source, while the balance quantity of 10.19 MMT was of imported crude. During the year, HPCL imported 6.67 MMT of crude on term contract basis from M/s. Saudi Aramco (Saudi Arabia), M/s. Somo (Iraq), M/s. Adnoc (U.A.E.), Petronas (Malaysia) and NOC (Libya), while the balance quantity was purchased on spot basis. For maximising margins at our Refineries, emphasis was laid on widening the crude basket so as to have an optimum choice from a variety of crude oils. Continuous attempts are being made to widen the crude basket and diversify the sources of supply. During 2004-05, 18 new crude from Malaysia, Yemen, Libya, West Africa, Brazil and Equador were included in the acceptable crude basket and 5 new crude from Egypt, Nigeria, Thailand and Brunei were processed in Visakhapatnam refinery. MR/VR achieved higher GRMs in 2004-05 (MR-$5.29/bbl, VR-$5.09/bbl) vis-a-vis 2003-04 (MR-$4.26/bbl, VR-$4.61/bbl) due to general buoyancy in international market caused by surging demand led by China. The change over of 1.0 MMT of AL/AM to Basrah improved refiner y margins by Rs. 15 crores per annum based on differential margins of about $0.3/bbl between Arab Light and Basrah. During the year, 10.23 MMT of imported crude oil worth CIF value Rs. 13,787.98 crores was
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purchased. Towards minimising crude freight cost, four VLCC cargoes were finalised for Visakh refiner y and the same were received after lighterage at Kakinada. This resulted in freight savings of Rs. 6 crores approximaely per cargo vis-a-vis direct discharge thru Suezmax tanker. Efforts are being made with major Public/Private ports for installation of SPM facilities at Visakh for reducing the freight cost further by direct discharge of VLCCs. On the exports front, a growth of around 20% in volume and 47% in rupee value terms was achieved in 2004-05 as compared to the previous year. This year, over 730.16 TMT of bulk petroleum products worth Rs. 1,425 crores were exported. Export incentives in the form of advance license were obtained against the expor ts made, which would enable duty free import of crude oil with CIF value of approximately Rs. 134 crores. Oil Price Risk Management : Steps have been initiated to build capabilities and develop skill to face the new challenges of a deregulated market and the various new risks to which the corporation is now exposed. Oil Price Management project is one of the tools to cover such risk. This will help in protecting margins for both refinery and marketing divisions and will also proactively address some of the corporate governance issues. The first phase of framing the policy is under way. The project will result in setting up of a trading desk and risk management activities are likely to commence by the end of 2005-06. 8th Annual INDUSTRY PERCEPTION SURVEY of Asia/Pacific Petroleum Trading Companies for 2004 Annual industry perception survey of Asia/Pacific Petroleum Trading Companies is conducted by Applied Trading Systems, Inc., Houston. Applied trading system specialises in analysis of the developments in the petroleum industr y and has been releasing daily repor ts on the petroleum industr y since 1988. Upon requests from clients, ATS has sponsored an annual Industry Perception Survey which focuses on identifying the most effective Petroleum Trading Company within Asia/Pacific. The first annual Industr y Perception Sur vey for Asia/Pacific Region was conducted in 1997 and the 8th annual survey was conducted for 2004. The 8th annual survey included seventy nine (79) petroleum companies that have been nominated for consideration and focused on 7 basic categories. This survey has been transmitted to over 90 dif ferent organisations within Asia and the U.S. West Coast that are either direct participants in, or service providers to, the Petroleum Trading Industry. In the very 3rd year from commencement of trading activities, HPCL has been ranked as the 4th best NOC Company (after IOC, Petronas & Sinopec) as per the Industr y Perception Sur vey of Asia/Pacific Petroleum Trading Companies for 2004. This is the first time HPCL has figured in the first 5 companies nominated under any category.
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Management Discussion & Analysis Report (Contd.) Marketing Team
Shri S.K. Biswas, Executive Director Projects & Pipelines
Shri S.P. Chaudhry, Executive Director Retail
Shri S.V. Sahni, Executive Director LPG
Shri K.R. Shankaran, Executive Director Direct Sales
Shri A.B. Pai, General Manager East Zone
Shri M.S. Damle, General Manager West Zone
Shri R. Sudhakara Rao, General Manager North Zone
Shri B. Gururajan, General Manager South Zone
Shri A.B. Thosar, General Manager Pipelines
Shri S.S. Mundle, General Manager Operation & Distribution
Shri S.K. Savla, General Manager Engineering & Projects
Shri Y.K. Gawali, General Manager LPG
Shri S.P. Singh, Deputy General Manager - Aviation
MARKETING
RETAIL BUSINESS The Oil sector is undergoing a rapid change. Progressive deregulation of the sector has provided oppor tunities to large private players to enter into the fray and seriously work towards grabbing their share of the market in the shortest possible time. The industr y is, therefore, witnessing a scenario of increased competition and companies competing aggressively for the share of market. The emerging challenges in Retail segments are; aggressive network development by new and existing players, price as a tool for competition, pressure on margins and volumes, increasingly demanding customers looking for greater choice, use of technology for providing differentiated services, dealer relationship, aggressive marketing and value for money offerings, all directed towards delighting the ultimate consumer.
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RETAIL SBU Retail constitutes nearly 60% of HPCLs business and, therefore, attracts special focus in the organization. HPCL has a market share of nearly 24% amongst PSU Oil companies in combined petrol and diesel volumes.
Shri S.C.Tripathi, Secretary to Government of India, MOP&NG, inaugurating the first ever online Density Display Unit at HPCL's e-fuel station in Bandra-Kurla Complex
A view of the "Hamara Pump" at Mananjeri, Tamilnadu
Retail SBU vision HPCL has been gearing itself well in advance in the face of impending deregulation of Retail sector from April, 2002. An Organisational Transformation Exercise was undertaken in the corporation for achieving continued excellence. The entire focus was to develop the Vision and Strategy to meet the stated and latent needs of the customers. The employees at different levels participated and shared their aspirations. As a result, Retail SBU vision was cocreated which reads as under :
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Retail is the highest performer in sales growth over industry. Retail has sustained profitability through increased sales, ARB earnings, cost optimization, focus on branded fuels and branded lubricants and has the best return on investment. Retail delights customers by fulfilling their stated and latent needs with innovative quality products and services, competitive prices through its loyal and committed dealers. Retail has competent, committed and empowered people making the workforce challenging vibrant and happening. Retail team has sense of pride, mutual trust and camaraderie conducting business in a fair, transparent and ethical manner.
To achieve the Retail Vision strategies were to be formulated. This was followed by formation of sub groups who spread across various market segments such as Highways, Car segment,
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2/3 Wheeler segment and Rural segment. They interacted with the customers and various focus groups to find out specific needs of the customers. Thereafter a Customer Centric Growth Strategy was developed with focus on Absolute Customer Delight as unique value proposition for each customer segment.
Retail Outlets
Retail Initiatives Retail SBU has taken several pioneering initiatives in the Oil Industry and has many Firsts to its credit in the last 2-3 years.
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First to introduce branded diesel Turbojet in India. First to set up e-fuel stations in India through large scale implementation of Retail Automation in line with international practices of quality thru quantity control. First to introduce Exclusive Mobile Labs to enhance the capabilities on quality checks. First to introduce the concept of Mobile Dispensers as a Rural initiative. First to set up low cost Rural outlets under the brand name Hamara Pump. First to launch Drive Smart a co branded fleet card focused on meeting the specific needs of fleet operators/transport companies.
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Retail Branding HPCL has branded its Retail outlets under the name Club HP positioned on the platform of providing outstanding customer and vehicle care. More than 2250 outlets have been branded and an aggressive expansion programme is in progress.
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Branded Fuels The need of branded fuels has been greatly felt by customers with the rapid growth of new generation vehicles in the past few years. HPC has successfully introduced Power in the petrol segment which is now available at more than 1200 outlets in the countr y. Power sales constitute more than 11% of total MS sales and growing rapidly. This is testimony to the acceptance of this premium product by the customers. Similarly Turbojet was launched in diesel segment and is available in more than 1400 outlets. Turbojet sales similarly constitute about 7% of total diesel sales and are growing. Loyalty Based Card Programme In the continued efforts to build consumer loyalty, Retail SBU launched successfully a card based loyalty programme comprising of Credit cards/Debit cards/Smart 1 cards/Fleet cards etc. The HPCL-ICICI co branded credit card has been recognised by VISA as the largest base and fastest growing co branded card in South East Asia. In a short period of three years Retail SBU has acquired a customer base of over 2.5 million customers under the loyalty programme. The total sales through these cards was Rs. 1336 crores during 2004-05. Non Fuel Business Retail has built a profitable non fuel business through wide range of value added facilities to customers. These include ATMs, take away food counters, vehicle accessories, courier services etc. through tie ups with reputed brands. 26 ATMs added during 2004-05, taking the total number to 208 as of March 31, 2005. NETWORK EXPANSION : With the commissioning of 1163 retail outlets during 2004-05, which is highest among all the Oil companies, HPCL has total network of 6667 Retail outlets as of 31.3.05. As a part of Rural initiative, 385 Hamara Pumps were commissioned during 2004-05 taking the total number to 392. Seeds, Pesticides and fertilizers are also being sold through select Retail outlets, to the farmers, upgrading them as Kisan Vikas Kendras. New Visual Retail Identity Project Aakarshan HPCL Retail SBU is the first to introduce the concept of New Visual Retail Identity to give fresh and attractive look to the Retail outlets. This has given world class look and appearance to its Retail outlets which stand out in the Oil Industry. Quality Assurance : Retail SBU has taken several initiatives, many of them, first in the Industry towards quality assurance under the banner of Good Fuel Promise at the Retail outlets.
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20 exclusive Mobile Labs were added during 2004-05. These labs have strengthened our capabilities of carrying out surprise checks at the outlets. Third party Surveillance Audit by M/s. Bureau Veritas was completed at 1303 Club HP outlets during 2004-05 which has resulted in remarkable improvement in the quality and service standards at the outlets. 363 Retail outlets received ISO certification during 2004-05, taking total number to 416 as of March 31, 2005. Customer Satisfaction Index (CSI) was under taken by the Regional Offices covering 1633 Retail outlets across the countr y during 2004-05, as a mechanism to receive customer feedback and further enhance the service provided to the customers. Retail SBU has taken unique initiative in launching Quality/Quantity awareness campaigns under the Club HP promise of Good Fuel Promise. More than 100 such campaigns have been conducted across the country.
Retail Automation : HPCL has pioneered the concept of e-fuel stations in India having fully automated over 40 Retail outlets in Mumbai/Vashi. Large scale expansion is being carried out covering more than 400 additional sites with focus on Highways. Retail Automation is an international practice for Quality Assurance through Quality control. It focuses on monitoring the stocks, sales and inventor y controls at Retail outlets by capturing, collating and analysing all the transactions electronically. Vehicle Management System : As a step towards ensuring quality of products during transportation to the Retail outlets, HPCL has taken the initiative to monitor tank truck movements on real time basis. The system comprises of Global Positioning System (GPS), Global System for Mobile Communication (GSM) and a software which links GPS and GSM with the Geographical Information System (GIS). The System has been successfully piloted on 20 tank trucks and is being expanded to all the company owned tank trucks across the country in phase I. Club HP helpline : HPCL has introduced Club HP Helpline in 11 major cities in India through toll free number 5500-5050 which facilitates the customers in receiving various information on HPCL Retail products, ser vices and promotional campaigns etc. Training/Motivation of Dealers and Dealermen : Dealers and dealermen are the initial point of contact for our Retail customers. It is essential that they remain alert and sensitive to the customers need when they come to the Retail
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Outlets and spare no efforts to provide the required services to the customers. To enhance their capabilities the Corporation has initiated the following training programme : Gurukul : Training Centres for in-house training programms are being developed at prominently located company-owned model retail outlets in each Region for training Dealers/Dealermen on a regular basis. 45 locations have been identified for such training centres and 29 Gurukuls have been set up. Dealermen Training : Dealermen training customer first conducted covering 9684 dealermen on all India basis in 482 training programmes held by professional agencies during 2004-05. In addition to above, In-sit-U training programme was conducted covering 6803 dealermen through 827 training programmes across the Regions. Highway Dealermen Training : The training module Highway Stars aims to sharpen customer oriented skills of Dealermen in highway retailing. 98 programmes have been conducted covering 2351 participants during 2004-05. Dealermen motivation : 1949 dealermen awarded under the scheme Spot & Reward, which aims at giving immediate recognitions for the good work by the dealermen. Similarly, 41 Dealermen children were given scholarships during 2004-05 across Regions. Retail SBU Performance As result of various marketing initiatives Retail SBU has achieved land mark performance in the year 2004-05. Following are some of the performance highlights : HPCL has achieved 4.8% growth in petrol sales which is higher than Industry growth of 4.1%, thereby increasing market share by 0.17%. Similarly growth of 4.8 % has been achieved in diesel sales which is higher than Industry growth of 3.9%. Market share in diesel has been increased by 0.19%. As such in the Retail business HPCL has shown superior per formance to Industry in the year 2004-05. AWARDS :
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Received Excellence Award Forecourt Retailer of the Year-2005 instituted by KSA Technopak ICICI Bank on February 24, 2005. Received Excellence Award 2005 for outstanding contribution in Petro Retailing Business by DEW Journal on March 20, 2005.
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Opportunities and Future Challenges Petroleum Retail Marketing provides immense growth opportunities. The competition is getting intense with private players working hard to grab market share. They have already commissioned more than 1000 Retail outlets with aggressive expansion plans. Multinational companies and other new players are also trying to set up their network. Each one is striving to increase share of market as quickly as possible. Successful Petroleum retailing companies would need to address all the challenges in a comprehensive and integrated manner. They would need to deliver value propositions that are relevant to the customer in a consistent manner across the retail network. The key to success is a differentiated ser vice at the forecour t and the winner will be the one who ultimately delivers the promises of his Brand. In order to succeed, it is, therefore, essential that we anticipate the future, initiate revolutionary innovations and change the historical pattern of management by aligning strategy, structure, people, culture, processes and ultimately working in teams to meet the contemporary business imperatives. Retail SBU in HPCL understands the challenges ahead and the entire Retail team stands committed to achieve the cocreated vision. LPG SBU The co-created vision of the SBU is as under :
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HP Gas is the market leader in growth and profitability in the industry. HP Gas is the world class and most preferred brand by the customers for the quality, appearance, innovations, services and offering total energy solutions for all gaseous fuel applications. HP Gas is global in entire gamut of LPG marketing and trading with massive presence in rural sector.
Unloading of the first LPG Vessel at the newly commissioned "Visakh Outer Harbour"
Pampore LPG Plant maintaining supply line in the Kashmir valley even in adverse weather conditions
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HP Gas is a caring organization with a strong bond with its customers, dealers and all other stakeholders. HP Gas is a team of highly motivated, competent and disciplined employees and conducts its business in ethical and transparent manner. HP Gas is totally committed to safety, health and environment.
The LPG Business line accounts for approximately 13% of the total volume base of HPCL. LPG Marketing has undergone tremendous change in the last few years with our countr y getting distinction of being one of the fastest growing market with regard to LPG consumption and one of the countries with largest number of domestic consumers serviced through LPG Cylinders. During the year 2004-05, LPG SBU has marketed 2.50 million Metric Tonnes achieving an all time record bulk sales of 83 TMT and Non-Domestic Packed sale of 47 TMT notching a growth of 33% in this sector. 160 new LPG distributorships were commissioned during the year taking the total distributorships to 2153. 19 lakhs new connections were given during the year taking the customer base to nearly 2.2 crores. Marketing initiatives : HPCL was the first Company to brand LPG Marketing under the platform of Ji Haan focusing on instant ser vice to LPG customers. Consolidation of the Ji Haan Ser vices was given emphasis and services such as delivery of refills within 24 hours, extended delivery timings between 8 am and 8 pm on all days of a week, installation of a new connection within 24 hours etc. were further consolidated across the countr y. The single contact point help line no. 1716 has now been extended to a total of 10 cities and Internet booking facility is available at 7 cities. Our Ji Haan services has not only set a benchmark in the Indian LPG marketing scenario but also has become synonymous with reliability and punctuality, emphasizing the importance of meeting the customer expectations which the industry followed. HP GAS has been awarded the Golden Peacock Innovative Product/Service Award for the year 2004 for its various initiatives on customer ser vice by the jury headed by Justice A. M. Ahmadi, Former Chief Justice, Supreme Court of India. Justice M. N. Venkatchaliah, Former Chief Justice of India and Chairman Centre for Corporate Governance, presented the Award. HP Gas was once again the first to anticipate the customer needs and visualise their future aspirations. We introduced the weight campaign, offering the customer the choice of verifying the correct weight of the cylinder at the doorstep which was not only followed by the industry but also very well appreciated by the public at large. This initiative of HP Gas has bagged the Dainik Bhaskar Indian Marketing awards 2004 for innovative marketing initiative for customer services. HP Gas won the award under the category of ser vices against stiff competition from strong brands such as Wipro and Hutch.
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Thrust Area : LPG has made all the difference between the urban and the rural woman, bringing about a drastic difference in their lifestyles. HPCL has taken steps to bridge this gap by focusing in rural areas. The HP Gas Rasoi Ghar concept has gained popularity not only at the village level but also in corporate world. In line with our commitment to provide a clean eco-friendly fuel to our rural population, we have taken several initiatives such as tie-ups with village level organisations for speedier implementation of the Rasoi Ghars. This concept is also picking up pace in the forest areas with state forest departments joining hands with HPCL for taking forward this innovative concept. HPCL has been awarded the National Excellence for Innovative technologies for its Rasoi Ghar concept besides being extensively covered through TV and press media. The award instituted by Wisitex Foundation in association with Indian Merchants Chamber was awarded to HPCL in recognition of our selfless and untiring effor ts and far reaching vision towards rural development and upliftment. Today there are over 1350 Rasoi Ghars operating across the country benefiting over 15,000 families. To strengthen our hold in the industrial and commercial sector and also become more competitive, number of steps were taken such as reducing costs through independent product sourcing, aggressive credit and discount policy etc. It has also successfully piloted several new alternate application of LPG and converted 50 industries from alternative fuels to LPG, generating ND packed and Bulk volumes of 1500 MTs per month. Recognising the need to promote environment friendly alternate fuel, HPCL has been the front-runner in the field of Auto LPG. HPCL, which was the first company to introduce Auto LPG in India, commissioned 6 more ALDs during the year taking the total numbers to 31, which has resulted in sales of more than 8000 MTs. Safety & Environment : Safety has always been accorded the highest priority in HPCL and to reaffirm the same the current year was obser ved as Customer Safety Awareness Year all over India. Multiple channels such as TV, Press, and Posters were adopted for increasing awareness besides conducting sensitisation programmes for deliver ymen and customers with door-to-door campaigns and inspections of Domestic, Non-Domestic and Bulk LPG installations across the country through trained distributor staff and 3rd party agencies to ensure that the LPG installation is safe. Special drive was also undertaken to make the rodent proof LPG hose called Suraksha LPG Hose the most preferred rubber hose for our customers. HPCL has also received approval from Ministry of Energy and Petrochemicals, Government of Gujarat for setting up CNG infrastructure in Ahmedabad, with permission to set up 10 CNG retail outlets in the City of Ahmedabad.
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Opportunities : The Reticulated system (Piped LPG for domestic use) is a value addition to customers, with features of safety, loyalty and uninterrupted supply of gas to households. HPCL has successfully installed 10 new projects during the year covering more than 1000 flats. HPCLs strength had always been its infrastructure and to further consolidate the same 3 grass root bottling plants are being set up at Mumbai, Loni and Rajahmundr y with a total capacity of 176 TMTPA. Capacity Augmentation program are also being under taken and currently projects at 8 plants are under various stages of completion. This will boost our existing bottling capacity from 1978 TMTPA to 2180 TMTPA. The commissioning of the prestigious Visakh LPG Import Facility has enabled HPCL to have the largest import capacity in the country. The 45.5 crores project would give a major boost in meeting the countrys ever growing LPG requirement. With commissioning of the facility, it would be able to handle upto 0.6 million tones of imports per annum and would be meeting the demand of Andhra Pradesh and Orissa. Further the commissioning of the GAIL Visakh Vijayawada Secunderabad Pipeline has enabled LPG from the Visakh LPG Import Facility/Refinery to be pumped directly through the pipeline thereby supplying the larger inland markets at a low cost option. Additionally with the jetty having a capacity to handle 40 TMT parcels, it would also reduce cost on imported LPG on commissioning of the SALPG cavern storage project. Keeping in mind customer requirement of correct quality and quantity product, the focus during the year was on quality. To re-emphasis our commitment of providing quality product to our customers, all plants have been provided with fully automatic, state of the art LPG filling and quality control equipments requiring minimum human intervention. ERP & IT Initiatives : During the year, 20 Plants and 16 LPG ROs have been linked to ERP. With this, ERP rollout is complete at 32 out of 40 Plants and 22 out of 26 LPG ROs as of 31.3.05. Distributor computerisation programme completed across the country. This would enable us to provide efficient service to consumers and also help us to roll out IT enabled value added services such as single number refill booking service, internet services, net based transactions with Corporation and build up centralised consumer database. Countrys first multi-application smart card for the HP Gas consumers was launched alongwith transit application of BEST on 19th November, 2004. ZERO-Mass Consortium is implementing the smart card based multi-application pilot project in line with the RBI and IDRBT guidelines and approvals. The ZERO-Mass industry Consortium includes Indian and global IT companies with a common commitment to the deployment of vendor independent open inter-operable standards and global best practices to bring benefits of the best technology solutions for mass deployment.
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Around 500 cards were issued as a pilot for study of applications for one month. This smart card is given to HP GAS consumers free of cost as a value added service and will be having the SV/TV data in secured digitized manner. The period ahead : The road ahead is challenging. The future demand of LPG is likely to grow at a CAGR of 8%. Volumes are expected to increase from 9.7 million tonnes to 12 million tonnes. Out of this domestic sector demand would be around 11 million tonnes. Though the demand of the urban domestic sector is expected to grow only at 6.5%, the rural segment is expected to witness a phenomenal growth of 17.5% increasing from 1.5 million tonnes to 3.5 million tonnes. Keeping in mind the oppor tunities available to HPCL, LPG SBU has chalked out elaborate future plans for the LPG business. Understanding customer needs and preferences, identifying new areas for use of LPG and setting and achieving high standards in customer service with a view to make it a differentiating factor in marketing of HP Gas would be the key to success in the days to come. DIRECT SALES SBU LUBES BUSINESS-LINE The co-created vision of the SBU is as under :
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HP DS (LUBES) is market leader in growth and profitability. HP DS (LUBES) is most preferred supplier of quality products at right price and time. HP DS is a learning organisation with committed, competent and professional team. HP DS (LUBES) is delighting the customers by value added services. HP DS (I&G) is the market leader in growth with focus on profitability. HP DS (LUBES) is a professional and empowered team for quick response to Shri M.B. Lal, C&MD seen alongwith Shri K.R. Shankaran, customers. ED-Direct Sales at the launch of HP Champion HP DS ensures consumer loyalty through differentiated services.
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Consequent to the deregulation of the lubricant trade in the year 1992-93, today, it is one of the most clustered markets in the country. The total Indian lube market is 1.2 MMTPA out of which 65% of the volume comes from the Automotive sector and the balance constitutes the Industrial sector. HPCL has the largest lube refinery in the country with a capacity of 3,35,000 MT per annum and, hence has the advantage of manufacturing various types of base oils. It has strategically
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located blending plants (all accredited with ISO 9001) at Mumbai, Kolkata, Chennai and state-of-the-art Plant at Silvassa. The Lubes Division at HPCL met the challenges posed by a volatile lubricant market and registered an impressive bottomline sales of 2,52,000 MT during the year covering entire range of lubricants and greases. The Division has the vision to be a market leader in growth and profitability. To meet this challenge the focus is on value proposition to customers which includes product quality, service levels and relationship management through a professional and empowered team. To achieve the above vision, HPCL has undertaken various initiatives : Servicing Small & Medium Scale Customers HPCL has recognised the requirements of small industrial customers who are not otherwise ser viced by the oil companies. HPCL has opened a network of 50 CFAs to cater to such customers. Focus on Core Sector Business HPCL has put in special effor ts in ser vicing the core sector industries like the Railways, Army, Coal, Steel and Transport segments. HPCL has registered a significant growth in these segments. Rural Marketing Having identified the need to cater to requirements of the rural sector, HPCL has developed special products like agricultural spray oils for crops of Apple, Rubber, Grapes, etc. It also markets Tractor Oils and Pumpset Oils specifically for this sector. HPCL has tied up with M/s. Rashtriya Chemicals & Fertilizers Ltd. (RCFL) for marketing of HP Lubricants and Finit (household insecticide) through their dealer network across the countr y. Marketing through Retail Outlets With the recently expanded network of more than 6600 retail outlets in its fray, HPCL continues to sell most of its automotive lubricants through the retail network. They have undertaken a micro marketing programme to bring into focus the lube business through the retail network for providing the customers with value added services at the outlets. This is being done through soft skilled training programmes, incentives and ser vice monitoring programmes. Network Expansion Considering the shift in buying habits of vehicle owners/mechanics from petrol pumps to bazaar lube shops, HPCL has gone in for a network of exclusive lube distributors. The network of 168 lube distributors located across the country in turn cater to a vast network of 15000 lube shops, authorised service centres and auto spare parts shops.
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Tie-ups with OEMs for Genuine Oils HPCL has tied up with major OEMs like TATA Motors and Kinetic Engineering for marketing of Genuine Oils. The tie up with TATA Motors includes a full range of lubricants for their passenger vehicles and in case of Kinetic 2 & 4 stroke engine oils. Product Promotion To enhance brand equity, HPCL is consistently engaged in product promotion and media campaigns. Research & Development The R&D Centre recently built at Vashi, Navi Mumbai has state-of-art equipment to cater to the needs of Lube Marketing Division. The Centre is constantly engaged in development of new customised products and improving the current formulations and blending process. Development of New Products Keeping in view the various needs of the different segments in lubes, HPCL is innovating and consistently developing new products to meet the market demands. The latest in the list are HP Champion, a diesel engine oil; HP Gasenol for CNG/LPG driven engines; HP Milcy Eurol 15W40 and Dieselino for Euro II compliant engines. Exports Expor t of finished lubes to countries like Bangladesh, Nepal and Kenya continues. The Corporation is making efforts to expand its reach to other neighbouring countries also. About 930 TMT of Naptha and Fuel Oil of the value of approximately Rs. 1425 crores were exported during the year. Awards HPCL won the Golden Peacock Innovation Award 2004 for in-house solubalising of Viscosity Index Improver additive at Mazagaon plant, for manufacture of multigrade engine oils. Our Silvassa blending plant has won a Silver Safety Award by M/s. Greentech Safety for maintaining high standards of safety and a TERI Corporate Award for Environment, for 2003-04. I&C BUSINESS LINE HPCLS I&C business line caters to the petroleum product requirement of wide range of customers in sectors like power, fertilizer plants, industrial units, cement, steel, coal, glass etc. In transpor tation sector, we meet fuel requirements of railways, state transpor t undertakings, defence and shipping. During the year 2004-05 we have recorded a sales volume of 5200TMT. HPCL holds market share of about 15.53%. HPCL has a market share of (Major products) 22.4% in Naphtha, 23.5% in LDO, 19.2% in FO, 17.3% in Bitumen and 8.3% in HSD. The business is transacted
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through 18 regional offices spread all over the country, with the complement of competent and technically strong staff catering to the varied needs of our customers. The business line has set itself a co created vision to be a market leader in growth with focus on profitability, a learning business unit with committed and competent professionals and ensure consumer loyalties through differentiation. In line with the said vision, various initiatives and thrust areas has been identified and are working to achieve to be the most preferred supplier. To ensure customer loyalties through dif ferentiation, we are offering innovative products/ser vice like fuel management, fixed pricing, energy audit resulting in commercial benefits and savings thereby delighting the customers. Considering the thrust given on road infrastructure development, marketing of bitumen continues to occupy special focus. Similarly, special products (Hexane, Solvent and MTO) continue to meet requirements of Solvent extraction units, Tyre industries and Paint industries respectively. With the thrust on expanding business spread, HPCL is focussing bunkering as one of the emerging opportunity area and in this direction has entered into an MOU with renowned multi national company M/s. Chevrons Fuel and Marine Marketing LLC. With this arrangement, we plan to launch internationally recognised bunkering fuel on competitive pricing and totally upgraded deliver y arrangements for both domestic and international customers. HPCL has the distinction of being the first to introduce a self propelled floating barge to take care of the fuel requirements of barges and vessels at sea. AVIATION The Aviation SBU provides Aircraft Refuelling services at the major airports in the country. The SBU continued to perform in line with the vision it had set for itself in 2002-03 as under :
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HP Aviation is the market leader in profitability and growth through a wider network among the industry. HP Aviation has the second largest market share in both domestic and international business in the country. HP Aviation has a highly motivated, inspired and dynamic team, which takes pride in being part of the SBU. HP Aviation inspires confidence in customers by providing the best quality in product and service. HP Aviation practices the highest standards of health, safety and environment in the industry.
The SBU achieved a remarkable growth of 47% in 2004-05. This was the second successive high growth year for the SBU following its 23.8% growth in 2003-04.
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In the process, the SBU added 11 new customer accounts, raising its market share from 10.5% in 2003-04 to 14.3% in 2004-05. Over the last two years, market share has increased from 9.8% to 14.3%. Market Share in the Foreign Airlines segment has increased from 3.8% to 21% in the same period. The SBU implemented several customer focused initiatives in its endeavour to delight customers with the best quality in product and service. HPCL's Aviation Ser vice Facilities in Mumbai, Delhi, Chennai, Kolkata, Cochin and Calicut are today the only such facilities to be certified to the ISO 14001 environmental standards, underlining the Corporations emphasis on safety and environment. Adding state-of-the-ar t refueling equipment, providing customer orientation training to employees, learning of foreign languages by supervisors to better interact with foreign airline customers etc. are some of the other initiatives that the SBU has taken to ensure a better service offering to its valued customers. The SBU continues its techno-commercial agreement with Chevron Texaco Global Aviation for inputs on current international operating practices and technology in this field. HPCL has begun expansion of its Aviation Service Network by adding its facilities at Bangalore and Goa airports. Consolidating its customer base, expansion of network and improvement in service standards will be the focus for the SBU in the current year. The Aviation SBU has achieved the following unique distinction during the year.
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Only Indian company nominated on the IATA Fuel Suppliers Advisory Committee. Only Indian Company having ISO-14001 certified Aviation facilities. Only Indian Company to win the Golden Peacock Award for Environment Management 2004-05. Only Indian Company providing Refueling Panel Operations service to its clients. Only Indian Company providing e-ticketing for air travel through select retail outlets. Only Indian Company ranked 17th among top 30 companies globally adjudged as Worlds best jet fuel marketers in survey conducted by the Armbrust Aviation group, USA.
Awards/Recognition 1. Received Greentech Gold Safety Award for Santacruz, Greentech Gold Environment awards for Santacruz/Palam and Greentech Silver Environment awards for Chennai/Calicut ASFs for 2003-04. 2. HP Aviation was ranked 17 globally in the 7th Annual Worlds Best International Jet Fuel Marketer held in 2004-05 by Armbrust Aviation Group. 71 airlines par ticipated in this sur vey and rated fuel suppliers on 22 ser vice parameters. This is the highest ranking among Indian suppliers and a considerable improvement on our ranking of 45 in the previous year.
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OPERATIONS & DISTRIBUTION HPCLs current infrastructure includes 2 product pipelines between Mumbai and Pune (being extended up to Solapur) and Visakh Vijayawada Secunderabad. Presently, there are 36 Terminals/Installations/TOPs and 100 depots spread across the country. These infrastructure facilitate continuous supply of products to the Retails Outlets. During the year, the following new facilities were added : 1. A NEW GRASS ROOT DEPOT AT AONLA, BAREILLY, U.P. The depot construction was completed in record 14 months. It is a Rail-fed depot completed at a total cost of Rs. 10.25 crores including land cost and common industr y siding sharing cost. It has 9080 KL product tankages for storage of HSD, MS, SKO and Ethanol. The depot will cater to the market demand of Bareilly, Pilibhit, Badaun, Rampur (Uttarpradesh) and bridging to Haldwani (Uttranchal). 2. A NEW GRASS ROOT DEPOT AT RAMAGUNDAM, A.P. A new Grass root Depot with total Tankage of 7974 KL for MS, HSD and SKO together, with product receipt through Railway Tank Wagons from Vijayawada Terminal has been completed at a cost of Rs. 11.47 crores and is ready for commissioning. The Depot will meet the requirement of Nizamabad, Adilabad and Karimnagar. The facilities were constructed under the extremely dif ficult terrain and weather conditions involving extensive Rock cutting. The siding facilities were completed by re-routing 2 nos. 132 KV HT Towers in the shortest possible time. 3. 25 KL CAPACITY TANK TRUCKS The Corporation plans to roll out progressively state-of-Art 25 KLs Tank trucks (TTs) for supply of products. 2TTs at Vashi Terminal in April 2004, 1 TT in Wadala Terminal and 2 TTs in ASF service at Shakurbasti have been so far introduced. Remaining 15 TTs will be put on road by September, 2005. 4. 40 KL CAPACITY NEW GENERATION TANK TRUCK CCOE approval for 6 months trial operation of Aluminium Alloyed tank truck of 40 KL capacity on Volvo FM 9 X 340, 6 X 4 Trailer Chassis has been obtained for operating between Vashi Terminal and Retail Outlet at Sajgaon on Mumbai Pune Express Highway. These state-of-ar t tank trucks made of Special Aluminium Grade are to be launched during 2005-06 have several safety, security and other technical features which will aid in enhancing distribution of products ensuring inter-alia Q & Q aspects. 5. ADDITIONAL TANKAGE COMMISSIONED A total of 13100 KL additional tankage was commissioned at various locations during 2004-05.
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6. VEHICLE MANAGEMENT SYSTEM FOR TANK TRUCKS HPCL is first in the oil industry to introduce the Vehicle Management System for monitoring of tank truck movement from depots to retail outlets and back on real time basis to ensure delivery of correct quantity and quality of products to consumers and to improve overall operational efficiency. The system comprises of base station at loading location, Vehicle Mounting Unit in each tank truck with GPS (Global Positioning System), GSM (Global System for Mobile) for data transfer and GIS (Geographical Information System) software for mapping of the supply locations. The system was successfully implemented in 15 company tank trucks during 2004 and is under implementation in 172 Company Owned tank trucks all over India which is expected to be completed by September, 2005. The System is designed to generate Per formance of Trucks (POT) Reports on monthly basis apart from generating Distance, Route Travelled and Speed Reports on daily basis. Contractor/Dealer supplied trucks are also proposed to be covered with the System. 7. ENERGY SAVING INITIATIVES : Lighting load : The system was commissioned at 71 locations and upto 20% savings in the energy consumption is reported. T/T Loading pumps : HPCL is first in oil industry in installing energy saving systems for product pumps and the systems are operative at 16 locations as of now with an expected energy saving of upto 30%. The system is being implemented at 51 more locations and is expected to be completed by March, 2006 in phases. Visakhapatnam - Vijayawada - Secunderabad Pipeline Pumps : Installation of Energy Saving systems for pipeline pumps at VVSPL locations, viz., Vishakhapatnam, Rajamundr y, Vijayawada and Sur yapet have been completed and are under commissioning. The system is first of its kind in South Asia and being implemented for the first time, not only in the oil industr y but in whole of Indian industr y. The system envisages energy savings to the tune of 30%. Other Energy Saving Initiatives : The following additional energy saving measures are under various stages of implementation : A) Micro processor based Intelligent lighting controllers for street lights and flood lights : Trial runs have been taken of the system at Vashi terminal and energy savings to the tune of 30% have been reported. The system is under implementation in 69 Depots/Terminals all over India. B) Micro processor based Soft Starters for Lube Oil Pipeline : The system which envisages energy savings based on reduction in the motor starting current and voltage control during part loads based on Torque requirements thereby reducing the Stator core losses, is under implementation for Lube Oil Pipe Line Operating Pumps at Mumbai.
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C) Wind/Solar Hybrid Package at Loni Terminal : 15 KW Wind/Solar Hybrid Power Plant to support a connected Lighting load of 6 KW for a working period of 6 to 8 hours per day is being implemented at Loni terminal as a par t of Renewable Energy using. Subsidy to the tune of 50% has been obtained from MoNES (Ministry of Non Conventional Energy Sources) through MEDA (Maharashtra Energy Development Agency). D) Solar Photo Voltaic System at Vashi Terminal : 100 Kwp Solar Power Plant (3 x25 Kwp at Vashi W/Oil and 1 x 25 Kwp at Vashi B/Oil terminals) is under implementation to support the lighting load which include street Lights and flood Light Towers. Subsidy application made to MoNES is under active consideration by them. E) Vapour Recovery System, Loni Terminal : System consists of collecting vapour generated while filling the tank trucks and conver ting the Vapour to MS using either condensation or vapour absorption process. Recovery of MS from vapours is estimated at 1.7 litres per 1 KL of MS Loading. The above mentioned initiatives are expected to result in savings of approximately Rs. 6 crores per annum commencing from financial year 2005-06. 8. MARKER SYSTEM Marker Doping system to combat adulteration has been effectively implemented for MS/ HSD at Vashi and Shakurbasti Installations. It has also been successfully introduced at HPCL-Wadala. 9. SECURITY LOCKING SYSTEM Security locking system has been implemented at all locations covering entire existing network. 10. ETHANOL DOPING SYSTEM 5% Ethanol Doped MS was introduced in 10 States in line with Government directives. The advantages of ethanol blended fuel are that it is a renewable and Biodegradable fuel and environment friendly alternative to fossil fuel. Being oxygenated fuel, ethanol enhances the combustion of petrol resulting in reduction in emission of all major pollutants. Ethanol being a byproduct of sugar industries, use of Ethanol will help the sugarcane growers. 11. ISO CERTIFICATION FOR DEPOTS & TERMINALS ISO Certification was obtained by 41 locations (NZ-20; EZ-6; WZ-9; SZ-6) : Two locations in WZ and three in SZ are expecting certification during this year.
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ONGOING MAJOR PIPELINE PROJECTS 1. PUNE SOLAPUR PIPELINE PROJECT HPCLs 161 Kms long Mumbai Pune Pipeline is being extended from Pune (Loni) to Solapur (Pakni) via Hazar wadi with a view to optimise the freight economics and to maximize utilization of Mumbai Pune Pipeline. This 343 Kms long, 14/12.75 dia cross country pipeline project from Loni to Pakni envisages new pumping stations at Vashi and Loni, tapoff facilities at HPCLs existing IRDs at Hazarwadi and Pakni and construction of additional tankages. The project also envisages derating of Trombay-Vashi section of Mumbai Pune pipeline. The design capacity of Mumbai Pune Solapur pipeline will be 4.295 MMTPA. The approved cost of the project is Rs. 335.17 crores and is scheduled to be completed in September, 2006. On commissioning of the project, industry requirements in the districts of Kolhapur, Solapur and Gulbarga will be catered. 2. MUNDRA DELHI PIPELINE PROJECT Mundra Delhi Pipeline project will be the longest multiproduct pipelines ever constructed in our country. It will be 1048 kms long, 18/16 dia cross country multi-product petroleum pipeline traversing through four states of the country starting from Mundra Port in Gujarat to Bahadurgarh in Haryana.The pipeline has the capacity to carry multiple Grades of MS/ HSD and SKO from west coast to northen part of India. The pipeline envisages 6 online pumping stations situated at Mundra, Santhalpur, Palanpur (in Gujarat), Awa, Ajmer and Jaipur (in Rajasthan). Enroute, this pipeline will feed four grassroot Marketing Terminals being constructed at Palanpur, Ajmer and Jaipur with road loading facilities and at Bahadurgarh with road/rail loading facilities. The existing Rewari Terminal will also be hooked up with the pipeline. Further, three 12 kms spur lines, one each for HSD, SKO and MS, are envisaged from Bahadurgarh Terminal to HPCLs proposed Marketing Terminal at Tikrikalan in Delhi. This will ensure uninterrupted supplies to the capital in abundance. The design capacity of the pipeline is 5.0 MMTPA in Phase-I (2012-13) and 5.8 MMTPA in Phase-II (2016-17). The approved cost of the project is Rs. 1623.84 crores and is scheduled to be completed in May, 2007. Mundra Delhi Pipeline will form the critical link in meeting HPCLs demands in north zone by transporting the surplus product available in West in the most reliable manner. This pipeline will meet HPCLs market demand in the states of Gujarat, Rajasthan, Haryana, Delhi, Uttar Pradesh, Uttranchal, and Madhya Pradesh. In the years to come Mundra Delhi Pipeline will play the role of most important supply source to north India both for HPCL as well as other industry members.
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RESEARCH & DEVELOPMENT (R&D) The Corporation has entered into MOU, with reputed institutions like IIP, EIL, CPCL, CHT, IICT etc for undertaking collaborative R & D projects. These include the following : a. Up-gradation of FCCU recycle oil through solvent extraction using NMP as solvent (with IIP, EIL & CPCL) The project aims at extraction of aromatics from the FCCU feed using NMP as solvent. The raffinate so obtained would be superior quality FCCU feed stock and would result in better yields of Light and Middle distillates. The benefit expected from this project is approximately Rs. 3 crores/annum. During the year 2002-03 and 200304, test runs were conducted for low Sulphur feed stock in MR-FCCU and high Sulphur feed stock at CPCLFCCU. The samples of side streams and residue were analysed by IIP. Subsequently, a successful plant run was undertaken in Solvent Extraction Unit of Mumbai Refiner y during Februar y, 2004, which resulted in raffinate yield of approximately 7580% and same was routed to FCC unit Shri S.C. Tripathi, Secretary to Government of India, MOP&NG, as feed stock. During 2004-05, physico-chemical characterisation and analysis of Test Run samples was done by IIP and mass transfer studies on Glass Packed Extraction Column has been completed.
inaugurating the R&D Centre at Vashi. Also, seen in the picture is Shri M.B.Lal, C&MD
b. Energy efficient Deasphalting process using supercritical solvent recovery (with IIP, EIL & CHT) In the energy efficient super-critical approach the solvent recover y in the unit is done under supercritical process conditions, resulting in an over all energy savings of about 20 to 40 per cent (mainly in utilities) and lower solvent losses. The project was initiated during 2002-03 and is scheduled to be completed by 2006. The benefit expected is approximately Rs. 2 crores/annum. During the year, test runs were conducted in MR-PDA unit and relevant samples were analyzed by IIP. Site selection, PFDs and P&IDs has been finalised in consultation with M/s. EIL to implement the facilities. The same is expected to be implemented by 2006.
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c. Optimisation studies of Hexane manufacturing unit & feasibility study for producing polymer-grade hexane (with IIP) Study has been initiated along with IIP during 2004-05 for optimizing the existing Hexane plant operating conditions to explore the possibility to produce WHO and Polymer grade Hexane, which have more stringent quality specification in respect of sulphur and benzene content. d. Optimisation studies of NMP Lube Extraction Unit (with IIP) Study has been initiated along with IIP during 2004-05 to optimise operating parameters to obtain specific product quality and thruput maximization. Improvement in colour, sulphur and saturates in products is also expected by increasing severity of hydrofining and through usage of suitable catalyst. e. Improvement of Propylene Purity (With IICT Hyderabad) Proposal has been signed with IICT Hyderabad to improve the purity of Propylene through membrane separation. f. MOU has been signed between Chevron, IIT Kanpur and Advanced Refining Technologies for various R&D activities.
JOINT VENTURES Mangalore Refinery & Petrochemicals Ltd. (MRPL) MRPL with a capacity of 3 MMTPA was commissioned in March, 1996. The capacity was enhanced to 9 MMTPA during 1999 - 2000. ONGC acquired the entire equity stake of IRIL in MRPL on 03.03.2003 and also infused Rs. 600 crores into MRPL as additional equity on 30.03.2003. The FIs/Lenders of MRPL conver ted Rs. 365 crores of debt into equity and Rs.160 crores of debt into ZCBs. Consequent to the above, HPCLs equity stands at 16.95% after which a fresh Shareholder Agreement dated 03.03.2003 has been signed by HPCL with ONGC to take care of the interests of HPCL. MRPL declared a maiden dividend of 10% for the financial year 2004-05. HPCL and MRPL have been exchanging intermediate process streams between their refineries to supplement efforts to meet new environmental norms in respect of products like MS and HSD on mutually agreed terms. Hindustan Colas Ltd. (HINCOL) The per formance of HINCOL, a Joint Venture Company formed with Colas SA of France for producing and marketing Bitumen Emulsions continues to be encouraging. In addition to Bitumen Emulsions, HINCOL has been successfully marketing a wide range of value added Bitumen products like Modified Bitumen, Cut Back Bitumen etc. meeting the requirements of road builders.
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During the year, HINCOL commissioned 2 new plants at Visakhapatnam and Mangalore. HINCOL now operates 6 plants geographically well positioned to meet the requirement of customers across India. This JV has been declaring dividend for the last 6 financial years. For the year 2004-05 a dividend of 15% has been paid.
Hincol, Vashi Plant - Bitumen Emulsion loading
Hincol, Baroda - A section of emulsion plant
South Asia LPG Co. Pvt. Ltd. (SALPG) This 50:50 Joint Venture Company between HPCL and Total Gas and Power India (a wholly owned subsidiar y of Total of France) formed in 1999 is currently setting up Underground Cavern storage of 60,000 MT capacity and associated receiving and despatch facilities at Visakhapatnam. This project is the first of its kind in South Asia and would facilitate import of LPG in large vessels resulting in savings in freight costs. The project will meet the requirement of a large storage for imported LPG in order to meet the increasing demand in Andhra Pradesh and neighbouring states. Underground Cavern storages are the safest means of storing hydrocarbons and are being used by several developed countries. There are over 80 mined underground caverns in the world for LPG alone. The cost of the project is estimated to be Rs. 333 crores and it is being financed through Debt-Equity of 2.33:1. The project is expected to be completed by December, 2006. Petronet India Ltd. (PIL) Petronet India Ltd. (PIL) was formed in May, 1997 as a joint venture company with 50% equity by oil PSUs and balance 50% being taken by private companies/financial institutions. Special Purpose Vehicles (SPVs) were floated by PIL with oil companies for implementing individual pipe line projects, viz., Petronet MHB, Petronet CCK and Petronet VK which are operating companies. Since oil companies are now laying pipelines independently, PIL has initiated action to disinvest its equity holding in individual JVCs.
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Petronet MHB Ltd. (PMHBL) HPCL, along with Petronet India Ltd. (PIL) has promoted Petronet MHB Ltd., for the construction and operation of MangaloreHassan-Bangalore pipeline. PIL and HPCL would each have 26% equity participation. ONGC has joined as a strategic partner in the Company by taking 23% equity. The product pipeline from
A view of Devangonthi Terminal
Interphase tanks at Devangonthi Terminal
Mangalore to Bangalore, with a tap off point at Hassan, has been executed at a cost of Rs. 639 crores. The pipeline is meeting the transpor tation needs between Mangalore, Hassan and Bangalore. Due to lower thruput and pipeline tariff, the operational and financial viability of PMHBL have been af fected. The restructuring of PMHBL is under progress.
Prize Petroleum Co. Ltd. HPCL, in partnership with ICICI and HDFC, had formed this Joint Venture E&P Company viz., Prize Petroleum Co. Ltd. for participating in exploration and production of hydrocarbons. Prize Petroleum in consortium with M/s. GSPC Ltd., Jubilant Enpro and Geoglobal Resources Ltd. has been awarded the Block CB-ONN-2002/3 in the Cambay Area under NELP-IV bidding process. The Production Sharing Contract for the same has been signed with the Government of India on February 6, 2004. Prize Petroleum Co. Ltd. along with Aban Lloyd Chiles Offshore Ltd. has also been awarded ser vice contract for development of 3 marginal onshore fields of ONGC in Gujarat viz., Hirapur, Khambel and West Bechrarji. Prize is currently carrying out further operations and expects to produce oil by the second quarter of the current financial year. The Company has also farmed in 50% participating interest in the producing Sanganpur field from M/s. Hydrocarbon Resources Development Co. Pvt. Ltd. Prize would sign the necessary Product Sharing Contract shortly. The Company has also set-up the latest state-of-ar t geological data processing and interpretation system.
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Bhagyanagar Gas Ltd. Bhagyanagar Gas Ltd. (BGL) has been formed as a Joint Venture Company by GAIL and HPCL for distribution and marketing of environmental friendly fuels (green fuels) viz., CNG and Auto LPG for use in the transpor tation, domestic, commercial and industrial sectors, in the state of Andhra Pradesh. BGL was incorporated on
Bhagyanagar Gas Limited - LPG Dispensing facilities at Hyderabad
August 22, 2003. HPCL and GAIL will hold 22.5% each of the equity while 5% would be held by Government of Andhra Pradesh and 50% by Strategic/Financial Investors. BGL has set up one Auto LPG Outlet at Tirupati Another Outlet of Bhagyanagar Gas Limited alongside and two Auto LPG Outlets at Hyderabad which Tirupati Hills are operational. It proposes to commence CNG marketing in Vijaywada during 2005-06. The construction of CNG Mother station/dispensing stations was completed on July 15, 2005. INTERNAL CONTROL SYSTEMS : HPCL believes that a strong internal control is necessary for good Corporate Governance and freedom of management should be exercised within a framework of appropriate checks and balances. The Corporation remains committed to ensuring an ef fective internal control environment that provides assurance on the efficiency of operations and security of assets. It has adequate internal control system commensurate with its size and nature of business and has well laid down documented manuals, policies and guidelines covering various aspects of business, processes and operations. It has an independent Internal Audit Depar tment comprising of financial, technical and IT professionals having varied experience in their respective functional areas. The focus of Internal Audit is to review the adequacy of internal controls, compliance with Corporations policies and guidelines highlighting areas which would result in optimum utilisation of assets and financial resources, increase in profitability and operational excellence. The Internal Audit activity encompasses carrying out test check of all major locations, Refineries, controlling offices and major operating functions on annual basis.
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The Annual Audit Programme is reviewed and approved by Chairman & Managing Director and the Audit Committee of the Board. The significant audit findings are reviewed by the top Management and Audit Committee and directions where necessar y, are given for follow up actions in line with the audit findings. BUSINESS DEVELOPMENT INITIATIVES MOU with Shell : An MOU was signed between HPCL and Shell to provide for products, infrastructure and facility sharing between the two companies in India. It also envisages HPCL participation in LNG facilities being put up by Shell at Hazira. MOUs with GSPCL : An MOU was signed with GSPCL aimed at mutual co-operation in the exploration and development of Oil and Gas fields and setting up a network of CNG stations in Gujarat. An MOU was also signed with GSPCL for marketing of CNG through the existing network of HPCL retail outlets in the state of Gujarat. Natural Gas : HPCL took the initial step for acquiring a stake in Shells Hazira LNG Project by carrying out a due diligence of the business. A decision on the project is expected to be taken during the current financial year. In addition to this, the other initiatives on the gas business are :
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A DFR is in preparation for setting up of LNG import/regassification terminal of 5 MMTPA at Mangalore/Mundra. An MOU is proposed with GAIL for setting up JVCs for distribution of city gas and CNG distribution facilities in Gujarat, Rajasthan and Madhya Pradesh. Negotiations are in progress with M/s. Niko Resources/GSPCL for sourcing Natural Gas at Mora.
Wind Power : HPCL has initiated steps to set up a Wind Power Generating Facility. Detailed feasibility report has been prepared for a 500 MW project. A pilot project of 25 MW is proposed to be set up either in Maharashtra or Karnataka during 2005-06. Exploration & Production :
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An MOU has been signed between Sun Petroleum and HPCL JV Prize Petroleum for copar tnering in NELP-V. Sun Petroleum has also expressed its interest to acquire equity stake in Prize Petroleum. Prize Petroleum along with Aban Lloyd has won the bid for development of three marginal fields in Gujarat owned by ONGC. Prize Petroleum has also acquired a 50% stake in Sanganpur Oil fields in Gujarat.
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Global Diversification :
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To identify global business opportunities, study of prospects in other countries is being carried out with the help of M/s. Ernst & Young in phases. Phase I reports have been received and are being reviewed. Equity participation in Paraxylene Plant proposed to be put up by Oman Oil Co. in the Sultanate of Oman is being explored.
EXPLORATION & PRODUCTION In its efforts to ensure security of supply and to improve the corporate profitability, HPCL has initiated steps to venture into Exploration & Production sector through acquisition of equity oil by securing interest in E&P projects in India or abroad. HPCL targets to acquire at least 1/3 of its crude oil requirements as equity oil and has initiated various steps in this regard. HPCL made an initial foray in E&P activities by setting up a Joint Venture called Prize Petroleum Company Limited, in association with financial institutions. This JV has been reviewing various farmingin oppor tunities in the oil and gas sector both in India and abroad. It also extends technical assistance to HPCL in its E&P initiatives. Its consortium was recently awarded service contracts to develop three marginal onshore fields of ONGC in Gujarat viz., Hirapur, Khambel and West Bechrarji. It has also secured a 50% participating interest in the producing Sanganpur oil fields in Gujarat and has undertaken further development in the fields. The ONGCHPCL consortium has secured two deepwater exploration blocks in the Kerala Konkan coast under NELP IV offering in 2003-04. Activities such as reprocessing the available seismic data, gathering of fresh 2D and 3D seismic data, geochemical sampling, geomagnetic surveys, analysis and interpretation of data to identify oil and gas prospects in these blocks etc., are currently in progress. Prize Petroleum also has won an onshore block in the Cambay Basin of Gujarat, under the NELP-IV offering, in consortium with GSPCL and others. HPCL is also exploring the feasibility of acquiring par ticipating interest in proven fields abroad, directly or jointly in association with other players. Various such oppor tunities are currently being reviewed. The Corporation has par ticipated in the bidding process of the ongoing NELP-V, in association with suitable par tners including Oil India Ltd., to secure interest in the exploration blocks currently on offer. HPCL would earmark required funds for expanding its E&P activities. The Corporation is also exploring the feasibility of associating with other major players in the E&P sector to further its efforts to enter the oil and gas segment. FINANCE The working capital requirements of the Corporation has gone up mainly on account of high crude and product prices and pressure on market margins during the year. Requirement of funds have been met mainly by short term borrowings.
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While average borrowings during the year have increased by 120%, interest cost has increased only 46%. The weighted average cost of borrowings during the year was 4.98%. During the year 2004-05, Foreign Exchange Market has been volatile. However, the Corporation took suitable steps to ensure that adverse impact is minimised by timely hedging/for ward cover products. During the year 2004-05, Corporation has commenced Commodity Risk Management transactions. The Corporation is of fering fixed price contracts to customers by taxing appropriate hedge in international commodity market. Initial experience has been ver y encouraging. Steps are being taken to set up a full fledged commodity risk management desk to manage various kinds of commodity exposure. With progressive implementation of Enterprise Resource Planning and increased implementation of core banking by major banks, it has now become possible to implement e-banking. A major initiative to leverage ERP has been taken up by the Corporation. ENTERPRISE RESOURCE PLANNING (ERP) The Corporation had initiated a Business Process Reengineering exercise which was followed by the commencement of implementation of Enterprise Resource Planning system to support the core processes which is the JD Edwards OneWORLDTmXe, a leading world class ERP solution. As of June 30, 2005, 335 locations have gone live in the new system. These include both the refineries at Mumbai and Visakh and almost the entire West Zone of Marketing Division. A total of 261 locations have been covered as of March, 2005 and approximately 85% of the Corporations sales by volume are being recorded in the system by 3300 users. The system has facilitated data integrity and availability of accurate information to enable timely decision making and has also ushered in significant level of transparency in the processes. Benefits in terms of better control over costs and standardization of processes are expected to be achieved on completion of the project. HUMAN RESOURCE DEVELOPMENT HR Depar tment is ensuring focus in enhancing the capabilities of the employees of the Corporation to rise up to the emerging challenges in the Oil Sector. Towards this end, Training and Development received continuous attention in our endeavour to be a Learning Organisation.
Training sessions in progress
A scenic view of the Training Centre at Nigdi
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An Organisational Transformation Exercise is currently in progress, details of which are provided separately. In order to take training closer to employees, a training por tal has been launched which ser ves as an inter face between the Training Department and employees. We have tried to make this portal very informative and user friendly. Some important features of this portal are Training Calendar, Training Histor y, Self Nominations, Notices, E-Learning, Learning Centre, Discussion Forum etc. Executive MBA : In order to enhance general management capabilities, officers are nominated for Executive MBA (EMBA) programme of the duration of 18 months which consists of oncampus learning of 9 days per quarter and offcampus learning. Other training programmes developed and conducted during the year were :
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MDP on Marketing for Retail Regional Managers and Sales Officers Retail Engineering for Retail Engineers Reach for the Skies for Aviation Officers
All India Annual Sports Meet held at Mumbai. Seen in the picture are Shri M.B.Lal, C&MD, Shri A. Balakrishnan, Director - HR and others
A section of employees participating in the sports event
Children at the Sports Meet
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Marketing Operations for Operations Stream Modern Safety Management for Officers in locations Step towards meeting future Refiner y Challenges for Refiner y Officers Foreign Trade for of ficers in Finance stream and SBUs
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Risk Management and Derivatives for officers in Finance and Direct Sales Linux for officers in IT stream Networking Basic for officers in IT Stream
All the above programmes have been customised to meet the Corporations needs. Services of reputed institutions like IIM-Ahmedabad, NCCB, Indian School of Petroleum etc., have also been availed for conduct of such programmes. Officers have also been sent for various external and foreign training programmes like Advanced Management Program, Accelerated Management Programme etc. conducted by reputed institutions. A series of Change Management Programmes were conducted for the internal Union Leaders and approximately 150 Union Leaders have been exposed to the changing business environment, customer needs etc. This has helped in implementation of ERP and other Organisational Transformation process in a streamlined manner. Other Significant Initiatives : Balanced Scorecard : To enable translation of strategy into operational objectives and to align the activities in line with core vision of the Organisation, HPCL has embarked on the Balanced Scorecard initiative. As a part of this initiative, Corporate Scorecards have been designed and formulated. Fourteen Level-1 scorecards have been designed and design of Level-2 scorecards is underway. Competency Mapping : To strengthen the competencies of our employees to meet the challenges of continuous change, HPCL has initiated the process of Competency Mapping for aligning employee competencies to the business strategies and build framework for both Behavioural and Technical competencies. During the year the Behavioural and Technical competency frameworks have been developed along with 100% position profiling. 207 officers have undergone competency assessments and their individual development plans are being implemented. Six Sigma : To bring about quality improvement in business process, Six Sigma approach is being institutionalised in the Corporation. As a part of this exercise, 14 projects have been identified and work on the projects are concurrently underway. Achieving Continuous Excellence : Thrust on upgrading skill of employees to deliver superior performance continued during the year through project ACE (Achieving Continuous Excellence) and Leadership development programmes. A total 93 ACE Workshops and 53 LO Workshops have so far been conducted on cumulative basis. Employees Relations Committee : A new Management Employees Relations Committee has been set up to provide the officers an easily accessible machinery for settlement of grievances. This new facility is expected to
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enable expeditious settlement of grievances leading to increased levels of satisfaction, productivity and efficiency in the Organisation. INDUSTRIAL RELATIONS : The Industrial Relations climate for the financial year April 2004 to March 2005, continued to be generally harmonious in all units of Marketing Division, Mumbai Refiner y and Visakh Refinery and there was no loss of production. Due to our endeavour and the positive approach of the Unions, the overall Industrial Relations scenario witnessed active cooperation from the employees which in turn enhanced the productivity and strengthened industrial peace. Several Memorandum of Understanding (MOUs) were signed during the year with Unions at different locations concerning different segment of activities of the Corporation. This has resulted in streamlined functioning of activities in these locations in a cordial work atmosphere and inter-personal relations. PROACTIVE IR Learning Organisation (LO) workshop covers individual development as well as team learning skills. During the year 2004-05, 6 LO workshops for HR Officers, 1 LO workshop for MSA CEC Members, 9 LO workshops for Union Leaders and 36 LO workshops covering the clerical/ secretarial staff were conducted across the Corporation. MANPOWER DATA The manpower statistics of our Corporation for the past 5 years is as under : Year-wise Manpower as on 31.03.2001 31.03.2002 31.03.2003 31.03.2004 31.03.2005 No. of Management Employees 3614 3571 3583 3594 3562 No. of NonManagement Employees 7935 7786 7630 7494 6999 Total Strength 11549 11357 11213 11088 10561
RECRUITMENT OF LAST 5 YEARS : Year-wise Recruitment 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Recruitment of Officers 27 38 27 63 80 Recruitment of Non-Management 66 41 11 1 6 Total Recruitment 93 79 38 64 86
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Break-up of Employees (As of 31.03.2005) Total Strength SC/ST Physically Handicapped Ex-Ser vicemen Women Employees Spor tsmen WELFARE The overall representation of SC/ST employees in the Corporation is 27.85%. During the year 2004-2005, our Corporation has carried out a number of Welfare/Developmental activities at various locations inhabited by SC/ST/Weaker Sections in the vicinity of operating business locations and Refineries at Mumbai and Visakhapatnam at a total cost of over Rs. 5.30 Crores. The said activities include Primar y/Secondar y/Graduation and Post-Graduation education, health care, augmentation of drinking water facilities, family welfare, vocational training, income generating schemes, rehabilitation of Persons With Disabilities (PWD), Scholarships to students of SC/ST/Weaker Sections including students with disabilities and provision of computer training to the poor and needy students from the SC/ST/Weaker Sections of Society. Out of a total of 1325 New Retail Outlets and LPG distributorships commissioned during the year, 105 were allotted to SC/ST category and 53 were allotted to Persons With Disabilities (PWD) categor y. Visits of Parliamentary Committees & Member of National Commission for SC/ST : During October 16-18, 2004, Study Tour of the Standing Committee on Petroleum & Natural Gas visited to Visakhapatnam to review the CSR activities of ONGC, GAIL and HPCL. HPCL was nominated as the Coordinator. The Honble Member of National Commission for ST visited at Chennai to review the implementation of reservation policy. OFFICIAL LANGUAGE IMPLEMENTATION : Progressive use of Hindi in the Corporation continues to receive due importance. Details are given separately. THE FUTURE - OPPORTUNITIES & THREATS : The Oil and Gas Sector is continuing to witness a turbulent phase. The downstream companies like HPCL which are primarily engaged in refining crude and marketing of petroleum products are experiencing continued pressure on margins which was reflected by a fall in net profit for the year 2004-05. This was primarily due to the fact that there was substantial increase in the crude oil prices which were not matched by corresponding increase in product prices, particularly LPG, Kerosene, MS and Diesel. 10561 2941 127 639 665 2
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The crude oil prices which moved from approx $32/bbl in March 2004 to $49.3/bbl in March 2005 is likely to remain at higher levels. It is in this context that your Corporation is giving utmost thrust to integrate refining and supply operations, optimize value chain, develop risk management capabilities, improve refinery GRMs etc. The Corporation is also pursuing options for entr y in upstream segments like Exploration and Production, Gas , Non conventional Energy areas, etc. Securing equity oil by foraying into exploration and production, marketing of eco friendly gaseous fuels, retail automation and dynamic pricing, leveraging state-of-the-ar t IT and communication technology, using risk management tools, strengthening of downstream infrastructure, etc. are some other initiatives that the Corporation is considering in pursuit of its future growth. The Marketing segment continues to witness intense competition not only between down stream companies but also from private and foreign companies which have already initiated their entr y and also from upstream companies who want to enter the retail segment. The objective therefore is not only to protect the existing volume but also identify new areas of growth. The initiatives of the Corporation in the area the highway segment etc, are
Inauguration of the Petrotech stall 2005 by Shri Eduardo Lopez Robayo, Hon'ble Minister of Energy & Mines, Equador. Seen in the picture are Hon'ble Minister of Petroleum & Natural Gas and Panchayati Raj, Shri Mani Shankar Aiyar & Shri M.B.Lal, C&MD
of allied retail business, penetration of rural market, focus on all aimed towards this purpose. WAY FORWARD :
In order to mitigate the impact of negative margins on the main product lines, the Corporation has been taking many initiatives oriented towards value additions and operational improvements in its core lines of refining and marketing. Improving unit service factors, improving the yield of value added products through process improvements in the Refineries and stabilising the impact of price fluctuations through oil price risk management have been the main focus areas during the year. In addition, we are also trying to enhance the supply side infrastructure through projects such as Mundra-Delhi Pipelines and Loni-Solapur Pipelines. Further setting up of SBM for receipt of crude through VLCC at a suitable location is also being explored. Cost control and cost reduction measures are continuous areas of our focused attention.
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Potential areas such as optimising the crude procurement costs, enhancement of the energy efficiencies, optimising the product distribution and transportation costs, steps for savings in financing and operating costs etc., receive focused attention resulting in savings to the Corporation. The Corporation is also gearing up to meet the demand of the market for both LNG and CNG by firming up arrangements for receipt of gas as well as for supply of gas to both retail and industrial customers. The demand for gas is set to grow substantially over the next ten years, not only to sustain economic growth, but also on account of the high price of liquid fuels which is encouraging customers to switch to gas. The Corporation on its par t would be required not only to ensure supply sources of CNG/LNG but also the infrastructures required for supply of the same to its existing customers. This is important as otherwise its customers base could move out to other supply points. This is also beneficial to the environment as seen after the introduction of CNG in both Delhi and Mumbai. A number of new gas finds have been announced and these will certainly enhance domestic supply in the medium term. However, this increase in domestic production will not be sufficient and there will be need to source gas from outside to bridge the supply gap. It is in this context that the Corporation is continuing to pursue tie-ups/Joint Venture arrangements with reputed companies both Indian and foreign, to pursue initiatives in segments like Gas, Exploration & Production, Power, setting up of infrastructure in Marketing/Refining area. The Corporations expansion and diversification plans would involve a capital expenditure of Rs. 11000 crores to be incurred in phases during the next 3 to 4 years. The major projects under implementation are Green Fuels and Emission Control Project in Mumbai Refiner y Rs. 1152 crores, Clean Fuels Project at Visakh Refinery Rs. 1635 crores, Mundra Delhi Pipeline Project Rs. 1624 crores, Extension of Mumbai Pune Pipeline to Hazarwadi at a cost of Rs. 335 crores. The proposed capital expenditure also includes outlays towards investments in Joint Ventures and Subsidiary Company for E&P initiatives and for modernisation and upgradation of marketing infrastructure. HR department is laying greater focus in enhancing the core competencies and capabilities of employees to rise up to the challenges and enable the Corporation to carve a niche for itself in the Oil Sector. CAUTIONARY STATEMENT : Matters covered in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be forward looking statements within the meaning of applicable securities, laws and regulations. The actual per formance could var y from those projected or implied. Impor tant or unforeseen factors that could make a dif ference to the Companys operations include economic conditions affecting demand/ supply and price conditions in the domestic market in which the Company predominantly operates, changes in regulations, and other incidental factors.
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The road ahead is challenging. The Corporation could continue to face pressures on margins. The scenario calls for action plans not only to sustain in current position but also to look for avenues to sustain the growth and development. The various initiatives that have been highlighted would provide the platform to the Corporation to chart its activities aligned to its Corporation Vision. The Corporation with its strong fundamentals and growth plans is confident of meeting the challenges ahead and live up to the expectations of all segments of its Stakeholders.
Shri P. Shankar, Central Vigilance Commissioner addressing at the Interactive session with the Functional Directors & Senior Officers of the Corporation. Also, seen in the picture is Shri M.B.Lal, C&MD
Functional Directors & Senior Officers of the Corporation at the Interactive session with Shri P. Shankar, Central Vigilance Commissioner
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Special Focus Areas

HPCLS CONSTANT ENDEAVOUR
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Aim for sustained Growth and Productivity to reward consistently our shareholders and stakeholders. Ensure highest standards of Safety in all our operations. Function in harmony with Environment and the Society. Produce Quality products and services to meet the stated and latent needs of customers. Set up infrastructure with state of the art facilities, endeavour for global standards in operations. Ensure highest standards of maintenance to ensure reliability of plants/units and enhance MTBF (Mean Time Between Failures). Be a learning organization with constant measures to upgrade skills and competencies to respond to the ever changing market scenario. Be known for highest standards of Ethics and Transparency in operations. Earn the trust of all sections with whom the Company operates for an enduring relationship aimed at mutual benefit. Creating an environment of Trust, Pride and Camraderie within the organisation.
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Setting goals, Raising the bar, Looking beyond the obvious, Courting the impossible, Dreams that chart The course of our future, Thats the HP way
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Special Focus Areas
(Contd.)
CORPORATE SOCIAL RESPONSIBILITY

The two biggest challenges confronting the humankind today is Poverty and Pollution. Corporate Social Responsibility is an integral part of Corporate Governance and is assuming a significant role for the corporates in their activities. The value of growing green i.e. being environmentally friendly, is looked upon by many companies as a balancing act between nature on the one hand and stakeholders on the other, arising more out of compulsions than passion to protect environment. But research reports indicate that investments in environment improvement measures lead to noticeable improvement in the Companys stock trading and the stakeholders confidence. HPCL has always endeavoured to discharge its social responsibility by undertaking wide ranging activities across the country. The focus of activities has been to improve the standard of living of weaker sections of the society including women, children and physically challenged persons. HPCL developmental programmes centre round critical areas like education, health, drinking water facilities, vocational training, sanitation, rural development etc. that not only provide basic needs of living but also encourage people to become self reliant. HPCL has progressively scaled up activities on the CSR front quite by allocating significant resources in this regard. In the last four to five years (2000-2005) nearly Rs.23 crores have been spent on various welfare activities. We have given below details of some significant CSR initiatives of the Corporation :
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On the primary education front, HPCL has provided uniforms to more than 60000 students, distributed note books, school furniture, constructed/renovated 34 school buildings, 4 hostel buildings and around 90 numbers of class rooms in various parts of the country and also provided 7 school buses in Arunachal Pradesh and Mizoram. Scholarships have been awarded to about 4000 students of various colleges for graduation and post-graduation studies.
On the health care front besides organizing medical, eye and gyanec camps, HPCL has provided 21 ambulances/mobile vans to various service societies and associations. HPCL has also been facilitating running of a burns/trauma care hospital at Chembur called Sushrut Hospital. Being located in a highly industrialized zone of Mumbai (Chembur) with many industries handling volatile and hazardous products, this hospital has been set up specially to take care of any emergencies arising out of industrial accidents. HPCL has contributed around Rs.20 crores towards the corpus fund of this hospital.
Bore-wells with hand pumps have been installed in about 265 locations in many parts of the country to mitigate the problems on the drinking water front. To support the income generation avenues for the needy rural population, apart from organizing vocational training in tailoring, driving, stenography, agro based training etc. HPCL has also provided supplementing tools to earn a decent livelihood. HPCL was one of the first to adopt eco-friendly technologies such as changeover from Phenol to NMP solvent in three lube extraction units and changeover from Oleum to NMP in the Hexane Treating Plant. These initiatives have been widely appreciated and have won for HPCL some national and international awards/citations.
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Special Focus Areas
(Contd.)
CORPORATE SOCIAL RESPONSIBILITY (Contd.)

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Being in an industry handling highly inflammable products, refining, distribution and marketing, it is essential that environmental norms are fully complied. The Corporation has set up an independent Department to handle Safety, Health and Environment (SHE) related activities. Continuous efforts are made for improving the SHE awareness among employees and contractors through training and field observations and clearly defining the safety responsibilities/accountabilities. All the efforts are towards HPCL being recognised as a SHE focused organization. A sum of Rs.149 crores have been spent on SHE related matters and Rs.10 crores have been earmarked for the current year. On the environmental front, HPCL is meeting all the gaseous emission norms at Mumbai refinery, on the liquid effluents we have taken necessary steps for Effluent Treatment Plant (ETP) integration for meeting the MINAS (Minimum National Standards) norms. Similarly in our Visakh refinery the ongoing Flue Gas Degenerate (FGD) projects when completed will bring all the SO2 emissions within norms as also MINAS to ETP modifications. To develop a sustainable and environmentally sound strategy for long term management of hazardous solid wastes, HPCL has entered into a tripartite agreement with national and international companies for preparing an Integrated Hazardous Solid Waste Management Plan. For handling the crude oil sludge, a two pronged strategy has been planned One to develop a methodology for treating the sludge in-situ so that untreated sludge inventory does not build up. The other parallel strategy is to employ a suitable technology that can process the already accumulated sludge in a central facility. Thus over a period of time, HPCL should be able to find a permanent and viable solution to the sludge problem. We have also undertaken ground water analysis for an assessment of water sampling and steps for covering all possible sources of contamination. Projects for potential rain water harvesting are under development. Our environment training modules are developed on core aspects such as statutory requirements, emissions measurement and control, solid waste management and environmental audits. Investments of over Rs.4600 crores have been made/being committed in various Projects that reduce the sulphur emissions from the refineries as well as in projects for producing transportation fuels for meeting the environmental norms and other emission standards. In the marketing operations the focus is towards total customer and vehicle care by providing quality product and value added services. Towards this objective, the Corporation has rolled out a number of initiatives like quality control mobile laboratories, external audits through independent agencies and e-fuel stations by way of retail automation.
INITIATIVES FOR RURAL POOR

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Earlier people in the rural areas had to cover long distances to source their fuel requirements. HPCL has pioneered the novel concept of Mobile retail outlets, to supply the products nearest to the point of consumption thereby saving time, energy and cost of rural customers. HPCL introduced the first of its kind in the industry in Maharashtra.
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Special Focus Areas
(Contd.)
CORPORATE SOCIAL RESPONSIBILITY (Contd.)
Visakh Refinery
Shri M.B. Lal, C&MD addressing the delegates at the National Seminar on Governance
HPCL has also put up Kisan Vikas Kendras, which cater not only to fuel requirements but also on fertilizers, pesticides, quality seeds etc. required for the agriculturists. We touch more than 20 million households by providing cooking gas and our LPG Business Line saw a role for us in CSR front. The introduction of Suraksha tube, to connect the LPG cylinder with the stove, safety awareness programmes, insurance coverage in the event of any accidents are all oriented towards safety and welfare of customers. LPG as a cooking fuel is yet to reach many portions of rural India. Most of the rural population in India meet their cooking fuel needs by other sources such as coal, firewood etc. Substantial time is spent on collecting these basic fuel needs. Moreover, due to the smoke and other forms of emissions in the conventional cooking, serious health hazards are also posed. So HPCL thought of providing cooking facilities at an affordable cost and thus emerged the Rasoi Ghar concept (community kitchen initiative). We provide cooking facilities such as stoves, utensils as also the LPG connections in a common place provided by Village Panchayat and operated through self help groups, for a nominal sum. This facility has been found extremely convenient by the rural women and we are extending the same to other places and also to hospitals and Schools' midday meal schemes. This unique initiative of ours has won laurels and has made a deep impact in the rural segment wherever it has been introduced.
Our CSR activities are also reaching the remote areas of the country and regions like Jammu and Kashmir which have extreme climatic conditions. Our uninterrupted supply of cooking gas in J&K, where HPCL market share is about 70% during the recent heavy snowfall has been well appreciated.
HPCL will always strive to be a role model on the CSR front and would look CSR initiatives not from the point of view of statutory compliance but rather as a process to meet the obligations to the Society.
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Special Focus Areas
(Contd.)
SAFETY, HEALTH & ENVIRONMENT CARE

As a socially responsible Corporate citizen, HPCL is committed to maintaining high standards of safety, health and environmental care. We have ensured that increasing scales of operation do not conflict with protecting safety and health and safeguarding environment. Without losing sight of our long term goal of reducing occupational injuries, operational incidents and environmental releases, we have expanded the manufacturing and marketing operations in tune with national needs. The safety management systems of MR, VR and MLIF have been audited by DNV, as per their ISRS protocol, and have been rated at level 8 (for MR & VR) and level 7 (for MLIF). Six other marketing locations are preparing for ISRS Safety Audit. SHE Department is in the process of undertaking the following initiatives : To enhance SHE management framework, a detailed SHE performance improvement/benchmarking study is being undertaken by the globally reputed SHE consultant. Achieving ISO-14001 accreditation for our marketing terminals. Adjudge different operating locations as per a newly developed SHE Index criteria consisting of various evaluation parameters. Create awareness and provide training to the officers for developing in-house Environmental Auditing capabilities of operating locations. HPCL has well-equipped health care facilities/arrangements at all major locations. Occupational health is a focus area for HPCL and all issues pertaining to occupational health are addressed comprehensively. Drastic reduction in SO2 emissions have been achieved in both the Refineries inspite of the significant increase in crude thruput. As a part of Green fuels and Emission Control project, Flue Gas Desulfurisation Unit (Wet Gas Scrubber) is being put up in FCCU unit for further reducing the SO2 emission and Particulate Matter in both the Refineries at Mumbai and Visakh. HPCL has been adopting ECO-friendly technologies such as changeover from phenol to NMP solvent and changeover from Oleum to NMP. These initiatives have been widely appreciated and have won for HPCL various national, international awards/citations. Diesel Desulphurisation facilities are fully operational in both the refineries. HPCL has undertaken projects worth about Rs.2800 crores for its Green Fuels Projects in both the refineries to meet the MS/HSD of EURO-III grade in Metro/Mega cities and Bharat stage-II grade in the rest of the country. Mumbai Refinery has already commenced production/supply of BIS-II MS/HSD and EURO-III HSD from 1st January 2005 and 1st week of May 2005 respectively. Project for EURO-III MS is under implementation.
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Special Focus Areas
(Contd.)
SAFETY, HEALTH & ENVIRONMENT CARE (Contd.) The Refineries have also taken initiative for treating the tank sludge in an environmental friendly manner without removal of the sludge from tank and with reduced tank down time. In this direction, in-situ cleaning by M/s. Balmer Lawrie & Co. Ltd. using BLABO technology has been started in Crude Tank for recovering maximum oil from the sludge. Over 75% of the petroleum products from the refineries are being evacuated through pipelines. Dependence on road transport for evacuation of products has been reduced drastically, resulting in considerable reduction in auto emissions to atmosphere. Extensive green coverage has been provided in and around the refineries and housing colonies, Housing colony at Mumbai has received the awards from The Friends of Trees association for Greenery. The Environment Management System of the Refineries, the Silvasa Lube Plant, Ajmer LPG Plant, Kota LPG Plant, Loni LPG Plant and Manglore LPG Import Facilities, have been audited and awarded accreditation under ISO 14001. Other three LPG plants at Gumdipundi, Madurai and Palghat have been audited for ISO 14001 and auditors have recommended for accreditation. The Corporation has won several awards on Safety that have been listed under the segment Awards/ Recognition.
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Special Focus Areas
(Contd.)
ENTERPRISE RESOURCES PLANNING (ERP)

Background With a view to leverage the Information Technology for the benefit of business, an Enterprise Resource Planning system (ERP) is currently under implementation and called as Project Parivartan which is JD Edwards OneWorldTMXe, a leading world class ERP solution. The implementation covers all the modules of the ERP software viz. Sales & Distribution, Manufacturing, Finance and HR to support the core business processes. The system when completed and rolled out at all locations would effectively manage the information needs of your Corporation. The system would provide the decision makers on-line and accurate information that would aid them in taking timely business decisions. Tracking of cost of operations would become easy with the implementation of this system. Standardisation of various business processes would result in better management control. The first phase of the project was to implement the solution at 14 pilot sites so chosen as to represent all types of HPCL locations. This has been followed by roll out across all other locations of the Corporation. Status of Implementation The ERP implementation which aims to cover more than 400 locations was started from the West Zone in August 2003 and has since progressed to the South Zone in March 2004, and subsequently to North Zone from October 2004. During the year, ERP has been implemented at a total of 170 locations covering more than 50% of Corporations business. As of April 2005, ERP implementation has been completed at 261 locations which include both the refineries at Mumbai and Visakh and almost the entire West, South and North Zones. Approximately 85% of HPCL sales are being recorded in the new system as of date. The JD Edwards system has been interfaced with the Computerised Materials Management System (CMMS) system (Maximo) at both Mumbai and Visakh refineries. This interface enables two-way flow of data related to purchase activities, warehouse issues etc. between the two systems. The interface has been configured to enable optimum utilisation of the functionalities available in both the systems to the maximum. Customised modules have been developed internally for Employee Compensation and Benefits and Employee Payroll. These modules have been integrated with the core HR and Finance modules of the JD Edwards software. The modules have been implemented at Mumbai Refinery and West Zone and are being rolled out at other locations. These modules would help achieve enhanced employee satisfaction in view of smooth and standardised implementation of HR policies. A Change Management Programme facilitates a smooth transition for the employees using appropriate Communication and Training strategies. Communication to the user groups is maintained using all available channels including an intranet website. Comprehensive training is impar ted to the users during the implementation at any site. This is followed by refresher courses of 2-3 months post implementation. Additional training programmes are also arranged from time to time for focussed training to specific user groups such as
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Special Focus Areas
(Contd.)
ENTERPRISE RESOURCES PLANNING (ERP) (Contd.) Regional Managers, Finance functionaries, location in-charges, clerical staff, etc. To foster a culture of maximising user contribution to the implementation, a competition was established among the pilot locations for the best implementation. Similar competitions during the roll out phase are continuing. A state-of-the-art data centre in the Head Office at Mumbai hosts powerful IBM enterprise servers, which manage the entire data and applications in a centralised architecture. The connectivity to the locations has been established by using various available communication channels such as leased lines, VSATs, ISDN, VPN, radio links and dial-ups. A separate Disaster Recovery Centre (DRC) is being set up in Hyderabad for providing a back-up in the event of any physical contingency at the primary site. This DRC would mirror the main server and would be in a position to take over in case of any disaster at the primary site as well as to enable any maintenance shutdown to the server. New initiatives in Parivartan Various new initiatives have been implemented which build on the information available on a real-time basis from the ERP system and sustained efforts continue to bring in more of these to reality. In keeping with the Corporations focus on enhancing Customer satisfaction, a dedicated portal has been designed to display the information related to despatch details and statement of accounts of a customer. This portal also gives details of sales for the last 3 years. A customer logs in through internet using a secure user -id and password. The portal has been launched for Retail, LPG and Aviation business and would be made available shortly for the Corporations major industrial customers as well. HPCLs dealers and distributors are getting the information by SMS and e-mail on the loads sent to them, once ERP system has been implemented at the despatch location. This information is sent to them immediately on printing the invoice and is a big help in enabling them to keep track of their indents. MIS report delivery by e-mail to senior management, field officers, document archival system for critical documents like invoices, purchase orders, cheques, etc., electronic data transmission to a foreign airline on sales are some of the other initiatives that have already been implemented. New areas where the on-line availability of information can be harnessed to provide improved customer service, as also provide visibility to other stakeholders are being explored on an ongoing basis. The project will be fully rolled out by March 2006 .
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Special Focus Areas
(Contd.)
PROJECT ORGANISATIONAL TRANSFORMATION

The process of organizational transformation which commenced about two years back has sown the seeds for making HPCL a "Learning Organization. More than 25% of employees of the Company have so far participated directly in the various workshops being conducted as a part of transformation process. They have experienced the power and value of co-creating a shared vision for the corporation. Employees who participate in the workshops have learnt that learning is beyond acquiring information and knowledge. They have understood that a Learning Organization is where people are continually enhancing their capabilities to create the results they truly desire, where individual and collective aspirations are set free, where new and expansive thoughts are nurtured, and where they are continually learning how to learn together. Like any growing body of knowledge, there is a disciplined approach towards building a Learning Organization. It is not possible to create an inspired organization capable of producing sustained high performance overnight. It is the rigorous application of the principles and practices of five disciplines of the learning organization by all its members that brings into being a learning organization. With the visions leading the teams and a sense of ownership to the vision prevailing, people in HPCL sense a feeling of empowerment and commitment like never before. Short term focus has today given way to sustainable value creation process. Today, people at all levels in the organization are committed to customer delight that not only allows them to be true to themselves but also to the organization. As people have more and more control on their jobs, they feel higher and higher responsibility for the outcomes. Shared and co-created visions in the teams has enabled emergence of higher accountability in teams for achieving results leading to improved results in all our business units in terms of risk taking, innovations and commitment. The trust imperative in an organization is the basis for outstanding business results. The process of building trust starts when there is intense open and reflective discussions in teams and they create their own future. The process has made the teams redefine their relationship with other stakeholders resulting in a higher degree of trust with them. Distributed and disaggregated leadership is a prerequisite to teams achieving excellence. Leadership skill building therefore at all critical levels in the business has become an immediate priority for the organization. The middle management members who are involved in leading unit level business teams at the Regional Offices were first involved in the process of leadership skill building. Leadership Development Workshops were conducted for the Regional Managers where they discovered the value of alignment, teamwork, customer focus. They also learned the importance of continually challenging Director-HR and Project Organisation Transformation team members with the Management Guru Mr. Peter Senge, author existing mindsets in order to avoid being prisoners of
of the book "Fifth Discipline"
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Special Focus Areas
(Contd.)
PROJECT ORGANISATIONAL TRANSFORMATION (Contd.) their own thinking. The value of conversing meaningfully to understand the import of significant issues by leveraging collective thinking was explored with the help of dialogue process. The participants in the leadership workshop understood the advantage of collective thinking replacing individual myopias. Leadership thus could become community phenomena instead of individual aggressiveness. Shared understanding and decision making is also resulting in people finding meaning in their work and collective achievement resulting in fulfilling individual aspirations also. Leadership is the ability to see the big picture and think systemically and holistically. The connectivity between happy and motivated workforce and delighted customers and higher profitability is often understood but not frequently paid attention to. In HPCL, we have done just that by capacity building in leadership workshops. In fact the effort does not end with the workshops. Enabling structures are being put up to see that what is learnt at the workshops is implemented at the workplace. A team of six internal coaches headed by Director HR attended the 7th Annual Meet of Society for Organizational Learning at Boston. The interactions with leading practitioners from world over, academicians from institutes like MIT Boston, etc. and leading consultants from all over the globe immensely benefited the development of coaches. Many of the ideas of connectivity, interdependencies and the primacy of team working were successfully implemented by the coaches in the workshops. The path is difficult, but the future is certain, since we have decided the future we want to create for ourselves. The more the challenges, the higher is the sense of achievement, that the people in HPCL will have. There are boundless opportunities and endless possibilities with the Organizational Transformation.
Participants at the Leadership Self Development Programme held at Nigdi with C&MD and Functional Directors
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Special Focus Areas
(Contd.)
OFFICIAL LANGUAGE IMPLEMENTATION 2004-2005

Progressive use of Hindi in the Corporation continues to receive due importance. During the year Hindi Pakhwada (Fortnight) was celebrated from September 6 to September 20, 2004. Efforts in the direction of associating Rajbhasha with productivity of the various Strategic Business Units of the Organisation have been given a further momentum. To further enhance the vocabulary and knowledge of Rajbhasha amongst the employees and encourage the hidden talents, various competitions like essay-writing, letter writing, elocution, group discussions etc. were organised. Eminent personalities dedicated towards propagation of Hindi were invited as judges. Kavi Sammelan, lectures on Hindi Implementation by renowned personalities in the field have motivated employees in more usage of Hindi. Various activities were carried out during the year such as : 1. Hindustan Petroleum Corporation Limited Rajbhasha Vision 2006 was prepared at the ACE (Achieving Continuous Excellence) programme. 2. 3. Bilingual Computer training programmes. Workshops and conferences for the officers/clerical staff to encourage the employees for implementation of Rajbhasha as also to update and rejuvenate their capabilities in Rajbhasha. 4. An All India Competition in Hindi - Interesting/ Inspiring Memorable incident was organised for all employees. 5. Rajbhasha Gyan Prashnavali Competition was held for all Mumbai based employees to create awareness about Rajbhasha Implementation. 6. 7. All India Rajbhasha Sammelan was organised at Visakhapatnam. Hindi Utsav at various places.
The Sub-Committee of the Parliament Committee on Official Language inspected various places. The SubCommittee appreciated the work done in Hindi by the Corporation. East Zone received an award from Official Language Implementation Department while South Zone also received an award from TOLIC for Official Language Implementation. The Corporation continues to head TOLIC in Mumbai for Public Enterprises/Organisations. Half yearly meetings were organised as per schedule. The progress of member Organisations is reviewed as also members share views on effective implementation for each others benefit during these meetings. Besides, CHAUPALS were conducted under the banner of TOLIC at the offices of various member Organisations. Various competitions were organised by the member Organisation under the banner of TOLIC.
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Special Focus Areas
(Contd.)
RASOI GHAR
l
HP GAS pioneered the launch of the Rasoi Ghar concept for providing lower strata of the society with cheap and alternate fuel for cooking at affordable price. It provides the villagers with a ready to cook facility that eliminates the cost of one time deposit as well as the recurring refill cost as they are required to pay basis the usage time only. The innovative concept of Rasoi Ghar, or community kitchen has been appreciated by all sections of society including voluntary organizations and women groups. Today there are more than 1350 Rasoi Ghars operating in 22 states and benefiting more than 15,000 people. These Rasoi Ghars also help in meeting the aspirations of rural population who could not af ford to have an LPG connection on their own.
A Rasoi Ghar
The Rasoi Ghar concept has now been expanded to public utility areas such as hospitals etc. Some of the important locations covered are AIIMS, Delhi, King George Hospital, Visakh, Tata Memorial Hospital, Mumbai and Lal Ded, Srinagar to ensure cooking of hygienic food at affordable prices for the relatives of patients who normally accompany the patient. Restricting felling of trees and protecting environment thereon has been another key benefit from these Rasoi Ghars. In a pilot project undertaken in the Yavatmal district of Maharashtra, 100 Rasoi Ghars were set up in the forest area in co-ordination with the forest department. It resulted in savings of nearly 36,000 trees per Rasoi Ghar. Further, temporary Rasoi Ghars were also set up at all major rural melas such as Pushkar, Sonpur, Ujjain etc. to benefit pilgrims and floating population and at the same time to popularize the concept as well to increase awareness of the benefits of LPG. Appreciating this novel initiative, NDTV Profit Channel has done a special feature covering the complete concept and operations. Further the concept has also been widely covered by several dailies, periodicals and magazines. For this innovative concept, HPCL has been awarded the prestigious Golden Peacock Award for eco innovation and has also been awarded the National Excellence Award for Innovative Techniques for improving access of a modern fuel to Rural Women. HPCL would endeavour to promote the scheme further for the benefit of wider spectrum of the society and in particular the weaker section of the society.
The Scheme has made a deep impact on the quality of living of rural people who otherwise dependent on charcoal, firewood etc., for heating with associated health and environmental hazards.
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Special Focus Areas
(Contd.)
INDIAs FIRST UNDERGROUND (CAVERN) LPG STORAGE FACILITY

l l l l l l l l l l l l l l l
Being set up by JV between HPCL and M/s. TOTAL of FRANCE (50 : 50), called South Asia LPG Pvt. Ltd. Underground LPG Cavern facility at Visakh 60,000 MTs. First in South Asia. LPG imports in large size 40,000 MT tankers resulting in freight savings. Project cost : Rs. 333 crores. Completion : August 2006. Storage facility is located at a depth of 160 mtrs. below the earths surface and is fully isolated. Technologically proven methodology. By far the safest and environment friendly means of storing LPG. Principle of containment ensures no leakage or contamination. Safety hazards on account of sabotage, storms, earthquakes and explosions are minimised. External fires will not affect storage. Surface land requirement is low in view of reduced safety distances. Caverns by their very nature require very low maintenance and hence safety is in-built. Low capital cost per tonne of storage.
A section of the Cavern under construction
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Special Focus Areas
(Contd.)
AWARDS/RECOGNITIONS - 2004 - 05
1. Award from Government of India for Excellent Overall Performance and being one of the top Ten Public Sector which fall under Excellent Category. 2. Golden Peacock Innovation Award for 2004 from Institute of Directors for innovation in manufacturing of Viscosity Index Improver. Oil Industry Safety Award for Best Overall Safety Per formance amongst Refineries to Mumbai Refinery from Oil Industry Safety Directorate. First Performer in Lube Oil Blending Category to Mazgaon Haybunder Lube Plant from Oil Industry Safety Directorate. Award for Best Workplace Practices from Asian Forum on Corporate Social Responsibility, Philippines for Employees friendly Policy and Practices. 6. National Safety Awards for Mumbai Refinery from Directorate General - Factory Advice Service & Labour Institute (Mumbai), Ministry of Labour, Government of India for achieving the lowest average weighted accident frequency rate over a period of 3 consecutive years. 7. National Safety Awards to Mumbai Refinery from Directorate General - Factory Advice Service & Labour Institute (Mumbai), Ministry of Labour, Government of India for working the longest number of manhours without a fatal/non-fatal accident/total Permanent Disability. Excellence Award to Retail SBU Forecour t Retailer of the Year 2005 instituted by KSA Technopak ICICI Bank. Excellence Award 2005 to Retail SBU for outstanding contribution in Petro Retailing Business by DEW Journal.
Shri T.N.R. Rao, former Secretary, MOP&NG, presenting the award for outstanding contribution in Petro Retailing business to Shri S.P. Chaudhry, ED-Retail C&MD and ED-LPG receiving "Golden Peacock Award" from Dr. Ola Ullsten, former Prime Minister of Sweden Shri Pranab Mukherjee, Hon'ble Minister of Defence presenting the prestigious Good Corporate Citizen Award to Shri M.B.Lal, C&MD
Dr. Manmohan Singh Hon'ble Prime Minister of India presenting the Prestigious MOU Award for Excellent overall performance to Shri M.B.Lal, C&MD
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Special Focus Areas
(Contd.)
AWARDS/RECOGNITIONS - 2004 - 05 (Contd.) 10. Award for Innovative Brand Strategies under DAKS Awards for Brand Excellence from Indian Brand Summit which recognises talent and encourages Mentorship, Role Models and Brand Leadership. 11. Recognition to LPG SBU - Rasoi Ghar - National Excellence for Innovative Technologies from Wisitex Foundation in association with Indian Merchants Chamber for selfless and untiring efforts and far reaching vision towards rural development and upliftment.
Justice M.N. Venkatchaliah, Former Chief Justice of India, presenting the "Golden Peacock Award" to Shri S.V. Sahni, ED-LPG
12. India Marketing Award 2004 to LPG SBU from Exchange 4 Media Group for Excellence in Marketing Services Category for their initiative in promising the customers the right weight of LPG cylinder, at their doorsteps. 13. Golden Peacock Award' to LPG SBU for Innovative Product/Services for its Ji Haan initiatives. 14. Indias Most Respected Company Award from Business World in reaching out to customers as compared to other Oil PSUs. 15. Mid-Day HR Excellence Award from Mid-Day Big Break & DAKs for Innovative HR Practices and Best Reinvention of HR functions. 16. Excellent Energy Conservation Implementation Gold Award from International Greenland Society for Energy Conservation. 17. Environment Excellence Gold Award for 2003-04 from Greentech Society for Commitment to Environment, Health & Safety. 18. Safety Gold Award from Greentech Society for Commitment to Environment, Health & Safety. 19. Gold Award for Environment Excellence in Petroleum Refinery Sector - 2003-04 from Greentech Foundation for Commitment to Environment, Health & Safety. 20. Good Corporate Citizen Award from PHD Chamber of Commerce and Industry for Corporate social responsibility, Productivity enhancement and upgradation of conservation facilities. 21. Best Employers Award from Hewitt Associates for progressive people practices and initiatives. 22. Best Layout Award for HPCL house journal HP News from Maya Ram Surian Foundation. 23. Golden Peacock Innovation Award for 2004 from Institute of Directors for highest achievement in the fields of quality innovation management and innovative products/services. 24. Best Customer focus Award from Petrotech 2005 for Best Customer focus at Petrotech Stall. 25. National Safety Council Safety Award (NSCI) from National Safety Council to Mumbai Refinery for Occupational Safety and Health Management and meritorious performance over sustained period of 3 preceding years.
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Human Resource Accounting

HPCL considers human dimension as the key to organisation's success. Several initiatives for development of human resources to meet new challenges in the competitive business environment have gained momentum. HPCL recognises the value of its human assets who are committed to achieve excellence in all spheres. The Human Resource Profile given below in table shows that HPCL has a mix of energetic youth and experienced seniors who harmonise the efforts to achieve the Company's goals. Age No. of Employees Management Non Management Average Age Accounting For Human Assets The Lev & Schwartz model is being used by our Company to compute the value of Human Resources. The evaluation as on 31st March 2005 is based on the present value of future earnings of the employees on the following assumptions. 1. 2. 3. Employees compensation represented by direct & indirect benefits earned by them on cost to Company basis. Earnings upto the age of superannuation are considered on incremental basis taking the Companys policies into consideration. Such future earnings are discounted @ 11% (2003-04 : 11%). Rs./Crores 2004-05 VALUE OF HUMAN RESOURCES Management employees Non Management employees 4,540 3,724 8,264 Human Assets vis-a-vis Total Assets No. of Employees Value of Human Assets Net Fixed Asset Investments Net Current Asset Employee Cost (incl. VRS compensation for 2004-05) Profit Before Tax Ratios (in %) : PBT to Human Resource Employee Cost to Human Resource Human Resource to Total Resource 10,561 8,264 7,730 1,757 2,514 20,266 714 1,641 19.86 8.64 40.78 4,206 3,378 7,584 11,088 7,584 7,074 2,048 1,775 18,481 570 2,980 39.29 7.52 41.03 2003-04 21 - 30 462 294 168 31 - 40 3,031 1,263 1,768 41 - 50 5,280 1,532 3,748 Above 50 1,788 473 1,315 Total 10,561 3,562 6,999 43
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Auditors' Report
TO THE MEMBERS OF HINDUSTAN PETROLEUM CORPORATION LIMITED 1. We have audited the attached Balance Sheet of Hindustan Petroleum Corporation Limited, as at March 31, 2005 and also the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order, 2003, (Order) issued by the Central Government of India in terms of sub-section 4A of Section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in Paragraph 3 above, we report that : (a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of the audit; (b) In our opinion, proper books of accounts, as required by law, have been kept by the Company, so far as it appears from our examination of these books and proper returns, adequate for the purposes of our audit, have been received from the branches; (c) The Branch Auditors report, made available to us, has been appropriately dealt with while preparing our report; (d) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (e) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; (f) On the basis of the written representations received from directors of the Company and taken on record by the Board of Directors, we report that no director is disqualified as at March 31, 2005, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; (g) In our opinion, and to the best of our information and according to the explanations given to us, and read with note no. 8 to Schedule 20 B regarding treatment of Income tax benefits, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India; (i) In the case of the Balance sheet, of the state of affairs of the Company as at March 31, 2005; (ii) In the case of the Profit and Loss account, of the profit of the Company for the year ended on that date; and (iii) In the case of Cash Flow Statement, of the cash flows for the year ended on that date. For N.M. Raiji & Co. Chartered Accountants Vinay D. Balse Partner Membership No. 39434
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For G.P. Kapadia & Co. Chartered Accountants Nimesh Bhimani Partner Membership No. 30547 Place : New Delhi Date : May 26, 2005
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Annexure to Auditors' Report

(Referred to in paragraph 3 of our report of even date) 1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets except for items like pipes, valves, meters, instruments and other similar items peculiar to a continuous process industry. (b) As explained to us, the Company, having regard to the size and nature of its business, has adopted a practice of carrying out physical verification of its fixed assets, except LPG cylinders and fixed assets of the erstwhile Kosan Gas Company undertaking, not handed over, on a staggered basis, over a period of three years in the case of Plant and Machinery and other assets, and over a period of five years in the case of furniture, fixtures and office equipment. We were informed that discrepancies noticed on such verification as compared to the book records have been properly dealt with in the books of account. However, the existence of the fixed assets situated at the residence of the employees is taken on self declaration basis. (c) Fixed assets disposed off during the year were not substantial and, therefore, do not affect the going concern assumption. 2. (a) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals. (b) The procedures of physical verification of stocks followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business. In the case of materials lying with third parties, certificates confirming stocks held have been received from them. (c) The Company has maintained proper records of inventory. We were informed that discrepancies noticed on such verification as compared to the book records were not material and have been properly dealt with in the books of account. 3. Based on the audit procedures applied by us and according to information and explanations given to us, the Company has neither granted nor taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Sub-clause (b), (c), (d), (e), (f) and (g) of sub-para (iii) of para 4 of the Order are not applicable. In our opinion, and according to the information and explanations given to us, and having regard to the fact that some of the items are of specialised nature in respect of which suitable alternative sources do not exist for obtaining comparative quotations, there are adequate internal control procedures commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services.
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5. (a) To the best of our knowledge and according to the information and explanations given to us, there were no transactions that needed to be entered in the register in pursuance of Section 301 of the Companies Act, 1956. (b) As there have been no transactions that needed to be entered in the register maintained under Section 301 of the Companies Act, 1956, during the year, no comments are required to be offered in respect of reasonability of prices at which such transactions have been entered into at the relevant time. 6. In our opinion, and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A and Section 58AA of the Companies Act, 1956, and the rules framed thereunder with regard to deposits accepted from the public. We have been informed that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.
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8. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government, the maintenance of cost records has been prescribed under Section 209 (1) (d) of the Companies Act, 1956. We are of the opinion that prima facie the prescribed accounts and records have been maintained and are being made. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete. According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has been regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and any other statutory dues during the year with the appropriate authorities. There are no undisputed dues payable for a period of more than six months as at March 31, 2005, from the date they became payable. According to the information and explanations given to us, dues relating to sales tax/customs duty/ wealth tax/excise duty/cess which have not been deposited on account of disputes with the related authorities have been reflected in the table here below : Forum Commissioner (Appeals) Amount (Rs./Lakhs) 426.06 560.14 76.86 32.49 7,608.38 8,703.93 CESTAT 43,503.96 73.54 2.64 26.76 10.32 533.06 1.04 270.36 280.55 4,440.78 49,143.01 Appellate Tribunal Grant Total Central Excise (A) Sales Tax Act Maharashtra GST Gujarat GST/CST Sales Tax Appellate Tribunal 3,047.79 4.68 1994 - 1995 to 1999 - 2000 1986 - 1994 173.58 58,020.52 1998 - 1999 1994 1997 1997 1997 1997 1998 1999 2001 2002 2003 2005 1998 1998 1998 1998 1999 2000 2002 2003 2004 1985 1993 1994 1997 2003 Year 2005 2004 - 2005 1996 1998 2004
9.(a)
(b)
Statute Central Excise
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Statute Bihar State CST/GST/Finance Act/Works Contract Act Uttar Pradesh CST Andhra Pradesh State GST/CST Karnataka State KST/CST/ Entry Tax Haryana CST Jammu and Kashmir Sub-Total (B)(i) Commissioner/ DCCT/ADC/JCCT Gujarat State MST Maharashtra State Sales Tax West Bengal State Sales Tax/CST Bihar State DFA and CST Orissa State GST/Entry Tax Assam State CST Uttar Pradesh State CST Delhi State CST Rajasthan State Andhra Pradesh State GST/CST Kerala State GST/CST Karnataka State CST/GST Jammu and Kashmir 102.76 3,409.00 1,674.90 138.37 4.29 100.10 15.03 80.99 860.34 4,381.54 368.68 261.16 8.15 1994 - 2000 1985 - 1997 1996 - 2002 1997 - 1998 1998 - 1999 1996 - 1998 1994 - 1995 1976 - 2002 2002 - 2003 1997 - 1998 1996 - 1999 1998 - 2003 1989 - 1990 to 2002 - 2003 Sub-Total (B) (ii) Sales Tax Kerala State Karnataka Entry UP CST/Works Contract Sub-Total (B) (iii) Kerala High Court Karnataka High Court 336.83 28,578.11 1,069.62 29,984.56 1987 - 1988 to 1995 - 1996 1986 - 1987 to 2002 - 2004 1994 - 2003 11,405.31 Forum Amount (Rs./Lakhs) 854.39 31.13 2,576.02 8,323.27 1,498.43 8.87 16,344.58 Year 1986 - 1996 1987 - 1998 1994 - 2001 1994 - 2002 1997 - 1999 1989 - 1990 to 2002 - 2003
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Statute Sales Tax Assam GST Madhya Pradesh Sub-Total (B)(iv) Grand Total Sales Tax Act (B) (i + ii + iii + iv) Customs Duty Commissioner (Appeals) Assam Board of Revenue Madhya Pradesh Board of Revenue 4,946.95 18.61 4,965.56 62,700.01 1993 - 1999 1985 - 1987 Forum Amount (Rs./Lakhs) Year
35,025.21 6.75
1994 - 2003 2000 - 2001
Grand Total Customs Duty (C) Grand Total (A + B + C) 10.
35,031.96 1,55,752.49
The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the financial year immediately preceding such financial year. According to information and explanations given to us and based on the checks carried out by us, the Company has not defaulted in repayment of dues to financial institutions or banks or debenture holders. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. The Company is not a chit fund/nidhi/mutual benefit fund/society. Therefore the provisions of sub-para (xiii) of para 4 of the Order are not applicable to the Company. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Therefore the provisions of sub-para (xiv) of para 4 of the Order are not applicable to the Company. In our opinion and according to information and explanations given to us, the Company has not provided guarantees for loans taken by others from banks and financial institutions. In our opinion, the term loans taken during the year have been applied for the purpose for which they were raised.
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17. According to the information and explanations given to us, and overall examination of the balance sheet of the Company, fund raised for short term basis have, prima facie, not been used during the period for long term investment. According to information and explanations given to us the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956 during the year. According to information and explanations given to us, securities have been created in respect of debentures issued which have been redeemed in full during the year. The Company has not made any public issue of any securities during the year. According to the information and explanations given to us and based on the audit procedures performed and representation obtained from the management, we report that no fraud on or by the Company, having material misstatement on the financial statements has been noticed or reported during the year under audit.
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For N.M. Raiji & Co. Chartered Accountants Vinay D. Balse Partner Membership No. 39434
111
Balance Sheet as at 31st March, 2005

Rs./Crores SCHEDULE SOURCES OF FUNDS Shareholders Funds : a) Capital b) Reserves and Surplus Loan Funds : a) Secured Loans b) Unsecured Loans Deferred Tax Liability Total APPLICATION OF FUNDS Fixed Assets : a) Gross Block b) Less : Depreciation c) Net Block d) Capital Work-in-Progress Investments Current Assets, Loans and Advances : a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances Less : Current Liabilities and Provisions : a) Liabilities b) Provisions 5 12,393.17 5,449.53 6 7 8 9 10 11 12 6,943.64 786.84 7,730.48 1,756.84 5,682.21 1,048.61 201.63 0.35 2,569.50 9,502.30 13 6,177.82 810.85 6,988.67 Net Current Assets Total
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF ACCOUNTS 20
2004-05
2003-04
1 2
338.93 8,101.92 8,440.85
338.90 7,403.91 7,742.81 542.73 1,158.07 1,700.80 1,454.08 10,897.69
3 4
319.91 1,865.44 2,185.35 1,374.75 12,000.95
11,387.43 4,809.32 6,578.11 496.14 7,074.25 2,048.42 5,402.53 1,000.29 199.21 0.32 2,827.82 9,430.17 6,448.14 1,207.01 7,655.15 1,775.02 10,897.69
2,513.63 12,000.95
M.B. LAL Chairman & Managing Director C. RAMULU Director-Finance N.R. NARAYANAN Company Secretary Place : New Delhi Date : May 26, 2005
FOR G.P. KAPADIA & CO. Chartered Accountants NIMESH BHIMANI Partner
FOR N.M. RAIJI & CO. Chartered Accountants VINAY D. BALSE Partner
112
Profit and Loss Account for the year ended 31st March, 2005
Rs./Crores
SCHEDULE INCOME Sale of Products
(Net of Discount : Rs. 462.60 crores, 2003-04 : Rs.315.94 crores)
2004-05 64,689.51 5,424.96 59,264.55 (7.86) 536.68 329.53 60,122.90 34.87 33,677.05 20,576.22 90.38 91.42 1,384.00 713.62 1,244.46 658.38 81.64 58,517.17
2003-04 56,332.57 5,993.47 50,339.10 160.30 1,018.26 379.39 51,897.05 357.50 30,304.41 15,017.04 79.15 317.61 1,228.97 570.79 1,171.36 605.35 55.65 49,350.33 2,904.22 (76.21) 2,980.43 1,022.45 54.04 1,903.94 4,422.10 6,326.04 190.39 25.00 203.88 542.93 95.65 5,268.19 56.18
Less : Excise Duty Paid Net Sales Net Recovery from/(Payment to) Industry Pool Accounts Recovery under Subsidy Schemes Other Income 14 INCREASE/(DECREASE) IN INVENTORY EXPENDITURE AND CHARGES Purchase of Products for resale Raw materials consumed Packages consumed Duties applicable to products Transhipping Expenses Payments to and provisions for Employees Other Operating Expenses Depreciation/Amortisation Interest 15
16 17 18
PROFIT FOR THE YEAR BEFORE PRIOR PERIOD ADJUSTMENTS AND TAXES PRIOR PERIOD ADJUSTMENTS DEBITS/(CREDITS) (NET) 19 PROFIT BEFORE TAXES PROVISION FOR CURRENT TAXATION PROVISION FOR DEFERRED TAXATION (NET) PROVISION FOR TAXATION OF EARLIER YEARS WRITTEN BACK PROFIT AFTER TAXES BALANCE BROUGHT FORWARD Transfer from Debenture Redemption Reserve PROFIT AVAILABLE FOR APPROPRIATION APPROPRIATED FOR : General Reserve Transfer to Debenture Redemption Reserve Interim Dividend Proposed Final Dividend Tax on Distributed Profits BALANCE CARRIED FORWARD EARNINGS PER SHARE (in Rs.) - Basic and Diluted
1,640.60 1,640.60 589.71 (79.33) (147.11) 1,277.33 5,268.19 100.00 6,645.52 127.73 169.67 339.33 71.15 5,937.64 37.69
(2004-05 : EPS = Net Profit - Rs.1,277.33 crores/Weighted avg. no. of shares - 33.893 crores; 2003-04 : EPS = Net Profit - Rs.1,903.94 crores/Weighted avg. no. of shares - 33.887 crores)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF ACCOUNTS
20
113
Schedules forming part of the Balance Sheet

Rs./Crores 2004-05 1. CAPITAL A. Authorised : 75,000 Cumulative Redeemable Preference Shares of Rs. 100/- each 34,92,50,000 Equity Shares of Rs.10/- each B. C. Issued : 33,93,30,000 Equity Shares of Rs.10/- each Subscribed and Called up : 33,93,30,000 Equity Shares of Rs.10/- each fully paid up Less : Calls unpaid by Others 2003-04
0.75 349.25 350.00 339.33 339.33 0.40 338.93
0.75 349.25 350.00 339.33 339.33 0.43 338.90
(1) 77,50,000 fully paid up equity shares of Rs. 10/- each were allotted to the shareholders of Lube India Limited on the amalgamation of that company for consideration other than cash. (2) 52,00,000 fully paid up equity shares of Rs. 10/- each were allotted to the President of India, for consideration other than cash, on the amalgamation of Caltex Oil Refining India Limited (CORIL) with the Company. (3) 26,44,30,000 shares of Rs. 10/- each were allotted as fully paid bonus shares by capitalisation of Capital Reserve, Capital Redemption Reserve and accumulated profits.
2.
RESERVES AND SURPLUS Share Premium Account As per last Balance Sheet Less : Calls Unpaid Debenture Redemption Reserve As per last Balance Sheet Add : Transfer from Profit and Loss Account Less : Transfer to Profit and Loss Account General Reserve As per last Balance Sheet Add : Transfer from Profit and Loss Account Profit and Loss Account Surplus per Account annexed
1,164.12 13.27 1,150.85 100.00 100.00 100.00 885.70 127.73 1,013.43 5,937.64 8,101.92
1,164.12 14.10 1,150.02 75.00 25.00 100.00 100.00 695.31 190.39 885.70 5,268.19 7,403.91
3.
SECURED LOANS i. 8.50 % Secured Non-Convertible Debentures redeemable at par on February 4, 2007 with an option for early redemption of debentures, at par, on February 4, 2005 (Secured against certain immovable properties of the Company.) ii. Overdrafts from Banks (secured by hypothecation of Stock-in-Trade)
319.91 319.91
400.00 142.73 542.73
114

Rs./Crores 2004-05 4. UNSECURED LOANS Fixed Deposits Short Term Loans from Banks (Due for repayment within one year Rs. 1665.33 crores, 2003-04 : Rs. 1155.28 crores) From Oil Industry Development Board (Due for repayment within one year Rs. 66.66 crores, 2003-04 : Rs. Nil) 0.11 1,665.33 2.79 1,155.28 2003-04
200.00
1,865.44 5. FIXED ASSETS (A & B)

Gross Block at cost as at 01/04/2004 Additions/ Deductions/ ReclassifiReclassifications cations Gross Block Depreciation Total at cost and Depreciation as at Amortisation and 31/03/2005 for the year Amortisation 2004-2005 upto 31/03/2005
1,158.07
Rs./Crores Net Net Block Block as at as at 31/03/2005 31/03/2004
A. 1. 2. 3. 4. 5. 6. 7. 8. 9.
OTHER THAN INTANGIBLE ASSETS Land - Freehold Roads and Culverts Buildings Leasehold Property - Land Railway Siding and Rolling Stock Plant and Equipment Furniture, Fixtures and Office/Lab. Equipment Transport Equipment Unallocated Capital Expenditure on Land Development (D) (C) 176.15 461.05 923.58 83.61 269.65 9,134.71 241.37 64.46 0.20 11,354.78 9.88 91.17 145.09 4.45 1.93 716.46 45.18 14.53 1,028.69 0.34 0.20 19.12 8.22 1.64 29.52 185.69 552.22 1,068.47 88.06 271.58 9,832.05 278.33 77.35 0.20 12,353.95 8.10 20.05 2.63 13.32 579.75 24.22 5.12 653.19 47.83 134.23 17.19 101.61 4,947.42 137.09 41.69 0.20 5,427.26 185.69 504.39 934.24 70.87 169.97 4,884.63 141.24 35.66 6,926.69 176.15 421.31 809.29 69.05 181.37 4,754.06 123.72 26.53 6,561.48
Total (A) B. 1. 2. 3. INTANGIBLE ASSETS Right of Way Technical/Process Licences Software
6.24 26.41 32.65 11,387.43 10,754.32
1.72 4.88 6.60 1,035.29 795.77
0.03 0.03 29.55 162.66
1.72 6.24 31.26 39.22 12,393.17 11,387.43
0.35 6.05 6.40 659.59 606.58
1.78 20.49 22.27 5,449.53 4,809.32
1.72 4.46 10.77 16.95 6,943.64 6,578.11
4.81 11.82 16.63 6,578.11
Total (B) Grand Total [(A) + (B)] Previous Year
A.
B. C. D.
Includes Rs. 2.60 crores (2003-2004 : Rs. 2.60 crores) of assets of erstwhile Kosan Gas Company arising out of vesting of that company with the Corporation. This amount includes Rs. 0.14 crores (2003-2004 : Rs. 0.14 crores) not handed over to the Corporation consisting of Freehold Land Rs. 0.01 crores (2003-2004 : Rs. 0.01 crores) Building Rs. 0.06 crores (2003-2004 : Rs. 0.06 crores) Plant & Equipment Rs. 0.07 crores (2003-2004 : Rs. 0.07 crores). Consequently, cumulative depreciation on the Fixed Assets amounting to Rs. 0.12 crores (2003-2004 : Rs. 0.12 crores) has not been provided for. Includes Rs. 62.05 crores (2003-2004 : Rs. 52.78 crores) being the Corporations share of cost of land and other assets jointly owned with other Oil Companies. Title Deeds to some of the lands acquired are still to be obtained. Includes Rs. 0.01 lakhs (2003-2004 : Rs. 0.01 lakhs) being share application money in Co-operative Housing Societies.
115

Rs./Crores 2004-05 6. CAPITAL WORK-IN-PROGRESS (at Cost) Unallocated Capital Expenditure and Materials at Site Advances for Capital Expenditure Capital Stores Capital Stores lying with Contractors Capital goods in transit Construction period expenses pending apportionment (Net of recovery) : Establishment charges Interest 648.16 57.91 47.88 4.45 2.03 760.43 25.71 0.70 26.41 786.84 7. INVESTMENTS (Long term, at Cost) A. TRADE INVESTMENTS Quoted 1. Mangalore Refinery and Petrochemicals Ltd. 29,71,53,518 Equity Shares of Rs. 10/- each fully paid up 2. 6.96% Oil Companies Government of India Special Bonds 2009 Unquoted 1. Guru Gobind Singh Refineries Ltd. (Wholly owned subsidiary) 29,57,10,000 Equity Shares of Rs. 10/- each fully paid-up (34,20,000 Equity Shares of Rs. 10/- each purchased/ allotted during the year) 2. Hindustan Colas Ltd. 47,25,000 Equity Shares of Rs. 10/- each fully paid up 3. Petronet India Ltd. 1,59,99,999 Equity Shares of Rs. 10/- each fully paid up 4. Petronet MHB Ltd. 1,30,000 Equity Shares of Rs. 10/- each fully paid up 5. Prize Petroleum Co. Ltd. 99,99,600 Equity Shares of Rs. 10/- each fully paid up 6. South Asia LPG Co. Pvt. Ltd. 2,75,00,000 Equity Shares of Rs. 10/- each fully paid up (50,00,000 Equity Shares of Rs. 10/- each allotted during the year) 7. Bhagyanagar Gas Ltd. 12,497 Equity Shares of Rs. 10/- each fully paid up Total (A) 423.38 9.03 38.87 4.66 1.49 477.43 18.11 0.59 18.71 496.14 2003-04
471.68 931.00
471.68 1,231.00
295.71
292.29
4.72 16.00 0.13 10.00 27.50
4.72 16.00 0.13 10.00 22.50
0.02 1,756.76
0.02 2,048.34
116

Rs./Crores 2004-05 B. OTHER INVESTMENTS Quoted 1. Government Securities of the face value of Rs. 0.02 crore (2003-04 : Rs. 0.02 crore) Deposited with Others On hand - Rs. 0.25 lakh (2003-04 : Rs. 0.25 lakh) 2. Scooters India Ltd. 10,000 Equity Shares of Rs. 10 each fully paid up Unquoted 1. Government Securities of the face value of Rs. 0.24 lakh (2003-04 : Rs. 0.24 lakh) Deposited with Others - Rs. 0.10 lakh (2003-04 : Rs. 0.10 lakh) On hand* - Rs. 0.14 lakh (2003-04 : Rs. 0.14 lakh) 2. East India Clinic Ltd. 1, % Debenture of face value of Rs.0.15 lakh Rs.0.15 lakh (2003-04 : Rs.0.15 lakh) 1, 5% Debenture of face value of Rs.0.07 lakh Rs.0.07 lakh (2003-04 : Rs.0.07 lakh) 3. Shushrusha Citizen Co-operative Hospital Limited 100 Equity Shares of Rs. 100/- each fully paid up Rs. 0.10 lakh (2003-04 : Rs. 0.10 lakh) 4. Petroleum India International (Association of Persons)** Contribution towards Seed Capital Total (B) Total Investments [(A) + (B)] Less : Provision for loss on Investments - Rs. 0.14 lakh (2003-04 : Rs. 0.14 lakh) 2003-04
0.02 0.01
0.02 0.01
0.05 0.08 1,756.84 1,756.84
0.05 0.08 2,048.42 2,048.42
Cost
2004-05 2003-04 Aggregate of quoted Investments 1,402.71 1,702.70 2,354.23 2,957.50 Aggregate of unquoted Investments 354.13 345.72 1,756.84 2,048.42
* ** Includes Rs. 0.14 lakhs (2003-04 : Rs. 0.14 lakhs) not in the possession of the Company Members in Petroleum India International (AOP) where Hindustan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd., Bongaigaon Refineries & Petrochemicals Ltd., Kochi Refineries Ltd., Engineers India Ltd., IBP Co. Ltd., Indian Petrochemicals Corporation Ltd., Chennai Petroleum Corporation Ltd. have a share of 12.50 % each
Market/ Redemption Value 2004-05 2003-04
117

Rs./Crores 2004-05 8. INVENTORIES (As per Inventory taken, valued and certified by the Management) Raw Materials (Including in-transit Rs. 221.93 crores; 2003-04 : Rs. 244.15 crores) Finished Products (Including in-transit between locations Rs. 449.54 crores; 2003-04 : Rs. 390.94 crores) Stock in Process Packages Stores and Spares * (Including in-transit Rs. 13.25 crores; 2003-04 : Rs. 8.47 crores) 1,166.24 4,107.17 275.07 7.96 5,556.44 125.77 5,682.21
* Includes stock lying with contractors Rs. 1.39 crores (2003-04 : Rs. 2.59 crores)
2003-04
931.53 4,149.69 197.68 13.42 5,292.32 110.21 5,402.53
9.
SUNDRY DEBTORS (Unsecured) Over six months : Considered good Considered doubtful Others : Considered good Less : Provision for Doubtful Debts 303.39 31.56 745.22 1,080.17 31.56 1,048.61 38.26 28.65 962.03 1,028.94 28.65 1,000.29
10. CASH AND BANK BALANCES Cash on hand Cheques Awaiting Deposit With Scheduled Banks : On Current Accounts On Non-operative Current Accounts* On Fixed Deposit Accounts ** With Others : In Current Account with Municipal Co-operative Bank Ltd. (maximum balance during the year Rs. 0.13 crores, 2003-04 : Rs. 0.09 crores) 1.21 0.59 196.74 0.01 3.02 1.11 0.25 194.85 0.01 2.94
0.06 201.63
0.05 199.21
* **
Represents amount deposited as per Court Order pending final disposal. Includes lodged as security deposit with Mumbai Port Trust - Rs. 0.54 crores (2003-04 : Rs.0.54 crores), with IAAI - Rs. 0.24 crores (2003-04 : Rs.0.24 crores) and with Sales Tax (Silvassa) - Rs.0.20 lakhs (2003-04 : Rs.0.20 lakhs)
118

Rs./Crores 2004-05 11. OTHER CURRENT ASSETS Interest accrued on Bank Deposits and Investments 12. LOANS AND ADVANCES Secured, considered good : Advances recoverable in cash or in kind or for value to be received * Interest Accrued thereon Unsecured, considered good : Advances recoverable in cash or in kind or for value to be received ** Balances with Excise, Customs, Port Trust etc. Other Deposits Prepaid Expenses Amounts recoverable from Pool Account Share application pending allotment Advance towards equity Other Accounts Receivable *** Unsecured, considered doubtful : Accounts Receivable and Deposits Less : Provision for Doubtful Receivables 0.35 0.32 2003-04
365.48 102.77 9.77 338.64 106.42 7.40 832.86 44.98 8.00 753.18 4.17 2,573.67 4.17 2,569.50
362.71 95.29 15.71 160.13 79.73 10.06 933.45 51.28 3.00 1,116.46 7.30 2,835.12 7.30 2,827.82
Includes Rs. 0.33 crore, (2003-04 : Rs.0.12 crore) due from Directors; maximum balance - Rs. 0.35 crore, (2003-04 : Rs.0.13 crore) and Rs. 0.02 crore (2003-04 : Rs. 0.02 crore) due from an Officer; maximum balance - Rs. 0.01 crore, (2003-04 : Rs. 0.02 crore). ** Includes Rs. Nil (2003-04 : Rs. Nil) due from Directors; maximum balance Rs. Nil, (2003-04 : Rs. Nil) and Rs. Nil (2003-04 : Rs. Nil) due from an Officer; maximum balance Rs. Nil, (2003-04 Rs.Nil). *** Includes Rs. 10.28 crores (2003-04 : Rs.10.11 crores) being amount due towards Companys share of profit in Petroleum India International.
13. CURRENT LIABILITIES AND PROVISIONS A. Current Liabilities Sundry Creditors i) Total outstanding dues of small scale industrial undertakings * ii) Total outstanding dues of creditors other than small scale industrial undertakings Deposits from Dealers/Consumers for LPG Cylinders Other Deposits Accrued Charges/Credits Preference share capital redeemed remaining unclaimed/uncashed Unclaimed Dividend** Unpaid matured fixed deposits Other Liabilities
4.41 2,094.84 2,549.33 90.28 200.39 0.01 10.84 1,227.72 6,177.82
2.78 1,188.41 2,373.41 60.18 101.32 0.01 10.05 0.06 2,711.92 6,448.14
119

Rs./Crores 2004-05 B. Provisions Provision for Tax (Net) Provision For Dividend Provision for Pension Provision for other retirement benefits Tax on Distributed Profits 301.91 339.33 37.04 84.98 47.59 810.85 6,988.67
* OUTSTANDINGS DUES OF SMALL SCALE UNDERTAKINGS FOR MORE THAN 30 DAYS M/s. A.K. Dey & Company, M/s. A.N. Instruments Private Ltd., M/s. A.V. Valves Ltd.. M/s. Adradin, M/s. AES Energy Works (P) Ltd., M/s. Ajay Industries, M/s. Anil Aluminium Works, M/s. Associated Suppliers, M/s. Cartal Technical Serivces, M/s. CDC Carboline India Pvt. Ltd., M/s. Chemtrols Engineering Ltd., M/s. Chhabi Electricals (P) Ltd., M/s. Coastal Ammonia (P) Ltd., M/s. Coromandel Paints & Chemicals, M/s. Dembla Valves (P) Ltd., M/s. Durga Electricals, M/s. Eastern Polycraft, M/s. Econo Valves (P) Ltd., M/s. Eskay Engineers & Precision, M/s. Evans Electricals, M/s. Fix Fit Fasteners Mfg. (P) Ltd., M/s. Flash Forge (P) Ltd., M/s. Floway Valves (P) Ltd., M/s. G. S. Engineering Co., M/s. Ganesh Engineering Works, M/s. Ganesh Enterprises, M/s. Gangotri Turbo Tech. Engg., M/s. Gaskets (India) Private Ltd.. M/s. Geetha Enterprises, M/s. Girish V. Kangane, M/s. Global Enterprises, M/s. Gobs Constructions, M/s. Goodrich Gasket (P) Ltd., M/s. Gopal Engineering Works, M/s. Gujarat Infrapipes (P) Ltd., M/s. H. Guru Industries, M/s. H.M. Technologies, M/s. Hemant Lahane, M/s. Hi-tec Valves, M/s. Hydro Pneumatics, M/s. IGP Engineers (P) Ltd., M/s. Inmacro, M/s. J J Industries, M/s. J R U Control (P) Ltd., M/s. Jayalakshmi Engineering Con., M/s. Joseph Leslie Drager Mfg. (P) Ltd., M/s. K.K.Vidyut, M/s. K.V. Fire Chemicals (India), M/s. Kailash Arts, M/s. Kevin Enterprises (P) Ltd., M/s. Leak Stop Experts, M/s. Levcon Instruments (P) Ltd., M/s. LPG Bulk Lloyds, M/s. M J Patel & Co. Ltd., M/s. M. Sagar, M/s. M.S. Fittings Manufacturing, M/s. Madras Industrial Products, M/s. Mahalakshmi Engineers, M/s. Mahendra & Singh Constructions, M/s. Manohar Singh Mehta, M/s. Marine Care N Associates, M/s. Mastan Engineering Works, M/s. Microcare Computers (P) Ltd., M/s. Mikroflo Filters (P) Ltd., M/s. Modern Electrical Works, M/s. Modern Papers, M/s. Mukund Engineering Services, M/s. Multi Thread Fasteners, M/s. Ncon Turbo Tech (P) Ltd., M/s. Newage Industries, M/s. Newtech Engineers, M/s. Nireka Engineering & Co. (P) Ltd., M/s. Pace Engineering Indl., M/s. Packings & Jointings Gasket, M/s. Parth Enterprises, M/s. Pavani Enterprises, M/s. Pavankumar Blasting Works, M/s. Pearsons & Drums, M/s. Pioneer Corporation, M/s. Pipefit Engineers, M/s. Prathyusha Safety Mfg. Co., M/s. Pravasi Enterprises, M/s. Precision Management Council, M/s. Prem Enterprises, M/s. President Engineering Works, M/s. Prime Mover Governer Services, M/s. PTD Fasteners (P) Ltd., M/s. Punjab Boot House, M/s. Pylon Engineers, M/s. Pyro Electric Instruments G., M/s. R R Engineering Company, M/s. Raj Petro, M/s. Rajendra More, M/s. Rank Controls & Instruments, M/s. Rao Welding Works, M/s. Remi Process Plant & Machin, M/s. Renuka Engineering Works, M/s. S P Constructions, M/s. S P M Mathew & Bros., M/s. S S R Electricals, M/s. S. Venkata Rao, M/s. S.K. Ahmed, M/s. S.K.M.L. Enterprises, M/s. Sabari Engineering Contract, M/s. Sanjay Sahai Sharma, M/s. Sebim Valves (India) (P) Ltd., M/s. Shalimar Valves (P) Ltd., M/s. Shanmuka Engineering Works, M/s. Shantinath Constructions, M/s. Shilpi Engineering, M/s. Shiva Jyothi Enterprises, M/s. Shreeji Suppliers, M/s. Sohan Engineering Enterprise, M/s. Southern Gasket Products, M/s. Sri Balaji Associates, M/s. Sri Gajalakshmi Industries, M/s. Sri Ganesh Ele & Rewinding, M/s. Sri Malleswar Enterprises, M/s. Sri Manoj Electrical Works, M/s. Sri Sai Leela Electrical Works, M/s. Sri Sanari Electrical & Eng., M/s. Sri Trinadha Electrical Works, M/s. Srinivasa Industries, M/s. Sriram & Co., M/s. Steel Samrat (India), M/s. Supreme Engineering Agencies, M/s. Suresh Engineering Works, M/s. Surya Sai Engineering Works, M/s. Swan Enterprises (P) Ltd., M/s. Swaran Singh & Co., M/s. TAS Engineering Co (P) Ltd., M/s. Technika, M/s. Techno Process Equipments Ltd., M/s. Teekay Tubes (P) Ltd., M/s. United Electrical & Rewindi, M/s. Usha Engineering Works, M/s. V.S. Mani, M/s. Vinsun Enterprises, M/s. Virgo Engineers Ltd., M/s. Voltamp Transformers (P) Ltd., M/s. Waaree Instruments Ltd., M/s. X Techs, M/s. Yash Packaging, M/s. Yazard. The above information is given to the extent available with the Company. ** No amount is due as at the end of the year for credit to Investors Education and Protection Fund.
2003-04 489.13 542.93 38.95 66.44 69.56 1,207.01 7,655.15
120
Schedules forming part of the Profit and Loss Account

Rs./Crores 2004-05 14. OTHER INCOME Interest (Gross) : * On Investments On Deposits On Staff Loans On Customers Accounts On Others Dividend Income Share of Profit from Petroleum India International (AOP) Rent Recoveries Profit on Sale of Investments Exchange rate variation (Net) Miscellaneous Income ** 74.77 3.85 14.76 4.11 20.19 117.68 0.71 0.67 33.31 6.60 77.88 92.68 211.85 329.53
Note : * Tax deducted at source amounts to Rs. 0.78 crores (2003-04 : Rs.5.56 crores) ** Miscellaneous Income includes : Profit on contract - Rs. Nil (2003-04 : Rs.2.05 crores), Gross billing : Rs. Nil (2003-04 : Rs.3.15 crores), Cost : Rs. Nil (2003-04 : Rs. 1.10 crores)
2003-04
86.02 17.48 18.53 3.78 25.49 151.30 1.47 27.80 129.90 68.92 228.09 379.39
15. INCREASE/(DECREASE) IN INVENTORY Closing Stock : Stock in Process Finished Products Less : Opening Stock : Stock in Process Finished Products 275.07 4,107.17 4,382.24 197.68 4,149.69 4,347.37 34.87 16. PAYMENTS TO AND PROVISIONS FOR EMPLOYEES Salaries, Wages, Bonus etc. * Contribution to Provident Fund Pension, Gratuity etc. Voluntary Retirement Compensation Employee Welfare Expenses ** Less : Recoveries 453.45 35.19 23.16 41.98 164.17 4.33 159.84 713.62
* ** Includes Rs. 16.79 crores (2003-04 : Rs. 12.59 crores) towards leave encashment on the basis of actuarial valuation. Includes Rs. 1.75 crores (2003-04 : Rs. 3.18 crores) towards post retirement medical benefits on the basis of actuarial valuation.
197.68 4,149.69 4,347.37 212.67 3,777.20 3,989.87 357.50
373.86 34.24 9.19 158.03 4.53 153.50 570.79
121
Schedules forming part of the Profit and Loss Account

Rs./Crores 2004-05 17. OTHER OPERATING EXPENSES Consumption of Stores, Spares and Chemicals Power and Fuel Less : Fuel of own production consumed Repairs and Maintenance to Buildings Repairs and Maintenance to Plant and Machinery Repairs and Maintenance to other assets Insurance Rates and Taxes Equipment Hire Charges Rent Travelling and Conveyance Printing and Stationery Electricity and Water Charities and Donations Loss on Sale/write off of Fixed Assets/CWIP Stores and spares written off Write off of Goodwill (refer note 2 of Schedule 20B) Provision for Doubtful Receivables Provision for Doubtful Receivables written back Provision for Doubtful Debts (After adjusting provision no longer required written back Rs 0.11 crores, 2003-04 :Rs.0.07 crores) Provision for assets under reconciliation Security Charges Advertisement and Publicity Sundry Expenses and Charges (Not otherwise classified) Consultancy and Technical Services Exploration Cost 70.77 969.53 956.76 12.77 10.23 234.28 5.34 29.71 320.98 1.04 55.82 59.39 9.63 101.57 21.13 4.02 3.12 1.22 (3.13) 2.91 27.43 94.60 157.50 23.34 0.79 1,244.46 18. INTEREST On Long Term Loans On Short Term Loans On Overdraft from Banks On Fixed Deposits Others 78.37 3.13 0.13 0.01 81.64 19. PRIOR PERIOD DEBITS/(CREDITS) Raw Materials Consumed (76.21) (76.21) 0.02 44.88 8.72 1.95 0.08 55.65 67.87 866.34 857.17 9.17 11.70 165.68 3.49 40.08 300.69 0.28 57.32 55.97 7.69 94.93 7.33 2.93 0.04 5.84 (0.07) 39.26 25.60 82.91 153.68 38.97 1,171.36 2003-04
122
Statement of Significant Accounting Policies and Notes Forming Part of Accounts

20A. SIGNIFICANT ACCOUNTING POLICIES Accounts are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles (GAAP), Accounting Standards issued by The Institute of Chartered Accountants of India (I.C.A.I.) and the provisions of the Companies Act, 1956. All income and expenditure having material bearing are recognised on the accrual basis, except where otherwise stated. Necessary estimates & assumptions of income & expenditure are made during the reporting period and difference between the actuals and the estimates are recognised in the period in which the results materialise. 1. 2. FIXED ASSETS Land acquired on lease for 99 years or more is treated as freehold land. INTANGIBLE ASSETS Cost of Right of Way for laying pipelines is capitalised as Intangible Asset and being perpetual in nature is not amortised. Costs incurred on technical know-how/license fee relating to process design/plants/facilities are capitalised as Intangible Assets. Cost of Software directly identified with hardware is capitalised along with the cost of hardware. Application software is capitalised as Intangible Asset. 3. CONSTRUCTION PERIOD EXPENSES ON PROJECTS Related expenditure (including temporary facilities and crop compensation expenses) incurred during construction period in respect of plan projects and major non-plan projects are capitalised. Interest on project specific borrowings are capitalised. 4. DEPRECIATION a) Depreciation on Fixed Assets is provided on straight line method, in the manner and at rates prescribed under Schedule XIV to the Companies Act, 1956 and is charged pro rata on monthly basis on assets, from/upto and inclusive of the month of capitalisation/sale, disposal or deletion during the year. All assets costing upto Rs. 5000/-, other than LPG cylinders and pressure regulators, are fully depreciated in the year of capitalisation. Premium on leasehold land is amortised over the period of lease. Machinery Spares which can be used only in connection with an item of fixed asset and the use of which is expected to be irregular, are depreciated over a period not exceeding the useful life of the principal item of fixed asset. Replacement of such spares is charged to revenue. Intangible Assets other than application software are amortised on a straight line basis over the useful life of the parent asset. Application software are normally amortised over a period of four years or over its useful life before it becomes obsolete, whichever is earlier.
b) c) d)
e) f) 5.
IMPAIRMENT OF ASSETS Assessment of impairment of fixed assets is carried out on each balance sheet date. Impairment loss is recognised when carrying amount of any CGU exceeds its recoverable amount.
6.
FOREIGN CURRENCY TRANSACTIONS a) b) Foreign Currency transactions during the year are recorded at the rates of exchange prevailing on the dates of transactions. All foreign currency assets and liabilities are restated at the rates ruling at the year end.
123
53rd Annual Report 2004-05 Statement of Significant Accounting Policies and Notes Forming Part of Accounts
c) All exchange differences are dealt with in the profit and loss account except those relating to acquisition on fixed assets which are adjusted in the cost of assets and those covered by forward contract rates where the gains/losses arising from such restatement are recognised over the period of such contracts.
7.
INVESTMENTS a) b) Long-term investments are valued at cost and provision for diminution in value thereof is made, wherever such diminution is other than temporary. Current investments are valued at lower of cost or fair market value.
8.
INVENTORIES a) b) c) d) e) Crude oil is valued at cost on First In First Out (FIFO) basis or at net realisable value, whichever is lower. Stock-in process is valued at raw material cost plus cost of conversion or at net realisable value, whichever is lower. Finished products are valued at cost (on FIFO basis) or at net realisable value, whichever is lower. Empty packages are valued at cost. Stores and spares are valued at weighted average cost.
Value of surplus, obsolete and slow moving stores and spares, if any, is reduced to net realisable value. Surplus items, when transferred from completed projects are valued at cost/estimated value, pending periodic assessment/ascertainment of condition. 9. DUTIES ON BONDED STOCKS Excise/Customs duty is provided on stocks stored in Bonded Warehouses (excluding goods exempted from duty/exports or where liability to pay duty is transferred to consignee). 10. DEPOSITS Amounts deposited with Government/semi-Government agencies not exceeding Rs.1000/- each are directly charged as an expense in the year of payment. 11. PROVISIONS A provision is recognised as present obligation of past event based on estimate as on the balance sheet date and settled on virtual certainty. 12. EXPLORATION & PRODUCTION EXPENDITURE Successful Efforts Method of accounting is followed for Oil & Gas exploration and production activities as stated below : a) b) c) Cost of surveys, studies, carrying and retaining undeveloped properties are expensed out in the year of incurrence. Cost of acquisition, drilling and development are treated as capital work-in-progress when incurred and capitalised when the well is ready to commence commercial production. Accumulated costs on exploratory wells in progress are expensed out in the year in which they are determined to be dry.
The proportionate share in the assets, liabilities, income and expenditure of joint operations are accounted as per the participating interest in such joint operations.
124

13. RETIREMENT BENEFITS Liability towards leave encashment, pension, post-retirement medical benefits and gratuity to employees is determined on actuarial valuation done at the year end. Liability so determined is funded in the case of gratuity and provided for in other cases. 14. SALE OF PRODUCTS Sales are net of discount, include applicable excise duty, surcharges and other elements as allowed to be recovered as part of the price but exclude sales tax. 15. RESEARCH & DEVELOPMENT Expenditure incurred on research activities are charged off in the year they are incurred. Expenses directly related to development activities which are capable of generating future economic resources are treated as intangible assets. 16. TAXES ON INCOME a) b) Provision for current tax is made in accordance with the provisions of the Income Tax Act, 1961. Deferred tax on account of timing difference between taxable and accounting Income is provided using the tax rates and tax laws enacted or substantively enacted by the Balance Sheet date.
17. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS Contingent Liabilities and Capital Commitments are considered only for items exceeding Rs.1 lakh in each case. Contingent Liabilities in respect of show cause notices are considered only when converted into demands. 18. ACCOUNTING/CLASSIFICATION OF EXPENDITURE AND INCOME a) Net Recovery from/Payment to Pool Account : Claim on Industry Pool Account/Government are accounted on acceptance in principle on the basis of available instructions/clarifications subject to final adjustment after audit as stipulated. b) c) d) e) Insurance claims are accounted on acceptance basis. All other claims/entitlements are accounted on the merits of each case/realisation. Raw materials consumed are net of discount towards sharing of under recoveries. Prior Period items : Income and expenditure over Rs.1 lakh in each case pertaining to prior period items arising in the current period are considered as prior period items. 20B. NOTES FORMING PART OF ACCOUNTS 1. The assets and liabilities relating to LPG business of M/s. Kosan Gas Company were vested in the Corporation by an Act of Parliament which was challenged by the erstwhile owners in the Delhi High Court. A compromise agreement for out of court settlement, negotiated with erstwhile owners and approved by the Government of India, has been filed in the Delhi High Court. Pursuant to the deeds of assignment signed between the President of India and the Company in its capacity as the custodian of Parel Investment and Trading Company Limited (PITCL) and Domestic Gas Limited (DGL), the assets and liabilities relating to LPG businesses of PITCL and DGL were acquired by the Company resulting in a Goodwill of Rs. 1.22 crores being excess of liabilities over assets, which has been charged to Profit & Loss Account. In compliance with Accounting Standard 17 on Segment Reporting issued by The Institute of Chartered Accountants of India, the required information is given in note 10S of Notes to Accounts.
2.
3.
125
4. (a) Inter-Oil Company transactions are reconciled on continuous basis. However, year end balances are subject to confirmation/reconciliation. (b) Customers Accounts are reconciled on an ongoing basis and are not likely to have a material impact on the outstanding or classification of the accounts. 5. In respect of sale of subsidised LPG (Domestic) and SKO (PDS), as advised by the Ministry of Petroleum & Natural Gas, a part of the under-recovery suffered by the Oil Marketing Companies during the year was compensated by ONGC and GAIL, by offering discount on price of crude, SKO and LPG purchased from them. Accordingly, the Company has accounted the discount received as follows: (a) Rs. 490.66 crores (2003-04: Rs. 277.35 crores) discount received on crude oil purchased from ONGC has been adjusted against Raw Material Cost and (b) Rs. 787.68 crores (2003-04: Rs. 417.22 crores) discount received on SKO (PDS) and LPG (Domestic) purchased from ONGC and GAIL has been adjusted against Purchase of Product for Resale. 6. Deferred Tax Assets/(Liabilities) arising due to timing differences comprise of : Rs./Crores 2004-05 Deferred Tax Asset Provision for Pension Provision for Medical Benefits Provision for Leave Encashment Others Total (A) Deferred Tax Liability Depreciation Others Total (B) Deferred Tax Liability [(A) + (B)] 7. Related Party disclosure : Subsidiary Company 2004-05 Sales Purchases Investment Advance towards Equity Share application pending allotment Interest Services Others Closing balances 14.00 2.12 2.07 0.18 (6.76) 2003-04 19.89 1.30 2.80 5.78 (2.95) Joint Venture Companies 2004-05 91.53 5,039.64 5.00 0.34 2.83 4.44 (240.12) 2003-04 43.53 5,646.87 13.51 9.98 0.80 4.82 2.30 (300.35) Total 2004-05 91.53 5,053.64 2.12 5.00 0.34 4.90 4.62 (246.88) 2003-04 43.53 5,646.87 33.40 11.28 0.80 7.62 8.08 (303.30) 12.47 2.72 18.65 36.05 69.89 (1,412.52) (32.10) (1,444.62) (1,374.73) 2003-04 13.98 2.27 13.71 15.92 45.88 (1,474.39) (25.57) (1,499.96) (1,454.08)
126

The names of parties are as follows : Subsidiary Company : Guru Gobind Singh Refineries Ltd. Joint Venture Companies : Mangalore Refineries and Petrochemicals Ltd., Hindustan Colas Ltd., Prize Petroleum Co. Ltd., Petronet India Ltd., Petronet MHB Ltd., South Asia LPG Co. Pvt. Ltd. and Bhagyanagar Gas Ltd. Key Management Personnel : Shri M. B. Lal, Chairman & Managing Director Shri D. S. Mathur, Director - Refineries Shri Arun Balakrishnan, Director - Human Resources Shri C. Ramulu, Director - Finance Shri S. Roy Choudhury, Director- Marketing (from May 10, 2004) Details of remuneration to directors are given in note 10F of Notes to Accounts. 8. The Company has been consistently following a policy of accounting for income tax benefits in the year in which the benefit is allowed in view of the past experience of uncertainties surrounding the claim for tax benefits. During the year, Company upon completion of assessment for the financial year 2001-2002 (assessment year 2002-2003) was granted deduction for claim under Section 80-IB, being the first year for which the claim was made. The Company while writing back the provision of Rs. 47.52 crores attributable to the said tax benefits, keeping in mind the past practice, has continued with the conservative accounting treatment for the subsequent years. Previous years figures have been regrouped/reclassified wherever necessary. Rs./Crores 2004-05 10 A. B. Estimated amount of contracts remaining to be executed on Capital Account not provided for No provision has been made in the accounts in respect of the following disputed demands/claims since they are subject to appeals/representations and a substantial portion thereof is recoverable from Pool Account i. Income Tax ii. Sales Tax/Octroi iii. Excise/Customs iv. Land Rentals & Licence Fees v. Others Contingent Liabilities not provided for in respect of i. Income Tax ii. Sales Tax/Octroi iii. Excise/Customs iv. Employee Benefits/Demands (to the extent quantifiable) v. Guarantees on behalf of others vi. Claims against the Company not acknowledged as debts 1,071.21 2003-04 341.62
9.
632.05 910.58 39.73 68.38 10.55 83.72 111.32 69.48 166.82 150.99
551.19 706.60 32.81 33.10 10.55 83.72 114.78 49.90 166.82 157.23
C.
127
Rs./Crores 2004-05 D. Payment to Auditors: Audit fees Tax audit fees Other Services Reimbursement of expenses Items included under Other Account Heads viz. Employee Welfare Expenses Salaries, Wages, Bonus etc. Contribution to Provident Funds Stores & Provision Electricity and Water (Net of recoveries) Repairs and Maintenance to Buildings Repairs and Maintenance to Plant & Machinery Repairs and Maintenance to Other Assets Pension/Gratuity/Medical expenses Rates and Taxes Rent (Net of Recoveries) Depreciation Medical Expenses Uniform/work clothes Insurance Security Others (Net) Managerial Remuneration : G. H (i) Salary and Allowances Contribution to Provident Fund and other funds Other benefits Raw materials Stores, Spares and Chemicals Capital Goods, Components and Spares 0.11 0.02 0.05 0.03 2003-04 0.10 0.01 0.07
E.
5.36 0.37 7.72 2.86 4.50 1.95 0.15 2.95 1.19 42.23 1.21 43.14 25.67 2.59 0.76 17.41 0.43 0.04 0.13 13,867.05 38.36 42.75
5.82 0.35 7.17 4.62 4.38 3.49 0.57 3.03 1.18 41.15 1.23 42.27 23.51 2.93 0.72 10.39 0.37 0.04 0.09 9,258.04 29.56 24.82
F.
C.I.F. value of imports during the year (excludes canalised imports):
Expenditure in foreign currency on account of : Engineering, Technical and other services, demurrage charges, royalties and other matters (ii) Foreign Currency payments for crude
64.01 13,849.09 1,943.51
5.33 9,237.84 1,123.59
I.
Earnings in foreign exchange : (On accrual basis) Export of goods calculated on FOB basis Includes Rs. 330.56 crores (2003-04 : Rs. 87.91 crores) received in Indian currency out of repatriable funds of foreign airlines customers
128

Rs./Crores 2004-05 J. Value of Raw Materials, Spare Parts and Components consumed : (i) Raw Materials Imported (in %) Imported (in Value) Indigenous (in %) Indigenous (in Value) 73.26 15,073.62 26.74 5,502.60 37.54 30.50 62.46 50.76 13,000,000 122,173 3,391 556 782 5,913 69.36 10,363.52 30.64 4,577.31 47.12 42.85 52.88 48.09 13,000,000 122,173 3,391 556 782 5,913 2003-04
(ii) Spare Parts & Components Imported (in %) Imported (in Value) Indigenous (in %) Indigenous (in Value) K. Licensed capacity at year end in Metric Tonnes p.a. : (a) Petroleum fuel and lube products (b) Lubricating Oils (c) Textile Auxiliaries (d) Hydraulic Brake Fluid (e) Insecticides (f) Greases Installed capacity at year end in Metric Tonnes per annum as certified by the Management on which the Auditors have relied upon : (a) Petroleum fuel and lube products (b) Lubricating Oils, Greases and Textile Auxiliaries * (c) Hydraulic Brake Fluid and Insecticides
* Product manufacturing facilities are interchangeable
L.
13,000,000 319,779 4,062
13,000,000 319,779 4,062
M. Production in Metric Tonnes : (a) Petroleum fuel and lube products i. Bulk Petroleum Products ii. Lubricating Oil Base Stocks (including Transformer Oil Base Stocks) iii. Carbon Black Feed Stock iv. Axle Oil v. Rubber Processing Oil (b) Lubricating Oils (c) Textile Auxiliaries (d) Insecticides (e) Greases
12,821,603 214,023 29,346 277 20,811 176,863 106 238 3,273
12,531,676 278,085 28,734 349 14,317 261,921 111 677 3,122
129
N. Information for each class of goods purchased, sold and stocks during the year : Rs./Crores
Opening Stock 2004-05 a. Bulk Petroleum Products Lubricating Oil Base Stocks (including Transformer oil Base stock) Carbon Black Feed Stock Axle Oil Lubricating Oils Textile Auxiliaries Insecticides Greases Automotive Accessories Total M.T. Value M.T. Value 2112103 3961.87 25870 51.50 2003-04 1837153 3623.70 29607 57.84 Purchases 2004-05 14697636 33677.05 2003-04 16921277 30583.90 2004-05 28082980 63703.18 38340 98.61 Sales 2003-04 29227690 55130.82 66254 142.87 Closing Stock 2004-05 1556197 3876.43 31033 61.95 2003-04 2112103 3961.87 25870 51.5
b.
c. d. e. f. g. h. i.
M.T. Value M.T. Value M.T. Value M.T. Value M.T. Value M.T. Value Value
2332 2.47 48 0.15 27664 123.56 46 0.17 725 2.34 1848 7.52 0.12 4149.69
2320 2.42 38 0.09 22373 86.97 37 0.14 426 1.07 1290 4.75 0.21 3777.20
33677.05
30583.90
31283 39.59 285 0.73 173194 824.66 119 0.58 379 2.87 3133 19.29 64689.51
28409 32.94 338 0.79 256572 1005.52 100 0.49 372 2.94 2560 16.20 56332.57
193 0.24 40 0.13 31308 155.88 33 0.14 584 2.99 1985 9.30 0.11 4107.17
2332 2.47 48 0.15 27664 123.56 46 0.17 725 2.34 1848 7.52 0.12 4149.69
No adjustments for transit/operational/temperature variations/consumption for own operation have been made in regard to quantitative information. Previous years figures are recast wherever necessary for comparison and adjustment.
2004-05 O. Raw Materials consumed: (a) Crude Oil Processed: Tonnes Value (b) Other Petroleum Products : Tonnes Value (c) Additives, Inhibitors and Chemicals: Value (d) Non-Petroleum Products: Value Expenditure incurred on Research and Development : Capital Revenue Interest on Project specific borrowings capitalised Exchange Differences : i) Adjusted in the carrying amount of Fixed Assets during the accounting period. ii) In respect of Forward Exchange Contracts to be recognised in Profit or Loss for one or more subsequent accounting periods
2003-04
13,942,043 20,316.50 43,049 83.68 99.36 76.68 0.47 1.28 0.10
13,699,685 14,709.60 49,585 48.12 90.80 92.31 0.99 1.47
P.
Q. R.
0.70 1.08
(0.17) 0.61
130

S. Information regarding Primary Segment Reporting as per AS-17 for the year ended March 31, 2005 is as under : Rs./Crores 2004-05 Petroleum Other Products Businesses Revenue External Revenue Inter-segment Revenue Total Revenue Result Segment Results Operating Profit Less: Interest Expenditure Prior Year Expenditure Add: Interest/Dividend Income Profit on Sale of Investments Profit before Tax Less: IT(including Deferred tax) Profit after Tax Other Information Segment Assets Corporate Assets Total Assets Segment Liabilities Corporate Liabilities Total Liabilities Capital Expenditure Depreciation
1.
2003-04 Petroleum Other Products Businesses Total
Total
59,997.23 59,997.23 1,600.03 1,600.03 81.64
59,997.23 51,744.28
51,744.28 51,744.28 2,959.52 2,959.52 55.65 76.21 152.77 2,980.43 1,076.49 1,903.94 16,504.42 2,048.42 18,552.84 7,797.88 3,012.15 10,810.03 941.32 606.58
59,997.23 51,744.28 (3.45) (3.45) 1,596.58 1,596.58 81.64 119.06 6.60 1,640.60 363.27 1,277.33 2,959.52 2,959.52
17,229.33
3.45 17,232.78 16,504.42 1,756.84 18,989.62
7,121.67
7,121.67 3,040.18 10,161.85
7,797.88
1,322.63 659.59
1,322.63 659.59
941.32 606.58
2.
3.
The Company is engaged in the following business segments: a) Downstream Petroleum i.e. Refining and Marketing of petroleum products. b) Exploration and Production of hydrocarbons. Segments have been identified taking into account the nature of activities and the nature of risks and returns. Segment Revenue comprises the following: a) Turnover (Net of Excise Duties) b) Subsidy from Government of India c) Net Claim/(surrender to) PPAC/GOI d) Other income (excluding interest income, dividend income and investment income) There are no geographical segments.
131
Cash Flow Statement for the year ended 31st March, 2005
Rs./Crores 2004-05 Cash Flow From Operating Activities Net Profit before Tax & Extraordinary items Adjustments for : Depreciation/Amortisation Loss on Sale/write off of Fixed Assets/CWIP Provision for assets under reconciliation Interest Expense Interest Income Income from Investment Increase/(Decrease) in Provision for Doubtful Debts/Receivables Dividend Received Exchange rate difference on loans Profit on sale of Investments Operating Profit before Working Capital Changes Increase/(Decrease) in Working Capital : Trade Receivables Other Receivables Other Current Assets Inventories Trade and Other Payables Amounts recoverable from Pool Account Cash generated from operations Direct Taxes paid (Net) Cash Flow before extraordinary items Extraordinary items Net Cash from operating activities (A) Cash Flow From Investing Activities Purchase of Fixed Assets (incl. Capital Work in Progress/excluding interest capitalised) Sale of Fixed Assets Purchase of Investment (Including share application money pending allotment/Adv. towards Equity) Sale Proceeds of Investments Interest Income Dividend Received Income from Investment Net Cash used in investing activities (B) 1,640.60 659.59 4.02 81.64 (78.62) (0.67) (0.22) (0.71) 10.14 (6.60) 2,309.17 (51.23) 160.64 (0.03) (279.69) (291.64) 1,847.23 100.59 1,947.82 (629.82) 1,318.00 1,318.00 2,980.43 606.58 2.93 39.26 55.65 (103.50) (1.47) 5.77 (6.11) 3,579.54 (137.85) (483.33) 0.09 (279.98) (633.01) 2,045.46 195.19 2,240.65 (617.70) 1,622.95 1,622.95 2003-04
(1,284.86) 2.79 (7.13) 306.60 78.62 0.71 0.67 (902.60)
(889.50) 0.92 (34.21) 0.21 103.50 1.47 (817.61)
132
Rs./Crores 2004-05 Cash Flow From Financing Activities Proceeds from Calls in Arrear (Net) Loans Repaid Loans Raised Interest Paid on Loans Dividend paid (including dividend distribution tax) Net Cash used in financing activities (C) Net Increase/(Decrease) in Cash and Cash equivalents [(A) + (B) + (C)] Cash & Cash equivalents as on 1st April (Opening) : Cash/Cheques on Hand Balances with Scheduled Banks - On Current Accounts - Others Balances with other Banks Overdrafts from Banks Cash & Cash equivalents as on 31st March (Closing): Cash/Cheques on Hand Balances with Scheduled Banks - On Current Accounts - Others Balances with other Banks Overdrafts from Banks 0.86 (8,454.84) 8,750.38 (81.64) (804.92) (590.17) 2003-04 2.47 (4,408.17) 4,796.61 (55.65) (912.51) (577.25)
(174.76)
228.10
1.36 194.85 2.95 0.05 199.21 (142.73) 56.48 1.80 196.74 3.03 0.06 201.63 (319.91) (118.28)
5.46 4.14 8.89 0.06 18.55 (190.17) (171.62) 1.36 194.85 2.95 0.05 199.21 (142.73) 56.48 228.10
Net Increase/(Decrease) in Cash and Cash equivalents

Previous years figures have been regrouped/reclassified wherever necessary.
(174.76)
For and on behalf of the Board M. B. LAL Chairman & Managing Director Place : New Delhi Date : May 26, 2005 C. RAMULU Director - Finance
133
Balance Sheet Abstract and Company's General Business Profile

I. REGISTRATION DETAILS REGISTRATION NO. : BALANCE SHEET DATE : 0 8 8 5 8 STATE CODE : 1 1 3 1 0 3 2 0 0 5 CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousands) PUBLIC ISSUE N I L BONUS ISSUE N I L
II.
RIGHTS ISSUE N I L PRIVATE PLACEMENT N I L
III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousands) TOTAL LIABILITIES TOTAL ASSETS 1 2 0 0 0 9 4 5 6 1 2 0 0 0 9 4 5 6 SOURCES OF FUNDS PAID-UP CAPITAL 3 3 8 9 2 7 7 SECURED LOANS 3 1 9 9 1 1 7 DEFERRED TAX LIABILITY 1 3 7 4 7 5 2 0 APPLICATION OF FUNDS NET FIXED ASSETS 7 7 3 0 4 8 2 5 NET CURRENT ASSETS 2 5 1 3 6 2 4 4 ACCUMULATED LOSSES N I L IV. PERFORMANCE OF COMPANY (Amount in Rs. Thousands) TURNOVER 6 4 6 8 9 5 0 8 2 + PROFIT/LOSS BEFORE TAX 1 6 4 0 6 0 4 0 EARNING PER SHARE IN RS. 3 7 . 6 9 V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS ITEM CODE NO. (ITC CODE) 2 7 1 0 PRODUCT DESCRIPTION : B U L K P E ITEM CODE NO. (ITC CODE) 2 7 1 0 0 0 PRODUCT DESCRIPTION : L U B R I C A + TOTAL EXPENDITURE 5 8 4 8 2 2 9 3 2 PROFIT/LOSS AFTER TAX 1 2 7 7 3 3 1 4 DIVIDED RATE % 1 5 0 OF COMPANY (As per monetary terms) INVESTMENTS 1 7 5 6 8 3 8 7 MISC. EXPENDITURE N I L RESERVES AND SURPLUS 8 1 0 1 9 1 6 8 UNSECURED LOANS 1 8 6 5 4 3 7 4
T R O L E U M 4 1 / 6 1 N T S
P R O D U C
T S
ITEM CODE NO. (ITC CODE) 2 9 0 1 2 2 0 0 PRODUCT DESCRIPTION : P R O P Y L E N E M.B. LAL Chairman & Managing Director Place : New Delhi Date : May 26, 2005 C. RAMULU Director-Finance N.R. NARAYANAN Company Secretary
134
Statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies
1. 2. 3. 4. 5. Name of the Subsidiary Company Financial period of the Subsidiary Company ended Total issued Share Capital of the Subsidiary Company Number of shares held in the Subsidiary Company Percentage of shares held in the subscribed capital of the Subsidiary The net aggregate amount, so far as it concerns the members of the Company and is not dealt with in the Companys accounts, of the Subsidiarys i) ii) Profit/(Loss) for the year ended 31st March, 2005 Profit/(Loss) of the previous financial years of the Subsidiar y since it became the Companys Subsidiary NIL Guru Gobind Singh Refineries Ltd. 31st March, 2005 29,57,10,000 Equity Shares of Rs. 10 each 29,57,10,000 Equity Shares of Rs. 10 each 100%
6.
NIL
7.
The net aggregate amount, so far as it concerns the members of the Company and is dealt with in the Companys accounts, of the Subsidiarys i) ii) Profit/(Loss) for the year ended 31st March, 2005 Profit/(Loss) of the previous financial years of the Subsidiar y since it became the Companys Subsidiary NIL
NIL
For and on behalf of the Board M.B. LAL Chairman & Managing Director Place : New Delhi Date : May 26, 2005 C. RAMULU Director - Finance N.R. NARAYANAN Company Secretary
135
Social Welfare
Income and Expenditure Account for the Township, Education, Medical and Other Social Welfare facilities for the year ended 31st March, 2005. Rs./Crores INCOME : Recovery of house rent Recovery of utilities Other recoveries Excess of expenditure over income 2004-05 3.36 0.32 0.66 159.84 164.17 EXPENDITURE : Salaries, Wages, Bonus etc. Contribution to Provident Funds Consumption of Stores, Spares and Chemicals Electricity and Water Repairs and Maintenance to Buildings Repairs and Maintenance to Plant & Machinery Repairs and Maintenance to Other Assets Pension/Gratuity Rates & Taxes Rent Depreciation Medical Expenses Uniform/Work clothes Insurance Security Others 2003-04 2.61 0.37 0.61 149.57 153.16
5.36 0.37 7.86 3.15 4.49 1.95 0.15 2.95 1.19 45.59 1.21 44.89 25.67 2.59 0.77 15.97 164.17
5.82 0.35 7.16 4.93 4.38 3.49 0.57 3.03 1.18 43.75 1.22 39.08 23.50 2.93 0.72 11.05 153.16
SCHEDULE OF FIXED ASSETS (TOWNSHIP)

Gross Block at cost as at 1.4.2004 1. 2. 3. 4. Land - Freehold Buildings, Roads etc. Plant and Machinery Furniture, Fixtures and Office/Laboratory Equipment Transport Equipment Total Previous Year 0.10 25.04 4.15 Additions/ Reclassifications Deductions/ Reclassifications Gross Block at cost as at 31.3.2005 0.10 25.43 4.15 Depreciation Total and Depreciation Amortisation and for the year Amortisation 2004-2005 upto 31.3.2004 0.42 0.16 6.39 2.55 Net Balance as at 31.3.2005 0.10 19.04 1.60 Net Balance as at 31.3.2004 0.10 19.07 1.77
0.39
4.25 0.01 33.55 25.69
0.19 0.58 7.99
0.02 0.02 0.13
4.42 0.01 34.11 33.55
0.06 0.64 1.89
0.70 9.64 9.00
3.72 0.01 24.47 24.55
3.61 24.55
5.
136
C & AG's Comments

Comments of the Comptroller and Auditor General of India under Section 619 (4) of the Companies Act, 1956 on the accounts of Hindustan Petroleum Corporation Limited for the year ended 31st March, 2005. (Addendum to the Directors' Report dated May 26, 2005)
I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditors Report under Section 619(4) of the Companies Act, 1956 on the accounts of Hindustan Petroleum Corporation Limited for the year ended 31st March, 2005.
Revathy Iyer Principal Director of Commercial Audit & Ex-officio Member, Audit Board-II, Mumbai
Place : Mumbai Date : June 24, 2005
137
Review of Accounts by C & AG

Review of Accounts of Hindustan Petroleum Corporation Limited for the year ended 31st March, 2005 by the Comptroller and Auditor General of India. (Addendum to the Directors' Report dated May 26, 2005) Note : Review of Accounts has been prepared without taking into account comments under Section 619 (4) of the Companies Act, 1956 and qualifications contained in the Statutory Auditors Report. 1. FINANCIAL POSITION The table below summarises the financial position of the Company under broad headings for the last three years : LIABILITIES Rs./Crores 2002-03 (a) Paid up Capital : (i) Government (ii) Others (b) Reserves & Surplus (i) Free Reserves & Surplus(other than Share Premium) (ii) Share Premium Account (c) Share Application Money Pending Allotment (d) Borrowings from (i) Government of India # (ii) Issue of Debentures (iii) Cash Credit/Overdrafts from Bank (iv) Others (e) (i) Current Liabilities & Provision (ii) Deferred Tax Liability Total ASSETS (f) Gross Block (g) Less : Cumulative Depreciation (h) Net Block (i) Capital Work-in-progress (j) Investments (k) Current Assets, Loans & Advances (i) Inventories (ii) Sundry Debtors (iii) Cash & Bank Balances (iv) Loans & Advances (v) Other Current Assets (l) Miscellaneous Expenditures to the extent not written off or adjusted Total
Note : # Relending of World Bank loan.
2003-04 173.08 165.82 6,253.89 1,150.02 400.00 142.73 1,158.07 7,655.15 1,454.08
2004-05 173.08 165.85 6,951.07 1,150.85 319.91 1,865.44 6,988.67 1,374.75
173.08 165.75 5,192.41 1,147.61 0.32 450.00 190.18 725.43 7,901.87 1,400.04
17,346.69 18,552.84 18,989.62 10,754.32 11,387.43 12,393.17 4,319.12 4,809.32 5,449.53 6,435.20 6,578.11 6,943.64 347.68 496.14 786.84 2,015.22 2,048.42 1,756.84 5,122.54 862.37 18.55 2,544.72 0.41 5,402.53 1,000.29 197.06 2,829.97 0.32 5,682.21 1,048.61 201.63 2,569.50 0.35
17,346.69 18,552.84 18,989.62
138

Rs./Crores 2002-03 (m) Working Capital [k-e(i)] (n) Capital employed (h+m) (o) Net Worth (a+b(i)+b(ii)-l) (p) Net worth per Rupee of Equity capital (Rs.)(o/a) 2. RATIO ANALYSIS Some important financial ratios on the financial health and working of the Company at the end of last three years are as under : 2002-03 A. Liquidity Ratio Current Ratio (%) B. Debt Equity Ratio C. Profitability Ratios (%) a) Profit before tax to i) Capital employed 34.06 36.11 5.36 23.02 35.68 38.49 5.79 24.59 17.35 19.44 2.74 15.13 108.18 0.09:1 123.19 0.05:1 135.97 0.02:1 2003-04 2004-05 646.72 7,081.92 6,678.85 19.71 2003-04 1,775.02 8,353.13 7,742.81 22.85 2004-05 2,513.63 9,457.27 8,440.85 24.90
ii) Net worth iii) Sales b) Net Profit after tax to Net worth 3. RESERVES & SURPLUS
The free Reserves and Surplus of the Company were 23.90 times the paid-up capital as on 31st March, 2005 as against 21.85 times as on 31st March, 2004 and 18.71 times as on 31st March, 2003. 4. INVESTMENTS The Company has made the following investments : (i) Rs.3.42 crores in the equity share capital of Guru Gobind Singh Refineries Ltd. (ii) Rs.5.00 crores in the equity share capital of South Asia LPG Co. Pvt. Ltd. 5. DUES FROM PP&AC As of March 2005, the Company has to receive an amount of Rs. 777.02 crores from Pool Accounts towards various pool claims pertaining to the APM period (i.e. up to March 31, 2002).
139

6. SOURCES AND UTILISATION OF FUNDS Funds amounting to Rs. 3154.56 crores from internal and external sources were realised and utilised during the year as follows : Rs./Crores 2004-05 SOURCES OF FUNDS Funds from operations : Profit after tax 1,277.33 Add : Depreciation 659.59 Add : Net Loss on sale/write off of Fixed Assets/CWIP 4.02 1,940.94 Adjustment on sale/deletion of Fixed Assets/CWIP 25.53 Share Capital 0.03 Share Premium 0.83 Short Term Loans raised 510.05 Increase in Bank Loan 177.18 Redemption of Oil Bonds 300.00 OIDB Term Loan raised 200.00 Total UTILISATION OF FUNDS Public Deposit Repaid Increase in Capital Expenditure Deferred Tax Dividend Paid Repayment of Debentures Increase in working capital Increase in Investments Total 3,154.56 2.68 1,345.37 79.33 804.93 400.00 513.83 8.42 3,154.56
7. WORKING CAPITAL i) The working capital of the Company as on 31st March for the year 2002-03, 2003-04 and 2004-05 was Rs. 646.72 crores, Rs. 1775.02 crores and Rs. 2513.63 crores respectively. ii) The percentage of working capital to capital employed during the three years 2002-03, 2003-04 and 2004-05 was 9.13, 21.25 and 26.58 respectively. 8. WORKING RESULTS The working results of the company during the last three years are given below : 2002-03 i) Net Sales (excl. excise duty & including payments to pool accounts) ii) Profit before tax iii) Profit after tax Rs./Crores 2003-04 2004-05
48,608.21 51,517.66 59,793.37 2,411.79 2,980.43 1,640.60 1,537.36 1,903.94 1,277.33
140

9. INVENTORY The inventory position as at the end of last three years was as follows : 2002-03 1,025.33 93.19 212.67 3,777.20 14.15 2003-04 931.53 110.21 197.68 4,149.69 13.42 Rs./Crores 2004-05 1,166.24 125.77 275.07 4,107.17 7.96
i) ii) iii) iv) v)
Raw Materials Stores & Spares Stock in Process Finished Goods Packages
The stock of raw materials at the close of each year was equivalent to about 21 days consumption in 2004-05 as against 23 days consumption in 2003-04 and 26 days consumption in 2002-03. The stores, spares and packages at the end of 2004-05 represented 303 days consumption as against 301 days consumption in 2003-04 and 323 days in 2002-03. Finished Goods at the end of the year was equivalent to 25 days sales during 2004-05 as against 30 days sales during 2003-04 and 26 days during 2002-03. 10. SUNDRY DEBTORS The position of sundry debtors for the last three years ending 31st March, 2005 stood as follows : Year Sundry Considered Percentage Debtors Doubtful & of debtors Provided for to sales Rs./Crores Rs./Crores 2002-03 891.09 28.72 1.69 2003-04 1,028.94 28.65 1.83 2004-05 1,080.17 31.56 1.67 The following table indicates the debts outstanding for more than one year as on 31st March, 2005 : Rs./Crores Government Departments Others Total Debts over one year but less than two years 0.13 9.32 9.44 Debts over two years but less than three years 0.65 11.43 12.09 Debts outstanding for more than three years 2.77 31.85 34.62 11. DIVIDEND The proposed dividend for the year 2004-05 is 150% on equity as compared to 220% paid for 2003-04 and 200% paid for 2002-03. The dividend payout ratio after considering the tax on distributed profits, calculated as a percentage of total dividend paid/proposed to profit after tax, during the last three years 2002-03, 2003-04 and 2004-05 was 49.24%, 44.23% and 45.42% respectively. Revathy Iyer Principal Director of Commercial Audit & Ex-officio Member, Audit Board-II, Mumbai Place : Mumbai Date : June 24, 2005
141
Joint Ventures
Sl. Name of the No. Joint Venture 1. Mangalore Refinery & Petrochemicals Ltd. Hindustan Colas Ltd. Date of incorporation 07.03.1988 Major Shareholdings Nature of operations
ONGC HPCL HPCL COLAS
71.62% 16.95% 50.00% 50.00%
Refining of petro products
2.
17.07.1995
Manufacture and Marketing of Bitumen Emulsions & Modified Bitumen To act as nodal agency for developing identified and prioritised petroleum product pipelines in the country
3.
Petronet India Ltd.
26.05.1997
HPCL 16.00% Financial/ Strategic Investors 50.00% Other PSUs 34.00% HPCL Petronet India Ltd. ONGC Financial/ Strategic Investors 26.00% 26.00% 23.00%
4.
Petronet MHB Ltd.
31.07.1998
Operation and maintenance of petroleum product pipeline between Mangalore-Hassan-Bangalore
25.00% Exploration and production activities in the oil and gas sector
5.
Prize Petroleum Co. Ltd.
28.10.1998
HPCL 50.00% ICICI & Associates 45.00% HDFC 5.00% HPCL TOTAL 50.00% 50.00%
6.
South Asia LPG Co. Pvt. Ltd.
16.11.1999
Construction of LPG underground cavern storage of 60000 MT capacity and associated receiving and despatch facilities at Visakhapatnam Distribution and marketing of environmental friendly fuels (green fuels) viz. CNG and Auto LPG in the state of Andhra Pradesh.
7.
Bhagyanagar Gas Ltd. 22.08.2003
HPCL GAIL AP Govt. Financial/ Strategic Investors
22.50% 22.50% 5.00%
50.00%
142
Auditors' Report
Auditors Report to the Board of Directors of Hindustan Petroleum Corporation Limited on the Consolidated Financial Statements of Hindustan Petroleum Corporation Limited, its Subsidiary and its interests in Joint Venture Companies. 1. We have audited the attached Consolidated Balance Sheet of Hindustan Petroleum Corporation Limited, its Subsidiary and its interests in Joint Venture Companies as at March 31, 2005, the Consolidated Profit and Loss Account and Consolidated Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of Hindustan Petroleum Corporation Limiteds management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements. We believe that our audit provides a reasonable basis for our opinion. The audited financial statements of the Subsidiary reflecting total assets of Rs. 305.46 crores as at March 31, 2005 and Nil revenue for the year ended on that date and of four of the Joint Venture Companies reflecting total assets of Rs. 230.21 crores as at March 31, 2005 and revenue of Rs. 47.71 crores for the year ended on that date, have been audited by other auditors on which we have relied. We have also relied on unaudited provisional financial statements of two other Joint Venture Companies, viz. Mangalore Refinery and Petrochemicals Limited and Petronet India Limited, reflecting total assets of Rs. 1,414.42 crores as at March 31, 2005 and revenues of Rs. 3,168.85 crores for the year ended on that date, for the purpose of our examination of the consolidated financial statements. We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standard 21 Consolidated Financial Statements and Accounting Standard 27 Financial Reporting of Interests in Joint Ventures, issued by the Institute of Chartered Accountants of India, on the basis of separate audited financial statements of Hindustan Petroleum Corporation Limited, its Subsidiary and four Joint Venture Companies and unaudited provisional financial statements of two Joint Venture Companies. On the basis of the information and explanations given to us and read with note 6 of Schedule 20 relating to noninclusion of cash flows of certain entities in the preparation of consolidated cash flow statements and note no. 8 to Schedule 20 relating to accounting for income tax benefits, and in the consideration of separate audit report on individual financial statements, of Hindustan Petroleum Corporation Limited, its Subsidiary and Joint Venture Companies, in our opinion, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: (a) (b) in the case of the Consolidated Balance sheet, of the consolidated state of affairs of Hindustan Petroleum Corporation Limited, its Subsidiary and its Joint Venture Companies as at March 31, 2005; in the case of the Consolidated Profit and Loss Account, of the consolidated results of operations of Hindustan Petroleum Corporation Limited, its Subsidiary and its Joint Venture Companies for the year ended on that date; and in the case of the Consolidated Cash Flow Statements, of the consolidated cash flows of Hindustan Petroleum Corporation Limited, its Subsidiary and two Joint Venture Companies for the year ended on that date. For N.M. Raiji & Co. Chartered Accountants Vinay D. Balse Partner Membership No. 39434
2.
3.
4.
5.
(c)
143
Consolidated Balance Sheet as at 31st March, 2005

Rs./Crores SCHEDULE SOURCES OF FUNDS Shareholders Funds : a) Capital b) Reserves and Surplus Shares Application Money Pending Allotment Loan Funds : a) Secured Loans b) Unsecured Loans Deferred Tax Liability Total APPLICATION OF FUNDS Fixed Assets : a) Gross Block b) Less : Depreciation c) Net Block d) Capital Work-in-Progress Investments Current Assets, Loans and Advances : a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances Less : Current Liabilities and Provisions : a) Liabilities b) Provisions 5 13,884.19 5,874.13 6 7 8 9 10 11 12 8,010.06 974.09 8,984.15 939.15 6,008.44 1,215.19 211.91 0.50 2,692.81 10,128.85 13 6,601.66 810.28 7,411.94 Net Current Assets Miscellaneous Expenditure to the extent not written off or adjusted : Expenses including commission or brokerage on underwriting or subscription of shares Total NOTES FORMING PART OF CONSOLIDATED ACCOUNTS 20 M.B. LAL Chairman & Managing Director C. RAMULU Director-Finance N.R. NARAYANAN Company Secretary Place : New Delhi Date : May 26, 2005 FOR G.P. KAPADIA & CO. Chartered Accountants NIMESH BHIMANI Partner FOR N.M. RAIJI & CO. Chartered Accountants VINAY D. BALSE Partner 2,716.91 6,747.52 1,208.67 7,956.19 1,942.73 12,865.87 5,153.60 7,712.27 661.35 8,373.62 1,239.15 5,605.50 1,142.52 221.32 0.38 2,929.20 9,898.92 1 2 2004-05 340.49 8,011.38 8,351.87 22.40 3 4 616.16 2,308.40 2,924.56 1,350.12 12,648.95 2003-04 340.46 7,175.81 7,516.27 37.84 977.13 1,688.94 2,666.07 1,349.43 11,569.61
8.74 12,648.95
14.11 11,569.61
144
Consolidated Profit and Loss Account for the year ended 31st March, 2005
Rs./Crores
SCHEDULE INCOME Sale of Products Less : Excise duty Paid Net Sales Net Recovery from/(Payment to) Industry Pool Accounts Recovery under Subsidy Schemes Other Income INCREASE/(DECREASE) IN INVENTORY EXPENDITURE AND CHARGES Purchase of Products for resale Raw materials consumed Packages consumed Duties applicable to products Transhipping Expenses Payments to and provisions for Employees Other Operating Expenses Depreciation/Amortisation Interest Miscellaneous Expenditure written off 2004-05 68,239.88 5,800.64 62,439.24 (7.86) 536.68 371.38 63,339.44 68.43 33,677.68 23,359.55 94.23 94.55 1,384.00 723.08 1,328.19 736.73 133.28 5.38 61,536.67 PROFIT FOR THE YEAR BEFORE PRIOR PERIOD ADJUSTMENTS AND TAXES PRIOR PERIOD DEBITS/(CREDITS) (NET) 19 PROFIT BEFORE TAXES PROVISION FOR CURRENT TAXATION PROVISION FOR DEFERRED TAXATION (NET) PROVISION FOR TAXATION IN EARLIER YEARS WRITTEN BACK PROFIT AFTER TAXES BALANCE BROUGHT FORWARD Transfer from Debenture Redemption Reserve PROFIT AVAILABLE FOR APPROPRIATION APPROPRIATED FOR : General Reserve Transfer to Debenture Redemption Reserve Interim Dividend Proposed Final Dividend Tax on Distributed Profits Market Development Fund BALANCE CARRIED FORWARD EARNINGS PER SHARE (in Rs.) 1,871.20 (0.05) 1,871.25 602.49 0.69 (147.57) 1,415.64 5,153.51 100.00 6,669.15 127.81 169.67 340.04 71.25 5,960.38 41.77 2003-04 58,508.51 6,205.51 52,303.00 160.30 1,018.26 486.33 53,967.89 390.89 30,583.90 16,811.96 82.53 319.78 1,228.97 576.35 954.89 675.57 128.19 5.47 51,367.61 2,991.17 (76.21) 3,067.38 1,023.63 67.88 1,975.87 4,220.19 16.60 6,212.66 190.51 25.00 203.88 543.64 95.74 0.38 5,153.51 58.30
14 15
16 17 18
(2004-05 : EPS = Net Profit - Rs. 1,415.64 crores/Weighted avg. no. of shares - 33.893 crores; 2003-04 : EPS = Net Profit - Rs. 1,975.87 crores/Weighted avg. no. of shares - 33.887 crores)
NOTES FORMING PART OF CONSOLIDATED ACCOUNTS
20
145
Schedules forming part of the Consolidated Balance Sheet

Rs./Crores 2004-05 1. CAPITAL A. Authorised : 75,000 Cumulative Redeemable Preference Shares of Rs. 100/- each 34,92,50,000 Equity Shares of Rs.10/- each Issued : 33,93,30,000 Equity Shares of Rs.10/- each Subscribed & Called up : 33,93,30,000 Equity Shares of Rs.10/- each fully paid up Less : Calls unpaid by Others Non-Cumulative Redeemable Preference Shares 2003-04
0.75 349.25 350.00
0.75 349.25 350.00 339.33 339.33 0.43 338.90 1.56 340.46
B. C.
339.33 339.33 0.40 338.93 1.56 340.49
2.
RESERVES AND SURPLUS Share Premium Account As per the last Balance Sheet Less : Calls Unpaid Debenture Redemption Reserve As per the last Balance Sheet Add :Transfer from Profit & Loss Account Less :Transfer to Profit & Loss Account Capital Reserve Market Development Reserve General Reserve As per the last Balance Sheet Add :Transfer from Profit & Loss Account Profit & Loss Account Surplus as per Accounts annexed 1,048.72 13.31 1,035.41 100.00 100.00 100.00 0.08 1.40 886.30 127.81 1,014.11 5,960.38 8,011.38 1,048.72 14.20 1,034.52 91.60 25.00 116.60 16.60 100.00 0.08 1.40 695.41 190.89 886.30 5,153.51 7,175.81
146

Rs./Crores 2004-05 3. SECURED LOANS Debentures 8.50% Secured Non-Convertible Debentures redeemable at par on February 4, 2007 with an option for early redemption of debentures at par on February 4, 2005 (Secured against certain immovable properties of the Company) Overdrafts from Banks Rupee Term Loan Long Term Loans from Banks Interest accrued and due Foreign Currency Loan Others 2003-04
320.13 48.17 123.45 2.55 79.91 41.95 616.16
400.00 142.73 25.06 130.00 1.72 237.63 39.99 977.13
4.
UNSECURED LOANS Fixed Deposits From Oil Industry Development Board (Due for Repayment within one year Rs. 66.66 crores 2003-04 : Rs. Nil) Foreign Currency Loans Advance towards Equity Interest Accrued & Due Short Term Loans From Banks Sales Tax Deferment Loan Others 0.11 200.00 2.79
166.98 1.40 1.05 1,667.83 16.78 254.25 2,308.40
583.97 0.88 1.52 32.97 10.01 1,056.80 1,688.94
147

5. FIXED ASSETS
Gross Block at cost as at 01-04-2004 Additions/ Deductions/ ReclassifiReclassifications cations Gross Block Depreciation Total at cost and Depreciation as at Amortisation and 31-03-2005 for the year Amortisation 2004-2005 upto 31-03-2005
Rs./Crores
Net Block as at 31-03-2005 Net Block as at 31-03-2004
A. 1. 2. 3. 4. 5. 6. 7. 8. 9.
OTHER THAN INTANGIBLE ASSETS Land - Freehold Roads and Culverts Buildings Leasehold Property - Land Railway Siding and Rolling Stock Plant and Machinery Furniture, Fixtures and Office/ Laboratory Equipment Transport Equipment Unallocated capital expenditure on Land Development
263.80 482.13 979.93 122.00 269.66 10,389.46 249.16 66.03 0.20 12,822.37
11.31 91.21 146.75 5.32 1.93 775.11 45.63 14.97 1,092.23
0.36 0.13 0.20 71.59 8.28 1.99 82.55
274.75 573.21 1,126.48 127.32 271.59 11,092.98 286.51 79.01 0.20 13,832.05
8.44 21.33 3.90 13.32 656.80 24.70 5.30 733.79
48.85 141.84 20.71 101.60 5,357.91 138.57 42.18 0.20 5,851.86
274.75 524.36 984.64 106.61 169.99 5,735.07 147.94 36.83 7,980.19
263.80 441.71 859.31 105.19 181.37 5,675.31 130.49 27.61 7,684.79
Total (A) B. 1. 2. 3. INTANGIBLE ASSETS Right of Way Technical/Process Licences Software
10.85 6.24 26.41 43.50 12,865.87 12,070.76
3.79 4.88 8.67 1,100.90 966.54
0.03 0.03 82.58 171.43
14.64 6.24 31.26 52.14 13,884.19 12,865.87
0.35 6.05 6.40 740.19 679.56
1.78 20.49 22.27 5,874.13 5,153.60
14.64 4.46 10.77 29.87 8,010.06 7,712.27
10.85 4.81 11.82 27.48 7,712.27
Total (B) Grand Total [(A) + (B)] Previous Year
2004-05 6. CAPITAL WORK-IN-PROGRESS (at Cost) Unallocated Capital Expenditure and Materials at Site Advances for Capital Expenditure Capital Stores Capital Stores lying with Contractors Capital goods in transit Construction period expenses pending apportionment (Net of recovery) Establishment charges Interest 765.82 60.67 50.72 4.46 2.03 883.70 0.65 89.04 0.70 90.39 974.09
2003-04 532.12 15.51 41.91 4.66 1.49 595.69 0.25 64.82 0.59 65.66 661.35
148

Rs./Crores 2004-05 7. INVESTMENTS (Long term, at Cost) A. TRADE INVESTMENTS Quoted 1. 6.96% Oil Companies Government of India Special Bonds 2009 Unquoted 1. Petronet MHB Ltd. 2. Petronet VK Ltd. 3. Petronet CCK Ltd. 4. Petronet CI Ltd. Total (A) B. OTHER INVESTMENTS Quoted 1. Government Securities of the face value of Rs. 0.02 crores Deposited with Others On hand - Rs. 0.25 lakhs (2003-04 : Rs. 0.25 lakhs) 2. Scooters India Ltd. 10,000 Equity Shares of Rs. 10/- each fully paid up Unquoted 1. Government Securities of the face value of Rs.0.24 lakhs Deposited with Others - Rs. 0.10 lakhs (2003-04 : Rs. 0.10 lakhs) On hand - Rs. 0.14 lakhs (2003-04 : Rs. 0.14 lakhs) 2. East India Clinic Ltd. 1, % Debentures of face value of Rs. 0.15 lakhs Rs. 0.15 lakhs (2003-04 : Rs. 0.15 lakhs) 1, 5% Debentures of face value of Rs. 0.07 lakhs Rs. 0.07 lakhs (2003-04 : Rs. 0.07 lakhs) 3. Shushrusha Citizen Co-operative Hospital Limited 100 Equity Shares of Rs. 100/- each fully paid up Rs. 0.10 lakhs (2003-04 : Rs.0.10 lakhs) 4. Petroleum India International (AOP) Contribution towards Seed Capital Total (B) Total Investments [(A) + (B)] Less : Provision for loss on Investments 2003-04
931.00 0.05 4.16 4.16 0.17 939.54
1,231.00 0.05 4.16 4.16 0.17 1,239.54
0.02 0.01
0.02 0.01
0.05 0.08 939.62 0.47 939.15
0.05 0.08 1,239.62 0.47 1,239.15
149

Rs./Crores 2004-05 8. INVENTORIES Raw Materials Finished Products Stock in Process Packages Stores and Spares 1,329.90 4,241.54 296.61 8.08 5,876.13 132.31 6,008.44 9. SUNDRY DEBTORS (Unsecured) Over six months : Considered good Considered doubtful Others : Considered good Considered doubtful Less : Provision for Doubtful Debts 317.25 31.97 897.94 7.28 1,254.44 39.25 1,215.19 10. CASH AND BANK BALANCES Cash on hand Cash & Cheques Awaiting Deposit With Scheduled Banks : On Current Accounts On Non-operative Current Accounts On Fixed Deposit Accounts With Others : In Current Account with Municipal Co-operative Bank Ltd. (Maximum Balance during the year Rs. 0.13 crores, 2003-04 : Rs. 0.09 crores) 1.24 0.85 199.62 0.03 10.11 0.06 1.13 1.10 203.75 0.04 15.25 0.05 52.54 29.04 1,089.98 1,171.56 29.04 1,142.52 1,006.07 4,250.65 219.08 13.48 5,489.28 116.22 5,605.50 2003-04
211.91 11. OTHER CURRENT ASSETS Interest accrued on Bank Deposits and Investments 0.50
221.32
0.38
150

Rs./Crores 2004-05 12. LOANS AND ADVANCES Secured, considered good : Advances recoverable in cash or in kind or for value to be received Interest Accrued thereon Unsecured, considered good : Advances recoverable in cash or in kind or for value to be received Balances with Excise,Customs, Port Trust etc. Other Deposits Prepaid Expenses Amounts recoverable from Pool Account Advance towards Equity Share Application Money Pending Allotment Other Accounts Receivable Unsecured, considered doubtful : Accounts Receivable & Deposits Less : Provision for Doubtful Receivables 367.31 102.77 57.94 348.38 108.73 7.48 832.86 5.92 40.51 820.91 4.36 2,697.17 4.36 2,692.81 13. CURRENT LIABILITIES AND PROVISIONS A. Current Liabilities Sundry Creditors i) Total outstanding dues of small scale industrial undertakings ii) Total outstanding dues of creditors other than small scale industrial undertakings Deposits from Dealers/Consumers for LPG Cylinders Other Deposits Accrued Charges/Credits Interest accrued but not due on loans Interest accrued and due on Unpaid Debentures Preference share capital redeemed remaining unclaimed/uncashed Unclaimed dividend * Unpaid matured fixed deposits Unpaid matured debentures Other Liabilities Provisions Provision for Tax (Net) Proposed Dividend on Preference Shares (Rs. 1,695; 2003-04 : Rs. 1695) Proposed Dividend on equity shares Provision for Gratuity/Pension Provision for other retirement benefits Tax on Distributed Profits 363.04 95.30 52.82 169.28 36.79 10.15 933.45 3.00 58.46 1,206.91 21.82 2,951.02 21.82 2,929.20 2003-04
4.45 2,484.23 2,549.33 97.80 200.39 1.59 1.18 0.01 10.84 2.80 1,249.04 6,601.66
2.79 914.80 2,373.41 62.45 101.38 4.19 1.56 0.01 10.05 0.07 2.91 3,273.90 6,747.52 489.16 543.64 39.00 67.22 69.65 1,208.67 7,956.19
B.
299.14 340.04 37.08 86.33 47.69 810.28 7,411.94
* No amount is due as at the end of the year for credit to Investors Education & Protection Fund.
151
Schedules forming part of the Consolidated Profit and Loss Account

Rs./Crores 2004-05 14. OTHER INCOME Interest (Gross) : On Investments On Deposits On Staff Loans On Customers Accounts On Others Dividend income Share of Profit from Petroleum India International (AOP) Rent Recoveries Export benefit under duty free entitlement scheme Difference on payment on sales tax deferral loan Profit on sale of Investments Exchange rate variation (Net) Miscellaneous Income 74.77 4.31 14.76 4.11 22.83 120.78 0.71 0.67 33.31 23.17 6.60 78.94 107.20 250.60 371.38 15. INCREASE/(DECREASE) IN INVENTORY Closing Stock : Stock in Process Finished Products Less : Opening Stock : Stock in Process Finished Products 296.61 4,241.54 4,538.15 219.07 4,250.65 4,469.72 68.43 16. PAYMENTS TO AND PROVISIONS FOR EMPLOYEES Salaries, Wages, Bonus, etc. Contribution to Provident Fund Pension, Gratuity etc. Voluntary Retirement Compensation Employee Welfare Expenses Less : Recoveries 461.82 35.81 23.18 41.98 164.62 4.33 160.29 723.08 379.36 34.64 9.20 157.68 4.53 153.15 576.35 219.07 4,250.65 4,469.72 227.98 3,850.85 4,078.83 390.89 86.02 17.84 18.53 3.78 26.82 152.99 1.47 27.80 40.88 43.33 145.66 74.20 333.34 486.33 2003-04
152
Schedules forming part of the Consolidated Profit and Loss Account

Rs./Crores 2004-05 17. OTHER OPERATING EXPENSES Consumption of Stores, Spares and Chemicals Power and Fuel Less : Fuel of own production consumed Repairs and Maintenance to Buildings Repairs and Maintenance to Plant & Machinery Repairs and Maintenance to other assets Insurance Rates and Taxes Equipment Hire Charges Rent Travelling and Conveyance Printing and Stationery Electricity and Water Charities and Donations Loss on Sale/write off of Fixed Assets/CWIP Stores & spares written off Write off of Goodwill on acquiring LPG Business of PITCL & DGL Diminution in Value of Investment Provision for Doubtful Debts Provision for doubtful Receivables Receivables written off Provision for Doubtful Receivables written back Provision for assets under reconciliation Security Expenses Advertisement & Publicity Consultancy and Technical Services Exploration Cost Sundry Expenses and Charges (Not otherwise classified) 74.14 1,076.46 1,060.76 15.70 10.29 238.80 6.31 32.28 369.81 1.04 56.80 59.87 9.66 101.76 21.13 4.17 3.15 1.22 10.23 (3.10) 27.52 94.69 23.75 0.79 168.18 1,328.19 18. INTEREST On Long Term Loans On Short Term Loans On Overdraft from Banks On Fixed Deposits Others 39.99 78.37 3.13 0.13 11.66 133.28 19. PRIOR PERIOD DEBITS/(CREDITS) Interest on Deposits Raw Materials consumed (0.05) (0.05) (76.21) (76.21) 55.50 58.10 8.72 1.95 3.92 128.19 74.00 961.22 949.26 11.96 11.92 169.05 4.18 43.05 60.13 0.30 57.81 56.30 7.72 95.13 7.32 3.16 0.10 0.47 (0.07) 5.84 0.07 39.26 16.72 81.51 37.72 171.24 954.89 2003-04
153
Notes forming part of Consolidated Financial Statements

20. Notes forming part of the Consolidated Financial Statements for the year ended 31st March, 2005 1. Basis of preparation The company has prepared the consolidated financial statements by consolidating its accounts with its wholly owned subsidiary Guru Gobind Singh Refineries Limited in accordance with Accounting Standard 21 (Consolidated Financial Statements) and its Joint Ventures in accordance with Accounting Standard 27 (Reporting for Financial Interest in Joint Ventures). 2. Principles of Consolidation The financial Statements of all these companies are prepared according to uniform accounting policies, in accordance with Generally Accepted Accounting Principles in India. 3. Companies included in Consolidation Subsidiary Guru Gobind Singh Refineries Limited Joint Ventures Hindustan Colas Limited South Asia LPG Company Pvt. Limited Prize Petroleum Company Limited Mangalore Refinery and Petrochemicals Limited Bhagyanagar Gas Limited Petronet India Limited Petronet MHB Limited 4. % Holding 100.00 50.00 50.00 50.00 16.95 25.00 16.00 26.00
Other Significant Accounting Policies and additional information The other significant accounting policies have been set out in the notes to accounts of the parent company Hindustan Petroleum Corporation Limited as the same have been applied to the accounts of the parent, subsidiary and joint ventures. Additional information not impacted by consolidation is also set out in the notes to the accounts of the parent company.
5. 6. 7.
Figures pertaining to the Subsidiary company and Joint Ventures have been reclassified wherever to conform to the Companys Financial Statements. Cash flow statements of Joint Ventures for which the provisions of preparation of cash flow statement is not applicable have not been included in the Consolidated Cash Flow Statement. Related Party disclosure: Rs./Crores Joint Venture Companies 2004-05 Sales Purchases Sale of Assets Dividend Investment Advance towards equity 91.53 5,043.35 0.71 5.00 2003-04 43.53 5,646.89 0.40 13.51
154

Rs./Crores Joint Venture Companies 2004-05 Share application money pending allotment Interest Services Others Interest paid Services received Closing balances Managerial Remuneration The names of parties are as follows : 0.34 2.83 4.44 0.01 1.50 (240.98) 0.61 2003-04 9.98 0.80 5.99 1.46 0.49
Joint Venture Companies: Mangalore Refineries and Petrochemicals Ltd., Hindustan Colas Ltd., Prize Petroleum Co. Ltd., Petronet India Ltd., Petronet MHB Ltd., South Asia LPG Co. Pvt. Ltd., Bhagyanagar Gas Ltd., M/s. Colasie, M/s Colas SA. Key Management Personnel: Shri M. B. Lal, Chairman & Managing Director Shri D. S. Mathur, Director - Refineries Shri Arun Balakrishnan, Director- Human Resources Shri C. Ramulu, Director - Finance Shri S. Roy Choudhury, Director- Marketing (from May 10, 2004) 8. The Parent Company (Hindustan Petroleum Corporation Limited) has been consistently following a policy of accounting for income tax benefits in the year in which the benefit is allowed in view of the past experience of uncertainties surrounding the claim for tax benefits. During the year, the Parent Company upon completion of assessment for the Financial Year 2001-2002 (Assessment Year 2002-2003) was granted deduction for claim under Section 80 IB, being the First Year for which the claim was made. The Parent Company while writing back the provision of Rs. 47.52 crores attributable to the said Tax benefit, keeping in mind the past practice, has continued with the conservative accounting treatment for the subsequent years. Previous years figures have been regrouped/reclassified wherever necessary. Rs./Crores 2004-05 10. A. B. Estimated amount of contracts remaining to be executed on Capital Account not provided for No provision has been made in the accounts in respect of the following disputed demands/claims since they are subject to appeals/representations and a substantial portion thereof is recoverable from Pool Account i. ii. iii. iv. Sales Tax/Octroi Excise/Customs Land Rentals & Licence Fees Others 632.05 910.58 39.73 68.38 551.19 706.60 32.81 33.10 1,192.83 2003-04 417.81
9.
155

Rs./Crores 2004-05 C. Contingent Liabilities not provided for in respect of i. Income Tax ii. Sales Tax/Octroi iii. Excise/Customs iv. Employee Benefits/Demands (to the extent quantifiable) v. Guarantees on behalf of others vi. Claims against the Corporation not acknowledged as debts vii. Enhancement of Compensation against land acquired viii. Service Tax ix. Others Payment to Auditors : Audit fees Tax audit fees Other services Reimbursement of expenses Managerial Remuneration : Salary and Allowances Contribution to Provident Fund and other funds Other benefits Deferred Tax Assets/(Liabilities) arising due to timing differences comprises of : Deferred Tax Assets Provision for Gratuity/Pension Provision for Medical Benefits Provision for Leave Encashment Expenditure under Section 35D of the I.T. Act, 1961 Unabsorbed Losses and Allowances Others Total Deferred Tax Liabilities Depreciation Lease Finance Others Total Deferred Tax Asset/(Liability) 25.19 128.64 112.61 69.48 184.41 190.92 173.26 0.08 1.72 0.17 0.02 0.07 0.03 0.65 0.05 0.18 2003-04 69.13 244.40 49.90 190.54 192.75 173.26 0.14 0.02 0.09 0.01 0.55 0.06 0.13
D.
E.
F.
12.48 2.72 18.65 193.66 40.10 267.61 1,571.63 12.58 33.40 1,617.61 (1,350.00)
13.99 2.27 13.71 0.02 267.35 25.68 323.02 1,629.11 14.80 28.34 1,672.25 (1,349.23)
156
Consolidated Cash Flow Statement for the year ended 31st March, 2005
Rs./Crores 2004-05 Cash Flow From Operating Activities Net Profit before Tax & Extraordinary items Adjustments for : Depreciation/Amortisation Deletion of Fixed Assets/CWIP Interest Expense Interest Income Income from Investment Provision for Doubtful Debts Dividend Received Provision written back Foreign exchange gain Profit on sale of Investment Misc. Expenses to the extent written off (Public Issue Expenses) Operating Profit before Working Capital changes Increase/(Decrease) in Working Capital : Trade Receivables Other Receivables Other Current Assets Inventories Trade and other Payables Amounts recoverable from Pool Account Cash generated from operations Direct Taxes paid (Net) Cash Flow before extraordinary items Net Cash from operating activities (A) Cash Flow From Investing Activities Purchase of Fixed Assets (incl. Capital Work in Progress/ excluding interest capitalised) Preliminary expense Sale of Fixed Assets Purchase of Investment(Including Share Application money pending allotment/Adv. towards equity) Sale proceeds of Investment Interest Income Dividend Received Income from Investment Net Cash used in investing activities (B) 1,890.98 724.59 4.15 120.56 (81.24) (0.67) 7.13 (0.71) (2.27) 10.13 (6.60) 5.17 2,671.22 (151.16) 162.19 (0.03) (402.98) (143.15) 2,136.09 100.59 2,236.68 (642.38) 1,594.30 1,594.30 2003-04 3,081.57 671.40 42.45 118.94 (104.80) (1.47) 5.83 (0.36) (6.13) 5.27 3,812.72 (260.10) (489.55) 0.09 (313.21) (541.52) 2,208.42 195.19 2,403.62 (618.80) 1,784.82 1,784.82
(1,302.95) 2.88 (7.13) 306.60 81.37 0.71 0.67 (917.85)
(907.54) 1.64 (34.21) 0.21 104.80 1.47 (833.62)
157
Consolidated Cash Flow Statement for the year ended 31st March, 2005
Rs./Crores 2004-05 Cash Flow From Financing Activities Proceeds from calls in Arrears (net) Proposed Public issue expenses Loans Repaid Loans Raised Interest paid on loan (including interest capitalised) Dividend paid Net Cash used in financing activities (C) Net Increase/(Decrease) in Cash and Cash equivalents [(A) + (B) + (C)] 4.28 (8,633.48) 8,698.99 (123.20) (805.72) (859.13) 2003-04 22.73 (0.04) (4,504.18) 4,805.57 (129.03) (912.51) (717.46)
(182.68)
233.74
Cash & Cash equivalents as on 1st April (Opening) : Cash/Cheques on Hand Balances with Scheduled Banks - On Current Accounts - Others Balances with other Banks Overdrafts from Banks
1.37 203.25 3.00 0.05 207.67 (142.73) 64.94
5.48 4.79 8.89 0.06 19.22 (190.17) (170.95) 1.37 203.25 3.00 0.05 207.67 (142.73) 64.94 235.89
Cash & Cash equivalents as on 31st March (Closing): Cash/Cheques on Hand Balances with Scheduled Banks - On Current Accounts - Others Balances with other Banks Overdrafts from Banks
1.81 197.27 3.03 0.06 202.17 (319.91) (117.74)

1. 2.
(182.68)
Figures have been regrouped/reclassified wherever necessary. Consolidated Cash Flow Statement for the year is for HPCL,its wholly owned Subsidiary (Guru Gobind Singh Refineries Ltd.) and its Joint Ventures ( Mangalore Refinery and Petrochemicals Ltd. and Hindustan Colas Ltd).
For and on behalf of the Board M. B. LAL Chairman & Managing Director
Place : New Delhi Date : May 26, 2005
C. RAMULU Director - Finance
158
Corporate Governance
Corporate Governance in a formal way was made applicable to Indian Corporates from the year 1999-2000 by SEBI, through the Listing Agreement with the Stock Exchanges. However, HPCL started Corporate Governance reporting from the year 1999-2000, even though for HPCL it was applicable from 2000-01. These practices form an integral part of the Companys Governance Culture. HPCL, lays special emphasis in conducting its affairs within the framework policies, internal and external regulations and in a transparent manner. Being a Government Company, its activities are monitored by several external agencies like the Statutory Auditors, Comptroller and Auditor General of India (CAG), the Central Vigilance Commission (CVC), and Parliamentary Committees, etc. Decision making process : Like any other corporate, at the apex level is the HPCL Board. The Board has constituted several sub-committees, such as the Committee of Functional Directors (CFD), the Audit Committee, the Investment Committee, the HR Committee, the Investor Grievance Committee, etc. The composition of these Committees is given in this Report. The meetings of these committees are convened on need basis and minutes of these meetings are placed for information of the Board. Majority of the members of the Committees except CFD are Independent Non-Executive or Government nominated directors with the whole time directors playing a facilitating role.
A cross section of the audience at the 52nd AGM of the Corporation
The Corporation has constituted recently an Executive Council comprising of C & MD, the Functional Directors and the SBU Heads of the Corporation. This group discusses important issues concerning the organization, analyse the same and recommend the way forward in respect of matters discussed. The emphasis laid by this group is on team approach, mutual support of functions and joint deliberations on issues which has enhanced further the decision making processes. It has thus facilitated an integrated thinking process and
159
(Contd.)
an aligned approach across the Corporation for achieving the Corporate Vision and each one of the aspirational aspects contained in the Vision Statement. Exercise of Authority : The Corporation has a well documented Limits of Authority Manual, Purchase Manual, Chart of Accounts, etc., facilitating the decision making process at various levels within the organization. Limits of Authority Manual : This manual (LAM) lays down the authorities that can be exercised at various levels i.e. the Board, Committee of Functional Directors, the Executive Committee, the Contracts Committee, the Bids Committee and the senior individual positions etc. for different activities of the Corporation. The manual is divided into segments representing different functions like Sales, Crude and Shipping, Capital Projects, Operations and Distribution, Finance, HR etc. and provides for a decision making process through various committees as above, represented by inter-functional groups including Finance. This ensures a transparent and streamlined decision making process adhering to the laid down systems and procedures and thereby leaving no room for arbitrariness. The Committee of Functional Directors has delegated further powers to various sub-committees within the organization, viz., Contracts Committee, Bids Committee, Credit Committee, etc. Purchase Manual : This Manual lays down elaborate procedures to be followed while undertaking purchases and in finalisation of contracts. It lays down, inter alia, the purchasing authorities at various levels, norms and processes for procurement. The endeavour always is on building trust with Shareholders, Employees, Customers and other stakeholders based on the basic principles of Corporate Governance i.e. transparency, fairness, disclosure and accountability. Disclosures : Given below are the various informations forming part of Corporate Governance disclosures : 1. BOARD OF DIRECTORS :
1.1 Composition of Board of Directors Executive Directors including Chairman (Whole-time) Non-Executive Government Directors (Ex-officio) Non-Executive Independent Directors (Non-official) Total 5 3 4 12
160
1.2 Board Meetings :
(Contd.)
Eight Board Meetings were held during the financial year on the following dates : 23rd April, 2004 29th October, 2004 31st May, 2004 9th December, 2004 28th July, 2004 27th January, 2005 8th September, 2004 3rd March, 2005
1.3 Particulars of Directors including their attendance at the Board/Shareholders Meetings

Names of Directors Academic Qualifications No. of Board No. of Attendance Meetings at the last AGM Details of Directorships in Companies Memberships held in Committee as specified in Clause 49 of the Listing Agreement FUNCTIONAL DIRECTORS Shri M.B. Lal B.E. (Chem), PGDBM (IIM Ahmedabad) Shri D.S. Mathur $ B.Tech, M.Sc. PGDPE 8 8 Yes 8 8 Yes 1. GGSRL 2. HINCOL 3. SALPG 1. GGSRL 2. Prize Petroleum Co. Ltd. Nil
Meetings attended held
Member - Audit Committee : GGSRL
Shri N.K. Puri @ DME
1. Petronet MHB Ltd. 2. MRPL 3. SALPG 4. GGSRL 5. Bhagyanagar Gas Ltd.
Nil
Shri Arun Balakrishnan
B.E. (Chem), PGDBM (IIM Bangalore) ACA. ACS, MBA
Yes
1. PIL 2. MRPL
Nil
Shri C. Ramulu
Yes
1. Prize Petroleum Co. Ltd. 2. GGSRL 3. HINCOL 4. SALPG
Member - Audit Committee a) GGSRL Chairman - Audit Committee a) HINCOL b) Prize Petroleum Co.Ltd
Shri S. Roy Choudhur y (*)
Mechanical Engineer
Yes
1. HINCOL 2. Petronet MHB Ltd. 3. Bhagyanagar Gas Ltd.
Nil
161
Names of Directors Academic Qualifications
(Contd.)
No. of No. of Attendance Board Meetings at the last Meetings attended AGM held
Details of Directorships in Companies
Memberships held in Committee as specified in Clause 49 of the Listing Agreement
NON-EXECUTIVE DIRECTORS (a) PART-TIME (EX-OFFICIO) Shri M.S. Srinivasan B.Tech. (Civil) Master of Public Administration, IAS 8 6 1. IOC 2. BPCL 3. GAIL Chairman Remuneration Committee : a) IOC b) BPCL Member - Audit Committee : a) HPCL b) GGSRL c) BLIL Member Shareholders' Investors Grievances Committee : a) HPCL Chairman Remuneration Committee : a) IOC Member - Audit Committee : a) IBP
Dr. B. Mohanty (**)
M.Sc. (Dev. Mgmt.) Ph.D. (Eco.)
1. BPCL 2. GGSRL 3. Balmer Lawrie Investments Ltd.
Shri A.K. Srivastava (***)
IAS
1. 2. 3. 4.
GAIL IBP BPCL Petronet LNG Ltd.
(b) PART-TIME DIRECTORS (NON-OFFICIO) Shri T.L. Sankar M.Sc. (Chemistry), MA (Dev. Eco.), IAS 8 6 1. Rain Calcining Ltd. 2. KSK Energy Ventures Ltd. 3. GGSRL 4. Delhi Power Co. Ltd. 5. Small Scale Sustainable Infrastructure Development Board Member Remuneration Committee : a) Rain Calcining Ltd. Chairman - Audit Committee : a) HPCL b) Rain Calcining Ltd. c) GGSRL Chairman Shareholders Investor Grievances Committee : a) Rain Calcining Ltd.
162
(Contd.)
Memberships held in Committee as specified in Clause 49 of the Listing Agreement Member Shareholders Investors Grievances Committee : a) HPCL Member Audit Committee : a) HPCL b) ONGC Member Shareholders' Investors Grievances Committee : a) Mukand Engineers Ltd. b) HPCL Chairman Shareholders' Investors Grievances Committee a) ONGC Chairman Shareholders' Investors Grievances Committee : a) HPCL
Shri Raja G. Kulkarni
M.A. (Eco.)
Yes
None
Shri Rajesh V. Shah
Degree in Mathematics, MBA
1. Mukand Ltd. 2. Mukand Engineers Ltd. 3. Fusion Investments & Financial Ser vices Ltd. 4. Catalyst Finance Ltd. 5. Conquest Investments & Finance Ltd. 6. Kalyani Mukand Ltd. 7. Bengal Port Ltd. 8. Jeewan Ltd. 9. India Thermal Power Ltd. 10. ONGC
Shri M. Nandagopal
B.Sc. (Agriculture)
1. Mohan Breweries & Distilleries Ltd. 2. Thirumugal Mills Ltd. 3. Artos Breweries Ltd. 4. S V Sugar Mills Ltd. 5. Vestas RRB India Ltd. 6. Mira Textiles & Industries Ltd. 7. Global Housing Finance Corpn.Ltd. 8. Binny Engg. Ltd. 9. Mysore Fruit Products Ltd. 10. Clean Power Ltd. 11. Sagar Sugars & Allied Products Ltd. 12. Binny Ltd.
@ (*) (**) (***) $
: : : : :
Shri N.K. Puri retired on attaining the age of superannuation on 30.04.04 Shri S. Roy Choudhur y appointed as Director-Marketing effective 10.05.04 Dr. B. Mohanty ceased to be Director effective 29.10.04 Shri A. K. Srivastava ceased to be Director effective 07.03.05 Shri D.S. Mathur retired on attaining the age of superannuation on 31.05.05
163
1.4 Profile of Directors :
(Contd.)
Shri Mahesh B. Lal

Shri Lal is the Chairman and Managing Director of Hindustan Petroleum Corporation Ltd. Shri Lal took over as the Chairman and Managing Director of HPCL, on June 05, 2002. Prior to this, Shri Lal was Director (Refineries) of BPCL. Shri Lal is a Chemical Engineer from Indian Institute of Technology, Kanpur and a Post Graduate in Management from IIM, Ahmedabad. Shri Lal has a vast and extensive experience in the Petroleum Industry. He was earlier Advisor - Refineries in the Ministry of Petroleum and Natural Gas, Government of India. In this capacity, he was the Government Director on the Boards of Kochi Refineries Ltd., IBP Co. Ltd., and Numaligarh Refineries Ltd. Thereafter, he was Director (Operations) of Madras Refineries Ltd. (now Chennai Petroleum Corporation Limited) before moving back to Bharat Petroleum Corporation Limited as Director (Refineries). IIT Kanpur has bestowed the distinguished Alumnus Award on Shri Lal in the year 2002.
Shri M.S. Srinivasan

Shri M.S. Srinivasan graduated from the Indian Institute of Technology, Madras in the year 1970 and received his Masters in Public Administration degree from Harvard University, USA in 1987. He has been a member of the Indian Administrative Service (IAS) since 1971. In a career spanning 32 years, Shri Srinivasan has had varied experience in both Public and Private Sectors. He worked as General Manager of Pallavan Transport Corporation, as Managing Director of Kattabomman Transport Corporation and Project Coordinator of the Tamil Nadu Integrated Nutrition Project. He also worked in the Ministry of Petroleum and Natural Gas as a Director during 1984-89. Some of the other assignments held by him include Managing Director of Tamil Nadu Newsprint and Papers Limited; Managing Director of the Chennai Metropolitan Water Supply and Sewerage Board, Chairman and Managing Director of the Tamil Nadu Industrial Development Corporation Limited and Secretary to the Government of Tamil Nadu, Industries Department. IIT Madras bestowed the Distinguished Alumnus Award on Shri M.S. Srinivasan in the year 2001. Since November 2002, he has been working as Additional Secretary in the Ministry of Petroleum and Natural Gas.
Shri A.K. Srivastava

Shri A.K. Srivastava, Joint Secretary in the Ministry of Petroleum and Natural Gas is a member of Indian Administrative Service. He is an Electrical Engineer from IRIMEE, Jamalpur, India and also B.E. (Mechanical) from the Council of Engineering Institution, London. He has also completed Post Graduate Diploma in Management from AIMA, New Delhi. He has held senior positions in various Ministries of the Government of India. He is also a Director on the Boards of Bharat Petroleum Corporation Limited, Gas Authority of India Limited, IBP Co. Limited and also a special invitee to the Board of Petronet LNG Ltd.
DR. B. Mohanty
Dr. B. Mohanty, Ph.D in Economics and M.Sc in Development Management, has held several positions during his 24 years of service in various Ministries of the Government of India, having rich and varied experience of working in the areas of capital market reforms in the Ministry of Food and Consumer Affairs.
Shri T. L. Sankar
Shri Sankar is a Retd. Indian Administrative Service Officer with M.Sc. (Chemistry), Madras and M.A. (Development Economics) (Williams College, USA). Shri Sankar has held several assignments for the Government of Andhra Pradesh, the Government of India, and international organisations in his 35 years career with the Indian Administrative Service. He continues to be associated with several Committees of the Government of India in the areas of Energy Economics, Public Policy Analysis, and restructuring of Public Enterprises. He has served as Principal, Administrative Staff College of India; Director General - National Institute of Rural Development; Director, Institute of Public Enterprises, Hyderabad; Advisor to the Government of India, Bangladesh, Sri Lanka, Tanzania and North Korea on energy policy and as Leader of the United Nations Team to design Regional Energy Development
164
(Contd.)
Programme and the Asian Development Banks Regional Energy Survey. He was also the Chairman, Gas Price Revision Committee. He was a member of the Power Ministers Committee of Eminent Persons and the Independent Standing Group under Justice P.N. Bhagawati. Shri Sankar has jointly edited two books, co-authored one, wrote several book chapters, and articles in national and international journals.
Shri Raja G. Kulkarni

Shri Raja Kulkarni is an M.A. with Economics from Bombay University and also holding Certificate on International Trade Unionism from Harvard University, USA. He entered the Trade Union Movement in 1944 and has been continuously in the Trade Union Movement for the last 58 years. He was the Member of Parliament (Lok Sabha) during the period from 1971 to 1976. He has participated in several International Conferences and has undertaken International Study Tours.
Shri Rajesh V. Shah

Shri Rajesh V. Shah obtained his first degree in Mathematics from the University of Cambridge in 1973, later obtained a Masters Degree in Business Administration from the University of California, Berkeley. He has also attended the Programme for Management Development (PMD) from Harvard Business School in 1983. Shri Shah is presently the Managing Director of Mukand Ltd. In this capacity, he is responsible for all the diverse activities of the Company, which is Indias leading speciality steel producer and executing projects for road construction and power plants. He has served on various business councils, is a past president and has been a member of the National Council of the apex Indian business body, the Confederation of Indian Industry (CII) since 1986. He has been a member of the International Young Presidents Organisation (YPO) and was also Chairman of the YPO International Conference held in Mumbai in February, 1996 and on the International Board of Directors in the same year. Shri Rajesh Shah has been a strong believer in bringing about change within his company through the application of Total Quality Management and has been awarded the Qimpro Gold Standard in 1990 and Platinum Standard in 1994 by Qimpro (an affiliate of Juran International Inc., USA), for his contribution in building India Inc.
Shri M. Nandagopal
Shri M. Nandagopal is B.Sc (Agriculture) from Agricultural University, Coimbatore. He is an Industrialist holding position as Director in various Companies. He is the Managing Director of Mohan Breweries and Distilleries Ltd. He is a Trustee in Sri Ramachandra Medical College and Research Institute, Chennai, Sakthi Trust, Delhi and Mother Service Society, Pondicherry. Shri M. Nandagopal is also a member of Cosmopolitan Club and Madras Cricket Club.
Shri D.S. Mathur

Shri Mathur is on the Board of Directors of HPCL, currently holding the portfolio of Director (Refineries) from 1996. Prior to that, for the period 1991 to 1996, he was holding the portfolio of Director (Personnel and Administration). Shri Mathur is a Chemical Engineer from the Indian Institute of Technology, Kanpur. He graduated in the second batch in 1966 and was thereafter awarded a Shell Scholarship for postgraduation in Management from the prestigious Loughborough University in U.K. On his return, he joined the erstwhile Lube India Ltd., which was a Joint Venture between Esso and the Government of India. Starting his career in the Lube Refinery as a Technical Engineer, Shri Mathur held various positions in Production Planning, Economics and Budgeting and Technical Departments of the Refinery. In 1974, on the formation of Hindustan Petroleum Corporation Ltd., he handled senior assignments in the Corporate Planning Division at Headquarters Office looking after the activities of both Refinery and Marketing functions. During his career, Shri Mathur attended various senior management programmes, like Project Management in the U.K and Senior Administration Programmes at Henley and also obtained a Diploma in Petroleum Economics from CPS, Oxford in 1985.
165
Shri N.K. Puri
(Contd.)
Shri Puri was on the Board of Directors of HPCL, holding the portfolio of Director (Marketing) till his superannuation on April 30, 2004. He is a Mechanical Engineer by profession. Shri Puri joined the erstwhile ESSO Standard Eastern in 1964 and held several important positions in the organisation such as Chief General Manager Retail, Chief General Manager - LPG, General Manager - HRD and General Manager - Lubes among others. Shri Puri has attended several international conferences and has also attended Advanced Management Programmes in Singapore and Malaysia.
Shri Arun Balakrishnan

Shri Balakrishnan is currently holding the portfolio of Director - Human Resources. Shri Balakrishnan is a Chemical Engineer and an alumni of the Indian Institute of Management, Bangalore. He joined HPCL in 1976 as a Management Trainee. He has held various positions in Marketing and Corporate functions around the country. These include positions such as Regional Manager of Orissa, Director Planning - OCC, General Manager - International Operations, General Manager - Lubricants and Specialities and Chief General Manager - Direct Sales. He is credited with launching a number of successful lubricant brands and for spreading the HP Lubes distributors network in the ASEAN countries. Shri Balakrishnan attended a program on Management in the United Kingdom under the Colombo Plan Program. He has also attended various seminars and conferences related to Petroleum and Energy.
Shri C. Ramulu
Shri C. Ramulu is currently holding the portfolio of Director- Finance. Shri C. Ramulu is a qualified Chartered Accountant and Company Secretary and is a rank holder at the All India level. Shri C. Ramulu secured distinction in MBA from the University of Leeds, U.K. in 1986. Shri C. Ramulu commenced his career in the Petroleum Industry with Caltex India Ltd., which was later nationalised. His wide experience of over 28 years encompasses Financial Management including Corporate Finance, Treasury Operations, Budgetary Control, Internal Audit, etc., and General Management including Strategy Planning, Management of Joint Ventures, etc. Shri Ramulu successfully handled the initial public issue of HPCL for raising equity capital of Rs. 1200 crores.
Shri S. Roy Choudhury

Shri S. Roy Choudhury took charge as Director - Marketing effective May 10, 2004. Shri S. Roy Choudhury is a Mechanical Engineer from the University of Assam. He commenced his career in the Petroleum Industry with Assam Oil Company, Digboi, a subsidiary of Burma Oil Company. Shri S. Roy Choudhury joined HPCL on June 21, 1982 as Construction Engineer. He has held various positions in the Company in Refinery, Marketing (Operations), Projects and Sales Division of HPCL. He is well known in the Oil Industry for his knowledge and expertise in the cross Country Pipeline Projects before his appointment as Director - Marketing.
Shri Prabh Das

Shri Prabh Das, Joint Secretary of Ministry of Petroleum & Natural Gas is a member of Indian Administrative Service. He is a B.Tech (Hons). from IIT, Kharagpur. He has also completed his Master of Business Administration from Southern Cross University, Australia. He has worked as a District Magistrate and Collector in Midnapur and Jalpaiguri Districts for a period of 5 years. Shri Prabh Das has also worked as a Deputy Secretary/Director in the Department of Ocean Development and Ministry of Commerce, Government of India. He has also worked as a Special Secretary (Transport) Government of West Bengal and Chief Executive Officer of Calcutta Metropolitan Development Authority.
166
(Contd.)
Shri Prabh Das joined the Ministry of Petroleum and Natural Gas as Joint Secretary in March 2003. He is also a Director on the Boards of Indian Oil Corporation Ltd., Engineers India Ltd. and Chennai Petroleum Corporation Ltd.
Shri C. B. Singh
Shri C.B. Singh, holds a Master Degree in Economics from Allahabad University and is also a Master of Business Administration from Southern Cross University, Australia. In the last 19 years of service with the Government of India Shri C.B. Singh has held several positions. Shri C.B. Singh held positions in the field of Economic Planning and Economic Administration including areas such as Investment Designing, Development Strategies and long range forecasting. He worked as Officer on Special Duty to the Union Agriculture Minister from March 2003 till April 2004. Shri Singh also held the position of Director/Joint Director, Department of Industrial Policy and Promotion from April 1999 to March 2003 in the Ministry of Commerce and Industry. He also held the position of Deputy Economic Advisor, Office of the Economic Advisor from March 1998 to April 1999. Shri Singh also held the position as Deputy Director, Department of Economic Affairs, Assistant Controller of Insurance, Assistant Advisor in the Ministry of Finance. Currently, Shri Singh is Joint Advisor (Finance) in the Ministry of Petroleum and Natural Gas.
Shri M. A. Tankiwala
Shri M.A. Tankiwala took charge as Director (Refineries) effective June 1, 2005 prior to which he was the Managing Director of Guru Gobind Singh Refineries Ltd. (GGSRL), a fully owned subsidiary of HPCL and was instrumental in developing the grass root project. He also served on the Board of Mangalore Refineries and Petrochemicals Limited (MRPL) the first refinery in the Joint Sector as Managing Director (Technical) and ensured that due share was given to MRPL in meeting the countrys energy demand. Shri M.A. Tankiwala, a Graduate in Mechanical Engineering, commenced his career in Mumbai Refinery of HPCL. He has had a wide exposure to the Petroleum Industry spanning for more than three decades in Refining Sector. He has worked in both Mumbai and Visakh Refineries of HPCL in various capacities and contributed to the growth and development of the refinery operations of the Corporation. 2. REMUNERATION OF DIRECTORS : HPCL being a Government Company, the remuneration payable to its whole-time directors is approved by the Government and advices received through the Administrative Ministry, viz., Ministry of Petroleum and Natural Gas. The Non-official part-time Directors are paid sitting fees for Board Meetings attended by them. HPCL does not have a policy of paying commission on profits to any of the Directors of the Company. The remuneration payable to officers below Board level is also approved by the Government of India in line with other Oil Companies.
167
(Contd.)
Remuneration paid to Whole-time Directors during 2004-05 is as under : NAME OF DIRECTORS Shri M. B. Lal Shri D. S. Mathur Shri N. K. Puri * Shri A. Balakrishnan Shri C. Ramulu Shri S. Roy Choudhury ** REMUNERATION Rs. 10,26,608/Rs. 10,42,458/Rs. 7,97,244/-
Rs. 11,93,286/Rs. 11,68,340/Rs. 8,27,619/-
* Retired on attaining the age of superannuation on 30.04.04. ** Appointed Director - Marketing effective 10.05.04. 3. BOARD SUB-COMMITTEES : A. Audit Committee : The Audit Committee comprises of Non-Executive Directors as follows : 1. Shri T. L. Sankar 2. Dr. B. Mohanty * 3. Shri Rajesh V. Shah 4. Shri M. Nandagopal ** 5. Shri C. B. Singh *** * ** Non-Executive Independent Director Non-Executive Government Director Non-Executive Independent Director Non-Executive Independent Director Non-Executive Government Director
Shri B. Mohanty ceased to be Director effective 29.10.04. Shri M. Nandagopal was inducted in the Audit Committee as a member effective April 07, 2005.
*** Shri C. B. Singh was inducted in the Audit Committee as a member effective 26.05.05. Shri T. L. Sankar is the Chairman of the Committee. The terms of reference of the Audit Committee are as provided under the Companies Act and other applicable regulations. The scope of the Audit Committee includes the following : Reviewing with Management the annual financial statements before submission to the Board. Reviewing with the Management, Statutory Auditors and internal auditors, the adequacy of internal control systems. Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internal audit. Discussion with internal auditors on any significant findings and follow up thereon.
168
(Contd.)
Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. Reviewing the Companys financial and risk management policies.
The Committee, at the meeting held on May 23, 2005, reviewed the Accounts for the year 2004-05, before the Accounts were adopted by the Board. Date of Audit Committee Meetings : 31st May, 2004 28th October, 2004 3rd March, 2005 23rd May, 2005
Attendance at Audit Committee Meetings : Name of the Members Shri T. L. Sankar Dr. B. Mohanty Shri Rajesh V. Shah B. Committee on HR Policies : The Company has constituted the Board Sub-Committee on HR Policies to look into various aspects including remuneration as well as Compensation and Benefits for the employees. The Committee comprises of : 1. 2. 3. 4. Shri Rajesh V. Shah Shri T. L. Sankar Shri Raja G. Kulkarni Shri Arun Balakrishnan No. of Meetings held 4 2 4 No. of Meetings attended 3 1 2 % of attendance 75% 50% 50%
Shri Arun Balakrishnan, Director - Human Resources, is the Convenor of the Committee. C. Investment Committee : The Company has constituted the Investment Committee with the following members : 1. 2. 3. 4. 5. Shri T. L. Sankar Shri Rajesh V. Shah Shri A.K. Srivastava (till 07/03/05 ) Shri C. Ramulu Shri Prabh Das (from 26/05/05)
Shri T. L. Sankar is the Chairman of the Committee. This Committee reviews investment proposals before they are placed before the Board for its consideration. D. Investor Grievance Committee : The Company has constituted Investor Grievance Committee comprising of Non-Executive Directors as follows :
169
1. 2. 3. 4. 5. * Shri M. Nandagopal Shri Rajesh V. Shah Dr. B. Mohanty*
(Contd.)
Non-Executive Independent Director Non-Executive Independent Director Non-Executive Government Director Non-Executive Independent Director Non-Executive Government Director
Shri Raja G. Kulkarni Shri C. B. Singh**
Shri B. Mohanty ceased to be Director effective 29.10.04.
** Shri C.B. Singh was inducted in the Investor Grievances Committee as a member effective 26.05.05. Shri M. Nandagopal is the Chairman of the Committee. The Committee reviews the status of Investor Grievances and Services and other important matters of investors interest. Dates of Investor Grievance Committee Meetings : 31st May, 2004 E. 29th October, 2004 3rd March, 2005 26th May, 2005 Remuneration Committee : HPCL has not felt the need for Remuneration Committee in view of the fact that the Company is a Government Company as per Section 617 of the Companies Act, 1956. The Remuneration of the wholetime Functional Directors are fixed by the Government of India. The details of Remuneration paid to all the Functional Directors are given below : The remuneration of the whole-time Functional Directors include basic salary, allowances and perquisites as determined by the Government of India. Also, they are entitled to provident fund and superannuation contributions as per the rules of the Company. The gross value of the fixed component of the remuneration, as explained above, paid to the wholetime Functional Directors, during the financial year 2004-05 is given below : (Rs. in Lakhs) Salaries & Allowances Contribution to Provident Fund 0.78 Contribution to Superannuation Fund and Gratuity Other Benefits Total
Name of the Director
M.B. Lal (Chairman & Managing Director) D.S. Mathur (Director - Refineries) Till 30.05.2005 N.K. Puri (Director - Marketing) Till 30.04.04 Arun Balakrishnan (Director - HR) C. Ramulu (Director - Finance) S. Roy Choudhury (Director Marketing) (From 10.05.2004)
8.16
1.32
10.26
8.23
0.78
0.03
1.38
10.42
7.53
0.06
0.28
0.10
7.97
9.73 8.90 6.18
0.80 0.84 0.53
0.01
1.40 1.93 1.56
11.93 11.68 8.27
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Shares Department Activities :
(Contd.)
HPCL has a Shares Department under the Company Secretary, which monitors the activities of R&T Agents and looks into the issues relating to shareholders. Share transfers, transmissions, demat/remat and other important matters are approved by the Share Transfer Committee. Presently, HPCL has over 107800 shareholders. The Corporation regularly interacts with the shareholders through letters, investors meets, at the AGM, wherein the activities of the Corporation, its performance and its future plans is provided to the shareholders. The Company has been taking appropriate steps to ensure that shareholder related activities are given due priority and matters are resolved at the earliest. The Company Secretary is the Compliance Officer in terms of the requirements of The Stock Exchange, Mumbai. The quarterly results are published in the newspapers . The Company also organises press meets and press releases. The Financial Per formance and other details are also posted on the Companys website hindustanpetroleum.com. 4. During the year 2004-05, there were no material transactions with Directors or their relatives having potential conflict with the interests of the Company at large. There have been no instances of non-compliance by the Company or penalties, strictures imposed on the Company by any Stock Exchange or SEBI or any Statutory Authority, on any matters related to capital markets during the last 3 years. 5. DETAILS OF ANNUAL GENERAL MEETINGS : 5.1 Location and time, where last three AGMs held : Year 2003-04 2002-03 2001-02 Location Y.B. Chavan Auditorium, Mumbai Y.B. Chavan Auditorium, Mumbai Nehru Centre, Worli, Mumbai Date 09.09.04 24.09.03 28.08.02 Time 3.00 p.m. 3.00 p.m. 3.30 p.m.
5.2 Whether Special Resolutions were put through postal ballot last year ? No. 5.3 Are votes proposed to be conducted through postal ballot this year? No. 6. MEANS OF COMMUNICATION : Half yearly report Quarterly results Which newspapers normally published in Press Advertisements, advices to Stock Exchanges, etc. Mainly business/regional newspapers, like Economic Times, Times of India, Financial Express, Indian Express Loksatta etc. hindustanpetroleum.com
Websites where quarterly results are displayed
171
(Contd.)
Whether it also displays official news releases and presentations made to institutional investors/analysts Whether Management Discussion and Analysis Report is a part of Annual Report Whether shareholder information section forms part of Annual Report
Yes
Yes
Shareholder information has been incorporated in the Annual Report. The Company also communicates with the shareholders from time to time.
7.
GENERAL SHAREHOLDER INFORMATION : 7.1 53rd Annual General Meeting Date and Time Venue : : September 21, 2005 at 3.00 PM Y.B. Chavan Auditorium, General Jagannath Bhosale Marg Next to Sachivalaya Gymkhana, Mumbai - 400 021
7.2 Financial calendar Financial reporting for Qtr. ending 30.06.05 Financial reporting for Qtr. ending 30.09.05 Financial reporting for Qtr. ending 31.12.05 Financial reporting for Qtr. ending 31.03.06 Annual General Meeting for year ending 31.03.2006 7.3 Date of Book Closure : End Jul, 2005 End Oct, 2005 End Jan, 2006 End May, 2006 Aug-Sept, 2006
September 6 - 21, 2005 September 26, 2005
7.4 Dividend payment date (tentative) : 7.5 (a) Listing on Stock Exchanges The Stock Exchange, Mumbai Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 001 :
The Delhi Stock Exchange DSE House, 3/1, Asaf Ali Road, New Delhi 110 002 Madras Stock Exchange Ltd. Exchange Building, 11, Second Line Beach, Chennai 600 001
The Calcutta Stock Exchange 7 Lyons Range , Kolkata 700 001
The National Stock Exchange of India Ltd. Exchange Plaza, 5th Floor, Plot No. C/1, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051
172
7.5 (b) Listing fees
(Contd.)
Listing fees for financial year 2005-06 have been paid to the above 5 Stock Exchanges in April, 2005.
7.6 Stock Codes : BSE NSE ISIN (for trading in Demat form) 7.7 Stock Market Data : HPCL Share Price BSE Year 2004-05 2003-04 2002-03 2001-02 High Rs. 538.50 542.45 329.60 338.75 Low Rs. 225.55 269.40 166.50 94.50 : : : 500104 HINDPETRO INE094A01015
Performance in comparison to broad based indices As on 31.3.2005 31.3.2004 31.3.2003 31.3.2002 31.3.2001 HPCL Share price Rs. 305.95 507.60 294.40 290.60 160.60 BSE 30 SENSEX 6492.82 5590.60 3048.72 3469.35 3694.38 NSE 50 NIFTY 2035.65 1771.90 978.20 1129.55 1148.20
173
(Contd.)
HPCL SHARE PRICE MONTHLY DATA Month High Rs. April 2004 May 2004 June 2004 July 2004 Aug 2004 Sept 2004 Oct 2004 Nov 2004 Dec 2004 Jan 2005 Feb 2005 Mar 2005 538.50 487.00 359.60 341.00 336.00 339.90 338.00 367.20 414.90 416.50 380.00 353.10 Mumbai Stock Exchange Low Rs. 448.20 225.55 299.50 280.00 296.50 307.45 303.60 302.55 341.00 325.05 337.10 296.20 Close Rs. 460.45 300.65 336.35 317.45 315.00 316.25 307.80 338.70 400.50 363.00 351.25 305.95 Volume Nos. 12482665 23969602 16247254 16330655 9440345 7697085 7654518 8858715 7926388 6434761 4943708 9216925 High Rs. 539.00 480.00 360.00 341.70 337.00 355.25 338.00 367.40 407.50 416.95 380.00 351.50 National Stock Exchange Low Rs. 448.20 264.55 300.20 262.20 295.35 291.15 291.15 302.00 341.05 282.00 336.25 295.10 Close Rs. 460.20 300.60 336.15 318.05 315.15 316.35 307.90 338.80 401.55 362.00 351.35 304.35 Volume Nos. 31283965 53034612 39396678 41021816 26657223 21035776 23335803 27114551 27549285 21336145 20457345 26255538
PER SHARE AND RELATED DATA : 2004-05 Per Share Data EPS CEPS Dividend Book Value Share Related Data Dividend Payout Price to Earnings* Price to Cash Earnings* Price to Book Vaue* * Based on March 31 closing prices Unit Rs. Rs. Rs. Rs. Unit % Multiple Multiple Multiple Rs. 37.69 54.81 15.00 249.04 45.42 8.12 5.58 1.23 305.95 2003-04 56.18 75.67 22.00 228.47 44.23 9.03 6.71 2.22 507.60 2002-03 45.37 62.94 20.00 197.12 49.24 6.49 4.68 1.49 294.40 2001-02 23.26 42.85 10.00 174.07 43.06 12.49 7.47 1.67 290.60 2000-01 32.12 44.91 10.00 191.47 34.37 5.00 3.60 0.80 160.60
7.8 Registrars and Transfer Agents :
M/s. MCS Limited Sri Venkatesh Bhavan, Plot No. 27, Road No. 11, MIDC Area, Andheri (East), Mumbai 400 093
7.9 Share Transfer System Activities relating to Share Transfers are carried out by MCS Limited who are the Registrars and Transfer Agents of the Company who have arrangements with the Depositories viz., National Securities Depository Limited and Central Depository Services (India) Limited. The transfers are approved by the Share Transfer Committee. Share transfers are registered and Share Certificates are despatched within a period of 30 days from the date of receipt if the documents are correct and valid in all respects.
174
(Contd.)
The number of shares transferred during last two years : 2004-05 88905 2003-04 222090 7.10 Status of Investor Services : Investor correspondence replied during the year are as follows : Nature of Correspondence 1. Share Transfers and related issues 2. Transmission of Shares/Nomination for shares 3. Issue of Duplicate share certificates 4. Dividend related issues 5. ECS/Bank Mandates/Request for Change of Address 6. Call Money Payment Correspondence/Reminders 7. SEBI/Stock Exchange/Legal cases 8. Others Total Number 269 354 110 2401 3642 2722 51 1185 10734
All complaints received from SEBI, Stock Exchanges, Department of Company Affairs etc., have been dealt with. 7.11 Dematerialisation of shares and liquidity : The total number of shares dematerialised as on 31.03.2005 is 161724223 representing 97.28% of share capital excluding shares held by the Government of India. Trading in Equity shares of the Company is permitted only in dematerialised form, w.e.f., February 15, 1999 as per notification issued by the Securities and Exchange Board of India (SEBI). 7.12 Outstanding GDRs/ADRs/Warrants or any convertible instruments, conversion date and likely impact on equity : There are no outstanding Warrants to be converted into Equity shares. Detachable Tradeable Warrants issued alongwith public issue shares in April 1995 were converted into equity shares during the period February 1997- April 1997. The Warrant certificates were not called back by the Company and bear no value. 7.13 Plant Locations : The Corporation has 2 Refineries located at Mumbai and Visakh. It has 85 Regional offices, 36 Terminals/ Tap off Points, 100 Depots, 40 LPG Bottling Plants and 6667 Retail outlets etc., located all over the country. 7.14 Address for correspondence Registrars and Transfer Agents : M/s. MCS Limited Unit : HINDUSTAN PETROLEUM CORPORATION LTD. Sri Venkatesh Bhavan, Plot No. 27, Road No. 11, MIDC Area, Andheri (East), Mumbai - 400 093 Telephone No.: 022 - 2821 5235 Fax No.: 022 - 2835 0456 Companys Shares Department : Shares Department HINDUSTAN PETROLEUM CORPORATION LIMITED 2nd Floor, Petroleum House, 17, Jamshedji Tata Road, Churchgate, Mumbai - 400 020 Telephone No.: 022 - 2202 6151 Ext. 3204/3201/3233/3239/3208 Fax No.: 022-2287 4552/2284 1573
175
(Contd.)
7.15 Distribution Schedule as on 31.03.2005 No. of Shares Physical Holding No. of Shareholders Dematerialised Holding No. of Shares Total Share holding No. of Shareholders %
No. of No. of Shares Shareholders
No. of Share- Holding Shares holders
1-500 18308 3412159 80836 10239619 99144 13651778 91.89 4.02 501-1000 810 590930 4783 3588543 5593 4179473 5.19 1.23 1001-5000 94 154388 2508 4832764 2602 4987152 2.41 1.47 5001-10000 3 19050 191 1401565 194 1420615 0.18 0.42 10001 & above 3 173429250 354 141661732 357 315090982 0.33 92.86 Total 19218 177605777 88672 161724223 107890 339330000 100.00 100.00 7.16 Shareholding pattern as on : 31.03.2005 Category No. of Shareholders 1 36 147 30 86 3547 1162 102881 107890 No. of Shares 173076750 52184490 73696932 1633802 8105835 1170352 522910 28938929 339330000 % No. of Shareholders 1 48 228 26 121 3387 1450 90740 96001 31.03.2004 No. of Shares 173076750 55822735 66875476 2069128 11628698 1102379 654525 28100309 339330000 %
President of India Financial Institutions FIIs/OCBs Banks Mutual Funds NRIs Employees Others Total
51.01 15.38 21.72 0.48 2.39 0.34 0.15 8.53 100.00
51.01 16.45 19.71 0.61 3.43 0.32 0.19 8.28 100.00
176
The Board of Directors of Hindustan Petroleum Corporation Limited We have examined the compliance of Corporate Governance by Hindustan Petroleum Corporation Limited, for the year ended on March 31, 2005, as stipulated in Clause 49 of the Listing Agreement of the said Company with stock exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement. We state that no investor grievances are pending for a period exceeding one month against the Company as per the records maintained by the Shareholders/Investors Grievance Committee. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.
For an on behalf of G.P. Kapadia & Co. Chartered Accountants Nimesh Bhimani Partner Place : Mumbai Dated : July 18, 2005
For and on behalf of N.M. Raiji & Co. Chartered Accountants Vinay D. Balse Partner
177
Guru Gobind Singh Refineries Limited

BOARD OF DIRECTORS Shri M.B. Lal, Chairman Shri M.A. Tankiwala, Managing Director Shri D.S. Mathur, Director (till 31/05/2005) Shri T.L. Sankar, Director Shri C. Ramulu, Director Shri S.P. Chaudhry, Director (from 14/05/2004) Dr. B. Mohanty, Director (till 29/10/2004) Shri N.K. Puri, Director (till 30/04/2004)
Registered Office Village Taluka District State : : : : Phulokhari Talwandi Saboo Bathinda Punjab
Administrative Office 3rd Floor, UCO Bank Building, Sansad Marg, New Delhi : 110001
Bankers Statutory Auditors M/s R.Vender Gupta and Associates Punjab National Bank 28-A, Kasturba Gandhi Marg New Delhi : 110001 Company Secretary Shri Sidhartha Tyagi
178
Directors' Report
On behalf of the Board of Directors of your Company, I present the 4th Annual Report on the working of your Company together with the Audited Statements of Accounts, the Auditors Report and the Review of the Accounts by the Comptroller and Auditor General of India for the financial year ended on 31st March, 2005. As you are aware your Company was incorporated on 13th December, 2000 with its Registered office at Bathinda and has been formed with the objective of setting up a 9 MMTPA Grass root refinery along with associated facilities in the State of Punjab. As on 31st March, 2005, your Company is a wholly owned subsidiary of Hindustan Petroleum Corporation Limited. The fiscal incentives granted by the Government of Punjab (GOP) has a significant bearing on the viability of the Project. As such, your Company is continuing discussions with Government of Punjab for early conclusion of Deed of Assurance (DOA) and the matter is expected to be finalized shortly. The Company thereafter intends to take up the project activities which were put on hold. During the period your company also assisted HPCL in the various studies on Non-Conventional energy resources.
STATUTORY DISCLOSURES (A) Particulars of Employees u/s 217(2A) of the Companies Act, 1956 : There are no employees under the category covered by Section 217 (2A) of the Companies Act, 1956. (B) Conservation of Energy : As required under 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 regarding Energy Conservation and Technology Absorption, the Board hereby discloses as follows : (i) That the Board, as part of its existing internal control measures, is striving for the Conservation of Energy under the supervision of Managing Director on a continuous basis and is satisfied that the utilisation of energy is optimum for the present working of the Company.
(C) Technology Absorption : The Company has not made any absorption, adaptation and import of technology from the date of incorporation. (D) Foreign exchange earnings and outgo : The required information in respect of foreign exchange earnings and outgo is given in Note no. 8 (b) of the Accounts. CORPORATE GOVERNANCE The details in this regard is enclosed as Attachment and form part of this Annual Report. DIRECTORS S/Shri M.B. Lal, D.S. Mathur, T.L. Sankar, C. Ramulu and S.P. Chaudhry continue to be the part time Directors of the Company and Shri M.A. Tankiwala the Managing Director of the Company. As per the provisions of Section 256 of the Companies Act, 1956, S/Shri C. Ramulu and S.P. Chaudhry will be the Directors who will retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment under the provisions of Section 256 of the Companies Act, 1956.
179
Directors' Report
(Contd.)
DIRECTORS RESPONSIBILITY STATEMENT In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors state that : (i) In the preparation of the annual accounts for the financial year 2004-05, the applicable accounting standards have been followed along with proper explanation relating to material departures.
(ii) The Company has selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31st March, 2005. (iii) The Company has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (iv) These accounts have been prepared on a going concern basis. ACCOUNTS There being no commercial activities, the Company is only required to prepare the Balance Sheet for the period of 12 months from 01/04/2004 to 31/03/2005. ACKNOWLEDGMENT Your Directors acknowledge with thanks the continued help, support and guidance received from the Government of India, especially, the Ministry of Petroleum and Natural Gas, Department of Public Enterprises, Government of Punjab, Punjab State Industries Development Corporation, Government of Gujarat, Government of Rajasthan, Government of Haryana and the holding Company HPCL in guiding the Company in its activities. Your Directors also take this opportunity to place on record their appreciation on the valuable contribution made by the employees. For and on behalf of the Board of Directors Shri M. B. Lal Chairman Place : New Delhi Date : May 09, 2005
180
Auditor's Report
To The Members GURU GOBIND SINGH REFINERIES LTD. 1) We have audited the attached Balance Sheet of Guru Gobind Singh Refineries Limited as at 31st March, 2005 along with Statement of Incidental Expenses incurred for the year ended on that date annexed thereto. No Profit & Loss account has been prepared since the Company is under construction stage during the year. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our Audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order. Further to our comments in the Annexure referred to above, we report that : (i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit.
2)
3)
4)
(ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books. (iii) The Balance Sheet and Statement of Incidental Expenses dealt with by this report are in agreement with the books of account. (iv) In our opinion, the Balance Sheet and Statement of Incidental Expenses incurred during Construction Period dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. (v) On the basis of written representations received from the Directors, as on 31st March, 2005 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2005 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. (vi) In our opinion and to the best of our information and according to the explanation given to us, the said accounts read with notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India. (a) In the case of the Balance Sheet, of the State of affairs of the Company as at 31st March, 2005. (b) In the case of Statement of Incidental Expenses the expenses incurred for the year ended on that date. For R. Vender Gupta & Associates Chartered Accountants Lalit Kumar Partner Membership No. 92803
181
Annexure to Auditor's Report

Referred to in paragraph 3 of our report of even date I. a) The Company has maintained a register showing full particulars including quantitative details and situation of fixed assets. b) All the assets have been physically verified by the management during the year and there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification. c) During the year, the Company has not disposed off any plant & machinery hence this clause is not applicable. II. As the Company in under construction stage therefore this clause (a, b & c) relating to inventory is not applicable to the Company. III. The Company had not taken any loan during the year from other companies covered in the register maintained under Section 301 of the Companies Act, 1956. Hence clause (a, b, c & d) is not applicable to the Company. IV. In our opinion and according to the information and explanation given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to fixed assets. As the Company is under construction stage, therefore, this clause relating to inventory and sale of goods is not applicable. During the course of audit we have not observed any major weaknesses in internal control. V. a) According to the information and explanation given to us, there are no such transactions which needs to be entered into the register maintained under Section 301 of the Companies Act, 1956. b) In our opinion and according to the information and explanation given to us , there are no transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 hence this clause is not applicable. VI. The Company has not accepted any deposit from the public during the year hence the provisions of Section 58 A & 58 AA of the Companies Act, 1956 and Rules framed there under are not applicable. VII. In our opinion, the Company has an Internal Audit System, commensurate with the size and nature of its business. VIII. The Company is in construction stage, therefore, this clause of cost records under Section 209 (1)(d) of the Companies Act, 1956 is not applicable. IX. a) The Company is regular in depositing with appropriate authorities undisputed statutory dues like Income tax, Sales tax, Excise duty and Custom duty, which were applicable during the year to the Company.
182

b) According to Information and explanation given to us, no undisputed amount payable in respect of Income tax, Sales tax, Excise duty and Custom duty were in arrears as on 31st March, 2005 for the Period more than six months from the date they become payable. c) According to Information and explanation given to us, there are no dues of Sales tax, Income tax, Custom duty and Excise duty, which have not been deposited on account of any dispute. X. XI. The Company is in the construction stage hence this clause of accumulated losses is not applicable. The Company has not taken any loan from Bank & Financial Institution and not issued any debenture during the year, hence this clause is not applicable. XII. The Company has not granted any loans and advances against pledge of shares, debentures and other securities hence this clause is not applicable. XIII. In our opinion, the Company is not a chit fund or a Nidhi/Mutual benefit fund/Society. Therefore this clause is not applicable. XIV. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Therefore this clause is not applicable. XV. In our opinion, the Company has not given any guarantee for the loan taken by others from Bank and Financial Institutions. Therefore this clause is not applicable. XVI. In our opinion, the Company has not applied for any term loan. Therefore this clause is not applicable.
XVII. According to information and explanation given to us and on the basis of overall examination of the Balance Sheet, we report that Company has not raised any Short Term/Long term funds, therefore, this clause is not applicable. XVIII. According to information and explanation given to us, the Company has not made any preferential allotment of shares to any party and companies covered in the register maintained u/s 301 of the Companies Act. Therefore this clause is not applicable to the Company. XIX. According to the information and explanation given to us, the Company has not issued any Debentures during the year under report. Therefore this clause is not applicable to the Company. XX. The Company has not raised any money by Public issue hence this clause is not applicable to the Company. XXI. According to information and explanation given to us, no fraud on or by the Company has been noticed or reported during the course of our audit. For R. Vender Gupta & Associates Chartered Accountants Lalit Kumar Partner Membership No. 92803
183
Balance Sheet as at 31st March, 2005

Amount (Rs.) Schedule I. SOURCES OF FUNDS 1. Shareholders funds : Share Capital 2. Share Application Pending Allotment Total II. APPLICATION OF FUNDS 1. Fixed Assets : a) Gross Block b) Less : Depreciation c) Net Block d) Capital Work in Progress 2 1,640,624,169 62,493,972 1,578,130,197 1,374,226,003 2,952,356,200 2. Current Assets, Loan and Advances : a) Sundry Debtors b) Cash and Bank Balance c) Other Current Assets d) Loan and Advances Less : 3. Current Liabilities and Provisions a) Liabilities b) Provisions 4 5 6 7 67,641,473 103,508 13,617 34,444,681 102,203,279 1,627,031,505 41,262,913 1,585,768,592 1,387,205,222 2,972,973,814 29,486,334 553,069 12,113 49,962,095 80,013,611 1 2,957,100,000 2,957,100,000 2,922,900,000 13,000,000 2,935,900,000 As at 31st March, 2005 As at 31st March, 2004
123,468,172 5,357 123,473,529
143,097,611 3,864 143,101,475 (63,087,864) 26,014,050
4. Net Current Assets 5. Miscellaneous Exp. (to the extent not written off or adjusted) Statement of Significant Accounting Policies and Notes forming part of Accounts Total 9
(21,270,250) 26,014,050
10 2,957,100,000 2,935,900,000
For R Vender Gupta & Associates Chartered Accountants Lalit Kumar Partner Place : New Delhi Date : May 09, 2005
M.A. Tankiwala Managing Director S. Malhotra DGM- Finance
C. Ramulu Director S. Tyagi Company Secretary
184
Schedules forming part of the Balance Sheet as at 31st March, 2005

Amount (Rs.) As at As at 31st March, 2005 31st March, 2004 SCHEDULE 1 SHARE CAPITAL A. AUTHORISED 550,000,000 (As at 31st March, 2004 : 550,000,000) Equity Shares of Rs. 10/- each
5,500,000,000 5,500,000,000
5,500,000,000 5,500,000,000 2,935,900,000 2,935,900,000
B.
ISSUED CAPITAL 295,710,000 (As at 31st March, 2004 : 293,590,000) Equity Shares of Rs. 10/- each
2,957,100,000 2,957,100,000
C.
SUBSCRIBED & PAID UP CAPITAL 295,710,000 (As at 31st March, 2004 : 292,290,000) Equity Shares of Rs. 10/- each fully paid
2,957,100,000 2,957,100,000
2,922,900,000 2,922,900,000
SCHEDULE 2 FIXED ASSETS

GROSS BLOCK Description As at 01.04.2004 Additions/ reclassification during the year 769,619 14,150,738 Ded/ Recl. As at 31.03.2005 As at 31.03.2004 DEPRECIATION BLOCK For the year 2004-05 Ded/ Recl. Total Upto 31.03.2005 NET BLOCK As at 31.03.2004 As at 31.03.2005
Land - Freehold - Right of Use Road & Culverts Buildings Lease Hold Property-Land Plant & Machinery Furniture & Fixture Total Previous Year
876,083,143 73,871,612 205,372,533 59,057,511
204,915
876,647,847 88,022,350 204,057,533 59,171,473
6,699,447 5,190,497
3,326,137 1,849,591
33,937
9,991,647 7,040,088
876,083,143 73,871,612 198,673,086 53,867,014
876,647,847 88,022,350 194,065,886 52,131,385
1,315,000 113,962
332,864,197 75,503,318 4,279,191 1,627,031,505 1,605,250,105
78,260
332,864,197 75,581,578 4,279,191 1,640,624,169 1,627,031,505
21,246,651 7,472,936 653,382 41,262,913 20,035,130
11,782,234 4,016,000 291,034 21,264,996 21,275,690
* 33,028,885 11,488,936 944,416
311,617,546 68,030,382 3,625,809 1,585,768,592 1,585,214,975
299,835,312 64,092,642 3,334,775 1,578,130,197 1,585,768,592
15,112,579 1,519,915 22,386,547 605,147
33,937 62,493,972 47,907 41,262,913
* This amount of amortization of land has been classified under the head Direct Revenue Expenses- SPM/COT' in Schedule 3
185

Amount (Rs.) As at 31st March, 2005 SCHEDULE 3 I. CAPITAL WORK IN PROGRESS (at Cost) Capital work in progress - Pipeline Capital work in progress - Refinery Capital work in progress - SPM/COT Advance to PSEB for Capital Expenditure Capital Expenditure not represented by asset owned by company Wind Energy Project Total (I) II. 201,448,531 409,202,542 50,541,226 3,215,061 146,857,678 950,743 812,215,781 199,804,858 525,051,131 50,541,226 3,215,061 141,510,678 920,122,954 As at 31st March, 2004
Incidental expenses during the construction (pending apportionment) Opening Balance 467,082,268 Direct revenue Exp-SPM/COT Lease Rent 32,492,213 Amortization of land 11,782,234 Survey and Feasibility Study 56,598 44,331,045 Direct revenue Exp-Refinery DFR Cost Consultancy to Invitation to Bid Other Incidental Expenses Salary and Wages (Reimbursed to Holding Co.) Travel/Conveyance/Transportation Charges Professional Charges Sponsorship/Subscription Outsourced services Rent Insurance Postage, Telephone Telegram and Telex Staff Welfare Expenses Security Charges Fuel, Electricity and Water Stationary and Office Supplies Repair and Maintenance to others Repair and Maintenance to building Books and Periodicals General Expenses Audit Fees (Inclusive of service tax) Income Tax Rates and Taxes Depreciation Sub Total
342,889,768 31,363,140 11,782,234 11,907,546
55,052,920
3,456,000
3,456,000
5,460,000 2,592,000
8,052,000
19,195,370 5,182,211 296,973 570,721 3,364,120 1,886,912 675 902,880 932,355 1,827,360 1,061,692 299,978 1,488,021 26,044 24,560 1,498,634 55,000 5,760 114,540 9,482,763 48,216,569
25,784,221 6,568,748 2,376,082 649,437 3,126,921 4,058,694 2,342 1,079,679 1,330,151 1,890,740 1,699,829 344,377 1,133,535 345,216 20,853 1,094,917 54,000 17,907 6,000 9,464,712 61,048,361
186

Amount (Rs.) As at 31st March, 2005 Prior period credit/debit Incidental Expenses Depreciation Sub Total Less Interest on Term Deposits Miscellaneous Income Total (II) Grand Total [(I) +(II)] SCHEDULE 4 SUNDRY DEBTORS (Unsecured) Debt outstanding for a period exceeding six months Considered good Considered doubtful Other debts Considered good (Due from HPCL, holding company) Total SCHEDULE 5 CASH AND BANK BALANCE Cash on hand Balance with Schedule Bank On Current Account with Punjab National Bank On Fixed/Recurring Deposit Account Total SCHEDULE 6 OTHER CURRENT ASSETS Interest Accrued on bank deposits but not due Interest accrued and due on bank deposits Total 2,627 10,990 13,617 7,677 4,436 12,113 100,000 3,508 103,508 140,000 808 412,261 553,069 67,641,473 67,641,473 29,486,334 29,486,334 14,637 1,027,086 (33,937) As at 31st March, 2004 349,925 (19,163)
48,182,632 563,051,945
61,379,123 467,373,811
1,041,723 562,010,222 1,374,226,003
10,772 280,771
291,543 467,082,268 1,387,205,222
187

Amount (Rs.) As at 31st March, 2005 SCHEDULE 7 LOAN AND ADVANCES (Unsecured, considered good) (Advance recoverable in cash or kind for the value to be received) Security Deposits Paid TDS on Interest Income CENVATABLE Claim Income Tax Refund due Other Advances Total SCHEDULE 8 CURRENT LIABILITIES AND PROVISIONS A. Current Liabilities Duties and Taxes Sundry Creditors Earnest Money Deposits Retention Money Security Deposits Received Adhoc deductions Liabilities for Works Contract Expenses 104,873 6,916,866 72,127 1,752,018 3,274,070 2,026,426 106,798,347 2,523,445 123,468,172 B. Provisions Income Tax 5,357 5,357 Total SCHEDULE 9 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Preliminary Expenses Proposed Public Issue Expenses 20,803,000 5,211,050 26,014,050 20,803,000 5,211,050 26,014,050 123,473,529 2,119,891 8,372,077 1,082,127 6,010,593 3,260,936 2,806,767 113,533,550 5,911,670 143,097,611 3,864 3,864 143,101,475 As at 31st March, 2004
8,706,782 3,061 25,692,288 42,550 34,444,681
9,316,910 1,883 40,530,929 16,723 95,650 49,962,095
188
Statement of Significant Accounting Policies and Notes forming part of Accounts as at 31st March, 2005
SCHEDULE 10 A. SIGNIFICANT ACCOUNTING POLICIES a. Accounts are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles (GAAP), Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and the provisions of the Companies Act, 1956. All income and expenditure having material bearing are recognized on the accrual basis, except where otherwise stated. Land Land acquired on lease for less than 99 years is treated as lease hold land. Cost of Right of Use is capitalized. Lease hold land is amortized over the period of lease. c. Fixed Assets Cost of Fixed Assets comprises of purchase price, duties, levies and any directly attributable cost of bringing the asset to its working condition for its intended use. d. Intangible assets 1. 2. e. Cost of Right of Use is capitalized. However, such Right of Use being perpetual in nature is not amortized. Expenditure on Intangible assets in the nature of Assets not owned by the Company are amortised over a period of five years after commencement of commercial production
b.
Depreciation 1. Depreciation on fixed assets is provided on straight line basis, in the manner and at the rates provided under Schedule XIV of the Companies Act, 1956. Depreciation is charged Prorata on monthly basis on assets, from/upto and inclusive of the month of capitalization/sale, disposal or deletion during the year. Premium on lease hold is amortized over the period of lease.
2. f.
Expenses during Construction Period The direct project expenditure incurred during the construction period has been shown under the head Capital Work in Progress which will be transferred to relevant fixed assets as and when they are completed. Indirect expenditure incurred during construction period has been shown under the head Incidential Expenditure relating to project (pending apportionment) which will be apportioned to fixed assets upon completion of the project.
g.
Miscellaneous Expenditure The expenditure shown under the head Miscellaneous Expenditure (to the extent not written off/ adjusted) will be amortized over a period of five years after commencement of commercial production.
B.
NOTES FORMING PART OF ACCOUNTS 1. The entire equity contribution to Guru Gobind Singh Refineries Limited (GGSRL) has been made by HPCL. Hence, GGSRL is a wholly owned subsidiary of HPCL and a Government company under Section 617 of the Companies Act, 1956. The Company has prepared the Statement of Incidental Expenditure during construction instead of a Profit and Loss Account. The necessary details as per Part II of Schedule VI of the Companies Act, 1956, have been disclosed in the said statement.
2.
189
3. Cost of land (Freehold) Rs. 8766 Lakhs (Previous Year Rs. 8760 Lakhs) comprises of : (i) Land at refinery site : Rs. 8758 lakhs (Previous Year Rs. 8760 lakhs). The necessary action for transfer of the above land viz Intakal process has been completed and the Company is in the process of signing conveyance deed. (ii) Rs. 8 Lakhs deposited with statutory authorities viz Sub Divisional Officers/Tehsildar towards land acquisition along pipeline route for pumping and service stations. The ownership of the land has not yet been transferred in the name of the Company. 4. There were no amounts due payable to Small Scale and/or Ancillary industrial suppliers on account of Principal and/or interest as at the close of the year exceeding Rs. One lakh for more than thirty days. The entire manpower of the Company except the Managing Director has been assigned by Hindustan Petroleum Corporation Limited (HPCL), the Holding company on full time basis. The Managing Director of the Company continues his lien with HPCL and his salary and other emoluments are administered by HPCL. Accordingly, no provision has been made for retirement benefits in the books of the Company and Section 217 (2A) of the Companies Act, 1956 is not applicable for the Company. A provision for Income Tax of Rs. 5357/- (Previous Year Rs. 3864/-) has been made on the interest received on term deposit with the Bank as per the rates applicable under Income Tax Act, 1961. The amount of cenvat claim in Schedule-7 represents excise duties and counter vailing duties paid by the Company which shall be utilized as a set off from the excise duty payments. Information pursuant to the provision of paragraph 3, 4C and 4D of part II of Schedule VI of the Companies Act, 1956. a. As the Company is in process of construction of Refinery and its associated facilities, hence information containing in paragraph 3 and 4C of Part II of Schedule VI is not applicable. (Rs./Lakhs) 2004-05 b. 9. Expenditure in foreign currency on account of : Purchase of Books/Magazine 1.11 2003-04 0.16
5.
6. 7. 8.
Contingent Liabilities not provided for in respect of (i) Land Compensation*(plus interest if any) 17326.00* 1649.22 7211.05 17326.00* 1289.00 7110.00
(ii) Claims against the Company not acknowledged as debts 10. Estimated amount of contract remaining to be executed on Capital Account not provided for 11. Related Party disclosure (With H.P.C.L., Holding Company) (i) Issuance of Share Capital
212.00 7.24
1071.00 20.77
(ii) Expenses Reimbursed
190
(Rs./Lakhs) 2004-05 (iii) Sale of steel plates Qty. Amount (iv) Cost of Employees assigned to Company 12. Managerial Remuneration 8008.47 MT 1399.70 189.15 3201.99 MT 571.80 265.05 2003-04
As Managing Director
(i) Salary and Allowances 6.77 0.29 0.83 1.57 6.14 0.26 0.65 1.12
(ii) Gratuity (iii) Contribution to Provident Fund (iv) Other Benefits 13. Auditors Remuneration (Incl. of service tax) (i) Audit Fees
0.55 0.05
0.54 0.05
(ii) Certification work 14. Amounts due from the Directors to the Company : (i) As on 31.03.2005
Nil Nil
Nil Nil
(ii) Maximum amount due during the year 15. Intangible assets (not internally generated) (i) Assets owned by the Company : Right of Use Amounts paid to Competent Authority for acquiring Right of Use to lay the pipeline and expenditure on investigating the title and measurement of the land. The Right of Use is a perpetual right of use of land but the ownership of the land does not rest with the Company. (ii) Assets not owned by the Company Amount paid for construction and widening of approach roads shown under Capital work in progress (Schedule-3). The ownership of the same rests with Punjab Government.
880.00
739.00
1469.00
1415.00
16. Previous years figures have been regrouped, recast and reclassified wherever necessary. 17. Schedule 1 to 10 form an integral part of the Balance Sheet and Statement of Incidental Expense during Construction. 18. Figures under Schedule 1 to 9 have been rounded off to the nearest rupee.
191
Balance Sheet Abstract and Company's General Business Profile

SCHEDULE VI PART IV OF THE COMPANIES ACT, 1956
I. REGISTRATION DETAILS REGISTRATION NO. : U 2 3 2 0 1 P B 2 0 0 0 P L C 2 4 1 2 6 BALANCE SHEET DATE : II. 3 1 0 3 2 0 0 5 RIGHTS ISSUE N I L PRIVATE PLACEMENT 3 4 2 0 0 TOTAL ASSETS 3 0 8 0 5 7 4 RESERVES AND SURPLUS N I L UNSECURED LOANS N I L STATE CODE : 1 6
CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousands) PUBLIC ISSUE N I L BONUS ISSUE N I L
III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousands) TOTAL LIABILITIES 3 0 8 0 5 7 4 SOURCES OF FUNDS PAID-UP CAPITAL 2 9 5 7 1 0 0 SECURED LOANS N I L APPLICATION OF FUNDS NET FIXED ASSETS* 2 9 5 2 3 5 6 NET CURRENT ASSETS ( 2 1 2 7 0 ) ACCUMULATED LOSSES N I L IV. PERFORMANCE OF COMPANY (Amount in Rs. Thousands) TURNOVER N I L PROFIT/LOSS BEFORE TAX + N I L EARNING PER SHARE IN RS. N I L
INVESTMENTS N I L MISC. EXPENDITURE 2 6 0 1 4
TOTAL EXPENDITURE N I L PROFIT/LOSS AFTER TAX + N I L DIVIDEND RATE % N I L
V.
GENERIC NAMES OF THREE PRINCIPAL PRODUCTS OF COMPANY (as per monetary terms) ITEM CODE NO. (ITC CODE) 2 7 1 0 PRODUCT DESCRIPTION B U L K P E T R O L E U M P R O D U C T S ITEM CODE NO. (ITC CODE) PRODUCT DESCRIPTION ITEM CODE NO. (ITC CODE) PRODUCT DESCRIPTION
* Include capital work-in-progress, incidental expenses and advances against capital assets.
M.A. TANKIWALA Managing Director Place : New Delhi Date : May 09, 2005
C. RAMULU Director
S. MALHOTRA DGM - Finance
S. TYAGI Company Secretary
192
Rupees in Millions 2004-05 2003-04 Cash Flow from Operating Activities Net Profit before Tax and Extraordinary items Adjustments for : Depreciation/Amortisation Interest Dividend received Deletion of Fixed Assets/CWIP Interest received on Long Term Investments Interest received on Fixed Deposits Misc. Expenses to the extent written off (Public Issue Expenses) Provision for Doubtful Debts and write offs Profit on sale of Investment Provision for Loss on Investments Operating Profit before Working Capital changes Adjustments for : Trade Receivables Other Receivables Other Current Assets Inventories Trade and other Payables (38.16) 15.52 (32.63) (55.27) Amounts recoverable from Pool Account Cash generated from operations Provision for taxes (Net) Cash Flow before extraordinary items Extraordinary items Net Cash from operating activities (A) Cash Flow from Investing Activities Purchase of Fixed Assets (incl. Capital Work in Progress/excluding interest capitalised) Sale of Fixed Assets Preliminary expenses Purchase of Investment Redemption of Investments Interest received on Fixed Deposits Interest received on Investments Dividend received Net Cash used in investing activities (B) 20.61 20.61 (128.95) (128.95) (55.27) (55.27) (55.27) (29.49) (40.67) (0.01) 1.06 (69.11) (69.11) (69.11) (69.11)
193
Rupees in Millions 2004-05 Cash Flow from Financing Activities Proceeds from issue of Share Capital : Share Allotment/Call monies (incl. Share Premium) Excess Share Application Money (adj.) Proposed public issue expenses Repayment of Loans Loans raised during the year Interest other than for Long Term Loans Interest on Long Term Loans (including interest capitalised) Dividends paid Net Cash used in financing activities (C) Net Increase/(Decrease) in Cash and Cash equivalents [(A) + (B) + (C)] Cash & Cash equivalents as on 1st April (Opening) : Cash on Hand Balances with Scheduled Banks On Current Accounts Others Balances with other Banks Overdrafts from Banks 2003-04
34.20 34.20 (0.46)
198.90 (0.44) 198.46 0.40
0.14 0.42 0.56
0.16 0.16
Cash & Cash equivalents as on 31st March (Closing): Cash on Hand Balances with Scheduled Banks On Current Accounts Others Balances with other Banks Overdrafts from Banks
0.10 0.10
0.14 0.42 0.56 0.40
(0.46)
For R. Vender Gupta & Associates Chartered Accountants Lalit Kumar Partner Place : New Delhi Date : May 09, 2005 S. Malhotra DGM - Finance
194
C & AG's Comments

Comments of the Comptroller and Auditor General of India under Section 619 (4) of the Companies Act, 1956 on the accounts of Guru Gobind Singh Refineries Limited for the year ended 31st March, 2005. (Addendum to the Directors' Report dated May 09, 2005) I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditors Report under Section 619(4) of the Companies Act, 1956 on the accounts of Guru Gobind Singh Refineries Limited for the year ended 31st March, 2005.
(A.K. Singh) Principal Director of Commercial Audit & Ex-officio Member, Audit Board-II, New Delhi Place : New Delhi Date : 19.07.2005
Review of Accounts of Guru Gobind Singh Refineries Limtied for the year ended 31st March, 2005 by the Comptroller and Auditor General of India Note: Review of Accounts has been prepared without taking into account the qualifications contained in the Statutory Auditors Report. 1. FINANCIAL POSITION The table below summarises the financial position of the Company under broad headings for the last three years: Rs./Crores As at 31st March, 2003 LIABILITIES a) Paid up Capital i) Government ii) Others b) Reserves & Surplus i) Free Reserves and Surplus ii) Share Premium Account iii) Capital Reserve c) Borrowings from i) Govt. of India ii) OIDB iii) Foreign Currency Loans iv) Cash Credit v) Others d) i) Current Liabilities & Provisions ii) Provision for Gratuity Total As at 31st March, 2004 As at 31st March, 2005
272.40 15.53 287.93
292.29 15.61 307.90
295.71 12.34 308.05
195
Review of Accounts
Rs./Crores As at 31st March, 2003 ASSETS e) Gross Block Less : Depreciation f) Net Block g) Capital work in progress h) i) Producing properties : ii) Less : Depletion iii) Net Amount i) Pre-producing properties j) Investment k) Deferred Tax Asset l) Current Assets, Loans and Advances m) Misc. Expenditure not written off (accumulated project expenditure) n) Accumulated loss Total o) p) q) r) 1. Working capital (m-d(i)) Capital employed (g+i+k+p) Net worth (a+b(i)+b(ii)-n-o) Net worth per rupee of Paid up Capital (in Rs.) 160.52 2.00 158.52 125.88 0.97 2.56 287.93 (14.56) 143.96 269.84 0.99 As at 31st March, 2004 162.70 4.12 158.58 138.72 8.00 2.60 307.90 (7.61) 150.97 289.69 0.99 As at 31st March, 2005 164.06 6.25 157.81 137.42 10.22 2.60 308.05 (2.12) 155.69 293.11 0.99
2.
3.
4. 2.
The working capital of the Company for the year 2002-03, 2003-04 and 2004-05 was (-) Rs.14.56 crores, (-) Rs.7.61 crores and (-) Rs.2.12 crores respectively. The increase in working capital during 2004-2005 was due to decrease in Current Liabilities. The Capital employed of the Company for the year 2002-03, 2003-04 and 2004-05 was Rs.143.96 crores, Rs.150.97 crores and Rs.155.69 crores respectively. The increase in capital employed was due to increase in working capital. The net worth of the Company for the year 2002-03, 2003-04 and 2004-05 was Rs.269.84 crores, Rs.289.69 crores and Rs.293.11 crores respectively. The increase in networth was due to increase in paid up capital of the Company. Decrease in Capital work-in progress is due to sale of Steel plates to HPCL.
WORKING RESULTS Working results of the Company during the last three years are given below: i) ii) iii) iv) v) vi) vii) viii) Sales Less : Excise Duty Net Sales Other or Misc. Income Profit/Loss before tax and prior period adjustment Prior period adjustment Profit/Loss before tax and after prior period adjustment Tax provisions 2002-03 2003-04 2004-05
196
Review of Accounts
Rs./Crores 2002-03 2003-04 2004-05
ix) Profit after tax x) Prepaid dividend As the Management of the Company has put on hold all the major activities pertaining to the refinery, hence there was no sales/income. 3. RATIO ANALYSIS Some important ratios on the financial health and working of the Company at the end of last 3 years are given below : Percentage 2002-03 A) Liquidity Ratio Current Ratio : (Current Assets to Current Liabilities and Provisions and Interest Accrued and due but excluding Provision for Gratuity) 0.06 2003-04 0.51 2004-05 0.83
B) Debt Equity Ratio Long Term Debt to Net Worth [c(i) to c(v) but excluding the Short-Term Loans] C) Profitability Ratio Profit before tax to a) i) Capital Employed ii) Net Worth iii) Sales b) Profit after tax to equity capital c) Earnings per share (in Rs.) of Rs. 100 each 4. SOURCES AND USES OF FUNDS Sources of Funds (Equity contribution) Funds from operations Profit after tax Capital reserve addition Project Expenditure written off Depreciation (Increase) Deferred Tax Asset Increase in Borrowings Total Utilisation of funds Increase in Fixed Assets Increase in Working Capital Investment Repayment of OIDB Loan Increase in Misc. expenditure (Project Expenditure) Decrease in Capital work-in-progress Total
Nil
Nil
Nil
Nil
Nil
Nil
Rs./Crores 3.42 2.13 5.55 1.36 5.49 (1.30) 5.55
197
Review of Accounts
Rs./Crores 5. SUNDRY DEBTORS Year Debts Considered good 2.95 6.76 Provision for Doubtful Debts Total Debtors 2.95 6.76 Sales Percentage of Debtors to Sales
2002-03 2003-04 2004-05
The Sundry debtors have increased from Rs.2.95 crores in 2003-2004 to Rs.6.76 crores in 2004-2005 6. INVENTORY Inventory position as at the end of last three years was as follows: i) ii) iii) iv) Stores and Spares Capital Stores Stock-in-trade Others 2002-03 2003-04 2004-05
As the Management of the Company has put on hold all the major activities pertaining to the refinery, hence there was no sales/income.
(A.K. Singh) Principal Director of Commercial Audit & Ex-officio Member, Audit Board-II, New Delhi Place : New Delhi Date : 14.07.2005
198
Your Company adopts the best corporate governance practices in order to maintain transparency, accountability and ethics. A. Board Meetings : During the year ended 31st March, 2005, four Board Meetings were held on the following dates : 29th April, 2004 28th July, 2004 26th October, 2004 25th January, 2005
These meetings were attended by the members of the Board, as under :

Names of Directors Academic Qualifications No. of No. of Attendance Board Meetings at the last Meetings attended AGM held Details of Directorships in Companies Memberships held in Committee as specified in Clause 49 of the Listing Agreement Nil
Shri M.B. Lal Chairman Shri M.A. Tankiwala Managing Director
B.E. (Chem), PGDBM (IIM, Ahmedabad) B.E. (Mech.)
Yes
1. HPCL 2. HINCOL 3. SALPG Nil
No
Nil
Shri D.S. Mathur B.Tech, Director M.Sc., PGDPE Shri N.K. Puri* Director DME
Yes
1. HPCL 2. PPCL 1. 2. 3. 4. 5. 1. 2. 3. 4. HPCL PMHB MRPL BGL SALPG HPCL HINCOL PPCL SALPG
Member Audit Committee : GGSRL Nil
No
Shri C. Ramulu Director
A.C.A. A.C.S. M.B.A.
Yes
Chairman Audit Committee : a) HINCOL b) PPCL Member Audit Committee : GGSRL
Dr. B. Mohanty** M.Sc. Director (Dev. Mgmt.) Ph.D. (Eco)
No
1. HPCL 2. BPCL 3. BLIL
Member Audit Committee : a) GGSRL b) HPCL c) BLIL Member Investor Grievance Committee : HPCL
199
(Contd.)
Memberships held in Committee as specified in Clause 49 of the Listing Agreement Chairman Audit Committee : a) HPCL b) Rain Calcining Ltd. c) GGSRL Member Remuneration Committee : Rain Calcining Ltd. Chairman Shareholders' Investor Committee : Rain Calcining Ltd. Nil
Shri T.L. Sankar M.Sc. (Chemistry), Director MA (Dev. Eco.), IAS
No
1. Rain Calcining Ltd. 2. KSK Energy Ltd. Ventures Ltd. 3. HPCL 4. Delhi Power Co. Ltd. 5. Small Scale Sustainable Infrastructure Development Board
Shri S.P. Chaudhr y*** Director
B.E. (Mech.) M.B.A.
Yes
Nil
* Retired on attaining the age of superannuation on 30/04/2004. ** Ceased to be Director effective 29/10/2004. *** Appointed as Director effective 14/05/2004. B. Audit Committee : An Audit Committee has been constituted comprising of the following members: 1. 2. 3. Shri T.L. Sankar, Director - Chairman of the Audit Committee Shri D.S. Mathur, Director - Member of the Audit Committee Shri C. Ramulu, Director - Member of the Audit Committee
The Committee reviewed the accounts for the financial year 2004-05 of the Company before it was submitted for consideration of the Board. C. Details of Annual General Meetings : Location and time, where last two Annual General Meetings of the Company held : Year 2002-03 Location Kailash Building, 7th floor, 26, K.G Marg, New Delhi - 110 001. Petroleum House 17, Jamshedji Tata Road, Mumbai - 400 020. Date 08.09.2003 Time 5.30 p.m.
2003-04
29.09.2004
3.00 p.m.
200
HPCL stall at the 6th International Petroleum Conference and Exhibition held in January 2005 at New Delhi (PETROTECH 2005)

AnnualReport2004-05 HPCL

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Our vision.....

Our Corporate Headquarters at Mumbai

53rd Annual Report 2004-05

53rd Annual Report 2004-05

53rd Annual Report 2004-05

53rd Annual Report 2004-05

Shri M. B. Lal Chairman & Managing Director

Shri M. S. Srinivasan Director (Till 20.06.2005)

Shri T. L. Sankar Director

Shri Arun Balakrishnan Director - Human Resources

Shri A. K. Srivastava Director (Till 07.03.2005)

Shri Raja G. Kulkarni Director

Dr. B. Mohanty Director (Till 29.10.2004)

Shri M. A. Tankiwala Director - Refineries (From 01.06.2005)

Shri D. S. Mathur Director - Refineries (Till 31.05.2005)

53rd Annual Report 2004-05

Senior Corporate Officers

Smt. Parminder H. Mathur, Chief Vigilance Officer

Shri S.K. Mukherjee, Executive Director Safety, Health & Environment

Shri K. Murali, Executive Director Research & Development

Shri N.R. Narayanan, Company Secretar y

Shri R.N. Sharma, Executive Director Internal Audit & JVCs

Shri A.K. Bhide, Executive Director Corporate Finance

Shri K.S.R. Prasad, Financial Controller

Shri S.P. Gupta, General Manager Payroll, Treasur y & Reimbursement

Shri V. Vizia Saradhi, Executive Director Industrial Relations

Shri B. Mukherjee, General Manager Human Resources

Shri Sandeep Joseph, General Manager Human Resources, (Special Activities)

Shri C.N. Rao, Executive Director Information Technology & Planning

Shri S.M. Palav, General Manager Information Technology

Ms. Nishi Vasudeva, General Manager Enterprise Resource Planning

Shri O.P. Pradhan, General Manager Strategy

Shri A.S. Tulaskar, General Manager Upstream

Shri G. Hariharan, General Manager Legal

Shri Ajit Singh, Deputy General Manager - I/C, DCO

Shri D.K. Hota, Head - Internal Coaches

53rd Annual Report 2004-05

Offices, Auditors & Bankers

Registered Office and Headquarters Office

Zonal Offices East Zone

West Zone Marketing Headquarters

South Zone Visakh Refinery

Notice of Annual General Meeting

53rd Annual Report 2004-05

Notice of Annual General Meeting

Notice of Annual General Meeting

53rd Annual Report 2004-05

Notice of Annual General Meeting

Notice of Annual General Meeting

53rd Annual Report 2004-05

Notice of Annual General Meeting

Notice of Annual General Meeting

21/01/1999 21/01/1999 14/08/2003 03/05/2005 03/05/2005 01/06/2005

53rd Annual Report 2004-05

50000 40000 30000 20000 10000 FY96

Gross Profit (PBDIT)

3000 2500 2000 1500 1000 FY96

53rd Annual Report 2004-05

Distribution of Earnings 2004-2005

31.5% 1.1% 0.9% 0.6% 2.1% 1.9% 1.1% 1.1% 8.4%

Taxation Dividend Transfer to Reserves

30 20 10 0 FY01 FY02 EPS FY03 DPS FY04 FY05