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Firstly, I would like to thank Mr. J. Jaya Raj (chief manager H.R) for
giving me the opportunity to undertake this project at HPCL Kolkata. I
would like to extend my gratitude to my project guide Mrs. Shweta
Bagaria Sarawgee (Deputy Manager-Finance) for her encouragement
and supporting me during the course of the project. Special thanks to Mrs.
Archana Agarwal (Senior Manager-Finance) for consistently guiding me
on this topic. Her deep interest in the subject helped me to refine my
thoughts and ideas for reflection on the topic. I am immensely indebted to
all the people who shared their thoughts with me and gave me valuable
sight to the study .Also greatly thankful to Mr.S.W.Kiro (Senior Manager-
Operation & Distribution) for being a mentor and guide. I would also like
to thank all the finance officers and staff in the Zonal Office (Church
Lane, Kolkata), Regional Office (Camac Street), Terminal Office(Budge
Budge), Aviation Office (Dum Dum) for giving their precious time,
relevant information and for sharing their experiences.
Section 1- Introduction
1. Definition
2. Why taking up the study of funds?
3. Sources of funds in a business.
4. Importance of funds in a business.
5. Flow of Funds
Introduction
When an organization becomes serious about raising funds to support budgetary needs
and/or capital projects it is vital to establish realistic goals based on sound research and
thorough planning. Realistic goals are a reflection of the organization’s understanding of
its financial structure and its capability to challenge existing funders and prospective
donors.
A professional feasibility study or planning assessment is one way to assess the viability
of funding goals. In a professionally directed study, confidential interviews are conducted
with organizational and community leaders, donors, potential donors, constituents,
vendors and others to determine the viability and level of acceptance of the priorities and
goals. After careful evaluation of the data, a realistic goal can be set that is based upon
personal opinion, a strong case for support, identified volunteer leadership and potential
donors.
It is good to aim high – to challenge those who care about the organization’s mission to
stretch themselves to new levels of support – while remaining realistic. Challenges that
are successfully met engender renewed commitment. With that fresh energy comes
enthusiasm, involvement, and interest. Meeting challenges ignites positive energy within
people. Setting challenging goals that are realistic enough to be met, is the first step to
achieving those goals. As CDS President, David Phillips, has said, “Nothing is more
discouraging than running a great campaign and coming up a few thousand dollars short
of the minimum goal.”
When setting funding goals, the first consideration should be the organizational needs.
Are the program goals going to require funds that are far too great – or are the program
goals too small to warrant a capital campaign? The wisest leaders will budget to a plan
rather than plan to a budget. Establish the goals of the organization then determine what
resources are needed to achieve those objectives. From there, the picture of funding needs
begins to emerge.
Consider how much money is needed to fund specific new projects, such as land
acquisition, new construction, renovations, programs and endowment. Preliminary costs
should be established as accurately as possible. What portion of current income can be
allocated to the new projects? Which income sources are most reliable? Which are least
reliable? Which income sources have the most growth potential? When you understand
your budgetary strengths, and weaknesses, you are better prepared to initiate a
fundraising campaign to reach specific funding goals.
1.1)Definition of fund- Fund may be defined as “A stock or capital; a sum of
money appropriated as the foundation of some commercial or other operation undertaken
with a view to profit; that reserve by means of which expenses and credit are supported;
as, the fund of a bank, commercial house, manufacturing corporation, etc.” In other
words it also can be stated as “An aggregation or deposit of resources from which
supplies are or may be drawn for carrying on any work, or for maintaining existence.”
Fund is generally created with the view that to provide and appropriate a fund or
permanent revenue for the payment of the interest of; to make permanent provision of
resources (as by a pledge of revenue from customs) for discharging the interest of or
principal of; as, to fund government notes.
A sustainability plan for a business is a plan that is designed for a certain project which
completely describes the justification of the project, the incurring costs, the revenue that
is expected to be generated from that project, the financial performance and most
importantly, whether the project was a success for the business or a failure that needs to
be avoided in the future. In order to raise funds, all of these figures need to be completely
accurate and totally up to the mark. The prerequisite schedule consists of several very
important elements without which the investor would certainly remain unconvinced about
the sustainability of your business.
The initial phase of the sustainability plan should provide an introduction about the
project and what is the scope of the project. The scope of the project deals with all the
deliverables of the project, the reasons for undertaking the project and all the pertaining
features of the project. The required figure of investment needs to be present as well,
which would show whether the project is a viable investment or not. The success of any
sustainability plan for any project depends heavily on the project's features, and whether
the project would be able to sustain itself in the longer term and be able to generate the
expected number of returns.
In the second part of the sustainability plan, an explanation should be given as to how the
project would be beneficial to the community and how the society would be able to take
advantage of this project. All the requirements of the project should be detailed, and a
complete risk analysis should be made. The risk analysis or risk assessment portion of a
sustainability report would deal with all the possible constraints that might be faced by
the project and what is the likelihood of the occurrence of such a risk.
Moreover, the risk analysis or the risk assessment should also detail solutions that have
been cited for the pertaining risks, because if the plan does not have a solution for any
risk, then that risk becomes a potential threat to the integrity of the sustainability plan of
that project without it having any defense or counter action against it.
The next phase of the sustainability report should deal with how the project shall be
undertaken and a complete activity list should be drawn up which would show how the
project would be developed until it is ready. All the financial implications of the project
should be enlisted in the sustainability report, and a thorough analysis should be made of
all the major activities of the project and whether any of them might be a risky option for
the project. Other additions that can be made to the sustainability report is the analysis of
the dealings of the competitor, which would depict all the actions that are being taken by
the closest competitor and which might affect the sustainability of the project. These are
the basic requirements of a sustainability report.
1.5)FLOW OF FUNDS
In accounting, the term "funds" has two distinct meanings: (1) cash and (2) the access of
current assets over current liabilities, which are called "net working capital." Current
assets refer to anything of value that a company will sell, use, or otherwise obtain cash
for during the current year or operating cycle, whichever is longer, such as cash,
inventories, and debt owed to a company. Current liabilities are obligations a company
owes within the same period, such as money a company owes another party, insurance,
taxes, and wages. Besides these two meanings, the term "funds" also can refer to a
combination of cash and working capital.
The flow of funds, therefore, denotes the earning and spending of cash or the growth and
reduction of working capital—i.e., fund inflows and outflows. Fund inflows include
activities designed to produce revenues, such as selling products, services, investments,
and other company assets, as well as issuing stocks and bonds. On the other hand, fund
outflows include paying wages, obtaining insurance, purchasing company assets and
materials, making long-term investments, and paying dividends and taxes. At one point,
companies gauged their flow of funds by using any definition of funds and included a
financial statement reporting these activities in their annual reports.
The original statements depicting the flow of funds had a number of different names,
including: statement of sources and uses of funds, statement of sources and applications
of funds, and statement of changes in financial position. These statements also were
called "funds statements" for short. Stated in cash and cash-equivalents, the statement of
changes in financial position demonstrated either the sources or uses of working capital
and changes in each working capital account, or changes in cash. When preparing a funds
statement, an accountant would obtain much of the needed information from the
beginning and ending balance sheets, the income statement, and statement of retained
earnings for the designated accounting period.
Investors, creditors, and financial managers monitor the flow of funds in order to
determine how effectively management plans and controls the quantity and types of its
resources, how it has invested and plans to invest company resources, and what methods
it uses to finance them. Though once this entailed using the funds statement, financial
statement users now obtain this information largely from cash flow statements, income
statements, and balance sheets. Depending on whether financial statement users want to
analyze cash flow or working capital, they can choose between the beginning and ending
balance sheets of a specific accounting period to evaluate a company's working capital or
the cash flow statement of the same period to evaluate a company's cash activities.
Financial statement users can examine these statements together to monitor both working
capital and cash activities.
In addition, stockholders and creditors find analyzing the flow of funds helpful in
understanding the changes in assets and asset sources. Analyzing the flow of funds helps
stockholders and creditors determine how a company used its additional resources
derived from profitable operations and to identify the financial strengths and weaknesses
of the business. This additional information is essential to evaluating managerial
performance and to making investment decisions. Creditors are more able to determine
how the business uses credit and the debt capacity of the business.
Within a company, managers monitor the flow of funds particularly when planning and
budgeting. From analyzing a series of relevant financial statements over a number of
years, management can project cash requirements needed for growth, identify and plan
the efficient use of idle funds, determine working capital requirements, ease the impact of
insufficient cash balances, and plan the payment of interest to creditors and dividends to
stockholders.
3.1)History- The Indian Petroleum industry is one of the oldest in the world, with oil
being struck at Makum near Margherita in Assam in 1867 nine years after Col. Drake's
discovery in Titusville. References to rock-oil as 'shilajatu' are found in the Vedas. Early
evidences of oil seeps were recorded along the banks of the Nampong River in upper
Assam, in the 1820s by British army men and geologists. First Indian oil well at Digboi
in 1889. Refining, transportation, followed with the discovery at Digboi. It is amazing
how the oil was transported in elephant drawn carts across the jungles and then through
the waterways to as far as the Malabar coast. Seismic surveys were carried out in the 19th
century in jungles of Assam using elephant logistics.
After independence, India didn't lose much time in initiating geological and seismic
surveys in search of oil in the Indian basins. After discoveries in the western sector in
Gujarat, the prevailing attitude of non-cooperation by multinationals necessitated the
establishment of Koyali refinery in the 60s. One after the other major refineries was set
up and infrastructure for distribution of the products expanded at a great pace.
The industry has come a long way since then. The giant offshore structures, the
ultramodern environment friendly refineries, the high-tech pipeline transportation
facilities may appear dazzling. For nearly fifty years after independence, the oil sector in
India has seen the growth of giant national oil companies in a sheltered environment. A
process of transition of the sector has begun since the mid nineties, from a state of
complete protection to the phase of open competition. The move was inevitable if India
had to attract funds and technology from abroad into our petroleum sector.
The sector in recent years has been characterized by rising consumption of oil products,
declining crude production and low reserve accretion. India remains one of the least-
explored countries in the world, with a well density among the lowest in the world. With
demand for 100 million tonne, India is the fourth largest oil consumption zone in Asia,
even though on a per capita basis the consumption is a mere 0.1 tonne, the lowest in the
region- This makes the prospects of the Indian Oil industry even more exciting.
The years since independence have, however, seen the rapid growth of the upstream and
downstream oil sectors. There has been optimal use of resources for exploration activities
and increasing refining capacity as well as the creation of a vast marketing infrastructure
and a pool of highly trained and skilled manpower. Indigenous crude production has risen
to 35 million tonnes per year, an addition of fourteen refineries, an installed capacity of
69 million tonnes per year and a network of 5000 km of pipelines.
But with the consumption of hydrocarbons said to increase manifold in the coming
decades (155mmtpa by the end of the 10th plan) the liberalization, deregulation and
reforms in the petroleum sector is essential for the health and overall growth of our
economy.
As the Indian Economy breaks the shackles of a Hindu rate of growth to grow at a pace
of 8% and above, the single biggest beneficiary should be the oil & energy sector. Oil and
energy are most happening sectors of the Indian economy today. PSU Oil Companies
were in the limelight over the past two years for a variety of reasons- first, the companies,
then the huge surge in profits, and recently, the drama over sale of government's stake
through public offer.
That should be pretty good news for the industry, which is counting on surging sales and
economic boom to absorb the huge refining capacity that has built up in the country. The
interesting story is that oil products consumption has started picking up in line with the
economic boom, though with a certain lag.
Going forward, we should see much larger pick- up in sales of oil products in line with
the GDP growth rate, feel analysts.
High consumption has meant high profit margins for oil companies, particularly refining
majors like Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation
(BPCL), Indian Oil Corporation (IOC) and a host of other smaller refining companies.
Refining margins are now ruling at their highest levels over the past decade. According to
analysts tracking the sector, refining margins are now at $8 per barrel, one of the highest
levels in many years. And these margins have stayed high despite a rise in prices of crude
oil.
For integrated refining & marketing companies, like HPCL, BPCL and IOC, the gains are
even more substantial and their numbers may look very impressive.
However, sentiment for the sector would be significantly impacted by the performance of
the biggest oil company in the country- ONGC .The Company is by far the biggest player
in the oil exploration & production sector and has a presence in the refining sector
through its arm- MRPL. As crude prices have held firm in the global markets over the
past months, the company should show good performance for the year. The company
should benefit from a surge in demand in this region.
According to CLSA. "While Asia (excluding, Middle East) accounts for only 10% of oil
production, it accounts for as much as 25% of oil consumption and refining capacity. Oil
consumption in Asia is returning, driven mainly by a surge in Chinese demand over the
shorter term. With most Asian economies on track for a solid recovery, we would expect
demand growth to top 3-4% in the next few years leading to a quick recovery. With Asia
forming 45% of global incremental demand between 2000 and 2010, we expect Asian
refining margins to remain at higher than global averages"
1.Exploration
India remains one of the least explored regions in the world with a well density of 20 per
10000km2. Of the 26 sedimentary basins, only 6 have been explored so far. The Oil and
Natural Gas Corporation (ONGC) and the Oil India Limited (OIL) - the two upstream
public sector oil companies- in 1981/82 had taken their search to previously unexplored
areas. Number of wells drilled as well as the meterage increased. However current
reserve accretion continues to be low.
2.NELP
The government in order to increase exploration activity approved the New Exploration
Licensing Policy (NELP) in March 1997 which would level the playing field in the
upstream sector between private and public sector companies in all fiscal, financial and
contractual matters.
1) There will be no mandatory state participation through ONGC/OIL nor there any
carried interest of the government.
2) The two public sector upstream companies would compete for petroleum exploration
licenses, instead of the existing system of granting of licenses on nomination basis. The
public sector companies will also be able to avail of the fiscal and contract benefits
available to private companies.
3) Open availability of exploration acreage to provide a continuous window of
opportunity to companies. The acreages will be demarcated on grid system and pending
preparation of the grid, blocks will be carved out for offer.
4) Freedom to the contractors for the marketing of crude oil and gas in the domestic
market.
5) Royalty payments at the rate of 12.5% for the on land areas and 10%for the offshore.
Half the royalty of the offshore area will be credited to a hydrocarbon development fund
to fund and promote exploration related study and activity.
6) To encourage exploration in deepwater and frontier areas royalty will be charged at
half the prevailing rate for normal offshore area, for deep water areas beyond 400m
bathymetry for the first seven years after commencement of commercial production.
7) Prompt action by the Ministry of Petroleum and Natural Gas to sign the PSC's for
exploration blocks.
The government to attract private investment in the upstream sector has conducted
regular rounds of bidding.
3.Refining
The total installed refining capacity of the 15 refineries in the country at the end of March
1998 was 69.140 million tonnes per annum and the total is expected to go up to 131 mtpa
by the year 2001/02. The expected increase in refining capacity should be sufficient to
meet the growth in petroleum product demand (112 mtpa by the end of the ninth plan)
with minimum level of imports.
The Sub-group on refining has suggested certain financial incentives for the efficient
functioning of the refining sector and enhancing private sector participation during the
Ninth five year plan period. In order to increase capacity utilization of the existing
refineries, 11 new crude pipelines have been proposed by the Sub-group.
In addition, there is an urgent need to reduce fuel loss in refineries, which reached a level
of 7.1% in 1985/86 and declining marginally to 6.1% in 1996/97. To reduce energy
consumption, projects amounting to Rs 7200 million have been identified, which on
implementation, will achieve a saving of 186000 tonnes per annum (tpa).
The aggregate consumption of petroleum products during 1997/98 was 90mt. In the
period 1992-98, LPG and HSD registered the largest demand growth rate of 9.2% and
8.6% respectively. The Transport (38%), residential (26%) and industrial (24%) sectors
are the largest consumers of petroleum products. The total production of petroleum
products during 1997/98 was 61mt (MoPNG 1998). India's self sufficiency in petroleum
products has declined to 34% in 1997/98 from 60% in 1985/86 resulting in a substantial
growth in the import bill.
5.Natural Gas
Natural Gas currently accounts for 8% of the energy consumption in the country. The
current demand is 89 mcmd with domestic availability lagging behind at 63mcmd. The
total gas consumption in 1996/97 was 19bcm with power and fertilizer sectors accounting
for more than 80% of the consumption. The gap between demand and supply is set to
widen unless major gas discoveries are made. India is also looking at pipeline gas and
LNG imports from neighboring countries as well as countries from Iran, Oman, Central
and South East Asia.
The growth of the gas/ LNG imports is very closely intertwined with the power sector,
and the competition, and perhaps to an extent the replacement of coal as the preferred
fuel. The setting up of Natural Gas import infrastructure would depend to a large extent
on the ability of the power sector to pay for gas as against the cheaper coal, or an
alternative fuel.
6.Transportation
The Railways handle the bulk of petroleum product movement in the country, followed
by the pipeline. The use of pipelines, provide for more reliability, safety, greater capacity
and efficiency in delivery of the product. There are 5000km of pipeline in the country. At
present there are two crude pipelines, one belonging to OIL bringing northeastern crude
to Barauni refinery and the other owned by IOC taking crude from the gulf of Kutchh to
Koyali and Mathura refineries. The IOC pipeline is being extended to bring crude to their
Panipat refinery. Another new pipeline is being laid from the Gulf of Kutchh to Bina to
meet the crude requirements of the new joint venture refinery at the place.
The Administered Price Mechanism, which has been a feature of the oil industry in the
last fifty years, was sought to be phased out. The dismantling of this mechanism began on
1 April 1998 and ended in 2002. The Government however continues to control the
prices of petro products.
The APM was made up of a cost-plus pricing system for the producing companies and
cross-subsidization for the consumers. The Oil -Pool Account was to see to the interests
of both producers and consumers. Subsidies have contributed to the severe liquidity
crunch faced by the oil companies. The new package accompanying the dismantling of
prices is directed towards bringing greater transparency in subsidies, moving prices
towards their real costs, sending right market signals, at the same time not throwing the
small consumer to the wolves. Studies have shown, the dismantling of the APM will
result in an overall wholesale price-index inflation of 1.57% in five years on a cumulative
basis.
The de-regulation of Natural Gas prices also began in a phased manner. The consumer
price of gas at landfall points would be linked to the price of a basket of LSHS/FO prices.
Domestic gas prices are to move closer towards the inter-fuel market determining pricing
regime. The de-regulation of prices is to accompany those of crude oil and petroleum
products, to provide a rational market- related pricing framework for end users.
According to Oil & Gas Journal (OGJ), India had approximately 5.6 billion
barrels of proven oil reserves as of January 2010, the second-largest amount in the Asia-
Pacific region after China. India’s crude oil reserves tend to be light and sweet, with
specific gravity varying from 38° API in the offshore Mumbai High field to 32° API at
other onshore basins.
India produced roughly 880 thousand barrels per day (bbl/d) of total oil in 2009 from
over 3,600 operating oil wells. Approximately 680 thousand bbl/d was crude oil, the
remainder was other liquids and refinery gain. In 2009, India consumed nearly 3 million
bbl/d, making it the fourth largest consumer of oil in the world. EIA expects
approximately 100 thousand bbl/d annual consumption growth through 2011.
The combination of rising oil consumption and relatively flat production has left India
increasingly dependent on imports to meet its petroleum demand. In 2009, India was the
sixth largest net importer of oil in the world, importing nearly 2.1 million bbl/d, or about
70 percent, of its oil needs. The EIA expects India to become the fourth largest net
importer of oil in the world by 2025, behind the United States, China, and Japan.
Nearly 70 percent of India’s crude oil imports come from the Middle East, primarily from
Saudi Arabia, followed by Iran. The Indian government expects this geographical
dependence to rise in light of limited prospects for domestic production.
8.Sector Organization
Though the government has taken steps in recent years to deregulate the hydrocarbons
industry and encourage greater foreign involvement, India’s oil sector is dominated by
state-owned enterprises. India’s state-owned Oil and Natural Gas Corporation (ONGC) is
the largest oil company and dominates India’s upstream sector. State-owned Oil India
Limited (OIL) is the next largest oil producer. Other major state-run players include the
Indian Oil Corporation (IOC) and the Gas Authority of Indian Limited (GAIL). In
addition, the private Indian firm, Reliance Industries Limited, is becoming a significant
operator in the oil sector and is the largest private oil and gas company in the country.
Cairn India, a branch of UK-based Cairn Energy, and BG Exploration are also important
private sector operators in the industry.
As a net importer of oil, the Indian government has policies aimed at increasing domestic
exploration and production (E&P) activities. As part of an effort to attract oil majors with
deepwater drilling experience and other technical expertise, the Ministry of Petroleum
and Natural Gas created the New Exploration License Policy (NELP) in 2000, which for
the first time permits foreign companies to hold 100 percent equity ownership in oil and
natural gas projects. Despite this, international oil and gas companies currently operate a
small number of fields.
India’s downstream sector is also dominated by state-owned entities. The Indian Oil
Corporation (IOC) is the largest state-owned company in the downstream sector,
operating 10 of India’s 18 refineries and controlling about three-quarters of the domestic
oil pipeline transportation network. Reliance Industries opened India’s first privately-
owned refinery in 1999, and has gained a considerable market share in India’s oil sector.
12.Downstream/Refining
According to OGJ, India had 2.8 million bbl/d of crude oil refining capacity at 18
facilities as of January 1, 2010. India has the fifth largest refinery capacity in the world.
In 2009, privately-owned Reliance Industries added another refinery to its Jamnagar
complex to raise the entire complex’s refining capacity from 660,000 bbl/d to 1.24
million bbl/d. The Jamnagar complex is the largest oil refinery complex in the world.
Other key upcoming refinery projects include Essar Oil’s Vadinar refinery expansion of
110,000 bbl/d in 2011, 120,000 bbl/d greenfield refinery in Bina in 2011 by a joint
venture between Bharat Petroleum Corporation Limited and Oman Oil Company
Limited, a 180,000 bbl/d grassroots refinery in Bhatinda in 2014 by Hindustan Petroleum
Corporation Limited, and IOC’s grassroots Paradeep refinery of 300,000 bbl/d in 2015.
India is slated to add 840 thousand bbl/d of refining capacity through 2015 based on
currently proposed projects.
Due to expectations of higher demand for petroleum products in the region, further
investment in the Indian refining sector is likely. As part of the country’s 11th Five Year
Plan from 2007 to 2012, the government would like to promote India as a competitive
refining destination, and industry experts expect the country to be an exporter of refined
products to Asia in the near future.
The Petroleum Planning & Analysis Cell (PPAC) was created w.e.f. 1st April 2002 after
dismantling of the Administered Pricing Mechanism (APM) in the petroleum sector and
abolition of the erstwhile Oil Coordination Committee (OCC). The Governing Body
under the chairmanship of Secretary (PNG) and senior officials of MOPNG and Chief
Executives of major oil and gas PSUs as members provides necessary supervision,
guidelines in the functioning of PPAC.
Petroleum products are the single largest merchandise export from India.
Improved Oil Recovery (IOR) / Enhanced Oil Recovery (EOR) techniques
Crude oil production from the deepwater block D6 in KG Basin
Use of improved technology
Extended oil field acquisition activities
Capacity utilization of refineries
Foreign company collaboration
End-user market and Infrastructure development
Setting up oil & gas courses at universities and training institutes
Opportunities for world-class service providers
The Indian petroleum market over the years has been generally dominated by Public
Sector Units (PSUs) under the grip of the Central Government. But in the recent past
remarkable achievements have been made by the private sectors which cannot be
overlooked. With increased capacity production and well equipped technology the private
sectors are giving a tough competition to PSUs. Thus, above mention reason the ranking
of the private company are creeping up and may overtake the leading PSUs. However the
present top ten oil companies are as follows….
HPCL operates 2 major refineries producing a wide variety of petroleum fuels &
specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum
(MMTPA) capacity and the other in Vishakhapatnam, (East Coast) with a capacity of 8.3
MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery &
Petrochemicals Limited (MRPL), a state-of-the-art refinery at Mangalore with a capacity
of 9 MMTPA. Another Refinery of 9 MMTPA is under construction in Bathinda, Punjab
by HMEL, a Joint Venture with Mittal Energy Investments Pte.Ltd.
HPCL also owns and operates the largest Lube Refinery in India producing Lube Base
Oils of international standards. With a capacity of 335 TMT. This Lube Refinery
accounts for over 40% of the India's total Lube Base Oil production. Presently HPCL
produces over 300+ grades of Lubes, Specialities and Greases.
The marketing network of HPCL consists of 13 Zonal offices in major cities and 101
Regional offices facilitated by a Supply & Distribution infrastructure comprising
Terminals, Aviation Service Facilities, LPG Bottling Plants, Lube filling plants, Inland
Relay Depots, Retail Outlets (Petrol Pumps) and LPG & Lube Distributorships.
HPCL has, over the years, moved from strength to strength on all fronts. The refining
capacity steadily increased from 5.5 million metric tonnes in 1984/85 to 13.00 million
metric tonnes (MMT) now. On the financial front, the turnover grew from 2687 crores in
1984-85 to Rs 1,31,802 Crores in Financial year 2008-09.
4.1)Products
1. Petrol- Known as Motor Spirit(MS) in Oil Industry. HPCL markets the product
through its retail pumps spread all over India. Its principle consumers are regular
personal vehicle owners.
2. Diesel - Known as High Spirit Diesel(HSD) in Oil Industry. HPCL markets the
products through its retail pumps as well as terminals and depots. Its consumers are
not only regular auto owners but also transport agencies, industries etc.
3. Lubricants- HPCL is the market leader in lubricant and associated products. It
commands over 30% of market share in this sector. The popular brands of HP lubes
are Laal Ghoda, Milcy, Thanda Raja, Koolgard etc.
4. LPG -A popular brand in mainly urban areas.
5. Aviation Turbine Fuel- With major ASF(Air Service Facility) present in all major
airports of India, HPCL is a key player in this sector supplying ATF to major airlines.
It has an accomplishment of sorts to supply fuel to US Air Force 1.
6. Bitumen
7. Furnace Oil
Refineries
International rankings
1. HPCL is a Fortune Global 500 company as per the ranking of 2009 and was
ranked at position 311.
2. HPCL was featured on the Forbes Global 2000 list for 2009 at position 1002
3. It is 10th most valuable brand in India according to an annual survey conducted
by Brand Finance and The Economic Times in 2010.
ZONE
DEPOT
CARRYING FRIEGHT AGENT(CFA)
CONTRATOR OPERATED DEPOT(COD)
COLD (FOR LUBRICANTS)
LPG BOTTLING PLANT
THERE ARE 14 Regional Offices UNDER THE EASTERN GMO
OF Hindustan Petroleum Corporation Limited:
6 RETAIL Regional Offices
4 LIQUID PETROLEUM GAS (LPG) Regional Offices
4 DIRECT SALES Regional Offices
2 TERMINALS AT BUDGEBUDGE AND RAMNAGAR
There are various modes in which the operative account of Hindustan Petroleum Corporation
Limited functions.
The Regional Offices have an operative account through which they meet the expenses of the
various operating locations under them. The limit of money held in the Operative Account is
determined and approved by the Treasury at CAG Branch, Mumbai, depending upon the needs
and requirements of the Operating Locations under the Regional Offices. The Operating
Locations only have Petty Cash Deposits (PCD) with them to meet petty expenses like
maintenance cost or cleaning charges, etc.
However the limit defined for the Operating Locations does
not include the Sales Tax to be paid by the Regional Offices. The Sales Tax payments are
directly made by the Zonal Office through cheques or letter of authority from the treasury via the
CAG Branch, Mumbai. The Sales Tax are not be paid by the Operative account of the Regional
Offices.
Besides the Operating account the Regional Offices have certain pre-funding accounts for
meeting expenses like
- salary payment of the non-management level staff;
- pension payments;
- Medical expenditures; etc.
The Regional Offices can open up new accounts requesting the Treasury at CAG Branch,
Mumbai. The Treasury approves the request and thus the required formalities are carried
out to open up the account.
The formalities for opening of a new account are:-
The Regional Offices can change the limitations or authorized signatories by making a
request to Treasury at CAG Branch, Mumbai. The Treasury approves the request and
thus the required formalities are carried out to make the required changes.
The formalities for altering the limitations of the Operating accounts or changing the
authorized signatories are:-
NON-OPERATIVE COLLECTION ACCOUNT
The Non-Operative Collection Accounts are maintained by Hindustan Petroleum Corporation Limited to
receive payments from parties and other segments.
The various modes in which the Non-Operative Collection Accounts receives payments are:-
CHEQUES - Non-Operative Collection Accounts can receive payments in the form of cheques from
its parties and then the amount gets credited into the bank account when presented.
DEMAND DRAFTS - Non-Operative Collection Accounts can receive payments in the form of
Demand Drafts. The money gets credited into the bank account of Hindustan Petroleum Corporation
Limited when presented in the bank.
PAY-ORDERS - Non-Operative Collection Accounts receive payments from parties in Pay-Orders.
The payer instructs his/her banker to make payments into the account of Hindustan Petroleum
Corporation Limited.
E-RECIEPT - under this mode of receipt the payment is received by the banker of Hindustan
Petroleum Corporation Limited. The bank uploads the vouchers on to the server of Hindustan
Petroleum Corporation Limited via its server using the BATCH PROCESSING ROUTE. The
account of the company is credited as well. Thus the cash-receipt is prepared by the accountants for
book-keeping purposes.
ONLINE PAYMENTS – the payment is received in the company account through E-mode and
cash receipt is prepared for book-keeping purposes.
DISCOUNTING LIMITS – the company receives negotiable instruments from distinct dealers in
respect of product supplied to them. In general the banker of Hindustan Petroleum Corporation Limited gets
the instrument cleared by depositing it in the local clearing house. Then the instrument goes to the clearing
house of the payer to get cleared. This usually takes a longer time which as a result blocks funds of the
company. To solve this problem Hindustan Petroleum Corporation Limited has made discounting
arrangements with its banker. The company has stated an estimated amount of outstation instruments it is to
receive in a stipulated period of time. The company pays a fixed rate of discounting charges on the
estimated amount irrespective of the fact whether the company receives any such instruments. The benefit
of this system is that as soon as the instrument is presented to the banker the account of the company is
created with such amount debiting the CAG Branch, Mumbai for discounting charges. Thus the funds of the
company remains mobilized.
1. NATURE OF FACILITY: Under the facility, HPCL will have the arrangement of
payment of excise duty through cheques issued by HPCL installations/deposits at select centers.
Wherever there is a letter of authority facility for this purpose the same will be replaced by this
“CHEQUE FACILITY (IN LIEU OF LETTER AUTHORITY FACILITY) FOR PAYMENT OF
EXCISE DUTY” within limits allocated under separate advices.
2. MODALITIES OF CONDUCT OF THE EXISTING ACCOUNTS are as under:
a. Cheques drawn on SBI designated branch issued by the authorized representative
of local union will be presented to designated SBI branch/other branches/other bank branches as the case
may be for making payment for the excise duty. The branch is also authorized to honor such cheques
after due scrutiny as and when they are presented by the excise authorities, etc. through their bankers.
b. The branch shall be authorized to make payment not exceeding a specified limit
per day and specified no. of times in a month for the purpose, separately advised to the branch.
c. The payments of this account shall be made only to Central Excise authorities and
no other payment from this account is to be provided. For the purpose of HPCL’s local event concerned
at the time requisitioning the chequebook, shall mention in the name of the payee (CEA). The branch
shall ensure that all cheques are pre-stamped with the payee’s name and are also pre-crossed “account
payee only” before the issue of chequebook. The requisite stamp will be provided by HPCL’s local unit
at the time of requisition of the chequebook.
d. The names and specimen signatures of the officials who will be signing the
cheques (jointly by two) attested by the head of the Banking and Insurance department, HQ Office,
HPCL Mumbai and duly verified by our office and sent to the branch. If the L/A facility has been
operative at the branch, the specimen signatures of authorized signatories on record for L/A facility for
payment of excise duty are also valid and applicable for cheques under the “CHEQUE FACILITY” (IN
LIEU OF LETTER OF AUTHORITY FACILITY) FOR PAYMENT OF EXCISE DUTY”
e. The existing current account for letter of authority facility for payment of excise
duty will itself re-designated/ Re-opened as “CHEQUE FACILITY” (IN LIEU OF LETTER OF
AUTHORITY FACILITY) FOR PAYMENT OF EXCISE DUTY” and hence no new formalities for
opening a current account are required. At branches where L/A is not upgraded a new current account as
“CHEQUE FACILITY” (IN LIEU OF LETTER OF AUTHORITY FACILITY) FOR PAYMENT OF
EXCISE DUTY” may be opened for this purpose.
f. If the branch is nominated to accept the concerned duty, on receipt of the cheque,
the payment bill will have to be made by internal book transfer entry. However in case, the nominated
bank (NB) at the centre is other than SBI, the payment will have to be made on presentation of cheque
(through clearing/ on collection basis) within a specified limit advised to you.
3. The facility will be operated strictly on the following lines:
a. the payment by cheque shall be released first by debiting HPCL’s account opened
for this purpose at the branch and then at the end of the day the total Outstanding balance as a lump-sum
will be debited by non-CMP linked branches through auto-sweep to CAG Branch, Mumbai where
HPCL’s cash credit account is maintained.
b. The branch should retain the paid cheques at the end.
c. In case the branch is having CMP facility the day end debit must be sent through
debit transfer mode of CMP, direct to CAG Branch, Mumbai through CMP center, Mumbai shall advise
the necessary code and operating instructions on debit transfer module of CMP for the purpose.
d. Wherever the debit transfer module of CMP is already in operation at the branch
for remitting the debit standing in the account of excise duty, the same procedure to be followed for
transfer of the main CC account of HPCL at CAG Branch, Mumbai.
4. The limit established at a branch for honoring payments by cheque is meant for
utilization each day if avail of. In the events cheques bearing different dates are presented for payment
on any day, it is possible that the total utilization of the facility on that particular day may exceed the
allocate limit at the branch. This may be permitted and reported to DGM and RM-AMT-1 at CAG
Branch, Mumbai for confirmation.
5. Recovery of charges:
a. A composite bank charge of rs.500 +service tax +EC as applicable towards
remittance charges (through whatever mode) (for all components of bank charges including
postage/telegram/telex charges) is recoverable from HPCL’s each days transfer funds. The said charge
should be recovered on monthly consolidated basis at the end of each month by debiting the CAG
Branch, Mumbai through branch clearing general account distinct date wise charges recovered. It may
be reiterated that the said charges are NOT to be recovered at the time of daily auto-sweep. In the case
of CMP LINKED branches, where from funds are to be transferred through CMP, only CMP charges are
applicable in the place of composite bank charges and these charges are recovered by centrally by CMP
center, Mumbai
b. Account maintenance charges are to be recovered at a prevailing rate on annual
basis.
c. Issuance of chequebook, the charges at rs.2 per leaf for an MICR centers and rs.1
per leaf for non-MICR centers shall be recovered on the date of issuance.
d. The branch on core platform, should be assured that “no fees “menu is selected so
that the charges are not automatically debited by the system.
6. These instructions are applicable w.e.f 13 aug.2009 valid till further advice.
SECTION 2
Money whilst on the premises during the business hours and whilst secured locked safe or strong
room in the insured premises outside business hours.
DEFINITIONS
Money shall mean and include cash, bank drafts, currency notes, cheques, postal orders and
current postage stamp.
SAFE
A strong and fire-proof receptacle containing money, valuable papers or the like which is
commercially marketed as safe
EXCLUSIONS
The company shall not be liable in respect of:
1. Shortage due to error or omission
2. Loss of money interested to any person other than insured or authorized employee of insured.
Loss of money where the insured or his employee is involved as a principle or accessory.
(However loss due to fraud or dishonesty of cash carrying employee of the insured, occurring
whilst in transit and discovered within 48 hours is covered.
3. Loss occurring on the premises, after business hours unless the money is in a locked safe or
strong room.
4. loss occasioned by strike, terrorist activities
5. money carried under contract affreightment and theft of money from unattended vehicle
6. Loss of money from safe or strong room following use of the key to the safe or strong room or
any duplicate thereof belonging to the insured, unless this has been obtained by threat or
violence.
7. loss or damage whether direct or indirect arising from war/ war-like operation, act of foreign
enemy, hostilities, civil war, rebellion, insurrection, civil commotion, military usurped power,
seizure, capture, confiscation, arrest, restraints, and detainment by the order of any government
or any authority. Any action, suit or other proceedings where the company alleges that by reason
of above provisions any loss or damage is not covered by this insurance. The burden of proving
such loss or damage is covered shall be upon the insured.
8. a. any loss, damage, destruction to any property whatsoever or any loss of expense whatsoever
resulting, or arising there from or any consequential loss, and any legal liability of whatsoever r
nature directly or indirectly caused by or contributed to by or arising from contributed to by or
arising from ionizing radiation or contamination by radioactivity, from ant source whatsoever.
b. any loss, damage, destruction or legal liability directly or indirectly caused by or contributed by
or arising from nuclear weapons material.
9. Consequential loss or legal liability of any kind.
10. Loss or damage due to or contributed to by the insured having caused or suffered anything to
be done whereby the risk hereby insured against unnecessarily increased.
SPECIAL CONDITIONS
MAITAINANCE OF BOOKS AND KEYS: the insured shall keep a daily record of the
account of the amount of cash contained in the safe or strong room and such record shall be
deposited in a secure place other than the said safe or strong room and produced as documentary
evidence in support of a claim under this policy. The keys of the safe or strong room shall be left
on the premises out of business hours unless the premises are occupied by the insured or any
authorized employee of the insured in which case, such keys if left on the premises shall be
deposited in a secure place not in the vicinity of the safe or strong room.
SUM INSURED: the sum insured should represent the estimated annual turnover, which should
not be less than the previous year’s turnover of money in transit + 15%. The insured has the
option of increasing the sum insured as and when required during the currency of the policy.
LIABILITY OF THE INSURER: if at a time of loss it is found that the actual money in transit
gas exceeded the sum insured under the policy, no liability shall attach. However, this does not
apply to the cash in the premises during the business hours.
RIGHTS OF RECOVERY: the company shall be entitled in the name of the insured to have
the absolute conduct and control of all or any proceedings that it considers necessary for the
purpose of tracing and recovering money lost or of securing during reimbursement in respect of
money lost and insured at the company’s expense furnish all such assistance as may be
reasonably be required by the company in connection with such proceedings and in the event of
any or all of the money being recovered, it shall be imperative upon the insured to refund to the
company such a proportion of the sum allowed by way of compensation as the amount recovered
bears to the total amount of money lost.
GENERAL
NOTICE: every notice in communication required by this policy shall be in writing to the office
of the company through which the insurance is affected.
DUTY OF DISCLOSURE: the policy shall be void and all premium paid hereon hall be
forfeited to the company in the event of misrepresentation, mis-description or non-disclosure.
REASONABLE CARE: the insured shall take all reasonable steps to safeguard the property
insured against accident, loss or damage.
CLAIMS PROCEDURE: upon the happening of any giving rise to or likely to give rise to a
claim under this policy, coming to the knowledge of the insured:
a. The insured shall give immediate notice to the police and to the policy issuing office of
the company and take all practicable steps to discover the guilty person/s to recover the
cash lost.
b. The insured shall deliver the company, within 14 days from the date on which the event
shall have come to his knowledge, a detailed statement in writing of the loss.
c. The insured shall furnish all explanations, vouchers, proof of ownership and other
evidence to substantiate the claim and the company may, if it deems necessary, require
corroborative evidence of the statements of the insured of any of the insured’s family
members or employee/s
CONTRIBUTION: if at the happening of any loss or damage covered by this policy there shall
be subsisting any other insurance of any other nature whatsoever covering the same property
whether effected by the insured or not, the company shall not be liable to pay or contribute more
than its rate able proportion of any loss or damage
Commercial contract
Features of a commercial contract
Sale / purchase contract is a document recording the terms of delivery and terms of
payment
Who will bear the expenses / risk factors up to which stage
Whether transport charges will be for the buyer or seller’s account
Transit risk will be covered by marine insurance at whose expense
At which stage transfer of title of the goods will take place
buyer
Buyer
RISK FACTORS
If the buyer refuses to accept the documents and not paying – Seller
To offer discount
To search for an alternate buyer offering the goods with or without discount
If alternate buyer not found, goods are to be re-booked
Expenses – transport charges, freight charges, bank charges….Cost of funds
Or abandon the goods…..
Documents are safe but payment not assured
COLLECTION
buyer
---------------------------------------------------------------------------------
buyer
buyer
buyer
DIRECT COLLECTION RISK FACTORS:
No control on the goods since it is directly consigned to buyer
Documents are also forwarded directly to the buyer
… Only if the Seller has absolute confidence on the buyer’s capacity to pay. this method
will be suitable; Otherwise… this will be more risky
ADVANCE PAYMENTS
Buyer remits the payment in advance
Receiving the consignment or getting back the payment if shipment never takes place
will be the risk for the buyer
Seller enjoys buyer’s funds
DOCUMENTARY CREDIT:
An arrangement whereby a bank acting at the request and on instructions of a customer
i.e., the applicant / buyer
To make payment to a third party (the beneficiary) by themselves or authorize other
bank to pay or negotiate
Against stipulated documents
Provided
Terms and conditions of the credit are complied with
2
buyer
STANDBY CREDITS
1. Promise to honor beneficiary’s presentation of a document indicating the default of the
applicant
2. Act as a standby arrangement in case the obligation is not fulfilled by the applicant
3. MORE USEFUL IN COLLECTION INSTRUMENTS.
4. TO PRESENT A COPY OF COMMERCIAL INVOICE & UNPAID BILL OF
EXCHANGE
5. In respect of any debt, obligation or any liability by the overseas party in connection
with bonafide trade transaction
6. As a back-up instrument for collection
7. ICC 600 & ISP 98 are the governing guidelines
GUARANTEE
Gu
a ran
t ee
iss
ue
d
GUARENTEED INVOCATION
Recovery
Stage 3
GUARANTEES INLAND/FOREIGN:
FINANCIAL / PERFORMANCE /DPG
DIFFERENCE BETWEEN FIN/PERF GUARANTEES
TYPES OF GUARANTEES –RECEIVABLES AND PAYABLES
CHECK POINTS
GUARANTEES - CHECK POINTS:
PURPOSE – SPECIFIC
VALIDITY PERIOD
CLAIM PERIOD
VALUE
LIMITATION CLAUSE
REASONS FOR INVOKING – SPECIFIC
HOW TO EXTINGUISH THE LIABLITY
INLAND GUARANTEES:
TYPE
STATUS OF THE IB
DOCUMENTARY CONDITIONS
DOCUMENTS TO BE SPECIFIED
REINSTATEMENT CLAUSE
CHARGES
INTEREST FACTOR
Post dated Cheques:
Advantages
Wrongful dishonor
Rightful dishonor
Implications of dishonor
Criminal
N I law (Amendment) Act 1988
CRIMINAL LIABLITY
IPC 415 CHEATING
IPC 417 PUNISHMENT FOR CHEATING
IPC 420 CHEATING AND DISHONESTLY INDUCING FOR DELY OF PROPERTY
– 7YEARS
SEC 2 & 11 DEFINES ‘PERSONS’ – CO, ASSNS, BODY OR PERSONS WHETHER
INCORPORATED OR NOT
Sec 138 – dishonor of cheques
For insufficient balance
Exceeds arrangement
Account closed
Payment stopped by drawer
Issuing notice by the drawer to the payee not to present the cheque – but
the payee presents the cheque – dishonored – can the drawer prosecuted?
Modi cements vs. Kuchil Kumar -1998
Drawer can easily get rid of the consequences. Hence stop
payment will not preclude action under Sec 138
Non cognizable offence Cheque to be presented within 6 months or expiry date
whichever is earlier
Payee or holder in due course makes a demand to drawer within 30 days from date of
receipt of the returned instrument
Drawee’s failure to pay within 15 days of receipt of notice
Non-payment leads to ‘cause of action’
Complaint to be registered within one month of the ‘cause of action’
Period of one month should be from the day immediately following the day on which the
period of 15 days from the date of receipt of the notice by the drawer expired. Supreme
Court judgment in Prem Chand Vs Yashpal Singh
No court lower to that of Metropolitan Magistrate or Judicial Magistrate of I class will try
the offence
GUIDELINES
Complaint in writing
With dishonored cheque / return memo / copy of notice / evidence for receipt of notice by
the drawer
Sec 146 conveys ‘Bank’s slip prima facie evidence of certain facts – court will
presume the fact of dishonor of such cheques until such fact is disproved’
Sec 147 – every offence punishable under this act is compoundable
To be filed either where cheque is issued / dishonored
With metropolitan magistrate/ judicial magistrate/ I class magistrate
Cause of action
Drawer can be punished only if he could not pay during the notice period
Not for dishonor of cheque
Punishment
Twice the cheque value
Two years imprisonment
Liability of Directors
Sec 141 of NI Act – every person of a company in charge of and responsible for business
shall be deemed guilty
Recent Supreme Court judgment by Arun Kumai in
Appeal by SMS Pharmaceuticals
Only directors responsible for the particular deal would be liable under NI Act
No universal rule that a director of a company is in charge of its every day
affairs…
Depends upon the respective roles assigned to the officers in a company
Market participants:
Merchants
◦ Domestic corporate / Multinational corporations
◦ Financial institutions
◦ Hedge funds –
High risky investment vehicles that speculates in the currency
Authorized Dealers / Banks/market makers
◦ Cover transactions – for merchant transactions
◦ Proprietary transactions
Brokers
Overseas Banks
Central Monitory Authority (BOE / FEDRESERVE / Bundesbank)
Hedgers-To meet their contractual obligations
Arbitragers
Speculators
Certain terminologies
Exchange rates
◦ Ratio used to convert from one currency into another currency
GBP/USD ……1.6576
Convertible currency
◦ Freely bought or sold with no restrictions or with lesser restrictions.
Exchange rates:
Buying and Selling
◦ Buying
TT / Bills Buying / TC Buying / FC buying
◦ Selling
TT / Bills / TC / FC
Certain transactions
Quoting appropriate rates
Sample transactions
Inward remittance EUR 5 million
Buying a draft for USD 50
Remittance of USD 15 million loan repayment
Retirement of Import bill
Transfer of 1 million USD from FC account of the customer
◦ Spread
◦ Concept of base rate and Merchant rate
Exchange rates:
Spot and forward transactions
spot
◦ what it means in the market – value date
◦ difference between spot / tom / cash
Forward transactions
◦ fixed delivery option delivery
Cross rates
Exposure in currencies other than USD
how it settles
◦ one export / import transaction
◦ Importer wants to retire import bill drawn in JPY against USD
◦ Importer wants to retire import bill drawn in JPY against EUR
DIFFERENT FACILITIES:
• FUND BASED FACILITIES
– PRE-SHIPMENT FINANCE
– POST-SHIPMENT FINANCE
• NON-FUND BASED FACILITIES
– EXPORT GUARANTEES
EXPORT OPERATIONS:
• Existing facilities
– Fund based
– Pre-shipment finance
• In rupees
• In FC (PCFC)
• PC Running account
– Post shipment finance
PRE-SHIPMENT STAGE:
• Maximum amount of loan
• Period of loan
• Interest rate
– Rupee credit / Credit in Foreign currency
– Up to 180 days
– Beyond 180 days
PRE-SHIPMENT FINANCE:
Recent developments
Interest rates on packing credit
Credit policy 19-04-2001 – switch over from administered system to freedom for the
bankers
Linked to their (PRIME LENDING RATE)PLR for such facilities
up to 180 days from date of advance
In case of Rupee finance PLR minus 2.5% maximum
For selective segments PLR minus 4.5%
In case of foreign currency PCFC LIBOR plus 1.0% maximum
Beyond 180 days - ECNOS
Overdue interest – freedom for banks
Recent developments
Liquidation of packing credit protecting concessional rate of interest
With any other shipping documents
With any other export proceeds
From EEFC account or Rupee funds
Advance to sub-supplier
Not having an export order / not even having IE Code no.
POST SHIPMENT FINANCE:
• Essentially against shipping documents
• Documents can be under letter of credit or confirmed order. (non LC bills)
• If under Letter of Credit and LC is restricted
• If the exporter does not want finance against the LC documents and insist the bank to
forward the documents to the LC issuing bank and claim reimbursement
DOCUMENTS – COMMERCIAL:
• Bill of exchange
• Commercial invoice
• Transport document – bill of lading
• Insurance document
• Certificate of origin
• Packing list – weight certificate
• Any other document – transaction specific
FEMA ON EXPORTS
FEMA 1999, Sec 7 sub sec (3) & sub sec (1)a
FEMA Notification 23 – Master Circular No.8 of July 1, 2004.
DECLARATION FORM – FORMALITIES
Exemption from declaration form
Goods sent abroad for testing – subject to re-import
Exports of value not exceeding USD25,000 or equivalent
Exporter’s obligations…
Gifts of goods value not exceeding Rs.5.00 lacks
Goods sent for export promotion up to 2%of average annual exports during preceding 3
years – subject to ceiling of Rs.5.00 lacks
Participation in trade fairs abroad
Manner of payment of export bills
TC /FC from the buyer during his visit to India
International Credit Cards –
Export to Nepal – in free foreign exchange if permitted by Nepal Rashtra Bank
Gems & Jewellery units in SEZ and EOUs – in the form of precious metal
Delay in submission of shipping documents
Dispatch of shipping documents to consignee directly
By AD
May accede to the request of the exporter for dispatch of documents for whatever
reason, direct to consignee for regular customer on the basis of standing and track
record of the exporter…
May permit Status holder exporters / units in SEZ to dispatch export docs to the
consignee … proceeds to be repatriated through the AD named in GR
Trade discount
declared in GR form
Reduction in value
Reduction in value more than 25%
Subject to exporter in export business for minimum 3 years
Satisfactory track record
INDIAN MARKETS
• REGULATIONS
– FEMA 1999
• RBI NOTIFICATIONS
• RBI SPECIFIC CIRCULARS ISSUED BY FED/DBOD /DBOS
– FOREIGN TRADE POLICY
– ICC PARIS GUIDELINES
• UCP 600 effective from 1.7.07
• ISBP ICC 681
• URC ICC 522
• ISP 98 for Standby Letter of Credits
• URDG 458 for guarantees
– FEDAI GUIDELINES
4.8) PRICING
Zonal pricing function carries the responsibility of ensuring sale of products at the correct
prices. Prices of all the products sold from Zone are developed by Zonal pricing officer
basis inputs received from various sources like HQO Pricing, Railway budget, Zonal
Sales Tax, RO Sales officer.
PENDING ISSUES
Service tax on Bitumen freight
Toll tax in Orissa
Recovery against debit note.
In past period due to certain logistic reason for district keonjhar Balasore was
taken as secondary pricing point even though Rourkela is nearer but in case of
direct customers, customers attached with Town Joda & Barbil still SPP was
taken Rourkela.
INITIATIVES
Comparison of RTKM of pricing & PCB
Realignment of Meghalaya pricing Point.
Review of CMR
ADVICE REQUIRED
VAT on West Bengal Cess in case of Non-Domestic LPG.
Pricing point of Somanthpur for FO.
Proposal of Inter State pricing Ex Visag for districts i.e
Rayagada,Koraput,Malkangiri & Nowrangpur.
Sources of funds
Owner's fund
Equity share capital 339.01 339.01 339.01 338.95 338.94
Share application money - - - - -
Preference share capital - - - - -
Reserves & surplus 11,218.96 10,391.62 10,224.28 9,259.70 8,396.80
Loan funds
Secured loans 1,375.88 698.49 1,118.48 1,005.48 1,486.16
Unsecured loans 19,926.49 22,056.68 15,668.22 9,512.05 5,177.67
Total 32,860.34 33,485.80 27,349.99 20,116.18 15,399.57
Uses of funds
Fixed assets
Gross block 24,985.96 20,208.63 19,570.05 15,638.48 13,479.25
Less : revaluation reserve - - - - -
Less : accumulated depreciation 9,681.70 8,554.08 7,640.77 6,817.64 6,141.85
Net block 15,304.26 11,654.55 11,929.28 8,820.84 7,337.40
Capital work-in-progress 3,890.00 5,001.27 3,315.95 4,243.56 2,363.88
Investments 11,387.22 14,196.47 6,837.05 7,127.47 4,027.64
Notes:
Book value of unquoted investments 1,595.39 1,026.39 610.56 574.11 354.13
Market value of quoted investments 10,226.97 12,948.34 8,068.12 7,094.89 4,458.23
Contingent liabilities 4,598.74 5,588.88 6,450.22 7,176.59 6,768.48
Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06
Number of equity shares outstanding
3386.27 3386.27 3386.27 3393.30 3393.30
(Lacs)
Income
Operating income 1,07,300.57 1,24,935.02 1,04,312.99 89,725.03 71,430.62
Expenses
Material consumed 97,466.11 1,16,474.02 98,080.49 82,632.14 66,533.17
Manufacturing expenses 929.02 435.23 316.28 275.28 308.93
Personnel expenses 1,617.32 1,137.19 867.66 729.42 690.77
Selling expenses 2,758.04 2,520.87 2,206.01 2,588.71 2,190.11
Administrative expenses 1,218.19 1,076.50 995.87 980.74 892.70
Expenses capitalized - - - - -
Cost of sales 1,03,988.68 1,21,643.81 1,02,466.31 87,206.29 70,615.68
Operating profit 3,311.89 3,291.21 1,846.68 2,518.74 814.94
Other recurring income 1,111.01 866.96 710.67 481.69 298.42
Adjusted PBDIT 4,422.90 4,158.17 2,557.35 3,000.43 1,113.36
Financial expenses 909.97 2,084.13 794.30 426.34 160.82
Depreciation 1,164.40 981.29 850.82 704.00 688.97
Other write offs - - - - -
Adjusted PBT 2,348.53 1,092.75 912.23 1,870.09 263.57
Tax charges 766.15 275.92 382.40 698.97 99.52
Adjusted PAT 1,582.38 816.83 529.83 1,171.12 164.05
Non- recurring items -227.34 -380.53 218.09 91.02 21.53
Other non cash adjustments -53.67 138.68 386.96 309.03 220.05
Reported net profit 1,301.37 574.98 1,134.88 1,571.17 405.63
Earnings before appropriation 9,405.53 8,369.65 8,027.01 7,757.80 6,343.27
Equity dividend 406.35 177.78 101.59 610.80 101.80
Preference dividend - - - - -
Dividend tax 67.49 30.21 17.26 97.75 14.28
Retained earnings 8,931.69 8,161.66 7,908.16 7,049.25 6,227.19
5) SWOT Analysis of Oil & Energy Sector
The energy sector has witnessed mixed news during the current fiscal so far. While
crude prices firmed up in the global market, the government's freeze on prices of petro-
products affected margins of oil companies in 1QFY05.
However, the government took a series of steps starting mid-June including excise duty
reduction and price increases. This was followed by another series of duty cuts (this time
excise as well as custom duties).
Given this backdrop, we feel that there is a compelling reason for a SWOT analysis on
the oil sector at the current juncture.
5.1) Strengths
Consumption growth Developing economy: Historically,
(MMT) FY01 FY02 FY03 FY04 demand for petroleum products has traced the
economic growth of the country. With GDP
Diesel 38 36.5 36.6 37.3
expected to grow at near 7% in the long-term,
(%) change -3.9% 0.3% 1.9% the energy sector would benefit from the same,
Petrol 6.6 7 7.6 7.9 going forward.
(%) change 6.1% 8.6% 3.9%
To put things in perspective, diesel sales grew
LPG 7 7.7 8.4 9.3
by nearly 12% (which constitutes 40% of the
(%) change 10.0% 9.1% 10.7% entire petro-products basket), petrol sales by
9% and a double-digit growth in LPG
(liquefied petroleum gas) in 1QFY05. While
this rate is not likely to sustain, we expect the industry to witness a 4% growth in the
entire product basket in FY05 and beyond.
Government decisions: The recent price increases and also the decision to allow oil
companies to increase prices within a band of 10% augurs well for the industry. This step
is likely to reduce government interference and provide some autonomy to oil companies
when it comes to increasing petrol and diesel prices in order to protect margins. Further,
the duty cuts are also likely to result in reduced under-recoveries by way of subsidies on
LPG and kerosene.
5.2) Weakness:
Crude prices: Nearly 70% of India's crude requirements are fulfilled by imports
and this figure is likely to increase going forward. Crude prices have breached the
$45 barrier again and are likely to remain at around $40 per barrel range.
As per IEA, India is one of the most inefficient countries among developing
nations as far as energy usage is concerned. Such high crude prices are likely to
impact margins of oil marketing companies. Given the political implications,
retail prices may continue to lag the rise in input cost.
As per the current estimates, the subsidies on LPG amount to Rs 90 per cylinder
after factoring in duty cuts and that on kerosene is over Rs 6 per litre.
While the government has managed to reduce its share in subsidies, select oil
companies are being forced to absorb the losses.
Government: Hands-off
Year Subsidies
(Rs) LPG/cylinder Kerosene/litre
2002-03 67.75 2.45
2003-04 45.17 1.63
2004-05 22.85 0.81
5.3) Opportunities:
Equity Oil: Major oil marketing companies are now venturing into upstream
exploration and production activities so as to secure crude supply.
To put things in perspective, IOC and OIL India are likely to jointly bid for oil
fields aboard. At the same time, ONGC's wholly owned subsidiary, ONGC
Videsh (OVL) has acquired stakes in over 9 countries in its quest to attain the 20
MMT (million metric tonnes) by 2020. This backward integration is an
opportunity for IOC to secure at least 25% of its crude oil requirements for the
refineries.
Although Petronet LNG has now started importing natural gas, the
future holds promise as Reliance Industries Krishna Godavari Basin
goes into commercial production in FY06 and Shell commences its terminal at Hazira.
More exploration activities are in the pipeline and this could reduce the country's
dependence on crude in the long term.
5.4) Threats:
However, with entry of private players such as Reliance, Essar Oil and Shell (in
the waiting), the sector is likely to witness increased competition going forward.
The oil PSUs had hitherto developed a fortnightly pricing mechanism, which is
likely to discontinue.
The price of petrol and diesel is artificially kept high so as to cross-subsidize LPG
and kerosene. Since private players will not be bound to provide for these
subsidies, PSU marketing players are likely to suffer from lower throughput per
outlet.
Continuing government interference: During the first six months of the current
fiscal year, the oil marketing companies were refrained from increasing product
prices due to political reasons.
Although we believe the industry is likely to witness increased competition, the initial
retail rush by private sector players has slowed down. PSU marketing companies have
already stepped up their expansion plans and to that extent, have created significant entry
barriers for private players.
Although throughput per outlet (sales per outlet) is likely to decline in the future, we believe that
any substantial entry of the private players would indirectly benefit the PSUs, as the
government's pricing policy will not hold much water and the market forces would determine
pricing.
Conclusion:-
Over the years India Petroleum Industry has played an influential part in triggering the
speedy expansion of the country's economy by contributing 15% in the total GDP.
Further to this, petroleum exports gave new dimension to foreign exchange earnings by
drawing US$ 23.64 billion in the FY 2008-09.
The petroleum industry has contributed heavily to the manufacturing industry in the
country through foreign trade in petroleum products. Rapid globalization, fast-changing
technology, and the changing methods in the way business is conducted have brought
significant changes and enormous opportunities for petroleum companies in India to
flourish and expand their operation to global markets.
Another very important reason why the Indian petroleum industry is a good option for
investment is that the future of the petroleum industry in India promises great potential
for development. The fast economic growth of India and the various developmental
activities taking place presents India with opportunities in the future to be a dominant
player globally in the export of petroleum products.
Webliography :-
1) www.hpcl.co.in
2) Wikipedia
3) iloveindia.com
4) www.roughneckchronicles.com/oilindustry/petroleumcompaniesinindia.htm
5) www.economywatch.com/companies/petroleum-companies.html
6) ezinearticles.com › Business › International Business
7) www.petrofed.org/