CORPORATE GOVERNANCE AND ETHICS

BHARAT PETROLEUM CORPORATION LIMITED

[2012]
ROLL NO-B61 NAME: PREETI GHORAWAT BATCH-PGDM 02

BHARAT PETROLEUM CORPORATION LIMITED (BPCL)

Bharat Petroleum Corporation Limited (BPCL), a fortune 500 oil refining, exploration and marketing PSU with Navratna status. Following nationalization in 1976, BPCL changed its gears and embarked upon a Rapid growth path. Turnover, profitability and financial reserves grew by leaps and bounds. BPCL started preparing sustainable report from 2007. The report is based on Global Report Imitative (GRI) G3 guidelines. It is also aligned with the International Petroleum Industry Environmental Conservation Association (IPIECA).To understand the governance of this organization I have analysed the company through the relationship it has built overtime with the stakeholders.

Employees and managers: The board of directors of the company has adopted a Code of conduct for directors and all its employees and managers. The board is assisted by expert committees in its supervision of overall affairs of the company to ensure transparent governance .They ensure that the code of conduct is implemented in the entire organization. The three main committees of the board are: 1. Audit committee 2. Investors grievance committee 3. Remuneration committee In order to ensure that the code of conduct is implemented BPCL has "Whistle blower policy" that ensures that all such non compliances are monitored. There is a Corporate Vigilance Department which conducts surprise visits and investigations of refineries, Depots and installation, Retail outlets and LPG distributorship. This ensures the safety of the employees who work there .It also ensures that work is done as per the guidelines and no theft or rule is broken in doing the business thus it leads to transparency and increases efficiency. The Hiring policy adopted by BPCL is based on merit for senior management posts. BPCL also adheres to guidance given by government in providing employment opportunity to certain economically and socially disadvantaged sections or society.

In fy2010-2011: there was no case of non-compliance by BPCL and no penalties strictures were enforced by the securities and exchange board of India (SEBI) or any other statutory authority on any matter related to their functioning in the respective financial year. The nature of activity undertaken by BPCL makes the organization more concerned about the Health & Safety of the employees working for it. Training sessions and programs on safety are conducted. Three fire safety officers have received " President's Fire service Gallantry medal" for the bravery shown in arresting a major ammonia leak from an overturned ammonia bullet truck in 2009.The HSSE management system is undertaken which looks into the matter of workplace health, safe operations, security and environment protection.

Customers: BPCL has a quality assessment cycle to ensure safety of its customer as they are the end users. In case of LPG cylinders consumed by the households special care is taken to ensure LPG cylinders are rigorously checked and tested for safe use. The same goes for CNG used for vehicles. BPCL also won performance excellence award of RBNQA 2010 under Large manufacturing category. BPCL has four NABL accredited testing laboratory and their products are regularly tested for quality. In pursuit of offering the best to their esteemed customers and promise for " Pure for Sure" assurance through technology, BPCL launched "Bharat Petroleum Retail Automation Systems and Solutions." Suppliers: BPCL always tries to maintain healthy relationship with it suppliers. It engages with its suppliers through Contract procedures, contract and project review, facility inspection, Business review meetings, vendor interaction meet. The challenges BPCL faces are the volatility of price and the payment of vendors on time.The procurement policy of BPCL is based on various parameters which include availability,quality and cost among others.BPCL contributes to Indian economy development and as a practice always prefer to procure from Indian suppliers.in 2010-11 Rs5217.61 was spent on procurement from local suppliers. Government: It is a public enterprise thus it has to adhere to all the rules and regulation with regards to anti-

corruption practices, Regulatory compliances and timely regulatory filings. High volatility of Oil price effects inflation this was the biggest concern as government was trying to align domestic price with international price. BPCL commitment towards fair practices ensured that there were no instances of Anti-competitive behavior. It also earned the BEST RUN AWARD IN COMPLIANCE for leveraging technology to create a robust compliance system (for the Governance Risk and compliance- Access Control implementation ) Shareholder: shareholders rights are maintained the financial performance, less risky projects, New ventures has all kept the shareholders engaged and happy. The volatility of price has always been a concern as it is not in the hands of the organization. Change in government structure was made and compliance to all the rules and regulations keeps assurance to shareholders that their money is in safe hands. Since its a public limited company major share is hold by government so the money is used more for CSR activities and other growth areas. Losses due to volatility of price is concern as it also affects the share price. In the year 2010-11 BPCL had a net profit of Rs 1742.06 crores Society & Environment: It is said that social responsibility should start from within and then spread to others .It seems BPCL is following the same policy "SAMAVESH" a leadership development program for the executives to take the vision of CSR forward by learning from ideas of various business personalities of the corporate world. Kochi refinery supports the student of government vocational higher secondary school by providing nourishment to students, Financial assistance for learning aids and uniforms, and awareness programs for health and safety. Integrity club" of Kochi refinery continued its effort of instilling human values in school children by aim of transforming children as young champions of ethics. Several other initiative were undertaken as Computer assisted learning, Education assisted programme,Teach for India programme etc The Petroleum industry has an impact on the environment at large. BPCL has identified core factors which largely affects the environment and has developed activities with the interest to serve the society. The four sustainability issues are Energy and climate change:

Use of bio fuels, solar power and wind power to substitute fossil fuel use GPS based vehichle tracking system to increase energy efficiency

Community development:

Project boond: Boond is a Rain Water Harvesting Project undertaken by BPCL with financial support from (Oil Industries Development Board) and executed in collaboration with NGO, Bridge Public Charitable Trust. Villages suffering from acute shortage of water were identified for this activity. Women from these villages had to walk long distances in the blazing sun on mountainous paths, at times exceeding four kilometers to fetch water. Runoffs triggered by topographical conditions, impervious bedrock, poor water holding capacity of the soil, soil erosion and unrestrained grazing had made the situation critical. The objective was to turn these villages from Water scarce to water positive . The work mainly comprised of repairs/Deepening of wells, building bunds to capture and store rain water, repairs and leak proofing of existing bunds, building water tanks etc. Project boond received many coveted awards Village adoption: BPCL has adopted 12 villages and conducts following Major Activities like

Education support, Medical assistance, Veterinary assistance, Ayurvedic Health center, Community library, Adult literacy, Vocational training, Entrepreneur development program, Construction of infrastructure, Agri and farm based support, Animal driven flour mill, Non electric irrigation system, Installation of Solar lights, Awareness on HIV/ AIDS, Awareness on environment.This helps in creating a sustainable environment and to help the villagers to grow.
New and clean technology: BPCL is putting forward its effort of producing new

technologies to curb waste, efficient material management and manufacturing effectively. Bioremediation helps naturally degrade the contaminants into less toxic forms. This method has helped in increasing degradation efficiency, better economic value and reduction in ground water contamination. Biofuel: BPCL is constantly putting efforts to develop biofuels like ethanol which are substitute to petroleum Utilization of solar energy to produce electricity Triple one project-cultivation of jathropa: this project aims a cultivating one million acres of wasteland creating one million jobs and producing one million tons of bio diesels to replace diesel over next 10 years. Water management:

Construction of five acre rainwater harvesting pond with capacity of 135 million ltrs at Kochi refinery Assessment of rainwater harvesting opportunity at significant marketing location to reduce fresh water intake Recycling of water through newer and better technology and using it instead of utilizing fresh water. Apart from the above four core issues BPCL also taking steps to curb pollution it takes initiative of efficient handling of effluents generated from operations. They have installed oil water separators at all relevant location to ensure wastewater discharged outside premises does not contain oil.

Measurement of BPCL governance I would give a score of 7 out of 10. Quantitative analysis: If we look at quantitative analysis then it is really tough to measure governance because the organization has to bear with the volatility international crude oil prices. Thus it wouldnt be right to measure on this scale since its a public sector it has to comply to certain prices given by the government sudden changes might shoot the inflation rate very high. The PE ratio has risen and fallen in the term it has not been able to stand the international pressure and also the regulation of giving oil at reduced prices. Qualitative Analysis: BPCL really scores high in qualitative analysis Transparency: Vigilance committee helps to keep check on corruption. Auditor Internal as well as external both makes sure everything is as per regulation. All the information is disclosed to the Public as it is a public sector organization Responsibility: The whistle blower policy ensures the code of conduct is followed by each and every employee of the organization and stringent action is taken if violated. Social awareness: Producing petroleum, LPG and other products out of crude oil pollutes the environment, the sewages out of these factories is very toxic and has adverse effect on both humans and environment. BPCL has understood it and taken initiative for producing technology that will reduce contamination of toxic elements into fresh water, saving of groundwater, and creating technology so that they can reuse the same water instead of fresh water. Community development initiatives by the organization have also helped in nurturing the future of so many people living in the villages. CSR initiative like Boond, village adoption has changed the outlook for oil & Gas manufacturing company. BPCL operation has major impact on environment. With cleaner technology and sound environmental management system they invest in processes to produce better products which contain lower emission levels. All their refineries are certified with ISO 14001 environment management standards. At refinery they had spent Rs 427.89 million towards environment while other SBU spend 12.49 million BPCL moving towards its dream project of being one of the most powerful brands, through sustainable growth i.e. taking both society and environment together. The leap is big but there are many loopholes to be plugged into. Steps have been taken if there is any emergency like oil spills etc but it is still in nascent stage. The waste system is still in its primitive stage as new technology is being under process so implementing will take time. Though BPCL has grown through its governance policy as one of the best organization in India but still there are certain areas where BPCL has to strive harder to stay ahead with it sustainability goals.