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BASIC REFINERY MODEL

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OBJECTIVES OF THE STUDY :

To know the organization structure and the process of activities.

Analyzing the function of each department.

To identify the strength and weakness of all the departments.

To study the growth, objectives and achievements of all departments.

To give suggestion for the purpose of improving the performance of all

departments.

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INDUSTRY PROFILE

Assam Oil Division of the Indian Oil Corporation Ltd. and is regarded as the

birthplace the country's petroleum industry. It was in this region that the pioneers

struck oil in the midst of dense jungles at a time when there was hardly any industrial

development in the country. The Digboi Refinery, commissioned in 1901, is today

India's oldest operating refinery and one of the oldest operating refineries in the

world. In fact, it was the only refinery in India till the mid 1950's. Earlier owned and

operated by the Assam Oil Company ltd. It came into the fold of the Indian Oil

Corporation ltd. by an Act of Parliament on 14 th October 1981 and became Assam Oil

Division of Indian Oil Ltd.

Indian Oil Corporation Limited. The Group's principal activities are manufacture andmarket petroleum products, crude oil, lubricants and grease, oil base and additives and

other petroleum related products. The Group operates in two segments: Petroleum

Products and Other Businesses. Other business includes sale of imported crude oil,

sale of gas, petrochemicals, explosives and cryogenics, wind mill power generation

and oil and gas exploration activities jointly undertaken in the form of unincorporated

joint ventures.

Indian Oil Corporation Ltd. operates a network of 10329 km long crude oil and

petroleum product pipelines with a capacity of 71.60 million metric tonnes per

annum. Cross-country pipelines are globally recognized as the safest, cost-effective,

energy-efficient and environment-friendly mode for transportation of crude oil and

petroleum products.

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THE INDIAN OIL FOUNDATION

As part of the Corporate Mission to help enrich the quality of life of the community

and preserve ecological balance and heritage, Indian Oil Corporation has set up

The IndianOil Foundation as a non-profit Trust to protect, preserve and promote our

national heritage and culture, in collaboration with the Archaeological Survey of India

and the National Culture Fund of the Ministry of Culture.

The Indian Oil Foundation will adopt at least one heritage site in every State and

Union Territory. Archaeological works will be funded by the IndianOil Foundation to

the Archaeological Survey of India through the National Culture Fund. Five

prestigious sites have been identified, viz., Qutb Minar, Delhi; Khajuraho, Madhya

Pradesh; Hampi, Karnataka; Kanheri Caves, Maharashtra; and Konarak, Orissa. The

IndianOil Foundation will develop world-class facilities and conveniences for visitors.

Indian Oil Corporation will provide refueling facilities for travelers and also

undertake community development in the neighborhood.

HISTORICAL VIEW OF IOCL:

In 1825, Army officers touring the jungles of upper Assam found Petroleum oil

exuding from the river.

In 1866, first oil well drilled at a depth of 120 ft, proved dry.

In 1882, Assam Railways and trading co. (AR&T CO.) come across oil seepageat Digboi.

In 18989, first commercial well struck in Digboi at a depth of 662 ft.

In1893, AR&T CO. installed a tiny refinery at Margherita.

In 1899, Assam Oil Company formed.

In1901, capacity of 500 barrels (20000 gallons) per day.

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In 1902, Assam oil company (AOC) began marketing kerosene oil in the north-

east.

In 1921, Burma Oil Company (BOC) took over control of Assam Oil Company

operation of Digboi Oil field and refinery.

In 1922, Digboi refinery completely rebuild and capacity expanded by Burma Oil

Company (BOC), the owner manager of Assam Oil Company.

In 1928-40, crude units, cooker, KTU, wax units, boilers, power houses are

added.

In1966, Assam Oil Company took over marketing from Burma Oil Company and

gave the brand name Assam Oil.

In 1981, the government of India took over Assam Oil Company/Burma Oil

Companys interest in India and merge Assam Oil Company with Indian Oil

Corporation, by an act of parliament but retained as division (Assam Oil Division)

with integrated refining and marketing operations.

In 2001, VRSD pilot plant commissioned and.

In 2002, merit certificate in best house keeping, in dealers conference held atDigboi on 20 th June 2002.

In1901, capacity of 500 barrel (20000) per day.

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COMPANY PROFILE

INDIAN OIL CORPORATION LIMITED

Indian Oil Corporation Ltd. (IndianOil) is the largest commercial enterprise in

India, and the only Indian presence in the Fortune magazines global 500 listing of

the worlds largest corporations, with a ranking of 226 for fiscal 2001. In the Forbes

International 500 list of the largest companies outside US, IndianOil is ranked 112

and tops the four Indian companies in the listing. In addition to being the largest

national oil company in the Asia Pacific region, IndianOil has also been ranked First

in Petroleum Trading among the 15 national oil companies in the region in the 2001

Industry Perception Survey conducted by Applied Trading Systems, Singapore.

Indian Refineries Ltd. And Indian Oil Company Ltd. was set up in 1958 and 1959

respectively, to build national competence in the oil refining and marketing business.

On 1st September 1964,IndianOil owns and operates in seven countrys 18

refineries, at Digboi, Panipat, with a combined capacity of 38.15 million metric tones

per annum (MMTPA). A new MMTPA grassroots refinery is being set up at Paradip

in Orissa. In addition, IndianOil has two subsidiary companies, Chennai Petroleum

Corporation Ltd. And Bongaigaon Refinery and Petrochemicals Ltd., with a

combined refining capacity of 9.35 MMTPA, thereby raising its total refining

capacity to 47.50 MMTPA, the highest in the country today. IndianOil has the

countrys largest network to crude and product pipelines, with a combined length of

6,523 km and a capacity of 43.45 MMTPA. With sales of 47.17 million metric tones

in 2001-02, IndianOil holds over 53% of the petroleum products market share in

India. Its extensive network of over 22,000 sales points is backed for supplies by 182

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bulk storage points and 78 Indane bottling plants. 92 Aviation Fuel Stations cater to

the Aviation Industry, defense as well as civil.

Indias flagship national oil company and downstream petroleum major, Indian Oil

Corporation Ltd. (IndianOil) is celebrating its Golden Jubilee in 2009. It is India's

largest commercial enterprise, with a sales turnover of Rs. 2, 85,337 crore the

highest-ever for an Indian company and a net profit of Rs. 2, 950 crore for the year

2008-09. IndianOil is also the highest ranked Indian company in the prestigious

Fortune 'Global 500' listing, having moved up 11 places to the 105th position in 2009.

IBP Co. Limited, a stand-alone marketing company and a subsidiary of IndianOil,

has a nationwide network of over 1,550 retail outlets.

IndianOils Research and Development Centre has been engaged in world-class

research in tribology (lubricants formulation), refinery processes and pipeline

transportation. The Centre has developed over 2000 lubricant and grease

formulations, and obtained approvals of original equipment manufacturers in Indiaand abroad.

A wholly owned subsidiary, Indian Oil blending Ltd., manufactures over 450

grades of the countrys leading R brand of lubricants and greases. In pursuit of its

Vision of becoming a major, diversified, transnational, integrated energy company,

with national leadership and a strong environment conscience, playing a national role

in oil security and public distribution, IndianOil is proactively identifying and

developing business opportunities in Exploration & Production (E&P), Gas and Gas-

to-Liquid, Petrochemicals, Power, Information Technology & Communications,

Collaborative R&D, Exports, Shipping, Training & Consultancy, Engineering &

Construction, and Transnational Operations. Twelve joint Ventures are now

operational in partnership with some of the leading international and Indian

companies;

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Avi-Oil (India) Pvt. Ltd. With NYCOSA, France, and Balmer Lawrie & Co. for

manufacturing and marketing Defense and civil aviation lubricants and specialties.

The cover depicts a bird, symbolizing IndianOil, breaking through barriers to seek

new horizons.

It is a quest marked by immense possibilities a quest for progress through pursuit of

new opportunities.

The colour blue signifies the vast expanse of a new world, and is a tangible expressionof widening horizons.

Indian Oiltanking Ltd., with Oiltanking (India) GmbH, Germany, for infrastructure

development and terminalling services.

Petronet India Ltd. (PIL), a consortium of oil companies and financial institutions, for

petroleum product pipeline projects.

Petronet Vadinar-Kandla Ltd., as a subsidiary of PIL, for Vadinar-Kandla product

pipeline. Petronet Chennai-Trichy-Madurai Ltd., also as a subsidiary of PIL, for Chennai-

Trichy-Madurai product pipeline.

IndianOil is marketing diesel fuel additives for automobiles in collaboration with Elf

Antar; France.IndianOil Air BP is collaborating in aviation fueling business.

IndianOils investments in creation of assets will exceed Rs. 40,000/- Crore over

the decade beginning 1997. These investments, substantially funded from internalresources, will result in expansion and modernization of existing capacities, as well as

creation of state-of-the-art facilities.

IndianOil is an academy company with 18training centers. The IndianOil

Institute of Petroleum Management (IIPM), Gurgaon, serves as an apex training and

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consultancy institute and conducts management development programmes in

association with reputed national and international institutes.

Indian Oil Management Centre for Learning (IMCL) recently set up in Mumbai

will facilitate in upgrading the functional knowledge and skills of the employees and

also impart behavioral training.

For the past two decades, IndianOil has been lending its expertise to several

countries in areas of refining, marketing, transportation, training and R&D. These

include Sri Lanka, Kuwait, Bahrain, Iraq, Abu Dhabi, Tanzania, Ethiopias, Algeria,

Nigeria, Nepal, Bhutan, Maldives, Malaysia and Zambia.

IndianOils commitment to quality, safety, health and environment is reflected in the

series of national and international certifications and awards earned over the years.

The 17th largest petroleum company in the world, Indian Oil, is now emerging as

a transnational energy conglomerate. From the icy slopes of Leh in the Himalayas toKanyakumari where the Bays of Bengal and the Arabian Sea join the Indian Ocean,

and from the Single Buoy Mooring at Salaya in the West to the Monasteries at

Tawang in the East, IndianOil lives in every heart and in every part of India.

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DIVISIONAL STRUCTURE OFINDIAN OIL CORPORATION LIMITED

MARKETING HO

4 REGIONAL OFFICES

15 STATE OFFICES

TERMINA34DIVISIONAL

OFFICES

LPG AREAOFFICES

AFSs

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DEPARTMENTS

Indian Oil Corporation Limited constitutes of various departments which helps the

organization to function properly and to attain the ultimate objectives.

The organization has four functional departments and they are:

Human Resource Management : It helps in taking decisions regarding Human

Resource Policies, employee engagement and creating a good working condition in

the organization.

Marketing Management : It is mainly involved in promoting the product of the

organization and increasing the sales.

Financial Management : It deals with the monetary transaction and maintaining

various accounts so as to keep a clear check on the day to day financial activities.

Production Management: It is mainly involved in transforming the raw materials

into the final product. It helps into smooth flow of products so that the organization

can meet the demand of its consumers.

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HUMAN RESOURCE MANAGEMENT

THEORETICAL FRAME WORK

Organisations are made up of people and function through people. Without

people organisation cannot exist. The resource of man money material and machinery

are collected, coordinate and utilize through people. The resources by themselves

cannot fulfill the objective of the organisation. They need to be united into a team. It

is through the combined effort of people that material and monetary resources areeffectively utilized for the attainment of common objective. Without united effort

human effort no organisation can be achieved its goals. All the activities of an

organisation are initiated and completed by the persons who make up the

organisation. Therefore peoples are the most significant resources of any organist ion.

The resource is called human resource and it is the most important factor in

production.

From the national view point human resource may be defined as the knowledge,

skills, creative, abilities, talent and aptitude obtained in the population. From the

view point of an organisation, human resource represents the people at work.

CONCEPT AND NATURE OF HRM

Human resource management may be defined as set of policies, practices and

program designed to maximize both personal and organisation goal. It is the process

of binding people and organisation together show that the objective of each are

achieved. According to flippo personnel management or human resource management

is the planning, organizing directing and controlling of the procurement,

development, compensation, integration maintenance of human resource to the end

that individual, organisation and social objectives are accomplished.

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ORGANISATION SETUP AND ROLE OF PERSONNEL

DEPARTMENT

A system approach to personnel in which the emphasize is on the inter-

relationships among various policies and programs of organisation. It involve

anticipating the future patterns of an organisation and of business environment and

then relating manpower requirements to these conditions

PERSONNEL & ADMINISTRATION DEPARTMENT

The personnel, administration, management services, HRD & training corporate

communication department at refineries HQ are headed by ED(HR) with the

following functions under his charge:

Personnel

Administration, welfare & Hindi implementation

Training & development

Management services

Corporate communication.

OBJECTIVES

The primary objectives of personnel department are as follows :

Design and develop an organisational structure with well defined relationship

commensurate with the business plans and corporate strategies;

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Promote and develop co-operative attitude amongst employees by fostering

harmonious relations at all levels and inculcate sense of belonging;

Promote and inculcate the culture of employee participation in management;

Change agent to new interventions.

FUNCTIONS :

STAFFING

Manpower planning

Determine the organisation structure and optimize manpower to effectively meet

companys objective

Job description

Recruitment

Personnel records

Promotions

Transfer

PERSONNEL MAINTENANCE

Motivation

Performance appraisal

Recreation

Communication

Employee amenities- canteen, clubs etc.

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Safety

Medical service

Securities

DEVELOPING HUMAN RESOURCE

Induction and apprentices training

Training and development of employee

Industrial relations

Productive bargaining

Grievance handling

Discipline administration

Providing joint consultive machinery-joint management councils

COMPENSATION

Wages ,salary surveys & controls

Negotiation

Incentives/bonus

PERSONNEL POLICY & PLANNING

Defining organisation goals policy guidelines and strategies

Formulating and implementing personnel policies

MANPOWER

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Manpower is the one of the essential and vital part of the organisation. To

maintain manpower human resource management plays an important role from

decade ago. the basic requirements of the human resources for the company is noted

by the HRM departments.

Some important measures for maintaining human resources (manpower)

Recruitment

Post recruitment action & records

Promotion and transfer

Officiating appointments

Probation and conformation

Seniority

Deputation

Forwarding of application & foreign assignments

RECRUITMENT

Procedure of recruitment

Recruitment through employment exchange

Recruitment through advertisement in news paper

Internal promotions

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Transfer on deputation from government department or other public sector

undertaking

Notification of vacancies .

There are two type of categories are there for recruitment

1) Officers

2) Non-Officers

OFFICERS

Campus recruitment

Advertisement

A employee who is working in non-officers grade and have not been

completed his/her 5 years of service can apply for officers grade

Advertisement on web site of corporation

NON-OFFICERS

Selection done in the local region of division by employment exchange

Notifications through news paper etc

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PROMOTION & TRANSFER

Promotion is based on the percentages allotted by the government .

Based on merit

Based on seniority

Based on merit+ seniority

Based on qualification

POST RECRUITMENT ACTION AND RECORDS

JOINING REPORTS

Every new appointee is required to submit a joining report accompanied by

medical certificate of fitness , duly completed attestation form and other documents

/testimonials as per the terms and condition of the appointee

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MEDICAL CERTIFICATE OF FITNESS ON FIRST APPOINTMENT

To be eligible for appointment in the service of the corporation . every

appointee has to submit a medical fitness certificate as per the prescribed

guidelines/format from the corporations chief medical officer as may be advice in the

offer of appointment . Before joining the corporation .

The candidate referred for pre-employment medical examination should either

be declared as fit or unit by medical officer and in case of later, the offer of

appointment should be cancelled or withdrawn.

MARITAL STATUS

A person who has entered into or contracted a marriage with a person having

spouse with another person is not eligible for the appointment in the service of the

corporation. Unless exempted by the director from the operation of the rule, based on

adequate justification

DATE OF BIRTH

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Personal department will record the age of every employee in sap data/ his p

file .

The date of birth once admitted shall not thereafter altered on any grounded

whatsoever.

PROBATION AND CONFORMATION

PERIOD OF PROBATION

Employee join in grade A of officers on appointment/selection/promotion (1-

year)

Employee join in grade I/IV of non-officers on appointment/selection/promotion(6-months)

Promotion [except on promotion to grade A, grade H , and grade I] (6-

months)

Promotion of grade H & I (1-year)

SENIORITY FOR OFFICER

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Direct recruitment

Seniority as between person on fresh appointment shell be determined according

to date of joining of the service

Where two or more appointee join on the same date ,their inter-se seniority shall

be reckoned according to their date of birth

FOR NON-OFFICER

Direct recruitment

Seniority as a rule of thumb will be according to the date of appointment in the

regular scale of pay

Seniority as between person on fresh appointment selected by the selectioncommittee at the same interview shall be determined according to order in the

merit list, irrespective of the date of joining.

DEPUTATION

Deputation in corporations interest

In the interest of the corporation, employees of the central/state

government , public sector undertaking or some other organisation may be

temporarily engaged on deputation in consideration of the nature of vacancies ,

special attainments of the persons concerned or the special requirements of certain

posts or for any other circumstances justifying appointment of such deputations as per

govt. guidelines on the subject.

Forwarding of applications

In deciding whether an application should be forwarded or withheld ,the

concerned authority should balance the interest the necessity of avoiding hardship to

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the individual. The term interest of the corporation should be interrupted strictly and

subject to that consideration.

HOLIDAYS

Festival holidays

10 paid festival holidays

Inclusive of 3 national holidays ( 26th

January-republic day, 15th

august-independence day, 2 nd October- Gandhi jayanti )

Additional holidays

On the death of high designation. The administration offices and other units of

IOC are to be closed as per guidelines issued by BPE under which the officers/units

are to be closed only on the death of the president on the day of funeral takes place.

AWARDS

Period of service Award

15 years 5gm gold coin

(24ct)25 years 10gm gold coin



(24ct)

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INDIANOIL SUGGESTION SCHEME:

The scheme hereunder named as Indian oil scheme harnessing the latent

creativity in every individual there by fostering amongst the employees a sense of

achievement and a feeling of involvement in the growth of organization.

OBJECTIVES:

To provide well designed procedure for receiving, evaluating and rewarding

creative ideas of the employees

To promote individual creativity for organisation excellence

To improve quality , productivity , safety service and economy through employees

enterprise

To enhance job satisfaction , sense of belonging and employee participant

SCOPE OF SCHEME:

Category 1:

All regular employees of IOCL are eligible to give the suggestion

Category 2:

Regular employees of IOCL who are on deputation to other organisation arealso eligible to give their suggestion pertaining to the business of IOCL

Category 3:

Deputationists from other organisation of IOCL are also eligible to give their

suggestion pertaining to the business of IOC

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TRAINING

ON THE JOB

ORIENTATION

JOB INSTRUCTION

APPRENTICE

INTERNSHIP

JOB ROTATION

COACHING

OFF THE JOB

VESTIBULE

LECTURE

SPECIAL STUDY

FILMS

TELEVISION

CONFERENCE

CASE STUDY

ROLE PLAY

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METHODS OF TRAINING ADDOPTED BY IOCL

ON THE JOB

ORIENTATION

Orientation is a program conducted when a new batch is selected in to an

organization. Orientation is a brief introduction of the company and the job that is to

be work upon. It gives a bird view of the organization.

JOB ROTATION

Here the employees are made to take up other responsibilities. This happens very

frequently in all other organisation. This helps then to gain more knowledge .jobs are

being rotated. Therefore every person gets to do different work at a time.

OFF THE JOB

CONFERENCE

This takes place for the higher level of the organisation .presentation,

discussions are held with a plane of member.

LECTURE

This is like a class room lecture where, an expert would come and give a

detailed lecture on the subject to be worked upon.

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SOCIAL SECURITY MEASURE

The concept of social security is essentially related to the high ideals of human dignity

and social justice. It is preliminary and instrument of social and economic justice.

According to ILO social security is the protection which society provides for its

members through a serried of public measures, against the economic and social

distress that otherwise would be caused by the stoppage or substantial reduction of

earning resulting from sickness, maternity, employment, injury, unemployment,

invalidity, old age, and death, the provision of subsidies for families with children.

SCOPE OF SOCIAL SECURITY

The scope of social security is very wide through the social security programmes

differ from country. Generally, social security schemes are of the following types.

1. Social insurance: under it the workers and employers make periodical contributions,

with or without a subsidy from the government. The funds so collected are used to

provide benefits without testing his/her financial position. Provident fund and groupinsurance are examples of this type.

2. Social assistance under it the cost of the benefit provided is financed fully by the

government without any contributions from workers and employers. However, benefit

is paid after judging the financial position of the beneficiary. Old age pension is an

example.

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EMPLOYEE PROVIDENT FUND

All employees are eligible to join the PF scheme from the date of their joining.

An equal contribution for 12% of the basic and DA from the employer and their

employee (through an employees contribution can go up to 100% of basic+da).

Administrated by a trust, the fund money is invested in the pattern prescribed by the

EPF act 1952.

Tax free benefits of the PF will be received in the event of:

Retirement/permanent disablement, forcing the employees to leave the

company.

Retirement, migration abroad for permanent settlement.

Transfer of PF fund to another establishment.

Death.

EMPLOYEES PENSION SCHEME

The salient features of the above scheme, which has come to effect from 16 th

November 1995, are as follows:

Employer and employee contribution to the fund up to 15 th November 1995 will

remain intact and would be paid to the employee at the time of retirement

registration, death etc, as per the provision of PF act.

Maximum services for eligibility to persion are 10 years subscription to EPF. In case

the services are less than 10 years, a lump sum amount is refunded, as laid down in

the scheme.

From 16 th November 1995 onwards 8.33% of Basic+DA (on maximum of 50000) of

employers contribution to PF will be deposited with the PF authorities towards the

pension fund.

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Provides financial assistance to family member in case of an employees death

while in service.

The company pays premium to LIC.

SAFETY PROGRAMS

The following are the various safety measures taken at IOCL.

MANAGEMENT COMMITTEE

The management is totally committed to promote a safe working environment

to the employees. Top priority is given to improve the areas to promote safety. To

demonstrate the commitment of the management, the general manager of the site

chairs all the safety committee meeting and personally inspects the sites that are

identified as unsafe conditions, along with the safety committee.

SAFETY COMMITTEE

This comprises of the total membership of 19 the committee is chaired by the

site general manager and it has representation from engineering is on the basis of

action prone section.

SAFETY DAY CELEBRATIONSafety day will be celebrated on 4 th of March. On this day, presentation on

safety will be given to the workmen by government officials, quizzes will be

conducted.

EMPLOYEE INVOLVEMENT

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Employees are involved in various activities of safety programmes and some

of which are detailed as under safety committee meeting. These meeting given an

opportunity

to explore the ideas of all people to improve on the safety aspects. The workmen

representative especially identified several areas where improvements can be made

and bring to the notice of the committee and based on this fed back, suitable action

will be taken. A copy of needs of such meetings is enclosed for ready reference.

RISK ASSESSMENT

Effective 1996, the process of conducting risk assessment has been started the

job of conducting risk assessment is normally given through professional consultant.

ACCIDENT INVESTIGATION

As soon as an accident is reported, the EHS department conducted an accident

investigation along with the shift in charge of the concerned shift. This exercise is

mainly identified the unsafe condition and unsafe acts and to take steps to avoid and

unsafe acts to take steps to avoid recurrence. At the time of such investigation, theworkmen who met with an accident and his co-workmen who witnessed them will be

involved to assess the conditions that have caused the accident.

FIRST AID

Various first aid has been provided at the site to take care of place injuries and

the health of the workmen and the details are as under.

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FULL TIME MEDICAL OFFICER

The first aid cum occupation health centre is under the charge of a qualified

medical officer. Paramedical staff assists him round the clock. The compounders

attend in shift are qualified pharmacists and trained in first-aid. They give first aid to

the injured workmen. Basing up on the severity of the case they sent permanent

workers to the panel hospitals and bad lies to ESI dispensary.

AMBULANCE

An ambulance van with driver has been kept at the site to transport the injured

employees to the nearest ESI hospital for further treatment.

PERIODICAL MEDICAL EXAMINATION

As per the statutory requirement all the workmen employed in hazardous

processes, like acid handling, boilers, canteen, ETP, QA pump houses coal etc, aresubjected to six monthly medical examinations, to assess the occupational health

hazard.

BUILT-IN SAFETY MEASURES

1. Drying in through autoclaves in vacuum and is accordingly designed.

2. Floors are frequently washed to maintain free from oils to prevent slips and falls.

3. Lagging is done on all steam lines. This prevents heat loss to surroundings as well as protects persons from burns.

4. Most of the coupling and Freon pump etc, are provided with guards.

5. On Freon compressor, pressure gauges and valves are provided for safety.

6. Raw material good owns, buffer salt, Maida, sugar are stacked in proper manner,

leaving clear moving place around and cross bonding to avoid collapse of the stack.

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7. Bands are laid around and the storage tanks are located on pedestals. Storage area is

under lock and control.

8. Few of the employees have been trained in fire fighting.

9. Qualified persons supervisors acid handling.

10. Employees are provided with protective wear.

PERFORMANCE APPRISAL IN IOCL

Performance Management System:

Term DescriptionPMS Performance Management System-The unique

system of managing performance at Indian oil.Alignment(of

objectives and

results)

Exist when individual and group objectives and

result contribute directly to achievement of

organization results.Appraisee Every officer whose performance is assessed under

PMS.Appraiser Every officer who assesses the performance of one

or more appraisees that report to him/her.Competency Skills and abilities described in terms of behaviours

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that are coahable, observable,measurable and critical

to individual performance.Countersigning

officer

The final authority in an individuals performance

appraisal process.e-Enabled Delivered through softwareFinal

performance

Rating

The rating given to an Appraisee after

countersignature

Internal

Change Agent

He/she is the first point of contract for any queries

on PMS process at his/her location.Cascade The process of sequentially breaking down

organizational objective and targets into those of

various leveis of the organization.The individual

KRAs (key result areas) would also include KRAs

over and above these cascaded ones such as

applicable to divisions, units , function areas and

individuals.Rating scale 5-point scale used to define and assess level of

achivevement on an element.Reviewer Typically the Appraisers, who is responsible for

reviewing the entire performance process.Score on an

Element

Level of achievement on the 5-point rating scale for

KPIs,competencies,values and potential.Stretch The degree of difficulty built into targets at the time

of performance planning.

Target A measurable and verifiable definition of outcomesto be accomplished.

Unique

Role(UR)

Jobs that are held by different individual but are

similar in terms of objectives and outcomes.

Weightage The percentage value(out of 100%) allocated to a

KPI or a section on the basis of the critically,time

and effort required.

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Role-based

KRAs

KRAs that are predetermined for a role in role

profile.Section score The summation of each elementFinal score Overall score calculated by multiplying each section

score with the section weightage and then

sammating the same. This score is validated by the

e-reviewer.Key result

area(KRA)

Critical achievement required to delivered Indian

Oils desired business results. Typically are

outcomes that directly contribute to Indian Oils

MoU, strategic objectives and operational goals

usually measurable or verifiable.Additional

KRAs

KRAs that are predetermined for other roles in thr

organization and the officer can choose among these

if she/he finds necessarySpecial KRAs KRAs to be written out by the Appraisee in case

required in his/her performance plan based on

special projects or membership of task forces,

committees etc.Performance

diary

A tool for the appraisee to record significant events

or aspect of performance which may be used for

performance discussion review.Performance

period

The period for which performance is being planned,

review or evaluated.Performance

plan

A description of KRAs,KPIs and their targets

expected to be accomplished during the performance

period.Proficiency

Level

The level at which a set of behaviours is required to

be demonstrated in a particular role.PMS

Facilitator

Responsible for centrally administering the e-

enabled PMS software.PMS Tools Tools developed within PMS to facilitate effective ,

usage, roles, rating scales, performance diary etc.

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T YPES OF WELFARE SERVICES

Employee welfare services may be classified into two broad categories.

1. Intra mural.

These services are provided with in the establishment these include latrines, urinal,

washing, bathing facilities, crches, rest rooms shelters, canteens, uniform mercial

aid, recreation facilities subsidized food etc.

2. Extra mural.

These services provided outside the establishment these consists of housing

accommodation, transport, maternity benefits, childrens education, sports, holiday

homes, leave be travel facilities, workers cooperative store, fair price shops, credit

societies, etc.

W ELFARE MEASURES IN I NDIAN O IL C ORPORATION L IMITED IndianOil Corporation continued its endeavour to upgrade facilities and promote the

welfare of employees. With a view to promote employees welfare, Indian Oil

Corporation brought about improvements in policies concerning medical facilities,

allowances at remote locations, Productivity Incentive Scheme and post-retirement

medical facilities.

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Welfare at Digboi has under done a several change over the years. It is no more

viewed as statutory but has been understood as a development need for employees.

Hence the factory has been taken lot of pro active state in field of employees welfare

which includes measures like long service awards, scholarship for workmen children,

activities for the workmen childrens and families like which drawing and painting

etc.

Apart from the compliance of the statutory requirements, the company welfare and

other measures like.

Long service award

Children merit scholarship

Organizing competitions

STATUTORY WELFARE FACILITIES :

SHELTER, REST ROOM AND LUNCH ROOM

In every company employing more than 150 employees, educate shelter, rest

room and lunch room with provision of drinking water, where workers can eat meals

by them.

CANTEEN

At IOCL canteen is run from its inception from 1979 onwards. Canteen is run

by IOCL employees society. On the basis of loss management replace it. They are

totally 52 employees who work for canteen with one manager. In canteen

management committee, there is equal participation from both the workers and

management.

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NON STATUTORY WELFARE ACTIVITIES FACILITIES

MERIT SCHOLARSHIP SCHEME

The company has instituted a merit scholarship scheme for providing financial

assistance to the children of IOCL employees to help then in their academic pursuit.

SOCIAL SECURITY MEASURE

The concept of social security is essentially related to the high ideals of human dignity

and social justice. It is preliminary and instrument of social and economic justice.

According to ILO social security is the protection which society provides for its

members through a serried of public measures, against the economic and social

distress that otherwise would be caused by the stoppage or substantial reduction of

earning resulting from sickness, maternity, employment, injury, unemployment,

invalidity, old age, and death, the provision of subsidies for families with children.

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MARKETING MANAGEMENT

INTRODUCTION

IndianOil has one of the largest petroleum marketing and distribution networks in

Asia, with over 35,000 marketing touch points. Its ubiquitous petrol/diesel stations are

located across different terrains and regions of the Indian sub-continent. From the icy

heights of the Himalayas to the sun-soaked shores of Kerala, from Kutch on India's

western tip to Kohima in the verdant North East, IndianOil is truly 'in every heart, in

every part'. IndianOil's vast marketing infrastructure of petrol/diesel stations, Indane

(LPG) distributorships, SERVO lubricants & greases outlets and large volume

consumer pumps are backed by bulk storage terminals and installations, inland

depots, aviation fuel stations, LPG bottling plants and lube blending plants amongst

others. The countrywide marketing operations are coordinated by 16 State Offices and

over 100 decentralised administrative offices.

Several landmark surveys continue to rate IndianOil as the dominant energy brand

in the country and an enduring symbol for high quality petroleum products and

services. The heritage and iconic association that the brand invokes has been built

over four decades of commitment to uninterrupted supply line of petroleum products

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IndianOil has the largest and most sophisticated integrated petroleum products

supply chain in India. Whether it is an immediate need, a long-term supply contract

or even setting up dedicated storage and handling facilities at your premises our

network is at your service. IndianOil's marketing operations network of storage,

distribution and supply hubs is backed by efficient sourcing, on-time logistics,

custom-designed deliveries and round-the-clock after sales service and consultancy.

Many customers like the Railways, State Transport Undertakings, Steel Plants,

Thermal Power Plants, Textile Mills and Power Plants continue to benefit from

long-term contracts signed with IndianOil for fuels & lubricants supplies and

consultancy. Tapping the expertise that we have built over five decades of working

with a cross-section of customers from a wide-range of industrial sectors,

IndianOil's Bulk liquid fuel supply offerings covers the complete gamut of fuels-

Diesel, Light Diesel Oil, Low Sulphur Heavy Stock, Special Products .

COMMERCIAL LPG/RETICULATED LPG

Besides supplying domestic Indane LPG cylinders to households, IndianOilalso markets commercial LPG cylinders in 19 Kg and 47.5 Kg capacity. The

commercial LPG cylinders are available at market rates and customers can avail of

the superior energy efficiency of LPG in their commercial establishments like

canteens, hotels or even in industrial and fabrication works like cutting, welding,

heating etc. Besides the regular Indane LPG cylinders that are delivered to

doorsteps, IndianOil also offers reticulated LPG systems for large residential

apartment complexes and establishments. Such systems are cost effective and thegas lines laid to individual homes draw from a bank of LPG cylinders stored safely

in a dedicated place in the building.

LPG (NON-FUEL ALLIANCES)

IndianOil has signed business agreements with reputed companies and brands

for marketing their products through its countrywide network of Indane distributors.

Some of the hugely successful products being currently sold through the network

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are Suraksha rubber hoses, Green Label stoves, Zenith and Safex fire extinguishers.

New tie-ups have been signed for marketing Suraksha flame retardant aprons,

CNG/LPG auto kits, e-booking of railway tickets, money transfers, KwalityWalls'

kiosks, Mysore Sandal Soaps, courier services and telecom products through the

Indane network.

RETAIL (NON-FUEL ALLIANCES)

In an effort to tap alternate revenue streams, IndianOil is focused on enhancing its

non-fuel revenues (NFR) through its 195 million sq feet of retail space. IndianOil hasalready mapped petrol stations to study the tyrefalls and assess their site potential with

the help of consultants, Technopak Advisors Pvt Ltd. A well-structured roll out plan

is already underway and petrol stations, primarily in the North have been identified

for a pilot study. The NFR model developed will provide for sharing of revenue

streams with the dealer network to enable unlocking of existing retail space value that

both IndianOil and its dealers command. Several alliances have already been forged

with leading brands like Hindustan Unilever Ltd, Dabur, ICICI Bank, Ferns & Petals,

MTR Foods, PVR Cinema, UAE Exchange, Reliance Capital and DHL. If you wish

to partner us in our non-fuel business ventures email your proposal to IndianOil

INDIANOIL AVIATION SERVICE

IndianOil Aviation Service is a leading aviation fuel solution provider in India and

the most-preferred supplier of jet fuel to major international and domestic airlines.

Between one sunrise and the next, IndianOil Aviation Service refuels over 1500

flights from the bustling metros to the remote airports linking the vast Indian

landscape, from the icy heights of Leh (the highest airport in the world at 10,682 ft) to

the distant islands of Andaman & Nicobar.

Jet fuel is a colorless, combustible, straight-run petroleum distillate liquid. Its

principal uses are as jet engine fuel. The most common jet fuel worldwide is a

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kerosene-based fuel classified as JET A-1.The governing specifications in India are IS

1571: 2001 (7th Rev).

IndianOil is India's first ISO-9002 certified oil company conforming to stringent

global quality requirements of aviation fuel storage & handling. IndianOil Aviation

also caters to the fuel requirements of the Indian Defence Services, besides refueling

VVIP flights at all the airports and remote heli-pads/heli-bases across the Indian

subcontinent.

IndianOil Aviation group regularly organises International Aviation conferences

that act as a vital information facilitator with participation from leading international

and all domestic airlines, allied industries, statutory aviation authorities and

government agencies from over 35 countries.

IndianOil is the only oil company in India to market the widest possible range of

fuels used by the aviation industry in India- JP-5, Avgas 100LL, Methanol Water Mixture, Jet A-1 and aviation lubricants, etc.

Aviation Turbine Fuel (ATF) is dispensed from specially designed refuellers,

which are driven up to parked airplanes and helicopters. Major airports have hydrant

refuelling systems that pump the fuel right up to the filling outlets on the tarmac

through underground pipelines for faster refuelling. Essentially, ATF is pumped into

an aircraft by two methods: Overwing and Underwing. Overwing fuelling is used onsmaller planes, helicopters, and piston-engine aircraft and is similar to automobile

fuelling - one or more fuel ports are opened and fuel is pumped in with a conventional

pump. Underwing fuelling, also called single-point is used on larger aircraft.

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LOYALTY PROGRAMMES:

IndianOil's loyalty programmes are designed exclusively to benefit the large

number of its customers who have been patronising the brand for over five decades

XTRA POWER

The XTRA POWER Fleet Card programme is a complete smart card-based fleet

management solution for fleet operators and corporates for cashless purchase of fuel

& lubricants from designated retail outlets (petrol pumps) of IndianOil through

flexible pre-paid and credit facilities. The fleet card also offers an exciting rewards

programme and unique benefits like personal accident insurance cover and vehicle

tracking facilities. In just under two years of its launch, it has emerged as the largestfleet card in the country with the widest retail outlet coverage. Any business entity

owning or operating a vehicle fleet can become a member of the XTRA POWER fleet

card programme at a nominal annual charge. Each fleet owner is issued a Fleet

Control Card and vehicle-specific Fleet Cards for every vehicle enrolled under the

programme. For enhanced security, the fleet card transactions are authorised through

a unique Personal Identification Number (PIN). Moreover, the card can help track

each vehicle's movement across remote corners of the country, leading to animprovement in vehicle utilisation and route compliance. XTRA POWER is also

backed by IndianOil's vast infrastructure network and web-based support services.

XTRA REWARDS

IndianOil XTRA REWARDS is India's first online rewards programme that seeks

to inculcate the habit of redeeming points. It is currently active in Mumbai, Delhi,

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PRODUCTION

PRODUCTION DEPARTMENT CONTAINS FOLLOWING UNITS

ATMOSPHERIC DISTILLATION UNIT( AVU )

Catalytic Reformer Unit ( CRU )

DELAYED COKING UNIT ( DCU )

Hydrotreater and Amine Treating Unit( HDTU )

Hydrogen Generation Unit ( HGU )

HEIGH PURITY NITROGEN UNIT( HPNU )

Solvent Dewaxing / Deoiling Unit ( SDU )

SULPHUR RECOVERY UNIT ( SRU )

SOUR WATER STRIPPING UNIT ( SWSU )

WAX HYDROFINISING UNIT ( WHFU )

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TOTAL PRODUCTIVE MAINTENANCE

TPM DEFINITION:

A Company-Wide Team Based Efforts To Build Quality Into Systems And To

Improve Overall Plant Effectiveness.

TOTAL:

All Employees Are Involved.

It Aims To Eliminate All Accidents, Defects, Wastage, Losses And System Problems.

PRODUCTIVE:

Actions Are Performed While Maintaining System Integrity.

Troubles For System Are Minimised.

MAINTENANCE:

Keep In Good Condition.

Repair, Clean, Clear, Lubricate.

TPM Combines Preventive Maintenance With Total Quality Control And Total

Employees Involvement To Create A Culture Where All Employees Develop

Ownership Of Their Equipment And Operating Systems And Become Full Partners

With Engineering And Maintenance To Assure Equipment And Systems Operate

Properly And Effectively Everyday.

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AIM OF TPM:

1. Achieving World-Class Standards Of Performance By Eliminating All Losses And

By Adhering To Optimized Efficient Refinery Operation, Maintaining Highest Safety

Standards.

2. Inculcating A Complete Cultural And Attitudinal Change In The Employees To

Foster Ownership Of The Equipment And Plants And To Promote Continuous

Improvement In Work Environment.

3. Reduction In Cost Of Production While Maintaining Highest Standards In Product

Quality To Achieve Customers Delight, With An Ultimate Aim To Increase ProfitsAnd Growth Of The Division And The Corporation As A Whole.

TOTAL PRODUCTIVE MAINTENANCE

TPM is a world class manufacturing strategy for optimizing the effectiveness of

manufacturing equipment.

The goal of the TPM program is to drastically increase production while, at thesame time, increasing employee morale and job satisfaction.

TPM was introduced to achieve the following objectives:

Avoid waste in a quickly changing economic environment.

Producing goods without reducing product quality.

Reduce cost.

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Produce a low batch quantity at the earliest possible time.

Goods send to the customers must be non defective.

TPM HAS 8 PILLARS , EACH BEING SET TO ACHIEVE A ZERO

TARGET :

1. Focused improvement (kobetsu-kaizen): for eliminating waste.

2. Autonomous maintenance (jishu-hozen): the operator is the key player. It involves

daily maintenance activities carried out by the operators themselves that

prevent the deterioration of the equipment.

3. Planned maintenance (keikaku-hozen): for achieving zero breakdowns.

4. Quality maintenance (hinshitsu-hozen): This is actually maintenance for quality. It

includes the most effective quality tool of TPM: poka-yoke , which aims to achieve

zero loss by taking necessary measures to prevent loss.

5. Education and training : for increasing productivity

6. Early equipment/product management : to reduce waste occurring during the

implementation of a new machine or the production of a new product

7. Safety, hygiene, environment : for achieving zero work-related accidents and for

protecting the environment.

8. Office TPM : for involvement of all parties to TPM since office processes can be

improved in a similar manner as well.

THE PQDSM CONCEPT:

P - Productivity Enhancement

Obtain Minimum 90% Ope. (Overall Plant Effectiveness)

Obtain Minimum 90% Oee. (Overall Equipment Effectiveness)

Q - Quality

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Operate In A Manner, So That There Are No Customer Complaints.

D- Delivery

Achieve 100% Success In Delivering The Goods As Required By The Customer.

S- Safety

Maintain An Accident Free Environment

M - Morale

Increase The Suggestions By 3 Times, Develop Multi-Skilled And Flexible Workers

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TPM BRINGS :

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Enhanced productivity

Reduced waste

Cost optimisation

Safety

HealthyEnvironment

ZeroAccidents

High MoralTeam

Collaboration Working

Customer Delight

OnTime Delivery

QualityImprovementTeam spirit

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TPM DEVELOPS THE FEELING OF OWNERSHIP

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MyEquipments

My PeopleMyRefinery

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MAINTENANCE DEPARTMENT OF IOCL (DIGBOI)

INTRODUCTIONMaintenance and repair of equipment in a Hydrocarbon process plant is defined as

"preserving the machine to operate its design condition with maximum availability at

minimum maintenance cost ".Maintenance function has become another Profit Centre of any organisation.

Maintenance has gone through a Metamorphosis from "RUN-FAIL-FIX-RUN"

syndrome to a dynamic function capable of Prediction & Prevention of equipment

failure trends and contribution to continuous enhancement of Organizational

Productivity. Maintenance no longer is deemed merely as a Spender Department in

view of its recent transformation into a powerful medium of overall effectiveness of

the organization.Maintenance function improves organizational productivity by consideration

of: Relationship between Loss Structure & Overall Equipment Efficiency

"Why-Why" Analysis of Equipment Failure

Observance of development of failure before it turns up

Failure Analysis Prevention of "Recurrence" of Failure

Quality control as applicable to Maintenance

Need for Training and Development of PersonnelPlant & Equipment maintenance can often be quite costly in a hydrocarbon

process plant operation. It is the awareness that true cost savings and profitability

can only be achieved by combining machinery reliability, safety, availability, and

maintainability into a cost-effective total.

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There are many approaches to perform maintenance and engineering activities at

an operating facility. The type of process, plant size, location, and business

conditions at a particular time are the variables that can affect this approach. The

system must fit the basic overall corporate goals. The final evaluation of success,

however, for whichever system selected, is achieving the lowest possible product

cost over extended periods of time at varying business conditions.Total plant profitability is obviously affected both by on-stream factors and

maintenance costs. One cannot be separated from the other. Any system, therefore,

must account for how cheaply maintenance can be performed from an organizational

setup, and also what must be done and how often. The ability to update maintenance

requirements and improved planning based on experience at a group of plants has a

large bearing on overall maintenance costs.

(a) Planning Sheets.

Planning in-charge shall prepare detailed planning sheets incorporating all the

jobs and circulate to all concerned one week before the planned shutdown date.

(b) Workshop FabricationSimultaneously, Planning in-charge in consultation with Workshop in-charge

and shutdown Engineer, shall finalized the list of jobs to be carried out in the Main

Repair shop and incorporate in the Planning sheets.

(c) WorkforceOn assessment of the workforce required (done in consultation with

shutdown Engineer), Planning in-charge shall process the approval from Zonal

Maintenance In-Charge for arranging additional reinforcement either from other

Refineries or on contracts.

(d) Supervisory ForceFor additional supervisory force, as required, Zonal Maintenance In-Charge

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shall get in touch with other Refineries and ensure their presence in time.

(e) Clearance ScheduleA calendar schedule for all the jobs planned shall be prepared by the

Production Coordinator in consultation with Production In-Charge concerned as well

as Planning in-charge and shutdown Engineer indicating the time when the clearance

for taking up individual jobs shall be available. The manpower requirement for

getting the equipment released shall also be planned and provided.

(f) Blinding ScheduleProduction Coordinator shall also prepare schematic diagram in consultation

with the Production In-Charge where the blinds are required to be fixed and furnish

the same to shutdown Engineer.

(g) Shutdown ProgrammePlanning in-charge shall prepare shutdown programme incorporating .

Date of shutdown

Date of completion

Job list with fixed tag numbers

Man-hours requirement

Distribution of the work force as well as date and time of clearance.

He shall also prepare PERT Chart for all major activities. The shutdown

programme so prepared shall be distributed to all concerned and displayed in the

shutdown Engineer's Office. Date of shutdown

Date of completion

Job list with fixed tag numbers

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Man-hours requirement

Distribution of the work force as well as date and time of clearance.

COMMUNICATIONSProper communications inters personnel / inter sectional play a vital role in

ensuring success of Management efforts to accomplish the desired objective. The

effective implementation of communication programmes enhances the sense of

participation in all members, in addition to making them 'result' oriented.

LOSS TO COMPANY'S PROPERTYIn the event of any loss to the Company's Property due to thefts, fire or accidents, the

procedures for reporting and follow up would be as follows:THEFTS: For any loss of Company's property due to theft at site, the concerned Engineer

Shall inform about it on telephone immediately to CISF Authorities and bring to the

notice his first observation and also shall keep his superiors and Senior Administration

Officer informed of the same. After investigation, on the same day report shall be submitted by Engineer inwriting detailing out the item / items found missing to Senior Administration Officer

with a copy to CISF Authorities and his superiors. Further follow up till completion of final investigation and recovery or write off

of the loss, shall be done by the concerned Administration officer who should keep the

Maintenance Manger fully informed.

LOSS OF PROPERTY DUE TO FIRE / ACCIDENTS

In the event of any loss to company's property on account of fire / accidents, thefirst report in detail shall be furnished by the concerned Engineer to functional head

through his superiors. Functional Head shall analyze all the facts in detail in association with the Fire

& Safety

REPORTING OF ACCIDENTSFor any accident of an employee on duty, the immediate Supervisor concerned

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shall fill up 'Work Accident Form' and send to Medical Officer with a copy to Fire &

Safety Officer. (If the injury is serious, the injured employee takes the Form with him

to the First Aid/Hospital immediately and his Supervisor shall send the form

afterwards).In case of death or serious bodily injuries, the Supervisor shall intimate the same on

phone to the Senior Medical Officer, Fire & Safety Officer, Chief Personnel &

Administration Manager and his own Departmental Head and shall follow by the work

accident from to the Senior Medical Officer and the Fire & Safety Officer.In all cases of accidents, the Supervisor shall also send the 'Supervisor's Accident

Investigation Report' to the Fire & Safety Officer within 24 hours of the accident in the

form (prescribed)

HOUSE KEEPING Field Maintenance Engineer shall ensure that the place of work is kept clean

and tidy on completion of assigned work. All leftover materials and scraps shall be

removed on the same time on completion of the jobs. For keeping the Plant area, loading gantry and other tank-farm area clean, Civil

Section shall provide yard service and shall ensure proper 'house keep-keeping' through

effective coordination with the concerned production personnel.

SAFETYApplication of all safety measures for prevention of personal injuries to the workmen

while on duty shall be primary concern of all supervisors. Engineer/ Senior Engineer to

whom the workman reports shall ensure that all safety appliances required ink the

performance of their assigned tasks are made available to them and also guide them in

application and use of safety appliances.

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FINANCIAL MANAGEMENT

INTRODUCTION

FINANCE is the lifeblood and nerve system of any business organization.

Just as circulation of blood is necessary in human body to maintain life, finance is

very essential to the business organization for smooth running of the business.Financial management involves managerial activities concerned with the

acquisition of fund for business purpose. The finance function does with procurement

of money taking into consideration today as well as future needs and finance is

required to purchase a machinery and raw material, to pay salaries and wages and also

for day-to-day expenses.

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METHODS USED IN FINANCING:

NET PRESENT VALUE :

It is the summation of the present value of cash proceeds in each year less the

summation of the present values of the net cash outflows in each year.

PROFITABILITY INDEX :

It is the present value of the return per rupee invested.

INTERNAL RATE OF RETURN :

It is the discount rates which equates the aggregate present value of the net cash

inflows with the present value of cash outflow of a project.

EQUIVALENT ANNUITY :

The equivalent annuity method expresses the NPV as an annualized cash flow by

dividing it by the present value of the annuity factor.

APPLICATION OF MANAGEMENT THEORY FOR DATA ANALYSIS

Capital projects in IOC are divided into :

1. Core Sector projects eg. refining, marketing, pipelines and R&D.

2. Diversification projects eg. exploration and production(E&P), Liquified Natural

Gas(LNG),petrochemicals and power etc.

3. Globalization projects core/non core projects overseas.4. Merger/Acquisitions

As per company policies all capital investment proposals above Rs. 100 crores require

board approval:

1. Above Rs. 100 crore : Board

2. Above Rs. 50 crore to 100 crore : Planning & Project

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3. Above Rs. 10 crore to 50 crore : Chairman

4. Above Rs. 10 crore : Fucntional Director

Project costing Rs. 250 crore and above also require approval of Project

Evaluation Committee. All proposals are to be prepared with the assistance of

professionals and experts.

Capital investment analysis involves estimating and comparing the benefits of

these schemes. Its is an exercise that helps Indian Oil to take a decision on he

investment proposal under review. The five basic steps in investment analysis in

Indian Oil are:

NEED AND JUSTFICATION

MARKET AND COMMERCIAL ASSESSMENT

TECHNICAL FEASIBILITY STUDY

FINANCIAL ANALYSIS

SENSITIVITY AND RISK ANALYSIS

The final decision on a proposal is taken only after sensitivity and risk analysis. As

the name suggests sensitivity analysis test the proposals viability of profitability to

modifications in few variables. The sensitivity of the project to the critical variables is

thereby established. Risk analysis is a more comprehensive extension of sensitivity

analysis as it seeks to examine the profitability of the capital invested subject to

differing combinations of movements of the critical variables. Sensitivity analysis is

the first step towards risk analysis. Both sensitivity and risk analysis enables the

management to comprehend the sources of risk that a project is exposed to over its

projected life period. More important, it enables the corporation to undertake

measures that help to mitigate risk either through risk sharing procedures or through

hedging options. Subsequent chapters shall examine the above issues in detail.

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In case of R&D, any expenditure on development, testing and pre commercial

operation, such as demonstration, pilot and development of prototype will be treated

as R&D expenses. However, any commercial production will have to satisfy the

hurdle rate criteria.

THE NEED FOR A PROJECT MAY BE BROADLY ON ACCOUNT OF:

Capacity enhancement due to demand and supply imbalance.

Economic considerations.

Technical/operational necessity.

Marketing consideration.

Improvement in existing operations through removal of constraints/ updation

of technology.

Govt./strategic policy decisions.

Safety/environmental and other statutory requirements.

Expansion into new business diversification/globalization.

Research and development activities.

PROJECT COST

An accurate and realizable project cost estimate is vital for appraisal of the

project since it has a direct relation with the economic viability of the project. The

project cost estimates shall be prepared including the following components while

clearly indicating the break up of Rupee and foreign exchange components.

PRIME COST

PROVISION FOR DESIGN AND SCOPE CHANGES

PROVISION FOR CONTINGENCIES

CONSTUCTION PERIOD EXPENSES

FINANCING COST DURING CONSTRUCTION PERIOD

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PRIME COST:

Prime cost of the project includes total cost of the land, building, equipments,

materials, civil construction, other items namely mechanical, electrical,

instrumentation, and safety, fire fighting, pollution control etc. required to complete

the project.

PROVISION FOR DESIGN AND SCOPE CHANGES:

The provision for design and scope change needs to be justified on case to case

basis. Normally no provision for scope and design change may be required in respect

of repetitive projects where scope is amply clear at the time of preparation a project

cost estimates. Similarly, for projects where quantum of jobs to be executed is

finalized and details of materials/specifications have been clearly determined, no

design change provision needs to be considered. However, in case of grass root

projects such provision not exceeding 10% of the total cost of the project may be

considered to take care of changes in the scope and design due to detailed

engineering.

PROVISION FOR CONTINGENCIES:

The provision for contingencies not exceeding 3% to 5% of the total estimated

cost can normally be included while estimating the project cost. However, level of

contingency may vary from project to project depending upon the nature.

CONSTRUCTION PERIOD EXPENSES:

As per statement of accounting policies, the construction period expenses are treated

as under:

Revenue expenses including expenses for crop compensation for acquiring Right-of-

way exclusively attributable to projects incurred during construction period are

capitalized. However, such expenses in respect of capital facilities being executed

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along with the production/operations simultaneously are charged to revenue.

Financing cost incurred during the construction period on loans specifically borrowed

for projects is capitalized at the actual borrowing rates.

FINANCING COST:

In line of above policy, financing cost during construction period is reflected

separately, whenever applicable. Financing cost incurred on General Borrowings used

for projects is capitalized at the weighted average cost. The amount of such

borrowings is determined after setting off the amount of internal accruals.

FINANCING PROJECTS:

Projects taken up by the corporation are partly financed through internal resources

and partly through specific borrowings. Debt-equity ratio 1:1 is assumed where no

specific financing plans have been finalized. Where financing mode has been decided

then the same are indicated. However the ratio is reviewed on case to case basis. Non- plan schemes are assumed to be financed from internal resources.

In respect of all those projects where the financing through borrowings has been

envisaged/ assumed, the following issues need to be dealt:

Extent of the loan available and terms thereof (like rate of interest, repayment

schedule, moratorium, commitment charges etc.)

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Break up of financing through borrowings into foreign exchange/Indian rupee

component.

Deferred credit if available.

For calculating financing cost, latest SBI Prime Lending Rate for long term loan.

DETERMINATION OF CASH FLOWS:

Determination of year wise cash flow cash flows is the most crucial step of the

financial analysis. The cash flow can be determined in 3 components namely:

A.INITIAL INVESTMENT

B.OPERATING CASH FLOWS

C.TERMINAL CASH FLOWS

A.INITIAL INVESTMENT:

This component of cash flows mainly represents net cash outlay in the period in

which the asset is purchased or constructed. In other words, initial investment shall

comprise of the total project cost as indicated in the capital investment proposal and

shall also include incremental value of working capital, wherever required. While

computing initial investment a care needs to be exercised in respect of following: in

respect of proposals where financing through borrowings is envisaged,

receipt/repayment of loans and payment of interest are not considered while

calculating ROI. However, these are to be considered while calculating ROE.

B.OPERATING CASH FLOWS:

The component of cash flow presents year-wise cash flow generated from

operations after the projects has been commissioned. The capacity utilization shall not

be more than 60% in the first year and at 90% from second year onwards till project

life cycle. The determination of operating cash flows shall, therefore, entail estimating

year-wise operating income, input/raw material cost and operating expenses during

the project life.

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C.TERMINAL CASH FLOW:

The cash flow in the terminal year of the project mainly represents the

salvage value of the project plus release of incremental working capital,

salvage value shall be considered as under:

Land to be valued at original cost

Other items to be valued at 30% of the original cost without financing cost

Tax on capital gain should be considered. Capital gains are taken as terminal value

minus written down value as per income tax act.

Terminal cash flow to be taken in 16 th year.

PROJECT LIFE:

For cash flow determination and financial analysis, the life of project is taken as

15 years from the date of completion, unless the project life is shorter.

Issues requiring special-care cash flows:

While determining the cash flows for the projects special care is taken which need to

be exercised in respect of following:

Cash flow can occur by increase in cash revenue and/or cash saving through reduction

in operating costs.

Cash outflow can occur by increase in operating expenses and/or decrease in cash

revenue, apart from outgo for initial capital investment.

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The net cash flow shall be estimated on after tax basis, as payment of taxes is an

outflow of cash.

For calculation of IRR, all financial charges arising due to financial leverage like

interest payment/dividend payments are not to be considered as cash outflows.

Similarly, tax shield/benefit allowable due to such financial charges are not to be

considered as cash inflow/outflow.

For calculation of ROE, interest outgo on project loans, tax shield available and

principle payments are considered. In this case, initial capital outgo shall be limited to

equity outgo.

CORPORATE TAX IS CONSIDERED AS UNDER:

1. Corporate tax to be considered on the project on standalone basis.

2. No tax shield for loss, if any.

3. Loss, if any, is carried forward for adjustment with future profit.

4. Minimum Alternative Tax (MAT) to be considered, wherever regular tax liability

does not arise.

5. All deductions/rebates/benefits etc. wherever available under the income tax act to be

considered.

6. Cen vat credit is not considered.

SUMMARY OF FINANCIAL ANALYSIS:

For the purpose of financial analysis of capital investment proposals, cash flow

estimates are to be prepared for the full project life. These cash flow estimates alongwith calculation of ROI/ROE, NPV, DSCR and Break Even Analysis are attached to

the proposal. While considering the base case, capacity utilization shall not be more

than 90% (from 2 nd year onwards) throughout the project life cycle for all projects.

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ANALYSIS OF RISK AND SENSITIVITY ANALYSIS AT INDIAN OIL:

After presentation of financial analysis of the project, the capital investment

proposal shall indicate an analysis of risk and uncertainty involved in the proposal.

All capital investment proposals involve some risk or uncertainty with respect to their

completion. Capacity utilization, fulfillment of specified need, safety and profitability

etc. as the underlying assumptions made at the project formulation stage may not hold

well during the project life. Therefore, analysis of risk and uncertainty is an essential

part of sound proposals but also helps in systematic consideration of risk by the

approving authorities.

TYPES OF RISKS:

FINANCING RISK:

Impact of various risks finally affects the profitability as a result of change in

cash flows from the values considered at proposal stage. Some qualification of financial involved with a proposal is possible. This quantification helps in decision-

making. Many techniques are available for determining financial risk involved with

the Project like Risk Adjusted Rate, Certainty Equivalent, Sensitivity analysis, DCF,

Break Even Analysis, Probability Assignment, Co-efficient of variation, and Standard

Deviation etc. Most of above techniques rely heavily on the institution of Project

Planner, because he has to give factors for probability or for risk quantification.

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Hence, the results established through such techniques are subjective and therefore do

not provide a clear insight to risk/uncertainty involved. However, sensitivity analysis

is subjective only with respect to the selection of range of variable for determining the

sensitivity. Sensitivity analysis is an excellent tool to know the financial impact of a

variable on the proposal. Therefore, sensitivity analysis shall be used for determining

financial risk of project.

OTHER RISKS:

Other risks constitute all those risks which may jeopardize

success/completion of the project. In case where need is other than profit, like

operational necessity, government policy, safety, environment etc. there is a risk to

the fulfillment of the same. Following shall come under any risks:

Risk in getting input/linkage with input sources.

Risk in disposing output/linkage with market, downstream plants etc.

Risk in obtaining statutory clearances.

Risk in capacity utilization due changing in demand/supply situation.

Performance risk associated with a new technology.

Risk of technology obsolescence.

Risk worthiness of technical collaborator.

SENSITIVITY ANALYSIS:

Sensitivity analysis is a quantitative process of measuring change in value of a

dependant variable consequent to change in the value of one or more other variables.

A further aspect of such analysis is evaluation of its sensitivity to possible errors in

estimation of each or some of the critical variable. This information is very valuable

and shall be provided in the capital investment proposal so as to give an overview of

the impact of changes in the value of those variables, which form an essential part of

the analysis. For the purpose of carrying out the sensitivity analysis, it is utmost

necessary in the first place to identify the important variables of the projects. These

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may be assumptions regarding incremental throughout/sales, capital cost, cen vat

benefit etc. after identification of these important variables, sensitivity analysis are

carried out to assess the impact of marginal changes in these variables on final results

of the project i.e. IRR/NPV of the project is also being computed on completion

Project Cost Basis, taking into account average rate of inflation in the following

manner:

Labour component of the project cost may be updated using the average (of 12

months) of Consumer Price Index (CPI) for industrial workers.

For all other components of cost except labour the average (of 12 months) of

Whole sale Price Index (WPI) for all commodities may be used.

With the help of sensitivity analysis, it is possible to identify the variables with high

sensitivity and low sensitivity. The Capital Investment proposals gives the full details

of these variables and their degree of sensitivity.

APPLICATION OF RISK AND UNCERTAINTY ANALYSIS:

Analysis of risk and uncertainty as enumerated above is applicable to all capital

investment proposals.

However, sensitivity analysis are normally provided for projects costing less than Rs.

50 crore, unless sensitivity of any variable is very high.

FINANCIAL OBJECTIVE OF INDIAN OIL CORPORATION LIMITED

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To ensure adequate return on the capital employed and maintain a reasonable annual

dividend on equity capital.

To ensure maximum economy in expenditure.

To manage and operate all facilities in an efficient manner so as to generate adequate

internal resources to meet revenue cost and requirements for project investment,

without budgetary support.

To develop long-term corporate plans to provide for adequate growth of the

Corporations business.

To reduce the cost of production of petroleum products by means of systematic cost

control measures and thereby sustain market leadership through cost competitiveness.

To complete all planned projects within the scheduled time and approved cost.

SWOT ANALYSIS

A SWOT (Strength, Weakness, Opportunities, Threats) analysis is a tool to

provide a general or detailed snapshot of a companys health.

In any business, it is imperative that the business be its own worst critic. A

SWOT analysis forces an objective analysis of a companys position vis-a-vis its

competitors and the market place. Simultaneously, an effective SWOT analysis will

help to determine in which areas a company is succeeding, allowing it to allocate

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resources in such a way as to maintain any dominant positions it may have. Below are

numerous, current example SWOT analysis.

STRENGTHS

The most important strength of IOCL is its goodwill. Its other strengths can be:

Extensive access to rural market.

Extensive marketing channels.

Proper quality-implementation of quality concepts like six-sigma, etc.

World class Research & Development centre.

Nearness to the market helps in sales.

Largest pipeline network.

Location of refineries near to exploration site.

WEAKNESS

Government intervention.

New to the upstream business.

Dependence on exploration companies for crude oil.

High cost of raw materials.

No control over fluctuation in the international market.

OPPORTUNITIES

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CORPORATE MISSION :

1. To achieve international standards of excellence in petroleum Refining, marketing

and transportation with concern for customer satisfaction.

2. To create a modern technology base for self reliance, growth and development.

3. To contribute to the national economy by providing adequate return on investment

and setting high standard of leadership in productivity and total quality.

4. To foster a culture of participation and innovation and innovation for employee

growth and contribution.

5. To help enrich quality of life of community and preserve ecological balance and

national heritage.

FINDINGS

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IOCL possess enough resources. The technology used in AOD hospital is also

upgraded from time to time.

Indian Oil with Assam Oil as a supplementary brand will be able to create a larger

pool of royal customers.

In the north zone, Assam Oil has immersed as a strong brand in the items of

royalty and perceived quality. Loyalty and perceived quality appear to be key

brand differentiators.s

SUGGESTIONS

Steps have to be taken for increasing the communication between various

departments. That can boost coordination.

More opportunities for career development of the employee have to come in the

picture and the management of IOCL (AOD) should give exposure to the new

generation.

IOCL (AOD) should attempt to put proper man in the right job, for this skill

inventory can be used.

Being market leader in the north east, it should try to defend its position the best

defensive strategy is the courage to attack itself by putting retail outlets with

modern look or by the re-modelling the old retail outlets with high sight potential

& high dealers capability.

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CONCLUSION:

With development in technology and infrastructure, Assam Oil Division is

moving towards attaining higher standa

Ioc Project Sonia

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