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Hindustan Petroleum Corporation Ltd - Directors' Report

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HINDUSTAN PETROLEUM CORPORATION LIMITED

ANNUAL REPORT 2011-2012

DIRECTOR`S REPORT

TO THE MEMBERS

On behalf of the Board of Directors, I have great pleasure in presenting to 
you the sixtieth Annual Report on the working of the Company, together with 
the Audited Accounts for the year ended 31st March 2012.

HIGHLIGHTS                                                      Rs./Crores
                                                     2011-12       2010-11

FINANCIAL

Sales/Income from Operation                      1,88,130.95   1,42,396.49

Profit before Depreciation, Interest and Tax        5,071.40      4,636.75

Depreciation                                      (1,712.93)    (1,406.95)

Interest                                          (2,139.23)      (892.06)

Profit before Tax                                   1,219.24      2,337.74 

Provision for Tax

Current Tax                                         (396.65)      (417.11)

Deferred Tax                                          (6.94)      (390.96)

Taxation of earlier years written back                 95.78       (82.17)

MAT Credit Entitlement                                     -         91.51

Profit after Tax                                      911.43      1,539.01

Balance brought forward from previous year          9,373.12      8,715.15

Appropriations:

General Reserve                                      (91.14)      (153.90)

Debenture Redemption Reserve                        (176.15)      (176.15)

Proposed Dividend                                   (287.83)      (474.08)

Tax on distributed profits                           (46.70)       (76.91)

Balance carried forward                             9,682.74      9,373.12

PHYSICAL PERFORMANCE (MMT)

Market Sales (Including Exports)                       29.48         27.03

Crude Thruput:

Mumbai Refinery                                         7.51          6.55

Visakh Refinery                                         8.68          8.20

SHAREHOLDERS` VALUE (Rs.)

Earnings per Share                                     26.92         45.45

Cash Earnings per Share                                77.70         98.58

Book Value per Share                                  387.52        370.49

DIVIDEND

Your  Directors,  after taking into account the financial  results  of  the 
Company during the year, have recommended dividend of Rs.8.50 per share for 
the  year 2011-12 as against  Rs. 14 per share paid for the  year  2010-11. 
The  dividend  for 2011-12, including dividend tax  provision  will  absorb  
Rs.334.53 crores (2010-11:  Rs. 550.99 crores).

SALES/INCOME FROM OPERATIONS

Your  Company has achieved sales/income from operations of   Rs.1,88,130.95 
crores as compared to  Rs.1,42,396.49 crores in 2010-11.

PROFIT

Your  Company  has earned gross profit of  Rs. 5,071.40 crores  as  against  
Rs.  4,636.75 crores in 2010-11 and profit after tax of  Rs. 911.43  crores 
as compared to  Rs. 1,539.01 crores in 2010-11.

INTERNAL RESOURCES GENERATION

The  Internal Resources generated were  Rs. 2,179.48 crores as compared  to  
Rs. 2,785.93 crores in 2010-11. 

CONTRIBUTION TO EXCHEQUER

Your  Company  has  contributed  a sum of   Rs.  31,300.53  crores  to  the 
exchequer by way of duties and taxes, as compared to 28,864.15 crores  in 
2010-11.

DIRECTORS` RESPONSIBILITY STATEMENT

In  terms  of Section 217(2AA) of the Companies Act, 1956,  your  Directors 
state that:

(i)  In  the  preparation  of  the  Annual  Accounts,  all  the  applicable 
Accounting  Standards  have  been followed along  with  proper  explanation 
relating to material departures.

(ii)  The  Company has selected such Accounting Policies and  applied  them 
consistently  and  made  judgments and estimates that  are  reasonable  and 
prudent  so as to give a true and fair view of the state of affairs of  the 
Company as on 31st March 2012 and Statement of Profit & Loss of the Company 
for the year ended on that date.

(iii) The Company has taken proper and sufficient care for the  maintenance 
of  adequate  accounting records in accordance with the provisions  of  the 
Companies  Act,  1956 for safeguarding the assets of the  company  and  for 
preventing and detecting fraud and other irregularities.

(iv) These Accounts have been prepared on a going concern basis. 

MEMORANDUM OF UNDERSTANDING (MOU) WITH GOVERNMENT OF INDIA

Your Corporation has been signing a Memorandum of Understanding (MOU)  with 
the Ministry of Petroleum & Natural Gas. The performance of the Corporation 
of the year 2011-12 qualifies for "Excellent" rating basis self evaluation.

REFINERY PERFORMANCE

HPCL refineries processed a combined crude thruput of 16.19 MMT (14.75  MMT 
in  2010-11) with a capacity utilization of 109% of the installed  capacity 
of 14.80 MMT.

The Combined Distillate yield of 73.2% was higher than MoU Excellent target 
of 73.0%. HPCL refineries recorded the highest ever HS crude processing  of 
68.3%.

Gross  refining margins of Mumbai Refinery averaged at US$ 2.83 per  barrel 
as against US$ 4.65 per barrel for the year 2010-11.

Gross  refining margins of Visakh Refinery averaged at US$ 2.95 per  barrel 
as against US$ 5.81 per barrel for the year 2010-11. 

Mumbai Refinery:

During  the  year, Mumbai Refinery achieved crude thruput of  7.51  MMT  as 
against installed capacity of 6.50 MMT. The refinery has set a milestone by 
recording  the highest ever crude thru put surpassing the previous  best  of 
7.42 MMT during 2006-07.

The  Distillate  yield  at 72.3% was higher than MoU  Excellent  target  of 
71.7%.

Mumbai  Refinery  achieved Specific Energy Consumption  (MBTU/BBL/NRGF)  of 
81.4 against MoU Excellent target of 89.0 for the current year.

The fuel and loss for the year was 7.9% against the target of 8.2% 

Visakh Refinery:

Visakh  Refinery  achieved crude thruput of 8.68 MMT as  against  installed 
capacity of 8.30 MMT The Distillate yield at 74.0% was inline with the  MoU 
Excellent target of 74.10%.

Visakh  Refinery  achieved Specific Energy Consumption  (MBTU/BBL/NRGF)  of 
84.20 against MoU Excellent target of 88.0 for the current year.

The fuel and loss for the year was 7.4% against the target of 7.9%.

The  particulars  with  respect  to  Conservation  of  Energy,   Technology 
Absorption, Foreign Exchange Earning & Outgo are detailed in Annexure I.

The  particulars relating to control of Pollution and other initiatives  by 
Refineries are listed in Annexure II of Directors` Report.

MARKETING PERFORMANCE

During the year 2011-12, your Corporation achieved sales volume  (including 
exports)  of 29.48 million tonnes as against 27.03 million tonnes  recorded 
in  2010-11.  HPCL recorded a growth of 7.9% in Marketing Sales,  over  the 
sales  volume of the previous year and amongst public sector oil  companies 
increased  its  market share to 19.96% as on 31st March  2012  from  19.65% 
recorded in the previous year.

During  the year, your Corporation commissioned 1,056 new  retail  outlets, 
which include 329 retail outlets in the rural areas taking the total  tally 
to 11,253 Retail Outlets. Your Corporation increased its market share in MS 
and  HSD  (combined)  by 0.55%, the highest gain in market  share  by  HPCL 
during  the last 26 years. In the LPG business line, enrolled  33.56  Lakhs 
new HP Gas customers taking their total to 362 lakh as on 31st March  2012. 
In  order to provide LPG to rural India, your Corporation commissioned  218 
distributors  under  the  Rajiv Gandhi Gramin LPG Vitaran  Yojana.  In  the 
Aviation Business line, your Corporation achieved the highest ever sales of 
768 TMT during the year. A record thruput of 41 million tonnes was  handled 
by  POL  installations and your Corporation`s pipeline network  achieved  a 
thruput  of  13.62 million tonnes during the year, exceeding  the  targeted 
thruput.

VIGILANCE

Vigilance  Department  has  always  striven to  create  an  environment  of 
proactive  vigilance,  to  give importance to transparency,  to  adhere  to 
professionalism  and  high  standards  in  Customer  Service  and   Project 
Execution.

On  the occasion of Vigilance Awareness Week which was observed  from  31st 
October  2011  to 5th November 2011 all over India in all  the  offices  of 
HPCL,  various competitions like slogan, quiz, essay writing contests  etc. 
were  organised  for  creating  awareness  amongst  the  employees.   These 
competitions were also held in various schools and colleges all over India.

INDUSTRIAL RELATIONS

The  Industrial Relations climate during the year 2011-12 continued  to  be 
harmonious  across  all locations. Long Term  Settlement  discussions  were 
conducted  for  Marketing  division  and  Mumbai  &  Visakh  Refineries.  A 
Settlement  on Career Development Policy for Marketing division was  signed 
with all-India Marketing Unions on 31st March 2012 before CLC (C), Delhi.

A  total number of 31 Industrial Relations related workshops were  held  in 
the year 2011-12 against an MoU target of 24. 

OFFICIAL LANGUAGE IMPLEMENTATION

Official  Language Implementation has been given the utmost  importance  in 
the  Corporation.  The Corporation was awarded  prestigious  Indira  Gandhi 
Rajbhasha Award for the fourth consecutive year by Home Ministry.

SC/ST LIAISON

The  overall  representation  of SC / ST employees in  the  Corporation  is 
27.67%.  During  the  year, your Corporation has carried out  a  number  of 
Welfare/Development  activities  such as primary  education,  scholarships, 
drinking   water  facilities,  health  care,  income  generating   schemes/ 
vocational  training, rehabilitation of persons with disabilities  &  other 
welfare activities.

CORPORATE GOVERNANCE

The Corporation has complied with the requirements of Corporate  Governance 
as provided under Clause 49 of the Listing Agreement and DPE guidelines  on 
Corporate Governance.

The  detailed Corporate Governance Report forms part of this Annual  Report 
separately. 

MANAGEMENT DISCUSSION & ANALYSIS REPORT

A  detailed  Management  Discussion  and Analysis  Report  has  been  given 
separately. 

PARTICULARS OF EMPLOYEES

A statement providing the information as required under Section 217 (2A) of 
the  Companies  Act, 1956 is annexed herewith (Annexure III).  The  details 
regarding  the  number of women employee`s vis-a-vis the  total  number  of 
employees in each group is also annexed. (Annexure IV).

FINANCIAL STATEMENTS OF SUBSIDIARIES

In  accordance  with  the  general exemption granted  by  the  Ministry  of 
Corporate  Affairs,  Government of India, the Annual Accounts  and  related 
information  of  the subsidiary companies are not being attached  with  the 
Balance  Sheet of the Company. The Company will make available  the  Annual 
Accounts  of the subsidiary companies and the related detailed  information 
to  any member of the company who may be interested in obtaining the  same. 
The annual accounts of the subsidiary companies will also be kept open  for 
inspection  at  the  registered  office of the  Company  and  that  of  the 
respective subsidiary companies.

COST AUDIT

The Cost Audit for the financial year 2010-11 was carried out and the  Cost 
Audit Reports were filed with the Ministry of Corporate Affairs before  the 
stipulated date of filing.

DIRECTORS

HPCL  Board presently comprises of 12 Directors. The Whole  Time  Directors 
are  Shri  S.  Roy Choudhury, Chairman & Managing Director,  Dr.  V.  Vizia 
Saradhi, Director - Human Resources, Shri B. Mukherjee, Director - Finance, 
Shri  K. Murali, Director -Refineries and Smt. Nishi Vasudeva,  Director  - 
Marketing.

The  Part-Time  Directors are S/Shri L.N. Gupta, Dr. Gitesh K.  Shah,  Anil 
Razdan, S.K. Roongta, G.K. Pillai, A.C. Mahajan and G. Raguram.

The following are the details of Directors appointment /cessation:-

>  Shri P.K. Sinha, Special Secretary and Financial Advisor, MOP & NG,  who 
joined  HPCL Board on March 01, 2006 ceased to be the Ex-Officio  Part-Time 
Director  of the Corporation effective March 01, 2012, consequent upon  his 
appointment  as Secretary, Ministry of Shipping, Government of  India.  The 
Board  place on record its sincere appreciation to Shri P.K. Sinha for  the 
valuable  services  rendered by him during his tenure as  Director  of  the 
Corporation.

Shri  L.N.  Gupta, Joint Secretary (Refineries), MOP & NG who  joined  HPCL 
Board on June 25, 2008 continues to be the Ex-Officio Part-Time Director of 
the Corporation.

>  Dr. Gitesh K. Shah who joined HPCL Board on December 07, 2009  and  Shri 
Anil Razdan and Shri S.K. Roongta who have joined HPCL Board on January 10, 
2011   continue  to  be  the  Part-time  Non-official  Directors   of   the 
Corporation.

> S/Shri G.K. Pillai, A.C. Mahajan and G. Raghuram were appointed as  Part-
time Non-Official Directors of the Corporation effective April 09, 2012.

>  Smt.  Nishi Vasudeva, Director (Marketing) was appointed  as  Whole-Time 
Director  on  HPCL Board effective July 04, 2011. Shri  S.  Roy  Choudhury, 
(Chairman  &  Managing Director), Dr. V. Vizia Saradhi  (Director  -  Human 
Resources),  Shri  B. Mukherjee (Director - Finance), and  Shri  K.  Murali 
(Director   -  Refineries)  continue  as  Whole  Time  Directors   of   the 
Corporation.

As per the provisions of Section 256 of the Companies Act, 1956 , Shri L.N. 
Gupta, Dr. Gitesh K. Shah, Shri B. Mukherjee and Shri Anil Razdan retire by 
rotation  at  the  next Annual General Meeting and  are  eligible  for  re-
appointment.

ACKNOWLEDGEMENTS

The  Directors  gratefully acknowledge the valuable  guidance  and  support 
extended by the Government of India, Ministry of Petroleum and Natural Gas, 
other  Ministries,  Petroleum  Planning  &  Analysis  Cell  and  the  State 
Governments.

The Directors also acknowledge the contribution made by the large number of 
dealers and distributors spread all over the country towards improving  the 
service  to our valued customers as well as for the overall performance  of 
the Company.

The  employees  of  the  Company have  continued  to  display  their  total 
commitment  towards  the pursuit of excellence. Your  Directors  take  this 
opportunity  to  place  on  record  their  appreciation  for  the  valuable 
contribution made by the employees and look forward to their services  with 
zeal and dedication in the years ahead to enable the Company to scale  even 
greater heights.

Your  Directors  are  thankful  to the shareholders  for  their  faith  and 
continued support in the endeavors of the Company.

                              For and on behalf of the Board of Directors 

                              S. ROY CHOUDHURY
29th May 2012                 Chairman & Managing Director

Annexure-I

Particulars  with respect to Conservation of Energy, Technology  Absorption 
and  Foreign  Exchange  Earning/Outgo  as  per  Companies  (Disclosure   of 
Particulars in the Report of Board of Directors) Rules, 1988.

ENERGY CONSERVATION & TECHNOLOGY ABSORPTION

I) CONSERVATION OF ENERGY

a)  Energy  Conservation  measures undertaken  and  Additional  Investment/ 
proposals for implementation on conservation of energy:

The  energy conservation measures undertaken by both the refineries  during 
the  year 2011-12 have resulted in a savings of 23,780 SRFT/year  (standard 
refinery  fuel  tonnage  per year). This translates to savings  of  Rs.  86 
crores/year approximately.

Savings  envisaged from proposals planned by both refineries for  the  year 
2012-13  would result in a savings of 74,277 SRFT/year  (standard  refinery 
fuel  tonnage  per year).This translates to savings of Rs.  211  crore/year 
approximately.

The  major  energy conservation measures undertaken during 2011-12  are  as 
follows: 

Mumbai Refinery:

1. In an effort to recover hydrocarbon losses, refinery has commissioned  a 
flare  gas recovery system at Lube Refinery, thereby reducing  the  overall 
flare  losses. The facility was commissioned during the second  quarter  of 
2011-12.

2.  Refinery  has installed Magnetic Resonators at Gas  Turbine  Generators 
(GTG III & GTG V) for increasing the combustion efficiency and reducing the 
carbon  emissions.  This has resulted in reduction of fuel  consumption  by 
0.8%.

3.   The  refinery  has  contributed  significantly  to  Natural   Resource 
conservation  by  recycling of effluent water. Water conserved  during  the 
year 2011-12 was 4,22,282 KL. Cumulative water recycled since the inception 
of the "Effluent Treatment Plant" is 7,61,300 KL thereby saving  equivalent 
amount of Natural Water resource for the community.

4.  Naphtha Splitter Unit (NSU) furnace efficiency improvement was  carried 
out  resulting in lower fuel consumption. Furthermore, maximization of  hot 
feed from Crude Distillation Unit (CDU I/II) Naphtha stabilizer to NSU  has 
resulted in substantial amount of energy savings.

Visakh Refinery:

1.  Make  up water heater was commissioned in one of the  HRSGs  (HRSG  6), 
resulting in considerable amount of energy savings.

2.  Antifoulant  injection was carried out at SR side of  crude/SR  preheat 
exchangers  in  CDU-III, thus enabling reduced fouling  of  exchangers  and 
hence resulting in energy savings.

3. Periodic steam leak survey and steam trap survey was carried out for the 
entire Refinery by engaging external surveyor using ultrasonic detector and 
visual  methods  as a part of regular steam leak monitoring.  Arresting  of 
steam leaks was carried out.

4.  Operation  of  new boiler with higher efficiency in  lieu  old  boiler, 
resulted in better steam to fuel ratio and fuel saving.

5.  Reduction in specific fuel consumption achieved in CPP by operation  of 
GTGs at higher loads.

6.  Online chemical cleaning of CDU-I, CDU-II, CDU-III & DHDS furnaces  was 
carried  out,  which resulted in reduced stack temperatures  and  increased 
heater efficiencies.

Oil  and Gas Conservation Fortnight was observed both at Mumbai and  Visakh 
refineries  from January 15 to January 31, 2012 to create  awareness  among 
the public for conservation of petroleum products.

b) Impact of above on energy conservation measures and consequent impact on 
cost of production of goods: 

Mumbai Refinery:

The  above energy conservation measures undertaken during the year  2011-12 
have  resulted  in a savings of 10,732 SRFT/year  (standard  refinery  fuel 
tonnage  per  year).This  translates  to  savings  of   Rs.  38  crore/Year 
approximately.

Savings envisaged from proposals planned for FY 2012-13 viz. Routing of Hot 
condensate  directly  from NHT-CCR & FRE units to  boiler  house,  Magnetic 
Resonator  installation  in all GTG`s, maintenance of GTG IV &  V  with  an 
expected increase in efficiency by 0.5% & HRSG IV& V efficiency increase by 
5%, Stack damper to be made operational at NHT/CCR heaters, Routing of  hot 
HVN to NHT CCR, Online Chemical Cleaning of Mix Fired furnaces, routing  of 
VDU off gases from FR / LR VDU to APS furnace, FR/LOUP flare gas routing to 
recovery  systems  etc.  is around 59,236  SRFT/year.  This  translates  to 
savings of Rs. 156 crore/year approximately.

Visakh Refinery :

The  above energy conservation measures undertaken during the year  2011-12 
have  resulted  in a savings of 13,048 SRFT/year  (standard  refinery  fuel 
tonnage  per  year). This translates in to savings of  Rs.  48  crores/year 
approximately.

Savings envisaged from proposals planned for FY 2012-13 viz. implementation 
of  air-fuel  controls  in  CDU`s, slop cut  steam  generator  in  CDU-III, 
Insulation  of FCCU-I/II MAB discharge line, routing of preheated DM  water 
from DHDS to IBH , online chemical cleaning of heaters etc. is around 15041 
SRFT/year.   This  translates  in  to  savings  of   Rs.   55   crores/year 
approximately.

c) Total energy consumption and energy consumption per unit of production: 

Please refer Form-A of the Annexure I to the Directors Report.

II) TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION

a)  Efforts  made towards technology absorption,  adaptation  &  innovation 
information is given in Form-B of the Annexure I to the Directors Report.

b) Imported Technology (Imported during last 5 years) is tabulated below.

Technology Imported                      A         B          C 

Mumbai Refinery:

Integrated effluent Treatment Plant     2008      Yes

Solvent Deasphalting (SDA)              2009      No    Project is under 
                                                        implementation

Diesel Hydro Treater (DHT)              2009      No    Project is under 
                                                        implementation

Isotherming Technology                  2011      No    Project is under 
                                                        implementation

Visakh Refinery:

Introduction of new catalyst in         2007      Yes  
FCCU-II (UOP) to improve LPG yield

Introduction  of new ZSM-5 additive     2007      Yes 
in FCC-I to improve Propylene yields 
and CRN octane

New type of nozzles in Wash Oil         2008      Yes 
Distributor in Vacuum column (CDU-I)

Refracto type Skin Thermocouples in     2008      Yes 
furnaces (CDU-I)

FCC-NHT/NIU OTS                         2008      No    Installation and 
                                                        commissioning 
                                                        planned shortly

Diesel Hydro Treater (DHT)              2008      No    Project is under 
                                                        implementation

Intelligent pigging of 36" crude line   2009      Yes

LOTIS inspection of Naphtha Steam 
Reformer tube                           2009      Yes

A = Year of Import 
B = Whether fully absorbed or not
C = If not absorbed, Reasons

III. FOREIGN EXCHANGE EARNING AND OUTGO

a) Activities relating to exports:

Various initiatives have been taken to increase exports and for development 
of  new Export markets for products and services. Efforts are on to  access 
international  markets and to tap export potential for free trade  products 
and lubricants.

b) Total Foreign Exchange used and earned:

Please refer Notes to Accounts - 46 E, F, G & H.

Annexure to DIRECTOR`S REPORT

Form A

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY 

MUMBAI REFINERY                                      2011-12       2010-11

(A) Power and Fuel Consumption

1 (a) Electricity Purchased

Units (Million KWH)                                   334.89        169.98

Total Amount  (Rs./Crores)                            208.20         98.69

Rate Per Unit (Excluding demand charges) (Rs./KWH)      5.87          5.36

Maximum Demand Charges (Rs./Crores)                    11.55          7.52

(b) Own Generation

Through Steam Turbine/Generator

Units (Million KWH)                                   320.65        307.67
Units per tonne of fuel                             2,789.00      2,762.97
Cost per unit  (Rs./KWH)                                2.34          1.31

2. Furnace oil/Liquid fuel (LSHS/HSD)

Quantity (Thousand tonnes)                            144.33        142.59
Total amount  (Rs./Crores)                            512.54        366.19
Average rate  (Rs./tonne)                             35,512        25,681

3. Other/Internal Generation:

i. Naphtha

Quantity (Thousand tonnes)                              0.05          0.07
Total amount  (Rs./Crores)                              0.22          0.23
Average rate  (Rs./tonne)                             45,738        34,788

ii. LPG

Quantity (Thousand tonnes)                             14.37          2.26
Total amount  (Rs./Crores)                             60.81          7.77
Average rate  (Rs./tonne)                             42,307        34,350

iii. Refinery Gas

Quantity (Thousand tonnes)                             85.70         82.70
Total amount  (Rs./Crores)                            304.35        212.39
Average rate  (Rs./tonne)                             35,512        25,681

iv. BH Gas

Quantity (Thousand tonnes)                              6.36          7.76
Total amount  (Rs./Crores)                              7.04          7.81
Average rate  (Rs./tonne)                             11,071        10,064

v. RLNG

Quantity (Thousand tonnes)                            192.90        170.31
Total amount  (Rs./Crores)                            542.10        355.76
Average rate  (Rs./tonne)                             28,102        20,889 

vi. Coke

Quantity (Thousand tonnes)                             67.35         32.19
Total amount  (Rs./Crores)                            239.19         82.66
Average rate  (Rs./tonne)                             35,512        25,681

(B) Consumption per Unit of Production

Electricity (KWH/Tonne of Crude)                       87.33         72.88
Liquid Fuel (Tonnes/Thousand Tonnes of Crude)          19.23         21.77
Gas (Tonnes/Thousand Tonnes of Crude)*                 39.88         40.13
Coke (Tonnes/Thousand Tonnes of Crude)                  8.97          4.91

* RLNG processing included

VISAKH REFINERY

                                                     2011-12       2010-11

(A) Power and Fuel Consumption

1.(a) Electricity purchased

Units (Million KWH)                                     8.79         12.32
Total amount  (Rs./Crores)                              6.53          7.84
Rate Per Unit (Excluding demand charges) (Rs./KWH)      3.87          3.78
Electricity Exported (Million KWH)                      0.02          0.13
Maximum Demand charges  (Rs./crores)                    3.13          3.17

(b) Own Generation (CPP)

Units (Million KWH)                                   528.52        437.09
Units Per Tonne of Fuel                             2,756.02      2,559.03
Cost Per Unit  (Rs./KWH)                                8.55          7.00

2. Furnace Oil/LSHS

Quantity (Thousand Tonnes)                             82.64        119.11
Total amount  (Rs./Crores)                            293.49        309.71
Average Rate per unit (Rs./Tonne)                     35,513        26,003

3. Other/Internal Generation

i. CPP Fuel (HSD/Naphtha)

Quantity (Thousand Tonnes)                            191.77        170.80
Total amount  (Rs./Crores)                            880.07        605.79
Average Rate per unit  (Rs./Tonne)                    45,892        35,467

ii. Naphtha (DHDS)

Quantity (Thousand Tonnes)                             33.43         37.55
Total amount  (Rs./Crores)                            153.11        131.65
Average Rate per unit  (Rs./Tonne)                    45,807        35,064

iii. Refinery Gas

Quantity (Thousand Tonnes)                            199.40        152.29
Total amount  (Rs./Crores)                            713.14        402.47
Average Rate per unit (Rs./Tonne)                     35,765        26,427

iv. Coke

Quantity (Thousand Tonnes)                             73.67         58.03
Total amount  (Rs./Crores)                            265.10        154.01
Average Rate per unit  (Rs./Tonne)                    35,984        26,541

(B) Consumption per unit of production:

Electricity KWH/Tonne of Crude                         61.88         54.79
Liquid fuel (Tonnes/Thousand Tonnes of Crude)          35.46         39.94
Gas (Tonnes/Thousand Tonnes of Crude)                  22.97         18.57
Coke Fuel (Tonnes/Thousand Tonnes of Crude)             8.49          7.08

Annexure to Directors` Report

FORM - B

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ADAPTATION & INNOVATION

1. RESEARCH & DEVELOPMENT (R&D)

Research  & Development is envisaged to provide support to  the  Refineries 
and  Marketing  divisions for operational improvement,  absorption  of  new 
technologies,  developing innovative & path breaking technologies,  license 
technologies and support external organizations and develop over long  term 
into a knowledge hub and profit centre.

To  realize  this objective HPCL is putting up a Corporate  R&D  Centre  at 
Bengaluru with an enhanced initial investment of  Rs.312 Crores. The centre 
will  be  involved  in carrying out Research &  Development  activities  in 
refinery technologies, nano-technology applications and also bio-fuels.

A) Green R&D Centre, Bengaluru:

The project is being executed in a phased manner with Phase-I investment of  
Rs.  312 Crores. The R&D Centre will be conforming to  eco-friendly  design 
norms  and will consist of Nine Research Labs covering Crude  Evaluation  & 
Fuels Research, Hydro processing, Catalytic Cracking (FCC/RFCC), Catalysis, 
Process Modelling & Simulation, Bio Processes, Standard Testing, Analytical 
Lab and Centre for Excellence in Nano-Technology under Phase-I.

Senior R&D Scientists with experience in relevant areas at Indian & Foreign 
Research  Institutes  have  been recruited to head  various  Labs.  Project 
Office has been set up in Bengaluru and a full-fledged group comprising  of 
Scientists,  Project,  Purchase,  Finance and Human  Resource  groups  have 
started  functioning  out  of  this Office. Architect  and  PMC  have  been 
appointed  and Project activities are in progress. Master Plan, Lab  Design 
and  Equipment Layout Plans have been finalized. Statutory clearances  have 
been  sought from various statutory authorities. Expected commissioning  of 
R&D Centre is 24 months from the date of statutory clearances.

B) Collaborative R&D Projects with Institutions:

In  addition to setting up of R&D Centre at Bengaluru, HPCL has  undertaken 
collaborative  R&D  projects with premier research institutes such  as  IIT 
Kanpur, IIT Madras, IISc Bangalore, IIT Delhi, TERI New Delhi, NIT Calicut, 
CIMFR  Dhanbad, GITAM University Visakhapatnam, Korea Institute for  Energy 
Research-Korea in the areas of process intensification, nanocatalysts,  CO2 
capture  & utilization, hydrogen production & storage,  resid  upgradation, 
improved lubricants and adsorptive separations. Following are the projects:

a) Project on `Hydrogen Production from Natural Gas (Methane) by  Catalytic 
Decomposition`  with  IIT Delhi & Centre for High Technology (CHT)  with  a 
project  cost  of  Rs. 51 lakhs. This project was initiated in  May,  2010. 
Expected completion of project is in April, 2013.

b) Project on `Chemical Mitigation of Carbon to Fuels & Chemicals` with IIT 
Madras with a project cost of  Rs. 34 lakhs. This project initiated in May, 
2010. Expected completion of project is in June, 2012.

c)  Project  on  `Nano-particle  based  Lubricants`  including  fundamental 
research on physics & mechanics of Nanolubricants with Indian Institute  of 
Science  (IISc),  Bengaluru  with a project cost of  Rs.  421  lakhs.  This 
project was initiated in December, 2007. Expected completion of project  is 
in December, 2012.

d)  Project  on  `An Integrated approach for  Hydrogen  production  through 
Combined  Dark & Photo Fermentation process` with TERI, New Delhi &  Centre 
for  High  Technology  (CHT) with a project cost of  Rs.  142  lakhs.  This 
project  initiated  in March, 2011. Expected completion of  project  is  in 
March, 2013.

e) Project on `Design and Construction of Metal-Organic Framework Materials 
with  Tunable  Physical  Properties for Storage  of  Hydrogen`  with  GITAM 
University, Visakhapatnam & Centre for High Technology (CHT) with a project 
cost of  Rs. 78 lakhs. This project was initiated in March, 2011.  Expected 
completion of project is in March, 2013.

f)  Project  on `Performance Evaluation of  Lubricants  with  Nano-particle 
Dispersion in Automotive Engines` with GITAM University, Visakhapatnam with 
a project cost of  Rs. 37 lakhs. This project was initiated in July,  2011. 
Expected completion of project is in June, 2013.

g)  Project  on `Heat Transfer Studies of Automotive  Coolants  with  Nano-
particles`  with  GITAM University, Visakhapatnam with a  project  cost  of 
Rs.36 lakhs. This project was initiated in July, 2011. Expected  completion 
of project is in June, 2013.

h) Joint Research Program with IIT Kanpur & Chevron, USA for the  following 
projects  with  HPCL`s  cost  share of  Rs. 39  lakhs.  Following  are  the 
projects  which  have  been  initiated  in  February,  2011  and   expected 
completion is in March, 2013:

> Nanocatalysts for Hydro-desulfurization

> Alkylation of iso-butane with butene for the production of gasoline

> Performance Analysis of Fixed Bed Reactor Internals using CFD

> CO2 Capture Using Zeolites Functionalized with Ionic Liquids

2. COMMISSIONING, UPGRADATION & OTHER INITIATIVES 

Mumbai Refinery:

1)  In order to produce superior quality of Lube Oil Base  Stock  (Group-II 
and III against the existing Group - I), the refinery has commissioned Lube 
Oil  Upgradation  Project (LOUP) facilities during the  second  quarter  of 
2011.  Refinery  has been able to significantly enhance the Lube  Oil  Base 
Stock production.

2)  Stabilization  and  sustained operation of NFCCU during  the  year  has 
resulted in the higher production of value added products viz. LPG and  MS. 
This has attributed to better margins.

3)  Installation of Sulphur guard bed reactor in ISOM unit has enabled  the 
unit to process high Sulphur feeds. This in turn will help in maximizing MS 
production  thereby  reducing export of Naphtha, contributing  to  refinery 
margins.

4)  Stabilizer  condenser leaky tubes were replaced  with  SDSS  metallurgy 
tubes  during  CCR shutdown, which resulted in achieving  higher  reformate 
yield by 2.05% wt.

5)  Advanced  Process  Control (APC) was commissioned in  NFCC  after  step 
testing & model building in GCU for better control.

6) GSR additive was used in old FCCU which has reduced LCN sulphur level by 
30%,  thereby  enabling  more  LCN  back blending  in  MS  pool.  This  has 
attributed to increase in Euro III MS production.

7) Commissioning of Propane recovery facility from DWO & wax circuit system 
has resulted in reduction of Propane intake to refinery substantially.

Visakh Refinery:

1) DHDS unit was operated successfully for the first time at a feed rate of 
210 m3/ hr with CCR off gas alone (having H2 purity of 92 vol %) as make-up 
gas.

2)  Reduced  Crude  Oil (RCO) of RIL crude was routed  to  FCCUs  directly, 
bypassing  Vacuum  section.  This has resulted in  reduction  of  operating 
expenditure.

3)  Achieved  sustained operation of DHDS unit by the use of  a  dispersant 
chemical  from  January, 2012 onwards to overcome the  high  pressure  drop 
across  the reactor. This is the first of its kind in India and  a  thruput 
increase from 230 to 310 m3/ hr has been achieved.

4) A temporary provision of routing slurry as flushing oil (without filter) 
to  the  casing  wear  rings of slurry pumps in  FCCU-II  was  given  which 
resulted  in reduction of VGO down gradation to fuel oil by 17 m3/  hr  and 
increase  in  overall unit conversion by 4 wt% due to reduction  in  slurry 
yield.

5) In an effort to increase the crude basket, 42 new crudes were  evaluated 
during the year. Out of which, 12 crudes were included in the crude  basket 
for neat processing and 19 crudes were considered as opportunity crudes.

6) DHDS Amine recovery system has been improved by replacing DEA with  MDEA 
solvent. This has resulted in capacity enhancement and utilities reduction.

7)   Integrated  Refinery  Business  Improvement  Programme   (IRBIP)   was 
undertaken  with  M/s  Shell  for  improving  refinery  profitability.   23 
recommendations  were  given of which 17 have been  implemented.  This  has 
resulted in improved product yield and reduced operating expenditures.  The 
remaining recommendations would be taken up during this year.

Major Ongoing Projects:

1. Diesel Hydro-Treating Project (DHT) at Mumbai and Visakh Refineries

HPCL  is  setting  up  Diesel Hydrotreater Units of  2.2  MMTPA  each  with 
associated  facilities at both Mumbai and Visakh Refinery to  meet  Euro-IV 
specifications  for  diesel as per the Auto Fuel Policy. Expected  time  of 
mechanical completion is by second quarter of 2012-13.

2. Flue Gas Desulphurization (FGD) Project at Mumbai and Visakh Refineries

As  a  part  of their commitment to protection  of  environment,  both  the 
refineries  are implementing Flue Gas Desulphurization (FGD)  projects  for 
removal of sulphur from the flue gases of the Fluidized Catalytic  Cracking 
Units.  FGD facility at Mumbai refinery was commissioned in March 2011  and 
at Visakh it is likely to be commissioned by September, 2012.

Annexure-II

Control  of  Pollution  &  other  Environment  initiatives  undertaken   by 
Refineries during 2011-12: 

Mumbai Refinery

A. Hazardous Waste Management

The  indigenously developed `Oil-zapper` technology of The Energy  Research 
Institute  (TERI)  has been deployed to treat oil sludge generated  in  the 
refinery. Oil zapper is essentially a cocktail of five different  bacterial 
strains  that feed on hydrocarbon compounds and convert them into  harmless 
CO2  and  water.  A  total  of 3,000 m3 of low  oily  silt  is  being  bio-
remediated.

All  spent  catalysts  and discarded chemicals were  disposed  off  to  the 
registered  "Common Hazardous Wastes Treatment Storage  Disposal  Facility" 
(CHWTSDF) operated by Mumbai Waste Management Limited.

B. Air Emission Control and Monitoring

Continuous  Ambient  Air Stations are being upgraded  with  new  continuous 
monitoring facilities for additional parameters viz, Ozone, PM 2.5, Benzene 
&  Ammonia. Apart from online monitoring, manual Monitoring of ambient  air 
as per NAAQS is being carried out by external MoEF approved laboratory.

All  quality parameters of the ambient air were conforming to the  National 
Ambient Air Quality Standards (NAAQS) during the year.

C. Effluent Water Treatment and Control

State  of  the art New Integrated Effluent Treatment  Plant  consisting  of 
primary,  secondary and tertiary treatment sections has been  in  operation 
consistently  since  2010  with  a  design capacity  of  300  m3/  hr.  The 
technology conforms to existing MINAS (environment standards) and can  also 
cater  to further stringent standards in the future. The  purified  treated 
water is being recycled for refinery consumption and has reduced intake  of 
fresh water from the Municipal Corporation.

D. Other Initiatives

>  Rain  Water  Harvesting  - Mumbai  Refinery  has  constructed  necessary 
infrastructure and has harvested about 60,000 KL of rainwater during  2011-
12  and planned to harvest 5,30,000 KL of rain water in the  year  2012-13. 
Further augmentation of rain water management facility is in progress as  a 
part  of  Natural Water Resource Conservation and  Sustainable  Development 
Project, including reduction in refinery carbon foot print.

> Ground Water Quality Monitoring - Bore wells were dug in the refinery for 
monitoring  ground  water quality. In order to further improve  quality  of 
underground  water,  roof  top rain water harvesting  has  been  undertaken 
across the geographical location of refinery.

>  Leak Detection & Repair (LDAR) - Programme was carried out  to  identify 
and control fugitive emissions from equipment leaks.

Visakh Refinery

A. Hazardous Waste Management

All  spent  catalysts  and discarded chemicals were  disposed  off  to  the 
authorized Central Pollution Control Board (CPCB) recyclers.

B. Air Emission Control and Monitoring

Data acquisition system was installed by M/s Thermo fisher at all the three 
CAAQMS.  Online connectivity to APPCB server was established.  Connectivity 
to CPCB server is in progress.

C. Effluent Water Treatment and Control

Bio-system  repair  jobs were completed and commissioned  at  the  Effluent 
Treatment  Plant  (ETP-I). Treatment of ATP -ETP water in  ETP-IV  started. 
This  has  significantly  improved compliance  to  the  MINAS  (environment 
standards).

D. Other Initiatives

> ISO 14001 - Conducted internal and external audits and Management  Review 
meetings for ensuring compliance to the ISO 14001 standards.

> HAZOP Study (Phase-III) - Completed for Offsite and Power & Utilities.

>  Leak Detection & Repair (LDAR) - Programme was carried out  to  identify 
and controlling fugitive emissions from equipment leaks.

>  SWRO plant was revived and RO skid old membranes were replaced with  new 
ones. Treated water is being used to augment fresh water supply.

>  World  Environment  Day  (June  5)  was  celebrated  and  saplings  were 
distributed on the occasion.

> Process Safety Management - A study on `Quantitative Risk Assessment`  is 
in  progress  by M/s DNV for identifying and addressing  potential  process 
risks.

>  Green Visakh Program - As a part of the initiative 2,000  saplings  were 
planted in Autonagar locality. 

Health, Safety and Environment Department:

To  conform  to  the  DPE guidelines  on  Sustainability  Development,  HSE 
Department has undertaken the following initiatives:

> Sustainable Development Policy for the Corporation prepared and  approved 
by the Board. Formation of Board level SD monitoring committee.

>  Identification and development of SD projects proposed by various  SBUs, 
approved by the Board.

>  Conducted  capacity  building workshops 15  locations  and  trained  500 
employees.

Achievements/Awards/Recognition:

>  Mumbai  refinery  received safety award  from  National  Safety  Council 
Maharashtra chapter for longest accident free period for the year 2010.

>  Visakh refinery was conferred with TOLIC award(Rajbhasha  Puraskar)  for 
the year 2011-12.

>  Visakh  refinery  presented  a paper on  `Online  Chemical  Cleaning  of 
Furnaces`  and  a poster presentation on `Excess oil  ingress  project`  at 
World Petroleum Congress at Doha during December, 2011.

Management Discussion & Analysis Report: 2011-12

DEVELOPMENTS IN THE ECONOMY AND THE OIL SECTOR

The  Indian economy slowed down perceptibly in 2011-12. The GDP growth  was 
estimated to be 6.5% during 2011-12 compared to 8.4% in 2010-11. The growth 
rate  was  below  the average annual growth of 7.6%  during  the  preceding 
decade. Growth in agriculture and industry declined. Agriculture, which had 
grown at 7% in 2010-11, is estimated to have grown by 2.8% during  2011-12. 
Industry growth dipped to 3.4% in 2011-12 from 7.2% in 2010-11. The  growth 
rate for services declined to 8.9% in 2011-12 compared to 9.3% in  2010-11. 
The slowdown is a consequence of, among others, a monetary policy  followed 
to  combat inflation, supply constraints and a troubled  external  economic 
environment.

Inflation  remained  around 10% for major part of the  financial  year.  It 
started  declining  around  Dec`11 with fall  in  primary  food  inflation. 
Manufactured products inflation also declined with slowdown in the economy. 
Fuel and power group inflation remained high despite suppression of  prices 
of  sensitive petroleum products. Global crude prices remained above  US  $ 
100  per barrel throughout the year, fluctuating in $100/bbl. to  $125/bbl. 
band.  Despite subdued global economy and oil demand, prices remained  high 
due to turbulence in the Middle East- loss of Libyan supplies, Iran nuclear 
issue, and unrest in Syria, etc.

High oil prices contributed to widening of the current account deficit. Oil 
imports  by India increased by about 46% in 2011-12 compared to  about  22% 
increase  in the previous fiscal. Non-oil imports increased by  about  27%. 
The total imports increased by 32.4% in 2011-12 compared to 28.2% in  2010-
11.  Exports growth declined to 21.3% in 2011-12 from 40.5% in 2010-11  due 
to  Eurozone crisis and worsening global economic outlook. Current  account 
deficit widened to about 4.5% of GDP in Q4 of 2011-12 taking the full  year 
ratio to 4.2% of GDP resulting in a substantial drawdown of reserves.

Despite  the slowdown, the consumption of petroleum products  increased  by 
4.9% in 2011-12 compared to 2.6% in 2010-11. Petroleum products consumption 
in  2011-12 was about 151 million tons. Consumption of all products  except 
SKO,  LDO, FO and LSHS increased. HSD grew at a whopping 8%, almost  double 
the  annual  average growth rate of 4.7% during the last  decade.  Although 
consumption of FO and LSHS has been declining in the last couple of  years, 
drop  during  the  year  was quite large at 17%.  Growth  rate  for  petrol 
consumption  decreased to 5.7% in 2011-12 compared to 11% in  2010-11.  LPG 
and   Naphtha  consumption  increased  by  7.5%  and   5.6%   respectively. 
Consumption of ATF increased by 9% while there was marginal growth of about 
2% in Bitumen consumption.

Economic  environment is still subdued and downside risks remain as  issues 
plaguing  the  domestic and international economy have proved to  be  quite 
intractable.

World Oil

As  per  the BP Statistical review of world energy  Jun`12,  the  estimated 
global  consumption has increased to 88.034 Million Barrels Per Day  (MBPD) 
representing an increase 0.595 MBPD i.e., a growth of 0.7% over historical. 
Consumption  in Asia-Pacific grew by 2.7%. India contributed to 4%  of  the 
world`s  oil consumption. The world oil production increased by 1.095  MBPD 
to  83.576 MBPD representing a growth of 1.3% over historical. There was  a 
decline  in production from the African region, by 1.3 MBPD, out  of  which 
the decline in Libya alone was 1.179 MBPD. The decline in Libya was off-set 
by  increase in production from other OPEC members of Kuwait, Iraq,  Qatar, 
Saudi Arabia and United Arab Emirates in the Middle-east. Oil production in 
Iran  marginally declined by 0.6% to 4.321 MBPD. While, OPEC accounted  for 
1.077  MBPD increase i.e., growth of 3.1%, the total increase in  countries 
from  Middle East was 2.376 MBPD representing a growth of 9.3%.  Production 
in  Europe  decreased  by 1.8%, while it increased by  about  2.4%  in  the 
American continents.

The  proved  oil  reserves were 1652.6 Billion  barrels  with  reserves  to 
production ratio of 54.2 years. 48.1% of the proved reserves continue to be 
in Middle East.

PERFORMANCE PROFILE 

Gross Sales:

The Gross Sales of the Corporation (inclusive of excise duty) for the  year 
ended March 31st, 2012 was  Rs. 1,88,131 Crore as compared to  Rs. 1,42,396 
Crore in the previous year. The total sale of products (including  exports) 
for 2011-12 was 29.48 MMT as against 27.03 MMT during 2010-11.

Profit Before Tax

The Corporation has earned a Profit before Tax of Rs. 1,219 Crore in  2011-
12 as compared to  Rs. 2,338 Crore in 2010-11. 

Provision for Taxation

An amount of  Rs. 308 Crore has been provided towards income tax for  2011-
12  considering the applicable income tax rates as against  Rs.  799  Crore 
provided during 2010-11.

Profit after Tax

The Corporation has earned a Profit after Tax of  Rs. 911 Crore during  the 
current  financial  year as compared to  Rs. 1,539 Crore  in  2010-11.  The 
lower  PAT  is mainly due to higher interest cost which increased  to   Rs. 
2,139  Crore from  Rs. 892 Crore in 2010-11. The higher interest  cost  was 
due  to  delayed  compensation for increased under-recoveries  on  sale  of 
sensitive petroleum products.

Depreciation and Amortisation

Depreciation for the year 2011-12 was  Rs. 1,713 Crore as against  Rs.1,407 
Crore for the year 2010-11. 

Borrowings

The borrowings of the Corporation were  Rs. 29,831 Crore as on March  31st, 
2012  as compared to  Rs. 25,021 Crore as on March 31st,  2011.  Borrowings 
during  the year were mainly through short term foreign currency loans  and 
commercial paper. External Commercial Borrowings (ECB) of  Rs. 2,297  Crore 
were taken in Oct/Nov`11 for ongoing projects and OIDB loans worth  Rs. 500 
Crore  were availed for DHT projects at the refineries. The long term  debt 
to equity ratio stands at 0.66: 1 as on March 31st, 2012 as against 0.54: 1 
as on March 31st, 2011.

Capital Assets

Net  Fixed Assets (including Capital Work in Progress) increased from   Rs. 
22,341 Crore as on March 31st, 2011 to  Rs. 25,294 Crore as on March  31st, 
2012.

Investments

Investments  as on March 31st, 2012 were  Rs. 10,371 Crore as  compared  to  
Rs. 11,335 Crore as on March 31st, 2011. Gross Refining Margins (GRMs)

Gross  Refining Margin of Mumbai Refinery averaged at US $2.82/bbl.  during 
2011-12 as against US $ 4.65/bbl. for the previous year.

Gross  Refining Margin of Visakh Refinery averaged at US $2.95/bbl.  during 
2011-12 as against US $ 5.81/bbl. for the previous year.

Earnings Per Share

Earnings per share are  Rs. 26.92 for 2011-12 as compared to  Rs. 45.45  in 
the previous year. 

Dividend

Dividend of  Rs. 8.50 per share has been proposed for the year 2011-12. The 
dividend would result in total payout of  Rs. 335 Crore, including Dividend 
Distribution Tax.

The  2010-11 performance of the Corporation has qualified  for  `Excellent` 
rating  in terms of the Memorandum of Understanding (MOU) signed  with  the 
Government of India.

REFINERIES

The benchmark Brent prices started the year on a high at $ 123.5/bbl.  with 
oil  markets anticipating disruption of supply due to the Arab  spring  and 
sanctions  on  Iran.  The  average price of Indian  crude  basket  was  USD 
118.61/bbl. during Apr`11. The debt crisis in Europe and accompanying fears 
of demand destruction led to steady decline in benchmark prices from Jul`11 
till  end  of  2011. However, the rupee`s steep  depreciation  from  Aug`11 
neutralised the impact of decline in price and added to crude import  cost. 
Events in Dec`11 saw Iran threatening to block the Strait of Hormuz and the 
US and European Union (EU) applying fresh sanctions on the Iranian  Central 
Bank  and  the financial sector. The oil market responded  by  hiking  risk 
premium,  leading to a sharp spike in Brent crude prices to $ 125.3/bbl  in 
Mar`12 surpassing the high prices witnessed in Apr`11.

The  increasing  sourcing of Russia`s East Siberian pacific oil  (ESPO)  by 
Asian  refineries, impending reversal of the Sea Way pipeline in  the  USA, 
trend  of shut down of lower complex refineries in Europe and  America  and 
the  emergence of shale gas as a serious alternate source of  energy,  were 
other  significant  events affecting world oil markets and  are  likely  to 
change the oil market dynamics particularly in Asia.

The year 2011-12 was a turbulent year for refinery margins as the crude and 
product  prices  have not moved in tandem. The first half of the  year  was 
characterised by declining crude prices and strong margins for gasoline and 
gasoil.  The  strong  summer seasonal demand was  a  major  contributor  to 
healthy  refining  margins in the first half of the  year.  Product  cracks 
declined  across the board in the second half of the year,  excluding  fuel 
oil  which was supported by the change in sulphur regulations and  shutdown 
of  less  complex refineries. The rise in crude prices,  declining  product 
cracks  and increased fuel and loss resulted in lower refinery  margins  in 
the 4th quarter of 2011-12.

The benchmark Brent crude oil for the year 2011-12 averaged $ 114.65  /bbl. 
higher  by $ 28.00 /bbl. compared to average of $ 86.65 /bbl. for  2010-11. 
The  Indian crude oil basket for the year 2011-12 averaged $ 111.87 /  bbl. 
higher by $ 26.80 / bbl. compared to average of $ 85.05 / bbl. for 2010-11.

During  the  year 2011-12, HPCL uplifted 3.9 MMT of  indigenous  crude  oil 
(Mumbai High, Ravva and KG-D6). The balance requirement of 12.5 MMT was met 
through  term  imports  mainly  from the Middle East.  The  crisis  due  to 
sanctions  on Iran affected the security of crude supply to HPCL which  was 
managed by increased quantities from other term suppliers.

The  increase  in the Brent Dubai spread in 2011 owing to  loss  of  Libyan 
volumes  resulted  in increased sour crude processing. The Brent  to  Dubai 
differential  was high, i.e. approximately $ 6 /bbl. in the first  half  of 
2011-12.  To  take advantage of high Brent-Dubai  differential,  additional 
high  Sulphur crude was processed at Visakh refinery. 66% of processing  at 
Visakh  refinery was high sulphur crude during Apr-Sep`11. The  Brent-Dubai 
differential narrowed to about $ 2/bbl. during the second half of the  year 
and the processing of high sulphur crude was cut down at Visakh refinery to 
about 62% during the period Oct`11 to Mar`12.

HPCL  expanded  the crude oil basket to 104 crudes by adding 6  new  crudes 
during  the year. Umm Shaif crude from Abu Dhabi was processed by HPCL  for 
the first time.

The  commissioning  of the 9 MMTPA HPCL-Mittal Energy Limited  Guru  Gobind 
Singh Refinery at Bathinda during 2011-12 will help in meeting the  product 
requirements in the north and help in increasing product sufficiency.

During  the  year  2011-12, HPCL`s refineries at  Mumbai  and  Visakh  have 
maximized  crude  processing and achieved combined refining  throughput  of 
16.19  MMT  with a capacity utilization of 109%. The  throughput  has  been 
increased  by  1.4  MMT  compared to previous  year.  Mumbai  Refinery  has 
achieved crude throughput of 7.51 MMT as against installed capacity of 6.50 
MMT. This was the highest ever crude throughput recorded.

HPCL refineries have maximized the MS production of Euro III /Euro IV  fuel 
specifications through newly commissioned clean fuels projects.

The  capacity addition due to new Fluidized Catalytic Cracking Unit  (FCCU-
II)  and  sustained operation of FCCU-II and Lube  Oil  Up-gradation  Plant 
(LOUP)  at  Mumbai  refinery have made the  secondary  processing  capacity 
commensurate  with  the  crude  distillation  capacity  and  have  enhanced 
production of value added products of LPG and MS. During 2011-12, at Mumbai 
Refinery,  LPG production was increased by 194 TMT to 444 TMT  representing 
an  increase  of 78% and MS production increased by 246 TMT  to  1,182  TMT 

representing  an increase of 26%. The FCCU-II operation has also helped  in 
upgrading  the bottom streams like extract, VBO, DAO & old FCC resid  which 
helped in increasing margins at Mumbai refinery.

HPCL has achieved highest ever Lube Oil Base Stock (LOBS) production of 382 
TMT  during 2011-12 representing an increase of 82 TMT over  previous  year 
and  growth  of 27%. The increased production is due  to  the  full-fledged 
commissioning  of  Lube Oil Up-gradation Project (LOUP)  facilities  during 
Jun`11. A total of 43.3 TMT of Group II a were produced during the year  to 
meet  the  growing demand for superior quality lube oil base  stock  market 
both in India and abroad.

HPCL reached a significant milestone at Visakh Refinery with the dedication 
of the Clean Fuel project to the nation by Hon`ble Minister of Petroleum  & 
Natural  Gas  on  February  20th, 2012. At  Visakh  refinery  highest  ever 
production  of MS, Propylene and Bitumen were achieved. During 2011-12,  at 
Visakh  Refinery,  LPG production was increased by 80 TMT to  361  TMT,  an 
increase  of  28%;  MS production increased by 260 TMT  to  1,357  TMT,  an 
increase of 24%; Propylene production was increased by 11 TMT to 53 TMT, an 
increase  of  26%  and Bitumen production increased by 72 TMT  to  368  TMT 
representing an increase of 24%.

Due to the decreasing demand of Naphtha and Fuel oil, Naphtha was converted 
to  MS  to  maximum  possible extent and the  balance  surplus  Naptha  was 
exported.  To  cater  to the bunkering fuel market,  HPCL  refineries  have 
started producing fuel oil with less than 3.5% Sulphur content. Naphtha and 
fuel oil/LSHS exports in the year were 738 and 843 TMT respectively.  HPCL, 
which  is classified as a Premier Trading House by Directorate  General  of 
Foreign Trade, exported nearly  Rs. 7,426 Crore of oil products.

Both  Mumbai and Visakh refineries have switched over to the production  of 
Viscosity  grade bitumen products viz. VG-10 and VG-30 which  are  superior 
quality   bitumen  products  compared  to  the  penetration  grades   being 
manufactured  earlier. HPCL refineries achieved highest bitumen  production 
of 945 TMT during the year.

To  meet the requirements of the BS-IV quality diesel as laid down  in  the 
Auto  Fuel Policy, both Mumbai and Visakh refineries are setting up  Diesel 
Hydro  Treater  (DHT) Units of 2.2 MMTPA each with  associated  facilities. 
Expected time of mechanical completion of the projects is in 2012-13.

With  the  rise of fuel oil prices, HPCL refineries have switched  over  to 
natural gas for meeting energy needs viz. fuel firing and power generation. 
Owing to the cost differential between fuel oils and natural gas, there was 
a substantial reduction in operating costs which in turn resulted in better 
refinery  margins.  While  Mumbai  refinery uses  natural  gas  for  firing 
majority of its furnaces and for power generation, steps are being taken to 
ensure the same at Visakh refinery.

During 2011-12, HPCL refineries recorded their lowest ever specific  energy 
consumption  (MBN figures) with 81.4 and 84.2 MBTU/Bbl/NRGF for Mumbai  and 
Visakh  refineries  respectively. The high level of energy  efficiency  was 
made  possible by consistent efforts in ensuring energy  optimization.  The 
year saw a rise in the NRG factor of Mumbai refinery from 4.8 to 5.8,  with 
the  commissioning and sustained operation of energy intensive units  along 
with better secondary processing.

The  major  energy conservation measures undertaken were  commissioning  of 
flare  gas  recovery  system at Lube Refinery in  Mumbai,  installation  of 
Magnetic  Resonators  at Gas Turbine Generators, antifoulant  injection  in 
preheat  exchangers,  furnace improvement programmes  and  online  chemical 
cleaning  of Heat Recovery Steam Generator (HRSG) preheat exchangers  which 
resulted  in a savings of 23,780 SRFT/year (standard refinery fuel  tonnage 
per year).

These  energy conservation measures have made it possible to restrict  fuel 
and  loss for Mumbai and Visakh refineries to 7.9% and  7.4%  respectively, 
despite commissioning of the new LOUP unit and sustained operation of FCCU-
II at Mumbai refinery.

Fresh  water  is  a  vital utility  in  refining  operations.  Accordingly, 
management  of fresh water consumption is significant as the resources  are 
constrained  due  to  limited supplies. The state  of  the  art  Integrated 
Effluent Treatment Plant (IETP) at Mumbai refinery has helped reduce intake 
of  fresh water from the Municipal Corporation by recycling  treated  water 
for   refinery  consumption  thus  contributing  significantly   to   water 
conservation.  The technologies conform to the existing MINAS  (environment 
standards) and can cater to further stringent standards in the future.

Water  conserved  during the year 2011-2012 was 422 TKL.  Cumulative  water 
recycled  since  the  inception  of the IETP was  761  TKL  thereby  saving 
equivalent  amount of natural water resource for the community.  Similarly, 
Reverse  Osmosis  (RO) plant for sea water treatment  was  commissioned  at 
Visakh refinery during the year, saving 451 TKL of water.

In  today`s  competitive scenario, it is imperative for the  refineries  to 
ensure that their technologies and processes are meeting the  international 
quality  standards. HPCL has volunteered for making both the refineries  at 
Mumbai  and Visakh to be part of the benchmarking study being organized  by 
CHT  in arrangement with M/s Solomon Associates, USA. The objective of  the 
study  is to provide a new frame of analysis for comparing the  performance 
of HPCL refineries with the other public/private players in the oil sector.

MARKETING

The total sale of products (including exports) by the Corporation for 2011-
12 was 29.48 MMT as against 27.03 MMT during 2010-11. During the year, HPCL 
increased market share in domestic sales to 18.40% achieving a market share 
gain of 0.50%. HPCL recorded a growth of 7.9% in Marketing Sales, over  the 
sales  volume  of the previous year. Amongst Public Sector  Oil  companies, 
HPCL increased its market share to 19.96% during 2011-12 compared to  19.65 
% recorded the previous year.

Retail

Retail constitutes 68% of HPCL`s overall sales and enjoys high brand recall 
among  consumers. HPCL enjoys significant market share of 25%  in  combined 
petrol  and  diesel  retail segments as of Mar`12.  During  the  year,  the 
innovative measures and initiatives for differentiated customer  experience 
by HPCL resulted in accelerated growth, excellent physical performance  and 
landmark achievements in the motor fuels segment.

Retail  sales  of Motor Spirit (MS) increased by 7.5% in the  year  2011-12 
compared to Industry (PSU) growth of 6%. High Speed Diesel (HSD) sales grew 
by 14.7% against Industry (PSU) growth of 11.7%. HPCL increased its  market 
share  in MS and HSD (combined) by 0.55% during the year 2011-12. HPCL  has 
commissioned  1,056 new outlets, including 329 outlets in the  rural  areas 
during 2011-12 taking the total number to 11,253 retail outlets.

* Customer - Centric Initiatives

To enhance Customer Experience, strong measures were undertaken to  improve 
and  standardize  the services offered at retail outlets.  During  2011-12, 
HPCL  implemented Standard Operating Practice (SOP) at about  2,750  retail 
outlets  pan-India,  which would be scaled up to all retail  outlets  going 
forward.  This initiative was taken to provide an enjoyable and  consistent 
customer  experience  across all retail outlets. Additionally,  to  enhance 
customer  confidence,  daily  Quality & Quantity (Q&Q)  checks  along  with 
regular Q&Q campaigns are being driven for our customers.

To enhance network productivity, HPCL has rolled-out a strategic  framework 
tool  at  about  2,000 retail outlets during  2011-12  for  taking  outlet-
specific  initiatives.  These initiatives include  outlet-specific  schemes 
based  on  local  tie-ups over and above the  national  and  regional-level 
campaigns, specifically catering to outlet-specific customers. To provide a 
fulfilling  and complete experience, additional facilities like ATMs,  tyre 
shops,  food  outlets, and convenience stores have been opened  up  at  the 
outlets.   Additionally,  higher  focus  was  ensured  on  Local   Business 
Solicitation and Key Account Management by leveraging our Loyalty  Program, 
Automation, Outlet facilities and Customer Service.

*  Retail SOP Refresher Training for Forecourt Salesmen

An extensive audio-visual cum cue card based training "Retail SOP Refresher 
Training"  was  launched aimed to create awareness of  safety,  health  and 
hygiene  aspects among the Forecourt Sales Men of the retail  outlet  (FSM) 
and   to  impart  in  them,  the  skills  of  salesmanship   and   customer 
relationship.  The  programme  imparts  knowledge  on  Standard   Operating 
Practices  and  engaging "Retail FSMs (Forecourt Sales Man)" as a  key  SOP 
Implementer  at  the Retail Outlets. The newly designed training  makes  an 
extensive  use  of cue cards coupled with class room training  and  faculty 
observation  for the individual development of FSM`s. During  2011-12,  232 
programs were conducted covering 328 dealers and 4,678 FSMs.

The major impacts of the programme were visible improvement in Housekeeping 
Practices,  imbibing  of  a better Queue  management  culture  &  increased 
awareness of safety standards.

Direct Sales - Industrial & Consumer

I&C  Business  line operated in a challenging and  competitive  environment 
during  the  year  2011-12 achieving a sale volume of  4.08  MMT  including 
exports. Domestic sale of 3.94 MMT is marginally lower by 3% over  previous 
year  sales.  The  focus during the year was  on  margin  improvement.  The 
Business  line  recorded a growth of above Industry in  MS,  HSD,  Bitumen, 
Hexane, Solvent and Propylene. However, sale of heavy fuels such as, FO and 
LSHS have got affected due to Customers switching over to cheaper alternate 
fuels including Natural gas especially in Power and Petrochemical Sectors.

During 2011-12, HSD Consumer sales surpassed 1 MMT mark for the first time, 
recording a growth of 14.7% compared to Industry growth of 2.6%. Similarly, 
the  Business  line also achieved highest ever sale of 931 TMT  in  Bitumen 
recording  a  growth of 16.9% as compared to Industry growth of  2.1%.  The 
year  also saw commissioning of 42 HSD Consumer pumps including 7  for  the 
Indian Army. To augment Bitumen supply infrastructure in the east coast,  a 
Bulk  Bitumen  storage  facility was  commissioned  at  Chennai  (Cassimode 
Terminal).

Strengthening  Infrastructure,  Bunker  Market,  long  term  tie-up`s,  Key 
Account  Management  etc.  have been identified as a few  focus  areas  for 
achieving  growth in the Direct sales business. The commissioning  of  HMEL 
(JV)  Refinery  at  Bathinda,  Punjab  would  further  strengthen   product 
availability in northern markets.

Direct Sales - Lubes

India  continues to be the third largest lube market in the world after  US 
and  China.  The  consumption  of  lubricants  in  the  country   including 
transformer  oils  and  white  oils  in the  year  2011-12  was  2,550  TMT 
approximately.  The  market comprises of 650 TMT of  Commercial  Automotive 
Oils, 350 TMT of Consumer Automotive Oils and 1,550 TMT of Industrial  Oils 
&  Fluids. The value added lube sales (excluding base oil sales)  for  HPCL 
has  increased to 267 TMT during 2011-12 from 243 TMT in the previous  year 
representing  a  significant growth of 10%. HPCL commissioned 27  new  Lube 
Distributors  and  CFAs in unrepresented markets during the  year,  further 
strengthening the marketing network.

The product range has been expanded by launching various new products of HP 
Milcy  Turbo  Tech in the Diesel engine oil category,  HP  Gabriel  Premium 
Front Fork Oil in Automotive specialties category and Aurelia TI &  Talusia 
Universal  in  the  Marine  oils  category.  In  order  to  meet   specific 
requirements  of  customers,  HPCL also customized  and  launched  distinct 
products  like Drawmet 14 S, Drawmet CABOD, Metasafe 1 AL, Cyndol  TC  800, 
Hycom Turbo Syn 100, Seetul RFL, Enklo HVLP 100 AH, Enklo 15AH and  Parthan 
RR 460 during the year.

During  2011-12,  HPCL entered into new tie ups with JCB  India  and  Force 
Motors  for  supply  of  lubes to their factory as  well  as  service  fill 
requirements.  The business relationship with other major OEMs  like  Bajaj 
Auto,  Bosch, TMTL (formerly Eicher), John Deere, TMTL  (formerly  Eicher), 
Gabriel,  etc.  was strengthened with portfolio expansion.  HPCL  continued 
innovation  in  packaging  with  introduction  of  Polypropylene  Copolymer 
Plastic (PPCP) square bucket for 20 and 10 Litre sizes, development of  new 
design & new closure PET bottle with special tamper evident features.

HPCL`s  range of Agricultural Spray Oils (for Apple, Tea, Grape, etc.)  was 
accorded  approval  by  certifying agency  "Institute  for  Market-ecology" 
(IMO), Switzerland for Organic farming.

The  new  Grease & Specialty plant at Silvassa with capacity of 5  TMT  per 
annum  for manufacturing greases, coolants and brake fluid has  been  fully 
stabilized during the year.

The  commissioning of 227 TMTPA Group II Base Oils facility at HPCL`s  Lube 
Refinery at Mumbai, has eliminated dependency on other sources for Group II 
base  oils.  HPCL  commenced sales of Group II base oils  under  the  brand 
Alprol Super grades.

HPCL  is  focused  on product development and product  innovation  to  meet 
customer needs and increase sales in this profitable segment of Business.

LPG

The Industry witnessed a declining growth rate in the total LPG consumption 
in  the second half of the year. During second half of 2011-12, the  growth 
in consumption was 5.4% compared to 9.9% during the first half of the year. 
The  total  LPG  Sales for Industry was 14.7 MMT during the  year  with  an 
overall growth of 7.5% over previous year.

HPCL  continues to be the second largest LPG sales marketer in the  country 
with a market share of 26.5% during 2011-12. The sales during the year were 
3,899  TMT  compared to historical sales of 3644 TMT,  corresponding  to  a 
growth of 7.1% over historical sales. Domestic LPG Sales were 3,432 TMT. In 
the  highly competitive Non-Domestic (ND) Bulk segment, HPCL  continues  to 
maintain leadership position with 40% market share.

In line with Vision 2015 of MOP&NG, HPCL has drawn comprehensive  strategic 
plans  to increase penetration of domestic LPG in the rural  areas.  During 
2011-12, HPCL has commissioned 218 new distributorships under Rajiv  Gandhi 
Gramin LPG Vitaran (RGGLV) Yojana and 46 new regular HP Gas Distributorship 
across India taking the total number of LPG Dealerships to 2,897. HPCL  has 
enrolled  33.6 Lakh new customers for domestic LPG and released  20.8  Lakh 
double  bottle  connections  during 2011-12. The  total  domestic  customer 
population  reached  3.58  Crore with 1.79 Crore  customers  having  double 
bottle   connections.  The  total  customer  base  including   non-domestic 
customers  is  3.62  Crore  as  of March  31st,  2012.  To  have  sustained 
competitive  advantage  in non-domestic segment, HPCL commissioned  10  new 
exclusive ND distributorship across India.

During  2011-12,  HPCL  achieved highest ever bottling of  3,747  MMT  with 
quantum  increase  in productivity corresponding to 7.9%  over  historical. 
Apart  from new capacity additions at Hazarwadi and Purnea LPG Plants,  all 
LPG plants have been converted to High Speed Downstream facilities  thereby 
increasing  production  rate  from  1,300  to  1,500  cylinders  per   hour 
approximately.  The total Bottling capacity has been increased by  675  TMT 
during the year to 3,610 TMTPA. The storage capacity was increased by  10.8 
TMT with augmentation at Ajmer, Raipur and Nasik plants and the  completion 
of new LPG Plants. The total storage capacity for LPG at marketing plants & 
import facilities is 92.3 TMT as of March 31st, 2012.

A  major innovation was achieved at HPCL Mysore LPG Plant, wherein  an  in-
house  sealing carousel for PVC sealing of cylinders was  developed  giving 
excellent sealing quality at a very high rate of sealing.

As  part of efforts to leverage technology, HPCL has implemented Tank  Farm 
Management System (TFMS) interfacing with ERP at Loni, Mahul, Rajahmundry & 
Cherlapally  LPG  plants for auto closing stock recording during  the  year 
taking the total number to 6 LPG plants where TFMS-ERP interfacing has been 
completed.

* LPG Infrastructure Augmentation

HPCL has identified development of LPG Infrastructure as a key focus  area. 
During  the year, On-line Propane-Butane blending facilities at NMPT  Jetty 
for  Mangalore  LPG  Import  Facilities  (MLIF)  were  commissioned.   HPCL 
commissioned a new LPG Plant at Bathinda with capacity of 75 TMTPA and a 16 
bay  bulk tank truck loading gantry at a cost of  Rs. 110 Crore in  Mar`12. 
Further, a new LPG Plant at Hazira of 150 TMTPA capacity at a cost  Rs.  64 
Crore has been mechanically completed in Dec`11.

As  part of infrastructure augmentation, HPCL has taken up construction  of 
new  LPG bottling plants of capacity 150 TMTPA at Solapur and Bangalore  at 
an  estimated cost of  Rs. 82.60 Crore and  Rs. 140.00 Crore  respectively. 
Land  had been taken over from MIDC in Feb`12 for Solapur plant and 80%  of 
the Land had been taken over from KIADB in Feb`12 for Bangalore plant.

* LPG Safety initiatives

HPCL  has launched On-line module for monitoring "HSE INDEX" of LPG  plants 
and  for prompt reporting, analysis and tracking of accidents involving  HP 
GAS customers. HPCL has also developed a model Security plan for LPG Plants 
in line with OSIPP guidelines, based on which all LPG Plants have developed 
individual security plans.

* Productivity improvement initiatives

- Project Utkarsh - Productivity Improvement Programme at LPG Plants

Project  Utkarsh  was  built  on  Participative  Management  wherein  plant 
employees at all levels came together as teams with the common objective of 
improving  plant  performance.  The Project used a  structured  process  of 
finding  causes  through validated data leveraging  technology,  finalizing 
solutions  and implementing them in time bound manner through formation  of 
Quality Circle Teams.

The  scheme was piloted at South Central LPG zone and after refinement  was 
rolled  out to other LPG Plants Pan-India. A number of meetings  were  held 
with  the  plant employees over a period to learn from  the  experience  of 
their colleagues giving rise to collaborative learning and synergistic team 
work  for  problem solving. Project Utkarsh provided a platform  for  plant 
employees and empowered them to show case their best talent and learning`s. 
By bringing changes in systems, the Project teams improved the processes  & 
productivity  significantly  with  focus  on  Safe  Operating   Procedures. 
Engagement  and  empowerment of people was achieved  through  participation 
management.  Training  program and interactive sessions were  conducted  at 
Plants at regular interval for effective implementation of the Project. The 
improvement  in productivity is more than 30% from base level on All  India 
basis.

To  sustain  and  increase productivity further  by  utilizing  technology, 
infrastructure  facilities, set benchmark in productivity norms,  manpower, 
increase  responsibility  &  accountability  on the  part  of  workmen  and 
encourage  participation management at floor level, a new LPG  productivity 
Incentive  scheme  was  signed  with  the  unions.  This  incentive  scheme 
redefined 100% productivity level of LPG plants based on defined number  of 
production  of cylinders per shift with increased benchmark of norm by  28% 
to 48% increase for various types of Plants over old norm.

Interactive  sessions were conducted for the plant employees  for  enabling 
smooth  implementation. With respect to new norm, significant  increase  in 
productivity  was noted in 24 out of 44 LPG plants, which achieved  greater 
than  or equal to new 100% productivity norm. The productivity was  greater 
than or equal to 90% in the remaining 19 LPG plants during 2011-12.

* Initiatives for increasing customer service

- HP Anytime

HPCL has extended "HP Anytime", the IVR/SMS based refill booking system  to 
60  cities in 16 States and 2 UTs covering 1,589 distributorships  and  2.2 
Crore customers, representing 61% of the customers holding.

- Transparency portal

HPCL is the first oil company in the Industry to develop the  "Transparency 
portal"  for  providing online information to the Citizens of  India  in  a 
transparent  manner.  The  portal provides information  on  the  number  of 
subsidized  LPG refills consumed by individual consumers and  has  features 
for rating the distributors and logging complaints.

- Saksham - Training program for Corpus fund Dealers

To  help uplift the management capabilities and customer service  standards 
of  corpus  fund  distributors  a  novel  program  branded  "Saksham"   was 
conceptualised. During 2011-12, a total 375 distributors were trained under 
in this program out of which 155 were SC/ST distributors.

- Ji-Haan Samarth, Training Program for LPG Deliverymen

To  better equip the LPG delivery men with the requisite skills,  knowledge 
and attitudes to perform in their jobs, HPCL is imparting training  through 
Ji-Haan  Samarth  to LPG delivery men in 9  different  regional  languages. 
During 2011-12, training was imparted to about 11,076 LPG delivery men.  In 
addition, exclusive training programmes were conducted for 2,150 mechanics.

- Samvad, Training Program for LPG Distributorship Staff

To equip the LPG Distributorship staff with aspects like customer handling, 
grievance redressal and professional conduct, HPCL is providing interactive 
Audio-visual  training  to  LPG  Distributorship  staff.  During   2011-12, 
training was imparted to about 5,549 LPG Distributorship staff.

- Suraksha Sanchetana campaign

To create awareness for safety in kitchen especially for the rural women, a 
novel campaign combining specifically designed games on kitchen safety  and 
staging  a  play to communicate safety messages in an  easy  to  understand 
manner  under the brand Suraksha Sanchetana campaign was conducted  at  164 
towns spread across 8 states. In addition, a number of innovative campaigns 
were  conducted  at  the  field level to spread the  message  of  safety  & 
conservation to all LPG users.

Aviation

During  the year 2011-12, HPCL achieved sales of 768 TMT in  aviation  fuel 
sales. During the year, HPCL commissioned 1(one) new ASF at Varanasi taking 
the total number to 34 ASFs as of 31.3.2012. Fixed storage facilities  have 
been commissioned at

Mangalore  and Trichy ASFs in the year. ATF Tank wagon loading facility  at 
Mahul  terminal  was  also commissioned during the year.  To  build  robust 
operating  practices,  a new Operations Manual and Training  Handbook  have 
been  developed  during  the year. Balancing  growth  &  profitability  and 
building capabilities will continue to be the focus areas.

Natural Gas

During 2011-12, HPCL expanded CNG retailing network in Ahmedabad by  adding 
5  daughter booster stations taking the total CNG network at  Ahmedabad  to 
one mother station and 20 daughter stations. The sourcing of the  allocated 
gas  from RIL was affected from Sep`11. To maintain gas supply to  all  CNG 
Stations, HPCL started sourcing RLNG from GSPL and GAIL.

The consortium formed by GSPC, IOCL, HPCL and BPCL has received the  letter 
of  Authorization from PNGRB for the three natural gas pipe Lines  notified 
by  PNGRB  during 2010-11 i.e., Mallavaram-Bhilwara,  Mehsana-Bathinda  and 
Bathinda-Srinagar  gas pipelines with a target commissioning date  of  July 
2014.  The  total estimated capital expenditure is  Rs.  13,706  Crore  for 
laying  these three pipelines. HPCL Board has approved capital  expenditure 
of  Rs. 452 Crore against 11% equity participation.

HPCL  has signed a Memorandum of Understanding (MoU) with Greater  Calcutta 
Gas  Supply  Corporation Limited (GCGSCL) & GAIL to form  a  Joint  Venture 
Company  for  laying, building and operating City  Gas  Distribution  (CGD) 
Network in Kolkata. PNGRB authorization for Kolkata CGD is awaited. The JVC 
will  be  formed  after receiving necessary authorization  from  PNGRB  for 
carrying out the project.

HPCL  is operating CGD projects in Andhra Pradesh through  Bhagyanagar  Gas 
Ltd and in Madhya Pradesh through Aavantika Gas Ltd, both of them as  Joint 
ventures with GAIL and other partners.

Operations & Distribution

During  the  year  2011-12, HPCL`s POL  installations,  achieved  a  record 
throughput of 41 MMT, an increase of 6% over historical for supporting  the 
sales performance. This was achieved by effective planning and execution in 
the  areas of product procurement, distribution, safe operations,  enhanced 
level  of  efficiency  in  operations  leveraging  automation  &   improved 
operating processes at POL Terminals and Depots.

HPCL  has  adopted  the  Climate Change  Policy  for  ensuring  sustainable 
development. During 2011-12, Carbon Footprint assessment under Scope 1, 2 & 
3  under  GHG  Protocol Standards was completed for  15  POL  installations 
including  recommendations  for  carbon  footprint  reduction.  Rain  water 
harvesting  projects have been commissioned at 18 POL installations  and  a 
Pilot  project  for  ground water  harvesting  undertaken  at  Secunderabad 
Terminal.

In  line with the directives of the government for introducing  environment 
friendly BS IV grade fuels to more cities/towns, HPCL successfully  changed 
over to BS IV grade fuels in 7 additional cities during 2011-12 taking  the 
total  number to 20 cities where BS IV grade fuels are being  supplied.  To 
reduce the consumption of fossil fuels & improve sustainability the Ethanol 
Blending  Programme  was implemented. During 2011-12, HPCL  achieved  34.8% 
Ethanol Blended Petrol (EBP) supplies in the 13 states and 3 UTs where  EBP 
program has been implemented.

HPCL  commenced  product evacuation and marketing from  Guru  Gobind  Singh 
Refinery  (GGSR), implemented by HMEL a Joint Venture refinery of  HPCL  at 
Bathinda   with   Pipeline  movement  from  Refinery   to   HPCL   Bathinda 
Installation.  HMEL  marketing  terminal  was  commissioned  with   product 
receipts  from the refinery and road despatches of MTO, SKO and  HSD.  This 
will ease supply constraints to markets in North India.

* Safety initiatives at POL Installations

Safety  remains  the focus area for HPCL. For enhanced  level  of  terminal 
safety,  SIL (Safety Integrity Level) study at Visakhapatnam  terminal  was 
undertaken  &  completed. In a major initiative, HSE  Index  for  capturing 
actual  performance  of  POL  installations  vis-a-vis  comprehensive   HSE 
parameters  was  developed & implemented at 25 POL  installations  for  the 
first time.

- ISRS Safety Certification

ISRS  Safety  Certification  is  a  comprehensive  and  integrated   safety 
management  evaluation system which indicates implementation of robust  and 
world class safety practices. During 2011-12, ISRS Level 6 was  implemented 
at  15  major terminals. A total to 60 POL installations have so  far  been 
awarded the ISRS Certification.

- CCTV Surveillance

For enhanced security and surveillance, CCTV has been installed under Phase 
I at 56 POL installations.

- Third party surprise inspections

During  2011-12,  to  ensure compliance to parameters on  Q&Q,  safety  and 
statutory norms in the contractor operated tank trucks, surprise Inspection 
through  independent 3rd party was conducted at 42 major POL  installations 
for contractor operated tank trucks.

- Project Suraksha - Safety training program

To  enhance safety, a training program under the name "Suraksha"  has  been 
conducted  at  95  POL installations across  the  country  covering  16,000 
contract workmen, tank truck crew & security personnel.

- Fit for the Road - Health checkup campaign

To  ensure medical fitness of the Tank Truck (TT) crew, a unique  `Fit  for 
the Road` health check-up campaign was undertaken covering 4,500 tank truck 
crew wherein essential health parameters of TT crew was checked and medical 
consultation provided.

* Compliance to M B Lal Committee Recommendations

HPCL  has  been taking a leading role in the implementation of  M.  B.  Lal 
Committee  recommendations. Out of the total recommendations of 118 by  the 
Committee, implementation status in respect of 113 recommendations is being 
regularly monitored by a Joint Implementation Committee, comprising members 
from Ministry, OISD & OMCs. During the year, HPCL achieved compliance to 79 
Recommendations out of the total of 113 recommendations being monitored  by 
the  Joint implementation committee. Push Button of Motor  Operated  Valves 
(MOVs)  at  21 POL installations have been shifted outside the  dyke  area. 
Energy  efficient  lighting  systems  have  been  implemented  at  72   POL 
installations for improving the lighting in operating areas.

* Initiativesleveraging technology

To ensure access to correct data an online manual "OnD Datamine" containing 
comprehensive  infrastructure details of all the 95 POL  installations  was 
developed and launched.

For  effective utilization of fleet and ensuring transparency in  operation 
an  Optimised  Logistics Assistant (OLA) tool was developed  &  piloted  at 
Secunderabad  terminal  to  enable scientific  &  optimized  scheduling  of 
product indents.

Terminal Automation System (TAS) for accurate deliveries & process controls 
has  been  implemented at 17 POL installations during the year  taking  the 
total number to 58 POL installations where TAS has been implemented. Out of 
the  58  POL installations, at 26 POL installations, Tank  Farm  Management 
Systems  (TFMS)  have also been integrated with the  ERP  stock  accounting 
system for real time reports with the highest accuracy.

* Initiatives for improving operational excellence

- Differentiated services to Dealers

Differentiated  Services  to Category `A` dealers were  extended  to  1,170 
Retail  outlet dealers & 55 Direct Sale Consumers, covering about 30  %  of 
retail sales volume.

- Project Utkrisht - Improvement in Productivity for POL installations

To enhance productivity at POL installations through management-worker  co-
operation by leveraging Technology, a unique project Utkrisht was  launched 
under Participative Management Principle, and successfully piloted at 5 POL 
locations during 2011-12.

Projects & Pipelines

HPCL  pipelines  Mumbai-Pune-Solapur pipeline  (MPSPL),  Visakh-Vijayawada-
Secunderabad  pipeline (VVSPL) and Mundra-Delhi pipeline (MDPL) achieved  a 
record  combined throughput of 13.62 MMT against the target  throughput  of 
11.0  MMT  during the financial year 2011-12. Lube  Oil  Pipeline  achieved 
throughput of 338.7 TMT against the target of 286.7 TMT for the year  2011-
12.

During  the  year,  a "Security Index" mechanism has  been  formulated  and 
implemented  to measure the security preparedness of the  pipelines  across 
all  the 3 operating pipelines. HPCL also introduced centralized toll  free 
number (1800-180-1276) for all the operating pipelines to enable the public 
to give alerts on security/ safety incidents in case of emergency along the 
Right of Use (ROU) of the pipelines.

A  number of projects are underway and are being planned to augment  HPCL`s 
marketing infrastructure. During the year, HPCL has submitted Expression of 
Interest  (EOI)  to  PNGRB  for the  following  three  (3)  major  pipeline 
projects.

* Rewari-Kanpur Pipeline (RKPL)

This  project  envisages  laying a 440 km multi-product  white  oil  cross-
country  pipeline from existing tap-off station of MDPL at Rewari to a  new 
terminal at Kanpur via existing depots at Bharatpur and Mathura.

* Awa-Salawas Pipeline (ASPL)

This  project  envisages laying of a 92 km multi-product white  oil  cross-
country pipeline from existing intermediate pumping station of MDPL at  Awa 
to existing depot at Salawas.

* Mangalore-Hassan-Bangalore-Mysore LPG Pipeline (MHBMLPL)

This  project  envisages laying a 382 km cross-country  LPG  pipeline  from 
Mangalore to Bangalore via Hassan along with a 106 km spur line to Mysore.

The details of the major projects completed during 2011-12 are described as 
under:

* New East Zone office building at Kolkata

A  state of the art office building for East Zone has been completed at  an 
approximate cost of  Rs. 31.0 Crore. The building comprises a basement  and 
6 floors with a total built up area of 50.1 thousand square feet.

* GGSR product evacuation project

HPCL-Mittal  Energy Limited (HMEL) has built the 9 MMTPA Guru Gobind  Singh 
Refinery  (GGSR),  a grass root refinery near Bathinda,  Punjab.  Following 
cross  country pipelines have been taken up for facilitating evacuation  of 
MS, HSD, SKO and ATF products to Bathinda and Bahadurgarh, namely:

- Ramanmandi - Bathinda pipeline

A  30  km  long, 10" diameter pipeline from  Bathinda  to  Ramanmandi.  The 
Pipeline has been commissioned in Dec`11 at a cost of  Rs. 89.0 Crore.

- Ramanmandi-Bahadurgarh Pipeline

A  250  Km long, 18" diameter pipeline from Ramanmandi to  Bahadurgarhat  a 
cost of  Rs. 370.0 Crore. Pre-commissioning activities have been  completed 
and the pipeline is awaiting receipt of product from GGSR Refinery.

* Tikrikalan Terminal

Construction  of  a new grass root terminal with  receipt  facilities  from 
Bahadurgarh-Tikrikalan Pipeline for handling MS, HSD, SKO and Ethanol at  a 
revised estimated cost of  Rs. 94.69 Crore has been completed mechanically.

* Bahadurgarh -Tikrikalan Pipeline

The  project includes laying of 2 numbers 12 km long product pipelines  for 
MS and HSD / SKO of 8" and 10" diameter respectively. These pipelines  have 
been laid from Bahadurgarh Terminal to Tikrikalan Terminal at an  estimated 
cost of  Rs. 60 Crore. The project has been completed mechanically.

* Replacement of 1.71 km pipeline in Mumbai-Pune-Solapur pipeline

Replacement  of  1.71  Km pipeline in ghat  section  from  Khopoli  booster 
station to NRV has been completed in the Mumbai-Pune-Solapur pipeline. This 
initiative  will  help  to  increase the flow rate by  almost  30%  in  the 
pipeline.

* Additional product tankages at POL Locations

Additional  product  tankages  (APT) at the  following  POL  locations  was 
completed during the year.

- Irumpanam: Construction of 2 (two) number above ground storage tanks  for 
MS/HSD with aggregate capacity of 10 TKL has been completed mechanically at 
a total cost of Rs. 9.9 Crore.

-  Jaipur: Construction of 3 (three) number above ground storage tanks  for 
MS/HSD with aggregate capacity of 13.5 TKL has been completed  mechanically 
in Oct`11 at a total cost of Rs. 10.5 Crore.

-  Ajmer:  Construction of 4 (four) number above ground storage  tanks  for 
MS/HSD with aggregate capacity of 16.7 TKL has been completed  mechanically 
in Mar`12 at a total cost of Rs. 12.8 Crore.

-  Rewari: Construction of 3 (three) number above ground storage tanks  for 
MS/HSD with aggregate capacity of 10.7 TKL has been completed  mechanically 
in Mar`12 at a total cost of Rs. 7.6 Crore.

-  Bahadurgarh: Construction of 6 (six) number above ground  storage  tanks 
for   ATF/MS  with  aggregate  capacity  of  45  TKL  has  been   completed 
mechanically in Sep`11 at a total cost of Rs. 29.0 Crore.

* Reconstruction of small filling plant shed, Chennai

Reconstruction  of small filling plant shed at Chennai with an  approximate 
area of 14,900 square feet was completed and commissioned during 2011-12 at 
a cost of Rs. 9.0 Crore.

* Tank truck Gantry at Kolkata, Paradeep and Raipur Terminals

Tank truck Gantry at following POL installations were completed during  the 
year.

Kolkata I terminal: A 2 x 8 bay tank truck gantry along with automation was 
commissioned at an approximate cost of  Rs. 26.0 Crore.

Paradeep  Terminal:  A 1 x 4 bay tank truck gantry was commissioned  at  an 
approximate cost of  Rs. 3.5 Crore.

Raipur Depot: A 1 x 8 bay tank truck gantry along with automation has  been 
mechanically completed at an approximate cost of Rs. 10.0 Crore.

In addition to the above completed projects, a number of projects are under 
construction to strengthen the distribution infrastructure to cater to  the 
increasing  demand of POL products. The details of major projects  and  the 
project status are described as under:

* White Oil Terminal at Visakhapatnam

The  While Oil Terminal at Visakhapatnam will be the first fully  automated 
white  oil terminal including Tank wagon gantry. The total project cost  is 
expected  to be  Rs. 465 Crore with total tankage capacity of 168 TKL.  The 
terminal  can receive product either from refinery or coastal  inputs  from 
jetty. The infrastructure contains provision for Tank truck loading,  wagon 
loading  and shipping from this installation.The terminal was  mechanically 
completed  in  Dec`11.  OISD  inspection  is  complete  and  compliance  of 
recommendations  is under progress. Tank Wagon Gantry work is in  progress. 
Commissioning activities are planned during the fiscal year 2012-13.

* LPG Terminal and Bottling Plant at Visakhapatnam

A  new LPG Terminal & Bottling Plant has been constructed at  Visakhapatnam 
and shall be the nerve center for LPG distribution from Visakhapatnam.  The 
storage  capacity  is  4.4  TMT  which is  the  largest  capacity  in  HPCL 
Marketing.  The  total project cost is  Rs. 250 Crore. The plant  has  been 
commissioned in Mar`12 and dispatches have commenced.

* White Oil Terminal at Ennore, Tamil Nadu

A  new green field White Oil Terminal is being constructed at Ennore  which 
is located on the outskirts of the Chennai City for relocating the existing 
Chennai terminal. The project is to provide Tankage facility of 140 TKL for 
storage and dispatch of MS, HSD, SKO and ATF. The terminal was mechanically 
completed  in  Dec`11. OISD and pre-commissioning  activities  are  planned 
during  the fiscal year 2012-13. The total project cost is expected  to  be  
Rs. 374 Crore.

* New Depot at Bokaro

Construction of new depot for handling black oil and white oil products  is 
in progress at a total estimated cost of  Rs. 188.0 Crore.

* New POL Depot at Bihta (Near Patna)

Construction of a new depot for handling White Oil (MS, HSD & SKO) &  Black 
Oil (FO & Bitumen) including wagon unloading siding at an estimated cost of 
Rs.  142.50  Crore is under progress. The Project is in advanced  stage  of 
completion and is expected to be commissioned in 2012-13.

* New Depot at Kadapa

Construction  for  resitement  of Kadapa depot is in progress  at  a  total 
estimated project cost of  Rs. 200.4 Crore. The new depot will handle  both 
black oil and white oil products.

* Revamping of existing terminals

Revamping of existing terminals at Budge-Budge, Paradeep and Loni are being 
carried out at a total estimated cost of  Rs. 236.2 Crore.

* Other infrastructure augmentation

Construction of new 1 x 8 Bay tank truck Gantry is in progress at  Bhatinda 
at a total project cost of  Rs. 24.5 Crore. Construction of additional  1x4 
Bay Tank truck Gantry each at Ajmer & Jaipur and 1x8 Bay Tank truck  Gantry 
at  Akola,  1x6 Bay Tank truck Gantry at Amousi and 1x8 Bay &1x6  Bay  Tank 
truck  Gantries  at Aonla are in progress at a total  approximate  cost  of  
Rs.73.70 Crore.

RESEARCH & DEVELOPMENT(R & D)

Research  & Development is envisaged to provide support to  the  Refineries 
and  Marketing  divisions for operational improvement,  absorption  of  new 
technologies,  developing innovative & path breaking technologies,  license 
technologies, support external organizations and in the long run to develop 
as a knowledge hub and a profit centre.

To  realize  this objective HPCL is setting up a Corporate  R&D  Centre  at 
Bengaluru in a phased manner with initial investment of Rs. 312 Crore. This 
Centre  will be involved in carrying out Research & Development  activities 
in refinery technologies, Nano-technology applications and also bio-fuels.

The  R&D  Centre will be conforming to eco-friendly design norms  and  will 
consist  of Nine Research Labs covering Crude Evaluation & Fuels  Research, 
Hydroprocessing,   Catalytic   Cracking  (FCC/RFCC),   Catalysis,   Process 
Modelling & Simulation, Bio Processes, Standard Testing, Analytical Lab and 
Centre for Excellence in Nano-Technology.

HPCL  has  undertaken  collaborative R&D  projects  with  premier  research 
institutes such as IIT Kanpur, IIT Madras, IISc Bangalore, IIT Delhi,  TERI 
New  Delhi,  NIT Calicut, CIMFR Dhanbad,  GITAM  University  Visakhapatnam, 
Korea  Institute  for  Energy  Research-Korea  in  the  areas  of   process 
intensification,   nanocatalysts,  CO2  capture  &  utilization,   hydrogen 
production & storage, resid upgradation, improved lubricants and adsorptive 
separations.

Collaborative  projects  were  also  taken  up  with  Indian  Institute  of 
Petroleum,  Dehradun and Research & Development Center for Iron  and  Steel 
(RDCIS),  Ranchi  for  understanding the impacts of  various  chemicals  on 
different  formulations  as fundamental research.  Preliminary  studies  on 
stability of dispersions of Nano particles in engine oils, Industrial  gear 
oils  etc. has been taken up by the institutes who have adequate  resources 
and manpower for carrying out the work.

HPCL has taken up development of new products in the automotive, industrial 
and  grease lubricants. These include products meeting the most recent  and 
stringent  demands  for  OEM`s and other industry  members  including  core 
sector  like defence, mining, steel etc. The products being developed  have 
approvals  of OEM`s and major industry users. HPCL obtained Patent  on  new 
process for complexing of lithium Grease.

The  focus  is on developing environment friendly  products.  Biodegradable 
products  for reducing ground water pollution, and friction  modified  oils 
for  reducing  noise pollution have been developed. HPCL  is  committed  to 
energy  conservation and has developed energy efficient gear oils,  spindle 
and slide way lubricants. To help Petroleum conservation high drain oils  / 
greases in automotive and industrial sectors have been developed.

In  the area of Alternate fuels development, an MOU has been  in  existence 
between  HPCL  and NIT, Calicut for "Investigations on the  application  of 
catalystic  Nano particles as diesel and biodiesel additives". The work  is 
in progress as per schedule in the project.

QUALITY CONTROL (QC)

HPCL  has  put in place Quality Management System for  ensuring  continuous 
vigil  on all inputs and protecting the product quality at every  stage  of 
handling  so  that quality products are supplied to the customers  all  the 
time.  Regular Quality Control (QC) audits of POL installations  have  been 
carried  out for improving the QC practices. Continuous training  is  being 
provided to the operating people for ensuring protection of product quality 
at all stages.

HPCL  has a dedicated Quality Assurance department which is independent  of 
Refining  & Marketing functions reporting to the Human Resources  function. 
The Quality Assurance department carries out inspections independent of the 
regular  QC departments and acts as an important nodal agency for  ensuring 
supply of quality products to customers.

The  focus is on infrastructure improvement in terms of setting-up  of  new 
stationary QC Labs and up-gradation of existing QC Labs. During 2011-12, an 
exclusive  calibration laboratory has been commissioned at Delhi.  Further, 
three (3) new QC Laboratories at Ennore, Tikrikalan and Bathinda have  been 
commissioned  and  testing facilities for industrial  consumers  have  been 
added  at  Indore, Bangalore and Pune laboratories. To  benefit  all  stake 
holders, an exclusive QC Portal has been hosted on the website.

The  future  plans  include, setting up of three (3)  new  Laboratories  at 
Jabalpur,  Rewari  and Mughalsarai & commissioning of two  (2)  CFR  Octane 
engines at Cochin and Guwahati.

HEALTH, SAFETY & ENVIRONMENT

HPCL  is committed to conducting business with an objective  of  preserving 
the  environment,  sustainable  development, being a safe  work  place  and 
enrichment  of  the  quality  of  life  of  employees,  customers  and  the 
community. HPCL endeavours continuously to implement systems and procedures 
for achieving the goal of highest standards in safety, occupational  health 
and environment protection.

All  the major POL installations across the country and the two  refineries 
are  ISO 14001, ISRS & OHSAS 18001 certified. They are well  equipped  with 
health  care  facilities  and  have  arrangements  with  nearby   reputable 
hospitals for treatment during emergencies. Regular check-ups are done  for 
all  the  employees,  especially for those who engage  in  adverse  working 
conditions.

During  2011-12,  awareness  programs on  maintaining  healthy  lifestyles, 
heart-care,  yoga,  meditation, work-life balance were  conducted  for  the 
employees and their family members.

HPCL  continued to build its culture of safety and improve its  performance 
in 2011-12. Regular internal safety audit and the mandatory audit from  Oil 
Industry  Safety  Directorate  (OISD)  were  conducted  during  the   year. 
Implementation  of OISD 116 recommendations are being carried out  at  both 
refineries.

Safety talks, trainings and case studies form part of the daily  activities 
of  all  the  personnel  directly or indirectly  engaged  in  the  refining 
process.  During  2011-12, safety training programmes for  447  contractors 
were  conducted in both the refineries. In addition, HMEL  employees,  CISF 
personnel and apprentice were trained in safety and fire fighting  courses. 
To  reduce the fresh water dependency on Municipal Corporation,  initiative 
of rain water harvesting planned during the year at Mumbai Refinery. Visakh 
refinery  has  conducted  a  "Green Visakha"  program  with  plantation  of 
saplings  in  Visakhapatnam as part of HPCL`s initiative to a  cleaner  and 
greener environment.

As  part of commitment for protection of environment, HPCL is  implementing 
Flue Gas Desulphurization (FGD) projects at both the refineries for removal 
of  Sulphur from the flue gases of the Fluidized Catalytic  Cracking  (FGD) 
Units. FGD at Mumbai refinery was commissioned in Mar`11 and the project is 
expected  to be commissioned by Sep`12 at Visakh refinery. Mumbai  refinery 
has  bio-remediated  around  3,000 m3 of low oily  silt  using  oil  zapper 
technology.  Oil  sludge  and  spent catalyst  from  both  refineries  were 
disposed to Central Pollution Control Board (CPCB) authorized recyclers.

*  Sustainable Development

HPCL has formulated a Sustainable Development (SD) policy and  disseminated 
to  all  the  employees  for inclusive action.  HPCL  has  installed  sound 
`Environment  Management  Systems`  in  various  locations  and  has   been 
upgrading them with newer and efficient technologies periodically. Both the 
refineries  at Mumbai and Visakh are equipped with state of the art  liquid 
effluent  treatment plants (ETP) to monitor and control the quality of  the 
effluent  water  that is being let out of the premises. All  the  marketing 
terminals  and depots also house ETPs / Oil water separators  for  effluent 
management.  During 2011-12, various initiatives such as Electrical  Energy 
audits,  Rain water harvesting at POL Locations, Rain water  harvesting  at 
Visakh  Refinery, Improving treated water output at Mumbai Refinery,  Power 
generation  through  Wind  Mills and Carbon Foot Print  Assessment  of  POL 
locations  have  been carried out. The progress of the  SD  initiatives  is 
monitored  by  a  Board Sub Committee periodically. A SD  report  has  been 
prepared  for  the financial year 2011-12 which highlights the  various  SD 
initiatives undertaken by HPCL. The SD report has been prepared as per  the 
guidelines of GRI and has been assessed by a third party as per the norms.

EXPLORATION & PRODUCTION (E & P)

To  build a strong foundation for the Exploration & Production business,  a 
significant  achievement during 2011-12 has been the takeover of M/s  Prize 
Petroleum  Company Limited (Prize), a Joint Venture Company of HPCL into  a 
Wholly Owned Subsidiary, effective December 22nd, 2011.

HPCL  had a portfolio of Participating Interests (PI) in 21 numbers  assets 
as of 31.3.2011 excluding the (2) two blocks awarded in the NELP-IX bidding 
round of Mar`11. Of these, 18 were domestic offshore & onshore blocks and 3 
were  overseas  exploration  blocks with minority stakes  (8%  to  25%)  at 
prospective basins ofAustralia and Egypt.

During  2011-12, HPCL has relinquished interests in 4  domestic  blocks.The 
total  portfolio  of  Participating Interests (PI) for  HPCL  stood  at  14 
Domestic  blocks and 3 Overseas Blocks as of March 31st, 2012. The  details 
of  the Blocks relinquished during 2011-12, are provided in the section  of 
`Statement  of  SignificantAccounting  Policies  and  Notes`  forming  part 
ofAccounts.

M/s  Prize Petroleum Company Limited (PPAC) has a portfolio of 2  producing 
fields  and one exploration block. The details of the performance  of  PPAC 
has been discussed in the section under Joint Ventures.

Going  forward, M/s Prize Petroleum Company Limited shall be  the  upstream 
arm  of HPCL and all the exploration and production activities, which  were 
being carried out by HPCL and Prize separately, will be carried out by  new 
entity.

RENEWABLE ENERGY

To  ease the stress on fossil fuels for meeting its growing energy  demand, 
India  needs  to invest in renewable energy sources.  India  has  abundant, 
untapped  renewable  energy  resources including a  large  land  mass  that 
receives  ample solar irradiance, a large coastline for tapping on-shore  & 
offshore  wind  potential, significant annual production  of  biomass,  and 
numerous rivers and waterways having potential for developing hydropower.

HPCL  has undertaken to put up 100 MW of Wind Farm project to tap the  vast 
wind  potential in the country. HPCL has planned to implement the  same  in 
two  phases.  Under the first phase, a total capacity of 50.5 MW  has  been 
commissioned  in two parts. The wind power generation during the  year  was 
816 Lakh KWH.

HPCL  has  ventured into bio-refining in  collaboration  with  Chhattisgarh 
State  Renewable Energy Development Agency (CREDA), for the  plantation  of 
jatropha  in  the State of Chhattisgarh. Jatropha seeds are  used  for  the 
production  of  bio-diesel  as  viable  renewable  source  of  energy.  The 
Company`s objective is to carry out jatropha plantation on 15,000  hectares 
of land leased to HPCL by the Govt. of Chhattisgarh.

INFORMATION SYSTEMS

Information  systems  are being used to support all business  processes  of 
HPCL.  All  business transactions are carried out  in  Enterprise  Resource 
Planning (ERP) system & various bolt on applications to the ERP system. Due 
to use of these systems, HPCL is able to reduce the time taken for  closing 
the quarterly, half yearly and annual accounts. To ensure transparency  and 
visibility of information across the Corporation, end-to-end processes have 
been  configured  in  these systems for reducing cycle  times  and  provide 
better management control.

Based on the foundation of ERP system, a multitude of IT enabled  solutions 
have   been  developed  &  implemented  to  help  managers  do  their   job 
effectively.  ERP  platform  has made possible  development  of  real  time 
interfaces  to  the  IT enabled systems  with  various  business  partners. 
Various  new  initiatives  have  been  implemented  and  sustained  efforts 
continue to bring in more of these to reality.

* Indent Management System (IMS)

To  automate indenting process, HPCL has implemented an  Indent  Management 
System (IMS). Our dealers & customers are now able to send indents by  SMS. 
Facility  for  placing indents through web-based customer portal  has  also 

been made available to our institutional customers. The system has  enabled 
stage-wise  tracking of indents. This has facilitated  effective  planning, 
monitoring and execution of indents.

* e-banking

e-banking  initiative  has been expanded to cover all payments  to  outside 
parties  such  as vendors & contractors and even HPCL employees.  HPCL  has 
tied up with multiple banks to offer the service to the various  categories 
of payees.

Payment  information flows seamlessly as ERP server  communicates  directly 
with the bank servers without any manual intervention. During 2011-12,  97% 
of  payment made to the vendors, other than that for crude  purchases,  has 
been made by electronic fund transfer.

During the year 2011-12, HPCL has achieved 92% of on-line fund transfer  in 
Sales process compared to 91% in the previous year. On-line fund  transfers 
now exceed  Rs. 12,000 Crore a month compared to  Rs. 10,000 Crore a  month 
in the previous year. The reconciliation process is also totally automated. 
This  initiative has enabled HPCL faster collection & better management  of 
funds.

* e-procurement

In  the  area of procurement, the platform provided by the  ERP  system  is 
being used for bringing in transparency. HPCL has implemented e-procurement 
process  wherein tenders are floated on-line & the responses  are  obtained 
from  the vendors also on-line using digital signatures. Tender  opening  & 
evaluation is being done in this application & order is placed through  the 
ERP system.

* Portals and workflow applications

A customer portal is being maintained which provides complete visibility to 
the  direct  customers, dealers & distributors on their  transactions  with 
HPCL.  Similarly  a  portal for the transporters  enables  them  to  access 
information pertaining to their transactions.

A number of work flow based applications have been implemented for employee 
self-service  to speed up the process of benefits  administration.  Capital 
budgeting  process  for  Non-plan projects as  well  as  revenue  budgeting 
process has been captured in the system through workflow based application. 
Two  (2) unique initiatives "Samavesh" meaning `inclusion` and  "Santushti" 
meaning  `complete  satisfaction`  have been implemented.  Both  these  are 
electronic  work-flow processes & integrate with ERP as well as  other  on-
line  systems. Through these systems, the induction process and  the  final 
settlement process for separating employees are e-enabled.

* GIS Maps based application for Retail outlets

HPCL  has  rolled  out a GIS Maps based  application  for  retail  outlets. 
Majority  of  the  retail outlets have been plotted on the  map.  This  has 
enabled  to  set default route from supply POL  installation  &  accurately 
measure  distance  which  in turn has resulted  in  improving  accuracy  of 
calculation of freight payments.

* Communication Infrastructure & Security

HPCL has taken a number of steps to ensure security of information systems. 
Robust  authentication methodology has enabled us to secure  our  corporate 
network  from unauthorized access. Security Operations center has been  set 
up for continuous monitoring of systems for any security related incidents. 
Identity management system has been implemented. To enforce segregation  of 
duties, implementation of GRC (Governance, Risk & Compliance) solution  for 
ERP  systems  has  been  started.  Systems  Management  Solution  has  been 
implemented for ensuring all PCs & laptops are patched with latest security 
patches to protect them.

HPCL  continuously  endeavours  to leverage  capabilities  and  upgrade  IT 
systems  with  the  introduction  of  the  new  technologies  and  evolving 
technologies for improving in-house processes and capabilities.

HUMAN RESOURCES

HPCL  is  focussed  on  development of  Human  Resources  and  providing  a 
congenial  work climate for ensuring operational excellence  and  increased 
productivity.  During  the  year  2011-12,  HPCL  has  undertaken   various 
initiatives   for  improvement  of  employee  engagement,  improvement   in 
productivity  and  promotion of industrial harmony  for  meeting  strategic 
objectives   of  the  Corporation  and  enhancing  the  value  to   various 
stakeholders.

HPCL is focussed on nurturing talent, developing & building capabilities of 
employees and ensuring a performance oriented culture to meet the  business 
expansion  and growth objectives. Some of the major initiatives  undertaken 
for enhancing performance of Human Resources during the year are as under:

* Leadership Development -  Project AKSHAY:

For  guiding  the collective effort of organizational members  towards  the 
common  goal  of being a World Class Energy Company,  a  unique  leadership 
development  initiative, christened "Project Akshay" has  been  undertaken. 
Project  Akshay is an experiential learning model with specific  leadership 
inputs  provided through classroom training. The training program  involved 
multiple   methodologies  like  executive  coaching,  one-to-one   coaching 
sessions,  360  Degree Feedback based on Emotional  and  Social  Competency 
Inventory,  Classroom  sessions, experiential  learning  through  mentoring 
opportunities and group projects.

A total of 21 top officials underwent this program. To provide a real  life 
simulation  to help the participants experiment their leadership skills  in 
guiding  and  inspiring  their  team  towards  achieving  time   determined 
outcomes, each of the participants were assigned with mentees who in groups 
undertook  different  projects  for enhancing  leadership  skills.  The  21 
participants  mentored about 104 employees. The training modules  were  all 
woven  together  and deployed in well designed,  co-ordinated  and  aligned 
manner over a period of 10 months.

The   program  helped  the  participants  to  consciously   examine   their 
interactions  with  peers  and mentees,  self-examine  their  reactions  to 
different  situations,  observe  how their  behaviours  impact  others  and 
identify their own strengths and areas for development.

* Employee engagement initiatives

- Project Utthaan

To  help  develop  technical  and  behavioural  competencies  of  employees 
promoted  from  labour to clerical grade and for increasing  their  overall 
efficiency  at the work place, HPCL has started a training  program  called 
"Utthan" targeting attitudinal, behavioural, IT orientation, Customer focus 
& Internal processes competencies.

Using  adult learning techniques extensively, the program  concentrates  on 
work  activities  (ERP/Non-ERP) handled by the employee in  focus,  project 
assignments  and work place skill development by providing bird`s eye  view 
of  organization  structure.  The training contains 3  sessions  of  5  day 
training  spread  over a period of 3 months. During 2011-12,  training  has 
been  imparted to 89 out of the total 125 workmen promoted from  labour  to 
clerical grade.

- Competency Management

During  2011-12,  the  Competency  Mapping  and  Development  process   was 
strengthened.  A  total  of  135 officers,  from  newly  elevated  managers 
attended  Development Centres. The focus was to facilitate the officers  to 
understand the behavioural framework applicable to Managers.

To  review progress of employees against their Individual Development  Plan 
(IDP),  Technical Competency Test (TCT) was conducted for 270  officers  in 
Retail,  LPG  and Pipeline functions. Based on the scores,  the  Competency 
Development  Review Committee (CDRC) held one-to-one discussions with  each 
of  the  employee`s to review the progress and update the IDP  of  the  270 
employees.

- Project Sankalp

To  enhance  the safety related competencies, based on M.B.  Lal  committee 
recommendations,  project Sankalp for non-management employees  working  in 
POL  installations  was  launched.  Technical  and  behavioural  competency 
assessments were carried out in 11 different languages. In the first  phase 
of the project, technical and behavioural competency assessment was carried 
out  for  1,554  non-management  employees working  in  100  different  POL 
installations.  The  second phase of the project  would  involve  designing 
interventions  towards  enhancing the safety related competencies  of  non-
management employees.

- HP GAURAV

To  encourage  commitment, adherence to safety measures and  excellence  in 
work,  HPCL  has  institutionalized HP Gaurav,  a  scheme  for  recognizing 
outstanding performance, conduct and discharge of duties by  non-management 
employees in 2010. During 2011-12, out of numerous nominations received, 82 
outstanding non-management employees were recognized with HP Gaurav awards.

* Improvement in Industrial harmony

- Long Term Settlement (LTS) and Career Development Policy (CDP)

The  Industrial relations climate during the year 2011-12 was  cordial  and 
fruitful.  Long  Term Settlement discussions were conducted  for  Marketing 
division and Mumbai & Visakh Refineries.

-  The  Long  term Settlement (LTS) on wage and other  allowances  of  non-
management employees of Marketing Division of HPCL for a period of 10 years 
was  signed on December 19th, 2011 and the Career Development Policy  (CDP) 
for  non-management employees for Marketing Division was signed  with  all-
India Marketing Unions on March 31st, 2012 before Chief Labour Commissioner 
(Central)[  CLC  (C)], Delhi. The new CDP will have an applicability  of  5 
years from the date of signing of CDP. The Visakha refinery LTS was  signed 
by both Visakh Refinery unions on January 8th, 2012 and the Mumbai refinery 
LTS was signed on February 15th, 2012.

* Other initiatives

- RMs Conference/Finance Strategy Meet

To  strengthen  the synergies amongst various SBUs, attain  commonality  of 
purpose and complete alignment across the organisation to achieve corporate 
objectives All India Regional Managers Conference was held in Nov`11  which 
helped  in  highlighting  the  underlying  issues  affecting   performance. 
Recognising  the  need to have an operating model to support  the  business 
objectives,  a  Finance  conference was held in Mar`12  involving  over  80 
officers  from  the  Finance  function  which  helped  in  launch  of   new 
initiatives and Manuals.

- Path of Light Program, a Program for Retiring Non-Management employees

To  make  the superannuating non-management employee and  his  /her  spouse 
aware  of  post-retirement  psycho-socioeconomic  changes  and   associated 
requirements  in health and wealth management, HPCL has launched  a  unique 
training  programme  called  "Path of light"  for  retiring  non-management 
employees which was inaugurated on August 18th, 2011.

During 2011-12, all non-management employees who will be superannuating  by 
Mar`13 totalling to 150 employees have been covered under the program.

- Programme for women employees

HPCL  has  a  large workforce of women who  are  ambitious,  competent  and 
achievement oriented. To support the career aspirations of women employees, 
focus  on  development  &  utilisation  of  female  talent  pool,   develop 
managerial  capabilities and upgrade skills in a systematic manner, a  two-
day  program for all women officers in junior management was  designed  and 
deployed  in  a  well-coordinated manner. The aspiration  levels  of  women 
officers  to aspire for a particular position and work consciously  towards 
achieving  it  by  building on  assertiveness,  perception  management  and 
confidence building etc. were accomplished during the program.

- Periodical Medical Examination

To ensure employee well being and mirror employee health, HPCL has launched 
a  new  health policy in 2010 and initiated  mandatory  periodical  medical 
examination  for all employees. During 2011-12, a total of 5,653  employees 
have undergone periodical medical examination.

RIGHT TO INFORMATION (RTI)

The  Right to Information Act 2005, promulgated on October 12th,  2005  has 
been adopted by HPCL for providing information to the Indian Citizen,  when 
he seeks information from this public authority.

HPCL  has leveraged technology and put in place a well-developed  IT  based 
system  for tracking the RTI applications received from  various  locations 
across India, ensuring timely response to the information seeker, acting as 
a  record keeping / search tool on RTI and providing real time  information 
availability to the concerned department.

HPCL  regularly  updates details of the corporation,  including  details  / 
address of the Public Information Officers and First Appellate Authorities, 
as mandated under Section 4 of the RTI Act 2005.

HPCL    has    hosted   detailed   information   in    its    WEB    portal 
www.hindustanpetroleum.com.The website is updated with relevant information 
on   need  basis,  including  publishing  the  details  of  Retail   Outlet 
Dealerships / LPG distributors selection. During 201112, security audit was 
conducted for ensuring adequate WEB security and prevent hacking.

During 2011-12, HPCL received a total of 4,108 RTI applications, in which a 
total of 12,434 queries were handled, by providing information.

Dissemination  of the Right to Information (RTI) knowledge  was  undertaken 
covering  300 employees, through 18 number of RTI  sensitization  programs. 
Going  forward,  it will be the endeavour of HPCL to ensure  that  all  its 
employees  are sensitized with regard to RTI Act 2005, through in  house  / 
outsourced training programs.

CORPORATE SOCIAL RESPONSIBILITY

HPCL draws from its mission statement a zest to help the downtrodden, needy 
&  marginalized citizensby creating social infrastructures. The mission  of 
the  corporation  incorporates broader responsibility of HPCL  towards  the 
society.

At  HPCL Corporate Social responsibility (CSR) is described as  responsible 
and efficient management of all operations, products & services that create 
positive  impact on the society, contribute to social economic  development 
and improve the quality of life in local community and society at large.

Signifying the importance given to CSR activities, HPCL has a CSR committee 
at the Board level and developed a CSR purpose statement. An exclusive  CSR 
department  has been formed for providing complete attention and  focus  to 
all the social responsibilities being undertaken at HPCL.

HPCL`s  CSR  policy  has distinctive features, and is geared  to  help  the 
company  in  smooth decision making on investment, selection  of  projects, 
implementation,  execution, monitoring, inspection, impact assessment  etc. 
so  that  HPCL can provide utmost and sustained value  for  the  investment 
made, and contribute effectively to the various causes.

HPCL`s  CSR  model  is  based on  "Creating  Shared  Value"  implying  that 
corporate success and social welfare are interdependent.

At  the  corporate  level,  projects are  undertaken  in  partnership  with 
specialized   NGOs/Implementation  partners  with  focus   on   Sustainable 
Livelihood,  Child Care, Education, Health Care and Community  Development. 
At the field level, the field personnel in the periphery of their  function 
identify  the  needs  of  the community at the  location  and  schemes  are 
implemented to bridge the gap of the community needs and within their  area 
of  business. In addition, activities under the Special component plan  are 
also carried out.

*  Special Component Plan

As  part  of Special Component Plan / Tribal Sub Plan &  Welfare  Plan  for 
Weaker  Sections  various  initiatives  pertaining  to  Primary  Education, 
Scholarship  for  Graduation  &  Post-Graduation  Studies,  Drinking  Water 
Facilities,  Health Care, Income Generating Schemes /  Vocational  Training 
and Rehabilitation of Persons with Disabilities etc. are undertaken.

During  2011-12,  HPCL has undertaken the following major projects  at  the 
corporate level. 

Child Care

- Bal Haq- Ek Sthayee Parivartan

To  work  for the child right, this project is partnered  with  CRY  (Child 
Rights  &You) to work in villages and slums for making permanent change  in 
the lives of underprivileged children. This project is implemented in 2010-
11 in Naupada and Kendrapara districts of Odisha and in Rajkot district  of 
Gujarat for marginalized communities and children. During the year  2011-12 
about 58 villages have been covered in this project.

- Muskan

This  program is partnered with Prayas-Juvenile Aid Center  (JAC)  Society, 
New Delhi for taking care of street / run away children and placing them in 
shelter  homes of Tughalakabad and Jahangirpuri for bringing them  back  to 
proper care in their childhood. During the year 2011-12 about 220  children 
have  been provided with basic needs like Food, Clothing,  Shelter,  Health 
Care, Counselling, Non-formal education and Vocational training to help  in 
their overall development and making them capable of standing on their  own 
feet.

- Childline

HPCL  is operating a Childline rescue van in Mumbai, Delhi and  Kolkata  to 
provide  a quick and reliable mode of transport that can transport a  child 
from  a risk ridden situation to a safer space. It will also create  access 
to children in those places which are difficult to reach without a vehicle.

Education

- Unnati

This  project  is  partnered  with  NIIT  Limited  for  promoting  computer 
education with allied facilities like MS Office, LAN, and Internet.  During 
the  year  2011-12  the  project has been  implemented  in  30  schools  in 
different  parts of India covering 5,500 students as beneficiaries of  this 
program.

- Nanhi Kali

This program is partnered with K.C.Mahindra Education Trust (KCMET), Mumbai 
for  focusing on education of girl children. During the year 2011-12  about 
9,168  girl children from Standard I to Standard X have been benefitted.  A 
majority  of these girl children come from families which are  economically 
backward  and  whose earning members are daily  wage  labourers,  vegetable 
vendors and rickshaw pullers.

- Children with special Needs (ADAPT)

This program is being implemented through ADAPT (Abled Disabled All  People 
Together)  for  support of educational service for  Children  With  Special 
Needs  (CWSN) in Mumbai. This project is implemented from 2011-12  and  305 
such children are benefitted.

- Mid-Day Meals for Govt. Schools ( Akshaya Patra)

This  program is implemented during the year 2011-12 for  providing  direct 
access to food for the under privileged children by providing mid-day meals 
in Visakhapatnam and Guwahati for 5,000 children and providing Food

distribution  vehicles  &  vessels at Medak dist.,  A.P.,  through  Akshaya 
Patra, which works in partnership with various State Governments of India.

Health Care

- Navjyot

This  project has been under implementation since 2005-06 and is  partnered 
with Navjyoti India Foundation, New Delhi for supporting "Child Health  and 
Welfare" program at Resettlement Colony at Bawana in Delhi. During the year 
2011-12 the beneficiaries are 5,100 children.

- Suraksha

This  project is implemented to arrest the fast spread of AIDS  and  ensure 
the safety of the members of the families of the truck drivers and cleaners 
through  the  two  `Khushi` Clinics set up at  Highway  Retail  Outlets  at 
Ravulapalem, Andhra Pradesh and Shoolagiri, Tamilnadu.

- Health care at Rural Areas

This  program is implemented during the year 2011-12 and it  provides  free 
health  services for poor people in the rural areas through mobile vans  at 
their doorstep in Bihta district, Bihar through Wockhardt Foundation.  Each 
van is fitted with a GPRS system which covers around 25 villages in  weekly 
cycles.  A  doctor  is attached to each van which  is  hired.  Besides  the 
medical  check-up and health support the doctors also spread  awareness  on 
hygiene and health care.

- Sushrut Hospital

"Sushrut Hospital", a Multispecialty Hospital and a charitable  institution 
at Chembur is being supported by HPCL for the past many years.

Livelihood

- Swavalamban

This project is partnered with Confederation of Indian Industry (CII),  New 
Delhi,  for  vocational  training  to  unemployed  youth  including  school 
dropouts   at  various  locations  like  Bathinda,  Chandigarh,   Guwahati, 
Visakhapatnam,   Loni,  and  Hyderabad.  The  skills  imparted  are   Basic 
Electrical,  Refrigeration, AC, Fabrication, Plumbing, Basic IT,  Computer, 
Beauty Culture and Skin care. During 2011-12 about 3,575 beneficiaries have 
been covered under this project.

- Employability for youth in Urban Slums (Smile)

This  program  is implemented during the year 2011-12 in  partnership  with 
Smile  foundation  for  imparting  skills  in  English  Proficiency,  Basic 
Computer  Education  and Soft Skills at the SMILE Twin  e-learning  Program 
(STeP)  centres at Jaipur and Chennai. A total of 240 youth have  been  the 
beneficiaries during 2011-12.

Community Development

- Jaltarang

This  project  is  aimed  at ensuring water  security  through  rain  water 
harvesting projects. 

OFFICIAL LANGUAGE IMPLEMENTATION

Official Language Implementation (OLI) has been given the utmost importance 
in the Corporation. During 2011-12, various workshops and conferences  were 
conducted for management and non-management employees to encourage official 
language  and  also to increase the capabilities in  communicating  through 
official language.

To  encourage  implementation  of official  language,  Hindi  Pakhwada  was 
celebrated  from  September  12th to 23rd, 2011;  Vishwa  Hindi  Diwas  was 
celebrated  on  January 10th, 2012 and Akhil Bhartiya  Hindi  Mahotsav  was 
organised  at  Mumbai on March 2nd, 2012. Further, an  effective  incentive 
scheme  is  in place in the organization and shield policy is in  force  at 
corporate,  zonal  and  refinery levels for best  performance  in  OLI.  HP 
samachar  and  TOLIC samachar were published in Hindi.The efforts  of  HPCL 
were recognised with a number of awards.

HPCL continues to head the Town Official Language Implementation  Committee 
(TOLIC)  in  Mumbai for Government Undertakings /  Corporations  since  its 
formation.  During inspections carried out by the Parliament  Committee  on 
Official

Language the official language implementation at various locations in  HPCL 
and the work done by HPCL during TOLIC discussion programs was appreciated.

HPCL  was conferred with the prestigious Indira Gandhi Rajbhasha Award  for 
the  4th consecutive year for best official language  implementation  among 
Public Sector Enterprises in India. The award was presented by the  Hon`ble 
President of India on Spetember 14th, 2011 for the outstanding achievements 
of  the Corporation in the realm of Official Language Implementation in  "B 
region".

AWARDS RECEIVED

*   SCOPE   Meritorious  Award  for  Corporate  Social   Responsibility   & 
Responsiveness Commendation Certificate for the year 2010-11.

* Indira Gandhi Rajbhasha Puraskar for the fourth successive time for  best 
official  language implementation among Public Sector Enterprises in  India 
on September 14th, 2011.

*  Golden  Peacock  Excellence  Award 2011 for Best  HR  practices  by  the 
Distinguished Fellow of Institute of Directors for significant contribution 
to business and society in Aug`11.

* Reader`s Digest Trusted Brand Award Gold Award 2011 for Club HP brand for 
the sixth consecutive year.

* Best Marketing campaign Award atAsia Retail Congress 2011.

* Brand Leadership Award 2011 in Service/Hospitality Industry at the  World 
Brand Congress 2011 in Dec`11.

* Golden Peacock Award 2011 for CSR at the 6th international conference  on 
CSR in Apr`11.

*  MDPL received the "Golden Peacock Innovation Management Award"  for  the 
year 2011.

* ASIA`s best CSR Practices Award 2011 at Singapore in the category of "The 
Best Corporate Social Responsibility Practice (Overall)".

*  Award  for  "Best Loyalty program" and "Brand excellence  in  Service  / 
hospitality" at the CMO Asia Awards 2011 at Singapore.

*  Mumbai Refinery received "Maharashtra Safety Award 2010"  for  achieving 
longest  accident  free period from National  Safety  Council,  Maharashtra 
Chapter on September 24th, 2011.

*  Visakh refinery was conferred with TOLIC award (Rajbhasha Puraskar)  for 
the year in 2011-12.

*  Conferred  "Forecourt Retailer of the Year" at the  Star  RetailerAwards 
2011 in Dec`11.

*  HPCL  bagged the Star News "Blue Dart World CSR Day  Global  CSR  Awards 
powered  by  Star  News" in two categories, viz.  "Best  Overall  Corporate 
Social  Responsibility  Performance" and "Corporate  Social  Responsibility 
award in the sector of Education".

*  HPCL  received  the  CSR award from  Subir  Raha  Centre  for  Corporate 
Governance  in  4 categories, viz. "Support and Improvement in  Quality  of 
Education",  "Concern  for  Health",  "Community  Development"  and   "Best 
Environmental Excellence".

*  Santacruz  ASF was awarded "Certificate of Merit"  for  achieving  "Zero 
Accident Frequency Rate" for the third consecutive year under  "Maharashtra 
Safety Award Competition -2010".

*  HPCL  received  the "CII Environmental Best Practices  Award  2012"  for 
Vapour Recovery System commissioned at Loni Terminal.

*  MDPL  received  OISD  "1st rank in Cross  Country  Pipelines  -  Product 
Category"  Safety  Award for the year 2010-11, consecutively  for  the  3rd 
year.

*  MPSPL  was awarded "Meritorious Performance in  Industrial  Safety"  for 
Trombay   (consecutively   for  the  5th  year),   Khopoli   and   Talegaon 
(consecutively  for  the 4th year) for the year 2010 from  National  Safety 
Council, Maharashtra Chapter.

* National Award for "Significant Achievements in Employee Relations by the 
Employee Federation of India (EFI) in Oct`11.

* Awarded World Star 2011 for 1 litre size Metalized Rolla-pack  introduced 
for LG.

*  Bagged  IFCA Star Award 2011 for introducing  IML  (In-mould  Labelling) 
technology  in  Lube Industry for HP Milcy Turbo pack &  for  adopting  HTL 
(Heat Transfer Label) for pails, first in Lube Oil Industry.

* Ajmer LPG Plant was declared silver award winner in 12th annual Greentech 
Environment  Award  in Petroleum Sector held at Srinagar on  October  20th, 
2011   for  the  3rd  consecutive  year  for  outstanding  achievement   in 
environment Management.

CORPORATE GOVERNANCE

A  separate  segment  on Corporate Governance forms  part  of  this  Annual 
Report.  However,  it  would  be  relevant  to  point  out  here  that  the 
Corporation  is  giving  utmost importance  to  compliance  with  Corporate 
Governance  requirements including compliance of  regulations,  transparent 
management process, adherence to both internal and external value norms and 
has implemented a robust grievance redressal mechanism.

* Integrity pact

The  Corporation has introduced "Integrity Pact" (IP) to enhance  ethics  / 
transparency  in the process of awarding contracts. A MOU has  been  signed 
with "Transparency International" on July 13th, 2007. HPCL has  implemented 
the Integrity Pact with effect from September 1st, 2007. The Integrity Pact 
has  now  become an integral part of procurement process  for  all  tenders 
above  Rs. 1.0 Crore.

RISK MANAGEMENT

HPCL  has  put  in place a properly defined Risk Management framework. 
Independent  experts have been engaged to ensure the effectiveness of  risk 
management  process  by  adopting best practices  and  also  to  facilitate 
detailed  exercise  on  the  subject, covering  the  entire  gamut  of  the 
Company`s  operations.  The SBUs/Corporate Functions  have  identified  and 
assessed  risks  in  order to determine prioritized risks  based  on  their 
likelihood and impact. The mitigation plans for the prioritized risks  have 
been  devised  by SBUs/Corporate Functions, and the same are  reviewed  and 
monitored periodically.

HPCL  has  laid down Risk Management Charter and  Policy  for  periodically 
informing  Board  members  about  the  risk  assessment  and   minimisation 
procedures.  The  Risk Management Steering Committee  (RMSC)  continues  to 
provide  direction  and guidance for the effective implementation  of  risk 
management  principles  and practices. Risk management is undertaken  as  a 
part  of  normal business practice and is an on-going  process  within  the 
organisation.  The  Company`s  risk management  system  is  integrated  and 
aligned with the corporate and operational objectives.

GLOBAL COMPACT

HPCL  is also a member of the Global Compact Society of India which is  the 
India  Unit  of the United National Global Compact, the  largest  voluntary 
corporate  initiative in the world. It offers a unique platform  to  engage 
companies in responsible business behavior through the principles of  Human 
Rights, Labour Standards Environment norms and Ethical practices. In  HPCL, 
all  these  areas receive constant attention of the  management  to  ensure 
continuous compliance.

OUTLOOK

The  Indian economy faces moderation of growth rate coupled with  high  and 
persistent inflation. The reasons are varied and include among others slow-
down  in investment, supply bottlenecks and rising fiscal deficit. In  this 
environment, Indian economy is projected to grow by about 7% in 2012-13.

The  external environment is not encouraging. IMF is projecting a  drop  in 
global growth from about 4.0% in 2011 to about 3.5% percent in 2012 because 
of weak activity during the second half of 2011 and the first half of 2012. 
The  reacceleration  of activity during the course of 2012 is  expected  to 
return  global  growth  to  about 4.0% in 2013.  Global  economy  is  still 
fragile.  Immediate  concerns relate to escalation of Eurozone  crisis  and 
resultant  flight  from risk as well as higher oil  prices  resulting  from 
geopolitical   uncertainty.   India  is  vulnerable  to   global   economic 
uncertainty in view of high current account deficit.

JOINT VENTURES

The  Joint Venture companies and subsidiaries of HPCL have  performed  well 
during the year 2011-12.

* HPCL-Mittal Energy Ltd. (HMEL)

HPCL-Mittal  Energy  Ltd.  (HMEL)  is a  joint  venture  between  Hindustan 
Petroleum  Corporation  Limited and Mittal Energy Investments  Pte  Limited 
(MEI),  Singapore,  an L N Mittal Group Company, for  implementation  of  a 
green  field  refinery project of 9 MMTPA capacity called the  Guru  Gobind 
Singh  Refinery  (GGSR) Project at Bathinda in the State  of  Punjab.  Both 
partners hold 49% equity stake in HMEL and balance 2% is held by  financial 
institutions i.e. IFCI Limited and State Bank of India.

GGSR  began refining crude oil in Aug`11 and achieved commissioning of  the 
entire project in Feb`12. It is a State of the Art refinery,  incorporating 
latest technology. The refinery has high Nelson complexity index which will 
enable maximizing value added products even from heavy / sour crudes.  GGSR 
is  a  zero bottom refinery incorporating features related  to  liquid  and 
solid waste management.

A green belt around the refinery has been developed. Various  environmental 
protection measures have been incorporated in the design of all  facilities 
viz. Sulphur Recovery Units, Hydro-treaters, Desulphurisation Units, State-
of-the-art  Effluent Treatment Plants, Vapour Recovery Systems and Low  NOx 
Burners in the furnaces.

Single Point Mooring (SPM), Crude Oil Terminal (COT) and the 1,017 km Crude 
Oil  Pipeline (COPL) passing through the States of Gujarat,  Rajasthan  and 
Haryana  has  been  set up by HMEL`s wholly  owned  subsidiary  HPCL-Mittal 
Pipelines Limited (HMPL). The import facility with Single Buoy Mooring,  is 
capable of berthing Very Large Crude Carriers (VLCCs) thus optimizing crude 
oil  transportation cost. The world class Crude Oil Terminal is capable  of 
blending  different  crude  which will enable  procurement  of  variety  of 
crudes.

The  refinery  was dedicated to the Nation by Dr. Manmohan  Singh,  Hon`ble 
Prime Minister of India on April 28th, 2012.

* HPCL Biofuels Ltd. (HBL)

In  line with Government`s policy for blending of ethanol in petrol, a  new 
wholly owned subsidiary company HPCL Biofuels Ltd (HBL) was incorporated on 
October 16th, 2009 to produce ethanol.

Integrated plants with cane crushing capacity of 3,500 TCD with  Distillery 
of  60  KLPD for manufacturing Ethanol and co-gen plant of 20  MW  each  at 
Sugauli  and Lauriya in East and West Champaran Districts in the  State  of 
Bihar have been set up.

During  the crushing season 2011-12, both the plants were commissioned  and 
started   commercial  production  of  sugar,  ethanol  and   power.   Plant 
performance  had been satisfactory and accident free in the first  year  of 
commercial operations.

* CREDA-HPCL Biofuel Ltd. (CHBL)

CREDA-HPCL Biofuel Ltd. (CHBL) was incorporated on October 14th, 2008 as  a 
subsidiary  company  with  equity shareholding of 74% by HPCL  and  26%  by 
Chhattisgarh  State Renewable Energy Development Agency (CREDA) to  venture 
into  alternate fuels. CHBL would undertake cultivation of Jatropha  plant, 
an  energy  crop used for production of bio-diesel, on 15,000  hectares  of 
land leased by the Government of Chhattisgarh.

Production  of bio-diesel and its blending with normal diesel will help  in 
meeting  domestic  demand.  HPCL  shall  have  exclusive  rights  over  the 
producing and marketing of biodiesel and bi-products from the produce.

CHBL  has started acquisition of land for cultivation of jatropha  and  has 
acquired 6,327 hectares of land as on March 31st, 2012. Some land is having 
already  standing  plantations. Maintenance of  jatropha  seedlings/nursery 
plants  is  currently  being  carried  out  on  1,710  hectares  of   land. 
Acquisition  of balance land is in progress and the plantation on the  same 
will  be  undertaken in a phased manner. During 2011-12, CHBL  carried  out 
crushing of jatropha seeds on a trial basis.

* South Asia LPG Co Pvt Ltd (SALPG)

South Asia LPG Co Pvt Ltd (SALPG), a Joint Venture Company with M/s.  Total 
Gas  and  Power  India (a wholly owned subsidiary  of  Total,  France)  has 
commissioned  an  underground  Cavern  Storage  of  60  TMT  capacity   and 
associated  receiving  & despatch facilities at Visakhapatnam  in  December 
2007.  SALPG Cavern is the first of its kind in South and South  East  Asia 
and ranks among the deepest Caverns in the World. The commercial operations 
commenced in January 2008.

During  2011-12, SALPG received 861 TMT of LPG into the Cavern  through  53 
Vessels  including  38 Very Large Gas Carriers (VLGCs). This  has  resulted 
into easing-out the product movement constraints across the east coast  and 
ensured  smooth  availability of LPG in the supply and  surrounding  zones. 
Also,  propane-butane  blender  at  the  Cavern  Terminal  has  helped  Oil 
Marketing  Companies  to  maximise the propane  inputs  into  Visakhapatnam 
considering  the  limited  availability of butane and  price  advantage  of 
propane in the international market.

SALPG  achieved  6%  higher turnover at  Rs. 145.63 Crore  and  15%  higher 
profits (PAT) at  Rs. 73.76 Crore during 2011-12 compared to previous year.

The  Cavern  cum Marine Terminal achieved 1,155,718  Safe  Man-hours  since 
commencement  of commercial operations in January 2008 without a Lost  Time 
Accident. SALPG won British Safety Council International Safety Award  2012 
with  distinction and secured second place in medium scale category in  the 
EHS awards from Confederation of Indian Industry (CII) during 2012-13.

* Hindustan Colas Ltd. (HINCOL)

Hindustan  Colas Ltd. (HINCOL) is a joint venture company promoted by  HPCL 
and Colas S.A. of France and was incorporated on July 17, 1995. HINCOL  has 
grown  steadily  over  the years to establish itself as  the  clear  market 
leader  in  manufacturing  and marketing  of  Bitumen  Emulsions,  Modified 
Bitumen and other value added Bituminous products.

HINCOL  presently  has eight (8) manufacturing plants across  India  HINCOL 
products find extensive use in the road construction industry.

During 2011-12, HINCOL has developed new formulations of bitumen (VG10  and 
VG30).  HINCOL has also started manufacturing of Road Bond at Thane,  Vashi 
and Savli Plant. A new efficient automatic system of drum sealing has  been 
started  at Bahadurgarh. A "Dynamic Shear Rheometer" installed to  evaluate 
rutting  resistance and fatigue resistance properties of bituminous  binder 
and to grade the binders as per Performance Grading Standard. HINCOL is the 
first  non-R&D  institution to have installed this `State of  Art`  testing 
equipment.  HINCOL  implemented  Emulfix  process at  all  the  plants  and 
commenced Emulsion sales from Haldia Plant.

HINCOL  recorded  a production of 146.38 TMT with  turnover  of   Rs.422.43 
Crore  and  earned  net profit (PAT) of  Rs.26.44  Crore.  HINCOL  declared 
dividend of 125% for the year 2010-11.

* Prize Petroleum Company Ltd. (PPCL)

HPCL, in partnership with ICICI and HDFC, had formed a Joint Venture E &  P 
Company  called  Prize Petroleum Company Ltd (PPCL)  for  participating  in 
exploration and production of hydrocarbons on October 28th, 1998. Over  the 
years, Prize Petroleum Company Limited (PPCL) has built up a portfolio of 2 
producing fields and one exploration block.

During  2011-12,  HPCL acquired the entire equity  shareholdings  of  ICICI 
Group  and  HDFC in PPCL and thus PPCL became wholly  owned  subsidiary  of 
HPCL.

PPCL  had  signed  Service Contract with ONGC for  development  of  Hirapur 
marginal field in Cambay Basin with 50% holding in the consortium. PPCL  is 
operator  for  the  field.  During 2011-12, 43,082  barrels  of  crude  oil 
(cumulative  production  of  283,150  barrels  since  inception)  has  been 
produced.  PPCL had also entered into a Production Sharing  Contract  (PSC) 
with  50%  Participating  Interest in Sanganpur Block  as  Joint  Operator. 
During  2011-12, 506 barrels of crude oil (cumulative production of  12,248 
barrels   from  inception)  has  been  produced.  The  crude  produced   is 
benchmarked to Bonny light crude.

The  company was awarded South Rewa Block in Madhya Pradesh  under  NELP-VI 
which  is  the biggest onshore exploration Block with 13,277 sq.  km  area. 
PPCL  is  the  Operator  for this block.  During  2011-12,  processing  and 
interpretation  of 2D (2,050.68 lkm of full fold) and 3D (303.96  sq.km  of 
full  fold)  seismic  data  has been completed.  Basis  this,  three  major 
prospects  were  identified  for drilling of wells,  as  committed  in  the 
Minimum  Work Program. API of Geochemical Survey awarded to NGRI  has  also 
been  completed.  The  result of the survey is used for  analysis  of  soil 
samples to identify concentration and or presence of light hydrocarbons  in 
the block.

PPCL  bagged onshore exploration block (401sq. kms area) in  Tripura  along 
with  consortium partner ABG Energy Limited (ABG) in NELP IX. PPCL  is  the 
operator  for this block with a participating interest of 20% and  will  be 
"carried" during the initial exploration phase. In the event of  commercial 
discovery and consortium entering the Development phase, PPCL will pay only 
10%  for  the  past  cost (which will be  recovered  by  ABG  from  `profit 
petroleum`) and will continue to hold 20% participating interest.

* Petronet MHB Ltd. (PMHBL)

HPCL, along with Petronet India Limited (PIL) promoted Petronet MHB Limited 
(PMHBL) for construction of Mangalore-Hassan- Bangalore Pipeline at a  cost 
of  Rs. 667 Crore with debt equity ratio of 3:1. The joint venture  company 
was  incorporated on July 31, 1998. Initially PIL & HPCL  each  contributed 
26%  towards equity. ONGC joined as a strategic partner in PMHBL by  taking 
23%  equity  in April 2003. Post debt restructuring of  PMHBL,  the  equity 
holding  of HPCL & ONGC increased to 28.766% each and PIL`s equity  holding 
decreased to 7.90%.The Pipeline is meeting the transportation needs between 
Mangalore-Hassan-Bangalore.

During  2011-12,  PMHBL achieved 7.57% higher throughput at  2.771  MMT  as 
compared  to 2.576 MMT in 2010-11. Revenue generation was higher by  10.16% 
at  Rs. 86.64 Crore as compared to  Rs. 8.65Crore in the previous year.

PMHBL  Integrated  Management System is certified by DNV  covering  Quality 
Management System-ISO-9001-2008, Environmental Management System-ISO-14001-
2004 and OHSAS-18001-2007.

GPRS  based Security Tracking System (STS) was commissioned for  monitoring 
movement  of  security line walker`s movement on PMHBL Right of  Use  (ROU) 
land.  Telecom System up-gradation & CCTV camera installation were  carried 
out at PMHBL Main Stations.

* Bhagyanagar Gas Ltd. (BGL)

Bhagyanagar  Gas  Limited (BGL) was incorporated on August 22,  2003  as  a 
Joint  Venture  Company by GAIL (India) Ltd and HPCL for  distribution  and 
marketing  of environmental friendly fuels (green fuels) viz. CNG and  Auto 
LPG  for  use in the transportation, domestic,  commercial  and  industrial 
sectors, in the state ofAndhra Pradesh.

BGL  has  been  authorized  to set up City  Gas  Distribution  networks  in 
Hyderabad, Vijayawada and Kakinada by MOP&NG and PNGRB.

During 2011-12, BGL commissioned Mother Station at Shamirpet, Hyderabad and 
Vakalpudi,  Kakinada.  BGL  also commissioned one online  CNG  stations  at 
APSRTC depot, two Daughter booster CNG stations in APSRTC depotsat Hakimpet 
and Cantonments and 4 CNG DBS retail stations in Hyderabad /  Secunderabad. 
Project work in respect of three CGD Projects at Hyderabad, Vijayawada  and 
Kakinada  are in progress. BGL has started supplying PNG to  households  at 
Shamirpet and Medchel in Hyderabad. For Industrial and Commercial PNG,  BGL 
has signed Heads of Agreement with various industrial and commercial  units 
for  supply  to  the tune of 0.376 MMSCMD in Hyderabad and  0.2  MMSCMD  in 
Kakinada.

* Aavantika Gas Ltd. (AGL)

Aavantika  Gas  Ltd  (AGL) was incorporated on June 07,  2006  as  a  Joint 
Venture  Company  by  GAIL  and HPCL  for  distribution  and  marketing  of 
environmental friendly fuels (green fuels) viz. CNG and Auto LPG for use in 
the  transportation,  domestic, commercial and industrial  sectors  in  the 
State of Madhya Pradesh.

AGL  has been authorized by MOP&NG as well as PNGRB for carrying  City  Gas 
Distribution  (CGD) operations at Indore, Ujjain and Gwalior.  The  company 
commenced commercial operations in the year 2008.

During  2011-12,  the company commissioned one online  station  at  Gwalior 
marking  the starting of business operations at Gwalior. With this  AGL  is 
now present in all three cities viz. Indore, Ujjain and Gwalior, for  which 
AGL  has  been  authorised. AGL also commissioned  one  online  station  at 
Indore. AGL now operates 11 CNG stations - 7 daughter stations (5 at Indore 
and  2 at Ujjain), 3 online stations (2 at Indore and 1 at Gwalior)  and  1 
mother station at Indore.

AGL also started supplying PNG to domestic customers from Dec`11. With this 
AGL  is  now  present  in  all  the  4  business  segments  viz.  CNG   for 
Transportation  sector  and  PNG for industrial,  commercial  and  domestic 
sectors.  Work  for construction of Mother Station at  Gwalior  is  nearing 
completion  and is expected to be commissioned by May/Jun`12. During  2011-
12, AGL achieved turnover of Rs. 54.73 Crore registering a growth of 141  % 
over previous year.

MANGALORE REFINERY AND PETROCHEMICALS LTD. (MRPL)

HPCL  holds  an  equity of 16.95% in the 9  MMTPA  Mangalore  Refinery  and 
Petrochemicals Ltd. (MRPL). HPCL and MRPL have been exchanging intermediate 
process streams between their refineries to supplement efforts to meet  new 
environmental  norms  in respect of products like MS and  HSD  on  mutually 
agreed terms.

MRPL declared a dividend of 10% for 2011-12. 

CAUTIONARY STATEMENT

Matters   covered  in  the  Management  Discussion  and  Analysis   Reports 
describing  the Company`s objectives, projections, estimates,  expectations 
may  be  "forward  looking statements" within  the  meaning  of  applicable 
securities  laws  and regulations. The actual performance could  vary  from 
those projected or implied. Important or unforeseen factors that could make 
a  difference  to  the Company`s operations  includes  economic  conditions 
affecting  demand / supply and price conditions in the domestic  market  in 
which the company predominantly operates, changes in regulations and  other 
incidental factors.

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