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Hindustan Petroleum Corporation Ltd - Directors' Report

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DEAR MEMBERS

On behalf of the Board of Directors it gives me immense pleasure inpresenting to you the sixty-fifth Annual Report on the Performance of the Corporationtogether with the Audited Financial Statements for the financial year ended March 312017.

HIGHLIGHTS
(` / Crores)

Consolidated

Standalone
2016-17 2015-16 2016-17 2015-16
FINANCIAL PERFORMANCE
Sales/Income from Operation 213904.15 197655.81 213488.95 197437.53
Profit before Depreciation Interest and Tax (PBDIT) 14583.03 10304.37 12091.77 9083.45
Depreciation & Amortization Expenses (2776.37) (2846.09) (2535.28) (2653.21)
Finance Cost (609.24) (723.18) (535.65) (653.60)
Profit before Tax (PBT) 11197.42 6735.10 9020.84 5776.64
Tax Expenses (2961.60) (2060.41) (2812.04) (2050.48)
Profit after Tax (PAT) 8235.82 4674.69 6208.80 3726.16
Balance brought forward from previous year 13498.08 10421.72 14740.12 12621.96
Amount available for Appropriation
Appropriations/Others:
Debenture Redemption Reserve (net) - 148.17 - 148.17
Dividend (3477.70) (1456.10) (3477.70) (1456.10)
Tax on distributed profits (707.98) (296.43) (707.98) (296.43)
Other Comprehensive Income that will not be (16.78) (3.62) (15.49) (3.64)
reclassified to profit or loss(Net of tax)
Other Appropriations - 9.65 - -
Balance carried forward 17531.44 13498.08 16747.75 14740.12
SHAREHOLDERS' VALUE (`)
Earnings per Share 81.07 46.02 61.12 36.68
Cash Earnings per Share 116.06 81.39 92.26 70.05
Book Value per Share 207.42 164.03 200.29 176.89

* The Financials for the year 2016-17 and 2015-16 have been preparedunder Ind AS

PHYSICAL PERFORMANCE (MMT ) 2016-17 2015-16
Market Sales (Including Exports)# 35.22 34.21
Crude Thruput:
Mumbai Refinery 8.51 8.01
Visakh Refinery 9.30 9.22

# Market sales (Including Exports) as per Ind AS is 35.23 MMT for FY2016-17 and 34.19 MMT for FY 2015-16.

SALES/INCOME FROM OPERATIONS

Your Corporation has achieved Sales/Income from operations of ` 213488.95crores in 2016-17 as compared to ` 197437.53 crores in 2015-16 on standalone basis.

PROFIT

Your Corporation has earned Gross Profit of ` 12091.77 crores in2016-17 as against ` 9083.45 crores in 2015-16 and profit after tax of ` 6208.80crores in 2016-17 as compared to ` 3726.16 crores in 2015-16 on standalone basis.

DIVIDEND

The Board in its meeting held on February 13 2017 declared an interimdividend of ` 22.50 per share. Further the Board in its meeting held on March 23 2017declared second Interim Dividend of ` 6.40 per share. The total interim dividend declaredis ` 28.90 Per Share.

The Board of Directors after taking into account the Financial Resultsof the Corporation during the year have recommended dividend of `1.10 per share (2015-16: ` 16 per share). The total dividend for the year 2016-17 works out to ` 30.00 per shareas against ` 34.50 per share for the year 2015-16.

The amount of proposed dividend totaling to ` 111.75 crores inclusiveof ` 22.75 crores for Corporate Dividend Tax on distributed profits shall be dispensedfrom the profit after tax for the year.

BONUS SHARES

Pursuant to the approval of the Shareholders in its meeting dt. Sept.08 2016 your company has issued bonus shares in the ratio of two equity shares of ` 10/-for one existing equity share of ` 10/- each in September 2016.

Further the Board of Directors in their meeting dated 26thMay 2017 have recommended the issue of Bonus shares in the ratio of one equity share of `10 /- for two existing equity shares of ` 10 each.

INTERNAL RESOURCES GENERATION

The Internal Resources generated during the year were ` 5534.65crores as compared to ` 5421.69 crores in 2015-16 on standalone basis.

CONTRIBUTION TO EXCHEQUER

Your Corporation has contributed a sum of ` 65674.37 crores to theexchequer during the year by way of duties and taxes as compared to ` 52234.73 crores in2015-16 on standalone 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 forthe year 2016-17 qualifies for "Excellent" rating basis self-evaluation.

REFINERY PERFORMANCE

FY 2016-17 was a stellar year for your refineries which have recordedthe best ever crude processing with a combined refining throughput of 17.81 MMT surpassingprevious year's thruput of 17.23 MMT with a capacity utilization of 113 %. Thisimprovement in performance could be achieved by sustaining the good endeavours viz.sustained equipment reliability timely shutdown adherence and commendable operationaldiscipline.

Higher crude processing translated into enhanced production ofpetroleum Products with your refineries recording best ever LPG (840 TMT) MS (3286 TMT)HSD (6962 TMT) LOBS (431 TMT) and Bitumen (1216 TMT) production respectively.

In a continuous effort to upgrade the product quality and forcompliance to BS IV specification Motor Spirit ("MS") and High Speed Diesel("HSD") necessary modifications in this aspect were completed. Thus yourrefineries have successfully switched over complete production of MS and HSD to BS IVspecification much in advance of April 2017 the timeline given by MoP&NG.

With Sustained commitment towards environmental protection yourCorporation has always been a frontrunner to implement initiatives for reduction ofemissions Mumbai refinery has successfully ensured mechanical completion of Tail GasTreating Unit (TGTU) in the Sulphur recovery Train at DHDS the technology which wasoffered by M/s Engineers India Limited (EIL). Visakh refinery has successfullycommissioned Tail Gas Treating Unit (TGTU) in DHDS SRU III. With this all the SRUs atVisakh refineries have TGTU facilities.

Continuing its focus towards a safe and secure work environment bothrefineries have put in place a robust system to bring in safety awareness amongstpersonnel in their respective assignments on a regular basis. Both refineries haveundertaken safety Management evaluation by external agencies. In this year Mumbairefinery has achieved best ever safety record since its inception with 18.33 Million SafeMan Hours as of 31st March 2017 i.e. 2092 incident free days since 7/10/2011.

The planned capacity enhancement under Mumbai Refinery Expansion Plan(MREP) to 9.5 MMTPA and Visakh Refinery Modernization Plan (VRMP) to 15 MMTPA has obtainedall the necessary statutory clearances during the year. Basic engineering for the packageis completed and residual process engineering finalized. Projects team has been workingrelentlessly to manage space for the projects by site clearance activities throughreorientation/removal of old assets. The project includes Bottoms Upgradation and BS VIfuel production in compliance to GOI guidelines for Implementation by 1st April 2020.

Your Corporation's R&D Centre at Bengaluru was dedicated tothe nation by Hon'ble Minister of State – Independent charge Ministry ofPetroleum & Natural Gas. The facility has worked on number of technologies /productsviz. H2 PSA Technology HPFurnOKare SprayMax FCC Feed Nozzle HP-ENOCT HP-DAK to name afew. During 2016-17 13 Indian and 13 International Patents have been filed and two keytechnologies have been developed/ demonstrated on a commercial scale.

The particulars with respect to conservation of Energy TechnologyAbsorption Foreign Exchange Earning & Outgo are detailed in

Annexure I.

The particulars relating to control of Pollution and other initiativesby Refineries are listed in Annexure II. Operating Performance of Refineries(Refinery-wise ):

Parameter Unit Mumbai Refinery Visakh Refinery
Crude Thruput TMT 8510 9304
Capacity utilization % 113 112
Distillate yield % 77.7 74.0
Fuel & Loss % 7.2 7.3
Specific Energy Consumption* MBTU/BBL/ NRGF 87.9 78.9
Gross Refinery Margin $/Bbl 6.95 5.51

* Specific Energy Consumption for the year is as per CHT New MBN method

MARKETING PERFORMANCE

The year 2016-17 saw your Corporation benefiting from the strategicplans implemented across different business verticals which include several meticulouslyexecuted customer-centric initiatives at its Retail LPG Institutional GovernmentAviation Lubes Gas and Renewables marketing streams.

Your Corporation has reinforced its winning streak by recording a bestever physical performance during 2016-17 by achieving a sales volume of 35.22 MillionTonnes (including exports) compared to sales of 34.21 Million Tonnes during the previousyear 2015-16. In the Domestic sales segment your Corporation recorded a growth of 2.5%over previous year volume. Amongst public sector oil companies your Corporation hasincreased its market share by 0.16% to reach a market share of 23.63% (excluding Petcoke/LNG) as on 31st March 2017.

In the mainstay Motor-Fuel segment your Corporation has achieved asales volume of 22.78 Million Tonnes and increased its market share in MS and HSD(combined) by 0.08%. Strategic expansion of its network saw the commissioning of 624 newretail outlets during 2016-17 which include 209 retail outlets positioned to cater tocustomers in rural areas. The network reach has further spread and deepened acrossmarkets with the retail outlet strength rising to 14412 by the year end.

Your Corporation has also significantly improved its market share inother key customer segments i.e. Diesel (Retail & Direct Consumers) LSHS BitumenLubricants Aviation Fuel & LPG which have contributed to its top line and bottomline.

Domestic LPG marketing is a vital part of your Corporation andunremitting focus has been given to maintaining excellence in all customer service areasacross India. A significant addition to the customer base has made through the noblePradhan Mantri Ujwala Yojana (PMUY) by which your Corporation has strived to reach thebenefit of this user friendly fuel to persons at the bottom of the pyramid.

An enrolment of 87.07 Lakhs new LPG Gas (Domestic) customers has beencompleted during the year which includes 53.85 Lakhs customers enrolled under PMUY during2016-17. Your Corporation's domestic LPG customer base now stands at a robust 612Lakhs wherein the domestic fuel quantity supplied during the financial year 2016-17stands at 4.89 Million Tonnes. Another path breaking initiative piloted by the governmentis the "#GiveItUp" campaign by which more than 30 Lakhs consumers of domesticLPG have been motivated give up LPG Subsidy which has helped in a significant way topromote the PMUY programme.

In the Aviation Business Line your Corporation achieved a sales volumeof 691 TMT and increased its market share by 0.34% amongst PSU companies and is nowsupplying Jet Fuel to all the ten scheduled domestic airlines of the country.

Your Corporation has maintained its pole position in the significantlyprofitable Lubricants business segment in the Indian market in which players from the MNCsegment private sector and public sector are very active. Your Corporation has created anew sales benchmark with an all-time high total Lubes sales of 607 TMT during the year bywhich it has retained its No. 1 position for the fourth year in succession.

Your Corporation continued to focus on enhancing the efficiency andreliability in operations of the O&D assets which has helped to register the highestever throughput of 47 MMT through its POL installations. Simultaneously your Corporationhas also achieved an all-time high pipeline thruput of 17.9 MMT during the year whichcommensurately aided in minimizing the product placement costs. Your Corporation hasalways considered supply and distribution infrastructure to be the essential corner-stonewhich determines the success of its long term business development plans. Close monitoringof infrastructure development projects during the Financial Year 2016-17 has led tocreation of facilities at important greenfield locations and significant enhancement ofcapacity and handling capabilities at existing brownfield supply locations across thecountry. Thrust on strengthening infrastructure saw the commissioning of a new LPGBottling Plant at Bhopal in the State of Madhya Pradesh and commissioning of MangaloreHasan Solur Mysore LPG Pipeline (MHSMLPG) in Karnataka State.

Your Corporation has played well its role as a conscientious corporatecitizen in two other important government led initiatives i.e. Swachh Bharat Abhiyan(SBA) and thrust towards Digital Payments vis--vis cash based transactions.

In support of SBA 89 Toilet blocks were constructed in villages andschools for the benefit of people in the vicinity of our supply locations. Retail Outletslocated on the country's Highway being an important touchpoint for the travelingpublic exclusive toilet facility for Ladies at 330 Retail Outlets has been developedduring the year supplementing the existing Gents toilets at these locations.

At your Corporation 99.8% of the payment receipts from institutionalcustomers dealers and other business associates is through digital i.e. electronicpayment routes. The Retail Outlet and LPG Distributor networks of your Corporation playeda vital role during the de-monetisation as one of the points authorized by the governmentto accept high denomination notes thereby creating substantial goodwill amongst thecitizens served by them. Hand in hand with the above your Corporation's Retail andLPG network also single-mindedly strived to motivate customers to adopt digital paymentsas a way of life e.g. Bank Debit Cards payment with ‘nil' bank charges Mobilewallet payment etc.

Many of the products handled being intrinsically vulnerable from firesafety standpoint your Corporation has exercised the maximum care throughout thelogistics chain. Constant vigilance in this regard has enabled your Corporation topractically eliminate serious incidents across the supply network during the year.

Your Corporation vigilantly monitors the emerging trends in the marketplace as well as the continuously evolving customer preferences. These are continuouslyanalysed for developing and implementing strategic initiatives repositioning of itsproducts and services as per the evolving market needs along with a sustained effort tomake the best use of technology to engage customers in innovative and impactful ways.

A detailed discussion of the performance of the Marketing function isgiven in the Management Discussion & Analysis.

TREASURY MANAGEMENT

During the year the company has repaid Long Term External commercialborrowings (ECB) of USD 1000 million (` 6813 crores). Your Corporation effectively used avariety of borrowing instruments to optimize its cost of borrowings. The short termborrowing requirements was met through Collateralized Borrowing and Lending Obligations(CBLO) Commercial Papers (CP) MIBOR Linked Loan USD Revolving Line of Credit (RLC) andCash Credit facility from consortium banks. Effective Treasury management and timelyhedging of LIBOR interest rate risk resulted in reduction in interest cost of theCorporation from ` 654 crores during FY 2015-16 to ` 536 crores during FY 2016-17.

Temporary surplus of funds were invested at best rates derivingsubstantial income on such investment. These funds were invested in term deposit withpublic sector banks debt schemes of public sector mutual funds and Treasury Bills. Theincome from temporary surplus funds was increased from ` 51 crores in financial year2015-16 to ` 126 crores in financial year 2016-17.

Your Corporation was able to retain long term issuer rating of"Baa3" with positive outlook from M/s. Moody's Investors Services and BBB-rating from Fitch Ratings with "stable" outlook. Both ratings are at par withsovereign rating.

INTERNAL FINANCIAL CONTROLS

Your Corporation has adequate Internal Financial Controls for ensuringthe orderly and efficient conduct of its business including adherence to theCorporation's policies; the safeguarding of its assets; the prevention and detectionof frauds and errors; the accuracy and completeness of the accounting records; and thetimely preparation of reliable information which is commensurate with the operation ofthe Corporation. As part of this exercise the design of internal controls and itsoperating effectiveness for the key business processes is tested by independent experts.Based on the review carried out independent experts have confirmed that they aresatisfied with the effectiveness and adequacy of Internal Controls over FinancialReporting. The entire activity of review and assessment of Internal Controls is carriedout under the guidance of a Core Committee set-up for this purpose.

RISK MANAGEMENT POLICY

Your Corporation has adopted a well-defined process for managing itsrisks on an ongoing basis and for conducting the business in a risk conscious manner.These self-regulatory processes and procedures are contained in our Risk ManagementCharter and Policy 2007. The Corporation has a structured and comprehensive RiskManagement Framework under which the risks are identified assessed monitored andreported as a part of a normal business practice. Your Corporation has leveragedtechnology to seamlessly integrate and automate the entire process of risk monitoring andreporting which also facilitate company-wide process of managing the risks. Our riskmanagement system is fully aligned with the corporate and operational objectives.

The Corporation has engaged the services of an independent expert toassist in continued implementation of effective Risk Management Framework. In thatdirection Risk Management Steering Committee (RMSC) continues to provide its guidance.Your Corporation has put in place mechanism to inform Board Members about the riskmanagement and minimisation procedures and periodical review to ensure that executivemanagement controls risks by means of a properly defined framework.

VIGILANCE

The vigilance function of your Corporation in addition to its regularduties has regularly interacted with other functions for promoting awareness amongstusers about the proper method for achieving set objectives while complying with system andprocedure guidelines and other rules of your Corporation.

During the year based on the theme of Public Participation inpromoting integrity and Eradicating Corruption a campaign was launched for administeringE-Integrity Pledge. More than 12000 E-Integrity pledges were taken by employees and otherstakeholders like vendors dealers etc.

Interactions with employees including new recruits and otherstakeholders were held. Also surprise inspections were carried out. Co-ordination withagencies like CBI CVC Vigilance wing of MOP&NG etc. was done apart from carrying outinvestigation of complaints received from offices of MOP&NG CVC CBI and othersources.

Review of operating areas for such as Terminal Automation systemactivities of R&D centres Outlet Diagnostic and Monitoring Tool etc. for systemimprovement was also carried out during the year.

INDUSTRIAL RELATIONS

As a result of proactive approach Industrial Relations remained alsoharmonious across the Corporation. It is worth mentioning that not only there was no lossof productivity due to IR issues the year also witnessed productivity increase acrosslocations which amply demonstrates the maturity of our Unions and commitment of employees.Various Settlements were signed with the Unions in the areas of Productivity EnhancementRedeployment etc. which is the outcome of Trust and the healthy IR climate in yourCorporation.

The Corporation took proactive steps to ensure that all our contractworkmen were covered under Pradhan Mantri Jan Dhan Yojana and Prime Minister Suraksha BimaYojana. To promote Digital India and cashless economy it was ensured that all ContractLabour deployed across your Corporation are paid their wages through National ElectronicFund Transfer ("NEFT"). Further various programs across your Corporation wereorganized for Contract workmen so that they can use various modes of cashless payments. Atyour Corporation we believe that safety and wellbeing of all stake holders includingContract Workmen is of paramount importance. Under the ( ‘Prerna' ) programlaunched by the Corporation to imbibe safe work culture and improve well-being of contractworkmen 109 ‘Prerna' Programs covering 5153 Contract workmen were conductedduring year 2016-17.

This year also your Corporation has been conferred with the prestigious"Global HR Excellence Award" for "Organization with Best Employee RelationPractices" at a ceremony held during the 25th edition of World HRD Congress onFebruary 15 2017 at Mumbai.

OFFICIAL LANGUAGE IMPLEMENTATION

Your Corporation gives significant importance towards implementation ofOfficial Language. Keeping in mind the harmony encouragement and motivation necessarycompliance of constitutional provisions pertaining to Official Language is ensured byusing hindi as business language. By using Modern technology use of Hindi is ensured inthe field of Information Technology. Through MOP&NG OL Conference All India HindiMahotsav Official Language Conferences competitions and Hindi workshops your Corporationcreates awareness among its employees for progressive use of Hindi. Your Corporation hasheaded Mumbai (PSU) Town Official Language Implementation Committee since 1983 and hasbeen awarded by Official Language Dept. GOI and has been appreciated by Secretary-OL MHAGOI. Thus your Corporation also provides guidance to the other Public Sector Undertakingsfor OL Implementation.

Your Corporation has bagged 37 awards in Official LanguageImplementation including Petroleum and Natural Gas OL Shield for last two consecutiveyears thus maintaining a lead position in the entire Oil Industry for which specialappreciation has been received from the Ministry of Petroleum & Natural Gas.

CORPORATE SOCIAL RESPONSIBILITY

Your Corporation has taken a leap forward this year in direction ofachieving its corporate vision by meeting its social commitment through taking stepsbeyond the mandates of various statutes and guidelines. Continuing with efforts to createa heathy educated and empowered nation your Corporation has spent its CSR Budget in theareas of Child Care Education Health Care Sports Skill Development Environment andCommunity Development. Your Corporation believes in creating social capital for thecommunity as well as business through its CSR efforts to accelerate social development.

Your corporation collaborated and undertook innovative CSR projects inthe year 2016-17 that brought together collective efforts to positively impact the qualityof life of those who are marginalized and less privileged. The focused efforts of yourCorporation towards social development through creation of community infrastructure andsocial intervention has led to empowerment and socio-economic welfare of the hostcommunities.

Your Corporation is constantly adding value to the sustainablesolutions to societal problems and all the CSR activities of the Corporation has remainedaligned with National Developmental Policies & Programs and has followed the standardsof Global Developmental Practices. The projects and intervention models have been able tomake sustained and long term impacts on the society. Your Corporation has adopted thestrategy of ‘Bridging the Gaps' by identifying gaps in the existing system andnarrowing them rather than creating new parallel systems.

As a conscientious Corporate citizen recognizing the need of ChildCare a model of inclusivity and equal opportunity was created by your Corporation underproject ADAPT. Through therapies special education and skill development the projectmakes special children independent and also sensitizes the stakeholders at large to acceptthem as equal members of society.

Your Corporation's CSR Projects are in sync with Government'sfocus on education and girl child. Project ‘Nanhi Kali' contributes to educationof girl child and women empowerment through proper academic material and social support.This results in reducing the school dropout and holistic development of girl child.

Project ‘Akshayapatra' supplements the efforts of GovernmentMid-Day Meal Scheme resulting in reduction in mal-nutrition and improved schoolattendance.

Project ‘Unnati' aims to support the Digital Indiainitiative by spreading computer literacy among the school children from under privilegedcommunities in semi urban and rural areas.

Project ‘Agastya' ignites the curious minds of the schoolchildren by fueling scientific temper at the young age. The mobile science labs providethe infrastructure and learning opportunities for the same.

As a part of focus on health care amongst other projects our project‘Dil without Bill' offers free heart surgeries for patients belonging toeconomically weaker section. Beneficiaries are identified through medical camps indifferent parts of the country.

17 Mobile Medical Vans under Project ‘Dhanwantari' providesfree basic health care facilities in the ‘last mile connect' to the remotestparts of the country and urban slums. This is achieved by providing facilities at thedoorsteps of the community.

Long Distance Truck drivers are the most vulnerable in our supplychain. To address their sensitive issues of STIs and HIV/AIDS Project Suraksha reachesout to them by offering free medical consultation counselling and other outreach servicesthrough ‘Khushi Clinics' at our retail outlets on Highways.

Your Corporation has been at the forefront of Skill India Mission andhas been providing skill training to youth from under privileged areas. Project‘Swavalamban' trains school dropouts in various skill trades like automobilehospitality welding driving construction etc. enhancing their employability. Theproject also covers difficult geographical areas which includes naxal affected areas andconflict areas of J&K.

Your Corporation is establishing Indian Institute of Petroleum andEnergy Visakhapatnam and has also contributed to the Skill Development Institutes atVisakhapatnam and Kochi. These initiatives will result in promoting higher education andemployability skills.

To address the needs of the host communities number of developmentprograms were implemented to reach out to the last mile of population. Programs likedevelopment of Rain shed bio-industrial areas organic farming farmers cooperatives andself-help groups etc. were executed through community participation.

Your Corporation has enthusiastically participated in ‘SwachhBharat Abhiyan' by engaging all its stakeholders including employees and citizensalike. Corporation focused on creation of infrastructure for sanitation and awarenessamong masses. Beneficiaries of CSR Projects also actively participated in the Abhiyan.Your Corporation also collaborated with Municipal Corporations and Panchayats in variousstates for achieving the objectives of Swachh Bharat Abhiyan.

Supporting the goals of Make in India and Stand Up India we have aunique Entrepreneurship Development Project for aspiring youth from SC and ST Communities.This program trains entrepreneurs on all round aspects of a startup.

To energize the academic talent among meritorious students from SC STOBC and PWD Communities scholarships worth ` 6.03 Crores were distributed to 10932school and college students.

Your Corporation was the proud winner of the Platts Global EnergyAward-2016 for Corporate Social Responsibility and gained recognition at the internationallevel. The judges acknowledged the work of Your Corporation by saying that "nobody..and we mean nobody does CSR better than your Corporation".

Your Corporation has endeavoured to ensure the maximum impact from thewell planned initiatives undertaken during the year with the expenditure beingcommensurate with the mandatory average net profit of the company for last three financialyears. The details of CSR activities of your Corporation containing details of CSRCommittee Members brief outline of the CSR policy overview of the CSR initiatives weblink of CSR Policy projects and Programmes prescribed expenditure amount spent etc.forming part of Director's report are provided in Annexure III

CORPORATE GOVERNANCE

Your Corporation continues to adopt the best practices of CorporateGovernance to ensure transparency integrity and accountability in its functioning. Thecorporate Governance Report highlighting these endeavours has been incorporated as aseparate section forming part of the Annual Report.

PROCUREMENT OF GOODS & SERVICES FROM MSES

In line with the Public Procurement Policy for Micro & SmallEnterprises (MSEs) Order 2012 for the year 2016-17 against the set target of 20 % yourCorporation has achieved 33.72% (` 2519 Crores) procurement of goods and services fromMicro & Small Enterprises (MSEs).

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

Your Corporation's emphasis is to provide a Safe Workplace for itsemployees. During the year ending 31.03.2017 neither any complaint of sexual harassmenthad been filed nor any complaint pending for enquiry. Further your Corporation hasconducted one workshop for the members of Internal Complaint Committee formed as per theprovision of the Sexual Harassment of Women at Workplace (Prevention ProhibitionRedressal ) Act 2013 at Hyderabad.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

A detailed Management Discussion and Analysis Report forms part of thisAnnual Report.

FINANCIAL STATEMENTS OF SUBSIDIARIES

In terms of Proviso to Section 136 (1) of the Companies Act 2013 theCompany will place separate audited accounts in respect of each of its subsidiary on itswebsite & also provide a copy of separate audited financial statement in respect ofeach of its subsidiary to any shareholder of the company who asks for it. The FinancialStatements of the subsidiary companies will also be kept open for inspection at theregistered office of the Company and that of the respective subsidiary companies.

Pursuant to provisions of Section 129(3) of the Companies Act 2013 aseparate statement containing salient features of the Financial Statement ofSubsidiary/Associate/Joint Venture Companies in Form AOC-1 is attached along withFinancial Statements.

COST AUDIT

The Cost Audit for the financial year 2015-16 was carried out and theCost Audit Reports were filed with the Ministry of Corporate Affairs before the stipulateddate of filing.

DIRECTORS

Your Corporation's Board presently comprises of 11 Directors. TheWhole Time Directors are Shri Mukesh Kumar Surana (Chairman

& Managing Director) Shri Pushp Kumar Joshi (Director – HumanResources) Shri J. Ramaswamy (Director- Finance) Shri S. Jeyakrishnan (Director –Marketing) and Shri Vinod S. Shenoy (Director – Refineries).

Shri J Ramaswamy is also the Chief Financial Officer (CFO) of theCorporation in terms of requirement of Section 203 of the Companies Act 2013.

The Government Directors are Ms. Urvashi Sadhwani and Shri SandeepPoundrik. The Part Time Non Official Directors (Independent) are Shri Ram Niwas Jain Smt.Asifa Khan Shri G.V. Krishna and Dr. Trilok Nath Singh.

As per the provisions of Section 152 of the Companies Act Shri SandeepPoundrik and J. Ramaswamy retire by rotation at the next Annual General Meeting and beingeligible offer themselves for re-appointment.

DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED ORHAVE RESIGNED DURING THE YEAR

Appointment:

O Shri S. Jeyakrishnan Director Marketing (Whole Time Director)& Shri Vinod S. Shenoy Director Refineries (Whole Time Director) were appointed asAdditional Directors on the Board of your Corporation effective 01.11.2016.

O Smt.Asifa Khan and Shri G.V. Krishna were appointed asNon-Official Independent Directors on the Board of your Corporation effective 13.02.2017.

O Dr. Trilok Nath Singh was appointed as Non-Official IndependentDirector on the Board of your Corporation effective 20.03.2017.

Cessationship:

O Shri B. K. Namdeo Director Refineries (Whole Time Director) andShri Y.K. Gawali Director Marketing (Whole Time Director) have ceased to be Directors ofthe Corporation effective 31.10.2016 on attaining the age of superannuation.

The Board places on record its sincere appreciation for the valuableservices rendered by the above Directors during their tenure as Directors of theCorporation.

NUMBER OF MEETINGS OF THE BOARD

During the year 10 (Ten) Board meetings were convened and held. Thedetails of the Board Meetings are given in Corporate Governance Report.

MANAGERIAL REMUNERATION & PARTICULARS OF EMPLOYEES

Your Corporation being a Govt. Company is exempted to furnishinformation under Section 197 of companies Act 2013 vide Ministry of Corporate Affairs(MCA) Notification dated 05/06/2015.

There was a reference by C&AG with regard to the requirement ofshift allowance being part of allowances within the ceiling of 50% of Basic pay.Corporation has represented on this matter to MOP&NG.

The details regarding the number of women employees vis--vis thetotal number of employees in each group is also given as herein below:

Group Total No. of No. of Women % of Women
Employees Employees Employees
A 5858 610 10.41
B* - - -
C 3796 289 7.61
D 768 20 2.60
TOTAL 10422 919 8.82

*Your Corporation has no posts classified under group ‘B' asthe entry in non-management grades has been re-classified in group ‘C' effective1.1.1994.

PERFORMANCE EVALUATION OF BOARD ITS COMMITTEES AND INDIVIDUALDIRECTORS

Your Corporation being a Government Company the PerformanceEvaluation of the Company is carried by the Administrative Ministry i.e. Ministry ofPetroleum and Natural Gas (MOP&NG) through the process of Memorandum of Understandingin each Financial Year. Further there is also performance evaluation of FunctionalDirectors by MOP&NG. As per MCA Notification dated

5th June 2015 Compliance of Section 134 (3) (p) areexempted for Government Companies as Performance Evaluation of Directors are carried outby the MOP&NG as per its own evaluation methodology.

DECLARATION BY INDEPENDENT DIRECTORS

All Independent directors have given a declaration that they meet thecriteria of independence as laid down under Section 149(6) of Companies Act 2013 and SEBI(Listing Obligations & Disclosure Requirements) Regulations 2015. Statement ofdeclaration required under Section 149(6) have been obtained from the IndependentDirectors.

POLICY FOR SELECTION AND APPOINTMENT OF DIRECTORS AND THEIRREMUNERATION

Your Corporation being a Government Company is exempted to furnishinformation under Section 134 (3) (e) of the Companies Act 2013 vide MCA Notificationdated 05.06.2015.

POLICY FOR REMUNERATION OF KEY MANAGERIAL PERSON AND OTHER EMPLOYEE

Your Corporation being a Central Public Sector Enterprise theremuneration payable to Key Managerial Persons and other employees are fixed by theGovernment of India. However payment like Performance Related Pay is placed for theapproval of Nomination and Remuneration Committee.

AUDIT COMMITTEE

The composition of Audit committee as required under section 177(8) ofthe companies Act 2013 is given as under:

Sl. No. Name Category
1. Shri Ram Niwas Jain Part-Time Non Official Director ( Independent) -Chairman
2. Shri G V Krishna Part-Time Non Official Director ( Independent) –Member
3. Shri J. Ramaswamy Whole Time Director Member

During the year there were no such cases observed where the Board hadnot accepted any recommendation of the Audit Committee.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act 2013the Company has appointed Shri Upendra Shukla Practising Company Secretary to undertakethe Secretarial Audit of the Company. The Report of the Secretarial Audit is annexedherewith as Annexure IV. There is no qualification reservation or adverse remarkmade by the Practising Company Secretary in his Secretarial Audit Report.

EXTRACT OF ANNUAL RETURN

Pursuant to section 92(3) of the Companies Act 2013 read with rule12(1) of the Companies (Management and Administration) Rules 2014 an extract of theAnnual Return is annexed as Annexure V.

RELATED PARTY TRANSACTIONS

The details of transactions entered into with the Related Partiesduring the year 2016-17 are enclosed as Annexure VI.

PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES JOINT VENTURES ANDASSOCIATES

The details on the performance and financial position of SubsidiaryAssociate and Joint Venture Companies are given in Management Discussion & AnalysisReport Further Pursuant to Section 129(3) of the Companies Act 2013 read with Rule (5)of the Companies (Accounts) Rules 2014 the salient features of Financial Statement ofSubsidiary and Joint Ventures in Form AOC-1 forms part of the Annual Report separately.

COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES JOINTVENTURES OR ASSOCIATE

Godavari Gas Private Limited (GGPL) was incorporated on 27th September2016 with your Corporation holding 26% equity stake and balance 74% being held by AndhraPradesh Gas Distribution Corporation Limited (APGDC).

No company have ceased to be subsidiary joint venture or associate ofyour Corporation during 2016-17.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

During the Financial Year 2016-17 there is no Order or Direction of anyCourt or Tribunal or Regulator which either affects your Corporation's status as agoing concern or which substantially or significantly affects your Corporation'sbusiness operations:

VIGIL MECHANISM / WHISTLE BLOWER POLICY

Your Corporation being a Government Company is subjected to the CVCGuidelines and the Corporation has a separate Vigilance Department administering theVigilance matters.

Your Corporation has a Whistle Blower Policy approved by the Board andthe same is placed on the website of the Corporation. Weblink of whistle blower policy isstated herein below:-Weblink: https://www.hindustanpetroleum.com/documents/pdf/Whistle_Blower_policy.pdfDETAILS OF DEPOSITS

Particulars Amount
(`/ crores )
i) Deposits accepted during the year NIL
ii) Deposits remaining unpaid or unclaimed as at the end of the year NIL
iii) Default in repayment of deposit or payment of Interest thereon during the year. NIL

 

Date : 26th May 2017 For and on behalf of the Board of Directors
Sd/-
MUKESH KUMAR SURANA
Chairman & Managing Director

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