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.