swot analysis on social responsibility of...
TRANSCRIPT
188
SWOT Analysis on Social Responsibility of CPCL
The social responsibility of an organization is rest with its ability to
survive, develop itself on the first hand and do some valuable services to
the society in respect of employment generation, environment
protection, energy conservation, and human resource development on
the other. The study unit CPCL’s responsibility in discharging its social
obligations is analyzed in this chapter.
A number of significant changes are taking place in the social,
economic, political and other aspects. The role of business is being re-
examined in the light of these developments. There is a call for social
consciousness on the part of business. It is heartening of note that
some big business houses are paying attention to the social cause.
At present there is a feeling that business should help in
overcoming social problems. Social responsibility refers to the
obligations and duties of business to the society.
5.1 Production Performance
The production and sales performance of the study unit is
analysed in order to understand its development and to assess its ability
in satisfying the needs of the customers.
189
The production performance of the study unit is depicted in
Table 5.1.
Table 5.1
Production performance of the CPCL During the Study Period (Qty in / 000 MT)
Year Crude Net Gas Intake
Light Distilla
tes
Middle Distillat
es
Lube Base Stock
Heavy Ends
Wax Others Fuel and Loss
1998-99 7521.0 11.2 1393.9 3696.4 139.8 1733.8 6.5 11.2 550.6
1999-00 6745.2 6.3 1305.7 3400.1 157.5 1397.0 13.7 -18.1 495.6
2000-01 7013.0 7.7 1320.8 3470.9 248.4 1423.7 18.1 8.0 530.6
2001-02 6625.3 16.2 1262.4 3256.9 205.4 1345.9 22.0 12.3 536.6
2002-03 6688.8 15.7 1330.8 3239.9 177.1 1463.0 20.7 -43.1 516.1
2003-04 6819.4 20.2 1382.4 3170.7 252.0 1466.0 21.6 10.6 536.2
2004-05 7039.9 25.3 1438.0 3390.1 232.9 1389.3 27.2 22.4 565.4
2005-06 8922.9 28.8 1620.2 4376.6 245.1 1853.2 24.8 -9.6 812.7
2006-07 10361.0 20.6 2064.8 5010.5 195.9 2106.8 25.5 15.1 943.1
2007-08 10402.0 27.16 2075.7 5051.3 187.3 2117.6 25.1 (2.2) 947.2
Source: Annual reports of the company
An analysis over the table 5.1 it can be interpreted that highest
ever distillate yield of 81.37 per cent as against the previous best of
78.51 per cent was achieved in the year 2006-07. The overall energy
consumption for the year at 131.18 MBTU/BBL/NRGF(MBN), the lowest
ever as against previous best of 140.08 achieved in the year 2004-05.
190
Highest ever gas processing of 72170 MT surpassing the previous best
of 63908 MT is recorded in 2004-2005. Chidambaranar Oil Jetty
completed 100 shipments of crude oil handling in March 2008. The
highest ever production level is achieved with the help of the highest
ever accident free man days at 2137 as compared to the previous best
of 2118 days.
5.2 Marketing While major fuel products produced by the company continued to
be marketed by the Indian Oil Corporation Limited, the holding
Company, CPCL has carved out a niche in marketing specialty products
to a large number of retail customers and petrochemical feedstock to
downstream units. The total direct sales of specialty products and
petrochemical feedstock increased from 489 TMT in 2005-06 to 589
TMT in 2006-07 with an impressive growth of 20 per cent amidst
competition from imports and other domestic companies.
The sales figures of various products in the current year as
compared to the previous year along with the per cent increase are
tabulated in the table 5.2.
191
Table 5.2
Sales – A comparison for last two years of the CPCL
Sl.
No 236Product
Sales
(TMT)
2007-2008
Sales
(TMT)
2006-2007
Per cent
Increase
1 Naptha 213.7 170.4 25.4
2 Propylene 27.5 25.7 7.0
3 Paraffin wax 25.3 24.3 4.1
4 Food Grade Hexane 6.4 6.2 3.2
5 Linear Alkyl Benzene
feedstock
47.7 49.5 3.6
6 Poly Butene Feedstock 7.2 5.7 26.3
7 Methyl Ethyl Ketone
Feedstock
6.7 5.3 26.4
8 Slack Wax 3.8 3.3 15.5
9 Sulphur 42.6 40.6 4.9
Source : Annual reports of the company
From the table 5.2 it can be perceived that the company has
registered an all time high turnover During the year 2007-2008, 15.5 per
cent jump when compared to the previous year. The Profit After Tax
also witnessed an increase of 17.5 per cent at Rs.565.27 crore as
compared to Rs.480.96 crore during the year 2006-2007. The internal
resources generated during the current year was higher at Rs.798.20
crore and the value addition was at Rs.1784.83 crore during the current
year as against Rs.1606.46 crore during the previous year.
192
Value added is a basic and important measurement to judge the
performance of an enterprise. It indicates the net value or wealth
created by the manufacturer during a specified period. No enterprise
can survive or grow, if it fails to generate wealth. An enterprise may
exist without making profit, but cannot survive without adding value.
Value added is a more meaningful measure of corporate performance
than conventional measures based on traditional financial accounting,
and can be particularly useful for employee-oriented approach, which
would allow more fruitful discussions with employees and can be
especially useful in productivity agreements. The value added is a basic
and broad standard of judging the performance of an enterprise.
The investment made in an enterprise comprises investments by
shareholders, debenture holders, creditors and specialized financial
institutions. If such an investment does create wealth (i.e. value added),
it means that is a misuse of public funds. Therefore, the concept of
value added has a direct linkage with the concept of “ social
responsibility”.
193
5.3 Generation of Value Added
The value added is the increase in the market value by an
alteration in the form, location, or availability of a product or service
excluding the cost of bought-in material or services used in that product
or service. In other words the value added is the excess of turnover plus
income from services over the cost of bought in materials and cost of
services.
5.3.1 Application of Value Added
The value added is shared by the three contributing members
viz., 1) employees 2) government and 3) providers of capitals (i.e.
lenders and shareholders). The reminder in the value added is
reinvested in business in the form of depreciation and retained earnings.
The employees comprise all human resources viz. workers and
staff. The share available to workers includes payment made to them
during a given period in the form of wages and salaries, gratuity ,
contribution to provident fund, bonus, remuneration to top management
and staff welfare expenses.
The Government provides not only the infrastructural facilities but
also conditions conducive to operational activities. Hence, the share of
194
value added has also to be given to the government in the form of
customs duty, excise duties, sales tax, income tax, wealth tax, rates and
taxes.
The Share holders are the ultimate claimants of value added. As
such a share in the value added is paid to them in the form of dividend.
From the points of view of financial policy, the profits ploughed back or
retained earning also belongs to them, but since they have not yet been
paid out, they are to be separately disclosed under the heading
‘Reinvested in the business’ providers of capital by outside agencies like
banks, financial institutions and debenture holders, a share in the value
added is paid to them in the form of interest.
195
Table 5.3 Value Added Statement
(Rs. In lakhs) Particulars 98-99 99-2k 2k-01 01-02 20-03 03-04 04-05 05-06 06-07 07-08
Value of production
268113.67 375383.46 566944.71 708040.46 629644.97 880698.84 953547.12 1669328.81 2580915.03 2973785.24
Less: Cost of Direct material
226723.54 321133.27 516840.40 652283.37 585988.70 788124.08 848284.92 1505280.25 2420268.60 2795301.84
Value added 41390.13 54250.19 50104.31 55757.09 43656.27 92574.76 105262.20 164048.56 160646.43 178483.40
Interest income
6248.93 6871.07 2871.76 3928.53 2881.92 2867.94 1162.51 632.04 1252.43 2164.90
Miscellaneous receipts
1900.85 3050.40 997.55 880.69 775.47 523.70 1161.41 5937.32 1558.60 3442.00
Profit on Sale of Assets
3.13 5.59 6.33 2.66 287.55 26.64 37.68 155.54 568.08 28.31
49543.04 64177.25 53979.95 60568.97 47601.21 95993.04 107623.80 170773.46 164025.34 184118.61
Applied Towards
Operating Expenses
12461.23 171489.95 18116.08 22117.11 17429.68 24419.36 33918.61 40753.31 50606.66 52804.53
Interest 14186.54 11200.64 8598.05 13146.34 12808.54 10665.18 4679.76 15665.72 17402.67 18829.87
Depreciation 8085.07 7900.21 8096.54 10203.43 7901.86 10201.93 11745.90 20938.04 23584.05 24193.78
Deferred revenue expenditure
362.88 362.88 0.61 358.55 572.62 1910.65 53.31 53.31 95.17 202.11
Income tax 1519.56 7071.13 4854.33 2500.41 2517.32 18507.10 17221.60 33666.27 24240.36 31560.99
Dividend 3970.19 5148.55 4413.07 3705.30 2980.07 5215.14 7446.13 17870.714 17870.71 17869.37
Dividend distribution t
397.02 514.86 1022.36 377.94 0.00 668.19 954.04 2525.45 2506.36 3036.90
Retained Earnings
8560.55 14830.03 8878.91 8159.89 3391.12 24405.49 31604.45 39300.65 27719.36 35621.06
49543.04 64177.25 53979.95 60568.97 47601.21 95993.04 107623.80 170773.46 164025.34 184118.61
Trend % 100 130 109 122 96 194 217 345 331 372
Source : Annual reports of the company
196
The value added concept is most significant when applied to very
large enterprises whose operations affect the socio and economic well
being of entire communities. The performance of such enterprises can not
be viewed within the narrow concerns of the owners only. From table 5.3 it
is clear that the value added concepts recognizes other contributors and
claimants to enterprises’ income. The value added statement of the study
unit shows not only the wealth created by its operations but also among the
various claimants. The value added by the study unit during the study
period account for 3.72 times. This can answers questions of distributive
justice. Therefore the value added concept of the study unit is closely
linked with the concept of social responsibility of the enterprise.
5.4 Development of the Company
The development of the company during the study period is assessed
in the following pages with the help of an analysis over completed and
ongoing projects.
5.4.1 Completed projects
Some important and valuable projects that were completed during
the study period are listed below :
197
5.4.2. 2.5 MGD Capacity Sewage Reclamation Plant
To enhance the availability of water for Manali refinery, an additional
2.5 MGD capacity Sewage Reclamation Plant consisting of biological
treatment, chemical treatment, ultra filtration and reverse osmosis was
commissioned in December 2006 at a cost of about Rs. 47 crore.
5.4.3 Offsite Automation Project
In order to improve the blending operation for meeting the product
specifications, an Offsite Automation Facility for Auto Blending of various
components of MS, Diesel and Fuel Oil was completed at a cost of about
RS. 26.8 crore.
5.4.4 On- going Projects
Some important projects that are on-going at present are enlisted
below:
5.4.5 Sea Water Desalination Project
The project for installation of a 5.8 MGD sea water desalination plant
at an estimated cost of Rs. 231.34 crore will be completed by December
2007. This project ensures uninterrupted operation of the refinery even
during the periods of water scarcity in Chennai.
198
5.4.6 Gas Turbine
A project for installation of 20 MW Turbine to enhance the reliability
and quality of Captive Power Generation at Manali Refinery at an estimated
cost of Rs. 157.88 crore the project will be completed by October 2007.
5.4.7 New Crude Oil Pipeline
The project for new 42” crude oil pipeline as a replacement for the
old 30” Pipeline from Chennai Port to Manali Refinery along the route of the
proposed port connectivity project, is proposed for implementation at a cost
of Rs. 65.4 crore. The project is expected to be completed within twelve
months after Right of Way clear of encroachments is made available by
Chennai Port Trust in coordination with Tamil Nadu Road Development
Corporation and National Highways Authority of India.
5.4.8 Windmill Farm project
To achieve significant greenhouse gas emissions significantly, a
project for setting up of a Windmill Farm of 17 MW capacity in
Melakaraipatti Village (near Pushpathur), Dindigul District, Tamil Nadu at a
cost of Rs 89.80 crore will be commissioned during November, 2007.
199
5.4.9 Refinery III – Capacity Augmentation
The project for Debottlenecking of Refinery III Unit of Manali
Refinery from 3 MMTPA to the existing capacity at an estimated cost of
Rs.134 crore is in progress. The project is expected to be completed by
March 2009. With the implementation of this project, the refining capacity
at Manali would increase from 9.5 MMTPA to 10.5 MMTPA.
The contract for Detailed Engineering, procurement and Construction
Management Services has been offered to M/s Engineers India limited,
Chennai.
5.4.10 Auto Fuel Quality Up-gradation Projects.
In order to meet the future specifications of MS and HSD, the
following initiatives have been taken up by the company at an estimated
cost about Rs.1900 crore.
Revamp of Naphtha Hydro Treating (NHDT) and Catalytic
Reformer Unit (CRU) to Continuous Catalytic Reformer Unit.
Setting up of new Isomerisation Unit.
Setting up of Diesel Hydro Treating Unit (DHDT)
200
Process Licensors have been selected. The first two projects are
expected to be completed by the end of 2009 and the third one by early
2010.
5.5 Installation of Additional Crude Tanks at Manali Refinery
A project for installing two more Crude Tanks to increase the crude
storage capacity at Manali at an estimated cost of Rs.56.60 crore is under
implementation. The project is expected to be completed by May, 2008.
5.6 New Projects
The new, upcoming and upgrading projects that are to be taken
place in the fourth coming years are enlisted in the following pages.
5.6.1 Resid Upgradation Project
For improving the distillate yield of Manali Refinery from 67 per cent
to 75 per cent, besides reducing the production of fuel oil, a Reside
Upgradation Project with a Delayed Coker Unit along with associated
facilities is being taken up at a cost about Rs.3,000 crore. Licensor
selection for the Delayed Coker Unit has been completed Proposals have
been received from the licensors for the new Sulphur Recovery Unit which
is a part of the Resid Upgradation Project are under evaluation.
201
5.6.2 Propylene Recovery Unit.
In order to tap full potential of the Propylene available in LPG from
FCCU, an additional Propylene Recovery Unit is proposed to be set up at
Manali Refinery.
5.6.3. 15MMTPA Refinery cum Petrochemical Complex
A new 15 MMTPA Grassroots Refinery cum Petrochemical Complex
is proposed to be set up at Ennore near Chennai on a joint venture basis
with the Indian Oil Corporation Limited. Process Configuration Study and
pre–feasibility report are under preparation. The CPCL has made a request
to the Government of Tamil Nadu for allocating 2500 acres of land in
Ennore which was earmarked earlier for Petro-Park.
5.7. Development Strategies
The Company organized interaction meetings with the Indian Oil
Corporation Limited, the Holding Company, in April, 2006 to discuss and
deliberate on various strategies for the future growth and expansion of the
company. Actions taken on various decisions at the interaction meeting
were reviewed by the Chairman and Functional Directors of IOCL. The
decisions taken at these Strategy Meetings focused on the need to make
investments in the following areas.
202
Expansion of refining capacity by low cost debottlenecking.
Projects for meeting environmental norms.
Improvement of distillate yields.
Enhance captive generation of utilities viz water and power to
minimize dependence on external sources.
Improving infrastructure to market various products in the
domestic market as well as export market.
5.8. Information Technology
The company is conscious of the news to make optimum utilization of
various advancements of Information Technology in order to provide
support for achieving operational excellence in various business activities of
the company.
Several initiatives have been taken by the company in this direction
and significant among them include the following.
Introduction of e-Seva System to enable the vendors /contractors
/ service providers to track the status of their bills.
Implementation of ERP software at Cauvery Basin Refinery.
Implementation of Material Gate Pass System for effective online
monitoring of movement of materials.
203
Modification of the company’s ERP system to incorporate various
changes in the VAT system introduced by the Government of
Tamil Nadu.
Introduction of various new features in the instruct system of the
company like industry information, reports fire and safety
messages, knowledge base, news and events.
5.9. Research and Development
The Research and Development of the company continues to
extend active support to refinery operations by carrying out pilot plant
evaluation of catalysts and feed stocks for secondary processing facilities,
and of new crudes. The requirements of refinery units like FCC, hydro
processing and lube units regarding process trouble shooting and
optimization studies are being catered to by this centre.
A new hydro treating pilot plant has been commissioned and the
same will be used for carrying out studies on Diesel Hydro –
Desulphurisation and Lube Hydrofinishing.
New collaborative research programmes with national center for
Catalysis Research at IIT, Chennai have been initiated by the Company’s
R&D centre for the following :
204
Development of Regenerable Absorbents for removal of sulphur
from diesel fuel.
Development of catalysts for end point reduction in diesel.
Initiation of collaborative project with pavement engineering group
of IIT (Chennai) in the area of “performance grade bitumen with
warrants for modifications”
Research alliance with Sud–Chemie India Limited for
development of suitable catalysts for Lube Hydro finishing
5.10. Safety Management
The company and its employees are conscious of their commitment
to conduct business by adopting best safety practices in handling
equipment and material. The company adopts best safety practices at par
with Indian and international standards. All the safety activates are aimed
at achieving credible safety performance at work not only by the employees
but by also by the contract labourers.
The company has undertaken several measures to improve the
safety management systems and procedures and significant among them
include the following.
Onsite Emergency Preparedness Plan revised / updated for both
Manali and Cauvery Basin Refinery.
205
On – site emergency mock drills conducted in November, 2006 in
association with mutual aid partners and statutory authorities at
Manali Refinery. At Cauvey Basin Refinery, off site mock drills
were conducted in March, 2007 in coordination with statutory
authorities and IBP Co Limited, the neighboring industry.
As a part of disaster management, one day awareness
programme on off site emergency plan was organized at Manali
Refinery on 21.12.06. Off site mock drill was also conducted at
Manali Refinery by District Collector of Tiruvallur on 09.01.07. At
Cauvery Basin Refinery, off site mock drills were conducted on
04.01.07 by the District Collector, Nagapattinam.
Twelve safety zones created in the Manali Refinery and allotted
to Deputy General Managers. Each zonal in charge delivers
safety measures once in a month.
Revised procedure and instructions on issue of work permits for
both Manali and Cauvery Basin Refinery as a supplement to oil
industry Safety Directorate Standards 105 was released for strict
compliance.
206
Special devices like fail arrestors with full body harness and
catwalk ladders procured and issued for use while working at
heights.
Implemented the recommendations of safety audit.
“Five Minute Safety Talk” for the benefit of contractors and their
workman at security main gate organized every day.
Reviewed and updated Safety Manual, Fire Manuals and Fire
Emergency Procedures.
5.11. Environment Management System
“Nourishing environment flourishing business” is the eco slogan of
the company.
Caring for the environment and taking constant efforts to preserve
and protect the ecological balance continues to remain the avowed
objective of the company. As a result of various environmental
conservation measures taken from time to time, the company could achieve
substantial reduction in pollution from its operations.
The Environment Cell of the Company works dedicatedly for the
upkeep of refinery environmental operations and also for complying with the
provisions of the Environmental Laws.
207
Some of the key environmental protection facilities successfully
commissioned includes the following:
Commissioning of Additional City Sewage Reclamation Plant,
comprising latest technology of Sequential Batch Reactor (SBR)
in December, 2006
Commissioning of Thermal DeNOx Facility in the major process
heaters of Refinery III to reduce Nox emissions in June, 2006
Continuous monitoring of ambient air at eight locations inside
the refinery to preserve the quality of water.
Uninterrupted operation of all three effluents treatment plants
with a total capacity of 600 KL/Hr to conserve water and re-
cycle the treated effluents for process applications.
Implementation of a new Zero Discharge Project to reuse the
treated effluents from Refinery III in the refinery process.
Operation of a Reverse Osmosis (RO) Rejects Cycle Plant to
reclaim 40KL/Hr of water from the rejects.
Mechanical treatment and bio-remediation of oily sludge.
As part of its efforts to provide a clean and green environment, the
company has implemented the program of Ethanol blending in Petrol for
supply at Bangalore, Guntakkal, Cudappah and Ongole.
208
5.12. Energy Conservation Measures
Energy conservation continues to be the thrust area focused by the
company. Several initiatives have been undertaken by the company to
reduce fuel and loss thereby to improve the Energy index. Some of the
initiatives are as follows:
o Commissioned seven numbers of Variables Frequency Drives
and achieved significant savings in power.
o Replacement of around 2000 faulty steam traps to improve
condensate recovery.
o Secondary seals provided for six crude tanks to reduce
evaporation loss.
o Agreement entered into with M/s Shell Global International
Center for High Technology (CHT) to undertake study for
margin improvements, energy and loss reduction and
improving operational performance at Manali Refinery.
5.13. Optimization
The company has always been a pioneer in keeping abreast with the
latest technological changes to achieve the best operating margins and has
always strived to implement the best process optimization techniques.
209
The company has implemented advanced process controls
technology (DMC plus) from M/s Aspen Tech in all major units and these
controllers have been optimizing the unit of operation to render the
maximum benefits by operating close to the constraint limits.
Some of the advanced process controls implemented during the year
are as under:
Maximization of Poly – butylenes feed stock with consistent
quality.
Maximization of Diesel in Once Through Hydro Cracker Unit
(OHCU) with consistent quality.
Development of Soft Analyzers for predicting critical properties of
FCCU gasoline, CRU reformat, Crude units diesel streams and
lube distillates.
Minimization of Hydrogen losses through flare.
Sustaining the Maximum FCCU throughput.
Automation of critical manual operations to improve equipment
availability.
The Offsite Automation project successfully commissioned during the
year facilitated the company to produce Bharath Stage II and Euro III
equivalent grades of MS and HSD simultaneously, Further auto blending of
210
MS with online analyzer and Blend Optimizer has improved the MS
production and reduced the quality giveaway.
The Company’s state of the art real time Process Information
Network (PIN) system, which is the focal point for process decisions, has
been strengthened by “No Single Point Failure” system architecture. Entire
system and database is designed, developed and maintained by in - house
experts. Following major applications have been developed and
implemented during the study period.
Interface of Lube Expansion Block (LEB) Old power house (OHP)
and Oil Movements and Storage (OM&S) new DCS systems with
process information network.
Generation of DCS Alerts when LAB results are updated to take
immediate corrective action.
Automatic triggering and sending of mobile SMS alters to
designated users on process units upsets.
Interface of refinery wide CCTV system with PIN to facilitate
users to access from their desktops.
5.14. Total Productive Maintenance (TPM)
The company continued to give thrust to Total Productive
Maintenance (TPM) technique commenced during the year 2005-06 for
211
improving productivity. Various awareness campaigns on TPM were
organized throughout the refinery to reorient the work culture.
The 5s practices have been implemented in all areas of Manali
refinery which resulted in clean, efficient, and conducive workplace for
implementing further improvements. The 8 Pillars of TPM are progressing
well and started yielding good results. “Zero Leak” campaign conducted
during the year 2005-06 has resulted in overall steam leak reduction to the
extent of 80 per cent.
The Company organized the first CPCL Kaizen Conference in
August 2006 and a “Book of Kaizens” was released on this occasion.
Another significant development in implementation of TPM is the
frequent use of One Point Lesson (OPL). OPL is an effective tool in TPM
for knowledge sharing and learning. OPL focuses on DO’s and Don’ts in an
Employee’s in the TPM program and during the year 2005-06, more than
1000 OPLs were generated.
5.15. Human Resources Development
In order to sustain the competitive edge in the Oil Sector, the
company has been taking several initiatives for improving the human
resource strength and creating a conducive work atmosphere. Increased
212
thrust is given for retention of talent for taking the company to newer
heights.
The manpower strength of the company was 1672 (672 supervisory
and 1000 non supervisory employees) as on 01.04.2007 and 1651 (723
supervisory and 928 non supervisory employees) as on 31.03.2008.
The company recruited 19 Officers and 13 refinery operators/
technicians during the year. As a part of the Apprenticeship training
requirement, 50 Diploma holders and 28 ITI Trade Apprentices underwent
one year training programme in the company.
During the year the company introduced several new HR initiatives
like monitoring for newly recruited officers, organizing field visits by HR
officers and open house session of employees with the top management.
During the year, the company has successfully organized the 40th
Personal Chief’s meet wherein 73 delegates representing various oil Public
Sector Undertakings participated.
It has always been the endeavor of the company to consciously
review and make improvements in various benefits extended to the
company’s employees. The Company has enhanced the benefits under the
performance based incentive scheme. The company has revised the
213
Superannuation Scheme by switching over from “Defined Benefit” to
“Define Contribution” with effect from 01.11.06.
The industrial relations climate continued to be harmonious and
cordial.
A settlement on rationalization of manpower with regard to workmen
was signed with the recognized unions.
As much as 61 per cent of employees of the company have been
covered by training during the current year and achieved 3.46 Average
Training mandays against the target of 2.0 mandays. This includes 324
mandays of Organizational Development Programs as against the required
300 mandays.
The Refinery Engineering School of Training (RESOT) of CPCL, a
well acknowledged centre for training on refinery technology, conducted a
Four Module Core Course of 8 weeks duration during the year. In addition
short duration programs on Refinery Technology, Process Optimization,
Power and Utilities, Total Productive Maintenance, presentation skills were
also conducted with participation from downstream units and all Refineries.
Various development programs were also conducted for the benefit of office
bearers/ committee members of the collectives.
214
The Company has been a pioneer in improving the creativity of the
employees by introducing innovative schemes. The suggestion scheme,
which has been introduced to promote the participation of the employees in
the functioning of the company elicited widespread response. As many as
55 employees were presented with Suggestion Awards for the year 2006, in
addition to Appreciation Awards. Letters of commendation were issued in
recognition of the good work done by deserving employees.
The company has been scrupulously adhering to the Presidential
Directives and various instructions of the Government relating to the welfare
of the SC, ST, OBC and Physically Challenged. Out of the total manpower,
there were 416 SC employees (previous year 418) and 33 ST employees
as an 31.03.07 (previous year 32) constituting 25.20 per cent and 2.00 per
cent of the total manpower respectively.
The company has been complying with the provisions of the persons
with Disabilities (Equal Opportunities, Protection of Rights and Full
Participations ) Act, 1955 by extending reservation in employment for
Physically Challenged and Disabled persons.
5.16. Welfare of Women
As on 31.03.08 73 women employees were on the rolls of the
company (previous year 70) of whom 23 are in the supervisory grade
215
(previous year 18) and 50 are in non supervisory grade (previous year 52)
constituting 3.18 per cent of the total supervisory employees and 5.39 per
cent of the total non-supervisory employees.
Women empowerment through conduct of training programs in
technical/development/functional areas was accorded top priority by the
management.
International Women’s Day was celebrated on 9th and 10th March 07
by organizing a programme on the theme “Celebrate Yourself “in which
eminent professionals from various fields delivered lectures on topics of
varied interests on women development and empowerment to the
participants.
In addition to nominating women employees to attend National
/Regional meets conducted by Women in Public Sector (WIPS), the
company also co-sponsored the recently held National Meet at Cochin.
5.17. Corporate Social Responsibility
The Company firmly believes that corporate social responsibility is
the continuing commitment by the business to behave ethically and
contribute to economic development while improving the quality of life of its
216
work force and their families as well as of the local community and society
at large.
The company has contributed a sum of Rs.90 lakhs towards
community development activities around Manali Refinery and Cauvery
Basin Refinery focusing primarily on health care educational infrastructure
socio cultural activities and infrastructural development.
The company is in the process of constructing three overhead tanks
to ensure continuous supply of water to the neighboring villages of the
Manali Refinery and for this purpose the Oil Industry Development Board
Drought Relief Trust has sanctioned a sum of Rs.26 lakhs.
Development of sports has always received the focused attention of
the company. For the third year in succession, the company sponsored the
Chennai Open Tennis Tournament conducted by the Association of Tennis
Professionals (ATP).
The company has also organizes Petroleum Sports Promotion
Board, Inter Unit Cricket Tournament for a period of six days every year.
Teams representing various petroleum companies participated in the event.
In order to restore the pristine beauty of the historical Senate House
of the University of Madras, the cultural heritage of the city of Chennai, the
company contributed a sum of Rs.10 Lakhs.
217
5.18. Global Compact
As a member of the Global Compact Programme, instituted by the
Secretary General of the United Nations, aimed to promote the Social
Responsibility of the Corporate all over the world, the company follows all
the ten principles enshrined in the said programme, the company has been
a forerunner in the effective implementation of each and every principle for
many years. This is being achieved through appropriate policies and
programmes adopted meticulously besides total compliance of the relevant
status all these years.
The CPCL took several initiatives in encouraging the development
and diffusion of environmentally friendly technologies by implementing De-
Nox technology in eight major stacks of Refinery III in addition to the
installation of low Nox burners in all the furnaces and process heaters of
Refinery III.
The CPCL has also taken several measures in Water Management
such as implementation of new Zero Discharge plant and an addition al
2.5MGD Sewage reclamation plant for cycling and use of city sewage into
feed water of DM plant for power Generation.
218
5.19. Occupational Health Services (OHS)
The Occupational Health Services of the company, an employee well
being measure fulfills its mandate to promote the health of all the
employees at workplace and encourages attitudes and methods that leads
to improves health.
The health care services offered by OHS are designed with
emphasis on preventing illnesses. The comprehensive programmes
conducted during the year include the following :
Monitoring of employees’ health in relation to specific health
hazards at workplace to determine the risk of development of
subsequent disease.
Identifying the diseases in its early stages
Screening of health condition of employees for early evidence of
chronic diseases.
About 86.7 per cent of employees were covered under periodic
health survillanc programme. Employees children in the age
group 8–10 years were screened for their visual acuity, colour
vision and muscle balance to true out squint.
Carried out epidemiological studies for work relatedness of
health. Imparted training to employees on health hazards in their
219
work place, first aid and emergency resuscitation life style
modification.
In view of the various health care measures taken, the company has
not lost any man hour due to occupational illness.
5.20. Investor Relations
The redressal of investors grievances with a view to ensure zero
complaints at any given point of time is the continued priority of the
company. The Shareholders / Investors Grievance Committee which is the
Sub Committee of the Board of Directors of the company meets at regular
intervals to review the status of investors grievances and offer valuable
guidance.
The company continues to display all the information in its website
which would be of use to the investors, viz share price details, shares
holding pattern , changes in directorships, press releases and financial
results and the same are updated periodically.
The shares of the company continued to be listed in the Madras
Stock Exchange Limited, Bombay Stock Limited and National Stock
Exchange of India Limited. The per cent of dematerialized shares have
increased to 98.30per cent as against 98.09 per cent in the previous years.
220
5.21. Corporate Governance
Corporate Governance is a systematic process by which Companies
are managed to enhance their wealth creating capacity. The CPCL is of the
view that the Governance process should ensure that various resources
which are utilized by the company meets not only the aspirations of the
shareholders but also the expectations of the society.
The company has complied with all the mandatory requirements of
the Corporate Governance Guidelines prescribed by Securities and
Exchange Board of India (SEBI)vide Clause 49 of the Listing Agreements.
A separate Corporate Government Report form part of the Annual Report of
the Company every year.
The company always strives to adopt best Corporate Governance
Practices and in recognition of this fact, the company was short listed as
one of the top twenty five companies adopting good Corporate Governance
practices by the Institute of Company Secretaries of India for the year 2006
out of 200 companies.
The analysis over Corporate Governance of the company reveals
that trusteeship, transparency, empowerment, accountability, and ethical
corporate citizenship remain the core principles of the Corporate
221
Governance philosophy of CPCL. It is also true that the CPCL is firm in its
belief that the practice of each of the above principle will create the right
corporate culture that fulfills the true purpose of Corporate Governance.
It is true that the CPCL was one among the 17 finalists out of 77
participants in the Golden Peacock Award for excellence in Corporate
Governance for the year 2006 organized by the Institute of Directors, New
Delhi.
5.22. Right To Information
In order to promote transparency and to ensure that citizens of India
have access to information under the control of the company a mechanism
in the right to information Act 2005 has been established in the company.
5.23. Vigilance
The Vigilance Department of the company continues to play a vital
role in increasing the awareness amongst the employees to adhere to
system and procedure and maintain transparency.
During the year a new system called e-Seva was introduced to
enable the contractors / vendors / service providers to track the status of
their bills.
222
A network based bill monitoring system was introduced for
expeditious settlement of bills of the contractors.
In line with the Central Vigilance Committee ( CVC) guidelines tender
documents award of contracts, details of purchase orders are displayed in
the website of the company.
Vigilance Awareness Week was observed in the Company from
06.11.2006 to 10.11.2006. Many guest lectures, quiz competitions, painting
competitions etc., were organized.
A compendium of vigilance Circulars issued by the Central Vigilance
Commission (CVC) and ministry of petroleum and Natural Gas was
released in the form of a CD.
From the foregoing analysis on the study unit CPCL the following
Strengths and weaknesses were assessed.
5.24. Strengths and Weaknesses
The increase in demand of petroleum products has been propelled
by the emerging economies of BRIC (Brazil, Russia, India, China) and this
has fuelled the world’s energy requirements, particularly the fossil fuels
such as coal, crude oil and natural gas. While the demand for oil and gas is
growing at about 3 to 4 per cent per annum for the emerging economies,
223
new supplies have not kept pace with the sudden surge in the demand,
particularly from the emerging economies of China and India. This is
definitely leading to a new world order.
The political upheaval in Iraq, disturbances in Nigeria, standoff in
Iran and limited availability of spare production capacity have compounded
the already delicate energy balance to make crude prices very volatile.
This has led several countries, including India, to look in to new areas for
energy security. Oil companies in India have been scouting for oil abroad
as never before. Also the recent NELP-VI bidding for exploration within the
country has attracted very good response. The recent KG basin strike of
huge gas potential has brought excitement to both local and international
players.
Growing demand, turbulent supply market, lack of spare production
capacity and continuous turmoil in several oil producing countries have
pushed up crude oil prices to record levels beyond $75 per barrel in 2006.
Prices are currently hovering over $ 70 per barrel.
This huge volatility in crude oil prices impacted Indian economy as
India depends on oil imports for about 76 per cent of this demand. Due to
stagnant indigenous crude oil production and increase in petroleum
224
products demand, the self sufficiency is estimated to decline from 27.8 per
cent in 2007 – 08 to 16.8 per cent in 2011 – 12.
The current refining capacity of India is 149 MMTPA and availability
of products, is expected at 143MMT in 2007-08, which is 27MMT higher
than the demand of 116 MMT and is expected to grow to 235 MMTPA by
the end of the XI Five Year Plan Period in 2012. The availability of products
which is expected at 143 Million Tonnes in 2007-08. It will be almost 27
Million Tonnes higher than the demand of 116 Million Tonnes. By 2011-12
the refining capacity is expected to grow to 241 MMTPA which will create a
surplus refining capacity of 96 million tones, which is more than half of the
current refining capacity.
The threats posed to the study unit on social arena and the
opportunities available to it are identified and enlisted in the following
pages.
5.25. Opportunities and Threats
As per the Energy Information Administration, USA global petroleum
prices are remaining elevated because of weak inventories, strong demand
and concerns about a long term supply crunch.
225
The continued high crude oil prices will have an adverse impact on
the global economy prospects, though not at a level experienced in 1970s.
The crude oil production in India is almost stagnant which is an area of
concern, eventhough, on gas front there are bright prospects with huge KG
basin Gas discovery, which will be commercially available during 2009-10.
The huge finds at KG basin and potential new finds at Mahanadi and
Cauvery Basin will lead to a substantial shift in the Indian energy balance.
The compounded Annual Growth Rate (CAGR) of the refining sector
during the next 5 years is expected to be at 9.54 per cent as against the
domestic demand CAGR of 2.93 per cent and hence, India is now targeting
itself as a regional hub for export of petroleum products. The present
product exports is about 2 MMTPA, while the exportable surplus would be
about 96 MMTPA by 2012.
The emerging challenges for the refining sector are mainly to
implement the emerging technologies to meet the predominant demand for
distillate yields, improve the quality of petroleum products to make them
more environment- friendly and globally competitive, improve efficiency in
refinery operations and create adequate infrastructure for exports. Large
quantity of exports will also call for major investment in port infrastructure,
pipelines network and tankages.
226
India has large reserves of trained and highly skilled manpower
available at a relatively lower cost compared to advanced countries.
However with growing demand for knowledgeable and skilled manpower
form different sectors on industry, there will be constraint in availability.
Hence recruiting and retaining manpower will be major thrust area. The
country has acquired rich experience in the installation and efficient
operation of petroleum refineries in the last 40 years. It is therefore,
expected that the operating cost will be low as the value addition in Indian
refineries will be of very high order and the setting up of refineries in India
for the domestic market as well as for exports would be economically
attractive
At present there is a mandatory provision for 5 per cent blending of
ethanol in petrol. This scheme of ethanol blending which began initially in
the select nine states was subsequently extended to cover the entire
country.
The development of alternative sources of energy including bio-fuels,
remains one of the critical elements for achieving the country’s energy
security. There is now an increased awareness of Bio-Diesel as a
substitute for normal diesel and the formulation of the Bio- Diesel Policy by
the Government is a major step in boosting initiatives in this direction and is
227
also expected to contribute to the development of rural economy in a very
big way. The overall policy initiatives of the industry should focus on
seeking energy independence by 2030
5.26. Risks, Concerns and Outlook
The rising demand for oil from energy hungry Asia and a rebounding
US economy could meet a supply squeeze later in the year 2007. Further,
the civil unrest in oil rich Nigeria, is adding to the concerns about political
unrest in the Middle East further disrupting the supply.
The volatile refining margins all over the world came down during
third quarter of 2006-07 on account of steep decline of diesel crack and
huge inventory losses suffered by the oil Companies. During the year
2006-07, the losses of the Marketing Companies an account of selling auto
fuels was partly compensated by the Refineries with the reduction in
Customs Duty on MS/HSD from 10 per cent to 7.5 per cent with effect from
16th June, 2006 together with a revised Trade Parity Price mechanism of
MS/HSD at 80:20 of import and export price as against 60:40 in vogue
during the period September, 2005 to 15th June, 2006. The subsidy sharing
mechanism of LPG / SKO by way of discounts offered by Refineries to
Marketing Companies, which was introduced in 2005- 06 was withdrawn in
2006-07.
228
However, the refinery has to concentrate on improving distillate
yields and value added products, reduce energy consumption and
operating and other controllable costs to remain competitive and profitable.
The company, in order to meet the above risks and concerns, is
taking all necessary initiatives to improve distillate yields, diversity crude
baskets at competitive price, optimize crude mix, maximize transportation of
crude through Suez max tankers, control energy consumption, reduce
operating cost and monitor refinery performance on a continuous basis.