Heat Exchanger (Final Project) by Hussain

2012
Indian oil Corporation Ltd Guwahati Refinery Noonmati.
Report on financial viability for installation of new heat exchanger in rfo (reduced fuel oil) at delayed coking unit of guwahati refinery
Presented By : Hussain Mustafa Azad
MBA 3rd Semester. Jawarharlal Nehru School Of Management Studies. Assam University
TABLE OF CONTENTS
A report by-Hussain Mustafa Azad,JNSMS
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SL. NO.
PARTICULARS
PAGE NO.
PREFACE ACKNOWLEDGEMENT STUDENT DECLARATION EXECUTIVE SUMMARY

1.1
5 6 7 8
IOCL
Brief introduction of IOCL,Guwahati Refinery Aims & Objectives Indian Oil Corporate History Vision,Mission,Objectives & Obligation Board Of Directors Organistion Structure Business Chart of IOCL Divisions Major Petroleum products Performance Review SWOT analysis
9 12-13 14-15 16-19 20-21 22-23 24 25-30 32-33 34-36 37-38
1.2
Under IOCL, GUWAHATI REFINERY

Classification Of Capital Budget Finance Department Function of Finance Department Achievement of Finance Department Development Report 2010-11 Implementation Of ERP-SAP 39-45 46-49 50-57 58-59 60-61 62-65
1.3
Project Analysis
Project Finance under IOCL A report by-Hussain Mustafa Azad,JNSMS Project Evaluation under IOCL 66
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67 68
PREFACE
In todays era of globalization and competition, coping up with technological advancement, which is undergoing evolution at a very fast rate, holds the key to the survival and growth of any organization. Installing technology, well-equipped facilities or going for modification in the existing
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ones are the means to attain better performance efficiency and hence further the value addition. Indian Oil, the largest commercial enterprise of India (by sales turnover) is Indias sole representative in Fortunes prestigious listing of worlds 500 largest corporations, ranked 105th for the year 2009. To maintain strategic edge in the market place, Indian Oil has given importance to capital budgeting because capital investment decisions often represent the most important decisions taken by an organization, and they are extremely important, they sometimes also pose difficulties. A company in practice should take all care in selecting a method or methods of investment evaluation. The criterion selected should be a true measure of the investments profitability (in terms of cash flows), and it should lead to the net increase in the companys wealth (that is, its benefits should exceed its cost adjusted for time value and risk). It should also be seen that the evaluation criteria do not discriminate between the investment proposals. They should be capable of ranking projects correctly in terms of profitability. The NPV method is theoretically the most desirable criterion as it is a true measure of profitability; it generally ranks projects correctly and is consistent with the wealth maximization criterion.
ACKNOWLEDGEMENT
This training part of MBA programme taught me a lot to understand the key of success in the organization. One of them is teamwork. Teamwork is ability to work together towards a common vision. It is a fuel that allows
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common people to attain results. Therefore, I would like to thank all management team of Indian Oil Corporation Limited who help me to achieve this result. I would hereby like to extend my gratitude to the following people without whose cooperation and help at every stage, successful completion of the project would not have been possible. It is my privilege to express my deep gratitude to Mr. G.K.Arora (CFM at IOCL) who gave me such a great opportunity & infrastructure to do this project and also for his kind cooperation & help throughout the project. I would like to express my profound gratitude & a sincere thanks to Mr. Ritesh Agarwal (ACO, Main Account), Mr. Abhishekh Maurya (ACO) and Mr. Sushil Shil for their valuable time & educative guidance. Their constant support, innovative ideas & practical approach helped me to make the project more objective. I would like to use this opportunity to thank my institution guide Mrs.
Lurai Rongmai (Assistant Professor,JNSMS ) for her constant guide and

support. Last but not the least, I would like to thank all others who directly or indirectly helped me in this regard.
STUDENT DECLARATION
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I hereby declare that the project report entitled, Report on Financial viability for installation of New Heat Exchanger in RFO (Reduced Fuel Oil) at Delayed Coking Unit of Guwahati Refinery as per requirement of the MASTER OF BUSINESS ADMINISTRATION AT ASSAM UNIVERSITY is my original work prepared on individual effort based on the data provided by the Finance Department and Technical Service Department of Guwahati Refinery.
Place
HUSSAIN MUSTAFA
AZAD
Date:
MBA 3rd
Semester Jawarh arlal Nehru School Of M anagement Studies.
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EXECUTIVE SUMMARY
Project Title: To provide a brief overview of the organization and working of Guwahati Refinery and determine the financial viability for installation of the New Heat Exchanger In RFO (Reduced Fuel Oil) for Heat Recovery at Delayed Coking of Guwahati Refinery.
Organization: Guwahati Refinery, Indian Oil Corporation Limited.
Organizational Guide: Mr Ritesh Agarwala (ACO, MAIN ACCOUNT)
Institution Guide: Mrs. Lurai Rongmai(Assistant Professor,JNSMS)
Duration of the project: 17th May to 30th July, 2012.
Objective of the study: To study the functioning of the different sections of the Finance Department of Guwahati Refinery and to determine the financial viability for installation of Heat Exchanger in RFO of Guwahati Refinery as an initiative towards CDM (Clean Development Mechanism) Projects.
Research Methodology: The Research carried out is a Descriptive study including mostly the secondary data. The data are analyzed using the various Capital Budgeting techniques. The data has been collected from the Finance and the Projects Department of Guwahati Refinery. A report by-Hussain Mustafa Azad,JNSMS
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INTRODUCTION
Brief introduction: GUWAHATI REFINERY:

The Guwahati Refinery in North East India -- the first Public Sector refinery of the country -- was commissioned in 1962 with a capacity of 0.75 MMTPA which was subsequently increased to 1.0 MMTPA through debottlenecking projects. The refinery processes only indigenous crude oil from the Assam oil fields. With its main secondary unit, a coking unit, it produces middle distillates from heavy ends and supplies petroleum products to North-Eastern India, and surplus products onward to Siliguri in West Bengal in 2003. Hydrotreater Unit for improving the quality of diesel has been commissioned in 2002. In 2003, the refinery installed an Indmax Unit, a novel technology developed by Indianoil's R&D Centre for upgrading heavy ends into LPG, Motor Spirit and Diesel oil. Beginning of Petroleum Refining in India In 1881, Assam Railway & Trading co. began laying of tracks in Assam They used elephants in place of cranes.
One day, one of the elephants wandered away, to come back with its feet smeared by slimy oil. Backtracking led to the discovery of oil in Borbhil, near present day Digboi A Canadian driller, Willey Leove shouted at native boys, Dig boy dig. Oil was struck and the name Digboi stuck.
Digboi became the birth place of Indias oil industry.
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In 1890s, crude oil distillated at Margherita, 16 km away from Digboi, in cast iron pans, called Stills. Digboi Refinery of Assam Oil Company (AOC) was commissioned at its present location in 1901 with 500 Barrels per day capacity.
AOC nationalized and its Refining and Marketing functions merged with IOC in October, 1981.
Digboi refinery is the oldest running refinery in the world.
In 1890s Crude Oil used to be distilled in DIGBOI in Cast Iron pans called Stills. Bottom portion of one such still of 9 feet diameter is still kept at Digboi Refinery.
Indian Oil Corporation Limited:

Date of Incorporation: 1st September 1964.
Type of Company: Government Company under Section 617 of the Companies Act, 1956.
Administrative Minister: Ministry of Petroleum & Natural Gas, Government of India.
Share Capital: i)Authorized: Rs.6000.00crores ii) Subscribed, issued & paid-up: Rs.2427.95 crores.
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Share Holding Pattern as on 31st March 2011:

1.08% 1.33% 2.50% 0.28% 0.29%
T 10 shareholders op
0.14% 0.14% 0.13%
President of India Oil & natural gas corporation
8.77%
LIC IOC-BRPL Merger Schem Trust e IOC-IBP Merger Scheme Trust Genaral Insurance Corporation Of India Bajaj Allianz LIC Ltd. LIC-Profit Plus
78.92%
LIC-MoneyPlus Wisdomtree India Investm ent Portfolio Inc
Listing with Stock Exchange: The equity shares of the Company are presently listed with the following stock exchanges:i) Bombay Stock Exchange (BSE) , Mumbai. ii) The National Stock Exchange of India Ltd. (NSE).
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AIMS AND OBJECTIVES Any project work exposes the research scholar to the ground realities prevailing in the particular industry and thereby enables to carry out a meaningful realistic analysis.
The objectives of the project are as follows:-
To provide a glimpse of Indian Oil Corporation Limited and of Guwahati Refinery. To understand and describe the functioning of each sections of the Finance Department of Guwahati Refinery.
To determine the financial viability for installation of Heat Exchanger in RFO (reduced fuel oil) rundown circuit of Guwahati Refinery leading to reduce the energy consumption.
LIMITATIONS The limitations of this study are as follows: The scope of the study is limited to the vicinity of Guwahati Refinery. Time taken to complete the project work is very limited.
The primary data collected are assumed to be correct.
RESEARCH METHODOLOGY
The data collection is carried out mainly through personal interviews as well as through the literature review from the relevant policy manuals as well as from the various daily reports made by the Finance Department.
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SOURCES OF DATA: For collecting necessary data two sources have been used. They are primary data & secondary data. a) PRIMARY DATA: Face to face discussion with the Finance Manager, Training Department personnel, Technical Department, Environment control, Finance Department Personnel and the employees of Guwahati Refinery (a unit of IOCL). b) SECONDARY DATA: 1. Data provided from the finance dept. regarding Cost of Investment, Cost of Capital and other related information. 2. Journals and magazines published by I.O.C. Ltd. 3. Library: records and manuals. 4. Annual Report 2010-2011 5. Also through Company websites i.e. www.iocl.com 6. Data collected from the Technical Service Department.
DATA ANALYSIS: The Research carried out is a Descriptive study including mostly the secondary data. The data are analyzed using the various Capital Budgeting techniques.
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Indian Oil Corporation-The Energy of India
Indian Oil Corporation Ltd. (Indian Oil) was formed in 1964 through the merger of Indian Oil Company Ltd. (Est. 1959) and Indian Refineries Ltd. (Est. 1958). It is currently India's largest company by sales. Indian Oil is also the highest ranked Indian company in the prestigious Fortune 'Global 500' listing, at 105th position. It is also the 20th largest petroleum company in the world. Indian Oil and its subsidiaries account for 46.9% petroleum products market share in the industry, 40.4% national refining capacity and 67% downstream sector pipelines capacity. The Indian Oil Group of companies owns and operates 10 of Indias 20 refineries with a combined refining capacity of 60.2 million tones per annum. These include one of the subsidiary refinery i.e. Chennai Petroleum Corporation Ltd. (CPCL). The Companys cross-country crude oil and product pipelines network spanning over 9,300 km meets the vital energy needs of the country. The Indian Oil Corporation Ltd. operates pipelines and refines imported as well as indigenous crude oil and markets petroleum products. To maintain its competitive edge and leadership status, Indian Oil has invested Rs. 43,250 crore (US $10. 65 billion) during the XI Plan period (2007-12) in integration and diversification projects, besides refining and pipeline capacity augmentation, product quality upgradation and expansion of marketing infrastructure. Indian Oil operates the largest and the widest network of petrol & diesel stations in the country, numbering around 16,455. It reaches Indane cooking gas to the doorsteps to over 46.4 million households in 2,709 markets through a network of 4,996 Indane distributors Indian Oil's ISO-9002 certified Aviation Service commands a 63% market share in aviation fuel business, meeting the fuel needs of domestic and international flag carriers, private airlines and the Indian Defense Services. Indian Oil also enjoys a A report by-Hussain Mustafa Azad,JNSMS
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dominant share of the bulk consumer business, railways, and state transport undertakings, industrial, agricultural and marine sectors. Indian Oil's world class R&D Centre is perhaps Asia's finest. Besides pioneering work in lubricants formulation, refinery processes, pipeline transportation and alternative fuels such as bio-diesel, the Centre is also the nodal agency of the Indian hydrocarbon sector for ushering in Hydrogen fuel in the country. Indian Oil joined the league of global technology providers in 2006-07 with its in-house developed IndMax technology selected for the 4 MMTPA Fluidized Catalytic Cracking (FCC) unit at the Corporations upcoming 15 MMTPA refinery-cumpetrochemicals complex at Paradip in Orissa, as well as for the FCC unit coming up at BRPL.
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Functions & duties Indian Oil Corporation Ltd. has been established to carry out the objectives specified in the Memorandum & Articles of Association of the Company. The main activities of Indian Oil are refining, transporting and marketing of petroleum products.
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Vision A major diversified, transnational, integrated energy company, with national leadership and a strong environment conscience, playing a national role in oil security & public distribution Mission:
To achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through value of products and services, and cost reduction. To maximise creation of wealth, value and satisfaction for the stakeholders. To attain leadership in developing, adopting and assimilating state-of- the-art technology for competitive advantage. To provide technology and services through sustained Research and Development. To foster a culture of participation and innovation for employee growth and contribution. To cultivate high standards of business ethics and Total Quality Management for a strong corporate identity and brand equity. To help enrich the quality of life of the community and preserve ecological balance and heritage through a strong environment conscience.
Objectives:
To serve the national interests in oil and related sectors in accordance and consistent with Government policies. To ensure maintenance of continuous and smooth supplies of petroleum products by way of crude oil refining, transportation and marketing activities
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and to provide appropriate assistance to consumers to conserve and use petroleum products efficiently.
To enhance the countrys self-sufficiency in crude oil refining and build expertise in laying of crude oil and petroleum product pipelines. To further enhance marketing infrastructure and reseller network for providing assured service to customers throughout the country. To create a strong research & development base in refinery processes, product formulations, pipeline transportation and alternative fuels with a view to minimising/eliminating imports and to have next generation products. To optimise utilisation of refining capacity and maximise distillate yield and gross refining margin. To maximise utilisation of the existing facilities for improving efficiency and increasing productivity. To minimise fuel consumption and hydrocarbon loss in refineries and stock loss in marketing operations to effect energy conservation. To earn a reasonable rate of return on investment. To avail of all viable opportunities, both national and global, arising out of the Government of Indias policy of liberalisation and reforms. To achieve higher growth through mergers, acquisitions, integration and diversification by harnessing new business opportunities in oil exploration & production, petrochemicals, natural gas and downstream opportunities overseas. To inculcate strong core values among the employees and continuously update skill sets for full exploitation of the new business opportunities.
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To develop operational synergies with subsidiaries and joint ventures and continuously engage across the hydrocarbon value chain for the benefit of society at large.
Obligations: To provide prompt, courteous and efficient service and quality products at competitive prices: 1. Towards suppliers To ensure prompt dealings with integrity, impartiality and courtesy and help promote ancillary industries. 2. Towards employees
To develop their capabilities and facilitate their advancement through appropriate training and career planning. To have fair dealings with recognised representatives of employees in pursuance of healthy industrial relations practices and sound personnel policies.
3. Towards community

To develop techno-economically viable and environment-friendly products. To maintain the highest standards in respect of safety, environment protection and occupational health at all production units.
4. Towards Defence Services To maintain adequate supplies to Defence and other para-military services during normal as well as emergency situations.
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BOARD OF DIRECTORS
Leadership in Excellence
1. Shri R.S. Butola Chairman w.e.f.28.02.2011
2. Shri P.K.Goyal Director (Finance) W.e.f.02.05.2011
3. Shri Michael Bastian Independent Director
4. Shri G. C. Daga Director (Marketing) 7. Shri B. N. Bankapur Director (Refineries)
5. Shri P. K. Sinha Government Director 8. Shri Sudhir Bhargava Government Director
6. Shri Nirmal Kumar Poddar Independent Director 9. Dr. Sudhakar Rao Independent Director w.e.f. 30.05.11
10. Shri K. K. Jha Director (Pipelines)
11. Prof. (Dr.) Indira J. Parikh Independent Director
12. Shri B. M. Bansal
Chairman & Director (P&BD)
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13. Dr. R. K. Malhotra 14. Shri Anees Noorani Director Independent Director (Research & Development) w.e.f. 05.08.2010 15. Shri Sudhir Bhalla
15. Shri V. C. Agrawal (Human Resources) upto 31.07.2010
16. Dr. (Smt.) Indu R. Shahani 17. Shri S. V. Narasimhan Independent Director
Chairman & Director (Finance)
Director (Human Resources) w.e.f. 27.10.2010 18. Shri A. M. K. Sinha
19. Prof. Gautam Barua Independent Director
Director(Plng. & Business Development) w.e.f. 16.03.2011 Note: shows the core team
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Decision Making Process:

The decisions making process of IOCL follows the following Channel:
BOARD OF DIRECTORS
CHAIRMAN
FUNCTIONAL DIRECTORS
EXECUTIVES
Overall management of the Company is vested with the Board of Directors of the Company. The Board of Directors is the highest decision making body within the Company. As per the provisions of the Companies Act, 1956 certain matters require the approval of the shareholders of the Company in General Meeting. The Board of Directors is accountable to the shareholders of the Company, which is the ultimate authority of a Company. Indian Oil being a Public Sector Enterprise (PSE) ,the Board of Directors of the Company is also accountable to Government of_India. The day-to-day management of the Company is entrusted on the Chairman and the A report by-Hussain Mustafa Azad,JNSMS
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Functional Directors and other Officers of the Company. The Board of Directors has delegated powers to the Chairman, Functional Directors, who have in turn delegated powers to the Executives of the Company through Delegation of Powers. The Chairman, Functional Directors and other officers exercise their decisionmaking powers as per this delegation of powers. The Chairman, Functional Directors and other Executives are accountable to Board of Directors for proper discharge of their duties & responsibilities. The powers, which are not delegated are exercised by the Board of Directors subject to the restrictions and provisions of the Companies Act, 1956.
ORGANISATION SET-UP:
BOARD OF DIRECTORS
Corporate Set-up
Divisional Set-up Refineries(including AODs Digboi Refinery)
Finance Human Resource Planning & Business Development
Pipelines Marketing (including AODs Marketing) R&D
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Business Chart of IOCL

IOCL has its presence in all spheres of downstream operations.
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Major Division
1. Refineries Division
Refineries HQ, New Delhi
Technical
Projects
HR S & EP Refineries
Digboi (AOD) Guwahati Barauni Gujarat Haldia Mathura Panipat Bongaigaon CPCL Nariman
Finance M&I
Materials
IndianOil group of companies owns and operates 10 out of Indias 20 refineries with a combined refining capacity of 60.2 million tonnes per annum. IndianOil refineries process all major indigenous crude oil plus over 36 types of imported crude oil, from which it produces more than 60 types of petroleum products, ranging from light distillates, such as LPG, naphtha and motor spirit, to heavy ends, such as furnace oil and low sulphur heavy stock. The flexibility of A report by-Hussain Mustafa Azad,JNSMS
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processing capability allows IndianOil to vary both its crude oil inputs and petroleum product outputs to achieve the companys desired production mix. To meet the growing domestic demand for middle distillate products, such as HSD and superior kerosene oil, IndianOil has invested in secondary processing facilities to produce these higher value added products. IndianOil refineries are fully equipped to meet the current environmental norms in relation to product specifications in the country and are being constantly modernized and upgraded to be able to meet all future environment regulatory requirements.
2.
Pipelines: Indian Oil Corporation owns and operates the largest network of crude oil and
product pipelines in India. The total network of pipelines is more than 10,000 km with a capacity of 71.61 million metric tonnes per annum as on March 2009. IndianOils pipelines include 4366 kilometers of crude oil pipelines and 5964 kilometers of product pipelines. The companys pipelines are well positioned to supply petroleum products from its refineries and Indias ports to high demand states in northwestern India. Indian Oil Corporation owns and operates the largest network of crude oil and product pipelines in India. The total network of pipelines is more than 10,000 km with a capacity of 71.61 million metric tonnes per annum as on March 2009. IndianOils pipelines include 4366 kilometers of crude oil pipelines and 5964 kilometers of product pipelines. The companys pipelines are well positioned to supply petroleum products from its refineries and Indias ports to high demand states in northwestern India.
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FUNCTIONING OF PIPELINE Sea Shore Division (Exploratio n)
Pipelines
Refinery Refinery Division
Pipelines
Marketing Division
Finished products to clients
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3. Marketing Division
Marketing HO, Mumbai
Regional Services North/East/West/South
AOD
International Marketing & Overseas Subsidiaries
State Offices
Indian Oil and its subsidiaries account for 47% petroleum products market share. The company distributes its products directly to bulk customers and to retail customers via a network of retail outlets and dealers/distributors.
The companys overall distribution network encompasses over 35,000 sales points incorporating its own franchise as well as independent outlets, consumer pumps, distributors etc. the substantial majority of which are governed by dealership agreements. Products are transported to the distribution points by pipeline, ship tanker, rail tankers and road tanker trucks. 4. Research and Development A report by-Hussain Mustafa Azad,JNSMS
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R&D Centre, Faridabad
Refining Technolo gy
Lube Technolo gy
Fuels & Emissio n
Petroch em & Biotech
Other s
Process Development Product Development Transportation Studies Projects
Established in 1972 for the development of lube as well as refining process technologies, the IndianOil R&D Centre at Faridabad has completed over 35 years of glorious service to the nation. It is one of its kind in Asia and has grown into a major technological development center of international repute in the down stream areas of lubricants, pipelines and refining processes. Developing more than 2500 formulations over the years, it has successfully perfected the state-of-the-art lube formulation technology meeting latest national A report by-Hussain Mustafa Azad,JNSMS
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and international specifications with approvals from major original equipment manufacturers. IndianOil markets around 800 grades of lubricants under the brand name "SERVO" based on its own R&D technology and is one among the six worldwide technology holders of marine oil technology. It has extensive laboratory and pilot plant facilities to successfully pursue projects in lube, refining and pipeline areas making it a unique technology centre. Its rich reservoir of highly qualified/ specialized scientific and technical manpower has elevated this centre to global status. Having an effective IPR portfolio of 195 patents including 48 US patents, the vibrant and innovative research at the Centre has led to many technological innovations, some of which have received prestigious national and international awards. INDMAX, i-Max, OiliVorous-S, INDETreat/INDESweet are few of them. Being the nodal agency of the hydrocarbon sector for implementation of the Hydrogen energy programmes in the country, the Centre has taken up a pilot project for developing infrastructure for fuelling neat hydrogen as well as H2-CNG blended fuel and is currently in the process of setting up a Hydrogen-CNG dispensing station at COCO retail outlet in Delhi. The Centre has also taken the lead in the development and commercialisation of biodiesel.
Indian Oil Refineries: Installed Capacities
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S.NO. NAME OF COMPANY 1. 2. 3. 4. 5. 6. 7. 8. 9. 10 TOTAL NOTE:

1. 2. 3.
THE LOCATION CAPACITY OF REFINERY (MMTPA) GUWAHATI BARAUNI KOYALI HALDIA MATHURA DIGBOI PANIPAT BRPL *CPCL *NARIMAN 1.00 6.00 13.70 6.00 8.00 0.65 12.00 2.35 09.50 1.0 6O.2
IOCL IOCL IOCL IOCL IOCL IOCL IOCL IOCL IOCL IOCL
MMTPA Million Metric Tonne Per Annum. * Subsidiary of IOCL. Indian Oil group of companies owns and operates 10 out of Indias 20 refineries with a combined refining capacity of 60.2(49.70-own capacity and 10.50-capacity of the subsidiary refineries) million metric tonnes per annum. Another refinery is being set up on the East Coast at Paradip (Orissa) with a capacity of 15.00 million metric tonnes per annum.
4.
Major Products of a Refinery:

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G u j a M aat t h Pu ar a i pBa at r a H a lidGi au w aDhi g tbC oPi CBL R P L r n un a i LPG N a p h th a M S -B S -II M S -B S -III SK Heaviest ATF H S D -B S -II H S D - B S - I I I FO L S H S / H P S W ax LOBS B itu m e n Products of the Refineries of IOCL: RPC LABFS LAB A report by-Hussain Mustafa Azad,JNSMS Page 32 pX PTA
Liquified Petroleum Gas (LPG) Naphtha Motor Spirit (MS)/ Petrol/ Gasoline Aviation Turbine Fuel (ATF) Superior Kerosene Oil (SKO) High Speed Diesel (HSD) Light Diesel Oil (LDO) Furnace oil (FO) Heavy Petroleum Stock (HPS) Lube oils Raw Petroleum Coke (RPC) Petroleum Wax Bitumen/ Asphalt
Lightest
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PERFORMANCE REVIEW
T urnover (inclusiveof Ex ciseD uty) ( in crore)

4,00,000 3,00,000 2,00,000 1,00,000 0 2008-09 (285,398) 2009-10 (271,095) 2010-11 (328,744) Turnover (inclusive of Excise Duty) ( in crore)
CHANGE IN AUTHORISED SHARE CAPITAL During the year, the Authorised Share Capital of the Corporation was increased from 2,500 crore to 6,000 crore with the approval of members by a Postal Ballot Process to enable the Corporation to raise finance through the issuance of shares in the future. DIVIDEND The Board of Directors of your Corporation is pleased to recommend a dividend of 9.50 per equity share of 10/- each on the Paid-up Share Capital as against 13/- per share in the previous year due to lower profits. So far, your Corporation has paid a cumulative dividend of 18,575 crore, excluding a dividend of 2,307 crore payable for the current year, subject to the approval by shareholders.
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D ividend (in crore) 910 3,156 2,307
2010-11 2009-10 2008-09
PUBLIC DEPOSIT SCHEME The Public Deposit Scheme, which was open only for employees and exemployees of the Corporation, was closed with effect from 31 August 2009. The total outstanding deposits were ` 55,000 as on 31.03.2011.
ProfitAfter T (in crore) ax

12000 10000 8000 6000 4000 2000 Profit After Tax (in crore) 0 2008-09 2009-10 2010-11 2950 7,445 10221
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CONTRIBUTION TO EXCHEQUER Your Corporation has been making enormous contributions to the Exchequer in the form of duties and taxes. During the year, 77,622 crore was paid to the Exchequer as against 57,680 crore in the previous year. In the current year, 39,658 crore was paid to the Central Exchequer and 37,964 crore to the States Exchequer.
NetW orth (in crore)

60,000 50,000 40,000 30,000 20,000 10,000 0 2008-09 2009-10 43,998 50,553
55,332 Net Worth (in crore)
2010-11
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SWOT ANALYSIS:
STRENGTH: Dominant Foothold in Indian Market Prominent Producer and Supplier of LPG. Robust Network. IOCL has 10 Refineries under its Group having a combined.Throughput of 60 MMTPA which is the highest in India. Vast Network of Petrol Pumps spread across all parts of India and IOC occupies more than 60% of Market Share in Petroleum Products in India. IOCL has downstream pipeline network of 10064 Km spread across India which is 71.4% of Total Downstream Pipeline Network in India. Large Network of Pipeline gives IOCL a competitive edge.
IOCL is the highest rank company in list of Global Fortune 500 companies. Currently its stand at 116th position.
IOC has integrated ERP package i.e SAP spread all across India. WEAKNESS: Non Autonomy. Most of IOCL Refineries are Inland Refineries which increases the cost of Production. Some of the Refineries Technology is old. They can only process Low Sulphur Crude and efficiency is also low. Low throughput of Individual Refineries increases the Fixed Cost of Production and company is unable to take advantages of Economy of Scale. A report by-Hussain Mustafa Azad,JNSMS
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Since IOCL is a Public Sector Undertaking there is high Government Regulation. OPPORTUNITY: Diversification into Renewable Energy. Positive Outlook for Natural Gas Business. Strengthening Petrochemical Operation. Increasing Demand for Petroleum Products. Developing its own technology with emphasis on R & D units. Company can integrate its core Business of Petroleum Products with Exploration Activities. Diversification oppurtunities are there in Gas Sector & Alternate Energy Sectors such as Bio-Fuels and also in Power Sector. THREATS: Highly Competitive Market Environmental Regulations. Volatile Oil and Gas Prices. Rising Capital Costs in the Refining Sector Prices regulated by Govt. for Four Major Products. i.e HSD, MS, SKO & LPG Increasing International Crude Prices and Depleting Crude Oil Reserves. Increasing Trend in Consumption of Gas & Nuclear Energy
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Emergence of Private Player like Reliance/ESSAR with latest refining technology having High Crude Throughput Installed Capacity and locational advantages. CLASSIFICATION OF CAPITAL BUDGET In IOCL, Guwahati Refinery capital budget is classified in 2 categories: Plan schemes Non- plan schemes viz. Additional Facilities (AF)
PLAN SCHEMES: Plan schemes are those schemes which are required to be included in the annual plan documents for submission to Government / Planning Commission for approvals. These schemes ultimately form part of the governments annual plan. they are important from national point of view and involve substantial expenditure, generally above 100 crores on items relating to capacity improvement of primary or secondary units. While non-plan schemes generally cover capital investments on additional facilities like buildings, off site, utilities, furniture, vehicles, etc. They are generally developed in line with action plan drawn on Long Range Plan (5 years) / Perspective plan (10-15 years) of the corporation. No expenditure on plan schemes is incurred unless the scheme is included in the approved annual plan document with a budget allocation for the year and also the scheme is approved by competent authority as per the delegation of powers. The annual plan is required to be submitted to the Government by mid September every year.
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It is essential that the revised outlay for the current year and the outlay required for the next year are assessed realistically in order to ensure that the total actual expenditure would be close to the proposed outlay.
NON- PLAN SCHEMES (AF): The AF schemes encompasses wide spectrum of activities covering safety, statutory requirements, technology up gradation, welfare, replacements/addition of assets, operational necessities, etc. Individually AF schemes may be lower cost, collectively they may account for significant portion of the total capital expenditure. Therefore the handling of AF schemes with regard to their selection, accurate cost estimates and timely completion assumes a great significance. The schemes need to be judiciously implemented after detailed study of various alternatives available.
PROCEDURE FOR APPROVAL OF AF (ADDITONAL FACILITES) SCHEMES
All AF proposals shall be initiated and prepared by units in the ZBB decisionmaking package. The AF proposals are required to be forwarded to Secretary, Investment Review Committee, and HO for approval only after obtaining concurrence of the local finance and endorsed by the Unit Head. The proposals forwarded to HO for approval shall cover full details and justifications. HO would examine the proposal and obtain the approval of the
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competent authority. On approval, necessary provision will be made in the AF budget. PREPARATION OF AF PROPOSALS
The units as per the prescribed format shall submit the AF proposals. While this is the minimum requirement for submission of an AF proposal, additional/ supplementary date/ information needs to be added as required for a better appreciation and evaluation of the proposal. AF proposal shall contain the following information: Name, objective and purpose Background/ origin of the proposal Generation/ evaluation of alternatives Description of activities Benefits / saving from the proposal Project cost estimates Completion schedule Economics
NAME, OBJECTIVE AND PURPOSE The name of the proposal should be brief but reflect the contents. The objective and purpose of the proposal shall be stated clearly and unambiguously and it should be ensured that the same are specific and not general nature. BACKGROUND / ORIGIN OF THE PROPOSAL
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Following points are of importance.
The circumstances leading to the preparation of the proposals should be explained in detail. In case the proposal is prepared in pursuance of the recommendations of a committee, working group, statutory bodies, ministry etc., the mere mention of this does not constitute the background for propelling the case. The case must be presented in perspective, explaining briefly the rationale behind particular recommendations. Full documentary evidence must be presented in support wherever applicable. In many cases, AF proposal are initiated to improve an existing operation by removing constraints, updating technology, replacement/ addition of equipments, process modifications, extension of an existing facility to new areas etc. in all these cases, it is of prime importance that the proposal includes a brief description of existing facilities/ operations . The constraints/ limitations experienced with the existing facilities must be discussed and efforts made in the past to overcome these problems etc. should be sufficiently elaborated. Brief description of operation of facilities in past vis-vis the need for proposed modification would help to appreciate the problem.
GENERATION / EVALUATION OF ALTERNATIVES Once the objective of the proposal is firmed and the evaluation of the existing facilities have been completed the next logical step is the generation of alternatives or options available for achieving the desired objectives.
The following 2 points are of importance in this regard: A report by-Hussain Mustafa Azad,JNSMS
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All possible alternatives should be explored and listed. This may involve different level of efforts and cost or different ways of performing the same functions, activity or operation. Evaluation of alternatives must also be carried out in systematic manner. While there cannot be a uniform approach for evaluation of alternatives, some of factors to be considered are: cost-benefit analysis, repercussion on other units/ operation, time schedule, availability of resources, down time requirements in case of plant modifications, long term implications, conforming to corporate policies, legal and other statutory requirements, etc. in any case, the proposal should clearly indicate the criteria and considerations that led to the selection of the recommended alternative. DESCRIPTION OF ACTIVITIES Once the evaluation of alternatives and selection of the optimum scheme is completed the proposal should be developed with sufficient detailing. Some of the major considerations/ requirements at this stage are listed below:
BENEFITS /SAVING FROM THE PROPOSALS The importance ability of the proposed scheme must be fully explored with reference to area requirements vis--vis availability, extent of enabling jobs required, execution feasibility (impact on running units, safety precautions needed, etc.), shut down requirements, utility requirements/ availability, hook up jobs, etc. these must also be documented as part of the proposal.
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Efforts must be made to identify and examine the utility of redundant/unutilized materials available in the plant. This would help in cutting down cost and time besides ensuring the use of idle equipment. The proposal should include only those activities/ facilities need for meeting the objective. Each element/ activity included in the proposal must be backed by adequate justification for its inclusion. It is always better not to include an entirely unrelated activity/ facility in a proposal but rather make a separate proposal with justification, etc. for the same. In case the proposal envisages the introduction of new technology/ process/ equipments, it is desirable to gather reliable information on the performance of similar process/ equipment elsewhere within the country or outside, instead of relying entirely on the vendors claims. An assessment of the additional manpower requirements for operating the proposed facility should be made and included as a part of the proposal. The methodology or execution of the project should be finalized at the proposal stages itself. In case it is felt necessary to engage a consultant, adequate justification for the same, job scope for consultant etc. must be clearly mentioned in the proposal.
PROJECT COST ESTIMATES
Need for realistic cost estimates The importance of making an accurate cost estimate4 cannot be over stressed. It will have a direct bearing on the economic viability of the scheme. While over-estimation may cause blockage of funds which otherwise could be utilized profitability for some other purpose, under
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estimation would necessitate repeated approvals for cost overruns and may also affect the project completion schedules. Basis It is essential that the basis adopted for cost estimation of all major components be included. Generally, cost estimates for major equipments, imported goods, proprietary items etc. shall be on the basis of current budgetary quotations. Detailed work ups, copies of quotations etc, must be enclosed with the proposal. The effort shall always be to base the cost estimates on a sound basis. Escalation All cost estimates shall be as on the date of submission of the proposal and the rate of escalation adopted for different cost estimates shall be indicated, along with basis. Foreign exchange requirements The foreign exchange requirements are to be worked out separately and shown. The need to import equipments /process etc. involving outgo of Foreign exchange are to be critically reviewed, indigenous availability fully explored and foreign exchange component of the proposal kept to the bare minimum.
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FINANCE DEPERTMENT OF GUWAHATI REFINERY

FINANCIAL MISSIONS 1. To provide high quality financial staff support for decision-making and control to all levels of managementcorporate, divisional, unit and location to enable the achievement of overall corporate objectives and goals. 2. To play a lead role in scanning the domestic and international financial environment, the formulation and implementation of all financial policies and plans for different time spans consistent with and conducive to the business plans for expansion, diversification, productivity etc. 3. To interact pro-actively with the relevant Government agencies on pricing and investment and with financial institutions, depositors and creditors, with sensitivity and promptness, for mobilization and provision of funds for uninterrupted operations and project execution at optimal costs. 4. To maintain, review and update of all relevant accounting records, systems and procedures for discharging the fiduciary responsibilities and enabling compliance with statutory obligations. 5. To inculcate financial awareness, cost benefit attitudes and system orientation in the entire organization. A report by-Hussain Mustafa Azad,JNSMS
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6. To develop the human resources, systems and techniques of finance for continuing innovation and contribution towards IOC corporate excellence. FINANCIAL OBJECTIVES 1. To ensure adequate return on capital employed and maintain a reasonable annual dividend on its equity capital. 2. To ensure maximum economy in expenditure. 3. To generate sufficient internal resources for financing partly/wholly expenditure on new capital projects. 4. To develop long term corporate plans to provide adequate growth of the activities of the Corporation. 5. To continue to make an effort in bringing reduction in the cost of production of petroleum products by means of systematic cost control measures. 6. The endeavour to complete all planned projects within stipulated time and within stipulated cost estimates. FINANCIAL GOALS 1. To inculcate cost consciousness in user departments. 2. Development of Standard Refining costs at each unit level. 3. Proper implementation of budgetary control and submission of MIS in time. 4. To keep the level of inventories below the level fixed by the Board and outstanding debts, loans & advances and claims at bare minimum. 5. Ensure payment on due date to various agencies. 6. Monitor capital expenditure to ensure completion within stipulated time and cost. 7. Optimize utilization of working capital. 8. Efficient management of Funds. A report by-Hussain Mustafa Azad,JNSMS
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THE FUNCTIONS OF THE FINANCE DEPARTMENT INCLUDES: Management of financial resources for meeting the Corporations programmes of operations and capital expenditure including investment of surplus fund, if any. Ensuring uniform financial and accounting policies and procedures, to the extent possible, in the Division. Establish and maintain a system of financial scrutiny and internal checks and render advice on financial matters including examination of feasibility studies and detailed project reports. Establishment and maintain an appropriate system of Budgetary Control and Management Information System for different levels of the Management. Carry out periodical/special studies with a view to control costs, reduce expenditure, economy in administrative expenditure, and improve efficiency to maximize profitability of the Corporation. Maintain the financial accounts, cost accounts and other relevant books and records in accordance with the various statutory and other requirements.
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FLOW OF FINANCE DEPARTMENT

(REFINERIES AND PIPELINES DIVISION)
DIRECTOR (R&P)
ED (FINANCE) HO
G.M. (FINANCE)
DGM (FINANCE)
CFMs
SFMs
FMs
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DFMs
SACOs
ACOs
THE FUNCTIONING OF DIFFERENT SECTIONS OF THE FINANCE DEPARTMENT AT GUWAHATI REFINERY:
1. MAIN ACCOUNTS: The main accounts section is entrusted with the responsibility of the following: 1. Preparation of Balance sheet 2. Preparation of Tax Audit 3. Co-ordinator for all Audits i.e. Statutory, Government, CAG, Internal Audit, etc. 4. Physical Asset verification. 5. Insurance of Assets and stocks. 6. Head Office Account Reconciliation. 7. Capitalization of Employee Assets. Cash budget is prepared in this section and the same is to be produced before HO. All other section of finance department provides the information to the Main Accounts for preparing list B. List B details include 20 items approximately. Some of them are mentioned below.
Employment and Housing accommodation statistics.
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Payment of sales tax, Excise duty, Entry tax and other tax and Loss on disposal/write-off of (a) Assets (b) Stores and spares showing original cost, book value and reason for disposal of each item under various categories.
duties.
Asset management is also controlled by this section. For assets management, they prepare the master of assets, which includes name, cost centre and other details for capitalization of assets. Further, receiving debit, credit notes and reconciliation of the is also a part of this section. 2. PURCHASE ACCOUNT: Generally this section deals with the payment of purchase items only. After purchase, the material is delivered to the stores department. The Stores Department makes Goods Receipt Note (GRN) and sends it to the purchase section. Here the GRN is checked with the purchase order (PO) and payment is made through ebanking. The purchases section is responsible for: 1. Scrutiny of purchase proposals. 2. Deposit and advance payments to suppliers. 3. Passing of bill for supplies received. 4. Pricing of goods receipts notes. 5. Accounting of cash purchases made by the materials department. 6. Arrangement for insurance of goods in transit. 7. Maintenance of books of accounts. 8. Sales tax matters/ VAT etc. A report by-Hussain Mustafa Azad,JNSMS
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9. Payment for imported goods in the respective currency. 3. WORKS/PROJECTS: The work section mainly deals with capitalization of CWIP (Capital Work In Progress) and payment of running contracts. Its considers only plants maintenance, roads, painting, welding, water etc. First and final payments are made on the basis of work completion. The works/project section is responsible for: 1. Payment of Bill. 2. Receipt/Release of EMD/SD. 3. Deductions/Deposits TDS,WCT etc. 4. Creation of Assets Master. 5. Capitalization of Assets. 6. Accounting of post capitalization assets. 7. Issue of TDS certificate. 4. PAYROLL: This section mainly deals with the payment to employees for their work. Rules for pay and allowance are prescribed by head office from time to time. The eligibility for special type of allowance such as special allowances, shift allowance etc. is determined by personnel department and intimations are sent to the finance department giving the details of employees those who are eligible for such allowance. Then the Pay Roll section functions accordingly. Function dealing with this section can be broadly classified as: 1. Scrutiny & concurrence of proposals from personnel department. A report by-Hussain Mustafa Azad,JNSMS
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of
various
Statutory
Deductions/Deposits
like
2. Payment of salaries and allowances. 3. Advances payment to employees. 4. Deductions from pay bills. 5. Other welfare schemes including gratuity. 6. Personal claims and other payments. 7. Statutory and statistical requirements. 8. Deduction of Tax at Sources and filing ETDS. This section also maintains the data of transfer and new recruitment of employees and adds it to master information. If a person is transferred to another unit, the LPC (last pay certificate) is required to be added into master information. 5. STORES AND CENVAT: MODVAT stands for Modified Value Added Tax, which is now known as CENVAT i.e. Central Value Added Tax. It is a scheme, which provides relief to final manufacturers on the excise duty borne by the suppliers in respect of goods manufactured by them. Under this scheme, a manufacturer can take credit of excise duty paid on raw materials and components used by them. The normal excise duty rate is 16%. However it depends upon the Tariff class under which the product is classified. The section dealing with accounting of stores have the following functions: Passing and accounting of transportation bills. Accounting of receipts, issues, return and transfer of materials. Accounting of imported materials for capital works and operations/ maintenance. Stock verification.
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Accounting for sale of surplus/scrap materials. 6. TA/LTC/MEDICAL: This section maintains in-transfer and out-transfers accounting for claim settlement and also handles the bill payment of official tour of employees. HO. The Claim of Leave Travel Concession (LTC), Leave Fair Assistance(LFA) and the claim of the foreign tours is controlled by this section. This section also deals with the payment of medical related issues. The main finctions of this section is: 1. Scrutiny and Payment of bills related to PRMS, Leave Fair Assistance (LFA), Leave Travel Concession(LTC). 2. Bill payment of official tours of employees. 3. Scrutiny of orders and bill payment to Panel Doctors and Panel Hospital. 7. PRODUCTION ACCOUNTING: This section maintains production accounts, including crude accounting, custom duty payments, product bill accounts, bitumen drum accounts and stock valuation accounts. Production Accounts Section keeps records of input in terms of crude oil and output in terms of the companys final products. The basic functions of the production accounts are: 1. Accounting of Crude oil quantity and value for the receipts, consumption and stock. 2. Accounting of inter-divisional/ inter-unit transfer of products for ex-refinery value and excise duty.
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3. Accounting of consumptions of own fuel/products. 4. Valuation of closing stocks i.e. Raw Material, ISD, Finished Goods 5. Preparation of Cost Sheet and Cost Audit Performa 6. Monitoring of Revenue Budget, Preparation of Revenue Budget. 7. Monthly Profitability.
8. Monitoring of STR MOU performance.
8. CASH / BANK: This section mainly deals with making payments. No fixed limit is established by the organization for making payments. The organization has special current accounts with State Bank of India. These accounts are the sources of payments. The balance at the end of the day, becomes nil by transferring the amount to the head office. The employees of the organization are paid through cash up to Rs.20000 and by cheque for over and above Rs. 20000. Salary to the employees is paid through cheques. Cash section shall be responsible for: 1. Receipts of cheques and bank drafts 2. Payment of cheques and bank drafts. 3. Handling of bank deposits/ withdrawls, custody of cash and transfer of funds. 4. Preparation of BRS (Bank Reconciliation Statement) 5. Safe custody of valuables and documents. 6. Preparation of bank reconciliation statement. 7. Maintenance of subsidiary cash credit account and special current account.
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9. PROVIDENT FUND & ADVANCES: The scheme of the provident fund is the same as in case of any government undertaking i.e. 12% of the dearness allowance is kept aside for this purpose and the company contributes the same amount. All the employees irrespective of their position in the organization are entitled to 9.5% interest on provident fund. This rule is applied uniformly to all the units and branches of the refineries division of Indian Oil Corporation limited. 10. OIL ACCOUNT Here are some basic functions of the oil accounting: 1. Accounting of crude oil receipts 2. Accounting of customs duty on crude oil. 3. Accounting of finished product receipts 4. Dispatch of products. 5. Excise procedure and accounting 6. Material balance & Production statistics. 7. Monthly Excise Duty Payment thorugh e-payment. 8. Loss/Gain calculation of finished product due to rise/decrease in temperature. 11. CONCURRENCE SECTION The Financial Concurrence is objected towards protection of financial interests of the Company in the decision making while ensuring financial propriety as a part of internal control system. The internal control is exercised through the vetting and A report by-Hussain Mustafa Azad,JNSMS
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concurrence by Finance department so that decision-making is as per policy guidelines, rules, regulations, provision of budgets, etc. and it is not detrimental to the financial interest of the Company. The financial concurrence facilitates achievement of transparency in the decision making which is subject to the scrutiny of various Government agencies like audit, vigilance etc.
12. MISCELLANEOUS SECTION The expense which cannot be accounted and beard by any other section is done by this section. The function of the Miscellaneous Section includes the following: 1. 2. 3. 4. 5. 6. Accounting of cash imp rest and advances for company expenses for Passing of bills of miscellaneous nature such as expenses of Auditor. Miscellaneous recoveries from outsiders Inter-sectional coordination. Payment of Electricity Duty. Payment for expenditure of Canteen and Training. specific reasons such as gift items for functions, urgent purchase etc.
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ACHIEVMENT OF FINANCE DEPARTMENT AT GUWAHATI REFINERY

INDIAN OIL CORPORATION LTD MIS.SECTION
SERVICE TRANSPORT BILLS SUPPLIERS BILLS CISFS PAYMENT ADVANCE PAYMENT C.D.PAYMENT
ACTUAL IN 2009-10 WITHIN WEEK TWO TO THREE DAYS WITHIN WEEK WITHIN THE DAY WITHIN 3 DAYS
TARGET 2010-11
CURRENT STATUS
WITHIN 3 DAYS ACHIEVED AND SUSTAINED WITHIN 2 DAYS DO 2 DAYS WITHIN THE DAY WITHIN THE 2 DAYS DO DO DO
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PAYMENT POWER BILLS etc HOSPITAL, SCHOOL BILLS etc CANTEEN,LABOUR, SUPPLY BILLS
WITHIN WEEK 2 TO 3 DAYS WITHIN 2/3DAYS
WITHIN 3 DAYS WITHIN 2 DAYS WITHIN 2 DAYS
DO DO DO
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INDIAN OIL CORPORATION LTD GUWAHATI REFINARY TA/LTC/MEDICAL
SERVICE
ACTUAL IN 2009-10 4 DAYS
TARGET 2010-11 WITHIN 2 DAYS WITHIN 2 DAYS WITHIN 2 DAYS WITHIN 2 DAYS
CURRENT STATUS
PAYMENT OF MEDICAL BILL/MEDICLA P.A PAYMENT OF TA, LTC ect PAYMENT OF PARTYS BILL/PANNEL PHARMA etc PMRS PAYMENT
ACHIEVED AND SUSTAINED DO
4 DAYS
6 days
DO
WITHIN WEEK
DO
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DEVELOPMENT REPORT 2010-11 FINANCE DEPARTMENT #1. Utilisation of SAP Tool developed and implemented for drawing fixed asset schedule alongwith Balance sheet through SAP Designed and implemented new simplified procedure for accounting of fund transfer from units through SAP thereby reducing work and improving control.
#2.Account Review by Auditors

No comments received from CAG on balance sheet audit for 2009-10 annual accounts of Refineries Division.
#3.Crude Oil Sales Agreement (COSA)

Crude Oil Sales Agreement (COSA) with ONGC,effective 1st April 2010 for supply of indigenous crude Oil initiated in May 2010 & approved by Board.
#4. Banking & Insurance

E-payment target of 90% achieved After review of the risk involved in crude oil transportation, risk coverage has been extended by replacing the ICC-C policy with institute bulk oil policy
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Reduction in package insurance policy rates to the extent of 19.24% involving savings of around Rs 10 crores
#5 Trust Accounts
Merger of IBP& BRPL Trust with IOCL SABF Trust approved by the respective Trusts. The merger activities have been completed. Merger of BRPL Gratuity Trust with IOCL employees Gratuity Trust completed.
#6 Custom & Excise

Custom Refund of RS86.33 crores has been received during calendar year.
Major demand on exempted values of clearances for products like SKOPDS,LPG-Domestic, LSHS/NAPTHA for end use as captive consumption and by fertilizer industry involving Rs 1100 crores dropped at customs, central Excise & service Tax Appellate Tribunal, Kolkata.
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IMPLEMENTATION OF ERP-SAP IN GUWAHATI REFINERY.
ERP-SAP has been implemented in Guwahati Refinery in 2002. This was the fourth refinery to IOCL to go live in SAP after PRP, MR, JR in the year 2002. All modules viz FICO, PM, MM, HR, PS implemented and all transactions are done in SAP.
FEATURES OF ERP-SAP
Covers the entire value chain/ supply chain, from customer requirement to fulfillment. Covers all business dimensions of the organization, process, people, structure and technology. Oriented towards business process and not around function. Covers all management levels of the organization. Fully integrated with all functionality of the organization. Built-in best practices available-strong enabler in improving business performance. Addresses all the enterprise requirements. Flexible to accommodate future changes. GENERAL ADVANTAGES Reduced working capital requirements.
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Improved customer service and quality. Reduced obsolescence. Reduced cost. Having accountability through out the organization. Improved productivity and effectiveness. MISCONCEPTIONS ABOUT SAP ERP facilitates the decision-making and does not decide. ERP provides comprehensive information to optimize but does not optimize dynamically. It automates and integrates transactions but does not target the cycle time
SPECIFIC ADVANTAGES FOR FINANCE Each Refinery / Pipelines unit, each regional office and state office of marketing division is a separate company under SAP. Inter company transactions involving transfer of product, money and assets are taken care of by the system. There is no need to generate control account advices, Debit/ credit notes between the division, units, and regions and between units, regions vs. HOs. No joint reconciliation meetings between divisions, regions, units and HOs. Authorized executives of each company will have access to the inter-company accounts of other companies. Hence, they can always compare and locate differences, if any. The new concept of fund center helps monitor online the revenue budget of each company in respect of revenuer expenses (a commitment item as per SAP A report by-Hussain Mustafa Azad,JNSMS
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terminology) at the time of release of payments. There is a warning message when 75% of the budget is exhausted. There is an error message in respect of controllable revenuer expenses when the budget is completely exhausted, and the payment is not processed until supplementary budget is given to the fund center. Whether the expanse is for current operation or for Assents under construction is distinguished by capturing a cost center or internal order/ WBS respectively. Various groups of vendors and customers have separate respective control Accounts (reconciliation accounts, in SAP terminology) in the general ledger. No one is allowed to post any transaction in these control (reconciliation) accounts; therefore, the balances of each sub-ledger representing a group of vendors or customers are always be equal to the respective control (reconciliation) accounts. Earlier since there was a time gap in communicating the frequent price changes to supply locations, the invoices continue to be prepared at the old rates for some time at some locations. This necessitates checking of all the invoices prepared at supply locations with the rate masters maintained at the regional office. This job was currently been done by the rate checking section of finance in the divisional offices, which raised debit/credit loads on the customers. After SAP, there is no need for rate checking because the price changes are made centrally for most of the price elements. Hence, there is no need for subsequent rate checking of the invoices. After SAP, each of collection, withdrawal and current bank account has a separate general ledger code. The user had to feed the bank statement in to the system and the system is doing the bank reconciliation and is moving the matched transactions to another account living the open unmatched items in the general ledger account of that bank account. After SAP, with the help of cash management facility, it is possible to view all the balances as per our books of all the bank accounts in the
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desired manner. This will help in managing the overdraft facility in a more logical manner. Since the system security is of utmost importance under SAP, user ID and Password is strictly enforced. Under SAP a complete Audit trial is maintained in the System. Therefore, the responsibility for any miss-happening is established as per the user ID to perform the relevant transactions.
DEMERITS ERP facilitates the decision making and does not decide. ERP provides comprehensive information to optimize but does not optimize dynamically. It automates and integrates transactions but does not target the cycle time
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Project Analysis
Project finance under IOCL
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Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights, and interests held as secondary security or collateral. Project finance is especially attractive to the private sector A report by-Hussain Mustafa Azad,JNSMS
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because they can fund major projects off balance sheet. Project financing involves identifying the project, determining the feasibility of the project, identifying sources of finance for the project, mitigating the risk and monitoring implementation of the project. It is most commonly used in the mining, transportation, telecommunication and public utility industries. KEY PARAMETERS TO BE EVALUATED IN A PROJECT The key parameters to be evaluated in a project are: Risk Analysis Demand Analysis Project Cost Estimation Revenue Analysis Financial Analysis Project Selection Criteria Project Evaluation under IOCL Project evaluation is a high level assessment of the project to see whether the project is worthwhile to proceed and whether the project will fit in the strategic planning of the whole organization. Project evaluation helps to decide which of the several alternative projects has a better success rate, a higher turnover.
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Capital Projects in IOC are broadly divided into:

Core-sectors projects: The core divisions of IOCL are Refining, Marketing, Pipelines and R&D, and the projects undertaken by these divisions come under the Core-sector projects. Diversification projects: Projects undertaken by IOCL in fields other than its core divisions (e.g. Exploration &Production (E&P), Liquefied natural
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gas (LNG), Petrochemicals and power etc.) come under diversification Projects. Globalization projects: Core/ non- core sector projects which are undertaken oversees come under globalization projects Merger / Acquisitions: The merger and acquisition of other organizations by IOCL come under this head.
Clean Development Mechanism under IOCL

The Clean Development Mechanism (CDM) is one of the "flexibility" mechanisms defined in the Kyoto Protocol (IPCC, 2007). It is defined in Article 12 of the Protocol, and is intended to meet two objectives: (1) to assist parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the United Nations Framework Convention on Climate Change (UNFCCC), which is to prevent dangerous climate change; and (2) to assist parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments (greenhouse gas (GHG) emission caps). "Annex I" parties are those countries that are listed in Annex I of the treaty, and are the industrialized countries. The CDM allows industrialized countries to invest in emission reductions wherever it is cheapest globally through renewable energy, energy efficiency, and fuel switching. An industrialised country that wishes to get credits from a CDM project must obtain the consent of the developing country hosting the project that the project will contribute to sustainable development.
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Crediting mechanisms like the CDM could play three important roles in reducing the amount of (mitigating) future climate change: Improve the cost-effectiveness of GHG mitigation policies in developed countries.
Help to reduce "leakage" (carbon leakage) of emissions from developed to developing countries.
Boost transfers of clean, less polluting technologies to developing countries.
NAME OF THE PROPOSAL:
Heat Recovery at Delayed Coking Unit by installing a new Heat Exchanger in RFO (Reduced Fuel Oil) rundown circuit.
1.
BRIEF DESCRIPTION: Delayed Coking Unit (DCU) of Guwahati Refinery was installed with
Rumanian Technology with a capacity of 0.33 MMTPA. Heat integration of the unit was done by M/s Kinetic Technology of India (KTI) with installation of New Charge Heater (03F101) and feed preheat exchanger trains. But, heat integration of Reduced Fuel Oil (RFO) was not addressed during the said revamp. Opportunity exists in RFO circuit to recover heat by integrating with generation of MPS in the existing system. Further, Delayed Coking Unit of Guwahati Refinery has been identified in Benchmarking Study conducted among all PSU refineries by M/s Shell Global Solutions at the request of MoP&NG. As per Benchmarking report A report by-Hussain Mustafa Azad,JNSMS
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2008 , DCU is operating with higher Energy Index, which signifies that the unit consumes more energy than theoretical/ benchmark energy figure of DCU of similar capacity and has recommended to explore possibility of heat integration to improve energy Index. In light of above, this is a proposal to install a new exchanger in DCU to recover additional heat from rundown stream. This recoverable heat energy, equivalent to 175 SRFT, is presently being rejected in Cooling Water System and thus being wasted. The proposed exchanger is Reduced Fuel Oil (RFO) Vs Boiler Feed Water (BFW) leading to increase in MP steam generation in Steam Generator section due to increased BFW inlet temperature.
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2.
COST ESTIMATE - Price used are based on which year - % of escalation amount - % of custom duty
: Rs. 70.7 Lakhs : 2008-09 : N/A
: N/A
Budgetary cost estimate of exchanger contingency @ 10%. Datasheet of the proposed exchanger was sent to a Heat Exchanger vendor M/s Ozone Engineers, Kolkata. The party conducted the detailed thermal design of the heat exchanger and has submitted their budgetary offer for basic price of Rs. 9.58Lakhs for design, fabrication, testing ,commissioning and supply of the exchangers. The total cost estimate including the additional expenses for piping, fittings, instruments and cost of execution works out to Rs.63.1Lakhs. Based on cost estimation of Engineering Services the total cost estimation of Heat Exchanger installation has worked out to be Rs 70.7 Lakhs .
3. JUSTIFICATION OF THE PROPOSAL The envisaged energy saving potential of this process scheme is equivalent to 175 SRFT.. Considering SRF price of Rs. 18354/MT, similar to that of LSHS price of MoU 10-11, this translates in additional Gross Refinery Margin (GRM) of Rs.32.10 Lakhs/Annum. With total investment cost of Rs. 70.7 lakhs, simple payback for the proposed AF project would be mere 2.85 years(without CDM) and 2.65 years ( with CDM). Reduction of 175 SRFT of fuel in boilers will lead to reduction of 567 MT of CO2 emission to the atmosphere translating to equivalent Carbon Emission Reduction (CER) of 567MT. This would provide an additional benefit of Rs. 2.55lakhs under CDM as it qualifies under technological barrier.
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4. ADVANTAGES : The increased heat recovery in the unit, due to installation of the new exchanger, would result in increased Medium Pressure generation from steam generator. This would reduce the energy consumption and hence the Energy Index of DCU. The investment cost would be recovered in only 2.85 years and the installed heat exchanger would continue to yield recurring benefit. ALTERNATIVE OPTION CONSIDERED, IF ANY: No. CONSEQUENCE (ON PRODUCTION/ PROFIT/ EFFICIENCY ETC.,) IN CASE THE PROPOSAL IS NOT ACCEPTED:
i) ii) iii) iv)
LOSS OF PRODUCTION LOSS OF PROFIT LOSS OF EFFICIENCY OTHERS (PLEASE SPECIFY) production ex DCU.
: No : Yes : Yes : Opportunity to maximize MPS
5.
TECHNICAL FEASIBILITY :
a) EFFECT OF ENVIRONMENT, IF ANY : None b) TECHNICAL CONSTRAINTS, IF ANY : None
6. IMPACT OF PROPOSAL OF MAN POWER :
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a)
WHETHER
ADDITIONAL
MANPOWER No
IS
REQUIRED
FOR
RUNNING THE FACILITY. IF YES, PLEASE FURNISH THE DETAILS IN THE FORM OF AN ANNEXURE:
b)
IF ADDITIONAL MANPOWER IS REQUIRED, HOW THE SCHEME WILL BE MANNED : No No WILL THE PROPOSAL RESULT IN SAVING MANPOWER FOR DEVELOPMENT IN OTHER JOBS :
c)
7.
OPERATIONING AND MAINTENANCE COST : Power, Fuel & Utility cost Salary & allowance Repair & Maintenance cost : Nil : Nil : Rs. 0.9 Lakhs
(Considering 1.25% of Investment Cost) Overheads & Insurance : Rs. 0.29 Lakhs (Considering 0.4 % of Investment Cost) Total Net Operating cost : Rs 1.19 Lakhs
8. REQUIREMENT OF ADDITIONAL WORKING CAPITAL, IF ANY :
NIL
(DETAILS TO BE ATTACHED)
9. ECONOMICS:
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a)
PAY BACK PERIOD
2.65 Years (With CDM) 2.3 Years (Without CDM)
b)
INTERNAL RATE OF RETURN : ANY OTHER CRITERIA USED:
36.37% (With CDM) ARR, NPV, PI, Discounted
33.72% (Without CDM)

c)
payback period. (Refer to below)
10. PHASING
OF EXPENDITURE : Rs.in Lakhs 70.7 Lakh (100 % of total investment)
YEAR 2012
11.CLASS OF PROPOSAL :
PRIORITY MARKS
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STATUTORY REQUIREMENT SAFETY ITEM ECONOMIC GROUNDS OPERATIONAL NECESSITY WELFARE / SOCIAL BENEFIT REPLACEMENT / ADD.OF ASSETS
12.
[ X ] [X ] [ ]
20 20 18 16 14 12
[ ] [ X ] [ X ]
LEVEL OF DESIRABILITY :
WEIGHTAGE ESSENTIAL HIGHLY DESIRABLE DESIRABLE PRIORITY RANKING:
PRIORITY WEIGHTAGE MARKS TOTAL MARKS
[ ] [ ] [ ]
5 3 1.5
DEPT. UNIT HEAD [ 18 ] UNIT ED / GM HEAD OFFICE [ 18 ] [ ]
] ] ]
[ 54
[ 3 [
[ 54 ] [ ]
13.APPROVAL: In view of the foregoing condition, for additional heat recovery in DCU,it is proposed to procure a new heat exchanger as per attached process datasheet, information and install the same in the unit as per attached process scheme.
14.COMPLETION SCHEDULE:
Page 78
The project is estimated to be complete within 12 months from the date of financial approval of the proposal. Chart for various activities envisaged for completion and commissioning is attached below:
S l . N oA c t i v i t y
T im e S c h e d u le 1 1 - A1 1p - r M1 1 a - yJ1 u1 n- J u Al u g 11 13 - - D1Ne2 o-c FJ vae 1nb3 1 4 - M
1P l a c e m e n t O f A F A p p r o v a l 2A F A p p r o v a l B y M a n a g e m e n t 3P l a c e m e n t N o t i c e I n v i t i n g T e n d e r 4P l a c e m e n t o f P u r c h a s e O r d e r 5D e l i v e r y F r e e o n B o a r d 6D e l i v e r y a t G u w a h a t i 7I n s t a l l a t i o n 8C o m m i s s i o n a n d S t a b i l i s a t i o n
Benefit calculation for installation of RFO Exchanger at Delayed Coking Unit
Calculation for CO2 Emission Reduction & CDM Benefit A report by-Hussain Mustafa Azad,JNSMS
Page 79
Parameters 1) Fuel SavingParameter 175 from RFO

Exchanger 0.96 1) 2) Average Density of steam due to Saving in High pressure refinery of heat exchanger fuel oil installation 7.63:1 2) 3) Calculated C:H Ratio Steam to fuel ratio of RFO(carbon:hydrogen) 3) Fuel 4) Carbon content of saved fuel oil
Value Units Value MT/pa Unit Remar ks

MT/M3 2369687.7 Kg/Year 12.6 : 1 Ratio Metric MT Ton = 154.62 =175 18354 As per AOR 2006-07
MT Per Metric 4) 5) CO2 Emission due to Cost saved fuel oil Ton (considering 12 MT of 175 18354 Lakhs/per Very 5) Monetary Benefit for installation of RFO = 567=32.10 carbon generates exchanger(Saving) 44 Mt year Attractive of CO2) 8 Euro 6) Rate of carbon credit 56.18 7) Rs to Euro conversion 567 8 56.18 = 2.55 Lakhs 8) CDM Benefit
PROJECT SELECTION CRITERIA Net Present Value: NPV can be defined as, A sophisticated capital budgeting technique found by subtracting a projects initial investment from the present value of its cash inflows discounted at a rate equal to the firms cost of capital.. NPV = PV of cash inflows cash outlay THE DECISION CRITERIA: If NPV is greater than 1, accept the project If NPV is less than 1, reject the project If NPV is equal to 1, indifferent Profitibility Index (PI) A report by-Hussain Mustafa Azad,JNSMS
Page 80
Profitibility Index(PI)is the ratio of the present value of cash inflows,at the required rate of return,to the initial cash outflow of the investment. PI = PV of cash inflows Initial cash outlay THE DECISION CRITERIA: When PI is used to make accept-reject decisions, the decision criteria are as follows: If the PI is greater than 1, accept the project. If the PI is less than 1, reject the project. If the PI is equal to 1, indifferent INTERNAL RATE OF RETURN.
The internal rate of return(IRR) is probably the most widely used sophisticated capital budgeting technique. The internal rate of return(IRR) is the discount rate that equates the NPV of an investment opportunity with Rs 0 (it is because the present value of cash inflows equals the initial investment). It is the compound annual rate of return that the firm will earn if it invests in the project and receives the above given cash inflows. IRR = Lower Discount Rate + Lower Discount Rate) The Decision Criteria When IRR is used to make accept-reject decisions, the decision criteria are as follows: A report by-Hussain Mustafa Azad,JNSMS
Page 81
(Higher Discount Rate
If the IRR is less than the cost of capital, reject the project. If the IRR is greater than the cost of capital, accept the project.
If the IRR is equal to the cost of capital, indifferent.
PAYBACK PERIOD Payback periods are commonly used to evaluate proposed investments. The Payback period is the amount of time required for the firm to recover its initial investment in a project, as calculated from Cash Flows. In the case of an annuity, the payback period can be found by dividing the initial investment by the annual cash inflow. For a mixed stream of cash inflows, the yearly cash inflows must be accumulated until the initial investment is recovered Payback period can be defined as The amount of time required for a firm to recover its initial investment in a project, as calculated from cash inflows.
Pay back period = Initial investment Annual Cash Inflow
According to the payback criterion, the shorter the payback period, the more desirable the project. A firm using this criterion, may specify the maximum acceptable payback period. The Decision Criteria When the payback period is used to make accept-reject decisions, the decision criteria will be:
Page 82
If the payback period is less than the maximum acceptable payback period accept the project. If the payback period is greater than the maximum acceptable payback period, reject the project.
Although popular the payback period is generally viewed as unsophisticated capital budgeting technique, because it does not explicitly consider the time value of money.
DISCOUNTED PAY BACK PERIOD A major shortcoming of the conventional payback period method is that it does not take into account the time value of money. To overcome this limitation, the discounted payback period is used. In this modified method, the cash flows are first converted into their present values, and then added to ascertain the period of time required to recover the initial outlay of the project.
ACCOUNTING RATE OF RETURN The accounting rate of return, also referred to as the average rate of return or the return on investment, is a measure of profitability which relates income to investment, both measured in accounting terms.
ARR = Average Annual Income After Tax & Depreciation x 100 Initial Investment
Page 83
The higher the accounting rate of return, the better the project. In general, projects which have an accounting rate of return equal or greater than a prespecified cut off rate of return
IRR CALCULATION OF RFO EXCHANGER SYSTEM AT GR (WITH CDM)

RS. LAKHS 1 TOTAL PROJECT COST (PCWOFC) 70.7 FINANCIAL COST 0.00 0.00 2 PHASING (PCWFC) TOTAL 70.7 3 OPERATING COST LAKHS -REPAIR &MAINTENANCE @1.25% 0.9 Page 84 RS. 0TH YEAR 0.00 1ST YEAR 0.00 2ND YEAR 70.7 0.00 0.00 68.7 68.7 0.00 2.00 2.00 0.00 70.7 LAND P&M CIVIL
-INSURANCE @ 0.4% 1.19 4 REALISATION Delta products ED benefits

CER
0.29
Product prices Products

Rs/MT
Freight under recovery

Rs/MT MT /
Rs/MT RS LAKHS
FUEL OIL 175 CDM 0.00 TOTAL 34.65 567
18354 32.10 449.44 2.55
0.00 0.00
0.00
GROSS PROFIT = (34.65 1.19) LAKHS = 33.46 LAKHS
Calculations with CDM

Written Down Value 70.7 45.96 39.06 33.2 28.22 23.99 20.39 Profit Before Tax 8.72 26.57 27.06 28.48 29.23 29.86 30.4 Disc Factor @13% 1.000 0.885 0.783 0.693 0.613 0.543 0.480 0.425 PV Of Cash Flows -70.70 26.99 19.13 16.69 14.58 12.77 11.20 9.83
Yea r 0 1 2 3 4 5 6 7
Gross Profit 33.46 33.46 33.46 33.46 33.46 33.46 33.46
Depreciation 24.75 6.89 5.86 4.98 4.23 3.6 3.06
Income Tax 2.96 9.03 9.38 9.68 9.93 10.15 10.33
PAT 5.76 17.5 4 17.6 8 18.8 0 19.3 0 19.7 1 20.0 7
Cash Flow -70.7 30.50 24.43 24.08 23.78 23.53 23.31 23.13
Page 85
8 9 10 11 12 13 14 15
33.46 33.46 33.46 33.46 33.46 33.46 33.46 33.46
17.33 14.73 12.52 10.64 9.05 7.69 6.54 5.56
2.6 2.21 1.88 1.6 1.36 1.15 0.98 0.83
30.86 31.25 31.58 31.86 32.1 32.31 32.48 32.63
10.49 10.62 10.73 10.83 10.91 10.98 11.04 11.09
20.3 7 20.6 3 20.8 5 21.0 3 21.1 9 21.3 3 21.4 4 21.5 4
22.97 22.84 22.73 22.63 22.55 22.48 22.42 22.37
0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160
8.64 7.60 6.70 5.90 5.20 4.59 4.05 3.58
CALCULATIONS Pay Back Period Net Present Value Profitability Index Internal Rate Of Return Discounted Pay Back Period Average Rate Of Return 2.65 years Rs.86.75 2.23 36.37%
3 .54 years 27.09%
IRR CALCULATION OF RFO EXCHANGER SYSTEM AT GR (WITHOUT CDM)
RS. LAKHS 1
LAND TOTAL
0.00
P&M
68.7
CIVIL
2.00
PROJECT COST (PCWOFC) 70.7
Page 86
FINANCIAL COST
0.00 0.00
0.00 68.7
0.00 2.00
0.00 70.7
2 PHASING (PCWFC) TOTAL 70.7 3 OPERATING COST RS. LAKHS -REPAIR &MAINTENANCE @1.25% -INSURANCE @ 0.4% 1.19 0.9 0.29 0TH YEAR 0.00 1ST YEAR 0.00 2ND YEAR 70.7
4 REALISATION
Delta products Products Product prices Freight under recovery ED benefits
Rs/MT RS LAKHS
Rs/MT
Rs/MT
MT
FUEL OIL 175
18354 32.10
0.00
0.00
TOTAL 32.10
GROSS PROFIT = (32.10 1.19) LAKHS = 30.91 LAKHS
Calculations without CDM
Page 87
Yea r 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Gro ss Prof it 30.91 30.91 30.91 30.91 30.91 30.91 30.91 30.91 30.91 30.91 30.91 30.91 30.91 30.91 30.91
Written Down Value 70.7 45.96 39.06 33.2 28.22 23.99 20.39 17.33 14.73 12.52 10.64 9.05 7.69 6.54 5.56
Depre ciatio n 24.75 6.89 5.86 4.98 4.23 3.6 3.06 2.6 2.21 1.88 1.6 1.36 1.15 0.98 0.83
Profit Before Tax 6.17 24.02 25.05 25.93 26.68 27.31 27.85 28.31 28.7 29.03 29.31 29.55 29.76 29.93 30.08
Inco me Tax 2.1 8.16 8.51 8.81 9.07 9.28 9.47 9.62 9.76 9.87 9.96 10.05 10.11 10.17 10.22
PAT 4.07 15.86 16.54 17.12 17.61 18.03 18.38 18.69 18.94 19.16 19.35 19.5 19.65 19.76 19.86
Cash Flows -70.70 28.81 22.75 22.4 22.1 21.84 21.63 21.44 21.29 21.15 21.04 20.95 20.86 20.8 20.74 20.69
Disc Factor @ 13% 1.000 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160
PV Of Cash Flows -70.7 25.4 18.0 15.5 13.5 11.8 10.3 9.1 8.0 7.0 6.1 5.4 4.8 4.2 3.7 3.3
CALCULATIONS Pay Back Period Net Present Value Profitability Index Internal Rate Of Return Discounted Pay Back Period Average Rate Of Return 2 .85 years Rs.75.87 2.07 33.72% 3 .87 years 24.75%
ITEMWISE DETAILS OF COST ESTIMATE FOR RFO EXCHANGER A report by-Hussain Mustafa Azad,JNSMS
Page 88
EQUIPMENT COST HEAT EXCHANGER 56.7 PIPE TAXES &FREIGHT
47.1 9.6
4.4 1.2 62.3
INSTALLATION 64.3 ADD: CONTINGENCY @10% 70.7
2.0
6.4
Pay Back Period
Initial Investment 70.70 lakhs Inflow in 1st year 30.5 0 lakhs Inflow in 2nd year 24.43lakhs Inflow in 3rd year 24.08 lakhs Since the cash inflows are uneven pay back period can be calculated as: In first two years we recover Rs 54.93 lakhs. To recover Rs 70.70 we need Rs 15.77 lakhs more This amount(Rs.15.77 Lakhs) can be recover in third year. In third year cash inflow is Rs 24.08 lakhs Therefore the Pay Back Period = 2 + 15.77
24.08
Page 89
= 2.65 years
Accounting Rate Of Return (ARR) Average income after tax &depreciation = 287.24/15 = Rs 19.15 lakhs Initial investment = Rs 70.70 lakhs ARR = 19.15 x 100 70.70 = 27.09% As the ARR of this project is 27.09% which is higher than the minimum rate established by the management of the organization which is 13%, thus we accept the project.
Net Present Value (NPV) PV of cash inflows = Rs 157.45 lakhs Cash outflow = Rs 70.70 lakhs NPV = 157.45 70.70 = Rs 86.75 lakhs Here we see that NPV of the project is Rs 86.75 lakhs which is greater than 1 thus we accept the project.
Profitability Index (PI) PV of cash inflows = Rs 157.45 lakhs
Page 90
Cash outflow = Rs 70.70 lakhs PI = 157.45 70.70 = 2.23 Here PI is 2.23 which is greater than 1, so we accept the project Discounted Pay Back Period: Initial Investment 70.70 lakhs
Inflow in 1st year 26.99 lakhs Inflow in 2nd year 19.13 lakhs Inflow in 3rd year Inflow in 4th year 16.69 lakhs 14.58 lakhs
In the first three years we recover Rs 62.81 lakhs To recover Rs 70.70 lakhs we need Rs 7.89 lakhs more This amount (Rs.7.89 lakhs) can be recovered in fourth year. In fourth year cash inflow is Rs 14.58 lakhs Therefore the Discounted Pay Back Period = 3 + 7.89 14.58 = 3.54 years
Internal Rate of Return:
Page 91
IRR = 30% + 82.66 70.70 (40% 30%) 82.66 63.90 = 36.37% As the IRR is higher than the opportunity cost of capital of the organization i.e36.37%, so we accept the project.
Pay Back Period Initial Investment 70.70 lakhs Inflow in 1st year 28.81 lakhs Inflow in 2nd year 22.75 lakhs Inflow in 3rd year 22.40 lakhs Since the cash inflows are uneven pay back period can be calculated as: In first two years we recover Rs 51.56 lakhs. To recover Rs 70.70 we need Rs 19.14 lakhs more This amount (Rs.19.14 lakhs) can be recovered in third year. In third year cash inflow is Rs 22.40 lakhs Therefore the Pay Back Period = 2 + 19.14 22.40 = 2.85 years
Accounting Rate of Return (ARR) Average income after tax &depreciation = 262.52/15
Page 92
= Rs 17.50 lakhs Initial investment = Rs 70.70 lakhs ARR = 17.50 x 100 70.70 = 24.75% As the ARR of this project is 24.75% which is higher than the minimum rate established by the management of the organization which is 13%, thus we accept the project. Net Present Value (NPV) PV of cash inflows = Rs 146.57 lakhs Cash outflow = Rs 70.70 lakhs NPV = 146.57 70.70 = Rs 75.87 lakhs Here we see that NPV of the project is Rs 75.87 lakhs which is greater than 1 thus we accept the project. Profitability Index (PI) PV of cash inflows = Rs 146.57 lakhs Cash outflow = Rs 70.70 lakhs PI = 146.57 70.70 = 2.07 Here PI is 2.07 which is greater than 1, so we accept the project Discounted Pay Back Period Initial Investment 70.70 lakhs
Page 93
Inflow in 1st year 25.50 lakhs Inflow in 2nd year 17.82 lakhs Inflow in 3rd year Inflow in 4th year 15.52 lakhs 13.55 lakhs
In the first three years we recover Rs 58.84 lakhs To recover Rs 70.70 lakhs we need Rs 11.86 lakhs more This amount (Rs11.86 lakhs) can be recovered in fourth year. In fourth year cash inflow is Rs 13.55 lakhs Therefore the Discounted Pay Back Period = 3 + 11.86 13.55 = 3.87 years Internal Rate of Return
IRR = 30% + 77.16 70.70 (40% 30%) 77.16 59.72 = 33.72%
As the IRR is higher than the opportunity cost of capital of the organization i.e. 13%, so we accept the project.
CONCLUSION
Page 94
To judge the worthiness of the project several aspects have been analyzed, considering CDM and without CDM whereby taking into consideration the financial viability and profitability of the project which also results in low CO2 emission as well as generate profit (by savings) in the long run .The various outcome by using the different capital budgeting techniques to find out the feasibility of the project are mentioned below:Based on the above findings we can conclude that the project is very much feasible from financial as well as
Criterio
With CDM
PBP < Target Period i.e 2.65yrs<15yrs NPV > 0 i.e Rs 86.75 > 0 PI > 1 i.e 2.23 > 1 IRR > Cost Of Capital i.e 36.37%>13% DPBP < Target period i.e 3.54yrs<15yrs ARR > Target period i.e 27.09%>15%
Without CDM
PBP < Target Period i.e 2.85yrs<15yrs NPV > 0 i.e Rs 75.87> 0 PI > 1 i.e 2.07 > 1 IRR > Cost Of Capital i.e33.72%>13% DPBP < Target period i.e 3.87yrs<15yrs ARR > Target period i.e 24.75%>15%
Payback Period Net Present Value(NPV) Profitability Index Internal Rate of Return(IRR) Discounted payback Period Accounting Rate of Return(ARR)
from economic point of view. Therefore it is recommended that the old heat exchanger in DCU which was to recover additional heat in rundown circuit of Guwahati Refinery should be replaced with the new one so as to gain good amount of carbon credit and increase efficiency in production energy index at the same time generate revenue in the form of savings . A report by-Hussain Mustafa Azad,JNSMS
Page 95
BIBLOGRAPHY
Books Referred: 1. Kothari, C.R., Research Methodology Methods and techniques, Reprint Edition, 2010, New Age International Publiser. 2.Chandra Prasanna, Projects Planning Analysis Selection Implementation and Review,Fourth Edition,Published in 1997. 3. Srivastava Rajiv,Misra Anil,Financial Mangement,Second Edition,Published in 2011,Oxford University Press. Weblinks: http://www.iocl.com http://myiris.com/shares/research/motilal/INDOILCO_20100 129.pdf http://www.iocl.com/Aboutus/FinancialPerformance.aspx http://www.iocl.com/Aboutus/FinancialPerformance.aspx
http://www.business.qld.gov.au/dsdweb/v4/apps/web/content.cfm ?id=7415
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Heat Exchanger (Final Project) by Hussain

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2012

Indian oil Corporation Ltd Guwahati Refinery Noonmati.

Presented By : Hussain Mustafa Azad

A report by-Hussain Mustafa Azad,JNSMS

PREFACE ACKNOWLEDGEMENT STUDENT DECLARATION EXECUTIVE SUMMARY

9 12-13 14-15 16-19 20-21 22-23 24 25-30 32-33 34-36 37-38

Under IOCL, GUWAHATI REFINERY

A report by-Hussain Mustafa Azad,JNSMS

A report by-Hussain Mustafa Azad,JNSMS

Lurai Rongmai (Assistant Professor,JNSMS ) for her constant guide and

A report by-Hussain Mustafa Azad,JNSMS

Semester Jawarh arlal Nehru School Of M anagement Studies.

A report by-Hussain Mustafa Azad,JNSMS

Organization: Guwahati Refinery, Indian Oil Corporation Limited.

Organizational Guide: Mr Ritesh Agarwala (ACO, MAIN ACCOUNT)

Institution Guide: Mrs. Lurai Rongmai(Assistant Professor,JNSMS)

Duration of the project: 17th May to 30th July, 2012.

Brief introduction: GUWAHATI REFINERY:

Digboi became the birth place of Indias oil industry.

A report by-Hussain Mustafa Azad,JNSMS

Digboi refinery is the oldest running refinery in the world.

Indian Oil Corporation Limited:

Administrative Minister: Ministry of Petroleum & Natural Gas, Government of India.

A report by-Hussain Mustafa Azad,JNSMS

Share Holding Pattern as on 31st March 2011:

LIC-MoneyPlus Wisdomtree India Investm ent Portfolio Inc

A report by-Hussain Mustafa Azad,JNSMS

The primary data collected are assumed to be correct.

A report by-Hussain Mustafa Azad,JNSMS

A report by-Hussain Mustafa Azad,JNSMS

Indian Oil Corporation-The Energy of India

A report by-Hussain Mustafa Azad,JNSMS

A report by-Hussain Mustafa Azad,JNSMS

A report by-Hussain Mustafa Azad,JNSMS

A report by-Hussain Mustafa Azad,JNSMS

A report by-Hussain Mustafa Azad,JNSMS

1. Shri R.S. Butola Chairman w.e.f.28.02.2011

2. Shri P.K.Goyal Director (Finance) W.e.f.02.05.2011

3. Shri Michael Bastian Independent Director

4. Shri G. C. Daga Director (Marketing) 7. Shri B. N. Bankapur Director (Refineries)

5. Shri P. K. Sinha Government Director 8. Shri Sudhir Bhargava Government Director

10. Shri K. K. Jha Director (Pipelines)

11. Prof. (Dr.) Indira J. Parikh Independent Director

12. Shri B. M. Bansal

Chairman & Director (P&BD)

A report by-Hussain Mustafa Azad,JNSMS

15. Shri V. C. Agrawal (Human Resources) upto 31.07.2010

Director (Human Resources) w.e.f. 27.10.2010 18. Shri A. M. K. Sinha

19. Prof. Gautam Barua Independent Director

A report by-Hussain Mustafa Azad,JNSMS

Decision Making Process:

Divisional Set-up Refineries(including AODs Digboi Refinery)

Finance Human Resource Planning & Business Development

Pipelines Marketing (including AODs Marketing) R&D

A report by-Hussain Mustafa Azad,JNSMS

Business Chart of IOCL

A report by-Hussain Mustafa Azad,JNSMS

Refineries HQ, New Delhi

A report by-Hussain Mustafa Azad,JNSMS

FUNCTIONING OF PIPELINE Sea Shore Division (Exploratio n)

Refinery Refinery Division

Finished products to clients