Hindustan Petroleum Corporation
BSE: 500104 | NSE: HINDPETRO | ISIN: INE094A01015 | Refineries
- Directors Report
- Chairman's Speech
- Auditors Report
- Notes To Accounts
- Accounting Policy
- Finished Products
- Raw Materials
| Chairman's Speech | Year : Mar '09 |
Dear Shareholders,
It is once again my privilege and pleasure to share the details of the
performance of your Corporation for the financial year 2008-09.
The year gone by was marked by volatility and trauma with catastrophic
events that have reshaped the world. Oil prices touched 7 per barrel
in July 2008. As sub-prime mortgage crisis unfolded, the global economy
suffered one of the worst economic contractions since the Great
Depression. Oil prices fell dramatically to /bbl by December 2008 in
response to the crisis. The governments all over the world have
deployed a series of measures, conventional and unconventional, to
stabilize the financial system and to contain the fallout on the real
sector.
As oil prices rose, the Government of India increased prices of diesel
and petrol in June 2008 to reduce the under-recovery/subsidy burden
borne by the oil companies. Growth decelerated sharply in the third
quarter as a result of uncertain economic climate. Exports as well as
capital inflows were affected adversely by global economic crisis. The
Indian government also introduced a series of fiscal stimulus to
minimize the impact of slowdown. The Government brought down petrol and
diesel prices as oil prices declined in the second half of the year.
Consumption of products whose prices are controlled such as petrol,
diesel and LPG has held up while demand for industrial products whose
prices follow international trends such as ATF, FO/LSHS, Bitumen etc.
fell due to a combination of high prices and economic slowdown.
Even under these difficult conditions, your Corporations physical
performance exceeded targets. Refineries at Mumbai (MR) and Visakh (VR)
achieved a combined thruput of 15.81 million metric tonnes. Market
sales (including exports) were 25.39 million metric tonnes compared
with 24.47 million metric tonnes in 2007-08. The product pipelines
achieved a thruput of 10.58 million metric tonnes vis-a-vis the target
thruput of 9.20 million metric tonnes.
The Company achieved highest ever turnover of Rs.l,16,428 crores during
the year as against Rs.1,03,837 crores in 2007-08. The profit after tax
for the year is Rs.575 crores compared to Rs.1135 crores for the
previous year. The financial performance of the Corporation was
affected by the higher interest cost of Rs.2083 crores, an increase of
Rs.1317 crores over the previous year. The increase in the interest
cost was mainly on account of higher borrowings, arising due to
increase in gross under-recoveries in the current year and the delay in
receipt of oil bonds, to finance the working capital requirements.
Borrowings at the end of the year were Rs.22,755 crores. The funds
requirement was managed through a combination of short and long term
loans and thru judicious treasury management.
India is a growing economy and it needs energy including oil. Hence,
demand for oil will increase in foreseeable future. Oil prices have
firmed up recently in the wake of OPEC output cuts. Private sector
players are again focusing on domestic markets as external markets
shrink due to slowdown. Volatility is an inherent trait of oil
industry. Our strategy is to ensure steady capital investment for
long-term growth and reduce the impact of volatility through rigorous
scrutiny of costs. We have improved our competitiveness by
consolidating our asset base underpinned by operational excellence. We
are investing in upstream, city gas distribution, and renewable energy
to diversify our revenue stream and to take advantage of emerging
opportunities. We have continuously utilized technology to improve
offerings to customers and to improve business processes.
The Green Fuel Projects at MR and VR are near completion and in the
process of stage-wise commissioning. MR has started producing Euro
III/IV quality petrol and VR will start producing the same during the
second quarter of 2009-2010. Both the Refineries are also currently
implementing Diesel Hydrotreater Projects at an estimated cost of
Rs.6900 crores. The projects, slated for completion in 2011, will
enable the Refineries to produce Euro III/IV quality diesel.
The Mumbai Refinery is also setting up a new FCCU Unit to enhance the
production of LPG, Petrol and Diesel. The project is due for completion
by May 2010. The Lube Oil Upgradation project at MR costing nearly
Rs.1030 crores for producing lube oil base stocks of Group 11/ III
quality is in progress and is also scheduled for completion by May
2010.
HPCL Mittal Energy Ltd., a JV company of HPCL with M/s. Mittal Energy
Limited, is in the process of setting up a 9 MMTPA grass root refinery
near Bhatinda in Punjab. The project is slated for mechanical
completion by Dec 2010 and commissioning by March 2011.
The Corporation has varied participating interests in 26 exploration
blocks. We are rigorously looking for prospective fields domestically
as well as internationally and aim to achieve the status of fully
integrated Oil Company. Current downturn could provide some attractive
opportunities.
Thrust for renewable energy has come from concerns about energy
security and climate change. We have invested in wind energy projects
in the states of Maharashtra and Rajasthan. In the initial phase, a
total of 25 MW capacity projects have been commissioned. The project
work for ethanol production in Bihar and Jatropha plantation in
Chattisgarh is progressing. Our projects in these states while
providing profitable opportunities for us also act as catalyst for new
investments.
We have maintained our focus on improving service offerings to
consumers. One example is HP Anytime launched in Kerala. The system
provides 24-hour LPG refill booking facility to consumers through an
interactive voice response system. We have kept our focus on rural
markets with low-cost Hamara Pump to meet the requirements of farmers
besides catering to the new found prosperity in these areas.
Information technology has become the core of your companys operation.
The Enterprise Resource Planning (ERP) system has provided essential
support to main business processes of the Corporation. The availability
of on-line and real time information in these systems enables speedy
decision making, improved responsiveness, reduced cycle times and
better customer service. IT enabled solutions are also being used to
simplify and improve processes and bring in more transparency in
operations.
Commitment, experience and hard work of our people have been an
essential part of our success. We aim to improve capabilities of our
people through training programmes and through sharing of expertise
available within the Corporation. HR initiatives like Balanced
Scorecard, Competency Mapping, Six Sigma have enhanced the competency
and productivity levels across the organization. Our employees
demonstrated their commitment by maintaining the fuel supply during the
strike by officers of some of the PSU oil companies, thereby preventing
total chaos in the system. Your Corporation , hence had the privilege
of being the sole supplier of petroleum products to the nation for
three days in January 2009.
It is a matter of pride for us that your Company is ranked 311 amongst
Global Fortune 500 Companies, 1002 amongst Forbes Global 2000 Companies
and 111 in the list of Worlds Most Reputed Companies brought out by
the Global Reputation Institute. We aim to conduct our business with
highest standards of corporate governance. We have implemented the
Right to Information Act (RTI) in letter as well as spirit. We have
also implemented the Integrity Pact in liaison with Transparency
International. The Integrity.Pact forbids vendors from using any type
of unwarranted influence for furthering their interests while in turn
ensuring them fairness, transparency and equal opportunity in their
association with the Corporation.
We have reached out to the Society in general and the underprivileged
in particular through our CSR initiatives by providing for education,
health, water, sanitation, rural developmental activities, vocational
training and income generating schemes to make them self-reliant. We
have resolved to keep aside 2% of our Profit after tax (PAT) for
Corporate Social Responsibility (CSR) from the current year onwards.
We thank all our shareholders for the trust reposed in us. Payout of
dividend this year has been lower as compared to earlier years due to
large under-recoveries. The Government of India is fully seized of the
matter and has provided support to Oil Marketing Companies via a number
of measures including issue of oil bonds and subsidy sharing by
upstream oil companies. We are quite hopeful that in the coming years
we would be in a position to improve the returns to our valued
shareholders.
The support of our customers and business associates has always been a
source of strength and I thank them for being part of our growth story.
The Independent directors, with their wide knowledge and experience,
have been a source of wise counsel. The guidance of the Government
directors has been invaluable in the progress of your company. Our
Administrative Ministry, the Ministry of Petroleum & Natural Gas, has
been providing continuous guidance and support in all our efforts. We
look forward to their continuing support in all our endeavors.
Thank you,
Arun Balakrishnan
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| Source : Religare Technova | |
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