Hindustan Petroleum Corporation

On behalf of the Board of Directors, I have great pleasure in
 presenting to you the fifty sixth Annual Report on the working of the
 Company, together with the Audited Accounts for the year ended 31st
 March 2008.
 
 HIGHLIGHTS                                           (Rs./Crores)
 FINANCIAL                                           2007-08    2006-07
 
 Sales/Income from Operations                     1,12,098.27  96,918.15
 Profit before Depreciation, Interest and Tax        2,751.97   3,094.14
 Depreciation                                        (850.82)    (704.00)
 Interest                                            (792.48)    (422.98)
 Profit before Tax                                   1,108.67   1,967.16
 Provision for Tax
 ?  Current Tax                                      (166.74)    (652.67)
 ?  Deferred Tax                                     (202.53)     (36.46)
 ?  Taxation of earlier years written back            408.61      302.98
 ?  Fringe Benefit Tax                                (13.13)      (9.84)
 Prof it after Tax                                  1,134.88    1,571.17
 Balance brought forward from previous year         6,892.13    6,186.63
 Appropriations
 General Reserve                                     (113.49)    (157.12)
 Proposed Dividend : Interim                            -        (203.60)
 Final                                               (101.59)    (407.20)
 Tax on distributed profits                           (17.26)     (97.75)
 Balance carried forward                            7,794.67    6,892.13
 
 PHYSICAL PERFORMANCE (MMT)
 Market Sales (incl. Exports)                          24.46       21.69
 Crude Thruput:
 Mumbai Refinery                                        7.36        7.42
 Visakh Refinery                                        9.41        9.24
 
 SHAREHOLDERS VALUE (Rupees)
 Earnings Per Share                                    33.48       46.35
 Cash Earnings Per Share                               64.55       68.20
 Book Value Per Share                                 311.59      283.19
 
 DIVIDEND
 
 Your Directors, after taking into account the financial results of the
 Company during the year, have recommended dividend of 30% (including
 NIL interim dividend) for the year 2007-08 as against 180% (including
 interim dividend of 60%) paid for the year 2006- 07. The dividend for
 2007-08, including dividend fax provision will absorb Rs. 118.85 crores
 (2006-07: Rs. 708.55 crores).
 
 SALES/INCOME FROM OPERATIONS
 
 Your Company has achieved sales/income from operations or Rs.
 1,12,098.27 crores as compared to Rs. 96,918.15 crores in 2006-07.
 
 PROFIT
 
 Your. Company has earned gross profit of Rs. 2,751.97 crores as against
 Rs. 3,094.14 crores in 2006-07 and profit after tax of Rs. 1,134.88
 crores as compared to Rs. 1,571.17 crores in 2006-07.
 
 INTERNAL RESOURCES GENERATION
 
 The Internal Resources generated were Rs. 2,069.38 crores as compared
 to Rs. 1,603.08 crores in 2006-07.
 
 CONTRIBUTION TO EXCHEQUER
 
 Your Company has contributed a sum of Rs. 21,753.33 crores to the
 exchequer by way of duties and taxes, as compared to Rs.19,447.05
 crores in 2006-07.
 
 DIRECTOR S RESPONSIBILITY STATEMENT
 
 In terms of Section 217(2AA) of the Companies Act, 1956, your Directors
 state that:
 
 (i) In the preparation of the Annual Accounts, all the applicable
 Accounting Standards have been followed along with proper explanation
 relating to material departures.
 
 (ii) The Company has selected such Accounting Policies and applied them
 consistently and made judgments and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Company as on 31st March 2008 and of the Profit & Loss Account of
 the Company for the year ended on that date.
 
 (iii) The Company has taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956 for safeguarding the assets of
 the Company and for preventing and detecting fraud and other
 irregularities.
 
 (iv) These Accounts have been prepared on a going concern basis.
 
 
 MEMORANDUM OF UNDERSTANDING WITH GOVERNMENT OF INDIA
 
 The performance of the Corporation of the year 2007-08 qualifies for
 Excellent rating basis self assessment. The details of performance
 vis-a-vis MOU 2007-08 targets are enclosed (Annexure I).
 
 REFINERY PERFORMANCE
 
 HPCL refineries achieved the highest ever combined crude thruput of
 16.77 MMT as against 16.66 MMT achieved during 2006-07.  During the
 year, Mumbai Refinery achieved crude thruput of 7.36 MMT as against
 7.42 MMT for the year 2006-07, which corresponds to capacity
 utilization of 133.73%. The Fuel and Loss at Mumbai Refinery was 6.85%
 during the year which is better than MOU excellent target of 7.40%.
 
 During the year, Visakh Refinery achieved crude thruput of 9.41 MMT as
 against 9.24 MMT for the year 2006-07, which corresponds to capacity
 utilization of 125.50%. The Fuel and Loss at Visakh Refinery was 5.58%
 during the year which is better than MOU excellent target of 6.80%.
 
 Gross refining margins of Mumbai Refinery averaged at US$ 5.98 per
 barrel as against US$ 4.78 per barrel for the year 2006-07.  Gross
 refining margins of Visakh Refinery averaged at US$ 6.98 per barrel as
 against US$ 3.51 per barrel for the year 2006-07.  Both refineries are
 on the verge of completing new facilities to produce environment
 friendly fuel.
 
 Mumbai Refinery achieved highest ever LOBS production of 351 TMT
 against installed capacity of 335 TMT, thus achieving capacity
 utilization of 104.70%.
 
 The particulars with respect to Conservation of Energy, Technology
 Absorption. Foreign Exchange Earning & Outgo are detailed in Annexure
 II.
 
 Similarly, particulars relating to control of Pollution and other
 initiatives by Refineries are listed in Annexure III of Directors
 Report.  
 
 MARKETING PERFORMANCE
 
 The market sales (including exports) registered 24.46 MMT as against
 21.69 MMT recorded in 2006-07. The company achieved highest ever
 turnover of Rs. 1,03,837.43 crores during the year as against Rs.
 91,448.03 crores during 2006-07.  
 
 VIGILANCE-
 
 Vigilance Department, in the current year has strived to emphasize in
 its activities, an environment of proactive vigilance, the importance
 of transparency, adherence to professionalism and high standards in
 customer service and project execution. The stress has been on
 preventive vigilance rather than being on fault finding mission.  The
 initiatives on which special thrust was given in the current year are
 highlighted below:
 
 A.  Preventive Vigilance Activities
 
 a.  System Review - A systems study of crude procurement process, newly
 introduced disbursement automation and vendor management system, and
 internal controls in place for e-payment was carried out.
 
 b.  Interactive Sessions - Vigilance Awareness Week was observed from
 12/11/07 to 16/11/07 all over India in all the offices of HPCL.
 
 c.  Inspections - During the year, 2302 inspections were conducted at
 Terminals, Depots, Retail outlets and LPG Dealerships.
 
 B.  Investigative Vigilance Activities
 
 a.  CTE Inspections/Tender Review
 
 During the year, 255 inspections of contracts and major purchases were
 conducted.
 
 b.  Complaints
 
 The practice of interacting directly with the person against whom
 complaint is received has been continued by vigilance officers to
 understand and hear the person. Further, on many occasions, CVOs
 personal interactions with the officers complained against during his
 visits to various HPCL locations have helped in building confidence,
 increasing transparency and awareness.
 
 INDUSTRIAL RELATIONS
 
 Industrial Relations climate during the year 2007-08 continued to be
 harmonious and there was no loss of production/man hours.
 
 Various spot settlements were signed with Unions for improvement in
 productivity, redeployment of workmen and commissioning of new
 facilities which resulted in optimum utilization of manpower.
 
 During the year, an e-care portal was launched for attending to
 employee complaints on-line. The Corporation bagged Employer Branding
 Award 2008 from the Asia Pacific HRD Congress for its uniqueness and
 innovation in Human Resource Management. A unique training initiative
 Jl HAAN SAMARTH launched internally to impart training to all LPG
 delivery-men was a grand success and received excellent feedback from
 end users.
 
 OFFICIAL LANGUAGE IMPLEMENTATION
 
 Progressive use of Hindi in the Corporation continues to receive due
 importance.
 
 SC / ST LIAISON
 
 The overall representation of SC / ST employees in the Corporation is
 27.91%. During the year, your Corporation has carried out a number of
 Welfare / Development activities.
 
 CORPORATE GOVERNANCE
 
 The Corporation has complied with the various requirements of Corporate
 Governance. The details in this regard form part of this
 
 Annual Report.
 
 MANAGEMENT DISCUSSION & ANALYSIS REPORT
 
 This report has been given separately.
 
 PARTICULARS OF EMPLOYEES
 
 A statement providing the information as required under Section 217
 (2A) of the Companies Act, 1956 is annexed herewith (Annexure IV). 
 
 The details regarding the number of women employees vis-a-vis the
 total number of employees in each group is also annexed (Annexure V).
 
 DIRECTORS
 
 HPCL Board presently comprises of 10 Directors. The Whole-time
 Directors are S/Shri Arun Balakrishnan, Chairman & Managing Director,
 S. Roy Choudhury, Director-Marketing, M.A. Tankiwala,
 Director-Refineries, V. Viziasaradhi, Director-Human Resources, and B.
 Mukherjee, Director-Finance.
 
 The Part-time Directors are S/Shri P.K. Sinha, T.L. Sankar, I.M.
 Pandey, Prakash G. Apte and P.V. Rajaraman. The following are the
 changes in directorships that occurred during the year:
 
 Shri Prabh Das, Joint Secretary, MOP&NG, who joined the HPCL Board on
 03.05.2005 ceased to be Director with effect from 05.03.2008 upon his
 resignation from the Government service.
 
 Shri P.K. Sinha, Additional Secretary & Financial Advisor, MOP&NG, who
 joined the HPCL Board on 01.03.2006 continues to be ex-officio
 Part-time Director of the Corporation.
 
 S/Shri Rajesh V. Shah & M. Nandagopal, who joined the HPCL Board on
 21.01.99, ceased to be Directors with effect from 23.08.2007.
 
 S/Shri T.L. Sankar, I.M. Pandey, P.V. Rajaraman and Prakash G. Apte
 continue to be part-time non-official Directors of the Corporation.
 
 S/Shri Arun Balakrishnan, Chairman & Managing Director, S. Roy
 Choudhury, Director-Marketing, M.A. Tankiwala, Director-Refineries, V.
 Viziasaradhi, Director-Human Resources, continue as the whole time
 Directors of the Corporation.
 
 Shri C. Ramulu, Director-Finance retired from the services of the
 Corporation effective 31.01.08 on attaining the age of superannuation.
 
 Shri B. Mukherjee has been appointed as Director-Finance with effect
 from 01.02.08 who has been co-opted as an Additional Director liable to
 retire at the next Annual General Meeting and is eligible for
 re-appointment.
 
 As per the provisions of Section 256 of the Companies Act, 1956, S/Shri
 P.K. Sinha, I.M. Pandey and S. Roy Choudhury are the Directors who will
 retire by rotation at the next AGM and are eligible for re-appointment.
 
 The Board of Directors place on record their sincere appreciation of
 the valuable services rendered by S/Shri Prabh Das, Rajesh V. Shah, M.
 Nandagopal and C. Ramulu during their tenure on the Board.
 
 ACKNOWLEDGEMENTS
 
 The Directors gratefully acknowledge the valuable guidance and support
 extended by the Government of India, Ministry of Petroleum and Natural
 Gas, other Ministries, Petroleum Planning & Analysis Cell and the State
 Governments.
 
 The Directors also acknowledge the contribution made by the large
 number of dealers and distributors spread all over the country towards
 improving the service to our valued customers as well as for the
 overall performance of the Company.
 
 The employees of the Company have continued to display their total
 commitment towards the pursuit of excellence. Your Directors take this
 opportunity to place on record their appreciation for the valuable
 contribution made by the employees and look forward to their services
 with zeal and dedication in the years ahead to enable the Company to
 scale even greater heights.  Your Directors are thankful to the
 shareholders for their faith and continued support in the endeavors of
 the Company.
 
                            For and on behalf of the Board of Directors
                                                      ARUN BALAKRISHNAN
 May 29, 2008                              Chairman & Managing Director