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Mangalore Refinery and Petrochemicals Directors Report, MRPL Reports by Directors
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Mangalore Refinery and Petrochemicals

BSE: 500109|NSE: MRPL|ISIN: INE103A01014|SECTOR: Refineries
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Directors Report Year End : Mar '17    Mar 16

Dear Members,

The behalf of the Board of Directors of your Company, it gives me immense pleasure to share with you the highlights, developments and the progress that your Company has made during the financial year ended March 31, 2017 and to present the 29th Annual Report on the business and operations of Mangalore Refinery and Petrochemicals Limited (MRPL) and its audited financial statements together with the Auditors’ Report and comments on the financial statements by the Comptroller and Auditor General (C&AG) of India. You will be delighted to know that financial year 2016-17 has been yet another year of achievements for your Company. The Company registered the highest ever throughput of 16.27 MMT.

STATE OF COMPANY’S AFFAIRS

Your Board is reporting the affairs of the Company for the FY 2016-17 as under:

Financial Performance

The standalone / consolidated financial highlights for the year ended 31/03/2017 are summarized below:

(Rs. In Crore)

Standalone

Consolidated

Year ended 31st March, 2017

Year ended 31st March, 2016

Year ended 31st March, 2017

Year ended 31st March, 2016

Profit Before Tax

5,531.41

1,158.30

5,053.85

286.51

Less: Current Tax

1,185.37

234.56

1,185.38

234.56

Deferred Tax

702.36

(223.20)

575.26

(453.82)

Profit For The Year

3,643.68

1,146.94

3,293.21

505.77

Add: Other

Comprehensive

Income

(5.03)

0.32

(4.90)

(0.12)

Total

Comprehensive Income for the Year

3,638.65

1,147.26

3,288.31

505.65

Less: Total Comprehensive Income Attributable to Non Controlling Interest

(179.55)

(318.13)

Total

Comprehensive Income Attributable to owners of the Company

3,638.65

1,147.26

3,467.86

823.78

Add: Balance in Profit and Loss Account (Adjusted)

4,198.67

3,051.41

3,803.47

2,979.69

Sub-Total

7,837.32

4,198.67

7,271.33

3,803.47

Appropriation

Transferred to General Reserve

-

-

-

-

Dividend on Equity Shares

1051.56

-

1051.56

-

Tax on Dividend

214.07

-

214.07

-

Closing Balance (Including other Comprehensive Income)

7,837.32

4,198.67

7,271.33

3,803.47

Your company achieved turnover of Rs.59415 crore during the financial year 2016-17 against Rs.50864 crore during the financial year 2015-16. The Company earned a profit after tax (PAT) of Rs.3644 crore during the financial year 2016-17 against profit of Rs.1147 crore earned during the financial year 2015-16. The Gross Refining Margin (GRM) for financial year 2016-17 was 7.75 $/bbl as against 5.20 $/bbl during the financial year 2015-16. Your Company has retained its highest corporate rating “[CCR AAA]” affirmed by CRISIL and IrAAA by ICRA during the FY 2016-17.

OPERATIONAL PERFORMANCE

The financial year 2016-17 has been a remarkable year for your Company. Some of the major highlights for the year 2016-17 are as under:

- Highest ever Gross crude processed for FY 2016-17 was 16.27 MMT against the previous highest of 15.69 MMT during FY 2015-16 registering an increase of 3.69 % in throughput. This high performance could be achieved by optimal crude mix, better equipment reliability, timely shutdown adherence and commendable operational discipline.

- New Crudes processed during FY 2016-17 were Pazflor (High TAN), Yombo & Soorosh.

- Yombo Crude from Congo processed was with the lowest ever API of 16.4.

- Received first parcel of crude oil for delivery into Mangalore cavern of Indian Strategic Petroleum Reserves Ltd (ISPRL). The first parcel of 260 TMT of Iran Mix was received in VLCC MT DINO.

- Highest ever production and dispatch of Poly - propylene, LPG, MS, HSD and throughput in MBPL pipeline.

- MRPL dispatched first parcel of HSD- Euro VI to HPCL during the month of October, 2016.

- MRPL has been awarded ‘BEST MANUFACTURER EXPORT AWARD - MEDIUM / LARGE’ (Petroleum & Petroleum products) for the year 2014-15, acknowledging the performance as the foremost exporter in the state of Karnataka.

MARKETING AND BUSINESS DEVELOPMENT

Your company continues to expand its market spread in the direct sales segment of petroleum products in the state of Karnataka and its adjoining states. Your Company has maintained significant market share and direct customer relations for products such as Bitumen, Fuel Oil, Sulphur, Diesel, Naphtha, Petcoke and Mixed Xylene in its refinery zone. The total sales volume of direct marketing products including Polypropylene during the FY 2016-17 has been 1858 TMT with a sales value of Rs.5132 Crores compared to sales volume of 1610 TMT with a sales value of Rs.3308 Crores in the previous FY 2015-16. MRPL has already achieved dominant market share for its MANGPOL branded Polypropylene in its marketing zone in a very short time. MRPL also continues to maintain leadership position for sales of Bitumen, Sulphur, Pet Coke and Xylol in its marketing zone.

Your Company continues to expand its Polymer product range with new grades and has also expanded its market reach. Your company achieved sales of 264 TMT Polypropylene in FY 2016-17 as against sales of 139 TMT in FY 2015-16. Your Company has also succeeded in marketing the entire production of Pet Coke on consistent basis with a sales volume of 838 TMT in 2016-17. Company also evacuated higher quantity of Sulphur in domestic market targeting major customer in adjoining states. The surplus Sulphur is being exported in larger parcel sizes.

Your company has also maintained timely supplies to State Trading Corporation, Mauritius which has a long term supply contract with MRPL. The company supplied 1049 TMT of petroleum products to STC Mauritius with a sales value of Rs.2860 Crores in FY 2016-17 against sales volume of 1057 TMT at a sales value of Rs.2757 Crores during FY 2015-16.

Your company has commenced the retail expansion plan by releasing the advertisement for appointment of dealers for retail outlets in the state of Karnataka & Kerala and is in the process of expanding its retail network in the its refinery zone. Letter of Intents have been issued to several shortlisted applicants for time bound commissioning of new retail outlets. Feasibility study for additional retail outlet locations is under progress and the company is expecting to commission a sizeable number of retail outlets during next few years.

Your Company Shell MRPL Aviation Fuel Services Limited has steadily acquired business for sale of Aviation Turbine Fuel (ATF) at Indian airports. The company achieved a turnover of Rs.554.29 Crores during FY 2016-17 against Rs.317.97 Crores in the previous FY 2015-16.

RECOGNITIONS

Your Company has been assigned Excellent Rating for the FY 2015-16 by Department of Public Enterprises, Government of India.

At a glittering Earth Day function organised by Srishti Publications at the India International Centre, New Delhi, on 22/04/2017, MRPL bagged Runner up in the manufacturing category after an intense scrutiny and verification by an expert panel.

Shri H Kumar, Managing Director has been conferred with the ‘FORE - Top Rankers Excellence Award’ for Organisational Excellence at the 18th National Management Summit on ‘Leading Transformation of Organisations in the Digital Age’, at New Delhi.

PROCUREMENT OF GOODS AND SERVICES FROM MSEs

In line with the public procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012, for the year 2016-17, against the set target of 20%, your Company has achieved 21.7% procurement of goods and services from Micro and small Enterprises (MSEs) and 40.3% (excluding proprietary items and catalysts & chemicals).

PROJECTS

Existing Projects: BS VI Upgradation

As per Auto Fuel Policy and directives from MoP&NG, the entire country has to move towards BS VI quality specifications for MS and HSD by 01/04/2020. Products from the Refineries have to meet BSVI quality specifications from 01/01/2020. Further MoP&NG has directed the refineries to complete necessary modifications and construction activities and attain mechanical completion by July, 2019 and roll out the products to Oil marketing companies from 01/01/2020. MRPL requires additional units for MS and Revamp/Catalyst changes for HSD. As part of this project, new FCC Gasoline Treatment Facility, Sulphur Recovery Unit, Nitrogen and Utilities and Revamps of CHTU and DHDT is being carried out.

Axens, EIL, UOP are the licensors for the various units and EIL have been appointed as EPCM Consultant for the job. The Environment Clearance for the project was recommended by the EAC on 18/04/2017.

Engineering of these units are in advanced stages and tendering for material and works have commenced.

CCR2 Unit Revamp

MRPL currently has two numbers of NHT/ Plat former Unit. Both the units are of identical capacity and licensed by M/s UOP. The feedstock to the unit is heavy naphtha from crude distillation units and Hydrocracker units. The objective of the unit is to upgrade the low octane heavy naphtha to High octane reformate. The existing CCR-2 unit is being revamped to produce higher quantity of Reformate, yielding higher quantity of MS.

UOP are the Licensor and M/s L&T, Chiyoda are appointed as EPCM consultant for the project. The ordering works are in progress and the revamped unit is expected to get commissioned in 2018-19.

Railway Siding for Pet Coke

Dispatches by Railway Wagons will improve safety in transportation, reduced environmental pollution, Make MRPL products conveniently available in competitive markets and improve commercial realisation to MRPL. Construction of state of the art Railway siding for smooth evacuation of Petcoke with M/s Konkan Railway is being carried out. The Railway siding will be executed by M/s Konkan Railway Corporation Ltd and M/s Mecon have been appointed as the EPCM consultant to execute the balance of plant of the Project consisting of Closed conveyor system, Loading silos with Rapid Loading Systems, Measuring devices, Pollution control facilities etc.

The project is under execution and Engineering has been completed. Tendering is in progress and the project is expected to complete in December 2018.

Future Projects: 2G Ethanol

Your company has been mandated by the Ministry of Petroleum and Natural Gas (MoP&NG), to set up a 2G ethanol plant in Karnataka State. 2nd generation bio-fuels or “Advance Biofuels” are produced from sustainable feedstock which are not in competent for fodder (viz. Surplus Rice straw, Wheat straw, Maize cobs, Maize stalk, Bagasse, Cotton stalk, etc) .

Based on the Biomass feedstock assessment study, your company is planning to set-up a 2G ethanol plant with a capacity of 60 KLPD. The Prefeasibility study of the project has been completed. As the next course of action, MRPL is planning to take up the detailed feasibility study.

The benefits from the advance bio-fuels will be,

- Ethanol is blended with petrol as a part of ethanol blending program from the Government, this will help in reducing the oil import bill of the country.

- Reduction in CO2 and CO emissions, thereby reducing the greenhouse gas emissions.

- Additional source of income to the farmers.

Power from open source:

MRPL is planning to meet all its future requirements through purchase of power through open access. A feasibility study was conducted by M/s PTC India Ltd. Basis this feasibility, a route survey and cost estimation for new facility to access power at 220kv level is under progress. This project is expected to complete in FY 2019-20.

Desalination Plant:

To mitigate the risk of river water as a single source of water, an alternate source of water is being planned through the installation of desalination plant. The Project has obtained permission from the Government of Karnataka. Feasibility studies along with studies for Environment Impact Assessment etc is being done. The project is expected to be commissioned in FY 2019-20.

USING INFORMATION AND COMMUNICATION TECHNOLOGY FOR PRODUCTIVITY ENHANCEMENT

MRPL has taken initiatives to leverage on Information Technology for improving business processes by implementing SAP (Systems and Application Products for Data processing) across all business functions. To run these applications, a state of the art Data Centre has been functioning at Mangalore site for supporting 24 x 7 business operations. Recently MRPL has completed technical upgrade of SAP from EHP 3 to EHP 7 to enhance functionalities of SAP system. MRPL has migrated its SAP system to GST Regime by incorporating all necessary changes in the system and it has gone live on 01/07/2017. With a strong focus on moving towards digitization, MRPL has initiated systems for digitization of documents and is in the process of implementing paperless E-Office system. All employees related self services has been digitized with the implementation of online systems like Leave Management System, Medical System, Travel Management, Time management, Monthly claims etc. These systems are being migrated to app based solution (SAP Fiori). MRPL is continuously upgrading its IT security to meet the new challenges of information threat thereby protecting all important information from any type of misuse. All IT infrastructures are provided to employees to carry out their regular business activities.

HEALTH, SAFETY & ENVIRONMENT PERFORMANCE

The company’s Philosophy on the HSE is to perform better than minimum required by statutes. The major Achievements on the Environment Management front include:

A) Environment

- Environmental Impact Assessment (EIA) study carried out by M/s National Environmental Engineering Research Institute (NEERI), Nagpur for proposed BS-VI (Stage-1) Auto Fuel Quality Compliance & Associated Projects Facilities in line with the approved Terms of Reference (ToR) obtained from Ministry of Environment, Forest & Climate Change (MoEF&CC), New Delhi.

- Hydrogeological Investigation & Modelling study is being carried out by M/s. National Institute of Hydrology (NIH) in the Refinery.

- Grid Analysis study carried out by M/s. National Environmental Engineering Research Institute (NEERI), Nagpur to assess Environmental Impacts of MRPL Phase-III units operation on Air, Ground Water & Noise quality in surrounding villages. Draft report received and a presentation was given to Technical Advisory Committee of Karnataka State Pollution Control Board (KSPCB).

- As a part of Oil & Gas Conservation Month 2017, a campaign was conducted to make neighbouring Villages, Chelairu, Soorinje, Jokatte & Permude as ‘Smoke Free Village’ by facilitating LPG connections free of cost to those households using only biomass/ wood as cooking fuel.

- As per agreement between MRPL and M/s. Ramky Engineers (State Pollution Control Board approved TSDF Operator), total 1120 MT of Solid Hazardous Waste was disposed during 2016-17.

- Total 287 MT of Spent Catalyst generated from Petro Fluidized Catalytic Cracking Unit (PFCCU) was disposed during 2016-17 for co-processing in Cement Plant.

- Replacement of street light fixtures by LED undertaken.

- In Air conditioning package units of phase-3, R22 (Ozone depleting agents) replaced by R407C refrigerant.

- As part of greenbelt development, 20 acres of plantation developed in Pilikula Biological Park, Mangalore.

- Following activities were conducted to spread awareness on tree plantation:

- Distribution of saplings in schools of neighbouring villages to spread awareness amongst students.

- Mass tree plantation as a part of Koti Vriksha Andolan was carried out with active involvement of neighbouring villagers.

- Contribution made to Karnataka State Forest Department towards the tree plantation program.

- 33,25,012 m3 of Treated Municipal Sewage Water was utilized for Cooling Tower makeup (April, 2016 to March, 2017) to reduce fresh water intake.

- Two Fog Generators procured and installed in the refinery to mitigate the dust pollution, if any, from Coke Laydown and Sulphur Recovery Unit area.

- Work Environment Monitoring carried out in the Refinery by M/s. Shiva Analyticals, Bengaluru to access the impact of air borne chemicals in the work zone area.

- ONGC Group Sustainability Report generated incorporating MRPL’s Sustainability Performance for the year 2015-16.

- Following proposals are initiated/completed to control pollution issues:

1. Covering of Sulphur Open Storage Yard & Coke pit;

2. Installation of closed blow out diverters at the top of the DCU Coke drums-completed;

3. Shifting of existing Pet Coke loading silos to a distance ~700m from the neighbouring residential area;

4. Noise reduction from SRU Incinerator blower by providing acoustic insulation on the discharge line up to Thermal incinerator-completed;

5. Shifting of existing Phase-3 slop tanks away from the existing location;

6. Construction of Railway Siding for reducing road transport.

B) Safety

- Surprise safety audit by OISD, External Safety Audit and audit by PESO were carried out.

- 294 days without Reportable Lost Time Injuries (RLTI) as on 31/03/2017.

- 3.41 Million Man Hours worked as on 31/03/2017.

C) Health

- Annual Medical Checkup of employees was carried out in three categories in compliance with the Rules under Factories Act and Karnataka Factories Rules.

- Two Occupational Health Centre (OHC) with 24x7 availability of Medical Staff are functional.

- Services of MRPL Hospital are available not only for the employees and their dependants but for Out Patients as well.

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY DEVELOPMENT

Corporate Social Responsibility (CSR)

MRPL’s social welfare and community development initiatives focus on the key areas of education, health care & sanitation and overall development of basic infrastructure in and around its operational area/ Dakshina Kannada & Udupi District/Karnataka State. These projects are largely in accordance with Schedule VII of the Companies Act, 2013.

MRPL has spent Rs.1.45 Crore (previous year Rs.4.11 Crore) for various CSR activities during the year 2016-17. Pursuant to Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 the Annual Report on CSR activities for 2016-17 is annexed herewith as ‘Annexure A’.

Sustainability Development and Performance

Sustainability efforts of your Company in foregoing year were intensified with footsteps towards the longevity of the company success in an era of continuous challenges. We as a company have emphasized on long term viable approaches in all segments of the organization. Embracing environmentally sustainable business practices were prioritized in all endeavors of the organization. Sustainable business processes to find novel solutions considering better and greener alternatives were initiated. Educating employees on eco-conscious business, sustainable business culture in all segments of company were given utmost importance. The focus on ensuring sustainability to build a culture of accountability throughout the organization was charted.

Your company improved its water foot print by enhancing intake of sewage treated water from City Corporation. Fresh water was eco-consciously replaced by treated sewage water from Mangalore by a quantity equivalent to 2 Million imperial gallons per day. This dual benefit of reducing fresh water intake and consuming urban effluent from city was seconded by using additional 1.5 Million imperial gallons per day treated effluent recycle to the cooling towers. Your company furthering its commitment to reduce its fresh water footprint is setting up a Reverse Osmosis system at a cost of Rs.15 Crore to further process treated sewage water received from the City, to make the water usable directly in the refinery processes. Your company had initiated actions for Zero Liquid Discharge (ZLD) considering availability of fresh water for refinery processes. The water foot print of the refinery complex is envisaged to be improved with novel practices and engineering techniques.

Your company ventured into renewable sources to supply its energy demands. Your company initiated processes for harnessing solar energy that is available in abundance. A roadmap has been drawn to setup 5.6 MWe of solar power plant from all available rooftops. Your company aims to invest around Rs.40 Crore in this project.

Your company had an innovative approach for improving the surrounding topography. The green cover of surrounding area was envisaged to be made denser by signing a Memorandum of Understanding (MOU) with Pilikula Nisarga Dhama, Vamanjoor, Mangaluru to take up the greenbelt development) at Pilikula Nisarga Dhama, Mangalore. In the novel cause termed “Let us plant a forest - Creation of Green Belt” MRPL sponsored plantation and subsequent maintenance for a period of three years in 20 acres of land by planting 2000 plants in Pilikula Nisarga Dhama with native species of Western Ghat.

Your company is endeavoring towards cleaner technologies by reducing vehicular emissions in refinery premises by switching to battery operated vehicles to its supervisory staff.

Naturally available sun light is used to alleviate the warehouse radiance using a novel technique of “SkyPipe “by harvesting day light.

Your company has envisaged an action plan to replace all existing street lights and office lighting to low power consuming LED’s in its premises. Substantial progress has been made on this and we anticipate being 100% LED illuminated by 2018. Total saving of 163500 W and future saving of 80000 W in next one year is envisaged by the scheme

Your company had practiced and will endure to take the footpath of sustainability in all the upcoming endeavors.

PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARY/ JOINT VENTURES/ ASSOCIATE

The details on the performance and financial position of Subsidiary, Associate and Joint Venture Companies are given in Management Discussion and Analysis (MDA) Report. Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule (5) of the Companies (Accounts) Rules, 2014, a statement on the performance and financial position of the subsidiary and Joint Venture Companies is provided as an Annexure to the Consolidated Financial Statements.

In accordance with the provisions of the SEBI guidelines, the Company has framed a policy for determining material subsidiaries that can be accessed on the Company’s website.

Your company has one subsidiary i.e ONGC Mangalore Petrochemicals Limited (OMPL). As per the Material Subsidiary Policy, OMPL is not a material subsidiary of the Company applying the test of materiality.

ANNUAL REPORT OF SUBSIDIARY AND CONSOLIDATED FINANCIAL STATEMENT

The Audited Consolidated financial statements for the year ended 31st March, 2017 of the Company and its subsidiaries form part of the Annual Report in accordance with Section 129 of the Companies Act, 2013 and the Ind AS 110 on “Consolidated Financial Statements” read with Ind AS 28 on “Investments in Associates and Joint Ventures”. In accordance with section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of the subsidiary Company are available on the Company’s website. These documents will also be available for inspection during business hours at the registered office of the Company at Mangalore.

INDIAN ACCOUNTING STANDARDS (IND AS) - IFRS CONVERGED STANDARDS

The Ministry of Corporate Affairs (MCA) on February 16, 2015, notified that Indian Accounting Standards (Ind AS) are applicable to certain classes of companies from April 1, 2016 with a transition date of 01/04/2015. Ind AS has replaced the previous Indian GAAP prescribed under Section 133 of the Companies Act, 2013 (“the Act”) read with Rule 7 of the Companies (Accounts) Rules, 2014 and are applicable to the Company from 01/04/2016. The reconciliations due to transition from previous GAAP to Ind AS have been set out in Note 51 in the notes to accounts in the standalone and consolidated financial statements.

TRANSFER TO RESERVES

No amount has been transferred to General Reserves for the financial year 2016-17.

DIVIDEND

The Board of Directors has recommended a dividend of Rs.6 per equity share for the FY 2016-17. The dividend shall be paid after the approval of members at the Annual General Meeting. The dividend has been recognized in accordance with Company’s Policy on Dividend Distribution. The Dividend Distribution Policy of the Company is annexed herewith as ‘Annexure B’ to this report.

DEPOSITS

Your company has not accepted any deposits during the year pursuant to Section 74 of the Companies Act, 2013 and Rules thereunder.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

There have been no loans / guarantees given or securities provided during the financial year 2016-17 under the provisions of Section 185 / 186 of the Companies Act, 2013. The details of investments covered under the provisions of Section 186 of the Act are given in notes to financial statements provided in this Annual Report.

SHARE CAPITAL

The company has not issued any shares during the FY 2016-17. The Issued, Subscribed and Paid up Equity Share Capital of your Company as on 31/03/2017 was Rs.1,753 Crore.

MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF FINANCIAL YEAR AND DATE OF REPORT

There has been no change in the nature of business during the year. No material changes or commitments have occurred after close of the year till the date of this report which affects the financial position of the Company.

HUMAN RESOURCES

Your company values its human resources the most. To keep their morale high, your company extends several welfare benefits to the employees and their families by way of compensative medical care, education, housing and social security. During the financial year 2016-17, various welfare related policies have been implemented by the Company for its employees.

The Company maintains an Employee Club known as MRPL Employees Club (MEC). The Club offers a wide range of pastime activities for the employees and their dependents. An Internal Departmental Cricket Tournament was also organised by MRPL Employees Club (MEC).

37th PSPB Inter Unit Carrom Tournament was held in MRPL Employees Club from 20/02/2017 to 04/03/2017. Players of International repute representing various Oil PSU companies participated in the prestigious tournament. IOCL won both Men’s & Women’s team events and ONGC was the Runner-up in both the team categories.

Your Company continues to enjoy cordial and harmonious relations and not a single man-hour was lost on account of any industrial disturbance during the year 2016-17.

Reporting on SC / ST / PWD

Presidential Directives and other guidelines issued by Department of Public Enterprises, Ministry of Petroleum & Natural Gas, Ministry of Social Justice and empowerment from time to time with regard to reservation in services for Scheduled Castes, Scheduled Tribes, other backward castes and Persons with disabilities. An adequate monitoring mechanism has been put in place for sustained and effective compliance. Liaison officers are appointed to ensure implementation of the Government Directives. Reservation Rosters are maintained as per the directives and are regularly inspected by the Liaison officer of the company as well as the officials from MoP&NG to ensure proper compliance of the Directives. MRPL also complies with provisions under “The Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 relating to providing employment opportunities for Persons with Disabilities (PWDs). As on 31/03/2017, there are 28 permanent employees with disabilities on the roll of MRPL.

During the year, your Company has recruited 120 employees comprising of 3 women employees and 46 Schedules Caste (SC) / Schedule Tribe (ST) employees. Total employee strength as on 31/03/2017 was 1,917 including 132 women employees, 252 SC/ST employees and 28 employees belonging to persons with disability category (PWD). 821 employees belong to Management cadre whereas 1,096 employees belong to Non-Management cadre. During the Year 2016-17, the Company devoted 5142 Mandays for training, development and learning, which amounts to 3.71 Mandays per employee for Management staff and 2.42 Mandays per employee for Non-Management staff.

In accordance with para-29 of the Presidential Directive, statistics relating to representation of SCs / STs in the prescribed performa, SC / ST/ OBC Report - I and SC / ST / OBC Report -II is attached as ‘Annexure - C’ to the report.

Skill Development Centre

As a part of National Skill Development Mission of the Government of India, MRPL has set up “MRPL Kaushal Vikas Kendra” (MRPL KVK) on 12/02/2017. The first batch of 60 candidates of MRPL KVK is undergoing skill development training in “CNC Operator-Turning” and “Industrial Electrician” course at Nettur Technical Training Foundation (NTTF), Bangalore.

WOMEN EMPOWERMENT

Women employees constituted over 6.88 percent of the Company’s workforce. During the year, programmes on women empowerment and development, including programmes on gender sensitization were orgainsed. Your Company has an Internal Complaints Committee (ICC) required under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. There have been no cases reported to the Committee, for the financial year 2016-17.

OFFICIAL LANGUAGE

Your Company is implementing Official Language Policy as per the Annual Programme prescribed by the Department of Official Language, Ministry of Home Affairs, Govt. of India. In order to propagate and promote Hindi among the employees, Hindi Workshops were organized on a regular basis at Mangalore, Mumbai, Delhi & Bangalore Offices. At regular intervals inspection of internal departments and subordinate offices records/documents for usage and promotion of Hindi were carried out.

Also, Hindi Fortnight was celebrated and many Hindi competitions such as Hindi Dictation, Handwriting, Admin Glossary, Hindi Padho, Samajho & Tick karo, News reading etc were conducted for the employees and their family members in the month of September 2016. In addition one more Hindi competition (Admin Glossary) was conducted in January 2017 for employees. Competitions were held in Hindi language for employees and their family members during National Safety Day, Environment Day, Security awareness week and Vigilance awareness week. Hindi usage is promoted by conducting special quiz competition for senior officers such as GMs & GGMs during Hindi month celebrations.

Hindi classes were arranged regularly to employees to qualify in Prabodh, Praveen & Pragya examinations and Hindi Steno examination. Employees are motivated to pass final Hindi examinations through Incentive schemes such as Cash award & Personal Pay etc. To increase the correspondence in Hindi in the organization, Unicode facilities were activated on all computers used for daily office work.

Special awards were given to 30 students of Delhi Public School (DPS) in MRPL Township, who have scored highest marks in Class-X Hindi examination.

Your Company participated at TOLIC level Hindi competitions and won Eight prizes and stood Second at the TOLIC level competitions. Hindi solo song competition was conducted for employees of TOLIC member organizations at MRPL. In addition Hindi debate competition was also organized for Degree College students of Mangalore University as a part of Hindi month celebrations under the auspices of TOLIC Mangalore. MRPL has been awarded first prize for outstanding performance in hindi implementation for the year 2016-17 at TOLIC level.

In order to propagate and to promote usage of Hindi in the company, in house Hindi Journal namely “MRPL PRATIBIMB” is being published. MRPL follow the guidelines of Official Language (OL), and conducted Official Language Implementation Committee (OLIC) meeting during four quarters of the year under chairmanship of MD to review and for action plan for improving usage of Hindi in MRPL. Your company is making continuous efforts for promoting Hindi usage in the organization by encouraging employees through trainings, workshops, seminars and incentives.

RIGHT TO INFORMATION ACT, 2005

Company’s RTI manual is available on Company’s website which discloses all required information. During the year, 174 applications were received, out of which 150 were disposed off before 31/03/2017, 01 application was transferred to other Public Authority and balance 23 applications were disposed off after 31/03/2017.

SECURITY MEASURES

Security of MRPL Refinery is designed to comply with Oil Sector Infrastructure Protection Plan (OSIPP) and the Security Audit recommendations given by MHA from time to time.

Physical Protection of the Refinery is handled by Central Industrial Security Force (CISF). The Company has recently inducted an additional contingent of 62 CISF personnel to further augment security arrangements in Phase-3 area of the Refinery. Proposal to further augment the CISF strength is under consideration of the MHA.

Security is on top of the agenda of MRPL and to ensure preparedness, periodic mock drills on work-place security preparedness are conducted. To promote awareness on security issues among all stake holders, Security Awareness Weeks are organised periodically. An integrated CCTV cum Electronic Intrusion Detection system is under implementation to further strengthen electronic surveillance of the Refinery.

VIGILANCE FUNCTION

Your company has developed a structured mechanism of vigilance functions and its practices are focused towards creation of value to stakeholders. The practices involve multilayer checks and balances to improve transparency. Vigilance awareness and preventive vigilance activities were continuously carried out during the year. New Chief Vigilance Officer Shri Rajeev Kushwah, ITS has taken charge on 15/04/2017.

In compliance with CVC instructions, your company has implemented a complaint handling policy in which all complaints received from various sources are recorded and can be examined by vigilance. MRPL corporate website has been revamped by including the system for registering the online complaints. The details on the best vigilance practices and links to various useful websites is also provided in the MRPL Corporate website. Your company has achieved highest compliance level with regard to e-procurement, e-tender and e-payment.

In line with instructions of CVC, your company had conducted Vigilance Awareness programs for spreading awareness on evil effects of corruption. A public kiosk was set up at Mangalore City Corporation facilitating the citizens of Mangalore to take E-Integrity Pledge. A walkathon was conducted in Surathkal to spread the awareness on transparency in public life. Debate competition was also conducted for the school children. MRPL and All India Radio, Mangalore conducted several vigilance awareness programs during the year.

DoPT has developed a web enabled online system for vigilance status of employees working in Government sector. Your company is in process of updating the vigilance status of Board level and below board level employees in the web system.

Leveraging the technology to enhance transparency has been a thrust area of action in which vigilance has placed a catalytic role. The website of company displays downloadable tender document, publication of information of work awarded on nomination basis, publication of post award information of contracts.

Whistle Blower Policy

The Whistle Blower Policy is formulated to provide a vigil mechanism for Directors and Employees to raise genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy. It also provides for adequate safeguard against victimisation of persons who use such mechanism. The Policy provides necessary safeguards for protection of Directors and Employees who avail the vigil mechanism from reprisals or victimization, for whistle blowing in good faith and to provide opportunity to Directors and Employees for direct access to the Chairperson of the Audit Committee in exceptional cases. The policy is available on the Company’s website. During the year, no complaints were received under Whistle Blower Policy.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO

Information required to be disclosed pursuant to Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 with respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo are furnished in ‘Annexure- D’ which forms part of this Report.

MANAGERIAL REMUNERATION AND PARTICULARS OF EMPLOYEES

MRPL, being a Government Company, is exempted from the provisions of Section 197(12) of the Companies Act, 2013 and relevant Rules in view of the Notification dated 05/06/2015 issued by Ministry of Corporate Affairs (MCA).

The functional directors of the Company are appointed by the administrative Ministry i.e. MoP&NG within the terms & conditions as per DPE guidelines.

EXTRACT OF ANNUAL RETURN

Information required to be disclosed pursuant to Section 134(3)(a) of the Companies Act, 2013 with respect to the details forming part of the extract of the Annual Return in form MGT-9 are furnished in ‘Annexure- E’ which forms part of this Report.

RELATED PARTY TRANSACTIONS & PARTICULARS OF CONTRACTS / ARRANGEMENTS WITH RELATED PARTY

All transactions entered with related parties during the financial year 2016-17 were on arm’s length basis and in ordinary course of business. Further, there were no material related party transactions during the year with the Promoters, Directors or Key Managerial Personnel. The Company has adopted a Related Party policy and procedure, which is available at company’s website.

The particulars of every contract or arrangements entered into by the Company with Related Parties referred in Section 188(1) of the Companies Act, 2013, in the prescribed Form No. AOC - 2 attached as ‘Annexure-F’. MCA vide Notification dated 05/06/2015, has exempted the applicability of Section 188 (1) of the Companies Act, 2013 for a transaction entered into between two Government Companies.

DIRECTORS & DIRECTORS’ RESPONSIBILITY STATEMENT

Changes in the Board of Directors and Key Managerial Personnel during the financial year 2016-17

MRPL being a Central Public Sector Enterprise (CPSE), Directors on the Board of the company are appointed by the Administrative Ministry i.e. Ministry of Petroleum and Natural Gas (MoP&NG), Government of India and therefore the provisions of Section 134(3) (e) of the Companies Act, 2013 regarding policy on Directors appointment and remuneration shall not apply in view of the MCA notification dated 05/06/2015.

Shri A.K. Sahoo assumed the office of Director (Finance) on 01/02/2016 and was appointed as a Director in the 28th Annual General Meeting held on 03/09/2016, in place of Shri Vishnu Agarwal, who superannuated from the services of the Company. Shri Diwakar Nath Misra, Director (GP), MoP&NG was appointed as Additional Director with effect from 09/03/2016 and was also appointed as a Director in the 28th Annual General Meeting held on 03/09/2016. Shri B.K. Namdeo, Nominee Director, HPCL ceased to be a Director consequent upon his superannuation from the services of HPCL on 31/10/2016 and Shri Vinod S. Shenoy, Director (Refinery) HPCL was appointed as Director in casual vacancy with effect from 08/11/2016. The Board places on record its appreciation for the valuable services rendered by the outgoing Directors during their respective tenure.

Ms. Manjula C. nominated as Non official Independent Director by MoP&NG with effect from 31/01/2017 was appointed as an Additional Director by the Board with effect from 31/01/2017, vacates her office in this AGM and being eligible offers herself for appointment as Director in the 29th Annual General Meeting.

FORMAL ANNUAL EVALUATION

MRPL, being a Government Company, the provisions of Section 134(3)(p) of the Companies Act, 2013 in respect of annual evaluation of the Board Committees and individual Directors shall not apply in view of the MCA notification dated 05/06/2015. However, as per Regulation 17 of SEBI Listing Regulations, 2015 formal annual evaluation of independent Director had been carried out by the Board. No meeting was held by the Independent Directors during the year as the company had only one Independent Director.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to provisions of Section 134 of the Companies Act, 2013, the Board of Directors of your Company has made the following statement for FY 2016-17:

a) In the preparation of the Annual Financial Statements for the year ended March 31, 2017, the applicable Ind AS have been followed along with proper explanation relating to material departures;

b) The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period;

c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d) The Directors have prepared the Annual Financial Statements on a going concern basis;

e) The Directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

As per SEBI Listing Regulations, 2015, Audit Committee has reviewed the Directors’ Responsibility Statement.

NUMBER OF BOARD MEETINGS

The Board of Directors of your Company had six (6) Meetings during the FY 2016-17. The maximum interval between any two meetings did not exceed 120 days as prescribed in the Companies Act, 2013. Details of the Board Meetings held, have been furnished in the Corporate Governance Report which forms part of this Report.

AUDIT COMMITTEE

The Audit Committee has been constituted as per the terms of reference, prescribed under Section 177 of the Companies Act, 2013 read with Rule 6 of the Companies (Meetings of the Board and its Powers) Rules, 2014, Regulation 18 of SEBI Listing Regulation, 2015 and Guidelines on Corporate Governance for Central Public Sector Enterprise issued by Department of Public Enterprise, Government of India. There have been no instances where the recommendations of the Audit Committee were not accepted by the Board of Directors. The details of Audit Committee are disclosed in the Corporate Governance Report which forms part of this Report.

Due to non-availability of sufficient number of Independent Directors, the Audit Committee is not constituted as per the provisions of the Companies Act, 2013 & SEBI Listing Regulation, 2015.

NOMINATION AND REMUNERATION COMMITTEE

Pursuant to Section 178 of the Companies Act, 2013 and Regulation 19 of SEBI Listing Regulations, 2015 and DPE guidelines on Corporate Governance for CPSE, your Company has constituted a Nomination and Remuneration Committee. The details on the Nomination and Remuneration Committee are disclosed in Corporate Governance Report which forms part of this report.

MRPL is a ‘Schedule-A’ category-1 Miniratna Central Public Sector Enterprise (CPSE). The appointment, terms, conditions and remuneration of Managing Director and Functional Directors (Whole-time Directors) are fixed by the Department of Public Enterprises (DPE), Govt. of India. MRPL being a Central Public Sector Enterprise (CPSE), Directors on the Board of the company are appointed by the Administrative Ministry i.e. Ministry of Petroleum and Natural Gas (MoP&NG), Government of India.

Due to non-availability of sufficient number of Independent Directors, the Nomination and Remuneration Committee is not constituted as per the provisions of the Companies Act, 2013 & SEBI Listing Regulation, 2015.

RISK MANAGEMENT POLICY

In line with the requirements of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, your Company has developed and rolled out a comprehensive Enterprise-wide Risk Management (ERM) Policy throughout the organization. The Audit Committee periodically reviews the risk assessment and minimization process in MRPL.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/COURTS

There are no significant and material orders passed by the Regulators/ Courts/ Tribunals that would impact the going concern status of the Company and its future operations.

CORPORATE GOVERNANCE

The Companies Act, 2013 and SEBI Listing Regulations, 2015 have strengthened the governance regime in the country. Your Company is in compliance with the governance requirements provided under the Companies Act, 2013, SEBI Listing Regulations, 2015 and has complied with all the mandatory provisions of Companies Act, 2013 and Rules made thereunder and SEBI Listing Regulation, 2015 relating to the Corporate Governance requirements and mandatory guidelines on Corporate Governance for CPSEs issued by DPE, Government of India, except for the presence of requisite number of Independent Directors on the Board and Board Committees. The Corporate Governance Report for the FY 2016-17 forms part of this Report.

Pursuant to Schedule V of the SEBI Listing Regulations, 2015, the Auditors’ certificate on compliance of conditions of Corporate Governance also forms part of the Annual report. The Auditors have made observations on the appointment of Independent Directors on the Board of the Company. The Company is pursuing with the Ministry of Petroleum & Natural Gas (MOPNG) for the appointment of requisite number of Independent Directors.

Pursuant to requirements of the Companies Act, 2013 and SEBI Listing Regulations, 2015, following policies/codes have been formulated and uploaded on the Company’s website at www.mrpl.co.in :

a) Code of Conduct for Board Members and Senior Management Personnel;

b) Whistle Blower Policy;

c) Related Party Transactions - Policy and Procedures;

d) CSR & SD Policy;

e) Material Subsidiary Policy;

f) The Code of Internal Procedures and Conduct for prohibition of Insider Trading in Dealing with the securities of MRPL;

g) Policy on Materiality for disclosure of events to the Stock Exchanges;

h) Policy on preservation of Documents;

i) Training Policy for Board of Directors; j) Dividend Distribution Policy.

BUSINESS RESPONSIBILITY REPORT

SEBI Listing Regulations, 2015 mandated inclusion of Business Responsibility Report (BRR) as part of the Annual Report for top 500 listed entities based on market capitalization. In compliance with the Regulation, BRR forms part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS

In terms of Regulation 34 of the SEBI Listing Regulations, 2015 the Management’s Discussion and Analysis (MDA) Report for the FY 2016-17 forms part of this Report.

INTERNAL FINANCIAL CONTROL

Your Company has a well-established and efficient internal control system and procedure. The Company has a well-defined delegation of financial powers to its various executives through the manual of Delegation of Powers (DOP). The Company has in-house Internal Audit Department commensurate with its size of operations. Audit observations are periodically reviewed by the Audit Committee of the Board and necessary directions are issued whenever required.

AUDITORS

Joint Statutory Auditors

M/s Shreedhar, Suresh & Rajagopalan, Chennai and M/s A. Raghavendra Rao and Associates, Mangalore were the Joint Statutory Auditors of the Company for the FY 2016-17. They have audited the Financial Statements for the Financial Year 2016-17 and submitted their report which forms part of this report. There is no qualification in the Auditors Report on the Financial Statements of the company. Notes to the Accounts referred to in the Auditors Report are self-explanatory and therefore do not call for any further comments.

Secretarial Auditor

Your Company engaged M/s Kumar Naresh Sinha & Associates, Practicing Company Secretary, Noida for conducting Annual Secretarial Audit for the year 2016-17 pursuant to Section 204 of the Companies Act, 2013. M/s Kumar Naresh Sinha & Associates, Practicing Company Secretary, Noida has issued Secretarial Audit Report for the year 2016-17 which forms part of this report as ‘Annexure-G’. The Auditors have made observations on the appointment of Independent Directors on the Board of the Company and overtime working hours as per the provisions of the Factories Act, 1948. The Company is pursuing with the Ministry of Petroleum & Natural Gas (MoP&NG), Govt. of India, for the appointment of requisite number of Independent Directors. As regards the observations on working hours, the same has been taken up with the Department of Public Enterprises by the Industry Group.

Cost Auditor

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost accounts maintained by the company for the FY 2016 -17 are being audited by Cost Auditors M/s. Bandyopadhyaya Bhaumik & Co., Kolkata.

M/s. Bandyopadhyaya Bhaumik & Co., Kolkata have been reappointed as Cost Auditor for FY 2017-18.

COMMENTS OF C&AG ON THE JOINT STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED AND STANDALONE FINANCIAL STATEMENTS FOR THE FY 2016-17

The Comments of Comptroller & Auditor General of India (C&AG) forms part of this report and are attached as ‘Annexure-H’. You would be pleased to know that your company has received NIL comments from C&AG for the year 2016-17.

ACKNOWLEDGEMENT

Your Board of Directors wish to thank the shareholders for the continued confidence reposed on their Company. Your Directors sincerely thank the Government of India (GoI), Ministry of Petroleum and Natural Gas (MoP&NG), Ministry of Finance (MoF), Ministry of Corporate Affairs (MCA), Department of Public Enterprises (DPE), Ministry of Environment and Forest (MoEF), Ministry of External Affairs (MEA), Ministry of Shipping (MoS), Ministry of Home Affairs (MHA), other Ministries and Departments of the Central Government and the Government of Karnataka, for their valuable support, guidance and continued co-operation.

Your Directors gratefully acknowledge support and direction provided by the parent company, Oil and Natural Gas Corporation Limited (ONGC) and the support of Hindustan Petroleum Corporation Limited (HPCL), as Promoters of the company. Your Directors acknowledge the continuing co-operation and support received from New Mangalore Port Trust, Financial Institutions, Banks and all other stakeholder. Your Directors recognize the patronage extended by the valued customers for the products of the Company and promise to provide them the best satisfaction. The Board would like to express its sincere appreciation for the dedicated efforts made and valuable services rendered by all the employees collectively and concertedly as a Team known as “Team MRPL” in the Company’s excellent achievements during the year 2016-17.

For and on behalf of the Board

(Dinesh K. Sarraf)

Chairman

(DIN: 00147870)

Place: New Delhi

Date: 19/07/2017

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