1.1 Executive Summary

1.
1 Executive Summary
Crude oil is one of the most necessitated worldwide required commodity. Any slightest fluctuation in
crude oil prices can have both direct and indirect influence on the economy of the countries. The
volatility of crude oil prices drove many companies away. Therefore, prices have been regularly and
closely monitored by economists. India fulfills its major crude oil requirements by importing it from oil
producing nations. India meets more than 80% of its requirement by importing process. Today, India
is emerging out of the shadows of the past & looking at the future. However, it is clear that energy –
scarcer, costlier, & increasingly strategic in the current times – will be a binding constraint on India’s
growth.
To meet the current rate of growth in demand, we need to build a new refinery the size of Mathura
Refinery every two years. Cross-country pipelines are globally recognized as the safest, cost-
effective, energy efficient & environment-friendly mode for transportation of crude oil & petroleum
products. With such inherent advantages, IndianOil’s 10,329 km long cross-country pipelines network
has been serving as the backbone of its refining & marketing operations, adding to their overall
efficiency & productivity. IndianOil would have added about 4,000 km of new pipelines by the end of
the XI Plan period (2007-12). Of these, about 318km length of pipeline will be commissioned in the
current fiscal.
For the coming years, the Pipelines Division shall remain fully focused on supplementing the efforts of
its sister Division of Refineries & Marketing, even as the Corporation charts new strategies to meet
the rising demand for petroleum products in the face of a turbulent & challenging business
environment.
Project financing is an innovative and timely financing technique that has been used on many high-
profile corporate projects, including Euro Disneyland and the Eurotunnel. Employing a carefully
engineered financing mix, it has long been used to fund large-scale natural resource projects, from
pipelines and refineries to electric-generating facilities and hydro-electric projects. Increasingly,
project financing is emerging as the preferred alternative to conventional methods of financing
infrastructure and other large-scale projects worldwide.
Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 1

Project Financing discipline includes understanding the rationale for project financing, how to prepare
the financial plan, assess the risks, design the financing mix, and raise the funds. In addition, one
must understand the cogent analysis of why some project financing plans have succeeded while
others have failed. A knowledge-base is required regarding the design of contractual arrangements to
support project financing; issues for the host government legislative provisions, public/private
infrastructure partnerships, public/private financing structures; credit requirements of lenders, and
how to determine the project's borrowing capacity; how to prepare cash flow projections and use
them to measure expected rates of return; tax and accounting considerations; and analytical
techniques to validate the project's feasibility
Project finance is finance for a particular project, such as a mine, toll road, railway, pipeline, power
station, ship, hospital or prison, which is repaid from the cash-flow of that project. Project finance is
different from traditional forms of finance because the financier principally looks to the assets and
revenue of the project in order to secure and service the loan. In contrast to an ordinary borrowing
situation, in a project financing the financier usually has little or no recourse to the non-project assets
of the borrower or the sponsors of the project. In this situation, the credit risk associated with the
borrower is not as important as in an ordinary loan transaction; what is most important is the
identification, analysis, allocation and management of every risk associated with the project.
In a no recourse or limited recourse project financing, the risks for a financier are great. Since the
loan can only be repaid when the project is operational, if a major part of the project fails, the
financiers are likely to lose a substantial amount of money. The assets that remain are usually highly
specialized and possibly in a remote location. If saleable, they may have little value outside the
project. Therefore, it is not surprising that financiers, and their advisers, go to substantial efforts to
ensure that the risks associated with the project are reduced or eliminated as far as possible. It is also
not surprising that because of the risks involved, the cost of such finance is generally higher and it is
more time consuming for such finance to be provided.

1.2 Introduction
The importance of crude oil in India can be gauged from the fact that it accounts for 36 per cent of the
Primary Energy Mix in India. Taken with natural gas, this percentage rises to 45 per cent. However,
the proportion of natural gas is approximately one-third that of the world average, once again
indicating the potential for rapid growth. It may be noted in this context, that a heavy reliance on coal
in India is not optimal, given that coal is a far more polluting fossil fuel as compared to natural gas.
Powerful winds of turbulence left an indelible mark on economies the world over & the growth story
grappled with the risk of losing momentum when the crude oil prices touched US$147 a barrel. In
India, the juggernaut of populist policies – cheap energy for everyone – rolled on. Faced with eroding
profits & mounting borrowings, IndianOil took decisive action to initiate demand-side measures as
well as scale up research into fuels of the future.
In India, the selling price for LPG, Kerosene, Petrol and Diesel are not aligned to international prices;
consequently any rise in crude prices, the burden in the first instance is to be borne by the Oil
Marketing Companies (OMCs). The implications are twofold: it hits the profitability & it also crunches
the liquidity. Considering the magnitude of the under-recoveries, the government has been evolving a
mechanism periodically to minimize the losses of OMCs by way of burden sharing by upstream
companies, passing on the price increase to the consumers, reduction in duties & refining margins of
refineries & issuance of Special Oil Bonds.
While such mechanisms ensure that OMCs post reasonable profits, it is not a long term solution, as
the borrowings increase due to lag in receipt & disposal of oil bonds.
"The EGoM (Empowered Group of Ministers headed by Finance Minister Pranab Mukherjee) is likely
to meet in the first week of June ‘10, either on June 4 or 5 to consider changes in the existing
petroleum pricing mechanism," a senior petroleum ministry official said. The government-appointed
Kirit Parikh Committee report on petroleum prices has recommended deregulation of petrol and
diesel and a partial increase in domestic LPG and kerosene prices. Besides Mukherjee, the EGoM
also includes Petroleum Minister Murli Deora, Agriculture Minister Sharad Pawar, Chemical and

Fertiliser Minister M K Alagiri, Railway Minister Mamata Banerjee, Road Transport Minister Kamal
Nath and Planning Commission Deputy Chairman Montek Singh Ahluwalia.
In the first fortnight of the current month(May’2010), the three Oil Marketing Companies, IOCL, HPCL
and BPCL, were losing Rs 272.5 crore per day on selling fuel below cost and going at this rate may
end the current fiscal with a Rs 90,150 crore revenue loss.
The companies sell petrol at a loss of Rs 6.63 a litre, diesel at a loss of Rs 6.25 per litre, kerosene at
Rs 19.74 per litre and domestic LPG at Rs 254.37 per cylinder. In 2009-10, the three public fuel
retailers -- Indian Oil, HPCL and BPCL -- have lost Rs 46,051 crore on selling subsidized petroleum
products.
According to the subsidy-burden sharing formula for 2009-10, revenue loss incurred on petrol and
diesel by the Oil Marketing Companies was borne by upstream companies like ONGC and Oil India,
while the Government paid for the under-recovery on cooking fuel. While the upstream companies
shared about Rs 14,432 crore of the subsidy burdens, the government shelled out Rs 26,000 crore
for the fiscal 2009-10.
"The OMCs will have to bear the balance amount," said an Oil Ministry official.
As a nation on the ascent, India does not have a choice in building & sustaining its competitive edge
in a global marketplace where volatility in commodity prices is a fact of life. As a leader in the
business of bringing energy to life, IndianOil has played a major role in driving the fundamentals of a
resurgent India. The performance was driven by strategies such as continually improving base
operations & a disciplined approach to new investments to enhance growth. Quest for energy security
saw IndianOil’s presence in over 20 oil & gas blocks in India & Abroad.
Alternative energy sources like wind & solar energy are being looked at as commercially viable
options. IndianOil is exploring the possibility of including these in its business model. The wealth of
experience & thought-out strategies gives IndianOil the confidence of overcoming every challenge in
en-cashing these growth opportunities.

2.1 Research Methodology
Research refers to the systematic method consisting of enunciating the problem, formulating a
hypothesis, collecting the facts or data, analyzing the facts & reaching certain conclusions either in
the form of solutions towards the concerned problem or in certain generalizations for some theoretical
formulation.
Research Methodology is a way to systematically solve the research problem. It includes the study of
various steps that are generally adopted by a researcher in studying his research problem along with
the logic behind them.
The research-type is of :
 Analytical Research, i.e., to use facts or information already available, & analyze these to make a
critical evaluation.
 Fundamental or Basic Research, i.e., finding information that has a broad base of applications &
thus adds to the already existing organized body of scientific knowledge.
 Historical Research, i.e., which utilizes historical sources like documents, remains, etc. to study
events or ideas of the past.
The review of literature is of the Conceptual Literature, concerning the concepts & theories. The
review of literature is done from two sources :
PRIMARY DATA 
The data which involves, collection of data about a given subject directly from the real world which is
collected by the researcher himself. The data are collected through :
 Personal Interview with the employees of the organization.
 Discussions among the concerned executives of the corporate.

SECONDARY DATA 
The data is collected by others and is re-used by the researcher:
 Internal Reports (Annual),
 Performance Report of IndianOil Corporation-Pipeline Division,
 Websites,
 Books.
2.2 Scope of the Project
 Project financing for the new “Paradip-New Sambalpur-Raipur-Ranchi pipeline”

 The analysis of asset management with the help of SAP,
 The study and analysis of Indian Oil Corporation Limited – Pipeline Division financials.
2.3 Objectives of the Project
 To determine the feasibility of the new “Paradip-New Sambalpur-Raipur-Ranchi pipeline”

 Linking practices with theoretical concepts,
 To understand the working of finance department
 To understand the real life management practices going on in the company.
 To study the assets management practices followed in IOCL-Pipeline Division.
2.4 Limitations of the Project
 The availability of the time was limited for the analysis of the huge organization’s practices.
 No opportunity to visit refinery.

3. Critical Review of Theory
3.1 Financial Analysis

Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-
business or project.
Professionals who prepare reports using ratios that make use of information taken from financial
statements and other reports perform it. These reports are usually presented to top management as
one of their bases in making business decisions. Based on these reports, management may:
 Continue or discontinue its main operation or part of its business;
 Make or purchase certain materials in the manufacture of its product;
 Acquire or rent/lease certain machineries and equipments in the production of it’s goods;
 Other decisions that allow management to make an informed selection on various alternatives
in the conduct of its business.
Financial analysts often asses the firm’s on:
1) Profitability- its ability to earn income and sustain growth in both short-term and long-term.
2) Solvency- its ability to pay its obligation to creditors and other third parties in the long term;
3) Liquidity- its ability to maintain positive cash flow, while satisfying immediate obligations;
Both 2 and 3 are based on the company’s balance sheet, which indicates the financial condition of a
business at given point of time.
4) Stability- the firm’s ability to remain in business in the long run, without having to sustain
significant losses in the conduct of its business. Assessing a company’s stability requires the use
of the income statement and the balance sheet, as well as other reports like those of competitors.
After determination of cash flows as per methodology enumerated above, the next step is to
financially evaluate the proposal. The analysis shall be carried out through following two methods:
 Internal Rate of Return (ROI/ROE)
 Net Present Value (NPV)
Both the above methods fully recognize the timing of cash flows through the process of discounted
cash flows.

3.1.1 Net Present Value (NPV)
Net present value (NPV) is defined as the total present value (PV) of a time series of cash flows. It is
a standard method for using the time value of money to appraise long-term projects. Used for capital
budgeting, and widely throughout economics, it measures the excess or shortfall of cash flows, in
present value terms, once financing charges are met.
Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed.
Therefore NPV is the sum of all terms
t - The time of the cash flow
i - The discount rate (the rate of return that could be earned on an investment in the financial markets
with similar risk.)
Rt - the net cash flow (the amount of cash, inflow minus outflow) at time t (for educational purposes,
R0 is commonly placed to the left of the sum to emphasize its role as (minus the) investment.
NPV is an indicator of how much value an investment or project adds to the firm. With a particular
project, if Rt is a positive value, the project is in the status of discounted cash inflow in the time of t. If
Rt is a negative value, the project is in the status of discounted cash outflow in the time of t.
Appropriately risked projects with a positive NPV could be accepted. This does not necessarily mean
that they should be undertaken since NPV at the cost of capital may not account for opportunity cost,
i.e. comparison with other available investments. In financial theory, if there is a choice between two
mutually exclusive alternatives, the one yielding the higher NPV should be selected.
However, NPV = 0 does not mean that a project is only expected to break even, in the sense of
undiscounted profit or loss (earnings). It will show net total positive cash flow and earnings over its
life.
 If the NPV is greater than 0, then the investment would add value to the firm, hence the project
should be accepted.
 If the NPV is less than 0, the investment would decrease value of the firm; hence the project
should be rejected.
 If the NPV is equal to 0, then the investment would neither gain nor lose value for the firm, the
management shall be indifferent whether to accept or reject the project. Decision should be
based on other criteria, e.g. strategic positioning or other factors not explicitly included in the
calculation.

3.1.2 Internal Rate of Return (IRR)
The internal rate of return on an investment or potential investment is the annualized effective
compounded return rate that can be earned on the invested capital.
In more familiar terms, the IRR of an investment is the interest rate at which the costs of the
investment lead to the benefits of the investment. This means that all gains from the investment are
inherent to the time value of money and that the investment has a zero net present value at this
interest.
Given a collection of pairs (time, cash flow) involved in a project, the internal rate of return follows
from the net present value as a function of the rate of return. A rate of return for which this function is
zero is an internal rate of return.
Given the (period, cash flow) pairs (n, Cn) where n is a positive integer, the total number of periods N,
and the net present value NPV, the internal rate of return is given by r in:
Note that the period is usually given in years, but the calculation may be made simpler if r is
calculated using the period in which the majority of the problem is defined (e.g. using months if most
of the cash flows occur at monthly intervals) and converted to a yearly period thereafter.
Note that any fixed time can be used in place of the present (e.g. the end of one interval of an
annuity); the value obtained is zero if and only if the NPV is zero.
In the case that the cash flows are random variables, such as in the case of a life annuity, the
expected values are put into the above formula.
Often, the value of r cannot be found analytically. In this case, numerical methods or graphical
methods must be used.
 If the IRR obtained is greater than the pre-decided hurdle rate then the project can be
accepted. If the IRR is less than the hurdle rate than the project should be rejected.
 Hurdle rate is the minimum return that investors would expect for risking investment in a
particular venture. The hurdle rate is usually determined by evaluating existing opportunities in
operations expansion, rate of return of investments, and other factors deemed relevant by
management.
 A risk premium can also be attached to the hurdle rate if management feels that specific
opportunities inherently contain more risk than others that could be pursued with the same
resources.
In cases where the financial analysis techniques are indifferent to the financial viability of the
project, the project can be evaluated on other basis such as:
Economic criteria: The flow of benefit is greater than the flow of costs.
Socio-economic criteria: The project might improve employment opportunities, have environmental
impacts or help to alleviate poverty in the surrounding area of the project.
Strategic criteria: The project though financially unviable at first may have high future benefits

4.1 INDUSTRY PROFILE
Oil and gas industry is broadly classified into Upstream and Downstream segments, Upstream
segment comprises of exploration and production of crude oil and to some extent transportation and
distribution crude oil; where as Downstream segment comprises of transportation and distribution
crude oil, refining, transportation and distribution of petroleum products and marketing different
petroleum products.
The performance of the Indian economy was robust during the year. It continued to be one of the
fastest growing large economies, drawing its strength from strong fundamentals such as high
investment & saving rates & productivity growth. The Indian Petroleum Industry is a case in point for
exhibiting the giant leaps. India has taken after its independence towards its march to attain a self-
reliant economy. It represents 2% of world market & does business worth USD 30 billion. The
petrochemical sector is one of the fastest growing sectors in India, growing at 13% yearly.
Petrochemicals is an industry which is highly organized & involves only a handful of companies.
In the overview of the petrochemical segments, it is seen that it is highly technology-intensive &
demands a great deal of capital investment. The prices of various petroleum products from crude are
very volatile & depends totally on the international market. India offers petrochemical products at a
substantial discount compared to its western counterparts while delivering the same class of output.
The demand for Indian Petrochemical products is high mainly because of its quality & competitive
pricing. India's low cost & high end Petrochemical products manufacturing expertise coupled with
developing world class infrastructure is the main leveraging factor for the rise of this industry. The
petroleum products, produced for specific applications are called, 'Petrochemicals & Specialties
(P&S) Products'.
The Indian hydrocarbon sector spends around Rs.200-250 Cr. on R&D every year, which is meager
compared to its annual turnover of over Rs.4,00,000 Cr. In the context of globalization & the need for
improving energy efficiency & developing indigenous technology & alternative fuels, the expenditure
on R&D efforts need to be scaled up substantially, with enhanced participation from the private sector
players.
MAJOR END USE OF PETROLEUM PRODUCTS

Petroleum Products from Crude
Heavy Ends
Light Distillates
Middle Distillates
LPG Furnace Oil

Mogas Kerosene LSHS/HHS/RFO
Naphtha ATF/RTF/Jet A-1 Lube Oils
Others High Speed Diesel Bitumen
Light Diesel Oil Petroleum Coke
Others Paraffin Wax
Other Waxes
PRODUCT MAJOR END USE

LPG (Liquified Petroleum Domestic Fuel. Also for Industrial application where technically
Gas) essential. Now permitted as auto fuel.

NAPHTHA / 'NGL (Natural Feedstock/ fuel for fertilizer units, feedstock for petrochemical
Gas Liquids) sector & fuel for power plants.

MS (Motor Spirit) Fuel for passenger cars, taxies, two & three wheelers.

ATF (Aviation Turbine Fuel) Fuel for aircrafts.

SKO (Superior Kerosene Oil) Fuel for cooking & lighting.

Fuel for transport sector (Railways/Road), agriculture (tractors,
HSD (High Speed Diesel)
pump sets, threshers,etc.) & Captive power generation.

LDO (Light Diesel Oil) Fuel for agricultural pump sets, small industrial units, start up fuel
for power generation.

FO / LSHS (Fuel Oil / Low
Secondary fuel for Thermal Power Plants, 'Fuel/ feedstock for
Sulphur Heavy Stock – Liquid
fertilizer plants, industrial units.
Fuel)

BITUMEN Surfacing of roads.

LUBES Lubrication for automotive & industrial applications.

OTHER PRODUCTS Feedstock for value added products like for chemical industry,
(Benzene, Toulene, MTO explosives manufacturers, paint industry, LAB manufacturers,
(Mineral Turpentine Oil), Carbon Black manufacturers, candle manufacturers, jute industry,
LABFS, CBFS (Carbon Black pharmaceutical industry, cement industry, etc.
Feedstock), Paraffin Wax,
JBO (Jute Batching Oil), MCW
(Micro Crystalline Wax),
Petcoke, etc.)
During the Independence era of 1947, the Indian Petroleum Industry was controlled by foreign
companies & India's own expertise in this sector was limited. Now, after 60 years, the Indian
Petroleum Industry has become an important public sector undertaking with numerous skilled
personnel & updated technology that is comparable to the best in the world. The vim & the
achievement during these years is the growth of productivity in petroleum & petroleum-based
products. Even the consumption has multiplied itself nearly 30 times in the post-independence era.
An important advancement in the petroleum industry came with the Industrial Policy Resolution, 1956
which signified the promotion of growth of industries. The ONGC, originally set up as a Directorate in
1955, was transformed into a Commission in 1956.
In 1958, the Indian Refineries Ltd., a government undertaking, came into existence. The Indian Oil
Company (IOC), also a government undertaking, was set up in 1959 with the purpose of marketing
petroleum-related products. Indian Oil Corporation Ltd. was formed in 1964 with the merger of the
Indian Refineries Ltd. (IRL) & the Indian Oil Company (IOC) Ltd. Presently, 17 refineries operate
under the Indian Petroleum Industry.
The Indian states of Gujarat, Maharashtra, West Bengal & Andhra Pradesh have the largest
concentration of chemical & petrochemical units

4.1.1 Sector Organization
India’s oil sector is dominated by state-owned enterprises, although the government has taken steps
in recent years to deregulate the hydrocarbons industry & encourage greater foreign involvement.
India’s state-owned Oil & Natural Gas Corporation (ONGC) is the largest oil company. ONGC is the
dominant player in India’s upstream sector, accounting for roughly 71 percent of the country’s oil
production in 2007, according to Indian government estimates. State-owned Oil India Limited (OIL) is
the next largest oil producer, having accounted for approximately 28 percent of oil production during
the same year. Other major state-run players include the Indian Oil Corporation (IOC) & the Gas
Authority of Indian Limited (GAIL), although these companies are primarily involved in downstream
activities such as petroleum refining & gas pipelines & distribution, respectively. In addition, the
private Indian firm, Reliance Industries Limited, is also becoming a significant operator in the oil
sector & is the largest private oil & gas company in the country. Cairn India, a branch of UK-based
Cairn Energy, & BG Exploration are also important private sector operators in the industry.
As a net importer of oil, the Indian government has introduced policies aimed at increasing domestic
exploration & production (E&P) activities. Economic reform & other efforts to open up the country
have led to increased foreign investment in India. As part of an effort to attract oil majors with
deepwater drilling experience & other technical expertise, the Ministry of Petroleum & Natural Gas
created the New Exploration License Policy (NELP) in 2000, which for the first time permitted foreign
companies to hold 100 percent equity ownership in oil & natural gas projects. International oil & gas
companies operate only a relatively small number of fields at this time, however.
India’s downstream sector is also dominated by state-owned entities, although private companies
have increased their market share in recent years. The Indian Oil Corporation (IOC) is the largest
state-owned company in the downstream sector, operating 10 of India’s 18 refineries & controlling
about three-quarters of the domestic oil pipeline transportation network. Reliance Industries, a private

Indian firm, opened India’s first privately-owned refinery in 1999, & has gained a considerable market
share in India’s oil sector.
4.2 Indian Petroleum Industry’s Growth Story

In the post-independence era, India grew tremendously in terms of infrastructure in the petroleum
industry, which in turn helped increase the production of petroleum & petroleum-related products.

4.3 Major Market Players

At present, there are four PSUs namely, IOCL, HPCL, BPCL & IBP (subsidiary of IOC) marketing oil
products in the country. In addition, certain private players like Reliance, Essar & Shell have also
been granted marketing rights for transportation fuels.
Indian Oil Corporation (IOC)
IOC is one of the biggest integrated Oil Company in India. It owns the biggest retail, pipeline, & crude
oil networks in India, & is one of the Indian companies in the Fortune 500 list.
It has a lot of history behind it, being incorporated way back in 1959 as Indian Oil Company, being set
up initially only for the purpose of arranging the supply of petroleum products from refineries in
Barauni & Guwahati, being set up then by Indian refineries. Subsequently they were merged, & Indian
Oil Corporation came into existence in 1964. The Indian Oil group (with subsidiary IBP) added 1,547
petrol pumps during FY06, raising its tally to more than 15,247 petrol pumps at present.
Hindustan Petroleum Corporation (HPCL)
HPCL was incorporated in 1974, on the nationalization & merger of Esso India & Lube India. It now
has two refineries in Mumbai & Vizag with capacities of 5.5 MMTPA & 7.5 MMTPA respectively.
HPCL is an integrated company, having its operations in the refining as well as marketing activities.
The company aims to improve its market share by focusing on customer relationship management, &
focusing on providing additional value added services.
Bharat Petroleum Corporation (BPCL)
BPCL was incorporated in 1952 when the Government entered into a joint venture with Burma Oil &
Shell Petroleum. Subsequently, the company was nationalized by way of acquiring a 100% equity
stake in 1976, but subsequently the Government has let go a part of its holding to financial
institutions, mutual funds, etc. Today, BPCL is the second largest refining & marketing company in
India, & has now three refineries, including KRL & NRL, & another target for disinvestment, that has
been stuck up in the middle of the process along with HPCL.
Reliance Industries Limited (RIL)

Reliance Petroleum was incorporated in 1991as Reliance Refineries, but changed its name to the
former in 1993, & has since merged with its parent company RIL. Its refinery is a standalone, & is at
Jamnagar, on the country’s western coast. The refinery was commissioned in July 1999, & it
commenced its operations in 2000-01. It is India’s largest standalone refinery, & constitutes 24% of
the country’s refining capacity. Additionally, the Jamnagar refinery is also the world’s fifth largest
refinery at a single place. RIL is a private integrated player in India, & has established a retail network
of more than 1300 units.
4.3.1 Indian Petroleum Industry Composition : 2007-08 & 2008-09
The Indian Petroleum Industry can be categorized into two sectors, public sector comprising Indian
Oil Corporation Limited, Bharat Petroleum Corporation Limited, Hindustan Petroleum Corporation
Limited, Oil & Natural Gas Corporation as major players; & private sector comprising Reliance
Industries Limited, Essar Oil as major players.
According to crude processing table given below, IOC is surely the industry leader among all major
players. RIL comes next after IOC, then comes BPCL, HPCL, ONGC, & at last Essar Oil. Public
Sector produced 9188.4 TMT & Private Sector produced 3133.1 TMT in the year 2008-09, registering
1.6% & -14.0% growth rate respectively.
60000
50000
IOCL TOTAL
40000 HPCL-TOTAL
BPCL-TOTAL
30000 CPCL-TOTAL
NRL-NUMALIGARH
ONGC TOTAL
20000 RIL TOTAL
EOL-VADINAR
10000
0
APR-MAR'09 APR-MAR'10 (Provisional)*
IOCL along with its subsidiary CPCL is leading the chart. NRL-Numuligarh is subsidiary of BPCL.

The overall PSU oil sector (IOCL,HPCL and BPCL) has shown a negative growth in year 2010 as
compared to last year figures.
Contrastingly, the private sector figures have surged as RIL’s SEZ got commissioned last year taking
the processed crude figure to 55,215 MMTPA i.e. a 72.7% growth over previous year.
4.3.2 Market Share of Major Downstream Petroleum Players
S.No
. Player 2007-08 2008-09
1 IOC 44% 45%
2 HPCL 16% 21%
3 BPCL 19% 13%
4 Other PSUs 2% 9%
5 Private Parties 19% 12%
TOTAL 100% 100%
Source : Petroleum Planning & Analysis Cell
Note : Percentage for 2008-09 are Provisional
We can see from the table above, the standing of major Indian Petroleum Players in terms of sales in
Indian Petroleum Industry in the year 2007-08 & 2008-09 :
4.4 Challenges for Petrochemical Industries

 India’s Stand - India has stably established itself in the core of the international production of
petrochemical & petrochemical- related products in the present scenario. With the economic
growth cycle slowing down in the United States, the Asian developing nations, especially India,
would ideally fortify its stand in the global petrochemical market as a producer of these products.
This is one of the major challenges facing India petrochemical industry.
 Supply & Operating Cost - The global economy is a dynamic & ever-growing one in spite of the
high cost of energy. This in turn is forging the demand for petrochemicals. The strong growth in
demand is not backed by a sufficient supply so the cost is still to come down. Operating rates of
major petrochemical product segments are very high presently.
 High cost of energy & feedstock and the impact on demand.
 Increase in the cost of project.
4.5 Key Problems / Issues
 The manufacturing units mostly use obsolete format of technology & are not able to produce
optimally
 There is a necessity for the modernization of equipments
 Excise duty on synthetic fiber should be rationalized
 Prevention of reservation on Small Scale Units
 Plastic waste to be recycled & the littering habits to be discouraged
 India requires advantage on feedstock, so the import cost has to be brought down
The industry should have access to the primary amenities of infrastructure
4.6 RATIO ANALYSIS

In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can
give a financial analyst an excellent picture of a company's situation and the trends that are
developing. A ratio gains utility by comparison to other data and standards.
Following is the Ratio analysis for major OMCs in Indian petroleum industry i.e. IOCL, BPCL and
HPCL under two different categories – Profitability and Liquidity.
4.6.1 Profitability Ratios
PBIT Ratio Gross profit Ratio

43.74 6
3.43 5.09
3.5 3.43 5
3 2.89 IOCL IOCL
2.5 2.55 4 4.11 3.47
BPCL 3.46 BPCL
2 2.01 1.84 1.83 HPCL 3 2.85 HPCL
2.58
1.5 2 1.86 1.84
1 0.94
0.5 1 0.95
0 0
Mar '07 Mar '08 Mar '09 Mar '07 Mar '08 Mar '09
Net Profit Ratio

4
3.43
3.5
3 2.78
IOCL
2.5 BPCL
21.74
1.85 HPCL
1.5 1.42
1.08
1 0.95
0.45
0.5 0.54
0
Mar '07 Mar '08 Mar '09
IOCL has the highest profitability in the industry mainly because of its huge capacity and asset base.
Pan industry a steep fall in profitability in the year 2008 can be observed in the line charts.

This is because during that period crude prices touched $147 a barrel and OMCs had huge under-
recoveries.
Both EBIT ratio and Gross profit ratio was almost same in 2009 as in 2008 but Net profit continued to
plunge due to Long term settlement (LTS) paid in last fiscal and rising operating expenses.
4.6.2 Liquidity Ratios
Current Ratio Quick Ratio

1.2 0.8
1.03
1 0.7 0.61 0.67
0.82
0.79 0.84 0.93 0.6 0.54
0.8 0.74 HPCL 0.51 BPCL
0.47
0.45
0.5 0.53
IOCL 0.47 IOCL
0.6 0.61 0.61 BPCL 0.4 HPCL
0.5 0.29
0.4 0.3
0.2
0.2 0.1
0 0
Ideal current ratio is 2:1 which none of the oil companies in India has maintained. IOCL’s CR is way
below ideal and has fallen to 0.61 in 2009.
So is the case with Quick ratio which according to experts should ideally be 1:1. IOCL’s QR is lowest
in industry

4.6.3 Activity Ratios
Debtors Turnover Fixed Assets Turnover Ratio

Ratio 98.47
100 88.37 7.92
8
8068.13 70.48 BPCL BPCL
60.42 63.44 63.23 HPCL 7 HPCL
60 6.01 6.22
5.98
IOCL IOCL
36.5 48.15 6
4032.23 5.35
5.15
20 5 4.38 4.98
0 4
DTR indicates the number of times the debtors are turned over a year. Low debtors turnover ratio
implies inefficient management of debtors or less liquid debtors which is the case with IOCL. By
looking at the trend we can comment it is improving, however, to reach that of competitors like BPCL
the pace has to be increased.
FATR measures a company's ability to generate net sales from fixed-asset investments - specifically
property, plant and equipment (PP&E) - net of depreciation. OMCs faced a steep fall in this ratio in
2008 however all improved it quite well last year. IOCL’s FATR is lowest in the industry and should
improve it in the coming years.

4.7 SWOT ANALYSIS FOR THE INDUSTRY
STRENGTHS WEAKNESSES
 High Growth Rate  Insufficient Basic Infrastructure
 Competitive Labor Cost  Increasing Cost of Projects
 Safe & Environment Friendly Distribution  Obsolete Technology
 Huge Talent Pool  High Import & Feedstock Cost
 Fastest Growing Segment  High Operating Costs
OPPORTUNITIES THREATS
 Increasing Preference for Pipelines  High Cost of Energy
 Cost-Effective & Competitive Projects  Increasing Competition
 Healthy Competition  Non-Availability of Alternatives
 Overseas Expansion  Difficult Terrain & Harsh Climate
 Unaffected Demand  Huge Investments
 Environmental Concern

4.8 Future / Scope of Petroleum Industry
The scope of Indian Petrochemical Industry is potentially huge. With the trend in the global market
shifting, India can become one of the leaders in this industry on a global basis. Indian Petrochemicals
industry is an important member of the Indian economy because it fulfills the need of major industries
like textiles, telecoms, power, cables, automobiles, agriculture, plastics etc.
The competitors in the market are attracted to the Indian petrochemical industry for its benefits. The
per capita consumption of synthetic fibers, synthetic rubber, plastics, polymers in India is lower than
the per capita consumption worldwide. But interestingly, the growth of the petrochemical industry in
India in recent times was around 14%, whereas the growth in the petrochemical industry globally was
only 4%. In the future, there is a huge scope for the Indian petrochemical industry in the global market
for petrochemicals & petrochemical-based products. This would make way for the entry of new
companies in the Indian market.
In the present scenario, the scope of Indian petrochemical industry is very good as the government
regulations are aligned with the industry & is playing an important part. The regulations have opened
the market which is full of scope for the rapid growth of the industry & in turn, the growth of the
economy. The supply & demand situations & the pricing views in the industry are also among the
factors for growth. With fierce competition in this sector, there is every chance that superb quality
products will be produced in order to stay ahead of competitors.

5.1 COMPANY PROFILE
5.1.1 Vision

5.1.2 Mission
 To achieve international standards of excellence in all aspects of energy & diversified business
with focus on customer delight through value of products & services, & cost reduction.
 To maximize creation of wealth, value & satisfaction for the stakeholders.

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To attain leadership in developing, adopting & assimilating state-of-the-art technology for
competitive advantage.
To provide technology & services through sustained Research & Development.
To foster a culture of participation & innovation for employee growth & contribution.
To cultivate high standards of business ethics & Total Quality Management for a strong
corporate identity & brand equity.
To help enrich the quality of life of the community & preserve ecological balance & heritage
through a strong environment conscience.
5.1.3 Values - CITP
5.2 Profile
P o
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India’s flagship national oil company and downstream petroleum major, Indian Oil Corporation Ltd.
(IndianOil) is celebrating its Golden Jubilee in 2009. It is India's largest commercial enterprise, with a
sales turnover of Rs. 2, 85,337 crore – the highest-ever for an Indian company – and a net profit of
Rs. 2, 950 crore for the year 2008-09. IndianOil is also the highest ranked Indian company in the
prestigious Fortune 'Global 500' listing, having moved up 11 places to the 105th position in 2009.

India’s Flagship National Oil Company
Incorporated as Indian Oil Company Ltd. on 30th June, 1959, it was
renamed as Indian Oil Corporation Ltd. on 1st September, 1964 following
the merger of Indian Refineries Ltd. (established 1958) with it. IndianOil
and its subsidiaries account for approximately 48% petroleum products
market share, 34% national refining capacity and 71% downstream sector
pipelines capacity in India.
For the year 2008-09, the IndianOil group sold 62.6 million tonnes of petroleum products, including
1.7 million tonnes of natural gas, and exported 3.64 million tonnes of petroleum products.
The IndianOil Group of companies owns and operates 10 of India's 20 refineries with a combined

refining capacity of 60.2 million metric tonnes per annum (MMTPA, .i.e. 1.2 million barrels per day).
These include two refineries of subsidiary Chennai Petroleum Corporation Ltd.
The Corporation's cross-country network of crude oil and product pipelines, spanning over 10,000
km and the largest in the country, meets the vital energy needs of the consumers in an efficient,
economical and environment-friendly manner.
IndianOil is investing Rs. 43,400 crore (US $10.8 billion) during the period 2007-12 in augmentation
of refining and pipeline capacities, expansion of marketing infrastructure and product quality
upgradation as well as in integration and diversification projects.

Network Beyond Compare
As the flagship national oil company in the downstream sector, IndianOil
reaches precious petroleum products to millions of people everyday
through a countrywide network of about 35,000 sales points. They are
backed for supplies by 167 bulk storage terminals and depots, 101
aviation fuel stations and 89 Indane(LPGas) bottling plants. About 7,335
bulk consumer pumps are also in operation for the convenience of large
consumers, ensuring products and inventory at their doorstep.
IndianOil operates the largest and the widest network of petrol & diesel stations in the country,
numbering over 18,278. It reaches Indane cooking gas to the doorsteps of over 53 million
households in nearly 2,700 markets through a network of about 5,000 Indane distributors.
IndianOil's ISO-9002 certified Aviation Service commands over 63% market share in aviation fuel
business, meeting the fuel needs of domestic and international flag carriers, private airlines and the
Indian Defence Services. The Corporation also enjoys a dominant share of the bulk consumer
business, including that of railways, state transport undertakings, and industrial, agricultural and
marine sectors.
Technology Solutions Provider

IndianOil's world-class R&D Centre is perhaps Asia's finest. Besides pioneering work in lubricants
formulation, refinery processes, pipeline transportation and alternative fuels, the Centre is also the
nodal agency of the Indian hydrocarbon sector for ushering in Hydrogen fuel economy in the

country. It has set up a commercial Hydrogen-CNG station at an IndianOil retail outlet in New Delhi
this year. The Centre holds 214 active patents, including 113 international patents.
IndianOil has joined the league of global technology providers last year with the selection of its in-
house developed INDMAX technology (for maximising LPGas yield) for the 4 MMTPA Fluidised
Catalytic Cracking (FCC) unit at the Corporation's upcoming 15 MMTPA grass roots refinery at
Paradip in Orissa, as well as for the FCC unit coming up at BRPL.
A wholly-owned subsidiary, IndianOil Technologies Ltd., is engaged in commercialising the

innovations and technologies developed by IndianOil's R&D Centre.
Customer First
At IndianOil, customers always get the first priority. New initiatives are launched round-the-year for
the convenience of the various customer segments.
Exclusive XTRACARE petrol & diesel stations unveiled in select urban and semi-urban markets offer
a range of value-added services to enhance customer delight and loyalty. Large
format Swagat brand outlets cater to highway motorists, with multiple facilities such as food courts,
first aid, rest rooms and dormitories, spare parts shops, etc. Specially formatted Kisan Seva
Kendra outlets meet the diverse needs of the rural populace, offering a variety of products and
services such as seeds, fertilisers, pesticides, farm equipment, medicines, spare parts for trucks and
tractors, tractor engine oils and pump set oils, besides auto fuels and kerosene. SERVOXpress has
been launched recently as a one-stop shop for auto care services.
To safeguard the interest of the valuable customers, interventions like retail automation, vehicle
tracking and marker systems have been introduced to ensure quality and quantity of petroleum
products.
Widening Horizons
To achieve the next level of growth, IndianOil is currently forging ahead
on a well laid-out road map through vertical integration— upstream into
oil exploration & production (E&P) and downstream into petrochemicals –
and diversification into natural gas marketing, bio fuels, wind power
projects, besides globalisation of its downstream operations.

Petrochemicals
In petrochemicals, IndianOil is envisaging an investment of Rs. 20,000 crore (US$ 4 billion) by the
year 2011-12. Through the world’s largest single-train Linear Alkyl Benzene (LAB) plant with an
annual capacity of 1,20,000 tonnes set up at its Gujarat Refinery, the Corporation has already
captured a significant market share of LAB in India, besides exporting the product to Indonesia,
Turkey, Thailand, Vietnam, Norway and Oman.
A world-scale Paraxylene/Purified Terephthalic Acid plant (annual capacities: PX - 3,63,000 tonnes,

PTA – 5,53,000 tonnes) for polyester intermediates is already in operation at Panipat, while a
Naphtha Cracker with a capacity of 800,000 tonnes of ethylene per annum, 6,00,000 TPA of
Propylene, besides an annual production of 3,25,000 TPA of Mono Ethylene Glycol, 1,40,000 TPA of
Butadiene, 6,50,000 TPA of Polyethylene and 6,00,000 TPA of Polypropylene, equipped with
downstream polymer units is to be completed by December 2009 at Panipat.
A grassroots refinery at Paradip is proposed to be completed by the year 2011-12, subsequently

followed by the setting up of an integrated petrochemical plants with an estimated investment of Rs
12,000 crore (US$ 2.5 billion) which will further strengthen the Corporation’s presence in the sector.
Oil Exploration & Production

In E&P, IndianOil has non-operator participating interest in seven oil & gas blocks awarded under
various NELP (New Exploration Licensing Policy) rounds and two Coal Bed Methane blocks in India,
in consortium with other companies. In addition, IndianOil has two onshore type ‘S’ NELP blocks,
with 100% participating interest (PI) and sole operatorship. It also has participating interest in an
onshore block in Assam and Arunachal Pradesh through a farm-in.
Overseas ventures of the Corporation includes two blocks (86 and 102/4) in Sirte Basin and Areas
95/96 in Ghadames basin of Libya, Farsi Exploration Block in Iran, onshore farm-in arrangements in
one block in Gabon, one on land block in Nigeria, one deepwater offshore block in Timor-Leste and
two onshore blocks in Yemen. In all, IndianOil has 12 domestic exploration blocks, including 2 blocks
where gas discoveries have been made and 9 overseas exploration blocks, & the Farsi block in Iran
where commerciality of gas discovery has been established. IndianOil has incorporated Ind-OIL
Overseas Ltd. – a special purpose vehicle for acquisition of overseas E&P assets – in Port Louis,

Mauritius, in consortium with Oil India Ltd. (OIL).
Gas
In natural gas business, IndianOil sold 1.849 million tonnes of the product in 2008-09. A technology
innovation has been initiated to reach LNG (Liquefied Natural Gas) directly to the doorstep of bulk
consumers in cryogenic containers for industrial as well as captive power applications.
To consolidate its city gas distribution (CGD) business, IndianOil has tied up with several players
such as Adani Energy, Reliance Gas Corporation, OIL and ONGC, etc., to set up joint ventures in
various cities of India. The Corporation has also entered into franchise agreements with CGD
players such as Indraprastha Gas Ltd., Mahanagar Gas Ltd., Adani Energy Limited, GEECL, SITI
Energy and GSPC Gas Ltd. to market CNG through its retail outlets
Bio-fuels
To straddle the complete bio-fuel value chain, IndianOil formed a joint venture with the Chhattisgarh
Renewable Development Authority (CREDA) with an equity holding of 74% and 26% respectively.
IndianOil CREDA Biofuels Ltd. has been formed for carrying out farming, cultivating, manufacturing,
production and sale of biomass, bio-fuels and allied products and services.
A pilot project of jatropha plantation on 600 hectares of revenue wasteland is underway in Jhabua
district in Madhya Pradesh to ascertain the feasibility of revenue land-based commercial biodiesel
units and to develop benchmarks for plantation costs and output.
IndianOil has also signed an MoU with M/s Ruchi Soya Industries Ltd. to take up contract farming on
one lakh hectare of private and panchayat wasteland in the state of Uttar Pradesh.
Wind Energy Business

IndianOiI has forayed into wind energy business with the commissioning of a Rs. 130 crore, 21 MW
wind power project in the Kutch district of Gujarat. The cumulative power generation from the 14
wind turbine generators has crossed 159 lakh KW since commissioning in January 2009.
It has also commissioned two pilot solar lantern charging stations at its Kisan Seva Kendra at Sathla

near Meerut and Chokoni near Bareilly.
Consultancy
For over two decades now, IndianOil has been providing technical and manpower secondment
services to overseas companies. Such services have been extended to Emirates National Oil
Company (ENOC), Kenya Pipeline Company and Aden Refinery, Yemen . For the first time, SAP
implementation / IT consultancy was provided in Sri Lanka . Consultancy on pipelines was provided
to Greater Nile Petroleum Operating Company (GNPOC), Sudan .
Globalisation Initiatives
IndianOil has set up subsidiaries in Sri Lanka, Mauritius and the United Arab Emirates (UAE), and is
simultaneously scouting for new business opportunities in the energy markets of Asia and Africa.
Lanka IOC Plc (LIOC)

Lanka IOC Ltd. operates about 150 petrol & diesel stations in Sri
Lanka, and has a very efficient lube marketing network. Its major
facilities include an oil terminal at Trincomalee, Sri Lanka's largest
petroleum storage facility and an 18,000 tonnes per annum capacity
lubricants blending plant and state-of-the-art fuels and lubricants
testing laboratory at Trincomalee. Presently, it holds a market share of
about 40%. In a highly competitive bunker market, catering to all types
of bunker fuels and lubricants at all ports of Sri Lanka, viz., Colombo,
Trincomalee and Galle. It is the major supplier of lubricants and
greases to the three arms of the Defence services of Sri Lanka. LIOC's
market share in petrol increased stands at 24.8% in 2008 with an
overall market share of 16.9%.

IndianOil (Mauritius) Ltd. (IOML)
IndianOil (Mauritius) Ltd. has an overall
market share of nearly 22% and
commands a 35% market share in
aviation fuelling business, apart from its
bunkering business. It operates a modern
petroleum bulk storage terminal at Mer
Rouge port, besides 17 filling stations. In
addition to the ongoing expansion of retail
network, IOML has to its credit the first
ISO-9001 product-testing laboratory in
Mauritius.
IndianOil Middle-East FZE (IOME)

The Corporation's UAE subsidiary, IOC Middle East FZE, which oversees business expansion in the
Middle East, is mainly into blending and marketing of SERVO lubricants and marketing of petroleum
products in the Middle East, Africa and CIS countries. Finished lubes were exported to Oman , Qatar
, Yemen , Bahrain , UAE and Nepal .
India Inspired
As a leading public sector enterprise of India, IndianOil has successfully combined its corporate
social responsibility agenda with its business offerings, meeting the energy needs of millions of
people everyday across the length and breadth of the country, traversing a diversity of cultures,
difficult terrains and harsh climatic conditions. The Corporation takes pride in its continuous
investments in innovative technologies and solutions for sustainable energy flow and economic
growth and in developing techno-economically viable and environment-friendly products & services
for the benefit of its consumers.

5.3 Distinctions
 Indian Oil Corporation Ltd. is currently India's largest company by sales with a turnover of Rs.
285,337 crore and profit of Rs. 2,950 crore for fiscal 2008-09.
 IndianOil is also the highest ranked Indian company in the prestigious Fortune 'Global 500'
listing, having moved up 11 places to the 105 th position in 2009. Only five Indian companies
are able to enlist their name into this magazine, amongst them IOCL took the first position.
 The Business Today-Indicus-PeopleStrong Survey of India’s Best Employers, ranks IndianOil

among the top 5 companies under the ‘Core Sector” category.( February 7, 2010)
 IndianOil has once again topped the prestigious 'ET 500' listing of India's corporate giants for
the year 2009 by the leading business daily The Economic Times, maintaining its enviable top
position for many years now.
 IndianOil has been ranked as the topmost petroleum downstream company, occupying first
position on the basis of net sales, in the 19th annual list of 'Super 100' companies released by
the business magazine, Business India (December 28, 2008 edition).

 IndinaOil is also the 18th largest petroleum company in the world.
 These & many other distinctions have been clipped to IndianOil over the years. India is the
sixth largest consumer of oil. There is a huge demand-supply gap in oil and gas in India. The
country imports more than 70% of its crude oil requirement.
 IndianOil is the only PSU that has found a place of pride in the recently declared India’s 25
best employers. An exclusive Outlook Business-Hewitt Associates study has listed Best
Employers after a stringent evaluation process from 230 companies that took part in the
study. This is part of an annual global study that Hewitt Associates conducts each
year. (16.04.2009)

5.4 Awards
In a befitting recognition of the sterling

contribution made by Mr. S.V.
Narasimhan, Director (Finance), to help
keep IndianOil afloat and operations
running in times of extreme volatility in
crude oil prices, India's Best CFO
Award was conferred on him by the
Union Minister of Finance, Mr. Pranab
Mukherjee, in a glittering ceremony
organised by Business Today on April
14, 2010 at New Delhi.
In a befitting recognition of his sterling

role in building India's flagship oil & gas
corporate, Mr. B M Bansal, Chairman,
IndianOil, was presented the prestigious
"Outstanding Contribution Award for
National Development" by IIT Delhi.
The award was presented to Mr. Bansal
by Dr. Surendra Prasad, Director, IIT-
Delhi, in a graceful ceremony held in the
capital on 24th April 2010.

The OCEANTEX awards presented by
the Governor of Maharashtra, Mr.
Sankaranarayanan to Mr. Bankapur for
his outstanding contributions to the
growth of the IndianOil Refineries. The
award is in recognition of Mr.
Bankapur's leadership in leading the
IndianOil Refining business to achieve
greater heights in throughput and
capacity utilization, thereby
strengthening the Corporation's
dominance in the increasingly
competitive and volatile market
scenario.

6.1 PIPELINES DIVISION
Indian Oil Corporation Ltd. operates a network of 10329 km long crude oil and petroleum product
pipelines with a capacity of 71.60 million metric tonnes per annum. Cross-country pipelines are
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globally recognised as the safest, cost-effective, energy-efficient and environment-friendly mode for
transportation of crude oil and petroleum products.

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During the year 2008-09 IndianOil’s crude oil pipelines registered the throughput of 38.46 million
metric tonnes. Corporation’s largest crude oil handling facility at Vadinar marked the berthing of
4000th tanker since inception. The terminal operates two offshore Single Point Mooring (SPM)
systems, to feed Koyali, Mathura and Panipat refineries.
Raising efficiency and emerging as the least-cost supplier, IndianOil has added the 330-km Paradip-
Haldia crude oil pipeline (PHCPL) to its bustling pipeline network during the year. The PHCPL system
has a Single Point Mooring installed 20-km off the Paradip coast. With this, it is now able to pump
crude oil from Very Large Crude Carriers to the tank-farm set up onshore and onward to Haldia
through the pipeline. The Pipeline has replaced the earlier system of receipt of crude oil at Haldia port
through smaller tankers.
On the west coast, the Mundra-Panipat pipeline is being further augmented to transport an additional
3 Million Metric Tonne Per Annum (MMTPA) of crude oil to Panipat Refinery, under expansion from
12 to 15 MMTPA. Additional requirement of crude oil for Koyali, Mathura and Panipat refineries is
planned to be met by de-bottlenecking and augmenting Salaya-Mathura Pipeline system.
IndianOil’s product pipelines, connecting its refineries directly to high-consumption centres, achieved
a throughput of 20.92 million tonnes during 2008-09. IndianOil has now joined the select group of
companies in India which owns and operates LPG pipelines by building its first such cross-country
facility linking Panipat with Jalandhar. Apart from providing better logistics, this pipeline can transport
700,000 tonnes of LPG from Kohand near Panipat refinery to IndianOil’s bottling plants at Jalandhar
and Nabha in Punjab. The pipeline will also simultaneously meet the requirement of LPG at Una and
Baddi in Himachal Pradesh and at Jammu and Leh in J&K.
Two pipelines linking the major airports of India have been commissioned during the year to transport
Aviation Turbine Fuel to these airports. The 36 km long pipeline from existing Devangonthi terminal to
New Bengaluru International Airport, Devanhalli, Bengaluru was commissioned in October 2008. The
95 km long ATF pipeline from CPCL to Chennai AFS was commissioned in December 2008.
In its continuous efforts of expanding the network IndianOil is implementing 290 km long product

pipeline from Chennai to Bengaluru to facilitate cost effective positioning of products at consumption
centre located in and around Bengaluru and to strengthen product positioning capabilities of CPCL
Refinery. IndianOil is also implementing a 217 km long branch pipeline from Koyali-Sanganer Pipeline
at Viramgam to existing scrapper station at Churwa along with use of a 14 km long existing pipeline
from Churwa to Kandla.
One of the major product pipelines currently under execution is 290 km long Chennai-Bengaluru
Pipeline. A 21-km spur line from Mathura to Bharatpur and a 94-km branch line to Hazira on the
Koyali-Dahej pipeline are also under implementation. A grassroots terminal facility is being set up at
Ratlam to feed the local markets. A 118-km pipeline is being laid from Bijwasan to Panipat for
transporting Naphtha from Mathura Refinery to the upcoming Naphtha Cracker unit at Panipat.
IndianOil sees gas pipelines as a major growth area in the future. The gas market in India is
expanding fast, thanks to enhanced availability of the product from indigenous sources and through
imports. The Corporation will commission its first regassified LNG pipeline from Dadri to Panipat (132
km) to synchronise with the completion of the first phase of the power plant coming up under the
Naphtha Cracker project at Panipat.
IndianOil has translated the expertise of its personnel in pipeline operations into a business
opportunity, by offering training and consultancy to several Indian and overseas companies.
Currently, the Corporation is imparting training for personnel of the Greater Nile Petroleum Company,
Sudan.
6.2 PIPELINE NETWORK
6.2.1 Crude Oil Pipelines

Salaya-Mathura Pipeline (SMPL)
IndianOil operates the 1870 km long Salaya-Mathura Pipeline from Salaya (near Vadinar) in
Jamnagar district on the coast of Gujarat to bring crude oil to IndianOil's refineries at Koyali
(Gujarat), Mathura (Uttar Pradesh) and Panipat (Haryana). Two Single Point Mooring (SPM) systems
are operated at Vadinar to unload the crude oil received from tankers including Very Large Crude oil
Carriers (VLCCs) with offshore pipelines. At Vadinar, IndianOil has a vast crude oil tank farm of 13
tanks with a total capacity of 0.773 MMT. IndianOil also has crude oil storage tank farm at Viramgam
with a total capacity of 0.331 MMT. Another storage tank farm at Chaksu has six tanks with a total
capacity of 0.219 MMT.
After traversing 435 km from Vadinar, the Salaya-Mathura Pipeline branches off at Viramgam in
Gujarat through a 148 km pipeline to Koyali (Baroda). Further, after 716 km, the pipeline branches off
at Chaksu to Mathura and Panipat.
Paradip-Haldia-Barauni Pipeline (PHBPL)

The 1302 km long crude oil pipeline from Paradip in Orissa to Barauni in Bihar has 328 km long
Paradip-Haldia and 498 km long Haldia-Barauni sections. In addition, the pipeline system include 20
km long offshore pipeline from Single Point Mooring system to tank farm in Paradip. It also has a
loopline of 437 km. A total of 19 km dockline also connects the pipeline with two crude oil jetties at
Haldia. The crude oil requirement of IndianOil's refineries at Haldia, Barauni and Bongaigaon is
transported through this pipeline.
Mundra - Panipat Pipeline (MPPL)

The 1174 km long Mundra Panipat Pipeline was commissioned to transport crude oil from Mundra on
the Gujarat coast to IndianOil's refinery at Panipat in Haryana. The pipeline consists of a 74 km long
pipeline from Mundra to Kandla which was hooked up to the existing system of Kandla-Panipat
section of Kandla-Bhatinda Pipeline at Churwa near Gandhidham. The pipeline utilizes Gujarat Adani
Port's Single Point Mooring (SPM) offshore crude oil terminal facilities and associated offshore and
onshore pipelines. The crude oil tank farm consists of 12 crude oil storage tanks with total capacity of
0.499 MMT at Mundra.
6.2.2 Petroleum Product Pipelines

Guwahati-Siliguri Pipeline (GSPL)
Guwahati-Siliguri Pipeline was commissioned in 1964. Designed by Bachtel, USA and constructed
by Snam Progetti, Italy, it has the unique distinction of being the first product pipeline to be built on
the east of Suez. The 435 km long pipeline originates at Guwahati Refinery, transporting petroleum
products for delivery at Betkuchi, Hashimara and Siliguri. GSPL represents the cradle of IndianOil’s
capabilities in operations and maintenance of pipelines.
Koyali - Ahamedabad Pipeline (KAPL)

The 116 km long Koyali-Ahmedabad Pipeline was commissioned in April 1966. Designed and
constructed by Snam Saipen, Italy, the pipeline carries a variety of petroleum products from
IndianOil’s Koyali Refinery to the Sabarmati terminal (Ahmedabad) through a high population density
route within the state of Gujarat.
Haldia - Barauni Pipeline (HBPL)
Commissioned in 1967, the Haldia - Barauni Pipeline originates at Haldia and terminates at Barauni.
This pipeline exemplifies IndianOil's expertise in system modification and pipeline hydraulic
engineering. The pipeline was commissioned as a petroleum product pipeline but for some initial
years, the pipeline was used to transport imported crude oil to Barauni. After some years, the
pipeline started pumping petroleum products from Barauni Refinery to Haldia. After Haldia Refinery
came into being, pumping was again reversed and at present, the pipeline is engaged in
transportation of indigenous as well as imported petroleum products from Haldia.
Barauni - Kanpur Pipeline (BKPL)
The 745 km long Barauni - Kanpur Pipeline was commissioned on September 26, 1966. It transports
petroleum products from Barauni Refinery. The pipeline has boosting-cum-delivery stations at Patna,
Mughalsarai, Allahabad and terminates at Kanpur. A branch pipeline was taken out from Gowria to
Amousi (Lucknow).
Haldia-Mourigram-Rajbandh Pipeline (HMRPL)

The 277 km long Haldia-Mourigram-Rajbandh Pipeline was built in early 1972 for transportation of
petroleum products from IndianOil's Haldia Refinery to Kolkata and beyond. It has delivery stations at
Mourigram and Rajbandh. An eight km long branch pipeline was taken out at Raghudevpur to Budge
Budge in 1999 crossing the river Hoogly.
Mathura-Delhi Pipeline (MDPL)

The Mathura-Delhi Pipeline was earlier a section of Mathura-Jalandhar Pipeline commissioned in
1984. It was designed by IndianOil with in-house construction supervision. The 147 km long pipeline
transports petroleum products from Mathura Refinery to Bijwasan in Delhi.
Panipat-Ambala-Jalandhar Pipeline (PAJPL)

The pipeline which was earlier part of Mathura-Jalandhar Pipeline was connected to Panipat

Refinery in 1997, enabling transport of petroleum products from Panipat Refinery. The pipeline has a
branch line from Sonepat to Meerut and from Kurukshetra to Najibabad via Roorkee.
Panipat-Delhi Pipeline (PDPL)

Petroleum products from Panipat are transported through Panipat-Delhi Pipeline, which was earlier
Delhi-Panipat section of Mathura-Jalandhar Pipeline. The pipeline has a branchline from Sonepat to
Meerut.
Mathura-Tundla Pipeline (MTPL)

A 55 km long separate pipeline was also laid from Mathura to Tundla to transport petroleum products
from Mathura Refinery.
Panipat-Rewari Pipeline (PRPL)

The 155 km long Panipat-Rewari petroleum product pipeline was commissioned in September 2004
for transporting petroleum products from Panipat Refinery to the agricultural and industrial demand
areas of Haryana.
Panipat-Bhatinda Pipeline (PBPL)

Panipat-Bhatinda Pipeline was part of erstwhile Kandla-Bhatinda Pipeline. Petroleum products from
Panipat is transported through this 219 km long pipeline.
Koyali- Sanganer Pipeline (KSPL)

The 1056 km long Koyali-Sanganer Pipeline has sections of Koyali-Bareja, Bareja-Sidhpur and
Sidhpur-Sanganer. The pipeline also has branchlines from Bareja to Navagam, Kot to Salawas,
Baghsuri to Ajmer, and Lasariya to Chittaurgarh.
Chennai – Trichy - Madurai Product Pipeline (CTMPL)

Chennai–Trichy-Madurai Product Pipeline consists of a 526 km long pipeline from Chennai to
Madurai and a 157 km branch pipeline to Sankari. The Pipeline was commissioned on August 24,
2005.
Koyali - Dahej Product Pipeline (KDPL)

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The 103 km long product pipeline from Koyali Refinery to Dahej terminal of Gujarat Chemical Port
Terminal Company Limited (GCPTCL) was commissioned in 2007.
Panipat-Jalandhar LPG Pipeline (PJPL)

The 274 km long pipeline from Kohand (Panipat), traversing through Nabha and terminating at
Jalandhar, and has hook up of facilities with existing bottling plants at Kohand, Nabha and Jalandhar.
This IndianOil’s first LPG Pipeline was commissioned in 2008.
Chennai ATF Pipeline

The 95 km long ATF pipeline from CPCL, Manali to Chennai AFS was commissioned in December
2008.
Koyali-Ratlam Product Pipeline(KRPL)

The 265 km long 16-inch diameter product pipeline from Koyali Refinery to Ratlam Marketing
Terminal was commissioned in February 2009.
Pipeline Bifurcation at IOCL

6.3 Projects under Implementation

Dadri-Panipat R-LNG Spur Pipeline:
The project envisages laying of a 30 inch diameter, 133 km long spur line from Dadri (U.P.) Terminal
of GAIL (India) Ltd. pipeline network to Panipat Refinery for supply of R-LNG as replacement of
Naphtha currently being used. The approved cost of the project is Rs. 298 crore.
Chennai-Bengaluru Pipeline:
The project envisages laying of 14 inch/ 12 inch diameter, 290 km long product pipeline from
Chennai to Bengaluru. The pipeline shall facilitate cost effective positioning of products at
consumption centres located in and around Bengaluru and would strengthen CPCL’s positioning
capabilities. The approved cost of the project is Rs. 273 crore.
Mathura-Bharatpur spur Pipeline:

The project envisages laying of 8 inch diameter, 21 km long product pipeline from existing Mathura
station of Mathura-Tundla Pipeline to existing IndianOil terminal at Bharatpur. This will facilitate
supply of petroleum products to Bharatpur depot through a pipeline from Mathura, which is more
economical and reliable vis-à-vis rail. The approved cost of the project is Rs. 23 crore.
Branch Pipeline to Hazira from KDPL:

The project envisages laying of a 12 inch diameter, 94 km long branch pipeline from Koyali-Dahej
Pipeline (from T-point at Amod) to Hazira (Marketing Terminal of IndianOil). This will facilitate
economical & reliable placement of petroleum products alongwith effective evacuation of products of
Koyali Refinery to Marketing ToP at Hazira. The approved cost of the project is Rs. 71 crore.
Bijwasan-Panipat Naphtha Pipeline:

The project envisages laying of 10 inch diameter, 118 km long pipeline from Bijwasan to Panipat for
transportation of Naphtha from Mathura Refinery to Panipat, to meet the shortfall of Naphtha with the
commissioning of Naphtha Cracker Unit at Panipat. The approved cost of the project is Rs. 65.08
crore.
Hook-up of Tikrikalan Terminal with MJPL:

The project envisages laying of 14 inch diameter, 2 x 4 km long loopline for hook-up of Tikrikalan
terminal with existing MJPL and installation of pumping facilities at Panipat to facilitate pumping of
products ex-Panipat to Tikrikalan, Bijwasan and Meerut. The approved cost of the project is Rs. 43
crore.
Introduction of Rajasthan crude into IndianOil pipelines:

The project envisages providing mass flow meter, online viscous meter, isolating valves, heat tracing
of above-ground piping and recycle line at Radhanpur and Viramgam. The project also includes heat
tracing of above ground lines and providing recycle lines (except at Panipat and Koyali) at Sidhpur,
Abu Road, Kot, Beawar, Sanganer, Rewari, Panipat and Koyali. The approved cost of the project is
Rs. 30 crore.
Augmentation of Chennai-Trichy-Madurai Pipeline (1.8 to 2.3 MMTPA):

The project envisages installing higher capacity Mainline Pumping Units (MLPUs) at Chennai, shifting
existing MLPUs from Chennai and installation at Asanur. The approved cost of the project is Rs. 46
crore.
Construction of tanks and blending facility at Vadinar:

The project envisages construction of five additional tanks, 85,000 kl each, alongwith crude oil
blending facility at Vadinar. The approved cost of the project is Rs. 267 crore.
Branch pipeline from KSPL, Viramgam to Kandla:

The project envisages laying of 16 inch diameter, 217 km long-branch pipeline from KSPL, Viramgam
to existing scrapper station at Churwa alongwith use of 22 inch diameter, 14 km long existing pipeline
from Churwa to Kandla. The approved cost of the project is Rs. 349 crore.

6.4 Services Offered by Pipeline Division
6.4.1 Project Management

IndianOil’s Pipelines Division provides services in the field of project management. The clientele
includes the existing pipelines companies and companies venturing into pipelines business.
The services provided in the area of Project Management are:
 For cross-country new pipeline projects we offer services from Concept to Commissioning:
 Project management consultancy to ensure timely completion of pipeline projects within
approved cost with international quality standards
 Techno-economic feasibility study of new crude oil and multi-product pipelines
 Detailed design, engineering of mainline, stations, offshore terminals, tank farm, cathodic
protection, etc.
 Engineering, Procurement and Construction (EPC) services for implementation of Pipeline
Projects
 Instrumentation, dedicated telecommunication system including optical fibre communication
and Supervisory Control And data Acquisition system
 Vendor selection, procurement of materials and award of work contracts
 Construction supervision
 Construction supervision, testing and commissioning
 Build, Own, Operate and Transfer (BOOT) contracts for cross country pipeline and terminals
 Natural gas and Liquefied Petroleum Gas pipelines
 For existing pipelines, we offer services in project management in respect of capacity
augmentation, revamping and de-bottlenecking.
6.4.2 Operation and Maintenance

IndianOil’s Pipelines Division provides services for operations and maintenance. The clientele
includes the existing pipelines companies and companies venturing into pipelines business.
The services provided for Operations and Management are:
 Cross country crude and multi-product pipelines

 Mainline engines, pumps and motors
 Station facilities, crude oil and petroleum product tanks
 Automation and advanced control systems
 Single Point Mooring (SPM) Systems, submarine pipelines
 Development of maintenance procedures, formats, schedules, manuals
 Corrosion monitoring and control
 Technical audits for better performance of energy consumption, quality, safety and
environment protection
 Onsite and offsite disaster management plans
 Selection, testing and evaluation of Chemical Drag Reducers and corrosion inhibitors
6.4.3 Training and Development Consultancy

IndianOil’s Pipelines Division provides consultancy services in training and development. The
clientele includes the existing pipelines companies and companies venturing into pipelines business.
The consultancy services provided in Training and Development are:
 Specially designed training programmes to cater to the specific business needs

 Operations and maintenance of mainline engines, pumps and pipelines
 Electrical and instrumentation systems
 Project system design and engineering
 Pipeline construction and commissioning
 Operations and maintenance of telecommunication and SCADA system
6.5 SWOT Analysis for Pipeline Division

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6.6 Challenges
Ma rk et
A growing economy & a dynamic industry present a number of challenges to the Corporation as a key
energy supplier:
SW
With increasing globalization & competition in the sector, IndianOil has to transform into the least
cost supplier of quality products & services to customers.
To enter into other energy sub-sectors to complement its own line of business.
omp e titiv e
Rising cos
Timely execution & safe commissioning of projects.
Ensure accounting of correct quantities in business transactions.
Retention of skilled manpower.
To reach to the nation’s rural population & community.
t Mo d e
 Protection of ecology & environment while meeting the stringent product quality standards.
7.0 Financial Analysis

ri zon
For every organization to sustain, it is very pertinent to perform efficiently at a continuous pace, year
by year. The organization needs to have a very strong financial condition with continuous innovation
to keep growing in the short term, medium term & long term period. The company’s working, its
performance, efficiency is adjudged with the help of financial analysis, carried down over the time.

The above diagram shows how the OMCs have been compensated for their under recoveries in last
four years. Compensation is given in the form of Oil bonds, discount from refiners & upstream
companies and subsidies by government.

7.1 Operating Profits Analysis (Pipelines)
To start with the financial analysis of pipeline division lets first have a look at a growth chart of its
operating profits, i.e. Earnings before Interests & Taxes (EBIT) for the period 2005-2010.
Operating Profit (in crores)

3000
2827.06
2514.37
2500
2000
1500
1000
500 417.15 435.32

295.23
0
2005-06 2006-07 2007-08 2008-09 2009-10
Operating Profit
In the year 2009, the operating profits shoot up to Rs.2538.14 Cr due to Change in Accounting
Policy of IOCL.
Earlier the operating cost of crude pipelines was taken as income and Product pipelines were
charged a 75% of notional railway freight.
From year 2009, 75% of Notional Railway Freight (NRF), for both crude as well as product
pipelines, is taken as income. It is also called as Cost of Transportation (COT).

7.2 Cost of Transportation (COT) Income Analysis
(Rs in Crores)
From the above analysis it can be clearly seen that in last two years the cumulative income from
transporting crude is 85% where as that of products is just a 15%.
The reason for the same is because crude is transferred from the start to end point of the pipeline i.e.
from oil tanks to refineries. There is no delivery in between and hence the COT charged is maximum
possible.
Whereas, in case of products it can be delivered to any of the intermediate stations and hence the
COT charged is only till that point of delivery.

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Head Office (HO):
1. Head Office (HO)
2. Construction office Jaipur
Eastern Region (ER) :

1. Guwahati-Siliguri Pipeline (GSPL)
2. Haldia-Mourigram-Rajbandh-Barauni Pipeline (HMRB)
3. Barauni-Kanpur Pipeline (BKPL)
4. Eastern Region Pipeline (ERPL)
5. Paradip-Haldia-Baraun Pipeline (PHBPL) (CRUDE)
Western Region (WR) :

1. Salaya-Mathura Pipeline (SMPL) (CRUDE)
2. Koyali-Ahmedabad Pipeline (KAPL)
 It includes biggest crude pipeline – Salaya-Mathura Pipeline (SMPL), it achieved highest daily
throughput of 84138 kl on March 5, 2009.
Northern Region (NR) :

1. Mathura-Jalandhar Pipeline(MJPL)
2. Panipat-Jalandhar Pipeline (PJPL)
3. Panipat -Bhatinda Pipeline (PBPL)
4. Mundra-Panipat Pipeline (MPPL)(CRUDE)
5. Dadri-Panipat pipeline (DPPL)
Southern Region (SR) :

1. Chennai-Trichy-Madurai Pipeline (CTMPL)

7.3 Analysis of Variable Cost per MT
Particulars 2006 2007 2008 2009 2010

Total Variable Cost(Rs Crores) 173 242 308 403 356
Throughput (TMT) 44832 51222 56686 59171 63992
Variable Cost Per MT(Rs) 39 47 54 68 56
Variable Cost Per MT

80
70 68
60
54 56
50 47 Variable Cost Per MT
40 39
30
20
10
0
2006 2007 2008 2009 2010
The variable cost at the pipeline division mainly constitutes Power & Fuel and Chemicals.
The Variable cost kept rising till year 2009 owing to rising crude prices which even touched
$147/barrel.
However last fiscal prices came down and currently are in the range of $75-80 a barrel which resulted
in lower variable cost per MT.

7.4 Ratio Analysis (Pipeline Division)
Particulars 2009-10 2008-09

Current Assets 300 12
Quick Assets 129 123
Current Liabilities 507 58
Working Capital -207 -47
Stock at the End 171 165
EBIT (or PBIT) 2832 2539
Interest 5 25
Total Assets 4848 4764
Net Fixed Assets 4548 4476
7.4.1 Liquidity Ratios

Liquidity ratios are used to determine the short term solvency position of a business enterprise. The
term ‘liquidity’ means the conversion of the assets into cash without much loss.
The objective is to find out the ability of the business enterprise to meet short term liabilities.
Current Ratio
Formula Used  Current Assets / Current Liabilities
Current Ratio
2009-10 2008-09
0.592 0.198
The excess of current assets over current liabilities is referred to as working capital. Generally a
current ratio of 2:1 is considered satisfactory; however IndianOil’s current ratio is 0.59:1. It suggests
that for the payment of current liability of Rs.1, the current assets of Rs.0.59 are available. This has
improved a lot from previous year’s 0.19.
Quick Ratio
Formula Used  Quick Assets / Current Liabilities
Quick Ratio
Vishal Maheshwari, Summer Trainee, IOCL-Pipeline
2009-10 Division, HO, NoidaPage 62
2008-09
0.254 2.114
Quick ratio, which is also termed as ‘acid test ratio’ or ‘liquidity ratio’, does not take into account
illiquid assets. Prepaid expenses & stock/inventory are taken as illiquid assets and hence not
included. It is also an indicator of short-term solvency. Ratio of 1:1 is considered to be ideal.
Last year it was way above ideal and this time it has fallen to 0.25
Inventory to Working Capital Ratio

Formula Used  Stock at the End / Working Capital
Stock to Working Capital Ratio

2009-10 2008-09
-0.826 -3.540
The Inventory to Working Capital ratio measures how well the company is able to generate cash
using Working Capital at its current inventory level. So long as inventories are less than working
capital, a reduction in the market value of inventories will register a smaller percent of reduction in the
working capital. An increasing Inventory to Working Capital ratio is generally a negative sign, showing
the company may be having operational problems.
Last year it was negative 3.5 however it has come down to negative 0.82 in the current fiscal.
7.4.2 Leverage Ratios

The interest coverage ratio or the times-interest-earned is used to test the firm’s debt-servicing
capacity.
The Objective is to indicate the firm’s ability to meet interest obligations.

Interest Coverage Ratio
Formula Used  Earning Before Interest & Taxes / Interest
Interest coverage Ratio

2009-10 2008-09
587.65 102.96
It signifies whether the business would earn sufficient profits to pay periodically the interest charges.
It is very important from lender’s point of view. The higher the ratio, the more secure the lender is in
respect of his periodical interest income. From 103 times last year it has increased to 587 times in
current fiscal which is commendable.
7.4.3 Profitability Ratios
The profitability ratios are computed to throw light on the current operating performance & efficiency
of the business. The objective is to find out the efficiency of the business operations.
Return on Total Assets Ratio

Formula Used  Earning Before Interest & Taxes / Total Assets * 100
Return on Total Assets Ratio

2009-10 2008-09
58% 53%
This ratio is computed to know the productivity of the total assets. The productivity of total assets in
pipeline division comes out to be 58%, which has improved by 5% from last fiscal. The reason for this
is increase in throughput by 7.31% to 63.98 MMT, the highest ever.
Return on Capital Employed Ratio

Formula used 
[Earnings before Interest & Tax/ (Working Capital + Net Fixed Assets) * 100]
OR Operating Profits / Capital Employed*100
Return on Capital Employed

Ratio
2009-10 2008-09
65.23% 57.33%
The return on capital employed improved to 65.23% owing to the same reasons cited above.
7.4.4 Other Ratios

Particulars 2009-10 (Rs) 2008-09 (Rs)
Number of Employees 1,975 2,043
Pipeline Throughput (TMT) 63,992 59,171
Operating Cost 15,66,25,29,00 14,39,48,00,000

0
Operating Cost (Excluding Dep) 11,16,95,10,00 10,80,73,00,000
0
Establishment Cost 3,52,34,86,000 3,40,43,00,000
Ratios
Pipeline Throughput/Employee 32.40 28.96
Pipeline Operating Cost/Employee 79,30,394 70,45,913
Pipeline Operating Cost 56,55,448 52,89,917
(Excluding Dep)/Employee
Establishment Cost/Employee 17,84,044 16,66,324
Pipeline Operating Cost/Tonne 2,44,758 2,43,275
Pipeline Operating Cost (Excluding 1,74,545 1,82,645
Dep)/Tonne
Pipeline Throughput Per Employee
It is calculated to know the total output per employee in the organization. This ratio has improved to
32.40 from 28.96 last year. Higher the ratios better the result.
Pipeline Operating Cost Per Employee
This ratio computes the total operating cost per employee. This ratio has increased to Rs.79.30 lakhs
in 2009-10, as compared to Rs.70.45 lakhs in 2008-09.
Pipeline Operating Cost (Excluding Depreciation) Per Employee
This ratio has also increased to Rs.56.55 lakhs in 2009-10 from Rs.52.90 lakhs in 2008-09.
Establishment Cost Per Employee

This ratio includes establishment costs which comprise salary & allowances, contributions to PF,
Gratuity Fund, Benevolent Fund, Leave Travel Concession, Medical Facilities, Canteen Expenses, &
other staff welfare expenses. This ratio also risen to 17.84 lakhs in 2009 from Rs.16.66 lakhs in 2008.
Pipeline Operating Cost Per Tonne
In this ratio, the operating cost is calculated per tonne of output produced. This ratio has moved up to
Rs. 2.44 lakhs against Rs.2.43 lakhs last year.
Pipeline Operating Cost (Excluding Depreciation) Per Tonne
It calculates operating costs of organization’s output per tonne, but excludes depreciation. It has
declined to Rs.1.74 lakhs from Rs.1.83 lakhs. Lower the ratio, better the result.

7.5 Finance Department Hierarchy

ncIsVuraeX
8.0 Stages of PROJECT FINANCE

PROJECT FINANCING AT IOCL (PIPELINE)
STAGE I:
The corporate office of IOCL or the PJ-systems department of IOCL Pipeline
Division perceive the need for undertaking a pipeline project which could require
laying down a new pipeline, augmenting a previous one or scouting for new
areas where the pipelines as a mean of transportation can be introduced.
Accordingly the PJ-systems department then develops a suitable design for the
concerned pipeline project on basis of which further appraisal is conducted.
STAGE II:
The technical departments i.e. Civil, Mechanical, Electrical and
Telecommunication & telesupervisory department prepare their respective cost
estimates where by individual expenditure to be incurred by them on the project
is estimated.
These cost estimated are forwarded to PJ-system and the finance Department.
While the PJ-system department further consolidates the cost estimates, the
finance department is responsible for financial concurrence of the estimates.
STAGE III:
The PJ-systems department prepares a consolidated report known as the
detailed feasibility report (DFR) from the cost estimates. The DFR consolidates
all the expenditures into capital expenditure and operating expenses and is used
to determine the financial feasibility of the project.
In case, the project requires a capital expenditure of less than Rs.100 crore then
a feasibility report is prepared. Where the project involves capital expenditure of
more than Rs. 100 crore, a two- step feasibility check is undertaken where a DFR
is prepared in the second step.
The Finance department is responsible for the financial concurrence of DFR at
this stage.

STAGE IV:
The DFR prepared in the third stage is forwarded to the board of directors for
their approval. The Board analyses the project not only from financial point of
view but also from other aspects like strategic consideration, ecological
implications etc.
If the project fails to meet Board’s approval then it can be re-analyzed for
improvements, if possible, or may be discarded altogether.
If the project gets board’s approval then the technical departments are given
orders to commence with their work on the project.
STAGE V:
The technical departments begin their work by preparing their purchase
requisitions which detail out their requirements of various parts and items for their
work on the concerned project.
The financial department receives these requisitions and checks them for their
actual requirement and their quoted prices and sources.
STAGE VI:
Tenders are invited by the contract department to fulfill the purchase requisitions
of the technical department. Where the items, for which tenders are being invited,
are required for purpose other than use in the project the tenders are invited by
the materials.
STAGE VII:
Once the tenders are received by the contract department, they are evaluated on
the following two consecutive basis :
a) Techno-commercial appraisal: the bids are first evaluated to be sure that the
items on which the vendor has bid confirm to the technical specifications required
by IOCL. Then the bids are appraised to be sure that they have adhered to all the
commercial requirements relating to EMD, Tender fee, Solvency certificate,
Annual reports, taxes, duties and exchange rates (in case it’s a foreign vendor)

b) Price-bid opening: the bids that qualify the former appraisal are then opened and
checked for the prices quoted by them.
The tender with lowest quoted price is awarded the contract for fulfilling the
concerned purchase requisition.
The finance department is always present at all the stages of bid appraisal and is
responsible for commercial and financial appraisal.
STAGE VIII:
As the work on the project commences and progresses it’s supervised by the on-
site technical teams as well as the PJ-Monitoring department which tracks the
physical progress of the project.
The finance department tracks the financial progress of the project in terms of the
capital spent till now and the future spending. It keeps a record of the
expenditure incurred on the project month-wise and from its commencement till
date. This way it can also track the variations in the actual and budgeted and
revised spending estimates and the reasons for the same.
Both the physical and the financial progress of the project are compiled in the
monthly reports which are submitted to the Board.
STAGE IX:
Meanwhile, insurance for the implementation stage of the project is taken. The
insurance is also awarded in a manner similar to the award of work to tenders.
The insurance taken is known as ‘Storage cum Erection Insurance’ (SCE) which
is taken till the date when the project gets commissioned. In case, there is delay
in the commissioning of project then SCE insurance needs to be taken for the
time period for which the project is expected to be delayed.
Once the project gets commissioned the SCE insurance needs to be converted
into Fire and Burglary insurance.
STAGE X:
This is one of the most important stages of project financing where the decision
regarding the funding of the project needs to be undertaken. At IOCL, funding decision
for the pipeline projects is made by the corporate finance department and not the
pipeline finance department.

a) If the funds required are less than Rs. 100 crore, then the funding is done
completely from internal sources of finance.
b) If the funds required are more than RS. 100 crore, then funding is done through
both internal and external sources of finance.
STAGE XI:
The final stage of project financing of a pipeline project at IOCL is commissioning of the
project and capitalization of all the expenses. By now, all the required expenses have
been made and now the project starts generating cash flows.

Detailed Feasibility Report (DFR)
For
Panipat-New Sambalpur-Raipur-Ranchi
Pipeline (PRRPL)
(This proposal is being put up for obtaining investment approval for the pipeline so that
activities for implementation can commence. Accordingly, a DFR has been prepared,
which deals with the cost, viability, implementation methodology and other details in
respect of laying Paradip -New Sambalpur- Raipur- Ranchi Pipeline. The pipeline
system has been designed considering IOCL’s volume and a minimum of 33% capacity
for use as a common carrier)

8.1 INTRODUCTION
 Board of directors of IOCL, in its meeting held on 25.03.2006, accorded in

principle approval to the proposal of setting up a15 MMTPA refinery cum
petrochemical complex at Paradip. The proposal includes laying of product
pipeline from refinery to Ranchi/Raipur/Korba for evacuation of products to
various demand centers in the states of Orissa, Jharkhand and Chhattisgarh. An
amount of Rs 8.35 crore was approved by the board for carrying out various pre-
project activities viz detailed survey of mainline route of the pipeline and other
surveys, and activities required to be undertaken for obtaining environmental
clearance of the product pipeline.
 Thereafter the board of directors of the IOCL in its meeting held on 28.02.2009
accorded investment approval for installation of 15 MMTPA refinery at Paradip.
The board also noted that the Paradip refinery project includes Rs 1053 crore for
Paradip-New Sambalpur-Raipur-Ranchi Pipeline and Rs 414 crore for
augmentation of Marketing facilities, for which separate proposals would be put
up by respective division after detail estimates are worked out.
 As regards to the product pipeline ex-Paradip refinery, after first stage approval
in march 2006, detailed route survey for the pipeline was undertaken and the
length of the pipeline was estimated to be over 1100 km. as per the guide issued
by the government in 2002 for laying of new petroleum product pipelines, this
pipeline was coming under common carrier category. Accordingly approval was
obtained in july 2006 from MoP&NG for publication of expression of interest
(EOI). However, IOCL has proposed to publish the notice inviting EOI at
appropriate time in the year 2008, so as to synchronize commissioning of this
pipeline with that of the Paradip refinery.
 In the meantime, the Petroleum and Natural gas regulatory board (PNGRB) act,
2006 was notified by the government. As per clause 17 of PNGRB act, an entity

which is laying, building, operating or expanding or which purpose to lay, build,
operate or expand, a pipeline as a common carrier or contract carrier can supply
in writing for the board for obtaining an authorization under this act. However,
regulation in respect of liquid petroleum product pipelines is yet to be notified.
 MoP&NG has, vide letter dated 11.06.2009 to PNGRB, confirmed authorization

of Paradip-New Sambalpur-Raipur-Ranchi Pipeline by the central government
before the appointed date i.e. 01.10.2007.
 As indicated above, the Board of Directors of IOCL in its meeting on 28.02.2009,

approved the Paradip refinery project with completion target of march 2012.
Paradip-New Sambalpur-Raipur-Ranchi Pipeline project is a linked project of
Paradip refinery project. This pipeline project is required essentially for
evacuation of petroleum products to meet the demand of consumption centers in
the states of Orissa, Jharkhand and Chhattisgarh. Therefore, it is necessary to
implement the pipeline project in order to ensure synchronization of pipeline
commissioning along with refinery. In pursuance to the same, application was
made to PNGRB for publication of EOI for booking capacity by interested entities
in the pipeline and to authorize IOCL for laying of this pipeline. PNGRB hosted
EOI on its website on 27.06.2009.
 This proposal has been put up for obtaining investment approval for the pipeline
so that activity for implementation could commence. Accordingly, this DFR has
been prepared which deals with the system configuration, cost, viability,
implementation methodology and other details in respect of laying Paradip-New
Sambalpur-Raipur-Ranchi Pipeline.

8.2 NEED AND JUSTIFICATION
 Petroleum products viz. MS, SKO & HSD from Paradip refinery would be
required to be transported to various demand centers viz. Jatni, Jharsuguda,
Ranchi, Raipur and Korba in the states of Orissa, Jharkhand and Chattisgarh.
The transportation requirement of products can be met by following alternate
modes.
a) By Rail
b) By Pipeline
 It has been globally established that pipelines are a superior means for
transportation of petroleum products compared to other modes viz. rail, road,
tankers etc. due to their distinct inherent advantages like reliability, economy,
safety, flexibility, low energy consumption, low transit losses and negligible
impact on environment. Construction of new pipeline also provides relief to other
modes of transportation in terms of congestion so the movement of essential
commodities and passengers could be improved.
 In view of the above, a product pipeline originating from Paradip and connecting
demand centers at Jatni, Jharsuguda, Ranchi, Korba and Raipur is being
considered for transportation of petroleum products e- Paradip Refinery.

8.2.1 Throughput projections
Throughput projections for the proposed Paradip –New Sambalpur- Raipur- Ranchi
pipeline (PRRPL) have been worked out by using IP model. The ToP wise, product-
wise throughput projections of PRRPL, considering IOCL demand are as under.
Throughput Projections (figures in TMT)
ToP Products/Year 2012-13 2016-17 2021-22 2026-27

MS 69 80 93 108
HSD 253 286 331 384
Jatni
SKO 37 36 36 36
Total 359 402 460 528
MS 21 25 29 34
HSD 240 271 314 364
Jharsuguda
SKO 58 56 56 56
Total 319 352 399 454
MS 59 69 80 92
HSD 326 367 426 493
Ranchi
SKO 93 91 90 91
Total 478 527 596 676
MS 193 209 220 231
HSD 1247 1294 1358 1429
Raipur
SKO 172 152 138 125
Total 1612 1655 1716 1785
MS 38 45 51 59
HSD 293 330 383 444
Korba
SKO 48 46 46 46
Total 379 421 480 549
Grand Total 3147 3357 3651 3992
It is worth to mention here that throughput of evacuation pipelines , by their very nature,
are dependent on changes in supply (e.g. capacity increases/changes in configuration
resulting in lower cost of production and economic exports), changes in demand(e.g.
substitute fuels/ changes in projected demand levels, changes in coastal demand

leading in coastal movements) as well as changes in crude spreads and products
cracks in the international oil market, which would lead to changes in the level of
imports/ exports. Accordingly, the throughput projections of this pipeline may vary.
8.2.2 Pipeline route

 The proposed pipeline would originate from a place near the pump station of
Paradip- Haldia- Baruni crude oil pipeline at Paradip, the pipeline would traverse
via existing Marketing depot of IOCL at Jatni, about 103 km from Paradip. Jatni
station would be an intermediate pump station cum delivery station. Thereafter
the pipeline would traverse up to New Sambalpur, which is 274 km from Jatni.
New Sambalpur would be the intermediate pumping station with dedicated pump
stations for the branch pipeline to Ranchi as well as the mainline to Raipur.
 From New Sambalpur, one branch line would be laid up to Ranchi via
Jharsuguda. Jharsuguda would be an intermediate ToP planned at chainage 66
km of the New Sambalpur- Ranchi section would be 318 km. On New Sambalpur
Raipur section , one brach line would emanate from Saraipalli(at about 132 km
chainage from New Samablpur) to Korba. The pipeline length from New
Sambalpur to Raipur would be 249 km and the branch line length from Saraipalli
to Korba would be 154 km. As mentioned earlier, the location of the ToP at
Ranchi and Raipur is yet to be finalized. The pipeline length and route would be
finalized accordingly.
 Petroleum products viz. MS, SKO and HSD from Paradip refinery would be
required to be to be transported to various demand centers viz. Jatni,
Jharsuguda, Ranchi, Raipur and Korba in the states of Orissa, Jharkhand and
Chhattisgarh. It has been globally recognized that pipeline are a superior mode
of transportation of petroleum products compared to other modes viz. rail, road,
tanker etc. due to their distinct inherent advantages like reliability, safety,
flexibility, low energy consumption, low transit losses and negligible impact on
environment. Construction of new pipeline also provides relief to other modes of

transportation in terms of congestion so that movement of essential commodities
and passengers could be improved.
 In view of the above, a product pipeline originating from Paradip and connecting
demand centers at Jatni, Jharsuguda, Ranchi, Raipur and Korba is being
considered for transportation of petroleum products ex-Paradip Refinery.
8.3 PROJECT DESCRIPTION
 The pipeline system has been designed considering IOCL’s volume and a
minimum of 33% capacity for use as common carrier. Suitable modification in the
pipeline system configuration would be incorporated, if required, depending on
the response to EOI.
 The main pipeline would be from Paradip to Raipur via Jatni and new Sambalpur.
From New Sambalpur, a branch line would be laid to Ranchi via Jharsuguda.
Another branch line to Korba would originate from Saraipalli, which would be a T-
point on New Sambalpur-Raipur section. It may be mentioned here that the
location for the Tops at Raipur and Ranchi is yet to be finalized.
 The pipeline system has been designed so as to optimally transport prtroleum
products from the proposed paradip refinery to various ToPs en route.
 Based on the results of the line size optimization study, the following line sizes
have been selected for various section of the pipeline
Paradip-New Sambalpur (377km) 18” OD
New Sambalpur-Ranchi (318km) 12.75” OD
New Sambalpur-Raipur (259km) 14” OD
Saraipalli-Korba (154km) 10.75” OD
 The proposed pipeline system would broadly involve the following activities.
o Laying of about 1108 km pipeline
o Installation of originating pump station at Paradip
o Installation of intermediate pumping-cum-delivery station at Jatni

o Installation of intermediate pump station at New Sambalpur with dedicated
pumping facilities for New Sambalpur-Ranchi and New Sambalpur-
Raipur/Korba sections
o Installation of 2 × 10,000 kl HSD line balancing tanks at New Sambalpur
o Installation of pipeline delivery station facilities at Jharsuguda, Ranchi, Raipur
and Korba ToPs
o Installation of T-point facilities at Saraipalli on New Sambalpur-Raipur section
for branch pipeline to Korba
8.4 Implementation methodology

 IOCL (Pipeline Division) possesses adequate expertise in the field of design and
engineering, procurement of materials and supervision of construction activities
of such projects including telecommunication and telesupervisory (SCADA)
systems. It is, therefore, proposed that execution of the project will be done by
IOCL as per conventional methodology.
 Statutory clearances - Suitable action has already been initiated for obtaining
MoE&F clearance and other statutory clearance for the proposed pipeline system
from the concerned authorities, as applicable.
 Length of the proposed pipeline, as per detailed route survey, has been
estimated to be 1108 km. As per the prevailing guidelines for laying of product
pipeline, this pipeline would come under the common carrier category. As
indicated in para 1.5, MoP&NG has, vide letter dated 11.6.2009 to PNGRB,
confirmed authorization of paradip-new sambalpur-raipur-ranchi pipeline by the
central government before the appointed date i.e. 01.10.2007
8.5 Construction schedule

The proposed scheme is expected to be completed in a period of about 36 months after
receipt of authorization from PNGRB. Commissioning of the pipeline would, however,
be synchronized with commissioning of Paradip refinery.

8.6 Manpower requirement
The manpower requirement during construction phase would be about 120 and that for
operation of the pipeline system (excluding 147 LPMs) would be around 132.
8.7 CAPITAL COSTS

The proposed pipeline system is estimated to cost Rs. 1793 crore, including a foreign
exchange component of Rs. 610 crore, at march 2009 price level.
 The project cost has been estimated on the basis of the following:-
1. Cost actually incurred in the past with appropriate escalation.
2. Establishing physical requirements, preliminary, specifications and in
house cost data.
3. Experience of virtually different projects elsewhere to establish physical
requirement and cost.
4. Experience of slightly different projects adjusted approximately to
establish physical requirement ad budgetary quotations.
5. Experience of similar projects in value/terms adjusted for price difference
by past experience and escalation data.
 Survey and field engineering
This cost includes the cost of surveys, sub soil investigation & field
engineering.
 Land cost acquisition , ROW, and crop compensation
Land requirement for pump stations, delivery station, scraper station. RCPs
etc. has been taken on the basis of permanent land acquisition. Right of way
(ROW) compensation has been considered for the entire 1108 km route
pipeline.
 Project management & engineering, insurance

The proposed scheme is expected to be completed in a period of about
36 months after receipt of authorization from PNGRB. The cost of project
management & engineering is estimated on the envisaged time schedule.
The manpower requirement during construction phase to be about 120.
 Mainline pipes & MATERIALS
The cost of pipes and coating has been considered as per the Latest data
available. The cost of materials requires such as casing pipes, coating and
wrapping materials, valves etc. has been estimated on the basis of
budgetary offers and cost actually incurred in recent past on similar items.
 Mainline construction
The cost of the mainline construction has been estimated on the basis of
the cost incurred in similar project executed elsewhere.
 Pump station and terminal
The cost under this head includes the cost of mechanical, civil, electrical
and instrumentation & control facilities which mainly comprise the
mainline pumping units including prime movers, valves, sump pump &
motor, scraper barrels, fire alarms & detection system, fire hydrant
network & related facilities, power cum Motor Control Center, PLC based
control system, control system, control building the erection and
installation of requisite facilities.
 Cathodic protection
This includes the cost of materials required for temporary and permanent
cathodic protection, installation & commissioning of equipment/materials,
CP rectifiers units, ground beds, cables etc. Estimates are based on
budgetary offers and the rates from similar projects executed in the
recent past.

 Telecommunication and telesupervisory system
OFC based telecommunication system and a dedicated telesupervisory

system has been envisaged for the proposed pipeline system. Cost
estimates are based on budgetary offers/ earlier purchase orders,
adjusted suitably.
 LBTs at New Sambalpur
This includes the cost of two line balancing tanks of 10,000 kl capacity
each considered for HSD at New Sambalpur.
 Escalation
No provision has been made for price escalation during the period of
execution of the project and, as far as possible, the estimates have
been prepared on the basis of the costs prevalent in March 2009.
However, provision for contingencies to the tune of 5% has been made
in the cost estimates, which is considered to be adequate to cover
unforeseen factors.
The summary of capital cost is given in the following table-

PARADIP-NEW SAMBALPUR-RAIPUR-RANCHI PIPELINE
CAPITAL COSTS
(March 2009 price level)
(Rs in Lakhs)
S.No. DESCRIPTION OF ITEM FE RUPEE TOTAL
1 Survey & Field Engineering 0 1122 1122
2 Land Acquisition, ROW & Crop Compensation 0 9640 9640
3 Colony 0 6167 6167
4 Project Management and Engineering, Insurance 0 9064 9064
5 Mainline Pipes 37623 20690 58313
6 Mainline Materials 0 1856 1856
7 Mainline Construction 10759 24219 34978
8 Pump Station and Terminal 12595 25242 37837
9 Cathodic Protection 69 1933 2002
10 Telecommunication & Telesupervisory 0 5054 5054
Sub Total 61046 104987 166033
11 Interest During Construction 0 13252 13252
Total 61046 118239 179285
(In Crores) 610 1183 1793

Exchange Rates-1US $ = Rs 52.03, 1 UK = Rs 74.27 , 1 Euro=Rs 65.69
8.8 OPERATING COSTS

 The operating cost of the pipeline system includes the cost of power required for
running the mainline pumping units, utilities, consumables, salaries & wages,

administrative overheads, repair & maintenance etc. the operating cost is
estimated to be Rs. 67 crore/year at March 2009 price level.
 Basis of estimation
1. Fuel/power(electricity)
2. The project envisages motor driven pumping units at Paradip, Jatni,
and New Sambalpur. The power for the mainline motors at all these
station would be taken from respective State Electricity Boards. For the
purpose of operating cost calculations, tariff for electricity has been
taken as @ Rs. 3.52 per unit based on the present cost at Paradip
station for PHBPL.
3. Utilities
- Power
Power is also required for the operation of the auxiliaries & controls
etc. and for illumination at the stations. Requirement of the power is
planned to be drawn from State Electricity Board’s power supply
points at IOCL installations along the pipeline.
- Water
There is no major requirement of the water for the operation of the
pipeline system. Water for fire fighting will be drawn from the fire
water network of IOC(M) at the ToPs and from Paradip Refinery at
Paradip. At New Sambalpur, water is envisaged to be sourced from
local water sources/borewell.
- Manpower
The cost towards salaries and wages shown against the labour
component in the operating cost is based on the estimated
manpower requirement on the existing sales of pay and
allowances. The manpower requirement, assessed to be around
132 during operation phase, has been worked out on the basis of
prevailing norms and practices. The requirement manpower is
expected to be met through internal deployment as well as by

induction of competent personnel, who will be trained to operate
system. The requirement of 147 no. of LPMs is envisaged to be
outsourced through DGR approved security agencies.
- Repair and maintenance
Repair and maintenance of the mainline has been considered @
1% of the investment in the mainline. Similarly, repair and
maintenance of the stations has been considered @ 2% of the
investment on stations, telecommunication & telesupervisory
system.
- Chemicals
The cost of injection of chemicals (corrosion inhibitor) into the
pipeline, which would be injected at Paradip, has been considered
on the basis of the throughput of the pipeline ex- Paradip.
- General Administration Expenses
The cost under this head covers management expenses including
security services, insurance of facilities etc. being proposed in the
pipeline system.

PARADIP-NEW SAMBALPUR-RAIPUR-RANCHI PIPELINE
OPERATING COST (March 2009 price level)

(Rs in lakh)
S.No. DESCRIPTION OF ITEM COST PER ANNUM
1 Power(for prime movers) 2006
2 Utilities
Power & Water 180
3 Manpower 1379
4 Repair & Maintenance
a) Mainline 1031
b) Pump administration Expenses 858
5 Other Expenses
a).General Administration Expenses 1213
6 Chemicals 40
Total 6707
(67 Crores)
8.9 FINANCIAL ANALYSIS (Working shown in Annexure)

 The capital cost of the project is considered to be financed through internal
resources/commercial borrowings. For the purpose of financial analysis, debt :
equity ratio 1:1 has been considered with interest @ 11% per annum and
repayment in 8 equal installments with one year moratorium for from the date of
commissioning. Requirement of working capital will be met through internal
resources.
 Proposed Paradip-New Sambalpur-Raipur-Ranchi pipeline is a part of the
Paradip refinery project as it is essentially required to facilitate transportation of
the products from Paradip refinery to existing marketing terminal at Jatni and
proposed new terminals at Jharsuguda, Ranchi, Raipur and Korba. Therefore,
economic viability of the proposed system was examined by working out the
combined IRR of the Paradip refinery and linked pipeline and marketing facilities.

 The combined internal rate of return (IRR) for Paradip refinery project was
indicated as 15.5% in the February 2009 board resolution. While working out the
combined IRR, the cost of the pipeline system was considered as Rs. 975 crore
(without interest during construction i.e. IDC) based on December 2007 price
level. The cost was for a pipeline system having a capacity of 2.5 MMTPA Ex
-Paradip.
 The updated cost of the pipeline system, for a capacity of 2.5 MMTPA, is
estimated to be Rs. 1374 crore (without IDC) based on march 2009 price level.
RHQ has estimated that considering the increase in cost of the pipeline (of 2.5
MMTPA capacity) from Rs. 975 crore to Rs. 1374 crore, the combined IRR would
change from 15.5% to 15.1%.
 Capacity of the pipeline system has been revised to 5 MMTPA by considering rail
loading of products ex-Raipur. The capital cost of the pipeline system for a
capacity of 5 MMTPA has been estimated to be Rs. 1660 crore (without IDC) of
the pipeline system (i.e. Rs . 1374 crore for 2.5 MMTPA), and the additional
corporate saving by considering rail loading of 1237 TMT at Raipur would be
about Rs. 86 crore per year.
 The IRR, corresponding to the incremental cost of 286 crore (without IDC) of the
pipeline system (i.e. Rs. 1660 crore for 5 MMTPA –Rs . 1374 crore for 2.5
MMTPA), and the additional corporate saving of Rs. 86 crore per year, work out
to 16.8%.
 It can, therefore, be concluded from the above that the proposed pipeline, is
financially viable.
 The financial appraisal of the paradip refinery project has already been done by
M/s SBI capital markets limited who has concluded that Indian Oil’s proposed
refinery projects at paradip, Orissa can be considered as financially viable. As

this pipeline is an integral part of the pradip refinery project, no separate
appraisal by financial institution has been considered for the product pipeline.
8.10 CONCLUSION AND RECOMMENDATIONS
 After commissioning of the upcoming refinery at Paradip, petroleum products viz.

MS, SKO and HSD from the refinery would be required to be transported to
various demand centers viz. Jatni, Jharsuguda, Ranchi, Raipur and Korba in the
state of Orissa, Jharkhand and Chhattisgarh.
 Pipeline mode transportation is superior to other modes in terms of reliability,
safety, economy, flexibility, environmental pollution control, energy consumption,
losses during transit etc.
 In view of the above, a product pipeline originating from paradip and connecting
demand centers at Jatni, Jharsuguda, Ranchi, Korba and Raipur is being
considered for transportation of petroleum products ex- Paradip refinery.
 Financial analysis of the proposal indicates that the proposed pipeline, which is
an integral part of the upcoming paradip refinery, is financially viable.
 In view of above, it is recommended to consider laying of Paradip-New
Sambalpur-Raipur-Ranchi pipeline with a design capacity of 5 MMTPA Ex-
Paradip at an estimated cost of Rs. 1793 crore at March 2009 price level.
 The project is estimated to be completed in the period of about of 36 month after
receipt of authorization from PNGRB for laying, building and operating Paradip-
New Sambalpur-Raipur-Ranchi pipeline.
 Accordingly, this DFR is being submitted for approval of the board to the above
recommendation. Construction activities would, however, commence after receipt
of authorization from PNGRB and other statutory clearance like environmental
and forest clearance etc.

9.1 Contribution to the Department
 E-payment Analysis for the months of March and April 2010

As per instructions given by corporate office to finance department, the
E-payments as a percentage of total payments should rise as much as possible
and eventually fade off check payments. The rationale behind such an initiative is
to minimize the frauds because of cash and check mode of payment. When an
E-payment is made, SAP is updated with all the relevant details like bank
account number and is hence considered to be the most appropriate mode of
payment.
A snapshot of output of the analysis –
CATEGORY E-PAYMENT CHEQUE % E-PAYMENT ANALYSIS
AMT (RS.IN NO. OF NO. OF AMT (RS.IN NO. OF NO. OF NO. OF NO. OF
LAKHS) TRAN PARTIES LAKHS) TRAN PARTIES AMT TRAN PARTIES
STATUTORY DUE 1,376.51 31 4 8.12 10 4 99.41 75.61 50.00
PSU VENDORS 23.00 5 1 77.11 37 8 22.98 11.90 11.11
PRIVATE PARTIES 1,020.15 17 6 457.48 206 115 69.04 7.62 4.96
EMPLOYEES 85.42 363 13 15.25 27 10 84.85 93.08 56.52
TOTAL 2,505.08 416.00 24.00 557.96 280.00 137.00 81.78 59.77 14.91
 SAP related work

Before issuing tenders the department estimates project’s cost using data from
similar transactions from past and hence the PO’s (Purchase Orders) need to be
checked from SAP. An escalation ranging from 0-5% is generally applied if the
PO was placed last fiscal or before that.
o Cost Estimates Checked for-
 Hot Crane
 Restoration of Sanganer
 PRRPL
 CBR Trichy Pipeline

 Tenders
Tenders have two parts- a) Techno-Commercial Bid and b) Price Bid
After the technical evaluation the tender comes to finance department for
evaluation of commercial bid where we make sure the party has followed the
guidelines. For example we check for EMD, Tender Fee, Certificate of Solvency,
last three years turnover using Audited Balance sheets, Current Commitments
etc.
After the parties qualify the techno-commercial bid only then their price bids are
opened and a comparative statement is prepared. Finally, the tender is allotted to
the one with the minimum price bid. Commercial bid and price bid evaluated for-
o ‘Hot Crane’ Tender
o ‘Restoration of Sanganer Plant’ Tender
 Prepared CapEx Report April’2010 and May’2010 (Using MS Excel)

Every month the CapEx report is prepared to trace the performance of finance
department which is measured in terms of actual capital outlay divided by
budgeted. Also, budgeted figures can be compared with actuals and hence
deviations can be used to come up with revised estimates.
 Preparation of Schedules for Auditing (Schedule X and Schedule V)

Analysis of payments to Foreign Parties .(PO Value, LC Value and net payment
including freight and insurance) from SAP.92
 Preparation of Insurance Claim file

A fire broke out on October 29, 2009 at 7:30 PM IST at the Indian Oil Corporation
oil depot's giant tank holding 8,000 kilolitres of oil, in Sitapura Industrial Area on
the outskirts of Jaipur, Rajasthan. The fire killed 11 people and resulted in losses
to the tune of over 280 crores.

9.2 Recommendations
1). Measures should be taken to improve the current ratio which stood at 0.61 as per
latest figures. It should eventually move towards the ideal ratio of 2:1.
2).So is the case with quick ratio which is 0.41 and is lowest in the industry. The
difference between the current ratio and the quick ratio indicates the extent to which
IndianOil has blocked its funds in stock. Measures should be taken to bring down
inventories and improve the liquidity of the firm.
3). Low debtors turnover ratio implies inefficient management of debtors or less liquid
debtors which is the case with IOCL. With a DTR of 48.15 which is almost half that of
competitors like BPCL it is strongly recommended to work out on debtors management.
4). Working Capital of IOCL is negative 117.78 because of current liabilities exceeding current
assets, therefore steps should be taken to turn it into positive. Either it should work on increasing
current assets or decreasing current liabilities or both.
5). Controllable costs should come down in order to improve the actual profitability of the
division.
9.3 Suggestions
1). SAP training could be provided to management trainees.
2). Project activities could be aligned constantly with finance activities.

1.1 Executive Summary

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Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 1

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 2

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 3

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 4

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 5

 Project financing for the new “Paradip-New Sambalpur-Raipur-Ranchi pipeline”

2.3 Objectives of the Project

 To determine the feasibility of the new “Paradip-New Sambalpur-Raipur-Ranchi pipeline”

2.4 Limitations of the Project

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 6

3.1 Financial Analysis

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 7

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 8

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 10

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 12

LPG Furnace Oil

PRODUCT MAJOR END USE

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 13

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 14

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 15

4.2 Indian Petroleum Industry’s Growth Story

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 16

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 17

Indian Oil Corporation (IOC)

Hindustan Petroleum Corporation (HPCL)

Bharat Petroleum Corporation (BPCL)

Reliance Industries Limited (RIL)

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 18

4.3.1 Indian Petroleum Industry Composition : 2007-08 & 2008-09

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 19

4.3.2 Market Share of Major Downstream Petroleum Players

4.4 Challenges for Petrochemical Industries

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 20

 High cost of energy & feedstock and the impact on demand.

 Increase in the cost of project.

4.5 Key Problems / Issues

The industry should have access to the primary amenities of infrastructure

4.6 RATIO ANALYSIS

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 21

4.6.1 Profitability Ratios

PBIT Ratio Gross profit Ratio

Net Profit Ratio

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 22

4.6.2 Liquidity Ratios

Current Ratio Quick Ratio

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 23

Debtors Turnover Fixed Assets Turnover Ratio

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 24

 High Growth Rate  Insufficient Basic Infrastructure

 Competitive Labor Cost  Increasing Cost of Projects

 Safe & Environment Friendly Distribution  Obsolete Technology

 Huge Talent Pool  High Import & Feedstock Cost

 Fastest Growing Segment  High Operating Costs

 Increasing Preference for Pipelines  High Cost of Energy

 Cost-Effective & Competitive Projects  Increasing Competition

 Healthy Competition  Non-Availability of Alternatives

 Overseas Expansion  Difficult Terrain & Harsh Climate

 Unaffected Demand  Huge Investments

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 25

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 26

Vishal Maheshwari, Summer Trainee, IOCL-Pipeline Division, HO, NoidaPage 27