NSE Symbol: | BSE Code: | ISIN: | Sector:
- Add to Portfolio
- Add to Watchlist
- Add to Alert
It gives me great pleasure to present to you the 61st Annual report for the year 2012–13.
The slowdown in Indian economy continued in 2012–13 with GDP growth at 5%, the lowest rate in last decade. All the three sectors viz. agriculture, industry and services recorded a lower growth rate compared to previous year. Inflation and high fiscal deficit in the current economic scenario are major concerns as oil prices impinge on both. Higher crude oil prices feed inflation directly if passed through to final consumer prices and if the pass through of prices to consumers is controlled, the subsidy adds to inflation indirectly through higherfiscal deficit.
International oil prices averaged above USD 100 per barrel during 2012–13. The higher oil prices coupled with only a partial pass through to consumer prices resulted in higher than budgeted subsidy outgo. Monetary tightening to contain inflation, slowdown in investment and a weak global economy has contributed to moderation in growth. The year also witnessed the highest ever production of tight oil (shale) in the US which reduced its dependency on West African crude therefore pressurizing Brent and diverting oil flows to Asia.
The rupee per US dollar fluctuated significantly, depreciating from Rs. 51 per dollar at the end of March 2012 to touch a low of Rs. 57 per dollar in June 2012 and fluctuating between Rs. 53–55 per dollar during October 2012 to March 2013. Depreciating rupee continues to be a growing concern.
Consumption of petroleum products in India increased by about 5% to reach 155 MMT during 2012–13. Diesel, the largest component of demand barrel, was the main driver of the growth, accounting for 60% of the incremental demand, followed by petcoke, petrol and LPG. Kerosene consumption has declined by about 3 MMT over the decade due to regulatory interventions. Furnace Oil consumption has also declined due to shift to natural gas. Petrol demand increased by about 5% despite the slowdown and periodic increase in prices indicating growing purchasing power of our country's population. Demand for ATF declined refecting the declining business activity, while Bitumen demand increased marginally.
The year that has gone by has been significant as HPCL completed 39 years since inception and entered into the 40th year in July' 2013. During the year 2012–13, many historical milestones have been achieved in the downstream of Refining & Marketing and the emerging business of Natural Gas. During the year, HPCL has qualified for 'Excellent' rating in terms of the MoU signed with the Government of India for the year 2011–12, with an MoU score of 1.037 which is the best score amongst all the PSUs under MOP&NG.
HPCL continued the trend of achieving superior performance and during the year 2012–13, the gross sales increased by about 15% to reach Rs. 2,15,675 Crore. Profit after Tax was Rs. 905 Crore during the year, marginally lower than last year, mainly due to higher provision fortax. HPCL has improved the Fortune 500 ranking to 260 from 267 rank in the previous year.
During 2012–13, the refineries at Mumbai and Visakh achieved a combined refining throughput of 15.78 MMT with a capacity utilization of 107%.The Guru Gobind Singh Refinery of HPCL–Mittal Energy Limited (HMEL) at Bhatinda was dedicated to the nation on April 28, 2012 by the Hon'ble Prime Minister of India. With the commissioning of Bhatinda Refinery, the self–sufficiency in refining capacity increased to 80% of Sales.
To cater to the growing demand for lube oil base stock, Lubes refinery achieved an annual production of 361.9 TMT of base oils comprising of 319.6 TMT of Gr I base oils and 42.3 TMT of Gr II base oils.
A significant initiative undertaken by your corporation during 2012–13 is the finalisation of a new 9 MMTPA Refinery–cum–Petrochemical complex in Rajasthan with HPCL as majority stake holder. The MoU with Govt. of Rajasthan (GoR) was signed on March 14, 2013 and the JV agreement with GoR has been signed on July 11, 2013. The proposed refinery will be designed with high complexity factor to process both the locally available Rajasthan crude and other crudes. This project will help inbridging the demand–supply imbalance for HPCL and also aid in diversifying into petrochemicals.
The total sale of products (including exports) of HPCL for 2012–13 was 30.32 MMT, achieving above industry growth of 1.4% and improving market share amongst Public Sector Oil companies to 20.19%. In Retail Sales, HPCL increased market share in combined petrol and diesel segments for the 9th consecutive year with an increase of 0.14% in the current year to reach 25.20%. In Direct Sales, HPCL achieved the milestone of 4 MMT of sales and recorded positive growth of 0.4% compared to negative growth of 2.3% by Industry mainly due to focus on Bitumen and consumer diesel product segments. Strengthening the bulk bitumen storage and logistics in key markets enabled 14% increase in bulk Bitumen sales. HPCL consolidated its position in the furnished lube market by increasing sales by 11%, although the lube demand remained under pressure due to slowing economy. HPCL maintained its No. 2 position in overall LPG Sales with 26.77 % share in the Indian market by focusing on initiatives for enhancing customer satisfaction, strengthening of infrastructure and increasing productivity.
During 2012–13, HPCL's distribution network of terminals and depots focused on enhanced levels of Safety, Security, Service and Efficiency in operations leveraging automation and improved operating processes. HPCL believes in safety in all spheres of its operations, environment protection and compliance with all applicable laws & requirements.
To ensure efficient and cost effective movement of products, HPCL has laid special emphasis on development of cross country product pipeline infrastructure. During 2012–13, HPCL achieved a record combined throughput of 14.06 MMT in pipeline operations. New pipeline projects planned include the 440 km Rewari–Kanpur Pipeline and 92 km Awa–Salawas Pipeline for transporting white oils and the 309 km Mangalore–Hassan–Bangalore–Mysore LPG Pipeline for which PNGRB authorization has been received and the projects are under implementation.
During 2012–13, HPCL commissioned state of the art facilities at various locations across India. These include additional product tankages at Loni Terminal (Pune), new Tank Truck gantries in Depots located at Raipur, Bhatinda, Ajmer and Jaipur and QC laboratory infrastructure at Bhatinda, Irumpanam (Kochi) and Loni Terminal (Pune). The greenfield projects at Bihta (Patna) and Tikrikalan (Delhi) have achieved mechanical completion.
To participate in the emerging business line of Natural gas and cater to the growing demand, HPCL has ventured into two joint ventures with other industry members for development of three cross country natural gas pipelines of Mallavaram–Bhilwara,Mehsana – Bhatinda and Bhatinda – Srinagar for which LOA has been received from PNGRB. In a major step to meet customer needs, HPCL has signed agreement with M/s. S P Ports Pvt. Ltd. for setting up an LNG Regasification Terminal at Chhara, Gujarat as a green–field portas a Joint Venture with 50% equity partnership.
As concerns about rising fossil fuel prices, energy security, and climate change increase, renewable energy can play a key role in producing local, clean, and inexhaustible energy to meet the nation's growing demand. During 2012–13, wind power generation of 774 Lakh KWH was achieved from the first phase of 50.5 MW wind farm project set up in Maharashtra and Rajasthan.
The outlook for economic prospects in the near term looks uncertain. Global crude oil prices and rupee/dollar exchange rate remain cause of concern. Government of India has taken a number of measures for fiscal consolidation. One of the measures undertaken was to increase diesel price by Rs. 5 per litre in September 2012. In January 2013, OMCs were authorized to increase diesel prices in small increments at regular intervals till prices reach international parity. Number of subsidized LPG cylinders has been capped at nine. All these measures should improve the realizations from sales.
In the medium and long term, rising income and growing population will lead to increase in demand for oil. Steps by Government of India to fast track mega investment projects and permitting FDI in a number of areas etc. will increase economic growth and thereby result in demand for higher energy. This will call for increased investment in infrastructure by Oil companies. HPCL has drawn up plans for investments across the downstream value chain to meet the increasing Oil & Gas demand.
Over the years, HPCL and its subsidiaries have shouldered the responsibility to meet the nation's fuel and energy through highly qualified, experienced and dedicated manpower and also forged a number of strategic alliances and Joint Venture companies.
HPCL is focused on employee engagement, capability building, leadership development and promotion of industrial harmony for meeting strategic objectives of the Corporation and enhancing the value to various stakeholders. Project Akshay – the unique leadership development initiative undertaken last year had a positive impact and helped in building a strong leadership pipeline through relevant interventions. The program was continued during 2012–13 also for guiding the employees towards the common visionof being aWorld Class Energy Company.
HPCL continuously endeavors to provide differentiated customer experience, operational excellence and sustainable and profitable operations. To prepare your corporation to face the challenges in the changing global scenario we have initiated steps for developing the long term plan for HPCL. We will continue to aggressively pursue initiatives for achieving growth and profitability and look forward to your continued support in this ongoing process.
Our employees, customers, business associates and shareholders have always been a source of strength and I thank them for their support. The Ministry of Petroleum & Natural Gas has guided and supported us in all our efforts. We look forward to their continued support in all our endeavors.
S. Roy Choudhury