CHAPTER - I 1
CHAPTER - I
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INTRODUCTION
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1.1 INDUSTRY PROFILE
The petroleum industry in India is a classic example of the strides made by the
country in its march towards economic self-reliance. At the time of Independence in
1947, the industry was controlled by international companies. Today, a little over 50
years later, the industry is largely in the public domain with skills and technical know-
how comparable to the highest international standards. The testimony of its success in the
past five decades is the significant increase in crude oil production from 0.25 to 33
million tons per annum (MMTPA). The consumption of petroleum products has grown
30 times in the last 50 years from 3 million tons during 1948-49 to about 91 million tons
in 1998-99. A vast network of over 29,000 dealership and distributors has developed and
backed by over 400 storage points over the years to serve the people even in the remote
and once-inaccessible areas.
In the 50 years since independence India has witnessed a significant growth in
the refining facilities and increase in the number of refineries from one to seventeen now.
During the first decade of Independence (1947-57) three coastal refineries were
established by multinational oil companies operating in India at that time. They were
Burma shell, Esso Stanvac and Caltex; the first two at Mumbai and the third at
Visakhapatnam.
The second decade (1957-67) witnessed the setting up of Indian Refineries Ltd in
1958, a wholly-owned public sector Government company. Under its banner three
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refineries were set up at Guwahati (Assam), Bahraini (Bihar) and Koyali (Gujarat)
essentially to process the indigenous crude discovered in Assam and Gujarat. Also, one
joint sector refinery was set up with the participation of an American company at Cochin
based on imported crude.
The next ten year period (1967-77) witnessed the establishment of two refineries,
one with equity participation from American and Iranian companies at Chennai and
another in the public sector at Halide by Indian Oil.
Two more refineries in the public sector have been commenced in the period
1977-87. The refinery at Bongaigon was the first experiment in having an integrated
petroleum refinery-cum-petrochemicals unit. The other refinery was set up at Matura in
1982. Major expansions of the coastal refineries at Mumbai, Cochin, Chennai and
Visakhapatnam were also completed during this period.
During the fifth decade (1987-97), a small refinery of 0.5 MMTPA
Nagappatinam was built in TamilNadu. In 1996, at three MMTPA refineries built in the
joint sector at Mangalore HPCL and India Rayon. This decade also saw significant
expansions of the capacities of the existing refineries, thereby the refining capacity to
about 62 MMTPA.
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1.3 COMPANY PROFILE
1.3.1 HISTORY
Chennai Petroleum Corporation Limited (CPCL), formerly known as Madras
Refineries Limited (MRL) was formed as a joint venture in 1965 between the
Government of India (GOI), AMOCO and National Iranian Oil Company (NIOC) having
a share holding in the ratio 74%: 13%: 13% respectively. Originally ,CPCL Refinery was
set up with an installed capacity of 2.5 Million Tonnes Per Annum (MMTPA) in a record
time of 27 months at a cost of Rs. 43 crore without any time or cost over run.
In 1985, AMOCO disinvested in favour of GOI and the shareholding percentage
of GOI and NIOC stood revised at 84.62% and 15.38% respectively. Later GOI
disinvested 16.92% of the paid up capital in favor of Unit Trust of India, Mutual Funds,
Insurance Companies and Banks on 19 th May 1992, thereby reducing its holding to 67.7
%. The public issue of CPCL shares at a premium of Rs. 70 (Rs. 90 to FIIs) in 1994 was
over subscribed to an extent of 38 times and added a large shareholder base.
As a part of the restructuring steps taken up by the Government of India,
IndianOil acquired equity from GOI in 2000-01. In July 2003, NIOC transferred their
entire shareholding to Naftiran Intertrade Company Limited, an affiliate, in line with the
Formation Agreement, as part of their organizational restructuring. Currently IOC holds
51.89% while NICO holds 15.40%.
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CPCL has two refineries with a combined refining capacity of 10.5 Million
Tonnes Per Annum (MMTPA). The Manali Refinery has a capacity of 9.5 MMTPA and
is one of the most complex refineries in India with Fuel, Lube, Wax and Petrochemical
feedstocks production facilities. CPCL's second refinery is located at Cauvery Basin at
Nagapattinam. This unit was set up in Nagapattinam with a capacity of 0.5 MMTPA in
1993 and later enhanced to 1.0 MMTPA.
The main products of the company are LPG, Motor Spirit, Superior Kerosene,
Aviation Turbine Fuel, High Speed Diesel, Naphtha, Bitumen, Lube Base Stocks,
Paraffin Wax, Fuel Oil, Hexane and Petrochemical feed stocks. The Wax Plant at CPCL
has an installed capacity of 30,000 tonnes per annum, which is designed to produce
paraffin wax for manufacture of candle wax, waterproof formulations and match wax. A
Propylene Plant with a capacity of 17,000 tonnes per annum was commissioned in 1988
to supply petrochemical feedstock to neighbouring downstream industries. The unit was
revamped to enhance the propylene production capacity to 30,000 tonnes per annum in
2004. CPCL also supplies LABFS to a downstream unit for manufacture of Liner Alkyl
Benzene.
The crude throughput for the year 2008-09 was 10.12 million metric tonnes
(MMT). The company’s turnover for the year 2008-09 was Rs 36489.67 crores and the
Profit after Tax was (Rs.397.28 crores).
The Company has not declared any dividend for the year 2008-09 in view of the
net loss incurred during the financial year.
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1.3.2 PRODUCTS AND SERVICES
The main products & services of the company are:
LPG
Motor Spirit
Superior Kerosene
Aviation Turbine Fuel
High Speed Diesel
Naphtha
Bitumen
Lube Base Stocks
Paraffin Wax
Fuel Oil
Hexane
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1.3.3 COMPETITORS
The key competitors for CPCL are as follows:
Mumbai Refinery (MAHARASHTRA) - Bharat Petroleum Corporation Ltd. (BPCL)
The Refinery at Mumbai came into stream in January, 1955 under the ownership
of Burmah-Shell Refineries Ltd. Following the Government's acquisition of the Burmah-
Shell, name of the Refinery was changed to Bharat Refineries Limited on 11.2.1976. In
August, 1977, the Company was given its permanent name, viz. Bharat Petroleum
Corporation Ltd. The installed capacity of 5.25 MMTPA was increased to 6 MMTPA in
1985. With the successful commissioning of “Refinery Modernization Project” (RMP) in
2005, the current refining capacity stands at 12.00 MMTPA. The Refinery uses latest
microprocessor based Digital Distributed Control System (DDCS) and has been
accredited with ISO 9002 (Quality Management System), the refinery has also been
accredited with the unique distinction of a quality certification from NABL for “Quality
Assurance Laboratory. BPCL Mumbai refinery is the first Indian work site to achieve a
Level 8 rating on the International Safety Rating System (ISRS), ISRS is a tool owned by
Det Norske Veritas, UK for comparison benchmarking and development of safety
management systems worldwide. ISO 14001 (Environmental Management System)
certifications has also been conferred to the refinery for effective deployment of
environmental care measures.
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Mumbai Refinery (Maharashtra) – Hindustan Petroleum Corporation Limited
(HPCL)
Mumbai Refinery was commissioned in 1954 under the ownership of ESSO and
was acquired by Govt. of India in March, 1974. Hindustan Petroleum Corporation
Limited (HPCL) was formed on 15th July 1974 after the merger of these companies. The
capacity of Mumbai Refinery was 3.5 MMTPA which was increased to 5.5 MMTPA
during 1985 after implementation of expansion programme.
Mumbai Refinery is also having Lube complex, which was commissioned in
1969 as a joint venture between Esso and Government of India with a capacity of 165
TMT per annum of LOBS. In the year 1974, Lube India Ltd was fully taken over by
Government of India and it was merged with HPCL. In the year 1983 Lube refinery units
were debottlenecked and capacity increased to 225 TMT per annum. In the year 1995,
Lube Refinery was further expanded by adding a new units and capacity increased to 335
TMT per annum of LOBS which is the largest in India even today.
In order to meet the Euro II/III specification of diesel, new project ‘Diesel Hydro
Desulphurization’ (DHDS) project was commissioned in the year 2000. To upgrade MS
quality from Euro-II to Euro-III & Euro-IV, Green Fuels & Emission Control Project
(GFEC) has been commissioned in the year 2009.
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Reliance Petroleum Limited (RPL) (Private Sector), JAMNAGAR (GUJARAT)
Reliance Industries Limited (RIL) has two refineries. The present capacity of the
first refinery is 33 MMTPA / day. Post amalgamation of Reliance Petroleum Limited
with RIL, RPL refinery (a unit in Jamnagar SEZ) has become the second refinery of RIL.
The Scheme of amalgamation is effective from 11 th September, 2009 with an appointed
date being 1st April, 2008. The capacity of the second refinery (SEZ) is 29 MMTPA /
Day.
Essar Oil Limited (EOL) (Private Sector), VADINAR (GUJARAT)
The private sector refinery was commissioned in November 2006 with an
installed capacity of 10.50 MMTPA at Vadinar, Gujarat.
1.3.6 BANKERS
Chennai Petroleum Corporation Limited Bankers are
STATE BANK OF INDIA HDFC ICICI
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CHAPTER - II
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METHODOLOGY
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2.1 Objective of the study:
To study the organization and to know about the policies, functions of finance
department at Chennai Petroleum Corporation Limited.
2.2 Time Period of the Study:
Time period of the study taken was about thirty working days.
2.3 Sources of Data:
Information are gathered through discussion with higher officials and also by self
observation.
2.4 Significance of Study:
Importance of the study is to learn the organization and its environment and how
one could able to complete the allotted work in perfect time schedules. To experience the
working environment and to gain benefits from that for the future career.
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CHAPTER - III
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FUNTIONS OF THE DEPARTMENT
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Description of the Functions of the Department:
PRODUCTION AND SALES SECTION
The production and sales section consists of the following sub-sections.
Sales section.
Crude purchase and insurance section.
Pool accounts, pricing and costing section.
The production and sales section, as a whole, is headed by a senior manager.
The sales section is looked after by a manager, who is assisted by a senior officer,
three accountants and a trainee.
The crude purchase and insurance section is looked after by a deputy manager, who
is assisted by an accountant.
The cost cell and product pricing section is looked after by a manager, who is
assisted by an accountant and an industrial trainee.
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PERSONNEL ENTITLEMENT SECTION:
This section is responsible for disbursement of payments like pay and
allowances, Medical (domiciliary & hospitalisation), medical fund, provident fund,
gratuity, superannuation, advance for housing, two/four wheeler purchase, etc.
This section includes
Pay roll & PF
Medical and housing
The pay roll and PF section is headed by a senior manager, who is assisted by five
Accountants and one industrial trainee.
The medical and housing section is headed by a deputy manager, who is assisted by
three accountants and one industrial trainee.
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MATERIALS AND WORKS SECTION
The materials and works section is primarily intended to look the work connected
with receipt, verification and passing of bills in respect of purchases, contracts and
miscellaneous services for the operating refinery.
This section includes functions such as
inland purchase bills
Work bills
Finance concurrence for work orders
Miscellaneous bills
Finance function in material management dept.,
Stores accounting
Foreign purchase bills
The materials and works section is headed by senior manager, who is assisted by
two managers, deputy manager, one senior officer, one officer, five accountants and four
industrial trainees.
CASH AND BANK SECTION
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The cash and bank section takes care of receipt of cash/ cheques, preparation and
dispatch of cheques, disbursement of salary, medical and other cash payments,
investment of surplus funds, borrowable of funds for working capital requirements and
for capital projects, preparation of cash flow forecasts etc.,
This section is headed by a senior manager, who is assisted by one officer and
two assistants and one industrial trainee.
PROJECT FINANCE SECTION
The project finance section looks after all capital jobs covered under plan and
Non-plan schemes.
For effective discharge of its responsibility, the section is divided into two
subsections namely,
Plan Projects section
Non-Plan Projects section.
The main function of each sub-section, namely, plan projects section and non
plan projects section are as follow
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Vetting of capital budget proposals as to its financial viability before placing
it to the board for approval.
According finance concurrence to capital budget proposals.
Processing of purchase bills.
Processing of works bills.
Monitoring of project expenditure of various projects both under plan and
non plan projects and monthly expenditure reporting.
Maintenance of projects stores ledger.
Capitalisation of completed projects.
The section, at present, is headed by a senior manager, who is assisted by a
manager, a deputy manager, three accountants and two industrial Trainees.
CORPORATE ACCONUTS, MIS AND TAXATION SECTION
The following functions are handled
The preparation of final accounts
Maintenance of fixed asset Register
Co-ordination with statutory /government auditors for audit of final accounts
Direct and indirect Taxation
Generation of MIS reports and
Filing returns
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The section comprises two sub-sections
Corporate accounts
Direct taxation & MIS
The corporate accounts, direct taxation and MIS section is under the direct of the
senior Manager, who is assisted by a senior officer, two accountants and one industrial
trainee.
CENTRAL EXCISE & CEVAT
The central excise section is headed by a manager who is assisted by an officer
and two accountants and one industrial trainee.
CPCL CAUVERY BASIN REFINERY
CBR-finance section is located at Cauvery basin refinery, Nagappatinam and
takes care of all finance activities at CBR. The areas of finance are almost the same as in
CPCL, Manali.
Senior manager is in-charge of finance activities of CBR. He is assisted by one
officer, two accountants, three assistant accountants and two commercial apprentices.
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The following finance work is handled at CBR.
Personnel entitlement
Production & sales
Materials & works
Project finance
Cash and bank activates
Head office account reconciliation
Accounting of transfers from Manali to CBR & vice versa
Preparation of final accounts of CBR.
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CHAPTER - IV
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CONCLUSION
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CONCLUSION:
It was a great experience working in finance department at Chennai petroleum
Corporation. During the internship process not only I gained knowledge about the
functions of the department but also working in the bill processing section gave me some
understanding of how to be with co-workers, within department and within the
organization. This period of study gave some confident for my future career
development.
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