SUMMER TRAINING REPORT

ON

A Study on the OIL EXCHANGE ANALYSIS.

AT

HINDUSTAN PETROLEUM CORPORATION LTD. 8, Shoorji Vallabhdas Marg, Ballard Estate, MUMBAI, MAHARASHTRA.

PREPARED BY SONAM BALIRAM KANGULE BATCH 2011-2013.

AKNOWLEDGEMENT

I owe my sincere gratitude to Hindustan Petroleum Corporation Limited, for providing me the opportunity to undergo summer training on the project titled A brief study on OIL EXCHANGE ANALYSIS. It was a great learning experience in the corporation environment. I am thankful to Mr. P.R.Lokrey Chief Finance Manager PVA and Oil Exchange for his support, co-operation provided to me during the training. I am highly indebted to my project guide, Mr. K.Y.PATIL (Oil Exchange Manager), who gave an insight in to the various aspect data release and their guidance throughout the project. The successful completion of this training wouldnt have been possible without the cooperation and coordination of many people who not only help me whenever I got hindered in between but also guide me. Such kind of cooperation extended by all has led to fruitful completion of training period.

SONAM B. KANGULE

ABSTRACT
TITLE OF THE PROJECT: A brief study on OIL EXCHANGE ANALYSIS

NAME OF THE COMPANY: Hindustan Petroleum Corporation Limited, Mumbai

NAME OF THE INSTITUTE: Indira Institute Of Business Management, Vashi

NAME OF THE GUIDE:

Mr. K.Y.PATIL Manager, Finance (Oil Exchange Dept.)

PROJECT PERIOD:

3/5/2012 to 2/7/2012

DATA SOURCE:

Secondary data

MAJOR OBJECTIVES OF THE STUDY: Analyzed the purchase & sales data for the past three years. Studied the Analyzing & Validation procedure in detail.

EXECUTIVE SUMMERY

The Oil Exchange is a process of purchase and selling of petroleum products between oil companies where an Oil Marketing company (OMC) supplies petroleum products in regions where it does not have its own presence. Oil exchange transactions have huge financial implications and a correct understanding of process and practices is critical to ensure cash flow management and correct accounting. Complexity of Oil Exchange transaction has increased the manifold with deregulation and entry of private players. Besides the introduction of ERP and B2B processes have led to significant changes in practices and time schedule, thereby placing greater onus on all the functionaries to correctly understand and operate various modules. Oil exchanges are a regular feature of the operations of oil marketing companies. The cost of this manual process of settlement / reconciliation of a large volume of petroleum products runs into Crores of Rupees and requires a settlement time of several months. At the end of every month, a settlement is carried out based on paper based joint certificates with each participating company which involves reconciliation of total products sold / purchased from each other and consequently financial settlement for arriving at the amount payable/receivable.

INDEX
SR NO. 1 2 3 CONTENT Introduction of Petroleum Industry Major Oil & Gas Companies in India HPCL 3.1 Introduction 3.2 HPCL Roots 3.3 Vision, Mission statement 3.4 Joint Venture & % holding 3.5 HPCL Products 3.6 HPCL Business 3.7 HPCL Refinery 3.8 Other Infrastructure Of HPCL 3.9 Corporate Social Responsibility Oil Exchange 4.1 Introduction 4.2 Document Flow in oil Exchange 4.3 Oil Exchange Procedure 4.4 Price Elements Considered In Oil Exchange Transaction 4.5 Oil Exchange Transactions i. 2009-2010 ii. 2010-2011 iii. 2011-2012 4.6 Purchase & Sales Statements 4.7 Validation i. Introduction & Objective ii. Steps iii.Validation- year 2011-2012 Learning & Outcome Bibliography

5 6

Introduction of Petroleum Industry in India

The petroleum industry includes the global processes of exploration, extraction, refining, transporting (often by oil tankers and pipeline), and marketing petroleum products. The oil Industry is a very important industry, it has been observed that whenever the oil prices increase the price of all products also increases. The fluctuation in the oil pricing is directly and indirectly affected on the all other products. Indian Petroleum Industry started its journey during the fiscal year 1890 in the northeastern provinces of India especially in the place called Digboi. The production of petroleum along with the exploration of new sites was primarily restricted to northeastern India up to the 1970s. After the inception of the Liberalization-Privation-Globalization (L-P-G) policy in the month of July, 1991, the Government had started allowing the Indian Petroleum Industry to go into private as well as government-private joint venture. The consumption of petroleum products during 2010-11 was 141.785 million metric tonnes (including sales through private imports) which is 3.60% higher than that of 138.196 million metric tonnes during 2009-10. The refining capacity in the India increased to 187.386 million metric tonnes per annum (MMTPA) as on 1.4.2011 from 183.386 MMTPA as on 1.4.2010. Crude oil production during 2010-11at 37.71 million metric tonnes is 11.91% higher than 33.69 million metric tonnes produced during 2009-10. Gross Production of Natural Gas in the country at 52.22 billion cubic metres during 2010-11 is 9.95% higher than the production of 47.50 billion cubic metres during 2009-10.

Brief introduction of consumption of petroleum products in India. Consumption of Petroleum Products

2010-2011 2009-2010 LPG Motor Spirit (Petrol) Naphtha Aviation Turbine Fuel Superior Kerosene High Speed Diesel Light Diesel Oil Lubes Furnace Oil / LSHS Bitumen Others Total 14.4 14.4 11.5 5.1 8.9 60.4 0.4 2.6 11.4 4.7 10.7 144.4 13.1 12.8 10.1 4.6 9.3 56.2 0.5 2.5 11.6 4.9 11.9 137.8

(Million Tonnes)
% Y-o-Y growth 9.6% 12.1% 13.9% 9.1% -3.8% 7.3% -6.0% 0.8% -1.7% -6.0% -11.1% 4.8%

Industry Structure
The Petroleum industry divides into five sectors. Upstream (exploration, development and production of crude oil or natural gas) Downstream (oil tankers, refiners, retailers and consumers) Pipeline Marine Service and supply

Major Oil and Gas companies in India

1.

RIL (Reliance Industries Limited):- The Flagship Company of the Ambanis and Indias

largest Private Company Reliance Industries is also Oil and Gas Giant .The Company has seen very sharp growth in the last decade and is diversifying into Retail .With a market cap exceeding $30 billion it is Indias most valued company.
2.

ONGC (oil and Natural gas Corporation):- ONGC ranks 3rd in Oil & Gas Exploration

& Production (E&P) Industry globally with a market cap of Rs. 235,000 Crores. It cumulatively produced 803 Million Metric Tonnes of crude and 485 Billion Cubic Meters of Natural Gas from 111 fields.
3.

GAIL India:- GAIL (India) Limited, is Indias flagship Natural Gas company, integrating

all aspects of the Natural Gas value chain right from exploration to marketing. It is a wellmanaged fast growing company in one of the best sectors in India with high competitive barriers.
4. BPCL (Bharat Petroleum Corporation Limited):- BPCL is major distributor of petroleum,

cooking gas and diesel in the Indian market The Company has a market capitalization of Rs. 21,000 crores. Bharat Petroleum produces a diverse range of products, from petrochemicals and solvents to aircraft fuel and specialty lubricants and markets them to hundreds of industries and several international and domestic airlines.
5.

IOCL (Indian Oil Corporation Limited):- The Company covers the entire hydrocarbon

value chain from refining, pipeline transportation and marketing of petroleum products to exploration & production of crude oil & gas, marketing of natural Gas and petrochemicals. With a market capitalization of Rs. 75,000 crores, it is in the Fortune Global 500 listing, ranked at the 125th position in the year 2010.
6.

HPCL (Hindustan Petroleum Corporation limited):- One of the major Oil and Gas

PSUs with a market capitalization of Rs. 11,000 crores. The company owns and operates the largest Lube Refinery in the country producing Lube Base Oils of international standards, with a capacity of 335 TMT

HPCL
(HINDUSTAN PETROLEUM CORPORATION LIMITED)
Hindustan Petroleum Corporation Limited (HPCL) is an Indian stateowned oil company headquartered at Mumbai, India. HPCL is ranked #336 globally in Fortune Global 500 list in 2011. It is Mega Public Sector Undertaking Company. HPCLs vast marketing network consists of its zonal & regional offices facilitated by a supply & distribution infrastructure comprising terminals, pipeline networks, aviation service stations, LPG bottling plants, inland relay depots & retail outlets, lube and LPG distributorships. HPCL accounts for about 20% of the market share and about 10% of the nations refining capacity. HPCL (Navratna) Navratnas, mean nine precious jewels. A pride of place accorded by the Government of india to nine public sector companies in recognition for their excellence services, HPCL is a navratna, because of its infrastructure and large network. Added to which are the mergers and takeovers as well as the large amount of capital,which has seen the company evolve into Indias second largest oil company. Above all this lays the fact that HPCL believes itself to be more than just about oil. In its commitment to people and the natural environment. Company emerge through following takeovers, (HPCL Roots)

1976
1974
1962
1952

1979

1952: The Company was incorporated in the name of Standard Vacuum Refining Company of India Limited on July 5, 1952. 1962: On 31st March, 1962 the name was changed to ESSO Standard Refining Company of India Limited. 1974: Hindustan Petroleum Corporation Limited comes into being after the takeover and merger of while Esso and Lube India Undertaking 1976: Caltex Oil Refining Ltd. is taken over by the Government of India and subsequently merged with HPCL in 1978. 1979: Kosan Gas Company, the concessionaries of HPCL in the domestic LPG market, are taken over and merged with HPCL. HPCL thus comes into being after merging four different organizations at different points of time.

COMPANYs VISION To be a world class Energy Company known for caring and delighting the customers with high quality products and innovative services across domestic and international markets with aggressive growth and delivering superior financial performance. The company will be a model of excellence in meeting social commitment, environment, health and safety norms and in employee welfare and relations. COMPANYs MISSION HPCL, along with its joint ventures, will be a fully integrated company in the Hydrocarbons sector of exploration and production, refining and marketing; focusing on enhancement of productivity, quality and profitability; caring for customers and employees; caring for environment protection and cultural heritage. Joint Venture % Holding
Company HPCL-Mittal Energy Limited Hindustan Colas Limited (HINCOL) South Asia LPG Company Pvt. Limited (SALPG) Prize Petroleum Company Limited Mangalore Refinery and Petrochemicals Limited (MRPL) Bhagyanagar Gas Limited Petronet MHB Limited Avantika Gas Limited % Holding 49 50 50 50 16.95 25 28.77 25

Subsidiary:1. HPCL Biofuels Limited 100% holding 2. Creda HPCL Biofuel Limited 74% holding

Joint Ventures
1. HPCL-Mittal Energy Limited: - HPCL-Mittal Energy Limited between Hindustan between

Hindustan petroleum Corporation limited and Mittal Energy investments Petroleum limited (MEI), Singapore, an L N Mittal group of companies, for implementation of a grassroot refinery project of 9MMTPA capacity at Bhatinda in the state of Punjab. Both partners hold 49% equity stake in HMEL and balance 2% is held by financial institutions i.e. IFCI Limited and state bank of India.
2. Hindustan Colas Limited (HINCOL):- Hindustan Colas Limited (HINCOL) is a joint

venture company promoted by HPCL and Colas S.A. of France and was incorporated on July 17, 1995. HINCOL presently has seven manufacturing plants across India and the eight Plants are in final stages of construction in the state of West Bengal. HINCOL products find extensive use in the construction industry. HINCOL recorded a production of 159.39TMT with turnover of Rs. 357.97 crores and earned net profit (PAT) of Rs.28.38 crores.
3. South Asia LPG Co Pvt Ltd.:- South Asia LPG Co Pvt Ltd.(SALPG), is a Joint Venture

Company with M/s. Total Gas and Power India (a wholly owned subsidiary of Total, France) has commissioned an underground cavern Storage of 60 TMT capacity and associated receiving & dispatch facilities at Vishakhapatnam in Dec, 2007. SALPG maintained 50% dividend for second consecutive year (2010-11).
4. Prize Petroleum Company Limited (PPCL):- HPCL, in partnership with ICICI and HDFC,

has formed this Joint Venture E & P Company for Participating in exploration and production of hydrocarbons on October 28, 1998. Over the years, Prize Petroleum Company Limited (PPCL) has built up a portfolio of 2 producing fields and one exploration block.

5. Mangalore Refinery and Petrochemicals Limited (MRPL):- HPCL holds equity of

16.95% in the 9 MMTPA Mangalore Refinery and Petrochemicals Limited (MRPL). HPCL & MRPL have been exchanging intermediate process streams between their refineries to supplement efforts to meet new environmental norms in respect of products like MS and HSD on mutually agreed terms. MRPL maintained dividend of 12% for 2010-11.

6. Bhagyanagar Gas Limited: - Bhagyanagar Gas Limited (BGL) was incorporated on August

22, 2003 as a Joint Venture Company by GAIL (India) limited& HPCL for distribution and marketing of environmental friendly fuels (green fuels). BGL now operates 15 CNG stations- 5 at Hyderabad, 8 at Vijayawada and 1 each at Kakinada and Rajahmundry.
7. Petronet MHB Limited:- HPCL, along with Petronet India Limited (PIL) promoted Petronet

MHB Limited (PMHBL) for construction of Mangalore-Hassan-Bangalore Pipeline at a cost of Rs.667 crores with debt equity ratio of 3:1. The Joint venture Company was incorporated on July 31, 1998. HPCL & ONGC holds the 28.77% equity stake and PILs equity holding is 7.90%.
8. Avantika Gas Limited: - Avantika Gas Limited (AGL) was incorporated on June 07, 2006

as a Joint Venture Company by GAIL and HPCL distribution and marketing of environmental friendly fuels (green fuels). AGL now operates 9 CNG stations 7 daughter stations (5 in Indore and 2 in Ujjain) and 1 mother station at Indore and 1 on line station at Indore.

HPCL PRODUCTS:Products Liquefied Petroleum Gas Motor Spirit/ Gasoline / Petrol Propylene Hexane Solvent Naphtha Motor Turpentine Oil Superior Kerosene Oil Aviation Turbo Fuel High Speed Diesel Light Diesel Oil Jute Batching Oil Railex Rubber Processing Oil Industrial Fuel Oil Low Sulphur Heavy Oil Bitumen Neutral Oils Industrial Oils End uses Domestic / industrial fuel Automobiles Fuel Petrochemicals feed stock Edible Oil extraction For paint industry Petrochemicals / fertilizers Solvent for paints Cooking Fuel / Illumination Aviation fuel Transport vehicles / Locomotive Engines Agricultural pumps Solvent in jute industry Railway Axils Oil Solvent in rubber/ Tyres industry Industrial furnaces / Bunker fuel Industrial furnaces Road Paving / Insulator / Paints Crank Case Lubrication of IC engines Lubrication of Hydraulic pumps

HPCL BUSINESS: HPCL Operates in four major sectors: Retail Direct Sales LPG Aviation

Retail

Aviation

HPCL Business Operations

Direct Sale

LPG

HPCL Refineries: Mumbai Refinery

Mumbai Refinery is a Lube based refinery with the highest lube production capacity in India. It is one of the most complex refineries in the country, is constructed on an area of 321 acres. During 2010-11, Mumbai refinery achieved crude throughput of 6.55 MMT as against installed capacity of 6.50 MMT. The fuel and loss of 7.6 wt% for the year was lower than Annual plan of 8.8% for the year. The Adjusted Distillate yield at 72.4% was higher than MoU Excellence target of 70%. Mumbai Refinery achieved Specific Energy Consumption (MBTU/BBL/NRGF) 0f 91.1 against MoU Excellence target of 97.0% for the year 2010-11. Visakh Refinery

During the year 2010-11, Mumbai refinery achieved crude throughput of 8.20 MMT as against installed capacity of 8.3 MMT. The fuel and loss of 7.3 wt% for the year was lower than Annual plan of 7.7% for the year. The Adjusted Distillate yield at 71.5% was higher than MoU Excellence target of 70%. Mumbai Refinery achieved Specific Energy Consumption (MBTU/BBL/NRGF) 0f 86.3 against MoU Excellence target of 90.0% for the year 2010-11.

Other Infrastructure of HPCL:-

Regional offices Terminals / Installations / TOPs Depots ASFs Retail outlets SKO/ LDO Dealers LPG Bottling Plants LPG Distributors

85 37 92 13 7313 1648 43 2202

CORPORATE SOCIAL RESPONSIBILITY

HPCLs CSR model based on Creating Shared Value. The Shared Value model is based on the concept that corporate success and social welfare are independent. HPCLs approach has been based on triple bottom line approach (people, planet and profit).

Major Projects:Swavalamban: - This project is for vocational training to unemployed youth including school drop-outs by imparting various skills like Refrigeration, AC, Fabrication, Plumbing, Basic IT, Computer, and Beauty Culture & skin care. Unnati: - The objective of this project is to Promoting Computer Education and literacy to the underprivileged children in semi urban and rural areas. Nanhi kali: - This program focuses on education of girl children in remote tribal villages. Muskan:- The objective of this program is to taken care of street/run away children by placing them in shelter homes for bringing back their lost childhood. Providing them foods, clothing, shelter, healthcare, counseling, non-formal education, and vocational training and giving them an opportunity to live dignified lives as future citizens. Navjot: - Supports Child Health and Welfare at Resettlement colony at Bawana in Delhi. The residents are provided health care facilities, Referral services through regular health check-up camps, Rehabilitation for slum families and training program. Suraksha: - This program is for preventing and spreading awareness of HIV/AIDS. This program executed through HPCL Retail outlets. HPCL Opened up khushi clinic, there is STI diagnosis and treatment along with bringing awareness on safe sex practices. Sushrut hospital: - Sushrut hospital is a Multispecialty Hospital and charitable institution at chembur, supported by HPCL. The objective is to make health care affordable to the public at large. Chale chalo: - It is a community based program in villages and slums. The objective of this program is to make permanent irreversible change in the lives of underprivileged Indian children and address the root cause that I pact childrens lives- gender, caste, displacement, livelihood etc.

OIL EXCHANGE

Tank Truck

Pipeline

OMC 1

OMC 2 Rail Wagons

HPCL

Introduction
Oil exchange is a business activity, were purchase & sale of oil or petroleum products made between the Oil Marketing Companies (OMC). Oil Exchange is a mutual agreement between the Oil Marketing Companies (OMC). The need for oil exchange arose mainly because of following reasons To bridge the gap between supply and demand To save on logistic cost To share infrastructure facilities

To bridge the gap between supply and demand

Need for Oil exchange arose because of....... To share infrastructure facilities

To save on logistics cost

Document Flow in Oil Exchange

Sale
Cr.

P & L. A/c.
JC

PDR

Dr.

Daily A/c.

Monthly
A/c.

Debit Note

Settlement A/c.
Credit Note

Cr. PRR

Daily A/c.

JC

Monthly A/c.

P & L. A/c.
Dr.

Purchase

The above diagram shows the document flow in Oil exchange transactions. There are two transactions made, that are purchase and sale of Oil or petroleum products. When company makes an oil exchange sale, product delivered report (PDR) is prepared and in the cases of purchase, product received report (PRR) is prepared in the JDE. In the PDR, the credit transactions transferred to P & L A/c and debit transactions are transferred to Daily A/c. In the PRR, the debit transactions transferred to P & L A/c and credit transactions are transferred to Daily A/c. After making Daily A/c and P & L A/c transactions, Monthly A/c is made on the basis Joint Certificate (JC) in purchase and sale transaction. After Monthly A/c, settlement is made on the basis of Debit Note (for sale transaction) and Credit Note (for purchase transaction).

Oil exchange process Agreements / MOUs with oil exchange companies: Agreements/MOUs signed with oil marketing companies / standalone refineries forms the basis of all activities involved in oil exchange transactions between companies such as IOC/BPC/RIL/ONGC/EOL defining the scope of sale and purchase of products, hospitality/safekeeping assistance and LPG bottling assistance. These agreement/MOUs are finalized at HQO level. Monthly distribution plan (MDP)/Industry Logistic plan (ILP) finalization: 1. As envisaged in the Agreements, a monthly MDP/ILP is prepared by oil companies at HQO level as per the demand and supply position and copies of the MDP/ILP figures are forwarded to zones and locations operations department about a week prior to the starting of the month. 2. MDP/ILP gives product wise, mode wise and source wise quantities to be supplied to the locations. It is the base document for daily planning. Placing of indents for product exchange: Basis the MDP/ILP allocations, oil companies place the indents at various locations for the product requirements. Indents should clearly specify inter-alia product name, end use (e.g. unbranded MS, MS intended for branding, domestic LPG, and ND LPG), quantity, mode of delivery (e.g. Tank truck, Tank wagon) and destination. Preparation of PDRs / PRRs: Basis the indent, oil companies makes the product deliveries through indented modes of delivery. Thus, HPC when makes an oil exchange sale, product delivered report (PDR) is prepared and in the cases of purchase, product received report (PRR) is prepared in the JDE.

 Preparation and finalization of joint certificates (JC): 1. Joint certificate is a document which gives summary of sales (PDRs) / purchase (PRRs) for a specific period. JC is normally prepared on fortnightly basis unless there are price revisions or duty changes falling within a fortnight. 2. JCs are jointly signed by the location representatives of the selling and buying company indicating acceptance of both parties to the transactions and are sent to zonal oil exchange office for the purpose of financial settlement. Compilation of debit/credit notes: Settlement zone on receipt of joint certificates/receipts and issues statements from the locations complies the same and arrive at the settlement amount to be realized from the companies. Some procedure is followed by other oil companies also. This forms the basis for settlement between OMCs. Settlement: A system of exchange of deposits exist between oil marketing companies whereby HQO of OMC exchange deposits for the net realizable amount basis actual transactions booked in ERP on the prescribed due dates. Once the final debit/credit notes are sent by zonal offices, HQO of oil companies proceed with the final settlement for the month. Payment to stand alone refineries: In the case of purchases from standalone refineries, settlement takes place on a daily/weekly/fortnightly basis in line with individual agreement/MOUs based on certified invoices / joint certificates received from locations. It should be ensured that purchases from standalone refineries are updated in JDE before releasing of payments.

Price elements considered in the Oil Exchange Transactions:Oil exchanges are on actual cost basis. Basic price - nearest port IPP/TPP. That is calculated as per the terms and Conditions. IPP freight Pipe line, Railway & Road - Pipe line - MS/HSD - 75% of freight for Railway distance ; - SKO 90% of freight for Pipe line distance - Railway & Road on actual basis. Terminalling charges - basically charges for storage & distribution facilities. Rates varies with mode of delivery & product
Terminalling Charges Product MS MS HSD HSD SKO SKO LPG Mode TT/TW Local P/L TT/TW Local P/L TT/TW Local P/L Rate/Kl @ Natural 68.31 10.63 79.66 12.40 75.02 11.67

varies depending on supply point

Nil TC on Coastal Shipment

Inventory Carrying Cost Charged for supplies ex TOPs towards working capital o Eight days quantities. o Applying SBI PLR rate applicable on 1st of the month o Computed on IPP+ED

 Excise duty - as per rates applicable to product. MS/HSD specific rates

MS Unbranded 14780.50/Kl

MS Branded 15965.00/KL

HSD Unbranded 2060.00/KL

HSD Branded 5922.50/Kl

SKO (PDS) & LPG (DOM.)- NIL CST/VAT/LST CST/VAT/LST settlement is to be made at applicable rates CST should be absorbed by the Seller for MS, HSD, SKO (PDS) and LPG (Dom.). For other products, CST settlement is based on specific understanding on this matter. Coastal Settlements Coastal Settlements are made on destination port coastal price declared by Pricing Dept., which is arrived at by deducting following elements from destination port RTP Wharfage, Insurance & Ocean loss included in destination RTP Notional Coastal Freight (NCF) to destination port. Service tax applicable on LPG filling charges Hospitality and safekeeping charges Pipeline charges Terminalling charges

CALCULATION OF PRICING FOR 1st FORTNIGHT OF MAY 2012 PRODUCT LOCATION CONNECTED PORT LOCATION CODE port RTP IPP Freight TAIPP Add: Exercise duty Sub Total ICC TC/PL TC Octroi TOTAL MS HSD SKO LPG ATF Udaipur Karur shimoga Palghat Panipat Kandala Kochi Mangalore kochi Kandala 21583 11956 11858 12649 13560 42538.03 44959.39 43927.66 56459.58 43210.48 1312.03 479.12 908.3 0 0 43850.06 15713.65 59563.71 0 0 69.48 0 59633.19 45438.51 2060 47498.51 155.69 12.55 0 0 47666.75 44835.96 0 44835.96 0 0 76.05 0 44912.01 56459.58 1258.11 57717.69 0 0 0 0 57717.69 43210.48 3560.54 46771.02 0 0 0 0 46771.02

The above table shows the calculation of pricing for the 1st fortnight of May 2012. The location, location code and port connected to the location of the products is mentioned in the table. Port RTP: Port linkage RTP is the price calculated from the RTP BCSP table. IPP Freight IPP Freight charges calculated from the IPP Freight table. For road it is calculated on actual basic price. Exercise Duty calculated as follows: 1) MS: 14731.70+2%+1% 14731+ 294.634+17.317 = 15173.65 2) HSD: Exercise duty for HSD branded is fixed i.e 2060 2000+2%+1% 2000+40+20 = 2060 3) ATF: 8%+2%+1% 8% on port linkage RTP 3456.8384+69.136768+34.568384 = 3560.543552 4) There is no Exercise duty on SKO and LPG.

Terminalling Charges for PL/RD The Terminalling Charges are always fixed. They are added to the price depends on the mode of transaction. MS product exchange transaction done through the Road so Road charges are added, i.e 69.48. For HSD: Pipe line charges: 12.55 For SKO: Road charges: 76.05

ICC (inventory Carrying Cost) is calculated when the mode of oil exchange is Pipe line The formula for calculating ICC is: ICC = Step 1: TAIPP+ED = Sub Total Step 2: Sub-total * 8/360days Step 3: Step 2 amt * 14.75 %( PLR Rate) The amount which we got from step 3 i.e. ICC (Inventory Carrying Cost). After adding all the above vales or figures we got the total amount.

Findings: RTP price is fixed for each product and port. If the location place is different, but the connected port and product are same then the port RTP price remain same for those locations. If the mode of oil exchange is pipe line then only the ICC calculated on that product Calculation of fortnight is the primary calculation which is essential for validation procedure

ANALYSIS

OIL EXCHANGE TRANSACTIONS

YEAR 2009-2010 Purchases - Product Wise

Product ATF HSD LPG MS SKO Total MT 729905.14 9321853.21 3918623.20 2550833.14 1597179.98 18118394.67 Rs in Crore 2256.98 31513.23 6228.82 12787.29 4598.92 57385.24

Purchase percentage
9% 14%

4%
ATF HSD

22%

51%

LPG MS SKO

Product wise Sales 2009-10

Product ATF HSD LPG MS SKO Total MT 630764.60 3514916.63 468986.40 966351.22 653031.15 6234050.00 Rs in Crore 1938.89 11962.72 793.55 4838.39 1880.39 21413.94

Sales Percentage
10% 16%
ATF

10%

8% 56%

HSD LPG MS SKO

Company Wise Oil exchange transactions 2009-10

MT Company BPCL ESSAR GAIL IOCL MRPL ONGC RIL Total Purchase 1964723.76 3352558.83 322359.17 3386390.62 2774312.63 495592.73 3212906.54 15508844.28 sales 1888451.93 185367.65 4056086.62 56.87 6129963.06

4500000.00 4000000.00 3500000.00 3000000.00 2500000.00 2000000.00 1500000.00 1000000.00 500000.00 0.00 BPCL ESSAR GAIL IOCL MRPL ONGC RIL Purchase sales

YEAR 2010-2011

Purchase - product wise

Product ATF HSD MS SKO LPG Total MT 687681.97 10623007.06 2142465.01 1076342.38 3490350.13 18019846.55 Rs in Crore 2591.08 45288.15 12474.82 3686.75 5871.17 69911.96

Purchase Percentage
19% 4%
ATF HSD

6%
12%

59%

MS SKO LPG

Product wise Sales 2010-11

Product ATF HSD MS SKO LPG Total

MT 570881.82 3566252.37 1095968.55 631863.07 411949.05 6276914.86

Rs in Crore 2152.28 15437.81 6414.41 2208.52 881.72 27094.75

Sales Percentage
10% 17% 7% 9%
ATF HSD MS

57%

SKO LPG

Company Wise Oil exchange transactions 2010-11

MT
Company BPCL ESSAR GAIL IOCL MRPL ONGC RIL Total Purchases Sales 1995381.06 2003471.459 3281231.67 327094.38 3428740.51 4081757.168 2430543.53 482166.67 3599633.27 15544791.09 25518.31 6217216.07 106469.136

4500000.00 4000000.00 3500000.00 3000000.00 2500000.00 Purchases 2000000.00 1500000.00 1000000.00 500000.00 0.00 BPCL ESSAR GAIL IOCL MRPL ONGC RIL Sales

YEAR 2011-2012

Purchase - Product wise

Product ATF HSD MS SKO LPG Total MT 738376.01 12000485.51 2177099.66 947704.12 3143511.28 19007176.58 RS in Crore 3857.85 63200.10 15667.87 4657.50 6049.36 93432.69

Purchase Percentage
17% 5%
ATF

4%

11%

HSD MS

63%

SKO LPG

Product wise Sales 2011-12

Product ATF HSD MS SKO LPG Total MT 610091.11 3665443.24 1138262.66 539503.96 506338.10 6459639.09 Rs. in Crore 3194.47 19420.18 8095.87 2640.74 1301.86 34653.12

Sales Percentage
8% 8% 18%
ATF HSD MS

9%

57%

SKO LPG

Company Wise Oil exchange transactions 2011-12

MT Company BPCL ESSAR GAIL IOCL MRPL ONGC RIL Total Purchases 2106388.59 2877083.55 326041.04 3533219.06 2242915.55 469112.89 5080136.75 16634897.43 Sales 2083151.34 30104.99 4158812.08 13047.06 6285115.47

6000000.00

5000000.00

4000000.00 Purchases Sales 2000000.00

3000000.00

1000000.00

0.00 BPCL ESSAR GAIL IOCL MRPL ONGC RIL

Validation
One of the most important activities of oil Exchange dept. is validation exercise. Objective:- The main objective of this exercise is to ensure that 100% sale, purchase and other physical transactions with oil companies are accounted, valuation of these transactions are done correctly, compare the same with the values generated in JDE debit/credit Notes and take necessary corrective action for the differences. Following are the steps which consider while doing the Validation:1)

Oil Exchange purchase/sale Report: - This report is taken from the Oil Exchange Portal based on the actual ERP data, which is prepared via PDR, PRR, and each zonal transaction. Oil Exchange purchase/sale Report consists of the purchase and sales transactions done by the company in the different zones or locations. Oil Exchange purchase/sale Report is essential for preparing the data which is needed for analyzing the oil Exchange transactions. Data: - Data from Oil Exchange portal is converted into various formats with the help of VLOOK-UP. Data is prepared and used for various MIS reports. Pivot Table: - Pivot table is an excel function, which is used for summarized the data. This is a very important tool for analyzing purchase and sale in various ways such as company wise/product wise in Quantity/amount as well as individual location comparison and analysis. With the help of Pivot Table, comparative prices also can be ascertained for validation. RTP BCSP Table: - RTP BCSP table contains the fortnightly price of the product, I e from - 1 to 15 date of the month and second period- 16 to 30/31 last date of the month. Oil Exchange Price: - RTP price calculate from the RTP BCSP Table. RTP + IPP (Import parity Price) Freight = TAIPP. Excise Duty, ICC (Inventory Carrying Cost) and Terminalling charges added in the TAIPP. Total value is arrived after adding the all values after adding the applicable local taxes.

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Year 2011-2012 - Validation Statement

Purchase
Exercise Duty 15173.65 2060 2967.1622

PRODUCT MS HSD SKO LPG ATF

RTP 36779.79 40438.14 38396.5 43933.76 36009.25

IPP FREIGHT 411.37 477.49 494.81 -

TAIPP 37191.16 40915.63 38891.31 43933.76 36009.25

ICC

TC 69.48 80.64 76.05 208 75.88

Total 52434.29 43056.27 38967.36 44141.76 39052.29

Average price Difference 53426.37 43638.68 39203.99 43497.28 39620.01 992.08 582.41 236.63 644.48 567.72

Sales

PRODUCT MS HSD SKO LPG ATF

RTP 36779.79 40438.14 38396.5 43933.76 36009.25

IPP FREIGHT 411.37 477.49 494.81 -

TAIPP 37191.16 40915.63 38891.31 43933.76 36009.25

Exercise Duty 15173.65 2060 2967.1622

ICC

TC 69.48 80.64 76.05 208 75.88

Total 52434.29 43056.27 38967.36 44141.76 39052.29

Average price 53180.23 43924.54 39109.74 44472.92 39810.05

Difference 745.94 868.27 142.38 331.16 757.76

Findings:(Validation) The purchase and sale validation for the year 2011-12 shows a difference. This is mainly due to the products sale \ purchases are scattered in various parts of India. The coastal and IPP freight are having a major impact on validating the yearly transactions. Hence such validation is only useful only for directionally difference. Simultaneously this is very useful for finding the mistakes at same location of different company. If the mode of transport is considered separate the price can be compared and matched with port locations.

LEARNING AND OUTCOME

It was good experience to work with HPCL. Oil exchange is very important activity for minimizing the cost. It is a mutual agreement between the oil marketing companies (OMC). HPCL using the JD Edward software for their business transactions. Also they are using the pivot table (Excel function) as a supportive but very much important function for summarized the data. Purchase and sale accounted through the Pivot-Table and the Validation procedure is accounted through JD Edward software. The validation procedure is very difficult and but it is very important to make a settlement between the OMCs Online business process has fastened the work, but still lot of paperwork is done in the HPCL. In the whole Oil Exchange procedure lot of paper work is done, the documents like Debit-Credit Note, Joint Certificate, P & L A/c and Daily A/c statements etc. are needed in the procedure.

BIBILOGRAPHY References: Annual Reports of HPCL Manual of oil exchange HPCL Portal

www.hindustanpetroleum.com www.google.com www.petronet.com