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 wouldn’t 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. CONTENT1 Introduction of Petroleum Industry

2 Major Oil & Gas Companies in India

3 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

4 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. 2009-2010ii. 2010-2011

iii. 2011-2012 4.6 Purchase & Sales Statements

4.7 Validation

i. Introduction & Objectiveii. Steps

iii. Validation- year 2011-2012

5 Learning & Outcome

6 Bibliography

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 north-eastern provinces of India especially in the place called Digboi. The production of petroleum along with the exploration of new sites was primarily restricted to north-eastern 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 (Million Tonnes)

2010-2011 2009-2010 % Y-o-Y growth

LPG 14.4 13.1 9.6%

Motor Spirit (Petrol) 14.4 12.8 12.1%

Naphtha 11.5 10.1 13.9%

Aviation Turbine Fuel 5.1 4.6 9.1%

Superior Kerosene 8.9 9.3 -3.8%

High Speed Diesel 60.4 56.2 7.3%

Light Diesel Oil 0.4 0.5 -6.0%

Lubes 2.6 2.5 0.8%

Furnace Oil / LSHS 11.4 11.6 -1.7%

Bitumen 4.7 4.9 -6.0%

Others 10.7 11.9 -11.1%

Total 144.4 137.8 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 India’s 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 India’s 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 India’s flagship Natural Gas company, integrating all aspects of the Natural Gas value chain right from exploration to marketing. It is a well-managed 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 state-owned 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.

HPCL’s 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 nation’s 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 India’s 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)

1952

1962

19741976 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.

COMPANY’s 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.

COMPANY’s 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 % Holding

HPCL-Mittal Energy Limited 49

Hindustan Colas Limited (HINCOL) 50

South Asia LPG Company Pvt. Limited (SALPG) 50

Prize Petroleum Company Limited 50

Mangalore Refinery and Petrochemicals Limited (MRPL) 16.95

Bhagyanagar Gas Limited 25

Petronet MHB Limited 28.77

Avantika Gas Limited 25

Subsidiary:-

1. HPCL Biofuels Limited – 100% holding2. 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 PIL’s 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 End uses

Liquefied Petroleum Gas Domestic / industrial fuel

Motor Spirit/ Gasoline / Petrol Automobiles Fuel

Propylene Petrochemicals feed stock

Hexane Edible Oil extraction

Solvent For paint industry

Naphtha Petrochemicals / fertilizers

Motor Turpentine Oil Solvent for paints

Superior Kerosene Oil Cooking Fuel / Illumination

Aviation Turbo Fuel Aviation fuel

High Speed Diesel Transport vehicles / Locomotive Engines

Light Diesel Oil Agricultural pumps

Jute Batching Oil Solvent in jute industry

Railex Railway Axils Oil

Rubber Processing Oil Solvent in rubber/ Tyres industry

Industrial Fuel Oil Industrial furnaces / Bunker fuel

Low Sulphur Heavy Oil Industrial furnaces

Bitumen Road Paving / Insulator / Paints

Neutral Oils Crank Case Lubrication of IC engines

Industrial Oils Lubrication of Hydraulic pumps

HPCL BUSINESS:

HPCL Operates in four major sectors:-

Retail Direct Sales LPG Aviation

HPCL Business Operations

Retail

Direct Sale

LPG

Aviation

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 85

Terminals / Installations / TOP’s 37

Depots 92

ASFs 13

Retail outlets 7313

SKO/ LDO Dealers 1648

LPG Bottling Plants 43

LPG Distributors 2202

CORPORATE SOCIAL RESPONSIBILITY

HPCL’s CSR model based on “Creating Shared Value”. The Shared Value model is based on the concept that corporate success and social welfare are independent. HPCL’s 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 children’s lives- gender, caste, displacement, livelihood etc.

OIL EXCHANGE

HPCL

OMC 1

OMC 2

Tank Truck

Pipeline

Rail Wagons

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

Need for Oil exchange arose because of.......

To bridge the gap between supply and

demand

To share infrastructure

facilities

To save on logistics cost

Document Flow in Oil Exchange

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).

PDR

Monthly A/c.Daily A/c.

Daily A/c. Monthly A/c.

PRR

Settlement A/c.

Sale

Purchase

Dr.JC

Cr. JC

Debit

Note

Credit

Note

Cr.

Dr.

P & L. A/c.

P & L. A/c.

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 Mode Rate/Kl @ Natural

MS TT/TW 68.31

MS Local P/L 10.63

HSD TT/TW 79.66

HSD Local P/L 12.40

SKO TT/TW 75.02

SKO Local P/L 11.67

LPG varies depending on supply point

Nil TC on Coastal Shipment

Inventory Carrying Cost

Charged for supplies ex TOPs towards working capitalo 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 MS Branded HSD Unbranded

HSD Branded

14780.50/Kl 15965.00/KL 2060.00/KL 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 MS HSD SKO LPG ATFLOCATION Udaipur Karur shimoga Palghat PanipatCONNECTED PORT Kandala Kochi Mangalore kochi Kandala

LOCATION CODE 21583 11956 11858 12649 13560

port RTP42538.0

344959.39 43927.66 56459.58 43210.48

IPP Freight 1312.03 479.12 908.3 0 0

TAIPP43850.0

6 45438.51 44835.96 56459.58 43210.48

Add: Exercise duty15713.6

52060 0 1258.11 3560.54

Sub Total59563.7

147498.51 44835.96 57717.69 46771.02

ICC 0 155.69 0 0 0 TC/PL 0 12.55 0 0 0 TC 69.48 0 76.05 0 0Octroi 0 0 0 0 0

TOTAL59633.1

947666.75 44912.01 57717.69 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 TotalStep 2: Sub-total * 8/360daysStep 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 MT Rs in Crore

ATF 729905.14 2256.98

HSD 9321853.21 31513.23

LPG 3918623.20 6228.82

MS 2550833.14 12787.29

SKO 1597179.98 4598.92

Total 18118394.67 57385.24

4%

51%

22%

14% 9%

Purchase percentage

ATF

HSD

LPG

MS

SKO

Product wise Sales 2009-10

Product MT Rs in Crore

ATF 630764.60 1938.89

HSD 3514916.63 11962.72

LPG 468986.40 793.55

MS 966351.22 4838.39

SKO 653031.15 1880.39

Total 6234050.00 21413.94

Company Wise Oil exchange transactions 2009-10

MT

Company Purchase sales

BPCL 1964723.76 1888451.93

ESSAR 3352558.83 185367.65

GAIL 322359.17 -

IOCL 3386390.62 4056086.62

MRPL 2774312.63 -

ONGC 495592.73 -

RIL 3212906.54 56.87

Total 15508844.28 6129963.06

BPCL ESSAR GAIL IOCL MRPL ONGC RIL0.00

500000.00

1000000.00

1500000.00

2000000.00

2500000.00

3000000.00

3500000.00

4000000.00

4500000.00

Purchase

sales

YEAR 2010-2011

Purchase - product wise

Product MT Rs in Crore

ATF 687681.97 2591.08

HSD 10623007.06 45288.15

MS 2142465.01 12474.82

SKO 1076342.38 3686.75

LPG 3490350.13 5871.17

Total 18019846.55 69911.96

4%

59%12%

6%

19%

Purchase Percentage

ATFHSDMSSKOLPG

Product wise Sales 2010-11

Product MT Rs in Crore

ATF 570881.82 2152.28

HSD 3566252.37 15437.81

MS 1095968.55 6414.41

SKO 631863.07 2208.52

LPG 411949.05 881.72

Total 6276914.86 27094.75

9%

57%

17%

10% 7%

Sales Percentage

ATF

HSD

MS

SKO

LPG

MT

Company Purchases Sales

BPCL 1995381.062003471.45

9

ESSAR 3281231.67 106469.136

GAIL 327094.38

IOCL 3428740.514081757.16

8

MRPL 2430543.53

ONGC 482166.67

RIL 3599633.27 25518.31

Company Wise Oil exchange transactions 2010-11

Total15544791.0

96217216.07

BPCL ESSAR GAIL IOCL MRPL ONGC RIL0.00

500000.00

1000000.00

1500000.00

2000000.00

2500000.00

3000000.00

3500000.00

4000000.00

4500000.00

PurchasesSales

YEAR 2011-2012

Purchase - Product wise

Product MT RS in Crore

ATF 738376.01 3857.85

HSD 12000485.51 63200.10

MS 2177099.66 15667.87

SKO 947704.12 4657.50

LPG 3143511.28 6049.36

Total 19007176.58 93432.69

4%

63%

11%

5%

17%

Purchase Percentage

ATFHSDMSSKOLPG

Product wise Sales 2011-12

Product MT Rs. in Crore

ATF 610091.11 3194.47

HSD 3665443.24 19420.18

MS 1138262.66 8095.87

SKO 539503.96 2640.74

LPG 506338.10 1301.86

Total 6459639.09 34653.12

9%

57%

18%

8%

8%

Sales Percentage

ATFHSDMSSKOLPG

Company Wise Oil exchange transactions 2011-12

MT

Company Purchases Sales

BPCL 2106388.59 2083151.34

ESSAR 2877083.55 30104.99

GAIL 326041.04 -

IOCL 3533219.06 4158812.08

MRPL 2242915.55 -

ONGC 469112.89 -

RIL 5080136.75 13047.06

Total 16634897.43 6285115.47

BPCL ESSAR GAIL IOCL MRPL ONGC RIL0.00

1000000.00

2000000.00

3000000.00

4000000.00

5000000.00

6000000.00

PurchasesSales

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.

2) 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.

3) 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.

4) 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.

5) 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.

Year 2011-2012 - Validation Statement

Purchase

PRODUCT RTP IPP FREIGHT TAIPPExercise Duty

ICC TC Total Average price Difference

MS 36779.79 411.37 37191.16 15173.65 69.48 52434.29 53426.37 992.08

HSD 40438.14 477.49 40915.63 2060 80.64 43056.27 43638.68 582.41

SKO 38396.5 494.81 38891.31 - 76.05 38967.36 39203.99 236.63

LPG 43933.76 - 43933.76 - 208 44141.76 43497.28 644.48

ATF 36009.25 - 36009.25 2967.1622 75.88 39052.29 39620.01 567.72

Sales

PRODUCT RTP IPP FREIGHT TAIPP Exercise Duty ICC TC Total Average price Difference

MS 36779.79 411.37 37191.16 15173.65 69.48 52434.29 53180.23 745.94

HSD 40438.14 477.49 40915.63 2060 80.64 43056.27 43924.54 868.27

SKO 38396.5 494.81 38891.31 - 76.05 38967.36 39109.74 142.38

LPG 43933.76 - 43933.76 - 208 44141.76 44472.92 331.16

ATF 36009.25 - 36009.25 2967.1622 75.88 39052.29 39810.05 757.76

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 OMC’s

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