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CHAPTER 1
INTRODUCTION
1.1 PETROCHEMICAL INDUSTRY PROFILE
Petrochemicals are chemical products derived from petroleum. Some chemical
compounds made from petroleum are also obtained from other fossil fuels such as coal or
natural gas, or renewable sources such as corn or sugar cane.
Petrochemical has become one of the most important natural resources of modern
civilization. In Latin, ‗Petra‘ means ‗Rock‘ and ‗Oleum‘ means ‗Oil‘, so petroleum is a
rock oil? It is a principle source of liquid fuel which is the most important among fossil
fuel. Since petroleum is obtained from the earth crust by mining process, it is named
mineral oil or crude oil.
During the last few years, petroleum industry has undergone tremendous growth
because of rubbers, perfumes, plastics, explosives, motor fuel and many other substances
are being manufactured from petroleum.
1.1.2 ORIGIN OF PETROLEUM
Petroleum was the formed several years ago from organic matter and marine
deposits in anaerobic consideration and present below the earth‘s crust only in certain
parts of the world. The vegetable and animal remains inside the earth strata have
gradually lost oxygen and nitrogen with consequent increase in the percentage of carbon
and hydrogen, fats and carbohydrates have undergone degradation by the action of
anaerobic bacteria.
Most theories concerning the origin of petroleum postulate a vegetable organic
with a close relation to coal. The theories say that any organic matter may be converted
into petroleum under suitable conditions. There is organic matter near shore and in
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marine deposits deficient in oxygen and associated with minerals converted by time and
pressure I to time stones, sand stones, dolomites and similar rocks. Petroleum is a
complex mixer of hydrocarbon with minor amount of nitrogen, sulphur, minerals and
other components. It is practically impossible determine exactly the composition of a
particular grade of petroleum. The composition of petroleum various from place to place
and from well to well.
Petroleum is a complex mixture of a multitude of constituents with a wide variety
of propertied. So, they cannot be directly used for industrial or commercial applications.
Therefore crude oil must be worked up in a refinery by suitable process to produce an
assortment of products which can be marked according to certain quality requirements.
The crude oil is bought to the surface by drilling holes as deep as five miles, are often
required to indicate an oil field at ground level, exploration methods have progressed to a
highly scientific stage.
The crude oil are usually transported by pipe lines or tankers to the refinery sites
or tankers to the refinery sites and stored in big tanks before being processed. The
continuous fractional distillation of crude oil in to different useful fractions and the
removal of undesirable impurities are called refining or processing of petroleum. Theprocessing structure of a refinery depends on the plant capacity and market requirements
of the products to be sold.
1.1.3 PETROLEUM INDUSTRY IN INDIA
The petroleum industry in India stands out as an example of the strides made by
the country I its match 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.
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The testimony of its vigor and success during the past five decades is the
significant increase in crude oil production from 0.25 to 33 million tons per annum and
refining capacity from 0.3 to 103 million metric tons per annum. The consumption of
petroleum products had growth 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 29000 dealerships
has been developed backed by over 400 storage points over the years to serve the people
even in the remote and once-inaccessible areas.
A major boost to the oil industry came in pursuance of the industrial policy
resolution 1956 that intended to promote growth of the vital factors such as petroleum
under the state control. ONGC, which was formed as a directorate in 1955, become a
commission in 1956.
Unlike at the time of independence when there was no specialized petroleum
bodies or institutions worth mentioning to provide developmental support to the
Petroleum Industry I the country. There are today several such institutions such as Indian
Petroleum, Oil Industry Directorate, Centre for Oil companies have set up research
centers such as the one established by the Indian Oil Corporation in Faridabad which
have done pioneering work in formulation of lubricants and greases.
The real growth in exploration and production sector began after the discoveries
by Burmah Oil and Natural Gas Commission in 1956 and Oil India ltd in 1959. During
the second decade of independence (1957-67) a number of Oil and Gas bearing structures
were discovered by ONGC in Gujarat and Assam. Discovery of oil in large quantities in
Bombay-High in February 1974 opened up a new vista of oil exploration in offshore
areas.
During the period 1977-87, exploration effort by ONGC and Oil India corporation
yielding discoveries of oil and gas in a number of structures in Bassein, Tapti, Krishna-
Godavary-Couvery basins, Cachar ( Assam), Nagaland and Tripura. The indigenous
production reached 30 million tons by 1984-85, a self sufficient level of 70% of the
country requirements.
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1.1.4 GROWTH OF THE PETROLEUM INDUSTRY
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.There has been an increase in the refining capacity from 0.25 million metric tons to about
103 MMT Per Annum. The first decade of independence saw the establishment of 3
coastal refineries by multinational oil companies operating in India at that time, viz.,
Burma shell, Gesso stanza and Caltex, the first two at Mumbai and 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 3 refineries
was set up at Guwahati (Assam), Barauni (Bihar) and Koyalu (Gujarat) essentially to
process the indigenous crude discovered in Assam and Gujarat. In addition, one joint
sector refinery was set up with the participation of an American company at Cochin,
based on important crude.
The next ten year period (1967-77) witnessed the establishment of 2 refinery, one
with equity participation from American and Iranian company at Chennai another in the
public sector at Haldia by Indian Oil.
In period 1977-87 saw the commissioning of two more refineries in the public
sector. The Refinery at Bongaigaon was the first experiment in having an integrated
petroleum refinery — cum-petrochemicals unit. The other refinery was set at Mathur in
1982. Major expansion of the coastal refineries at Mumbai, Cochin, Chennai and
Visakapatnam were also completed during this period. The notable feature of the capacity
additions during this decade have been the extensive utilization of the process design
capabilities of M/S Engineering India Ltd and installation of secondary processing
facilities to increase the production of much required Kerosene, Diesel and LPG.
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During the fifth decade (1987-97), a small refinery of 0.5 MMT Per Annum at
Nagapatinnam was built in Tamil Nadu. It is based on crude from adjoining fields. In
1996, a 3 MMT Per Annum refinery was built in the joint sector at Mangalore, between
HPCL and Indian Rayon. This decade also saw significant expansions to the capabilities
of the existing refineries, thereby raising the refineries capacity to about 62 MMT Per
Annum. Today, with the setting up of Panipat refinery during 1998-99 and Reliance and
Numaligarg refineries in 1999-2000, there are 17 refineries operating in the country, 15
in the public sector, One in the joint sector and one in the private sector, with an installed
capacity of 103 MMT Per Annum. This decade also witnessed major policy initiatives in
the refineries in the joint sector in which the equity participation of public sector
undertaking was envisaged to be 26%, another 26% equity was meant for private sector
partner and the balance 48% was to be raised from the public.
Two petrochemical classes are olefins including ethylene and propylene, and
aromatics including benzene, toluene and xylene isomers. Oil refineries produce olefins
and aromatics by fluid catalytic cracking of petroleum fractions. Chemical plants produce
olefins by steam cracking of natural gas liquids like ethane and propane. Aromatics are
produced by catalytic reforming of naphtha. Olefins and aromatics are the building
blocks for a wide range of materials such as solvents, detergents, and adhesives. Olefinsare the basis for polymers and oligomers used in plastics, resins, fibers, elastomers,
lubricants, and gels.
Global ethylene and propylene production are ~110 million tonnes and ~65
million tonnes per annum respectively. Aromatics production is ~70 million tonnes. The
largest petrochemical industries are located in the USA and Western Europe; however,
major growth in new production capacity is in the Middle East and Asia. There is
substantial inter-regional petrochemical trade.
Primary petrochemicals are divided into three groups depending on their chemical
structure:
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Olefins include ethylene, propylene, and butadiene. Ethylene and propylene are
important sources of industrial chemicals and plastics products. Butadiene is used
in making synthetic rubber.
Aromatics include benzene, toluene, and xylenes. Benzene is a raw material for
dyes and synthetic detergents, and benzene and toluene for isocyanides MDI and
TDI used in making polyurethanes. Manufacturers use xylenes are used to
produce plastics and synthetic fibers.
Synthesis gas is a mixture of carbon monoxide and hydrogen used to make
ammonia and methanol. Ammonia is used to make the fertilizer urea and
methanol is used as a solvent and chemical intermediate.
1. 1.5 Overview of the Petrochemical Segment:
A petrochemical segments overview indicates that this sector forms a vital
category of the chemicals industry. The petrochemical sector is one of the fastest growing
sectors in India, growing at 13% yearly.
Petrochemicals are an industry which is highly organized and involves only a handful
of companies. In the overview of the petrochemical segments, it is seen that it is highly
technology-intensive and demands a great deal of capital investment.
In the segments of petrochemical overview, the distribution is done either through
distributors or is given to a company directly in large volumes. Also seen in the overview
of the petrochemical segments is that the prices of these products are very volatile and
depends totally on the international market. Even though the international prices are not
justifiable, the Indian producers are forced to match it.
The main Indian companies in the petrochemical segments are:
In Kolkata the Haldia petrochemical
RIL industries Ltd in Mumbai
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In Delhi the Gas authority of India Ltd
In Mumbai the NOCIL
In Mumbai the Indian petrochemical Ltd
The petrochemical segments overview covers the various by products of it. They are:
Synthetic rubber such as poly butadiene and styrene butadiene
Polymers such as poly propylene and polystyrene
Synthetic fibers such as acrylic fiber and nylon filament
Basic chemicals such as ethylene and propylene
Intermediates such as acrylonitrile and vinyl chloride
In the overview of the petrochemical segments, the synthetic rubber is used to
manufacture footwear, tubes, and tires. The polymer by product in the petrochemical
segment overview forms the raw material for plastic. In the overview of the
petrochemical segments, the synthetic fibers are the raw materials for the textile industry.
The basic chemicals are important by-products of the petrochemical segment overview
since they are the building blocks. In the petrochemical segment, the intermediates by
product are processed further in order to get chemicals of various kinds.
In the petrochemical segments overview it can be said that this industry has grown
considerably but even then there is still room for development. And this growth in the
petrochemical segments can be achieved by the determined efforts of the government of
India and the petrochemical companies.
The petrochemical industry in India has been one of the fastest growing industries in
the country. Since the beginning, the Indian petrochemical industry has shown an
enviable rate of growth. This industry also has immense importance in the growth of
economy of the country and the growth and development of manufacturing industry as
well. It provides the foundation for manufacturing industries like construction,
packaging, pharmaceuticals, agriculture, textiles etc.
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The Indian petrochemical industry is a highly concentrated one and is
oligopolistic in nature. Even a few days back, only four major companies viz. Reliance
Industries Ltd (RIL), Indian Petrochemicals Corporation Ltd. (IPCL), Gas Authority of
India Ltd. (GAIL) and Haldia Petrochemicals Ltd. (HPL) used to dominate the industry at
a large extent. The recent amalgamation of IPCL with RIL has made the industry more
concentrated further, as they jointly account for over 70% of country's total
petrochemical capacity. However, the scene is a bit different for the downstream
petrochemical sector, which is highly fragmented in nature with over 40 companies exist
in the market.
1. 1.6 Characteristics of Indian Petrochemical Industry-
Petrochemical Industry in India is a cyclical industry. This industry, not only in
India but also across the world, is dominated by volatile feedstock prices and sulky
demand. India has one of the lowest per capita consumptions of petrochemical products
in the world. For example, the per capita consumption of polyester in India lies at 1.4 kg
only comparing to 6.6 kg for China and 3.3 kg for the whole world. Similarly, the per
capita consumption of polymers is 4 kg in India, whereas the per capita consumption is
around 20kgs for the whole world.
1. 1.7 The Growth-
The petrochemical industry in India came into existence during 1970s. The 1980s and
1990s saw some rapid growths for Indian petrochemical industry. The biggest reason for
this growth was the high demand for petrochemicals in India, which grew at an annual
rate of 13 to 14% since late 90s. It also called for rapid expansion of capacity. The BMI
forecast of average annual growth in India over 2007-2011 is 14 to 16%. However, the
industry suffered setbacks during 2008 due to surge in the price of crude oil. It will be
tough for Indian petrochemical industry to plug the deficit of 5mn TPA of ethylene and
4mn TPA of polymer by 2012 (according to the predictions of the government).
The Present Scenario Presently India has three gas-based and three naphtha-based cracker
complexes with a combined annual capacity of 2.9 MMT of ethylene. Besides this, there
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are also 4 aromatic complexes with a capacity of 2.9 MMT of Xylenes.
The production of 5.06 MMT polymers during FY09 accounted for around 62% of the
total production of key petrochemicals. It also achieved 88.5% capacity utilization. The
industry also produced 2.52 MMT of synthetic fibers during FY09 with a 73% of
capacity utilization.
1. 1.8 Key Segments-
Petrochemical industry is constituted of the following key segments:
Polymers: The demand for polymers saw a growth of 13.4% during 2007,
comparing to a demand growth of 5.6% in 2006. According to the prediction of
Chemicals and Petrochemicals Manufacturers' Association (CPMA), the demand
growth for polymer would further be augmented to over 15% in the coming year.
Polyester Intermediates: The combined production of 5 fiber intermediates
(CAN, DMT, Caprolactum, MEG and PTA was 3,417 KT during 2007. Among
those, PTA and MEG accounted for 69% and 27% respectively, while the rest
were DMT, Caprolactum and CAN.
Aromatics (Paraxylene): The demand for Paraxylene (PX) saw a growth of 18%
during 2007. According to the prediction of CPMA, it is expected to grow at the
same rate in the coming year as well.
Benzene, Toluene, MX and OX: The demands for Toluene and OX saw a
contraction rate of 4% and 10% respectively during 2007. However, Benzene and
MX saw a positive growth though.
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1. 1.9 Top Petrochemical Companies in India-
Though the Indian petrochemical industry is highly dominated by only a few
players, however, there are a number of petrochemical companies in India, doing theirshare of business. Some of the top companies can be listed as below:
Reliance Industries Ltd.
Haldia Petrochemicals Ltd.
Mangalore Refinery and Petrochemicals Limited
Indian Oil Corporation
Gas Authority of India Limited
National Organic Chemical Industry Ltd.
Bongaigaon Refinery and Petrochemicals Ltd.
Manali Petrochemical Limited
I G Petrochemicals Limited
The Andhra Petrochemicals Limited
Tamil Nadu Petro products Limited
1. 1.10 SCOPE-
The scope of India Petrochemical Industry is potentially huge. With the trend
in the global market shifting India can become one of the leaders in this industry on a
global basis.
India Petrochemicals industry is an important member of the Indian economy
because it fulfills the need of major industries like textiles, telecoms, power, cables,
plastics etc.
The competitors in the market are attracted to the India petrochemical industry for
its benefits. The per capita consumption of synthetic fibers, synthetic rubber, plastics, and
polymers in India is lower than the per capita consumption worldwide. But interestingly,
the growth of the petrochemical industry in India in recent times was around 15%
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whereas the growth in the petrochemical industry globally was only 4%. In the future,
there is a huge scope for the India petrochemical industry in the global market for
petrochemicals and petrochemical-based products. This would make way for the entry of
new companies in the market.
This industry is divided into 3 basic petrochemicals such as olefins (ethane,
propane, and aromatic compounds such as benzene, toluene, intermediate petrochemicals,
end products (polymers), synthetic fibers, and synthetic rubber. As the general trend in
the global arena of the petrochemical market has shifted to the Middle East and Asia
from the West, India stands a good chance in providing a lucrative market to the world.
In the present scenario, the scope of India petrochemical industry is very good as
the government regulations are aligned with the industry and is playing an important part.
The regulations have opened the market which is full of scope for the rapid growth of the
industry and in turn, the growth of the economy. The supply and demand situations and
the pricing views in the industry are also among the factors for growth. With fierce
competition in this sector, there is every chance that superb quality products will be
produced in order to stay ahead of the competitors.
The encouragement for investment has been another growth factor for the India
petrochemical industry. The capacity of different products is in the production,
segmentation, and consumption trend of each of the products and so the economies of
scale play a very important role in the profit making mechanism of this industry, thereby
determining the scope of each of the competitors in the industry.
The major Indian companies in this sector are:
Reliance Industries Limited
Gas Authority of India Limited
Indian Petrochemicals Corporation Limited
Grasim Industries Limited
Indo Rama Synthetics Limited.
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1.1.11 GROWTH OF THE PETROCHEMICAL INDUSTRY-
Growth of India‟s petrochemical industry is playing a major part in the
growth of the economy and the development of the manufacturing sector. Thepetrochemicals industry provides more value addition to the Indian economy than
most of the other companies.
Petrochemicals are obtained from different chemical compounds which are by-
products of crude oil refining. Most of them fall may be categorized into
hydrocarbons. With the fractional distillation of the crude oil, chemicals like naphtha,
kerosene, petroleum gases, ethane, methane, propane, and butane are the primary
stocks used in the petrochemical industry for the production of various other chemical
compounds.
Presently, the extent of penetration of the petrochemical products in day-to-day
use is vast. It actually covers most of the domain of existence such as apparels,
accessories, household items, furniture, electronics, construction, housing,
automobiles, medical appliances, packaging, horticulture and agriculture.
The India petrochemical industry originated in the 1970s and entered the arena
of the industries of India. This sector was subjected to rapid growth in the period
between the 1980s and 1990s. Even today, expectations from this sector are sky-high.
The Indian petrochemical industry for its part is doing very well and has been
contributing significantly to the country's GDP for several years now. The India
petrochemical industry primarily consists of synthetic rubber i.e. elastomer, yarn of synthetic fiber, synthetic detergent intermediates, performance plastics, plastic
processing industry, and polymers.
The Bongaigaon refinery was set up as an experimental one with the capacity
of a refinery and a petrochemical unit. The success of this integrated petroleum
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refinery-cum-petrochemicals unit led to a spree of activities in this sector. Many such
units were established to boost production capabilities. With the growth of India
petrochemical industry, it holds the share of around 20% of the total global producer
of petrochemical related products.
In the present scenario, 5 naphtha and 3 gas cracker coordination compounds
are in operation with ethane production capability of around 2.6 million tons every
year, jointly. Along with this, another 4 aromatic coordination compounds are in
operation with a xylene production capability of around 2.1 million tons.
1.1.12 CHALLENGES:
The challenges facing India petrochemical industry provides the industry with
better tools which would in turn help the growth of the economy.
India has stably established itself in the core of the international production of
petrochemical and petrochemical- related products in the present scenario. With the
economic growth cycle slowing down in the United States, the Asian developing nations,
especially India, would ideally fortify its stand in the global petrochemical market as a
producer of these products. This is one of the major challenges facing India
petrochemical industry.
The global economy is a dynamic and ever-growing one in spite of the high cost
of energy. This in turn is forging the demand for petrochemicals. The strong growth in
demand is not backed by a sufficient supply so the cost is still to come down. Operating
rates of major petrochemical product segments are very high presently.
In the Indian economy, the petrochemical sector is one of the fastest growing
segments which and has a growth rate of around 13% which currently is more than twice
the gross domestic product growth. The investments made in the India petrochemical
industry are huge which bode well for the growth in this segment.
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There is a steadfast growth in the production activity of the main petrochemicals
and as the result, the India petrochemical industry attained self-sufficiency. The dominant
part of the India petrochemical industry, the segment consisting of polymers is growing at
a superb pace, with the middle class household boosting the consumption.
Following are the challenges facing India petrochemical industry:
High cost of energy and feedstock and the impact on demand
The transformation in the kinetics of competition in manufacturing
Increase in the cost of project
Problems faced by the India petrochemical industry:
The manufacturing units mostly use obsolete format of technology and are not
able produce optimally
There is a necessity for the modernization of equipments
Excise duty on synthetic fiber should be rationalized
Prevention of reservation on Small Scale Units
Plastic waste to be recycled and the littering habits to be discouraged
India requires advantage on feedstock, so the import cost has to be brought down
The industry should have access to the primary amenities of infrastructure
1.1.13 OPPORTUNITIES-
The opportunities for India petrochemical industry are enormous in the
present international scenario and India possesses a good potential of becoming a global
competitor in this sector.
Rapid globalization, changing technology, and modifications in the way business
is conducted today, have brought immense changes and enormous opportunities for
companies to extend and flourish globally in all kind of industries. Petrochemical and
related sectors are no exception to this. The petrochemical industry is a novel industry in
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India but it had played an important role in the country's change from an agrarian based
economy to an industrialized one.
There are promising opportunities for India petrochemical Industry, which is
expected to grow significantly in the future especially since the per capita consumption of
synthetic fiber and plastic in India is much lower in comparison to the global average.
The petrochemical industry in India produces more than 20% of the global petrochemical
output. The demand facilitators for the petrochemical industry include rapid urbanization,
new products introduction, and substitution of products and dynamics of the domestic
market.
In order to increase its presence in the global petrochemical industry, India needs
to leverage upon the opportunities India Petrochemical Industry. For this, the Indian
petrochemical industry needs to:
Enhance competitiveness to stimulate growth
Unlock its potential
The Petrochemical industry seeks to gear up its constitutional strengths with the
support of the accessibility of skilled human resource, strong technology base, and greatleaps of the Indian information technology. The focus is though export oriented and
tapping the unexploited potentials. To be successful in the efforts of becoming one of the
global players, there is a need of being strong in three dimensions:
To be a true marketer by setting up a customer service which would provide
services and solutions
To be a leader in cost by setting up international standards manufacturing units
and provide economies of scale
To be a leader in technology with a unique product development capability.
The government of India has provided satisfactory infrastructure to the Indian
petrochemical industry. As this industry needs a special kind of infrastructure, it is one of
the major areas of development for the government to undertake. With the approval of
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the policy of Investment Regions for the Petroleum, Chemical, and Petrochemical, this
has become easier. The infrastructure would act as a gear to the growth of the industry. It
would also add the advantage of grabbing the emerging opportunities in the
petrochemical sector.
1.1.14 Demand & Future:
Demand and Future of petrochemicals in India is heading towards further
growth. The growth statistics of the Indian GDP have been remarkable in the fiscal year
2006-07 which is at 9.4%. The foreign exchange reserves have surged ahead to USD 200
billion to which Petrochemical investments contributed significantly.
The demand for petrochemicals has increased and many skeptics have been silenced,
considering the recent use of petrochemicals in various sectors of the country. The
following are the sectors in which demand and future of petrochemicals are heading
towards positive growth:
Healthcare
Food preservation
Hardware
Transportation
Equipments in office
Foreign investments are also being made in the petrochemical industry of India
enabling great future prospects in the foreign trade of petrochemicals in India. With the
rise in demand for petrochemicals in India, many barriers to the growth of petrochemicals
in India have been decreasing during last few years and currently India is keen on
investments in foreign technology for the manufacturing of various petrochemical
products.
Mega chemical hubs are coming up with view to increasing foreign investments in
the Indian petrochemicals market. The West Bengal state Government for instance, has
worked out a new system for setting up five zones in this sector which is expected to
bring in investments amounting to USD 17.4 billion. Other such places include Gujarat,
Orissa and Karnataka.
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Currently, the size of the petrochemical industry has an estimated turnover of Rs. 450
billion.
The following products are in high demand:
Polyvinyl chloride
Polypropylene
Synthetic fibers and rubber
Jet fuel like, kerosene-fuel type
Olefin - ethylene
Polyethylene
Butadiene
Polystyrene
The leaders in this field are Reliance Industries and Indian Petrochemicals
Corporation Limited. Both have contributed as much as 65% share in the production of
petrochemical crackers. After these, Haldia Petrochemicals and Gas Authority of India
deserve to be mentioned. Globally, there is high demand for Indian Petrochemicals and
the benefits have been enjoyed by the domestic market since 2004.
However, the rising demands for petrochemicals could have been better if the
following hindrances could be taken care of: The pricing of petrochemicals
Increase in use of recycled plastic
Slow industrial growth of downstream plastic
1.1.15 Price Volatility:
The global petrochemicals industry has been affected by rise in price volatility
for years. Prices are less stable and are difficult to predict in recent times. As a matter of
fact, the uncertainty in prices of petrochemicals has affected the development of the
petrochemicals market of India on a global front.
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The chief reason for such unstable prices is the change in crude oil prices. The
market of petrochemicals in India on the global front is fairly large. The foreign
pharmaceutical trade is directed towards Middle East and China at large. The large
volatility in prices has called for implementation of risk management.
Though price volatility in the petrochemical market is highly unpredictable, there
lies a thin glimmer of hope during the spring and winter season‘s in India which is due to
the constraint of the available supply. Unfortunately, that is just a small ray of hope for
the petrochemical markets in the area of the price volatility.
The prices of petrochemicals are subject to the variations in prices of energy
commodities, which results in price volatility. The amazing thing about the prices of
petrochemical is that previously, they were believed to be based on the prices of the
finished goods for which they were used in but now they are sensitive to crude oil prices.
No doubt the size of the petrochemical market is smaller than the oil market and
this gives the petrochemical market the edge in increasing individual spot transactions.
This further aggravates the situation of price volatility. There is a sense of lowtransparency in the prices of petrochemicals.
Apart from the effect of prices of oil market, another major reason for price
volatility is the global Petrochemical market. China is emerging as a major buyer of
Petrochemicals. The industry there is growing rapidly which in turn has contributed to
increase in the global demand of petrochemicals.
Interestingly, the middle-east has a major share in the supply of ethylene
derivatives. The region accounts for the highest amount of surplus in this regard
amounting to 7 million mt. So price volatility is here to stay considering the fact that the
petrochemicals market is currently facing a huge boom.
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As such, price volatility has been affected to a certain extent by sophisticated and
new buyers. These buyers are demanding more value added products and are keen on the
quality, also increasing their contracts at the same time.
Suggestions for controlling price volatility have been worked on lately. They
include floors, swaps, cost collars, virtual integration, and caps.
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1.2 COMPANY PROFILE
MANGALORE REFINERY AND PETROCHEMICALS LIMITED
[MRPL]
“AN ISO 9001:2000 AND ISO 14001 CERTIFIED COMPANY”
The biggest Mangalore Petrochemicals Plant is known as Mangalore Refinery
and Petrochemicals Limited. Mangalore Refinery and Petrochemicals Limited is a
subsidiary of Oil and Natural Gas Corporation (ONGC)
ONGC – Mangalore Refinery and Petrochemicals Limited is located in a beautiful
hilly terrain north of Mangalore city. It was set up in Karnataka to meet the growing
needs of South India. It was initially set up as India‘s first ever Joint Stock Company in
the field of refineries which was promoted by Hindustan Petroleum Corporation Limited
and Indian Rayon Industries Limited and its associates like Grasim Industries, Hindalco,
Indo Gulf Fertilizers which are a part of Aditya Birla Group in 1987. It‘s an ISO
9001:2000 and ISO 14001 certified company. The unit has a well established
infrastructure including a state-of-the-art laboratory for the efficient measurement of product quality. The products are marketed and sold through Hindustan Petroleum
Company Limited [HPCL], who has a vast retail outlet network. The refinery project was
approved with a debt equity ratio of 4:1 without any form of resource finance from any
other institutions.
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The total plant consists of manufacturing facilities which were designed by
International consultant of repute under the project management consultation by m/s
Toyo Engineering Corporation Japan.
Out of the total refining capacity of India, the contribution of Mangalore Refinery
and Petrochemicals Limited is 8%. The organization is spread over and area of about
1800Acres with an asset base of over 7000crores.
1.2.1 SHAREHOLDING OF MRPL-ONGC
Company Name Percentage of Shares
ONGC 71.62%
HPCL 16.95%
Resident Individuals 8.54%
Non-R.I 0.62%
Domestics Company 0.71%
Non-D.C 0.48%
GIS & Subsidiaries 0.83%
Banks & Institution 0.20%
Mutual Funds 0.05%
M.R.P.L is an organization when asset base of over 7000crores.
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1.2.2 Share holding pattern of Mangalore Refinery and Petrochemical
Limited-
Table No. 2.1
Shareholders Percentage
Oil and Natural Gas Corporation Limited 71.62%
Hindustan Petroleum Corporation Limited 16.95%
Mutual Funds, Banks and Financial
Institutions
1.68%
Individuals / Private bodies 8.31%
Domestic and Non-Domestic Companies 1.44%
100.00%
Chart No. 2.1
72%
17%
8%
1%
1% 0%
1%
0%
0%
Shareholdings of MRPL
ONGC
HPCL
RESIDENT INDIVIDUALS
NON-R.
DOMESTIC COPM
NON-D.C
GIC & SUBSID.
BANKS
MUTUALS FUNDS
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The Mangalore Plant is dedicated to improving its supply of petrochemicals,
efficient technical support, maintaining quality in its products, and facilitating wider
distribution. MRPL is one of the medium sized ventures in the petrochemical sector.
Striving to live up to the standards of major petrochemical plants like RIL, and IPCL,
Mangalore Refinery and Petrochemicals Limited is aiming to increase its supply.
Mangalore Refinery and Petrochemicals Limited being the biggest Mangalore
Petrochemicals Plant, is looking forward to increasing the per capita consumption of
petrochemicals, equipping the petrochemical plant with latest technology.
Currently, it is setting up a plant which would deal in aroma based goods. The name
of the plant is linear alkyl Benzene (LAB) plant. The plant is also popular for its energy
conservation measures. The latest endeavors in this field have been enlisted below:
Sulphur recovery unit incinerator: Using amine flash column hydrocarbon vapors
Refinery drives: Using variable speed drives
LPG recovering: Hydrocracker unit stabilizer revamp
Crude Unit-2: Advances Process control
Compressor maintenance: Interconnecting Hydrocracker stabilizers
Mangalore Refinery and Petrochemicals Limited have a 3% share in equity. ONGC
has a major participation in the equity which is 46%, and the rest are shared by banks and
financial institutions. MRPL being a subsidiary of ONGC has a smaller participation in
equity. As such, the new petrochemical based aroma plant is estimated to be worth Rs.
4852 crores.
The aromatics petrochemical complex is proposed to be set up by 2010 and is
going to be a part of the Naphtha stream of Mangalore Refinery and Petrochemicals
Limited - yet another great step towards revolutionizing the Mangalore Petrochemicals
Plant.
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VISION
To be a world class Refining and Petrochemicals Company, with a strong emphasis
on Productivity, Customer Satisfaction, Safety, Health and Environment Management
Corporate Social Responsibility and Care for Employees.
MISSION
Sustain leadership in energy conservation, efficiency, productivity and
innovation.
Capitalize on emerging opportunities in the domestic and International market.
Strive to meet customers‘ requirements to their satisfaction.
Maintain global standards in health, safety and environmental norms with a
strong commitment towards community welfare.
Continuing focus on employee welfare and employee relations.
Imbibe highest standards of business ethics and values.
Sustained enhancement in shareholders‘ value.
QUALITY COMMITMENT
―MRPL-ONGC ensures stringent quality checks by testing maximum number of
samples as compared to the refinery not a single product goes out of the refinery without
laboratory certification act the product meet Bharat-1 and Euro-2 norms also other BIS
standards‖.
QUALITY CONTROL
―Quality control laboratory is established under technical services department.
the main objective of the laboratory is to provide analytical assistance to all units, round
the clock in addition to produce certification. it is responsible for exercising a strict
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control over the quality of the product manufactured and dispatched. the activities of
laboratory are as fallow‖.
Intermediate sample analysis from all the processing units.
Utility units, water treatment plant sample, plant and instrument air sample
and nitrogen sample.
Waste water treatment plant and treated effluent samples.
Plant bulk chemical analysis.
Scale and deposit sample analysis.
Research and development.
Investigation and failure analysis.
SOCIAL COMMITTED
―As a organization committed to the discharge of its responsibilities we have
to create a community development. The community development activities based on the
needs of the neighboring communities. The community development, medical and
educational activities in nearby village. Besides infrastructure needs such as roads,
playground, bus shelter etc. are built in the village.‖
HELTH AND SAFETY POLICY
―It is the policy of the company that every reasonable effort shall be made to
ensure that all employee have a safe healthy place to work and that the surrounding
environment. The prevention of all accidents particularly those involving personnel
injury or damage to property is recognized as well as to avoid hardship and suffering. It is
the duty of all and at all levels to promote and maintain safety in the operation and
maintenance of all plant and equipment.‖
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SAFETY:-
―Safety‖ 1st is our motto.
MRPL-ONGC is the convener of the Mangalore chapter of the national safety
council.
Safety and housekeeping committees regularly review the plant safety.
One of the best equipped live fires fighting ground is used for training all staff.
Mock fire drill and on sight emergency plan.
GREEN BELT
―MRPL-ONGC has also developed a green belt around the entire factory. The
plant species has been specially selected to blend with the local floor. Some of the species
are expected to act as Bio-Indicator. Till date more than 118000 sampling have been
planted.‖
WASTE WATER TREATMENT
―The waste water treatment plant installed treats refinery waste water containing
sulphide, phenol, ammonia Oil etc. So as to get treated water limits of ―Karnataka State
Pollution Control Board‖ (KSPCB). The treatment consists of Oil separation chemical
treatment, biological treatment, filtration the treated waste water is discharged into the
sea at the distance of 900m and depth of 6.5m‖
MRPL-ONGC is recycling about 70% of the treated waste water to cooling
tower. MRPL-ONGC is 1of the few refineries in the world which rescues the treated
waste water continuously‖.
ENVIORNMENT POLICY
―Company wants to achieve and sustain excellence in the petroleum refining by
producing quality product in an Eco-Friendly environment by adopting sound efficient
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technology. It also promotes environment responsibility and propagates the policy among
al the employees and promotes GREEN BELT‖
SPORTS, ENVIRONMENT AND OTHER ACTIVITIES
Conducting public awareness programs in environment, fire fighting and safety
awareness in the surrounding village.
Providing assistance for beach cleaning.
Organizing event like cricket events under PSPB.
Providing a teacher for the special school for the mentally challenged kids.
WELFARE MEASURES AND FACILITY
The company hires professionals and technology to under its activity to attract
and retain competent hand, attractive compensation package is formulated, consisting of
not only salary/wages, but also various other competent apart from statutory provident
fund. The major components are house rent allowance for those who are not staying in
company township, conveyance, reimbursement, uniform allowance, education
allowance, medical reimbursement leave travel assistance etc.
Depending on the requirement, merit and experience of the incumbent, they are
placed in suitable grades. Perquisites applicable to the grade are provided to the
employee. Wearing safety helmet and safety shoes within the plant battery and safety
shoes with in plant battery limits is a prerequisite to go to work. This is provided by the
company.
To meet the heaves rains that is there usually for four month in a year. Rainy wear
such as rain-coats and gum-boots are provided to employees as per eligibility. Accident
insurance covers, round the clock, under units any losses that may be incurred due to any
employment injury or otherwise of the employees. Hospitalization insurance cover not
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only under writes the medical expenses due to hospitalization of the employees but also
the dependents of the employees. Employee‘s benevolent fund extends financial support
when chronic or prolonged illness, strikes an employee. The company contributes as that
of the member every month, apart from the initial 1time corpus grant of one lacks.
The following are some other facilities which are given by MRPL-ONGC:-
Vehicle purchase/loan scheme.
Long service emblem.
Transfer entitlements
Superannuation benefits
Gratuity
Furniture purchase scheme
Benevolent fund
Festival advance
Marriage gift
Laptop desktop computer facility provided at the residence of employees etc.
1.2.4 ACTIVITIES-
MRPL has been established to carry out the objectives specified in the
Memorandum & Articles of Association of the Company. The main activities of MRPL
are refining of crude oil and producing and marketing value added petroleum and
petrochemical products.
The major products produced from the refinery are LPG, Naphtha, Motor Spirit (Petrol),Reformate, Kerosene, Aviation Turbine Fuel, High Speed Diesel (HSD), Fuel Oil,
Bitumen (Bulk and packed), Sulphur.
MRPL does its business operation within the objectives specified in the
Memorandum & Articles of Association in a most fair and transparent manner. MRPL
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also endeavors to protect interest of its stakeholders as well as to maximize the value of
the shareholders. The Atmospheric, Vacuum Distillation Units and Naphtha Splitter Unit
designed by M/s Engineers India Ltd., are heat integrated, using Pinch Technology to
achieve high-energy efficiency, thereby reducing Fuel Oil consumption and in turn
reducing air emissions.
The Hydro cracker Units produce high quality Sulphur free Diesel and ATF. The
Plant is designed for 100 percent conversion of low value Vacuum Gas Oils to lighter,
low Sulphur valuable products.
MRPL Oil Jetties are located inside the NMPT (New Mangalore Port Trust).
There are 6 lines running from Refinery to coastal terminal out of which four are White
Oil lines and 2 are Black Oil lines. Out of 2 Black Oil lines one is a Crude receipt line of
36‖ diameter and other one is used for Furnace oil/ LSHS service. From coastal terminal
hook up is taken for supplying products to IOCL and BPCL. There are 5 Oil Jetties inside
the NMPT. J-10 and J-11 are with MRPL, J-9 is with IOCL and J-12 is a multi-user Jetty.
As of now we have not berthed our vessels at multi-user Jetty but hook is also available
for that Jetty. We can berth Crude vessel only at J-10 and 11. At virtual Jetty we can load
MS, HSD and FO. In each Jetty we have six marine loading arms at J-10/11 out of which4 are for Black Oils and two are for White Oils. Out of 4 Black Oil-loading arms all four
can be used for crude unloading but only 2 loading arms can be used for loading.
QUALITY POLICY
MRPL implemented Quality Management System (QMS) as per ISO 9000:1994
standards from December 1999 and after obtaining its first accreditation. Later in January
2003, MRPL upgraded its QMS to ISO 9001:2000 standards and was accredited on
March 13, 2003 by TUV Rhineland. This accreditation is an important milestone in the
Company‘s continuous quest for excellence in quality and total customer satisfaction.
This certifies that the production system and quality of the Refinery products has
been established in conformance with international standards.
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QMS is diligently followed throughout the Refinery (wherever applicable).
Having definite quality objectives, continual improvement projects, conducting regular
corrective actions and preventive action sessions have helped to achieve improvements in
the system. Internal audits for individual departments, management review meetings,
awareness programmes for employees, collection and review of customer feedback and
customer meet programmes are other steps to confirm to standards.
1.2.5 INFRASTRUCTURE FACILITIES:
General
Black topping of village roads.
Construction of Bus shelter at Bala Village
Construction of Culvert at Kuthethur Village
Construction of Road at Kalavar Village
Construction of Samudaya Bhavana at Bala Village
Desilting of major storm water drains in the villages and in the Mangalore
Corporation area.
Education:
MRPL School continues to get grant of about Rs. 1.5 Million per annum from
the company and about 65% of the children are from the neighboring places.
Up gradation of rural school in the Fishermen village of Panambur and other
neighboring schools.
Donation of furniture and computers to Schools.
Donation of pressure cookers to various schools for Midday Meal programme.
Scholarships to Students – 31 Schools covering 190 Students.
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Health:
Running a free Primary Health Centre at the Rehabilitation colony in Chellairu
Village.
Donation of Ambulance to the Red Cross Society at Mangalore.
Conducting Artificial Limb Camp and providing free artificial limbs to the
physically challenged.
Free Medical and Eye camps.
Providing medical facilities at for the neighboring community at MRPL hospital.
Helping in Malaria, Polio and Filarial eradication programmes of District Health
Department.
Drinking Water Facility:
Providing financial assistance to the Rajiv Gandhi Drinking Water Project, which
provides drinking water facility to a group of 10 villages.
Providing drinking water facility at Permude village.
Providing approx. 5 kms. water pipeline to take water from Kaikamba to the
Project Displaced Rehabilitation Colony.
Digging Bore wells in Villages.
1.2.6 ORGANISATION GRADE STRUCTURE
Chairman, Managing Director and Directors
E8 (M1) – Group General Manager
E8 (M2) – General Managers
E7 (M3) – Dy. Gen. Managers
E6 – Chief Manager E5 (M4) – Sr. Managers
E4 (M5) - Managers
E3 (M6) – Dy. Managers
E2 (M7) – Sr. Executive, Sr. Engineers
E1 (M8) – Executive, Engineers
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1.2.7 REFINERY MANUFACTURING UNITS
Crude distillation unit (CDU)
Vacuum distillation unit
Naphtha Splitter unit
Bitumen plant
Visbreaker unit
Hydro cracker unit
Kerosene merox
LPG merox
Hydrogen Reformer (PSA)
Catalytic Reformer (CCR)
Sulphur Recovery unit (SRU)
Sour water Stripper Unit single
stage / two stage
Offsite / pipeline / utility
Cooling water unit
HW captive power plant
Waste water treatment plant
(WWTP)
GOHDS (ISOM)
Mix xylene
1.2.8 DEPARTMENT AND STRUCTURE
The departments at MRPL can be classified into two categories on the basis of
nature of work discharged. They are:
I. Technical Department
II. Non Technical Department
The other departments classified under these departments are :
I. Technical Department
o Operation Department
o Production, Planning and control department.
o Maintenance
-Electrical
- Mechanical
- Instrumental
o Information system
o Laboratory
o Fire and safety office
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o Documentation centre
o Power plant
o Hydrogen plant
o Hydro cracker unit
o Oil movement and storage
o Distillation plant
- Vaccum distillation
- Crude distillation
II. Non Technical Department
o Personnel and administration department.
o Finance Department
o Material Department
1.2.9 MAIN DEPARTMENTS
Human Resource Department
Marketing Department
Materials Management
Vigilance Department
Purchase Department
Finance Department
Information Systems
Technical Department
Operations Department
Fire and Safety
Technical Services
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CHAPTER 2
2.1 PRODUCT PROFILE
MANUFACTURING FACILITIES
MRPL has the unique distinction in India of having two hydro crackers and two
CCR units, which produce high quality fuels.
1. Crude & Vacuum distillation unit:-
The atmospheric and vacuum distillation units and Naphtha splitter unit
designed by EIL are heat integrated to achieve high energy efficiency there by
reducing fuel oil consumption and in turn reducing air emissions.
2. Hydro cracker unit: (Technology: UOP, USA):
The hydro cracker unit in India and first in southern part of India produces
high quality sulphur – free diesel, Kerosene and ATF. The plant is designed for
100% conversion of heavy low value gas oils to lighter and valuable products.
Diesel from hydro cracker unit has a high cetane number, which facilitates.
3. Visbreaker Unit:
Shell soaker Visbreaker technology under the license of ABB lummus of
Holland has been adopted to upgrade heavy vacuum residue to Naphtha and gas oil.
This is the first unit in India to have vacuum flash column, producing vacuum gas oil,
which is used for supplementing the feedstock to hydro cracker unit.
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4. CCR Plat forming unit:
A state of the art unit, the continuous catalytic regeneration type plat forming
unit (CCR) produces lead – free, high octane motor spirit (petrol). Hydrogen produced
as a by-product, is used in the hydro cracker unit.
5. Merox (Technology: UOP, USA):
LPG and Kerosene Merox units covert mercaptons to disulphide. Reformat
with RON 110 is also exported for production of premium grade petrol and also for
extraction of P-xylene, a high value aromatic component used in the production of
PTA and polyester.
6. Hydrogen:
The hydrogen plant designed by M/s. KTI, Holland produce hydrogen by
steam reforming of Naphtha Hydrogen purity of 99.9% is achieved through Pressure
Swing Adsorption (PSA) unit the technology for which is given by UOP.
7. Bitumen:
This unit employs the highly efficient Bitumen process given by M/s. Porner
of Austria to produce paving grade asphalt.
8. Power Plant:
Keeping in view the power situation in the district, MRPL as installed a 112.5
MW power plant to meet its entire power requirements, through five turbo generator
of 22.5MW each. There are seven boilers of 140Mt/Hr capacity each.
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concentration. A powerful odorant, ethanethiol, is added so that leaks can be detected
easily. The international standard is EN 589. In the United States, thiophene or amyl
mercaptan are also approved odorants.
LPG is a low-carbon-emitting hydrocarbon fuel available in rural areas, emitting
81% of the CO2 per kWh produced by oil, 70% of that of coal, and less than 50% of that
emitted by coal-generated electricity distributed via the grid. Being a mix of propane and
butane, LPG emits less carbon per joule than butane but more carbon per joule than
propane. As a low-carbon, low-polluting fossil fuel, LPG is recognized by governments
around the world for the contribution it can make towards improved indoor and outdoor
air quality and reduced greenhouse gas emissions. LPG is widely available and can be
used for hundreds of commercial and domestic applications. LPG is also used alongsiderenewable technologies, as well as with decentralized electricity generation (Combined
heat and power systems — See Uses - Rural heating) to help reduce carbon emissions on
a local level.
NAPHTHA:
Used in Fertilizers and Petro Chemical Industries. Naphtha normally refers to a number
of different flammable liquid mixtures of hydrocarbons, i.e. a distillation product from
petroleum or coal tar boiling in a certain range and containing certain hydrocarbons. It is
a broad term covering the lightest and most volatile fraction of the liquid hydrocarbons in
petroleum.
In petroleum engineering, full range naphtha is defined as the fraction of
hydrocarbons in petroleum boiling between 30°C and 200°C. It consists of a complex
mixture of hydrocarbon molecules generally having between 5 and 12 carbon atoms. It
typically constitutes 15-30% of crude oil, by weight.
Light naphtha is the fraction boiling between 30°C and 90°C and consists of
molecules with 5-6 carbon atoms.
Heavy naphtha boils between 90°C and 200°C and consists of molecules
with 6-12 carbons.
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Naphtha is used primarily as feedstock for producing high octane gasoline (via the
catalytic reforming process). It is also used in the petrochemical industry for producing
olefins in steam crackers and in the chemical industry for solvent (cleaning) applications.
Common products made with it include lighter fluid, fuel for camp stoves, and some
cleaning solvents.
MOTOR SPIRIT:
Generally known as Petrol which is 100% free from lead. Gasoline or petrol is a
petroleum-derived liquid mixture which is primarily used as a fuel in internal combustion
engines. It is also used as a solvent, mainly known for its ability to dilute paints.
It consists mostly of aliphatic hydrocarbons obtained by the fractional distillation of
petroleum, enhanced with iso-octane or the aromatic hydrocarbons toluene and benzene
to increase its octane rating. Small quantities of various additives are common, for
purposes such as tuning engine performance or reducing harmful exhaust emissions.
Some mixtures also contain significant quantities of ethanol as a partial alternative fuel.
Most current or former Commonwealth countries use the term petrol, abbreviated frompetroleum spirit. The term mogas, short for motor gasoline, is used to distinguish
automobile fuel from aviation gasoline, or avgas. In British English, gasoline can refer to
a different petroleum derivative historically used in lamps, but this usage is relatively
uncommon.
AVIATION TURBINE FUEL [ATF]:
It is used as Fuel in domestic aircrafts and defence aircrafts. Aviation fuel is a
specialized type of petroleum-based fuel used to power aircraft. It is generally of a higher
quality than fuels used in less critical applications such as heating or road transport, and
often contains additives to reduce the risk of icing or explosion due to high temperatures,
amongst other properties.
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Most aviation fuels available for aircraft are kinds of petroleum spirit used in
engines with spark plugs i.e. piston engines and fuel for jet turbine engines which is also
used in diesel aircraft engines. Alcohol, alcohol mixtures and other alternative fuels may
be used experimentally but are not generally available.
Avgas is sold in much lower volumes, but too many more individual aircraft,
whereas Jet fuel is sold in high volumes to large aircraft operated typically by airlines,
military and large corporate aircraft.
HIGH SPEED DIESEL [HSD]:
This is used in all heavy vehicle trucks, tankers, railways etc. Normal diesel fuel as used
in, say, heavy road transport, has a very finite rate of burning when ignited in a cylinder,
thus the speed it can impart continuing pressure on a descending piston is also limited.
The smaller "high speed" diesel motors use a more volatile blend, and do not run the very
high compression levels of heavy diesel engines. Thus they can rotate faster.
KEROSENE:
It is used as a fuel. Kerosene, sometimes spelled kerosine in scientific and
industrial usage,[1]
also known as paraffin in UK and South Africa, is a combustible
hydrocarbon liquid. The name is derived from Greek keros. The word Kerosene was
registered as a trademark by Abraham Gesner in 1854 and for several years only the
North American Gas Light Company and the Downer were allowed to call their lamp oil
kerosene. It eventually became a generalized trademark.
Kerosene is widely used to power jet-engine aircraft (jet fuel) and some rockets,
but is also commonly used as a heating fuel and for fire toys
FUEL OIL:
This is basically used in Furnace and Boilers. Fuel oil is a fraction obtained from
petroleum distillation, either as a distillate or a residue. Broadly speaking, fuel oil is any
liquid petroleum product that is burned in a furnace or boiler for the generation of heat or
used in an engine for the generation of power, except oils having a flash point of
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approximately 40 °C (104 °F) and oils burned in cotton or wool-wick burners. In this
sense, diesel is a type of fuel oil. Fuel oil is made of long hydrocarbon chains,
particularly alkanes, cycloalkanes and aromatics. The term fuel oil is also used in a
stricter sense to refer only to the heaviest commercial fuel that can be obtained from
crude oil, heavier than gasoline and naphtha.
BITUMEN:
MRPL produce different grades of Bitumen which is used for laying roads
highways and airport runways. Bitumen is a mixture of organic liquids that are highly
viscous, black, sticky, entirely soluble in carbon disulfide, and composed primarily of
highly condensed polycyclic aromatic hydrocarbons.
Naturally occurring or crude bitumen is a sticky, tar-like form of petroleum which is so
thick and heavy that it must be heated or diluted before it will flow. At room temperature,
it has a consistency much like cold molasses.[1]
Refined bitumen is the residual (bottom)
fraction obtained by fractional distillation of crude oil. It is the heaviest fraction and the
one with the highest boiling point, boiling at 525 °C (977 °F).
SULPHUR:
Trucks directly dispatch this from Sulphur recovery unit. Sulphur is the chemical
element that has the atomic number 16. It is denoted with the symbol S. It is an abundant,
multivalent non-metal. Sulfur, in its native form, is a bright yellow crystalline solid. In
nature, it can be found as the pure element and as sulfide and sulfate minerals. It is an
essential element for life and is found in two amino acids: cysteine and methionine. Its
commercial uses are primarily in fertilizers, but it is also widely used in black
gunpowder, matches, insecticides and fungicides. Elemental sulfur crystals are commonly
sought after by mineral collectors for their brightly colored polyhedron shapes. In
nonscientific contexts, it can also be referred to as brimstone.
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3. FINANCIAL ANALYSIS OF MRPL.
3.1. Leverage Ratios (Capital Structure)
3.1.1 Debt Equity Ratio-The Debt Equity Ratio is the relative proportion of long term debt and shareholders‘
equity.
Table: 3.1
Year Long Term Debt(in
Rs million)
Shareholders‘ equity
(in Rs million)
Debt Equity Ratio
(in Rs million)
2005 34665.33 21636.33 1.60
2006 3307.72 23953.39 1.38
2007 19688 37567.96 0.7
2008 19468 37829.43 0.5
2009 19868 49670 0.4
Interpretation
The ideal Debt Equity Ratio is 2:1. As such if the debt is less than 2 times the equity,
the logical conclusion is that the financial structure of the concern is sound and so the
stake/risk of long term of creditors is relatively less. On the other hand, if the debt is
more than two times the equity, the conclusion is that the financial structure of the
concern is weak and so the stake/risk of long term of creditors is relatively high.
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3.1.2 Debt to Asset Ratio-
The Debt to Asset Ratio is the proportion of total debt to total assets.
Table: 3.2
Year Total Debt(in Rs
million)
Total Assets(in Rs
million)
Debt to Asset Ratios
(in Rs million)
2005 24665.33 82762.44 0.42
2006 32072.72 83011.38 0.40
2007 23683.07 88501.21 0.27
2008 20580.68 37829.43 0.54
2009 19868 40729 0.18
Interpretation
The above chart indicates that there is increase in the debt to asset ratio in the year
2005-0.42, in 2006-0.40 and in the year 2007-0.27, but again it has increased to 0.54 in
2008. But has reduced to 0.18 in 2009. The main reason being the Phase III project begun
during this year.
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3.2. Profitability Ratios
Profitability Ratios related to Sales:
3.2.1 Gross Profit Margin-
It shows the gap between revenue trading and trading costs. It indicates the amount of
Gross Profit for every Rs. 100 of sales.
Table: 3.3
Year Gross Profit(in Rs
million)
Sales(in Rs million) Gross Profit
Margin(in Rs million)
2005 17183.90 185083.35 9.28
2006 14075.04 249675.40 5.64
2007 15847 284646 5.6
2008 20470 325751 6.3
2009 21509 382438 5.6
Interpretation
The actual gross profit is compared with the gross profit ratio of the previous year and
those of the other concern carrying on similar business. If the actual gross profit ratio is
higher, it is an indicator of good results. On the other hand, if the actual gross profit ratio
is too low, it is an indicator of poor results.
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3.2.2 Operating Profit Ratio-
It shows the operational efficiency of the firm. Lower operating ratio shows the
higher operating profit and vice versa.
Operating Profit Ratio= Earnings before income tax × 100
Sales
Table: 3.4
Year EBIT(in Rs million) Sales(in Rs million) Operating Profit
Ratios (in Rs million)
2005 16904.93 185083.35 9.13
2006 8103.50 249675.40 3.25
2007 13034.81 286331.40 4.55
2008 18815.37 325751.28 5.78
2009 18105.56 382438 4.73
Interpretation-
The ideal Operating Profit Ratio is 10%. So an Operating Profit Ratio of 10% or
more is an indicator of the operating efficiency of business. An Operating Profit Ratio of
less than 10% is an indicator of the operating inefficiency of business.
The above data shows that the Operating Profit Ratio was 9.13 in 2005. In the
year 2006 it has reduced to 3.25 and again increased to 4.55 and 5.78 in 2007 and 2008.
And during 2009 it again deteriorated to 4.73.
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3.3 Ratios:-
3.3.1 Earnings per share
The profit available to ordinary share holder‘s thus shareholders are represented by net
profit after taxes and preference dividend.
Net profit available to equity share holders
Earnings per share= ----------------------------------------------------------
No. of equity shares outstanding
Table: 3.5
Year
Net profit available
to equity
shareholders(Rs in
millions)
No of equity shares
outstandingEarnings per shares
2005 8797.58 1752.60 5.02
2006 3716.15 1752.62 2.12
2007 5255.23 1752.62 3.00
2008 12722.28 1752.64 7.26
2009 11919.72 1752.90 6.8
Inference: More the earning per share the better is performance and the prospectors of
the company higher earnings per share suggest the profitability of more cash dividend or
b onus share and raises in the market price of the share.
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3.3.2 Dividend per Share: DPS is the net distributed profit belonging to the shareholders
dividend by the number of organization ordinary shares outstanding.
Table: 3.6
Year
Dividend paid to Equity
Shareholder(Rs. in
millions)
No of Equity Share
Outstanding(Rs. in
millions)
Dividend Per
Share (Rs. in
millions)
2005 1752.61 1752.61 1.00
2006 1227.03 1752.62 0.20
2007 1402.32 1752.62 0.802008 2103.48 1752.64 1.20
2009 2103.48 1752.90 1.20
Inference: In 2004 the company did not pay dividend to the Equity Shareholders, in
2005 dividend per share was rupee 1. In 2007 dividend per share was 0.80 and in the year
2008 and 2009 rupee 1.20.
3.3.3 Dividend Payout Ratio: D/P Ratio can be found out by dividing the DPS by EPS.
Thus
Dividend per Share
Dividend Payout Ratio= --------------------------------------- *100
Earnings Per Share
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Table: 3.7
Year DPS(Rs. in millions)
EPS(Rs. in.
millions)
Dividend Payout
Ratio
2005 1.00 5.02 0.20
2006 0.70 2.12 0.33
2007 0.80 3.00 0.27
2008 1.20 7.26 0.16
2009 1.20 6.8 17.64
Inference:
A low payout ratio suggests that there is good chance of appreciation in the price
of share. On the other hand, a high payout ratio suggests that a chance of price in the
share is dim. As such, an investor who is interested in the appreciation in the price of
share would invest in the share of company having low payout.
It indicates the proportion of earning available to Equity Shareholder when this
ratio is deducted from 100, it will give the percentage of profit retained.
The above data shows that there is more investment opportunity in the firm; it
retains most of its earnings. This will raise the share value of the firm in the market
instead of going for fresh issue or raising loan retain earning is one of the best source of
finance.
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3.3.4 Dividend Yield Ratio:
The Earning Yield may be defined as the ratio of earning per share to market
value per ordinary share. It is calculated as follow:
Dividend per Share
Dividend Yield Ratio= ------------------------------------- *100
Market Price Per Share
Table: 3.8
YearDPS(Rs. In.
millions)
EPS(Rs. In.
millions)
Dividend Yield
Ratio (Rs. In.
millions)
2005 5.02 47.33 10.56
2006 2.12 42.50 4.99
2007 3.00 33.85 8.86
2008 7.12 78.85 9.29
2009 1.20 6.8 17.64
Inference:
The actual Dividend Yield Ratio of company is question should be compared with
the Dividend Yield Ratio of the other similar concern. If the dividend yield ratio of the
company in questions is more than that of other similar companies. It is an indication of
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the investors that it is worth investing the share of the company in question. On the other
hand if the dividends yield ratio of the company in question is less than that of other
similar companies. It is suggest to the investor that the share of the company in question
or not attractive.
3.3.5 Price Earnings Ratio: P/E ratio is closely related to the earning price ratio. It is
calculated as follow:
Market price of share
Price Earnings Ratio = ------------------------------------------
Earnings Per Share
Table: 3.9
Year
Market price of
Share (Rs. In.
millions)
EPS (Rs. In.
millions)
Price Earnings
Ratio(Rs. In.
millions)
2005 47.55 5.02 9.47
2006 42.50 2.12 20.05
2007 33.85 3.00 11.28
2008 78.10 7.26 10.76
2009 68.5 6.8 10.07
Inference:
The higher price earnings ratio, the better are the chance of appreciation. In the
Market Price of Shares a measure for determining the value of share. It is also used to
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measure the Rate of Return expected by Investor. Above table shows that in the year
2007 the Price Earnings Ratio was 11.28 and it was decreases to 10.76 in the year 2008.
CHAPTER 4
RESEARCH METHODOLOGY
4.1 STATEMENT OF THE PROBLEM
In the current system, there is no provision for fixing of goals and the key
performance areas in advance. There is no direction or guideposts for the
employee to follow and perform throughout the year.
In the current system, the review is held on an annual basis. Therefore, the
evaluation is done at the end of the year, the expected levels of performance are
known only at the end of the year.
Reward in the existing system is in the form of promotions. This brings the
promotional policy into picture. This is a major problem. The existing policy
clearly specifies a minimum performance rating and time period for the appraisee
to qualify for promotions. All the employees who qualify are given promotions
subject to vacancies at higher levels. In lower levels, the promotions are time
bound. It does not make any performance distinctions and rewards superior and
inferior alike. This kills motivation of the employees, who have performed
exceedingly well, to maintain the same level of performance.
The self-appraisal forms that are given to the employees fils to ask them to state
the conditions under which they performed. There is no provision for employees
to state about facilitating and hindering factors that had a bearing on their
performance. It is not possible to get a truly objective picture of performance
without consideration of these factors.
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Another area of concern is the presence of only superior appraisal. This has
pitfalls like favoritism, victimization coming into the appraisal process. In such a
case, a situation arises where the appraisee is evaluated not only on the basis of
his job related performance but also on his relations with his superiors. In such a
case, the judicious distribution of awards, which is one of the main objectives of
the performance appraisal, is affected.
Again, it is not mandatory on the part of the appraisers to show the final rating
and the recommendations to the appraisee. Now, a situation might arise where
some appraisers show the ratings and some don‘t. This could lead to straining of
relationship between the appraisee and the appraiser, if the appraiser of a
particular appraisee does not show the final rating and recommendations whilethat of another appraisee does. This leaves a room for suspicion in the mind of
employee, who is not shown his final rating.
Another area of concern is that the system does not accept a normal statistical
distribution in terms of performance. In the existing system, there is no check
mechanism that ensures the appraisers are not too lenient or play safe. There is a
possibility that all appraisees get the same rating irrespective of performance. This
may happen when the appraiser rates everyone excellent, just to gain the
subordinates ‗goodwill. This also could be dangerous to the motivational levels of
the appraisees who have performed well.
4.2 INTRODUCTION TO THE STUDY
An organization‘s goal can be achieved only when people put their best efforts how to
ascertain whether an employee has shown his or her best performance on given job? The
answer is performance appraisal it has been said the process of reviewing employees
performance of the whole organisation in turn is managed monitoring the performance of
the organisation is a vital process, since it is the only through the realization of at least an
adequate performance that the organisation can hope to achieve its objectives and
continue to survive and develop.
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Performance appraisal is essential to understand and improve the employee‘s
performance. In fact, performance appraisal is the basis for HRD. It is viewed that
performance appraisal is useful to decide upon employee promotion/ transfer, salary
determination and the like. But the recent developments in human resources management
indicate that performance appraisal is the basis for employee‘s development.
Performance appraisal indicates the level of desired performance level, level of actual
performance and the gap between these two. This gap should be bridged through human
resources development techniques like training, executive development etc.
Performance appraisal is a method of evaluating the behavior of employees in the
work spot, normally including both the quantitative and qualitative aspects of job
performance. Performance here refers to the degree of accomplishment of the tasks that
make up an individual‘s job. It indicates how well an individual is fulfilling the job
demands. Often the term is confused with effort, but performance is always measured in
terms of results and not efforts.
4.2.1THE APPRAISAL PROCESS
1. The first step in the appraisal performance process is the determination of
standard of performance based on the organizational objectives & job
descriptions.
2. The next step of performance appraisal is the measurement of employees
performance against the pre-determined goal & standards.
3. The next step is the actual process of measurement. Performance appraisal has to
be a continuous process & feedback should be given to the employee at regular
intervals.
4. The next step is the very critical step & involves communicating the result of the
appraisal to the employee concerned.
5. Once appraisal is finalized after discussing it with the employees, it have to be put
effective use.
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4.2.2PERFORMANCE APPRAISAL METHODS
1. Management by objective or goal setting.
2. Graphic rating scale.
3. Work standard approach.
4. Essay appraisal.
5. Critical incidence method.
6. Forced choice rating method.
7.
Point allocation method.8. Ranking method.
9. Check list.
10. Behavioral anchored rating scale.(BARS)
11. 360 degree performance appraisal.
12. Team appraisal.
13. Balanced scorecard method.
1) MANAGEMENT BY OBJECTIVE (MBO)
The main aspect of MBO is clear & well defined goals, a definite time span to achieve
the goals, action plan & finally, timely & constructive feedback. It is also called a goal
setting approach; MBO is more commonly used for managers & professionals.
2) GRAPHIC RATING SCALE
This method of appraisal requires the rater to rate the employee on factors like quantity &
quality of work, job knowledge, dependability, punctuality, attendance etc. This method
is also used for performance appraisal of employees. They check their employees daily
by using this method.
3) WORK STANDARD APPROACH
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This method of appraisal is more suitable in a manufacturing scenario, where the goals
are pre determined work standard. These work standards can be set based on the average
output of a typical employee in the organization or by bench marking against the work
standard of a competitor in a similar business.
4) ESSAY APPRAISAL
In the essay appraisal method, the appraiser prepares a document describing the
performance of the employees. Questions or guidelines are provider to the appraiser
based on which analyses & describes the employees‘ performance.
5) CRITICAL INCIDENT METHOD
In this method of performance appraisal, the appraiser makes a note of all the critical
incident that reflect the performance & behavior of the employee during the appraisal
period. These are recoded as & when they occur & can demonstrate either positive or
negative traits or performance.
6) FORCED CHOICE RATING METHOD
In this method the appraiser is required to assign ranks to different attributes are all
seemingly positive, but have different weights which are unknown to the appraiser. Once
the employees‘ attributes are ranked the human resource department applies the weights
& arrives at a score which is the final appraisal score.
7) POINT ALLOCATION METHOD
In this method of appraisal, the appraiser has to allocate points to different members in
his team. He has at disposal , a specific number of points which he has to distribute
among his team members, based on their performance during the appraisal period.
8) RANKINNG METHOD
There are three commonly used methods of ranking namely alternation, paired
comparison & forced distribution. The first two methods are used when there are only a
few employees to be ranked, whereas forced distribution method is used in large
companies which have thousands of employees.
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9) CHECKLIST
In this method the rater has to respond ‗yes‘ or ‗no‘ to a set of questions which assess the
employee‘s performance & behavior. Normally weights are attached to each of these
questions based on which the final appraisal score of the employee is calculated.
10) BEHAVIOR ANCHORED RATING SYSTEM (BARS)
BARS concentrates on the behavioral traits demonstrated by the employees instead of his
actual performance. Some of the other methods like graphic rating scale & checklist also
measure the behavior based on the assumption that desirable behavior result in effective
performance.
11) 360 DEGREE PERFORMANCE APPRAISALS
A 360 degree appraisal system aims at a comprehensive & objective appraisal of
employee performance. In a 360 degree appraisal system the employees‘ performance is
evaluated by his supervisor, his peers, his internal external customers, his internal
external suppliers & his subordinates. This system reduces the subjectivity of a traditional
supervisor appraisal.
12) TEAM APPRAISAL
In the new economy era, where team work is essential for any venture to succeed, team
appraisal has emerged as one of the best tool for the performance management. In the
team appraisal method the individual team member evaluate their colleagues in the team
& provide feedback.
13) BALANCED SCORECARD
The balanced scorecard as a method of measuring performance channelizes the efforts of
people to achieve organizational goals. The implementation of balanced scorecard
involve formulating a strategy & deciding what each employee needs to do to achieve
the objectives based on strategy.
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4.2.3 PERFORMANCE APPRAISAL AT MRPL
Performance appraisal as a tool was introduced in MRPL by the end of the year
1996. Given below are the features of the Performance appraisal system for the
management cadre at MRPL.
Source of appraisal is the traditional superior appraisal. The reporting officer is the
immediate supervisor and reviewing officer is the boss of the immediate supervisor.
The key performance areas are not usually fixed in advance. They are identified at
the end of the year. The identification is through discussions between the appraisers
and the appraisee.
The appraisee is assessed against managerial traits. The traits are common to all
grades of employees. Weightage is given to performance against key performance
areas as well as the management traits while assessing the performance of the
appraisee.
Performance is also rated. Here a behaviorally anchored rating scale used. The
rating scale is used. The rating scale is 5 point rating scale.
The reward in the existing system is in terms of promotion to the next grade and
annual increments. There are no financial incentives schemes like performance
related pay in the system. Performance appraisal is the major factor governing the
promotional and annual increment decisions in addition to experience in the
relevant scale and qualification.
Explanation of ratings with regards to each trait, objectives and process of appraisal
are given in separate annexure.
Performance review is been done on an annual basis. It‘s done at the end of the
performance appraisal period.
The system has self- appraisal where the appraise assesses his performance against
the Key Performance Areas (KPA‘s). However, appraisee isn‘t allowed to rate his
performance.
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Training needs are identified in the system for both on the job and behavioral
training. The training needs identified for every individual are fed in the Human
Resources Information System (HRIS). The training needs are then compiled and
a training calendar is drawn. On the basis of this calendar the training programs are
organized.
4.3 SCOPE OF THE STUDY
The study is conducted to measure the level of performance among the employees at
MRPL. The study covers mainly the three departments namely Personnel department,
marketing department, finance department. The findings of the study are applied to whole
of the organization.
A study on performance appraisal prevailing in the industry will help us to know the
peace prevailing in the organization which is conducive to the normal functioning.
4.4 LITERATURE REVIEW
4.4.1 Performance Appraisal
A key input for the development and recognition of the importance of PerformanceManagement has been the more competitive environment with which organizations now
operate. With market globalization and increased competition increasingly from 3rd
world
countries, organizations became increasing pressure to increase productivity and reduced
costs. During the 1980‘s,a more holistic view was adopted considering all the influences
on Performance with a shift from simply performance measurements of outcomes to a
more sophisticated performance management approach, developing a more strategic
HRM approach to resource management (Marchington & Wilkinson, 2005) linking the
aims of the organization to performance of the individual.
Performance Management is a structured method of review which aims to link
together individual goals, departmental purposes and organizational objectives. In this
there is a clear strategic link between employee behaviour and the performance of the
organization. A useful definition of performance management was provided by Verweire
and Van Den Berghe (2004) as a ‗…comprehensive management process framing the
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continuous improvement journey by ensuring that everyone understands where the
organization is and where the organization needs to go to meet stakeholders needs.‘
The overall aim of Performance Management is to establish a high performance
culture. In this, employees would visualize as part of their function the requirement to
continually assist in improving the performance of the organization. They will also
perceive that they can influence important aspects of overall performance. This was
described by Horton and Farnham (1999) as a process of maximizing the value added
through the Performance Management such that the initial costs are exceeded by the
subsequent benefits. To achieve this, individuals and teams take responsibility for the
continuous improvement of the business developing their own skills and effectiveness
(Armstrong, 2006). By harnessing and developing the potential of the individual, the
organization will be best placed to achieve the strategic goals.
The principles of performance management have been summarized as follows
(Information Data Services, 1997):
1. Translates corporate goals into individual team, department and divisional goals.
2. It helps to clarify corporate goals.
3. It‘s a continuous and evolutionary process in which performance improves over time.
4. It relies on consensus and corporation.
5. It creates a shared understanding of what is required to improve performance and howthis will be achieved.
6. It encourages self management of individual performance.
7. it requires a management style which is open and honest and encourages two way
communication between superiors and subordinates.
8. It requires continuous feedback.
9. It should apply to all staff.
10. It shouldn‘t primarily be concerned with linking performance to finance.
These again point towards the development of the individual to become high
performers who will help achieve the strategic aims of the organization. Employees are
therefore the most important economic factor in achieving corporate aims of the
organization (Armstrong, 2006). But the development of employees or performance
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management in general isn‘t a one of occurrence. The most important message is that an
effective performance management is a continuous cycle.
The diagram below which is based on the model proposed by Deming (1986),
demonstrates one example of performance management cycle. Most performance
management cycles are similar in that they link together strategy and planning with
employees monitoring as well in reinforcing performance standards (Marchington &
Wilkinson, 2007). The Deming cycle links the various elements of management process
into a continuous process. The different elements can be analyzed as follows:
a. Plan is agreeing the objectives and competence requirements for the organization.
This‘ll identify the behavioral requirements, objectives and performance plans, and will
also enhance the knowledge and skills of the employees.
b. act is the actual carrying out of the work to achieve the objectives.
c. Monitor is the process of continually checking on progress towards the desired
objectives and responding to new demands.
d. Review is holding regular meetings to ‗stock take‘ and asses the progress and take
action where required for completing the cycle by moving into the planning stage
Source: http://derekstockley.com.au/h-performance-management.html
(Armstrong & Baron, 2007). Thus, performance management is hence considered as a
process and not a single event. As Deming‘s model shows, it operates as a continuous
cycle. The corporate strategic goals provide the starting point followed by agreement on
performance and development leading to the drawing up of plans between individuals
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and managers with continuous monitoring and feedback supported by formal reviews
(CIPD, 2008).
4.4.2 Are Managers Mean? By Derek Stockley.
Many employees seem to think that they are. In training sessions over the last twenty
years, in both the public and private sectors alike, I have received some comments
criticizing managers for being uncaring, inconsiderate, and bombastic or the like.
Comments on participant training evaluation forms have included comments like "this
training should be compulsory for all managers". Such comments show that employees
believe that managers need to develop their interpersonal and leadership skills. They also
indicate concerns about the way employees feel they are managed. When such concerns
are discussed with participants, a better picture emerges. Often some clarification is
required. Sometimes misunderstandings have occurred.
Unfortunately, this does not negate the impact of negative feelings in the first place.
Perception is different to reality, but it is perception that guides feelings. If employees
have a perception which is negative, then morale and performance will suffer.
The first thing is to be very conscious of how statements and actions may be
perceived. Managerial actions must match the rhetoric. Employees look for the behaviour
that supports the words. Many people can quote examples of managers talking about the
importance of customer service whilst simultaneously slashing operating budgets. This
mismatch between the rhetoric and actions constantly undermines the attempts made by
organisations to bring about cultural change.
Secondly, any consultant will tell you that the most frequently mentioned problem in
most organisations is communication. Communication flow throughout the organisation
is essential. Communication channels need to be adjusted for the more fluidorganisational structures and the new technologies.
Thirdly, managers need to pay constant attention to the people issues, particularly in
environments of change. Most people do not like change being forced on them. Some are
used to change. Some welcome it, particularly if they play a role in determining and
implementing it. The emphasis nowadays on increased participation in the workplace is
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partly a reflection of the environment of constant change. We need participation to reduce
the stress change causes.
One of the key issues now is increased workload across all organisational levels.
Increased workload has arisen because of restructuring, downsizing, increasedresponsibilities etc.
A real difficulty is determining whether a person has too much work, or
alternatively, is inefficient or ineffective. People can innocently confuse "busyness" with
efficiency or effectiveness. It is important to review activities and processes to assess
their importance and contribution. Morale and organisation culture may also be a factor.
One important factor is workload associated with the planning and implementation
of change. Often change activities have to be run in parallel with existing systems. For
example, the old payroll system still needs to be run whilst the planning, development,
testing and implementation of a new computer payroll system over a six month period is
carried out. The need to develop a new payroll system is not a good enough reason to
stop paying people for six months! This change will place a heavy responsibility and
workload on the payroll officer. Additional staff support may be required or maybe it is
possible to carry the additional workload for six months.
The additional work generated by change is often the key factor in workload
discussions. Workload increases caused by change activities can be justified in the short
term, particularly if the change brings better processes and increased efficiency.
Incremental change is particularly stress free i.e. make a change, reap the benefits and
increased productivity, which then frees time for more change activity, which when
implemented, then frees more time for change, etc. This approach keeps the workload at
a very manageable level.
If however, the changes come frequently and constantly, with little respite from
normal day to day requirements, then workload can become unmanageable. If this
continues, both the employee and the organisation suffer. These matters require constant
attention, as the damage may be hidden. For example, if customer service levels
deteriorate, it may be some time before impacts start to manifest themselves in
performance indicators.
As another example of the importance of people, research into organisational
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performance in the United States and elsewhere is now starting to question the merits of
corporate downsizing and the 'slash and burn' restructuring. Loyalty and trust are being
increasingly recognised as important elements if long-term performance is to be
achieved.All these examples highlight the need for organizations to be diligent in the
management of people. Changes have caused issues. Sometimes many issues have to be
responded to. All responses should include consideration of the human element. People
need to be assured that their interests and concerns are constantly being addressed. And
by the way, it is good, sound business practice too.
4.4.3 Effective Performance Appraisal. By Andrew E. Schwartz
To many managers, performance appraisals are nothing more than a tedious chore.
As a result, these managers overlook the problem-solving power of a properly conducted
appraisal. Other managers view employee reviews as a test of their own supervisory
capabilities; they often become fearful that they will not ―measure up‖ in their
employee‘s eyes.
Stress, anxiety, and fear often accompany performance appraisals both for the
employee being reviewed and for the supervisor conducting the appraisal. The end result
of all these negative and ambivalent feelings is an employee review which is incomplete,
sloppy, and ultimately ineffective. The simple truth is that by underestimating the
inherent power of performance appraisals, many managers are neglecting a major aspect
of their management roles. Understanding these feelings, overcoming them and
administering effective appraisals are important to the success of any manager. Many
times, managers do not take full advantage of performance appraisals simply because
they are unaware of the appraisal‘s overall role in management. It is important to
understand why performance appraisals are necessary to job situations: All employees
need periodic discussions with their supervisors to determine the effectiveness of their
performance. In addition, appraisals help supervisors insure that their own goals are being
met.
Moreover, it is crucial for the evaluator to fully comprehend both the positive and
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negative effects of performance-appraisals. Discovering a step-by-step method to
developing feasible performance appraisal strategies can help clarify appraisal situations
for managers by adjusting their perspectives on the true importance of performance
reviews. Only then can the appraisal be utilized effectively in problem-solving.
The First Step: Preparation: Preparation is the first step to any successful performance
appraisal. Both the appraiser and the employee must participate in this preparation. Each
participant must decide on specific instances — positive and negative — that are reflective
of the employee‘s performance. Each must also plan to discuss specific accomplishments
and how these accomplishments may be built upon in the future.
All appraisals must include each party‘s impressions of the worker‘s personal
development (and what changes, if any, need to be made). In addition, changes may be
required in the work environment, in shifts or in arrangements between the employee and
other workers to accomplish future performance goals.
Setting the Scene: The next step is the actual meeting during which a discussion takes
place between the supervisor and employee. The discussion needs to take place in the
supervisor‘s work area. During the appraisal both players need to feel equal.
Although most appraisals take place while seated at the supervisor‘s, many mangers find
it beneficial to sit facing the employee without a desk or barrier. This seating
arrangement encourages a more relaxed atmosphere, one that often is welcomed and
creates more open communication by both parties.
Getting the Point Across: At the beginning of the discussion, the supervisor needs to
always begin by defining exactly what will be covered and in what manner. (Nothing is
worse than a misunderstanding of intention in a performance appraisal situation). Any
misunderstandings will only create obstacles and conflicts in the relationship that
supervisors may have previously worked to break down. Furthermore, any
misunderstanding may cause one or both parties to become distracted-a possible problem
for any conversation, it is especially disrupting during an evaluation: Mark‘s boss Jane
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told him that she wanted to discuss his organization of the company‘s accounts payable
system. Both prepared privately by listing Mark‘s achievements and future goals. When
they met, Jane began by first discussing that the flow of work through accounts payable is
smoother than before. Then she abruptly changed the subject, listing serious system abusechanges, Mark (understandably) became confused and upset. Jane should have invoked a
more serious tone and perhaps given an overall review of the accounts payable system
(instead of breaking the review into two parts).
An issue that needs to always be discussed, aside from work performance, is
personal growth and development. It is important for the supervisor to listen for both the
emotional and logical content of an employee‘s responses. Also, after each point the
employee makes, the supervisor needs to summarize and give feedback. The evaluator
must also evaluate any points he or she does not understand. Only the speaker knows
what he or she is feeling, and a supervisor‘s attempt at understanding will make the
employee feel that the supervisor is really listening.
Listen and Learn: Active listening is the supervisor‘s primary role in an employee‘s
self-appraisal. When the employee has completed his or her self-appraisal, the supervisor
needs to respond in a constructive, positive manner-mentioning first the agreeable points,
then the disagreeable points. During this discourse, it is important that the supervisor be
non-judgmental and supportive. Even if the supervisor disagrees with a point the
employee made, the supervisor needs to not to be overpowering. (Doing so will only
cause defensiveness, a barrier to be avoided at all costs).
When discussing what is considered an employee‘s poor performance, the
employee must be encouraged to work with management to solve the problem.
Positioning such problem solving in ―we‖ or ―our‖ frames of reference (instead of to
―you‖) invites the employee to feel as if the supervisor is on his or her side. Finally, set
specific goals to be reviewed again within a specified period of time.
Defining Performance Problems: Often, appraisals do not follow such a clear-cut path:
Frequently, supervisors have trouble defining a problem with a employee‘s performance.
Such nebulous problems can include not working independently, a lack of enthusiasm or
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repeated mistakes. How can a manager you accomplish what needs to be done without
having to direct such employees every step of the way? Why do some employees really
care about their jobs while others do only what they are told (and then only if their
supervisor stands over them)?
4.4.4 What is the point of Performance Appraisal? By Robert Bacal
M.A
Robert Bacal is a noted author, keynote speaker, and management consultant. His most
recent books include Performance Management - A Briefcase Book , and ‘ The Complete
Idiot's Guide To Managing Difficult Employees.’
Probably the most misused and abused and disused management tool in history is
the performance appraisal. It's the strangest thing. Ask any manager or human resources
person whether they think performance appraisal is an important thing to do, they are
almost unanymous. "Of course it is", is the common response. If you ask why it's
important, they will tell you and tell you and tell you.
The odd thing is that they often don't get done, and managers, supervisors and
employees hate the darned things. Human resource professionals spend a lot of time
whipping people into doing them, while managers look for a variety of reasons to delay
and delay.
It's uncomfortable to do performance appraisals. But why is it uncomfortable?
Because people undertake them for the wrong reasons and wrong perspective, which ends
up putting the manager and the employee on different "sides". Appraisals are used for
determining pay increases, who gets let go, who gets promoted. Often they are used to
focus on what people have done wrong.
The most important purpose or goal of the appraisal is to improve
performance in the future...and not just for the employee. Managers can get valuable
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information from employees to help them make employee's jobs more productive. Work
units and organizations can identify problems that interfere with everyone's work.
If we shift from affixing blame, to identifying barriers to performance we begin to
remove the fear and dread people have about these "appraisals". When we focus on thepresent and the future, we change our focus to what's been to what can be better
tomorrow. An appraisal that works involves a number of things, but first and foremost is
the process of identifying what has gotten in the way of better performance (regardless of
the level of performance), and how manager and employee can work together in the
future, to improve it. It's really that simple.
When managers put away the "blaming stick" in appraisals and move to a cooperative,
dialogue approach, the whole process can become more comfortable and effective.
Because, it puts the manager and employee on the same side, and working towards the
same goals, getting better and better.
Sure, we do use appraisals for a number of reasons but if we are going to get real value
out of the time and energy we put into them, we have to look at the process in a more
constructive way. And, bottom line, that's making performance better.
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4.5 OBJECTIVE OF THE STUDY
To study the existing performance appraisal system in Mangalore Refinery and
Petro-Chemicals Limited.
To know the perception of the employees regarding the existing appraisal system
in the company.
To identify the role of performance appraisal in enhancing employee‘s
effectiveness and role clarity.
To measure job performance that will facilitate ongoing coaching and
development of the employee.
To study the procedures undergone during process of performance appraisal.
To study the relationship between employee and employer relationship.
To study the methods of appraisal and rating scale.
4.6 METHODOLOGY OF THE RESEARCH
Type of research:
This study would be descriptive research since fact-finding enquiries such as
survey would be used for a definite purpose, which is evaluating the Performance
Appraisal System. As a result, in my opinion, Descriptive Research would be the
best option.
Research Design:
To arrive at a meaningful sample, the list of employees in all Management and
non management grade shall be taken. A sample is a smaller representation of the
large whole. In this sampling method I have made use of systematic random
sampling method. After careful observation I have selected employees (appraisees)
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on random basis to give equal chance to the respondents who belong to different
departments. Further 53 employers (appraisers) of the organization were
interviewed through questionnaire. The entire sample possesses more than 2 years
of experience at MRPL.
Data Collection:
The data required for the purpose of the study will be collected through Primary
and Secondary data.
i. Primary data:
a. In order to find out the Performance Appraisal System in MRPL a
Questionnaire is proposed to be developed. The investigator shall be
meeting each individual of the sample and explain to him contents of the
questionnaire to get the right information from the respondents.
b. Observation and Interviews to identify the perception of employees
towards various aspects of Performance Appraisal System in the
organization.
ii. Secondary data:
The secondary data will be computed through Performance
Appraisal System Reports, Human Resource Information System,
Performance Appraisal Manuals, Company Procedures, journals, and
books related to the topic.
Analysis of data:
The data collected through questionnaire will then be tabulated and analyzed by
using statistical package and methods such as SPSS and percentage, pie diagram,
and line diagrams respectively.
Limitations of the Study:
Every study has its limitations due to the unpredictable environment that it is
conducted by the researcher may have control over his aspect of the study but has to
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depend on his universe and sample for the study. Within a limited time period a lot
of information had to be collected.
Due to time constraint and hectic schedule of MRPL employees, occasionally I
found difficulty in interaction with employees.
Organization being very large an effort was made to do the tasks effectively and
efficiently but more detailed study could have done by having large sample size.
Employees delayed in submitting the feedback form so it effected the time in
compiling and analyzing data for findings and suggestions.
Many questions were responded as ―Cannot Say‖ due to the subjectivity of the
topic and some information was not revealed due to certain reasons like being
confidential in nature, as a result those questionnaires were of new use in my
report.
Some respondents felt hesitated to express their opinion in front of us. Hence
attaining accurate result is not possible.
As the top management employees are very busy and time conscious, it was not
possible to meet them personally and to have discussion with them.
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CHAPTER 5
DATA ANALYSIS
5.1 Analysis of the questionnaire:
A questionnaire was conducted at Mangalore Refinery and Petrochemical
Limited. However, I out of the 120 questionnaires prepared. Only 60 could be distributed
and only 53 questionnaires were properly answered by the respondents. There were many
problems like employees being absent, they were prre-occupied and so on… another
problem was that our access was restricted to only a few buildings and not to the whole
premises for safety as well as security reasons. Time constraint was also on our hands.
Table 5.1
Sex Percent
Male 50.9
Female 49.1
Total 100.0
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Chart 5.1
From the above graph, it‘s clear that above 40% of the employees at
Mangalore Refinery and Petrochemical Limited are at the age group of 30 – 29 Years.
Following with 24.53% in the age group of 40 – 49 and 20.75% above the age group of
50 years.
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Table 5.2
Education Qualification Valid Percent
Diploma 7.5
Graduate 15.1
Post Graduate 41.5
Technical 24.5
Professional 11.3
Total 100.0
Chart 5.2
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From the above graph, it‘s evidently clear that a majority of the population in
Mangalore Refinery and Petrochemical Limited are Post Graduates in one or the other
discipline. Followed by Technical Graduate Professional and Diploma
Table 5.3 (1)
Valid Percent
technical 28.3
Clerical 11.3
Supervisory 18.9
administrative 41.5
Total 100.0
Table 5.3 (2)
Job Type Valid Percent
Clerk 3.7
DGM (FN) 1.9
DGM (MR) 1.9
Dy Mngr1 1.9
Engineer 18.5
Exc 9.3
Jun Off 1.9
Jun Offr 3.7
Manager 9.3
Nil 1.9
Officer 24.1
Sen Exc 5.6
Sen Mgr 1.9
Sen Off 3.7
Sen Offr 1.9
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Sen. Off 1.9
Sr. Exec 1.9
Tech 1.9
Total 100.0
Chart 5.3 (1) & (2)
Here we come to know that majority of the population are Administrative in
nature. Followed by Technical, Supervisory and Clerical respectively.
Apart from this, we also come to know that a majority of the employees are
permanent in nature
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Table 5.4 (1) Table 5.4 (2)
Salary Per Month Percent
below 20000 15.1
21000-30000 24.5
31000-40000 49.1
41000-50000 9.4
above 50000 1.9
Total 100.0
Chart 5.4 (1) & (2)
Experience Percent
below 5 years 26.4
5-10years 24.5
10-15years 45.3
above 15years 3.8
Total 100.0
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From the above graph, we come to know that 48.15% of the
employees earn about Rs. 31000 - Rs. 40000 and 44.44% of the employees have an
experience of 10 – 15 years.
Q. How is the appraisal usually conducted in your organization?
Table 5.5
Appraisal Percent
Forman appraisal 56.6
Informal appraisal 30.2
Combination 9.4
Never conducted 3.8
Total 100.0
Chart 5.5
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From the above graph, it‘s clear that a majority, i.e. 56.6% of the employees have
undergone Formal Appraisal, followed by 39.19% with Informal and 9.43% with a
combination of both. However the 3.77% who said that Performance Appraisal has never
been conducted may have been Contract Workers, who work in MRPL for a limited
period of time and then move on to another organization.
Q. Do you feel that prior information is provided if employee‘s ratings are below a certain
level?
Table5.6
Particulars Percent
Strongly Agree 22.2
Agree 46.3
No Opinion 11.1
Disagree 13.0
Strongly Disagree 5.6
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Particulars Percent
Strongly Agree 22.2
Agree 46.3
No Opinion 11.1
Disagree 13.0
Strongly Disagree 5.6
Total 100.0
Chart 5.6
From this Pie Chart we can safely say that 46.30% have received prior
information regarding their performance prior to Performance appraisal.
Q. Is performance is the root cause for promotion?
Table 5.7
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Particulars Percent
Strongly Agree 22.2
Agree 57.4
No Opinion 7.4
Disagree 7.4
Strongly Disagree 3.7
Total 100.0
Chart 5.7
From this Histogram, we can say that approximately 59%% of the employees at
MRPL strongly believe that Performance Appraisal is the root cause for their promotion
followed by 22.2% who believe that.
Q. Individual feedback should be provided after the appraisal?
Table 5.8
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Particulars Percent
Strongly Agree 27.8
Agree 46.3
No Opinion 14.8
Disagree 7.4
Strongly Disagree 1.9
Total 100.0
Chart 5.8
In this situation, 27.8% believe that individual feedback should be provided after
that appraisal. After enquiring with the employees, all have stated that this would help
them to better their performance for future developments.
Q. The management helps to provide an atmosphere where all are encouraged for
teamwork and comradeship?
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Table 5.9
Particulars Percent
Strongly Agree 30.19
Agree 47.17
No Opinion 13.21
Disagree 3.77
Strongly Disagree 5.66
Total 100.0
Chart 5.9
Here, approximately 47%of the employees believe that the management in MRPL
push for teamwork within the organization. Followed by 30% who stand by it. This is
really good as it would involve interaction among the employees and finishing off the
work faster.
Q. Does your Superior appreciate you when you do a good job?
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Table 5.10
Particulars Percent
Yes 74.51
No 25.49
Total 100.0
Chart 5.10
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Q. If YES, the appreciation/reward in terms of Bonus, Promotion, Vacation Packages,
Certification and Perks?
Table 5.11
Particulars Percent
1. Bonus 13.2
2. Promotion 32.1
3.Vacation Packager 3.8
4. Certification 47.2
5. Perks 3.8
Total 100.0
Chart 5.11
From this, we can safely say that majority of the reward for a good work by an
employee is through Certification. This is the best method as too much expenditure isn‘t
incurred and it‘s helpful to an employee in case he gets a better offer in another company.
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Q. The appraiser rates my performance based on Personal Observation, Colleagues
Opinion, Personal Interaction, Departmental Heads, or Clients Interaction.?
Table 5.12
Particulars Percent
Strongly Agree 28.3
Agree 52.8
No Opinion 11.3
Disagree 3.8
Strongly Disagree 3.8
Total 100.0
Table 5.13
Particulars Percent
Strongly Agree 9.4
Agree 49.1
No Opinion 24.5
Disagree 7.5
Strongly Disagree 9.4
Total 100.0
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Table 5.14
Particulars Percent
Strongly Agree 15.1
Agree 43.4
No Opinion 28.3
Disagree 9.4
Strongly Disagree 3.8
Total 100.0
Table 5.16
ParticularsPercentage
Strongly Agree 17.0
Agree 56.6
No Opinion 13.2
Disagree 7.5
Strongly Disagree 5.7
Total 100.0
Table 5.15
Particulars Percent
Strongly Agree 22.6
Agree 41.5
No Opinion 18.9
Disagree 1.9
Strongly Disagree 15.1
Total 100.0
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Chart 5.12, 5.13, 5.14, 5.15 & 5.16
From the above graph, it‘s clear that the employees at MRPL believe that their
performance is being rated on the above mentioned basis equally.
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Q. Are you rated on your competencies such as Knowledge, Problem Solving,
Communication Skills, Software Tools, Teamwork, Flexibility and Decision Making
ability?
Table 5.17
Particulars Percent
Strongly Agree 26.4
Agree 52.8
No Opinion 17.0
Strongly Disagree 3.8
Total 100.0
Chart 5.17
Here, 51.85% of the employees believe that they are rated based on their knowledge.
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Table 5.18
Particulars Percent
Strongly Agree 18.9
Agree 56.6
No Opinion 17.0
Disagree 5.7
Strongly Disagree 1.9
Total 100.0
Table 5.18
Here, 55.56% of the employees believe that they are rated based on their Problem
Solving skills.
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Table 5.19
Particulars Percent
Strongly Agree 13.2
Agree 50.9
No Opinion 32.1
Disagree 1.9
Strongly Disagree 1.9
Total 100.0
Chart 5.19
Here, 50% of the employees believe that they are rated based on their
Communication Skills.
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Table 5.20
Particulars Percent
Strongly Agree 9.4
Agree 43.4
No Opinion 32.1
Disagree 13.2
Strongly Disagree 1.9
Total 100.0
Chart 5.20
Here, 43% of the employees believe that they are rated based on their Software Skills.
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Table 5.21
Particulars Percent
Strongly Agree 28.3
Agree 41.5
No Opinion 17.0
Disagree 7.5
Strongly Disagree 5.7
Total 100.0
Chart 5.21
Here, 42% of the employees believe that they are rated based on their capacity to
perform in a team.
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Table 5.22
Particulars Percent
Strongly Agree 17.0
Agree 54.7
No Opinion 20.8
Disagree 3.8
Strongly Disagree 3.8
Total 100.0
Chart 5.22
Here, 55% of the employees believe that they are rated based on their flexibility
to perform in any situation given to them by the management or organization.
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Table 5.23
Particulars Percent
Strongly Agree 30.2
Agree 43.4
No Opinion 18.9
Disagree 5.7
Strongly Disagree 1.9
Total 100.0
Chart 5.23
Here, 44% of the employees believe that they are rated based on their capacity to
make effective decisions in their job.
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Q. In your opinion, should there be some incentives based on the individual and group
performance?
Table 5.24
Particulars Percent
Yes 65.38
No 34.62
Total 100.0
Chart 5.24
In this graph, majority of the employees, i.e. 65% agree that there should be some
kind of incentives based on individual / group performance. As of now, no such
incentives exist in MRPL.
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Q. Are you provided with the genuine feedbacks?
Table 5.25
Particulars Percent
Most Likely 22.6
Likely 54.7
No Opinion 11.3
Unlikely 7.5
Never 3.8
Total 100.0
Chart 5.25
Here, 55% believe that the feedback that they receive is genuine in nature,
followed by 23% who have some doubt.
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Q. Do you find appraisal counseling beneficial for future developments?
Table 5.26
Particulars Percent
Strongly Agree 35.8
Agree 54.7
No Opinion 3.8
Disagree 1.9
Strongly Disagree 3.8
Total 100.0
Chart 5.26
Here, 55% believe that appraisal counseling is beneficial for their future developments.
However, as of now, no such appraisal counseling exists in the organization.
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Q. Do you think management take a serious note of training requirements shown in the
appraisal?
Table 5.27
Particulars Percent
Yes 62.3
No 35.8
Total 100.0
Chart 5.27
62% of the employees at MRPL believe that the management takes serious note
of the Training Requirements shown in the appraisal followed by 36% who oppose this
fact.
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Q. Do you want the system of 360◦ degree appraisal in which you can appraise your
superior?
Table 5.28
Particulars Percent
Strongly Agree 32.1
Agree 50.9
No Opinion 9.4
Strongly Disagree 7.5
Total 100.0
Chart 5.28
Here, a majority of the employees believe in 360◦ of Performance Appraisal and
they would like to appraise their employees.
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Q. Do you think your appraisal form reflects your true performance?
Table 5.29
Particulars Percent
Most Likely 26.4
Likely 52.8
No Opinion 17.0
Never 3.8
Total 100.0
Chart 5.29
Here, approximately 53% believe that the appraisal form reflects their true performance.
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Q. Do you think you have sufficient control over your work environment?
Table 5.30
Particulars Percent
Strongly Agree 24.5
Agree 50.9
No Opinion 17.0
Disagree 1.9
Strongly Disagree 5.7
Total 100.0
Chart 5.30
Here approximately 70% of the total population believes that they have sufficient
control over their work environment.
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CHAPTER 6
FINDINGS
6.1 MAJOR FINDINGS
1. The appraisal process provides them an opportunity for development and growth.
2. The management helps to provide an atmosphere where all are encouraged for
comradeship and teamwork.
3. Appreciation is provided for the job done well, mostly in the form of a
certification.
4. The appraisers are generally aware about their subordinates and their talents and
potential.
5. Most of the raters have the ability to give constructive criticism in a friendly, firm
and positive manner.
6. Employees are being rated on their knowledge and skills. And decision making
ability.
7. MRPL has maintained a fair relationship between the Top Level, Middle Level,
and Bottom Level management.
8. The study reveals that majority of the employees belongs to the age group
between 30 years - 39 years. This shows that the workforce in MRPL is young,
energetic as well as experienced.
9. MRPL‘s appraisal system is being strongly considered as an effective instrument
for helping the employees to grow and develop in an organizational setup by 60%
of the respondents.
10. The employees of this organization are being motivated through the feedback of
performance appraisal system.
11. The study reveals that 50 percent of the respondents strongly agree that self
appraisal system helps towards self monitoring oneself.
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12. It is found that around 70 percent of respondents convey that promotion is not
purely based on performance appraisal of an employee even other factors such as
handling situations and job experience etc.
13. Majority of the respondents have strongly conveyed that appraisal systems helpsin identifying those areas in which they are lacking and gives an opportunity to
improve for the better performance.
14. Appraisal data are being used by the HRD department as an important mechanism
designed and utilized for the all-round development and growth of employee in
the organizations, also to evaluate whether employees at various level perform
their assigned jobs as per norms.
15. The salary decisions are based on Performance Appraisal ratings of an employee.
If the ratings are good then they are been promoted or given some incentives. The
most common being certification.
16. The appraisal system defines rating scale clearly.
17. The appraisal results are kept partly confidential by appraiser that means the
rating are not shown to appraisee. So there is a need to bring in openers and
results need to be communicated in a positive approach.
18. MRPL provides good working environments to its employees.
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CHAPTER 7
SUGGESTIONS AND CONCLUSIONS
7.1 SUGGESTIONS:
The performance appraisal system of MRPL is of good quality. On the basis of the
analysis of responses and findings I have reached to some conclusions. So taking them
into consideration few steps may be considered to strengthen the performance appraisal
system.
1. The system should be made more transparent. This can be achieved by creating
awareness among the employees regarding each and every aspect of the appraisal
process. They should be made aware about the standards and the criterions for
evaluation. Further they should be shown the appraisal result.
2. The appraiser and appraisee should sit together and then the appraiser should rate
the appraisee for his performance and should state the reason for the same. This
will increase the level of transparency and the employee will feel satisfied as he
will have an opportunity to respond at that very moment itself.
3. The genuine feedback should be provided to the employees. So that they may be
in a position to know where they stand exactly. So that they can identify their
performance gaps and prepare accordingly for the future.
4. The general belief among employees is that the relations with the superior affect
the evaluation process. This is not good as this creates a sense of favoritism in the
organization. No doubt one should be in pleasing terms with the superior but that
should not affect the evaluation at all. For this the raters should always consider
the performance as the only measure for the evaluation.
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5. The raters should take note of the critical performance incidents of an individual
so that at the end of the year it should not be that only the recent performances are
given more weightage.
6. Raters should consider the specific requirements of the people to do the job. They
should help them out by providing necessary skill set to do the job more
efficiently. They should set the goals as per the potential and caliber of the
individual.
7. Employees should have the opportunity to respond to the appraisal result. For this
individual feedback should be provided.
8. Management should take serious note of the training requirements shown by the
individual in the appraisal sheet. Training plays a vital role in the development of
an individual and helps improve the performance.
9. Some incentives should be introduced on the performances basis. This thing
creates a sense of healthy competition among employees which boost up the
growth of the individual as well as the organization.
Again, the frequency of appraisals should be increased for employees who have got
a poor / below average rating in their last appraisal and adequate counseling should
be given so that the employees improve gradually and this will make sure that the
company has better work force and that will help in the long run.
Creating new avenues such as full-fledge Projects, Corporate Planning, Marketing,
New technology selection etc., departments, which do not exist today, at least in
recognizable strength.
Creating more posts at intermediate managerial levels such as Additional Senior
Manager, Additional General Manager etc.
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This is because of the promotional policy of the company where every person who
qualifies is rewarded, without much distinction between an excellent and an
ordinary performer.
This will not only cause a problem for management of the organization in the longrun, but also a drop in the motivation and morale of the employees. Now this
problem can be countered by modifying the promotional policy of the organization.
The organization can go for one time financial benefit system. This is because as
per the promotional policy, the promotions into some of the cadres the promotions
are dependent on vacancy. A situation is prevalent in the company where the
employees are not getting promotions, in spite of being qualified and eligible to get
one, because of the non-availability of one vacancy. In this case, the employees donot get reward except the usual annual increment. Employees may be given
financial incentives, such as higher basic, different perks, such as loans etc. for the
higher scale, travel status of higher rank etc., if they have performed exceedingly
well even though they might not be promoted to the higher cadre due to lack of
vacancies.
Poor rating or below average rating must be supported with proofs or documents
and such a rating can be given only after adequate counseling. For such employees
intermediate appraisals should be conducted and this can be done once in 6 months
and the progress of such employees should be monitored carefully.
As pointed out earlier in the report, many times, it does happen that promotions are
stopped because of lack of vacancies and in such cases when the employee
performs above expectations, management must see to it that he gets the
recognition for his services. It can be in the form of some prize such as best
employee award. This can be a very good motivator for an employee who performs
well and not only that, such awards also bring out the best from other employees
and give a competitive edge to the whole organization.
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7.2 CONCLUSION
Performance Appraisal forms the backbone of performance management. Any
organization, to progress a head needs to look into performance appraisal as a major
growth indicator. Performance appraisals can transform an organization into a highly
competing and a world-class unit as it deals with the employees, who run the
organization, for this reason the H.R.D. department plays a vital role in any organization.
The project undertaken solely aimed at making the performance appraisal system
more efficient and more meaningful. One must understand that there is nothing called as
a perfect performance appraisal system and there can never be one.
It is impossible to do a project work on performance appraisal‘, without touching
some sensitive and foremost important, issues like safety measures, promotions, medical
facilities, since the latter is an output of the appraisal only. Many employees in fact
closely interlink the two. Hence some of the suggestions do touch upon the promotion
issue, though not in an exhaustive way.
At the end of the whole study on the performance appraisal system in MRPL, I
have come up with suggestions, which may kindly be looked into. Although it cannot be
predicted as to how far the suggestions will go in making the performance appraisal
effective, but I sincerely feel that it could be of some help to the grey areas discussed in
the earlier report. The success and acceptability of the some can be gauged only on
implementation.
Since the suggestions have been formulated on the basis of feed back of the
survey conducted at the organization. I sincerely hope the changes suggested should be
acceptable to the employees and the management.
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BIBLIOGRAPHY
1. Rao T.V. ― HRD Audit, Evaluating the Human Resource function for Business
improvement‖ ; Response Books ( A division of Sage Publications) New Delhi/
Thousand Oaks / London.
2. Udai Pareek & Rao T.V. ―Designing & Managing Human Resource Systems‖ ;
Oxford & IBH Publishing Co.. Pvt Ltd.
3. Basava K.D., ―Human Resource Development‖; Vidya Vahini Prakashan, Hubli.
4. Rao T. V., ―Appraising & Developing Managerial Performance ―; Excel Books,
T.V. Rao Learning Systems Pvt. Ltd.
5. Rao V.S.P., ―Managing People‖; Excel Books Pvt. Ltd., New Delhi – 110 028.
6. Dick Grote, ― The complete guide to Performance Appraisal‖ ; Amacom American
Management Association 1601 Broadway, New York, NY 100 19.
7. Gary Latham P. and Wexley, Kenneth N., ―Increasing Productivity through
Performance Appraisal‖, Addison – Wesley Publishing Company, California.
Websites:
http://www.businessballs.com/performanceappraisals.htm
Last accessed on 09/08/2010
http://business.mapsofindia.com/india-petroleum-industry/
Last accessed on 09/08/2010
http://derekstockley.com.au/a-human-resources.html
Last accessed on 09/08/2010
http://www.moneycontrol.com/financials/mangalorerefinerypetrochemicals/cash-
flow/MRP
Last accessed on 10/08/2010
http://derekstockley.com.au/h-performance-management.html
Last accessed on 10/08/2010
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http://derekstockley.com.au/a-hr-issues.html
Last accessed on 18/08/2010
http://www.moneycontrol.com/financials/mangalorerefinerypetrochemicals/ratios/
MRP
Last accessed on 19/08/2010
http://performance-appraisals.org/Bacalsappraisalarticles/
Last accessed on 19/08/2010
http://www.jobseekersadvice.com/career_advice/articles/performance_appraisal.h
tm
Last accessed on 21/08/2010
http://www.moneycontrol.com/financials/mangalorerefinerypetrochemicals/profit
-loss
Last accessed on 25/08/2010
http://derekstockley.com.au/performance-management-articles.html
Last accessed on 29/08/2010
http://work911.com/performance/particles/perfpoint.htm
Last accessed on 02/09/2010
http://www.readysetpresent.com/products/articles/performanceappraisals.htm
Last accessed on 15/09/2010
http://www.oppapers.com/subjects/review-of-literature-of-performance-appraisal-
project-page1.html
Last accessed on 15/09/2010
http://www.allbusiness.com/management/584817-1.html
Last accessed on 15/09/2010
http://chesterrep.openrepository.com/cdr/handle/10034/76114
Last accessed on 15/09/2010
http://www.assignmentsplus.com
Last accessed on 15/09/2010
www.profilematchassessments.com
Last accessed on 15/09/2010
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http://www.moneycontrol.com/financials/mangalorerefinerypetrochemicals/balan
ce-sheet/MRP
Last accessed on 20/09/2010
http://www.mrpl.co.in/htmlfiles/HS-policy.htm
Last accessed on 20/09/2010
http://en.wikipedia.org/wiki/Mangalore_Refinery_and_Petrochemicals_Limited
Last accessed on 20/09/2010
http://business.mapsofindia.com/india-company/mrpl.html
Last accessed on 20/09/2010
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ANNEXURE
Questionnaire on the topic “PERFORMANCE APPRAISAL” with
reference to MRPL
Respected Sir/ Madam
I Saihl Peter Aranha, student of St. Aloysius College doing my 1st Year (II Sem.), M.B.A
course, will be carrying out an Internship Project as a part of MBA curriculum.
I therefore kindly request you to furnish the required information as per the questionnaire
that would benefit me greatly.
I declare that the information provided by you will be kept confidential and solely usedfor my academic purpose only.
Thank You
Yours faithfully
Saihl Peter Aranha
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Personal details
1. Age 20-29 ( )
30-39 ( )
40-49 ( )
Above 50 ( )
2. Sex Male ( )
Female ( )
3. Marital status Married ( )
Unmarried ( )
4. Educational Qualification
Diploma ( )
Graduate ( )
Post Graduate ( )
Technical ( )
Professional ( )
5. Designation:
6. Name of the department:
8. Type of job Technical ( )
Clerical ( )
Supervisory ( )
Administrative ( )
9. Name of the job Permanent ( )
Temporary ( )
Contract ( )
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10. Salary per month below 20000 ( )
21000-30000 ( )
31000-40000 ( )
41000-50000 ( )
Above 50000( )
11. Year of experience below 5
5- 10 years
10-15 years
Above 15 years
Please answer the following questions according to your opinion.
Q1.Please place a mark on the scale below to indicate how you would chacterize your
relationship with the organization?
Unsatisfactory [___] [___] [___] [___] [___] satisfactory
Unproductive [___] [___] [___] [___] [___] productiveUncooperative [___] [___] [___] [___] [___] cooperative
Q2. How the appraisal is usually conducted in your organization?
Formal appraisal ( )
Informal appraisal ( )
Combination ( )
Never conducted ( )
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Q3. Do you feel that Prior information is provided if employees ratings are below a
certain level?
Strongly Agree ( )
Agree ( )
No Opinion ( )
Disagree ( )
Strongly Disagree ( )
Q4. Is Performance a root cause for promotion? Strongly Agree ( )
Agree ( )
No Opinion ( )
Disagree ( )
Strongly Disagree ( )
Q5. Individual feedback should be provided after the appraisal?
Strongly Agree ( )
Agree ( )
No Opinion ( )
Disagree ( )
Strongly Disagree ( )
Q6. The management helps to provide an atmosphere where all are encouraged for
teamwork and comradeship.
Strongly Agree ( )
Agree ( )
No Opinion ( )
Disagree ( )
Strongly Disagree ( )
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Q7. My Superior appreciates me when I do a good job. Yes ( ) No ( )
Q8. If YES, the appreciation/reward in terms of the following (tick as many as possible)
a. Bonus
b. Promotion
c. Vacation Packages
d. Certification
e. Perks
f. Any other, please specify:____________
Q9. The appraiser rates my performance based on the following situations.
Strongly Agree Agree Don‘t Know Disagree Strongly
Disagree
a. Personal Observation ( ) ( ) ( ) ( ) ( )
b. Colleagues opinion ( ) ( ) ( ) ( ) ( )
c. Personal Interaction ( ) ( ) ( ) ( ) ( )
d. Departmental heads ( ) ( ) ( ) ( ) ( )
e.
Client interactions ( ) ( ) ( ) ( ) ( )
Q10. The employees are provided with the opportunity to respond to the feedback of the
appraisal.
Every time ( )
Occasionally ( )
Optionally ( )
Never ( )
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Q11. Are you rated on your competencies?
Strongly Agree Agree Don‘t Know Disagree Strongly
Disagree
Knowledge ( ) ( ) ( ) ( ) ( )
Problem solving ( ) ( ) ( ) ( ) ( )
Communication
skills ( ) ( ) ( ) ( ) ( )
Use of software
Tools ( ) ( ) ( ) ( ) ( )
Teamwork ( ) ( ) ( ) ( ) ( )
Flexibility ( ) ( ) ( ) ( ) ( )
Decision making
ability. ( ) ( ) ( ) ( ) ( )
Q12. In your opinion, should there be some incentives based on the individual and group
performance?
Yes No
Q13. Are you provided with the genuine feedbacks?
Most Likely ( )
Likely ( )
No Opinion ( )
Unlikely ( )
Never ( )
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Q14. Do you find appraisal counseling beneficial for future developments?
Strongly Agree ( )
Agree ( )
No Opinion ( )
Disagree ( )
Strongly Disagree ( )
Q15. Do you think management take a serious note of training requirements shown in the
appraisal?
Yes No
Q16. Do you want the system of 360◦ degree appraisal in which you can appraise your
superior?
Strongly Agree ( )
Agree ( )
No Opinion ( )
Disagree ( )
Strongly Disagree ( )
Q17. Do you think your appraisal form reflects your true performance?
Most Likely ( )
Likely ( )
No Opinion ( )
Unlikely ( )
Never ( )
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Q18. Do you think you have sufficient control over your work environment?
Strongly Agree ( )
Agree ( )
No Opinion ( )
Disagree ( )
Strongly Disagree ( )
Thank you for your time and patience.
With warm regards.
Saihl Peter Aranha
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BALANCE SHEET OF MANGALORE REFINERY AND PETROCHEMICAL
LIMITED FOR THE YEARS 2004 - 2009
Mangalore Refinery and Petrochemicals
Balance Sheet ………………...Rs. in crores……………...
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
SOURCES OF FUNDS
Total Share Capital 1,761.80 1,761.80 1,761.80 1,761.82 1,761.83
Equity Share Capital1,752.61 1,752.62 1,752.62 1,752.64 1,752.65
Share Application
Money0 0 0 0 0
Preference Share
Capital9.19 9.19 9.19 9.19 9.19
Reserves 401.83 633.54 994.99 2,021.12 2,967.57
Revaluation Reserves0 0 0 0 0
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Net worth 2,163.63 2,395.34 2,756.79 3,782.94 4,729.40
Secured Loans 893.44 579.71 437.82 350.2 238.94
Unsecured Loans 2,573.10 2,727.56 1,930.48 1,707.86 1,747.86
Total Debt 3,466.54 3,307.27 2,368.30 2,058.06 1,986.80
Total Liabilities5,630.17 5,702.61 5,125.09 5,841.00 6,716.20
APPLICATION OF
FUNDSMar „05 Mar „06 Mar „07 Mar „08 Mar „09
Gross Block 6,740.19 6,779.36 7,297.80 7,371.61 7,415.88
Less: Accumulated
Depreciation2,335.35 2,683.49 3,036.38 3,398.81 3,766.14
Net Block 4,404.84 4,095.87 4,261.42 3,972.80 3,649.74
Capital Work in
Progress77.98 409.23 98.71 133.67 414.95
Investments 0 27.28 27.28 645.14 642.89
Inventories 1,911.62 1,890.70 2,498.27 3,624.30 1,890.43
Sundry Debtors 960.8 1,153.02 1,194.87 2,204.70 1,286.98
Cash and Bank
Balance7.52 3.19 6.12 12.32 15.37
Total Current Assets 2,879.94 3,046.91 3,699.26 5,841.32 3,192.78
Loans and Advances 1,785.49 1,448.72 902.14 1,378.41 2,569.95
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Fixed Deposits 1.64 2 126.78 394.34 1,755.75
Total CA, Loans &
Advances4,667.07 4,497.63 4,728.18 7,614.07 7,518.48
Deffered Credit 0 0 0 0 0
Current Liabilities 3,271.31 3,144.92 3,808.96 5,506.68 3,902.06
Provisions 278.95 182.47 181.53 1,017.98 1,607.81
Total CL &
Provisions3,550.26 3,327.39 3,990.49 6,524.66 5,509.87
Net Current Assets 1,116.81 1,170.24 737.69 1,089.41 2,008.61
Miscellaneous
Expenses 30.53 0 0 0 0
Total Assets5,630.16 5,702.62 5,125.10 5,841.02 6,716.19
Contingent Liabilities 796.98 861.53 669.59 746.67 5,739.54
Book Value (Rs) 12.29 13.61 15.67 21.53 26.93
