A SUMMER TRAINING REPORT

ON

“INDIAN OIL CORPORATION LIMITED”

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF BACHELOR OF BUSINESS ADMINISTRATION (BBA)

Maharaja Agrasen Institute of Management Studies ON

“CASH MANAGEMENT”

Training Supervisor Submitted ByMs. KAKOLI BOSE VIPULASST.MANAGER (F) ENROLLMENT NO.

SESSION

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MAHARAJA AGRASEN INSTITUTE OFMANAGEMENT STUDIES

PREFACE

This is to certify that Mr.VIPUL Doing BBA at Maharaja Agrasen InstituteOf Management Studies, ROHINI has done a project entitled “CASH MANAGEMENT ” at INDIAN OIL CORPORATION LTD.

Ms.Kakoli Bose

Asst.Manager (F)

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Acknowledgement

“People must have guidance in doing their work and know where to turn for help & guidance”.

- Anonymous

It is said “no learning is possible without any proper guidance and no research endeavor

is a solo exercise, some contribution is performed by various individuals.”

This project work, which is a step in the field of professionalism, has been successfully

accomplished only because of the timely support of well-wishers. We would like to pay

our sincere regards and thanks to those, who directed us at every step in this project work.

We would like to thanks Ms Kakoli Bose , who allowed us to undertake this project and

provided his valuable guidance in doing it and supporting throughout the term of the

project. It was a learning experience to work under her guidance.

VIPUL

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LIST OF TABLES/FIGURES

TABLES PAGE NO.

World largest corporation 12Petroleum refining 13Data of Green Park 60Final Outcome 61DBASE Format 62DATA State Offices 66

FIGURES

Marketing design 25 Refineary 37 Pipelines 38 Marketing 39Marketing Network 40

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TABLE OF CONTENTS

Sl.NO. Page No.

CHAPTER-1 INTRODUCTION

1.1 Overvie of industry as a whole 61.2 Profile of the organization 81.3 Competition information 131.4 S.W.O.T Analysis 14

CHAPTER-2 OBJECTIVE & METHODOLOGY

2.1 Significance 192.2 Mangerial usefulness of study 202.3 Objective 262.4 Scope of study 302.5 Methodology 31

CHAPTER-3 CONCEPTUAL DISCUSSION 33 CHAPTER-4 DATA ANALYSIS 81

CHAPTER-5 ANNEXURES 86

CHAPTER-6 CONCLUSION 90

CHAPTER-7 LIMITATIONS 91

CHAPTER-8 RECCOMENDATION 92

CHAPTER-9 BIBLOGRAPHY 93

CHAPTER-10 GLOSSARY 94

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INTRODUCTION

1.1 OVERVIEW OF INDUSTRY AS A WHOLE

The Beginning…

Oil is one of the most important factors contributing to the economic

development of a country. The production and consumption of oil in a country has

become a barometer of the country’s economic growth and prosperity.

When India became independent, it had just one refinery at Digboi. This refinery,

owned by the Assam Oil Company, processed the entire production of less than 0.3

million tones. The country’s annual oil consumption was less than 3 million tones. For

over 90% of its needs, it was dependent on imports. But the thrust of India’s rapid

economic growth and quick pace of industrialization demanded more and more

petroleum products.

With the advent of economic planning three refineries were set up, to process

crude oil, by international oil companies; two at Bombay in 1954 and 1955 and the third

at Vishakhapatnam in 1957. But, this wasn’t enough. India had to build up her own

resources to minimize her dependence on foreign imports.

Prime Minister, Pundit Jawaharlal Nehru declared in India’s Parliament on May

26,1956 “Oil is of vast importance in the world today. A country that does not produce its

own oil today is in a weak position. From the point of view of defence, the absence of oil

is a fatal weakness.”

So, in order to protect national interest, the Government of India decided to

establish a nationally owned and controlled oil industry in India under the Ministry of

Petroleum and Chemicals. The Oil and Natural Gas Commission and Oil India Limited

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were formed to search for oil in 1956 and 1959 respectively. To refine crude oil, Indian

Refineries Limited was set up in August 1958. To market it, government set up

the Indian Oil Company in July 1959 as state owned oil-marketing company.

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1.2 PROFILE OF THE ORGANISATION

Vision

A major diversified, transnational, integrated energy company, with national leadership and a

strong

environment conscience, playing a national role in oil security & public distribution.

Distinctions

Indian Oil Corporation Ltd. (IndianOil) is India's largest commercial enterprise, with a sales

turnover of Rs. 2,47,479 crore (US $ 61.70 billion) and profits of Rs. 6,963 crore

(US $ 1.74 billion) for the year 2007-08. IndianOil is also the highest ranked Indian company

in

the prestigious Fortune 'Global 500' listing, having moved up 19 places to the 116th position

in

2008. It is also the 18th largest petroleum company in the world.

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India’s Downstream Major

Beginning in 1959 as Indian Oil Company Ltd., Indian Oil

Corporation Ltd. was formed in 1964 with

the merger of Indian Refineries Ltd. (established 1958).

IndianOil and its subsidiaries account for 49%

petroleum products market share, 40.4% refining capacity and

69% downstream sector pipelines

capacity in India.

For the year 2007-08, the IndianOil group sold 59.29 million tonnes of petroleum products,

including

1.74 million tonnes of natural gas, and exported 3.33 million tonnes of petroleum products.

The IndianOil Group of companies owns and operates 10 of India's 19 refineries with a

combined refining capacity of 60.2 million metric tonnes per annum (MMTPA, .i.e. 1.2

million barrels

per day). These include two refineries of subsidiary Chennai Petroleum Corporation Ltd.

(CPCL) and

one of Bongaigaon Refinery and Petrochemicals Limited (BRPL).

The Corporation's cross-country network of crude oil and product pipelines, spanning about

9,300 km

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and the largest in the country, meets the vital energy needs of the consumers in an efficient,

economical

and environment-friendly manner.

IndianOil is investing Rs. 43,393 crore (US $10.8 billion) during the period 2007-12 in

augmentation

of refining and pipeline capacities, expansion of marketing infrastructure and product quality

upgradation as well as in integration and diversification projects.

Network Beyond Compare

As the flagship national oil company in the downstream sector,

IndianOil reaches precious petroleum

products to millions of people everyday through a countrywide

network of about 34,000 sales points.

They are backed for supplies by 166 bulk storage terminals and

depots, 101 aviation fuel stations and

89 Indane (LPGas) bottling plants. About 7,100 bulk consumer pumps are also in operation

for the

convenience of large consumers, ensuring products and inventory at their doorstep.

IndianOil operates the largest and the widest network of petrol & diesel stations in the

country,

numbering over 17,600. It reaches Indane cooking gas to the doorsteps of over 50 million

households

in nearly 2,700 markets through a network of about 5,000 Indane distributors.

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IndianOil's ISO-9002 certified Aviation Service commands over 62% market share in

aviation fuel

business, meeting the fuel needs of domestic and international flag carriers, private airlines

and the

Indian Defence Services. The Corporation also enjoys a dominant share of the bulk consumer

business,

including that of railways, state transport undertakings, and industrial, agricultural and

marine sectors.

Customer First

At IndianOil, customers always get the first priority. New initiatives are launched round-the-

yearfor the

convenience of the various customer segments.

Exclusive XTRACARE petrol & diesel stations unveiled in select urban and semi-urban

markets offer

a range of value-added services to enhance customer delight and loyalty. Large format

Swagat brand

outlets cater to highway motorists, with multiple facilities such as food courts, first aid, rest

rooms and

dormitories, spare parts shops, etc. Specially formatted Kisan Seva Kendra outlets meet the

diverse

needs of the rural populace, offering a variety of products and services such as seeds,

fertilisers,

pesticides, farm equipment, medicines, spare parts for trucks and tractors, tractor engine oils

and

pump set oils, besides auto fuels and kerosene. SERVOXpress has been launched recently as

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a

one-stop shop for auto care services.

To safeguard the interest of the valuable customers, interventions like retail automation,

vehicle

tracking and marker systems have been introduced to ensure quality and quantity of

petroleum products.

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Table 1.1

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Table 1.2

1.3 Competition Information

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The major competitors of IOC are HPCL & BPCL. To overcome the increasing

competition and to become the market’s no.1 holder, IOC is spending a lot on

advertisement also. It improves the image of the organization and also gives

information about the company to the common man.

1.4 SWOT ANALYSIS

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For a long time the company had monopoly in the downstream sector but with the

changing time, more and more private and multinational companies are entering the

sector, IOC is facing competition. But with the vast distribution and pipeline network, it

will have an edge over them. The following analysis throws light on the various facets of

the present position of IndianOil.

STRENGTHS

Most powerful player - IOC being the only Indian Company to be listed and

ranked 191 in the fortune global 500 companies holds a strong brand image. It is

the most powerful petroleum corporate in the downstream sector. It owns 7 out of

the 17 refineries of the country in public sector contributing to 55% of the

nation’s requirements.

Experience- IndianOil has been in the petroleum sector for the past 41 years.

During these years it has gathered a lot of valuable expertise and learned the trick

of trade, the tougher way. It has enjoyed unlimited protection and nurturing from

the government, which helped it grow and gain a substantial hold of the market.

This experience will be valued more as and when it will face competition with the

upcoming firms in the sector.

Pipeline network- IndianOil has a pipeline network of 6268 kms throughout the

country running right from Guwahati in the East to Kanda in the West. It also

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reaches the Northern Region to Jallandar and plans to extend till Udhampur. This

decreases the transportation

cost to a great extent for the company. This is a major advantage as the other

private refineries coming up will have very little or no

transporting both crude oil as well as finished products. So IndianOil has a

natural edge over these companies.

Distribution infrastructure - The Company operates the largest marketing network

of 19000 sale points in the country. It has 5026 captive consumer outlets and 52

jubilee retail outlets. It has over 3000 LPG distributorships bottled in 50 bottling

plants throughout the country. It also owns 92 Aviation Fuel Stations and 1294

SERVO shops across the nation. It also handles 853 tankers. This facilitates

uninterrupted supply of products throughout the year. Such extensive distribution

network is nothing but the muscles of the organization making it stronger and

tougher to compete with others. The wide distribution network of the corporation

takes care of the imports and exports.

Rural reach - in rural areas it has 231 multipurpose distribution centers. IndianOil

has over 100 Indane LPG distributorship commissioned in rural and semi-rural

areas. This helps to cater to the need of population of rural, remote and far flung

areas constituting about 75% of the country’s population.

WEAKNESSES

Government’s control- The functioning of IOC is greatly influenced by the

government’s policy and regulations. The government has 82% stake in the

company, thus, gaining the control of the company. There is always a risk of its

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proposal being rejected as there is uncertain political environment prevailing in

the country.

Large size- IndianOil is a huge organization having its head office at Mumbai, 4

regional offices, 15 state offices, 44 divisional offices and 33 area offices. It

employs 30162 employees in various levels of organizational hierarchy. This

leads to slowing down of processes and inefficient performance due to numerous

departmental layers. Handling such large pool of human resource and

channelizing their skills in a direction same as that of the organization is not an

easy task. This hinders the fast growth required by the organization.

People’s perception - In our country, the perception of the corporate and

consumers towards government organizations and offices is not favorable,

hence though IOC is the only Fortune 500 company and has grown by leaps and

bounds, it is still viewed as an inefficient company, not getting the due

importance.

Retail market share - Even though IOC controls most of the retail outlets it has

market share of only 33.8% in petrol and 39.6% in diesel registering an increase

of 0.5% and 0.3% respectively over the last year. This is comparatively very small

as compared to its size, reach and production. This is because of the fact that its

retail outlets are concentrated more in semi-urban areas and rural areas

OPPORTUNITIES

More revenue - with the dismantling of APM by 2002, IOC will be able to fix the

prices of its products without government intervention resulting in an upsurge in

the revenue earned. Firstly, the new players will use the infrastructure facilities

provided by IOC and pay for the services rendered; for example, IOCL has signed

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the marketing rights agreement for 10 years with RPL. Secondly, by reducing the

existing prices to the permissible extent and providing better facilities. This will

help them capture more market share making it harder for the new players to grab

the market.

Modernization- The liberation of the economy has attracted many foreign players

to invest in our country. Again, with the liberalization of the oil economy, more

and more MNC’s are entering the sector. They will bring with them the latest

technology available. IOCL can utilize their services by means of joint ventures,

collaborations and tie-ups, for modernization and capacity augmentation of its

plants and refineries increasing the quality as well as the quantity of its product

Intensifying infrastructure - the competitors entering the sector are still not fully

operational. While they are building up there infrastructure IOC should grab the

opportunity to extend and strengthen it in deficient areas. It can modernize its

plants and augment its capacity, extend pipelines to central and southern regions

facilitating cheaper transport in those areas. Also more jubilee retail outlets,

which are state-of-the-art, should be commissioned in different parts of the

country for greater customer satisfaction.

THREATS

Tastes of competition- as we are closing in on the dismantling of APM we already

see a lot of private participation in the sector. With the government opening the

upstream sector and taking away the sole right of distribution from PSU’s, private

players see a lot of scope for business. As a result Reliance has already entered

the field and has started production and ESSAR refineries is following suite. If

these companies are able to do profitable business in this sector then other

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national and multinational companies will also be lured into this field. IOC’s shift

from a monopoly in the protected environment to a free market will not be easy.

Price wars- In this free market operation, where all the firms have the full liberty

to control the prices of their products, a price war is certain to happen in the near

future, since this will be a major factor in determining their market share. If

MNC’s with deep pockets decide to enter this sector then they may be able to

make this war tougher by cutting down prices even below the permissible level,

initially to capture market share.

Better-equipped competitors- The new players will give tough competition, as

they will have latest technology and more advanced research and development

resources, skills and expertise. They will have better and more efficient machines

capable of producing more and better. They will have easy access to foreign

markets due to their global presence and standards

OBJECTIVE AND METHODOLOGY

2.1 SIGNIFICANCE

Towards customers and dealers:- To provide prompt, courteous and efficient

service and quality products at competitive prices.

Towards suppliers:- To ensure prompt dealings with integrity, impartiality and

courtesy and help promote ancillary industries.

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Towards employees:- To develop their capabilities and facilitate their

advancement through appropriate training and career planning. To have fair

dealings with recognised representatives of employees in pursuance of healthy

industrial relations practices and sound personnel policies.

Towards community:- To develop techno-economically viable and environment-

friendly products. To maintain the highest standards in respect of safety,

environment protection and occupational health at all production units.

Towards Defence Services:- To maintain adequate supplies to Defence and other

para-military services during normal as well as emergency situations.

2.2 MANAGERIAL USEFULLNESS OF STUDY

ANALYSIS ON THE BASIS OF 4 S MODEL OF Mc KINSEY

MODEL FOLLOWED:

1. Strategy

2. Style

3. Skills

4. Structure of the marketing division

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1. STRATEGY:

Strategies can be defined as the policies or the guidelines, which are being used in any

organization. Strategies of any company can be changed with the change in business

atmosphere or the increase in the competition. But there can be some strategies in the

organization, which will remain the same over a period of time because of their nature.

Internal Strategies:

To provide the quality products.

To provide various schemes to the customers as already launched like IOC Extra

and Credit Card etc.

To provide the products with best satisfaction to the retailers (Industries,

Aviation) as well as to the customers.

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To concentrate more on customer orientation than profit maximization.

To provide better working environment to the employees to attract the potential

employees as well as satisfy the present employees.

Broad Area :

IOCL has been developed all over the country. There is no area left in

the country where Indian Oil doesn’t have its retail outlets. It has its retail outlets

not only in urban area but also in rural areas .It has its retail outlets in under

developed areas like J&K, Himachal Pradesh, Leh etc. where the means of

transportation is very costly as well as rare. In J&K in spite of terrorism and

Kargil war, Indian Oil has provided the required oil without fear. So it has helped

in nation’s security and integration also.

Indian Oil is providing its services to Airlines also. Aviation is one of the major

customers of the company and it is providing the best quality product to Airlines.

It is providing the facility inside the Airport only so that the requirements can be

met at any time.

EXPORTS:

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IndianOil exports its products mainly to Kenya, Bangladesh, and Dubai etc. Most

of the times the NAPHTA is being exported to these countries. But the company

has to face losses on these exports. Though it has a big domestic market, at times

in case of excess the products are exported.It also exports Lubricants to Dubai,

Kenya etc. with profits because of regular dealings with these countries.

2. STYLE:

Since with the increase in the competition and new inventions, training has become the

necessity of any organization. IndianOil’s employees are being trained from time to time

as per requirement. The various measures of training adopted in IOC are:

Off the job training.

Lecture system.

Group discussion.

Seminars etc.

Since all these measures of training are indirect and less motivating because the

employees are not actually put into work. So the company should try to adopt the system

of On the Job Training where the employees are actually given hands on work for what

they are being trained. This system is more effective and motivating than any other

system

3. SKILLS:

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The term Recruitment means to attract the potential employees to apply in the

organization. It is also one of the most important systems in any organization. The

success of any company depends on its employees. In IOC people are being recruited on

the basis of the qualification required for the particular job.

The written examinations are conducted as per the requirements and the selected

candidates are called for an interview. There are no direct placements in the company.

First division professional degree holders and Post Graduates from relevant disciplines

are recruited as management/engineering trainees, officers, accountants, medical officers,

lab officers, system officers, communication officers, scientists etc.

4 . STRUCTURE FOR THE MARKETING DIVISION

It can be broadly divided into 3 categories as represented by the following ways

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MARKETING

AVIATION L.P.G PETROL

Fig 1.1

There are only 2 major customers for aviation products namely airlines and air force.

After the deregulations of aviation products in 1992, maintaining high market share has

been a challenging task for the company.

For marketing of L.P.G , the company has divided the total market into various areas

headed by respected area officers .

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AIRLINES AIRFORCE

2.3 OBJECTIVES

FINANCIAL OBJECTIVES

To ensure adequate return on capital employed and maintain a reasonable annual

dividend on its equity capital.

To ensure maximum economy in expenditure.

To generate sufficient internal resources for partly/wholly financing expenditure

on new capital projects.

To develop long term corporate plans to provide adequate growth of the activities

of the corporation.

To continue to make an effort in bringing reduction in the cost of production of

petroleum products by means of systematic cost control.

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FINANCIAL GOALS

To inculcate cost consciousness in user departments.

Proper implementation of budgetary control and submission of MIS in time.

To keep the level of inventories below the level fixed by the Board of Outstanding

Debts, loans & advances and claims at bare minimum.

Ensure payment on due date to various agencies.

Monitor capital expenditure to ensure completion within stipulated time and cost.

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]

SPECIFIC OBJECTIVE

Study is conducted to understand and analyze the working of Banking Section

in IOCL.

To understand the various Accounts prepared in the Banking

To understand the various Reconciliation’s prepared in the Banking Section.

To find out the various causes of the unmatching of the Reconciliation.

To identify the open items and unmatched items.

To analyze and clear the open items.

To interpret the results thereof and to reach at some conclusion.

To understand the practical difficulties faced in the Banking Section.

To study the overall Objectives and Obligations of the company.

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GENERAL OBJECTIVES

Employees recommendation regarding future strategies, ideas and various skills

required for the various fields.

To study the structure of the organization.

To study the S.W.O.T ANALYSIS

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2.4 SCOPE OF THE STUDY

The study has been conducted in the Indian oil corporation (marketing division), New

Delhi. It covers the preparation of the reconciliation in the I.O.C.L and the problems

encountered ion the preparation of the same. The study is mainly done to found out

various causes of the unmatching of the reconciliation. It covers the perception of various

respondents (mostly officers), through interview on the system of reconciliation and

various other activities included in it. The study is limited to the Northern Region of IOC

only.

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2.5 METHODOLOGY

The study requires majority of primary data for the completion of the project. Viewing

the work done by the various staff and the executives of the organization has collected

primary data. Executives were chosen on the basis of their in depth knowledge and work

experience in the company and in the Banking section.

The second source of data collection is the secondary data, which is collected from the

past-recorded files, annual reports of the company and also from some other financial

statements. The monthly magazines published by the company “Indian Oil News” and

“Parivar” is also one of the most important sources of data collection.

RESEARCH DESIGN

This study has been conducted in New Delhi (IOCL) Northern Region. I

had taken the required information from the officers related to the

banking section.

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CONCEPTUAL DISCUSSION

CASH MANAGEMENT

Cash Management is a marketing term for certain services offered primarily to larger

business customers. It is used to describe all bank accounts (such as checking accounts)

provided to businesses of a certain size, but it is more often used to describe specific services

such as cash concentration , zero balance accounting and automated clearing house facilities.

Cash Management Services

The following is a list of services generally offered by banks and utilized by larger

businesses and corporations:

Account Reconcilement Services: Balancing a checkbook can be a

difficult process for a very large business, since it issues so many checks it can

take a lot of human monitoring to understand which checks have not cleared and

therefore what the company's true balance is. To get around this, banks have

developed a system which allows companies to upload a list of all the checks that

they issue on a daily basis, so that at the end of the month the bank statement will

show not only which checks have cleared, but also which have not. More recently,

banks have used this system to prevent checks from being fraudulently cashed if

they are not on the list, a process known as positive pay.

Advanced Web Services: Most banks have an Internet-based system which is

more advanced than the one available to consumers. This enables managers to create

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and authorize special internal logon credentials, allowing employees to send wires

and access other cash management features normally not found on the consumer

web site.

Armored Car Services: Large retailers who collect a great deal of cash may

have the bank pick this cash up via an armored car company, instead of

employees depositing the cash.

Automated Clearing House: services are usually offered by the cash

management division of a bank. The Automated Clearing House is an electronic

system used to transfer funds between banks. Companies use this to pay others,

especially employees (this is how direct deposit works). Certain companies also

use it to collect funds from customers (this is generally how automatic payment

plans work). This system is the subject of the ire of some consumer groups,

because under this system all banks assume that the company initiating the debit

is correct until proven otherwise.

Balance Reporting Services: Corporate clients who actively manage their

cash balances usually subscribe to secure web-based reporting of their account

and transaction information at their lead bank. These sophisticated compilations

of banking activity may include balances in foreign currencies, as well as those at

other banks. They include information on cash postitions as well as 'float' (e.g.,

checks in the process of collection). Finally, they offer transaction-specific details

on all forms of payment activity, including deposits, checks, wire transfers, ACH

(automated clearinghouse debits and credits), investments, etc.

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Cash Concentration Services: Large or national chain retailers often are in

areas where their primary bank does not have branches. Therefore, they open

bank accounts at various local banks in the area. To prevent funds in these

accounts from being idle and not earning sufficient interest, many of these

companies have an agreement set with their primary bank, whereby their primary

bank uses the Automated Clearing House to electronically "pull" the money from

these banks into a single interest-bearing bank account.

Lockbox services: Often companies (such as utilities) which receive a large

number of payments via checks in the mail have the bank set up a post office box

for them, open their mail, and deposit any checks found. This is referred to as a

"lockbox" service.

Positive Pay: Positive pay is a service whereby the company electronically

shares its check register of all written checks with the bank. The bank therefore

will only pay checks listed in that register, with exactly the same specifications as

listed in the register (amount, payee, serial number, etc.). This system

dramatically reduces check fraud.

Sweep Accounts: are typically offered by the cash management division of a

bank. Under this system, excess funds from a company's bank accounts are

automatically moved into a money market mutual

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fund overnight, and then moved back the next morning. This allows them to earn

interest overnight. This is the primary use of money market mutual funds.

Zero Balance Accounting: can be thought of as somewhat of a hack.

Companies with large numbers of stores or locations can very often be confused if

all those stores are depositing into a single bank account. Traditionally, it would

be impossible to know which deposits were from which stores, without seeking to

view images of those deposits. To help this problem, banks developed a system

where each store is given their own bank account, but all the money deposited

into the store account is automatically moved into the company's main bank

account. This allows the company to look at individual statements for each store.

US Banks at the present time, however, are almost all converting their systems so

that companies can tell which store made a particular deposit, even if these

deposits are all being done into one account. Therefore, zero balance accounting

is being used less frequently.

Wire Transfer: A wire transfer is an electronic transfer of funds. Wire transfers

can be done by a simple bank account transfer, or by a transfer of cash at a cash

office. Bank wire transfers are often the most expedient method for transferring funds

between bank accounts. A bank wire transfer is a message to the receiving bank

requesting them to effect payment in accordance with the instructions given. The

message also includes settlement instructions. The actual wire transfer itself is

virtually instantaneous, requiring no longer for transmission than a telephone call.

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DIVISIONS AT IOCL

Refineries

Indian Oil controls 10 of India's 18 refineries - at Digboi, Guwahati, Barauni,

Koyali, Haldia, Mathura, Panipat, Chennai, Narimanam and Bongaigaon - with a

current combined rated capacity of 47.50 million metric tonnes per annum

(MMTPA) or 950 thousand barrels per day (bpd).

“Indian Oil accounts for 41% of India's total refining capacity.”

Fig 1.2

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Pipelines

Indian Oil owns and operates India's largest network of cross-country crude oil and

product pipelines of 7,000 km, with a combined capacity of 43.45 MMTPA. Indian Oil

also operates two Single Buoy Mooring systems in the high seas off Vadinar coast in the

Gulf of Kutch for receipt of crude oil.

“Indian Oil owns & operates 76% of India's downstream pipeline

network.”

Fig 1.3

Marketing

38

Indian Oil’s countrywide network of over 22,000 retail sales points is backed for supplies

by its extensive, well spread out marketing infrastructure comprising 182 bulk storage

terminals, installations and depots, 92 aviation fuel stations and 78 LPG bottling plants.

Its subsidiary, IBP Co. Ltd, is a stand-alone marketing company with a nationwide retail

network of over 1900 sales points. Indian Oil touches every customer's heart by keeping

the vital oil supply line operating relentlessly in every nook and corner of India. Indian

Oil’s vast distribution network of over 22,000 sales points ensures that essential

petroleum products reach the customer at the "right place and right time".

“Indian Oil caters to over 53% of India's petroleum consumption.”

Fig 1.4

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Fig 1.5

Indianoil’s Marketing Network for the year 2006-07

Research and Development

Indian Oil’s world-class R&D Centre, with state-of-the-art facilities, has done pioneering

work in tribology (lubricants formulation), refinery processes, pipeline transportation and

fuel-efficient appliances. It has developed over 2,200 formulations of the leading SERVO

40

brand lubricants and greases for virtually all conceivable applications - automotive,

railroad, industrial and marine.

The wide range of SERVO brand lubricants, greases, coolants and brake fluids meet

stringent international standards and bear the stamp of approval of all major original

equipment manufacturers. The Centre has to its credit over 60 national and international

patents, including 5 from US.

TYPES OF ACCOUNTS

All the accounts that IOCL has are broadly divided into:

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01. Collection Account

02. Special Current (Withdrawal) Account

03. Regional Cash Credit Account

04. Cash Management Product

05. Cash Credit Account

06. Valuedations.

07. Real Time Gross settlement (R.T.G.S)

08. Railway credit note

09. Dishonor of Instrument

10. Letter of Authority Account

A brief description about each is given below. Also given is the procedure explaining

how each of the entries come across in each type of account.

The overview also explains the various requirements necessary for opening account at

various locations as at the end they have a lasting effect on the credit availability of the

organization. Hence while opening a location various reasons and how they effect the

cash flow has been given.

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1. COLLECTION ACCOUNT

Collection Accounts are opened for various locations and other offices for

depositing various instruments collected from customers/parties.

Also while deciding the branch, assess the quantum of outstation cheques that are

likely to be deposited every month and accordingly get the DDP limit allocated to

the branch. This will enable to get the immediate credit for all outstation

instruments deposited in the account.

DDP limit is a facility under which SBI purchases all outstation cheques and

gives immediate credit against them, ending actual realization of cheques from the

dealers.

Quantum of DDP limit should be calculated estimating the value of outstation

cheque that the location will be depositing in a period of 15 days.

For all instruments that IOCL receives, they generate a DCR (Daily Collection

Report) that acts as a receipt for the organization as it gets it stamped from the

bank, which can also act as a proof for all future references.

Since we have a DDP limit, depending upon the clearinghouse arrangement for local

banking instruments, at present all cities in the country can be divided into three

different categories namely

Day zero center

Day one center

Day two center

43

In all day zero center credit and transfer of funds for local instruments is given to

us on the same day of deposit provided the instruments are deposited before the

cut off time for acceptance of instruments by the branch for presenting it in the

days clearing.

Similarly in all day one credit and transfer of funds for local instruments is done

on the next day provided the instrument are deposited well before the cut off time

for acceptance of instrument by the branch.

However as per the understanding with SBI, credit and transfer of funds for local

instruments in all day two centers should be given to bank on day one itself. This should

be ensured by all the location of day two centers.

2. WITHDRAWL ACCOUNT

All regions and state offices operate the Special Current (Withdrawal) account.

Even some major locations having monthly payments of more than Rs.1crore are

given the facility of Special Current (Withdrawal) account.

In case of special current account no pre –funding of the account is done .The

daily balances are transferred via Regional Cash Credit account at Mumbai.

44

All payments made from the account are centrally funded from the operations

Main Cash Credit Account at Mumbai

No deposit of any instrument is permitted in this account.

Cheques that are more than six months old should not be revalidated and the same

should be transferred to time barred cheque code.

Care should be taken for safe keeping of computerized chequebooks printed by

us. As a precaution it is recommended not to keep stock of more than six months

requirement of computerized cheques.

Computerized cheques should be pre-printed with “Account –Payee” only

crossing.

Debit entries in the bank statement for bank recovered by SBI for issues of

demand draft etc. are to be verified in line with MOU.

It should be verified that the bank charges debited by the bank are in line with the

charged agreed by the cooperation.

It must be ensured that the instrument given by the customer are not deposited in

Special Current Account or the bank should not credit our Special Current

Account by mistake in case both our Collection and Special Current Account are

maintained at the same branch.

45

3. REGIONAL CASH CREDIT

Each regional office of marketing and other divisions of the corporation

individually operates a Regional Cash Credit Account.

In this account, pooling of Debits and Credits from the various accounts other

than Current account operated by locations are effected.

Debit entries to the Regional Cash Credit Account is from the following two

accounts, which are:

Withdrawal account and

Railway credit note

Credit entry to the Regional Cash Credit Account is from the Collection account.

Separate code no are allotted to identify each type of transactions in the Regional

Cash Credit account which are:

For Collection - code01

For Withdrawal - code02

For RCN debits - code05

SBI branches having any of the above-mentioned account transfer the daily

balance to the respective Regional Cash Credit Account.

Net balances pooled in the Regional Cash Credit Account are to be daily

transferred to our main Cash Credit at Mumbai.

46

A separate code no “19”identifies this transfer amount. No balance is retained in

this account.

4. CASH MANAGEMENT PRODUCT

Cash Management Product (CMP) is a new facility provided by SBI whereby the

collections and withdrawals from upcountry branches are transferred via

electronic mode to our cash credit account at Mumbai.

The facility provides DCR Number in the daily reports in place of Instrument

Number and to suit our MOU terms and conditions.

The Cash Management Product facility can be divided into two main categories

namely: -

Credit Module of CMP and

Debit Module of CMP.

Credit Module of CMP deals with Collection Proceeds and Debit Module of CMP

deals with Withdrawal.

Entire transaction data is provided in soft copy to all Regional offices and Sate

Offices on monthly basis from Mumbai.

47

All the Memorandum Terms and conditions of Collection Account are equally

applicable to the facility under CMP except that instead of TT transfer to RCC

A/c, now daily fund transfer takes place through electronic media direct to CC

A/c at HO. Under CMP virtually no new account is opened rather on receipt of

the request for collection account for a location.

CMP DATA TO REGIONS

Following CMP transactions data in electronic form shall be provided by H.O to regions

DCR details in text format in DBASE

Details of system returns for amount debited by the bank in Dbase

Details of manual entries posted by the Bank-both debit/credit entries in Dbase format.

Bank statements of CMP account maintained at HO in text format

Regions to check that the value dates given in these statements are inline with MOU.

Regions to segregate the above data state wise in the format amenable to their bank

Reconciliation module and send the same to states for reconciliation.

5. CASH CREDIT ACCOUNT

CCA is operated by H.O. marketing division and is a very important account of

the corporation.

48

Only the board of directors can open a CCA upon passing a resolution to the

effect.

Transfer of funds from all other types of accounts like collection account,

withdrawal account etc. are to CCA.

Apart from transfer entries all payments handled by H.O. like purchase of foreign

currencies, repayment of loan availed etc. is directly debited to CCA. Similarly

loans availed for working capital purpose and major receipts handled by H.O. are

mostly credited to CCA directly.

The limits sanctioned by SBI for the CCA are required to be renewed every year

by submitting yearly credit monitoring arrangement data in the prescribed form

by the bank. The data to be given are current and previous year’s actual and next

two years projections.

Monthly bank reconciliation and clearance of open items etc. are applicable to

CCA as well.

The bank balances of CCA is monitored on daily basis to ensure that the overdraft

balances do not exceed the sanctioned limit and also no surplus balances are kept

idle.

6. VALUEDATION

49

As corporation maintains number of bank accounts through out the country for

different purposes like separate account for withdrawal of funds and separate

account for sales realization etc., it is pertinent to pool all this debits and credits

together to avoid idling of funds at one account and paying interest to bank on

withdrawals from another account.

In order to pool all the debits and credit at one account, Regional Cash credit

Account were opened. Such Regional Cash Credit was opened region wise for

easy control and proper accounting.

To overcome the drawback of time gap between transfer of funds and receipt of

funds from various collections accounts and other withdrawal accounts at

Regional Cash Credit Account, the concept of “Valuedation” was introduced.

Under this facility the amount received at Regional Cash Credit are recorded with

the date of original transfer of amount from the Collection account or other

Withdrawal accounts.

Interest to be paid to SBI on amount borrowed is calculated for the Corporation as

a whole on the basis of daily “Valuedated” balance of the Main Cash Credit

account by applying the effective rate of interest.

7. REAL TIME GROSS SETTLEMENT (R.T.G.S)

New mode of payment Real Time Gross Settlement has been introduced

Under these new modes, payment to suppliers &vendors is very fast and hassle

free in terms of avoiding collection/deposit of cheques and getting credit after

clearing, which exist, in the present conventional mode.

50

The payment is through RBI and the facility is available in more than 5000

branches of various banks. RTGS facility can be availed if the fund transfer is to

be made to a bank other than the bank from where fund is transferred. In our case

since we are having our account with SBI, Vendors/suppliers having account in

banks other than SBI, can avail this a facility provided their bank is RTGS

enabled.

8. RAILWAY CREDIT NOTE ACCOUNT

This facility is given to us by the SBI to enable our locations to make Railway freight

payments. Under this facility, locations are authorized to make payment of Railway

freight. The bank cannot permit any other payment under this facility.

At present we have 3 ways of making payment of railway freight:

By having a special current (withdrawal) account at the location.

By issuing cheques of special current (withdrawal) account maintained at the RCC

branch.

By issuing RCN.

51

OPENING OF RCN FACILITY

Request for opening of any type of RCN Account should be forwarded to Head Office

after ensuring the following aspects:

Ensure that the Branch is able to handle the workload of our account by inquiring

about the Branch’s infrastructure, staff strength etc.

The branch should be selected in consultation with the Railway Authorities so that

their requirements are met and IOC does not incur any bank charges.

More than one officer should be posted in that location.

The proposal contains all necessary details like:

# IOC location nam

# IOC location code

# SBI branch name

# SBI branch code

# SBI branch address

# Monthly withdrawal limit

CHECKLIST OF VARIOUS ASPECTS TO BE VERIFIED BY REGION/LOCATION

The chequebooks should be pre-printed with the Name of the Railway Authority to

whom payment is made. There should not be any blank cheque book/ leaf without the

name pre-printed.

52

Region should not distribute to different locations; the cheque leafs from the same

chequebook. In other words separate chequebooks should be given to each location.

While issuing new chequebook to the Location it should be ensured that all the

cheque leafs of the earlier chequebook are utilized and proper accounting for all

cheques is submitted by the Location.

Proper explanation should be obtained from the Location in case of any missing

cheque number in the Bank Statement.

Bank charges for the facility is 0.50ps per RS 100/-

Reconciliation should be done on the monthly basis by the region based on statement

received from locations containing details of RCN’s issued during the month.

9. DISHONOUR OF INSTRUMENT

Dishonor of instruments is one of the areas of major concern in banking activity.

Timely realization of all instruments/cheques has to be constantly and closely

monitored by all concerned and immediate corrective steps to be taken whenever

the cases of dishonor or delay in realization are noticed so that no financial losses

occur to the corporation.

All debit entries for dishonor of instrument, the original instrument are

collected /obtained from the bank. This aspect is equally applicable to centers

having CMP facility.

53

As soon as the dishonor of instrument is received, ensure to pass the necessary

entry immediately debiting the customer for the value of instrument along with

interest and incidental charges.

Action to be taken for obtaining replacement cheques/DD from the concerned

party. Divisional manager to be immediately informed of the dishonor.

10. LETTER OF AUTHORITY ACCOUNT

This facility is given to our locations for making payments of particular nature i.e.,

payment to Customs and Excise authorities or payment to Port trust authorities or

payment to other refineries for cost of product.

This facility can be utilized for making various payments provided the facility is used by

the location to make payment to any one single authority.

OPENING OF A LA FACILITY

Request for opening of a LA facility or enhancement in limits should be forwarded to

Head Office after ensuring the following:

The note for opening of the account in limits should be duly approved by Finance In-

charge of the region.

54

The proposal contains all necessary details like:

#IOC Location name

I#OC Location code

SBI Branch name

#SBI Branch code

#SBI Branch address

#Fortnightly/Daily LA Limit

#Nature of payment i.e., Excise duty/Customs duty/Port trust charges etc.

LA facility should be opened in such SBI branches, which is authorized to collect

Central/Excise revenue.

In case if in that center the authorized revenue collecting bank is other than SBI, then

the SBI branch where the facility is to be opened should be one from where the

transfer of funds to the other bank is possible in the quickest time.

Normally the SBI branch conducting the clearinghouse in that center is able to

transfer the funds to other banks on the same day. This aspect is to be checked and

verified with the SBI branch and accordingly the branch is to be identified for

opening the LA facility.

As per our Memorandum of Understanding with SBI, it has provided us with the facility

to make payments and get collections in three ways, which are as follows:

1) CMP (Cash Management Product): - Almost 90% of the transactions occur through

this mode. Under this, the collections and withdrawals are transferred directly from SBI

locations to SBI CAG, Mumbai.

55

2) RCC (Regional Cash Credit): - Some transactions occur through the RCC mode.

Under this, the collections and withdrawals are transferred first from SBI location to

SBI CAG, New Delhi. This flow of money is known as BT1. Then from SBI CAG, New

Delhi the money is transferred to SBI CAG, Mumbai as BT2.Then we reconcile BT1

against BT2. The left over BT1’s against which no advice is received are taken up with

the respective SBI location.

3) IOCL is on its way in starting Corporate Internet Banking (CINB) with SBI. This is

because Central Vigilance Commission desires that PSUs should make maximum number

of payments through electronic modes such as ECS/EFT with an ultimate aim to phase

out the traditional modes such as cheques and DD’s.

Although ECS/EFT is used in IOCL from quite a long period of time in making

payments such as payments to retired employees, CINB is a new concept and will initiate

slowly. Payments can be made under CINB through SBI website www.onlinesbi.com.

Under this, payment of contractors can be made by IOCL by way of electronic

instructions to SBI. Even payments to

Government/private parties by regional/state offices are decided to be made through

Internet Banking System.

CHECKLIST OF VARIOUS ASPECTS TO BE VERIFIED BY LOCATION/ REGION

Locations should verify the bank charges debited by the bank to ensure that they are

in line with the charges agreed by the corporation.

Bank reconciliation should be done on monthly basis.

56

In respect of excise duty payments made by the locations care should be taken not to

issue more than 3 LA’s in a month. However, in case of custom duty and other

payments made through LA facility no such restriction is imposed.

WORKING

As discussed Northern Region (NR) is divided into four state offices Punjab State Office

(PSO), Rajasthan State Office (RSO), Delhi State Office (DSO), Uttar Pradesh State

Office (UPSO) each of which have their own banking transaction with the main banker

SBI

Banking

DSO NR PSO RSO UPSO

GREEN PARK PARLIAMENT STREET

Northern Region undertakes the transactions occurred at these state offices and it also has

their own account with SBI at Green Park and Parliament Street.

57

All the accounts of IOC are broadly divided into two types, which are

TYPES

RCC CMP

REGIONAL CASH CREDIT (RCC) ACCOUNTS AND CASH MANAGEMENT PRODUCT (CMP)

RCC accounts are those accounts where the amount collected by the various state offices

are first transferred to the central CAG office in Delhi, and from there it is transferred to

SBI, Mumbai

CMP Account is that account, where each location passes their daily collection to SBI

Mumbai, our final cash credit account. The day end balance has to be nil.

Everyday collections are deposit through DCR (daily credit report), which is a form of

pay-in-slip. According to our understanding of MOU we need to

receive credit for high value cheques on the same day and all other cheques by the next

day.

REALISATION Statement is what we receive everyday from bank, which gives us a

picture of the total amount credited in our account in lieu of the DCR deposited.

Any discrepancies in the two are taken up with the bank immediately as they lead to

delay in receiving of funds which may lead to loss of interest.

RCC Papers are also received on an everyday basis, which gives a clear picture of the

total credits and debits of the entire marketing division of the Northern Region, which

includes all the state offices and their various locations.

58

Northern region does reconciliation of the accounts that it operates, i.e. the withdrawal

and the collection account at Green Park and the withdrawal account at the Parliament

Street.

As discussed we receive the data of Green Park in hard copy for which we format the file

according to the given format, which is:

A B C D E F G H I J K

INCO FOR COLLECTION/OUT FOR WITHDRAWAL IN TEXT FORMATE

DATE IN TEXT FORMAT(BOTH)

AMOUNT IN NUMBEWR FORMAT(BOTH)    

AMOUNT IN TEXT FORMAT(BOTH)

DCR NUMBER IN THE CASE OF COLLECTION TEXT FORMAT

CHEQUE NUMBER IN THE CASE OF WITHDRAWAL

CHRGES IN TEXT FORMATE(BOTH)  

INCO IN TEXT FORMATE

                     

INCO 110200510000.00       01       INCO

CHRG 1102005100.00           M01006   CHRG

EDEB 11020055000.00               EDEB

ECRE 11020055000.00               ECRE

TRANSFER 11020051000000.0     1000000        

TRANSFER

Table 1.3

59

And we finally come out of this type of file

inco 2703200616000.00       124       inco

inco 29032006115000.00       126       inco

chrg 30032006 1500.00       128       chrgecre 31032006 7500.00       129       ecreinco 31032006 5000.00       130       incoh000 311032006 145000     145000         h000

Table 1.4

The point to be noted here is the last entry, which is h010, which indicates that the total

amount of credits received during a month, has also been transferred to our CCA at

Mumbai. While working on the format if the total of transfers does not match with the

credit received it has to be taken up the bank.

For Withdrawal Account of Parliament Street we receive data as a soft copy, which is

then formatted according to the DBASE format to make it SAP enabled.

We receive data in the following way:

01000578063 051201051201TO CLG: 00203298 D000000001698000D000000001698000

01000578063 051201051201TO CLG: 00203286 D000000001321000D000000003019000

01000578063 051201051201TO CLG: 00202924 D000000000312500D000000003331500

01000578063 051201051201TO CLG: 00202595 D000000000061600D000000003393100

01000578063 051201051201TO CLG: 00202910 D000000000600000D000000003993100

60

A B C D E F G H I J Kchrg 14122005 440.00           m01006   chrgchrg 28122005 55.00           m01006   chrgede 01122005 2800.00             ededOut 28122005 3400.00         198441     outOut 27122005 1592.00         199149     out

Table 1.5 Once the formatting is done it is now loaded in SAP

SAP is an ERP package .The entire list of transaction that are done in Banking Division are done

through SAP. The total withdrawals that occur during the whole month occur through cheques,

which are generated by SAP.

But it also happens that we have extra debit termed as EDEB from our accounts which is an entry

shown in the first column

Now SAP does not accept that as an amount which is debited through SAP

EDEB could be because of CHARGES for example made on making of DD

Or could be any other amount, which does not pertain to IOCL or could be of a refinery or some

other division of IOCL and has been debited from our Marketing Division

Now all those amounts that pertain to us, we give a JV for those items and those items that does

not belong to us we take them up from the bank to make sure that we receive them back

JV is a system where we make SAP accept the amount paid through ECS

accept as a withdrawal and hence the amount withdrawn matches with that of our SAP amount

and proof is completed for the month

61

In case of collection account we have extra credit, which means that ECRE bank has given extra

amount of money in our bank, which has to be debited from our account, as SAP does not accept

these payments

As in case of withdrawal Sap accepts withdrawal as any amount given through cheque and in case

of collection account it is any amount which is deposited through DCR (daily collection report)

which also act as a proof for the deposits of the amount. We have already discussed the Green

Park and the Parliament Street data.

The difference between the two data is that Green park data is an RCC account where as the data

that we will be discussing now is CMP account.

We receive a file called IOCLN.This is the file that we receive from head office. This file

contains data of all the state office and at the same time the total transactions occurred during the

month in all the state offices and the Region.

From the file we sort out the data according to the state offices and pass on the data to them for

further working at their end. The raw data looks

0053531/03/2006844720.00002203GEN Clg.01200

0053531/03/20062303100.00002207GEN Clg.01200

62

0100001/03/20061263487.00000773HV Clg.01100

0100001/03/20062000000.00000774HV Clg.01100

0100003/03/20061406140.0035687MICR Clg. 01000

0100003/03/2006885500.001MICR Clg.01000

0100003/03/2006275900.00000776MICR Clg.01000

0100021/03/2006956000.00000821HV Clg.01000

0100304/03/2006500000.00001215MICR Clg.01300

01003

63

04/03/200628184.00001214MICR Clg.01300

0100306/03/200671427.00001219MICR Clg.01400

0100306/03/20063700000.00001218MICR Clg.01400

64

After formatting the file looks like this

LOC_CODE CREDIT_DT AMNT BDS_NO REMARKS STATE24 1/3/06 365944 1 GEN Clg. 100024 2/3/06 3456 1 GEN Clg. 1000    369400                 25 1/3/06 45678 774 GEN Clg. 100025 1/3/06 1999666 775 GEN Clg. 1000    2045344                 26 1/3/06 5678 34835 GEN Clg. 100026 2/3/06 288190 34836 GEN Clg. 1000    5123356                   TOTAL = 7538100                 567 1/3/06 400000 456 GEN Clg. 1100678 1/3/06 12059 457 GEN Clg. 1100    412059                 987 2/3/06 40646 7726 ONBRANCH Clg. 1200998 2/3/06 1906472 7727 ONBRANCH Clg. 1200    1947118                 1234 3/3/06 791303 976 GEN Clg. 13001235 3/3/06 805640 977 ONBRANCH Clg. 1300    1596943                 657 4/3/06 4695971 1234 GEN Clg. 1400789 5/3/06 6758 1235 GEN Clg. 1400    4702729                   TOTAL= 16196949      

Table 1.6

It has a location code different for each state indicating that there is different CMP

account within each state, which explains quick flow of funds in the organization.

65

The file has the following features:

LOCATION CODE –It indicates the SBI branch within

the state.

CREDIT DATE- it indicates the date on which the credit was transferred to SBI,

Mumbai.

BDS_NO – This is the most important factor that helps in differentiating accounts and

accounts with-in accounts.

It is actually the DCR no of different states.

STATE- each state office has a different location code

Region –1000

DSO-1100

PSO-1200

RSO-1300

UPSO-1400

The data is sorted according to state offices and the total amount for each state office is

calculated and then the entire division is calculated to reach upon the amount that

indicates the total amount of transactions occurred during the month.

The data for each state office is send to them.

We take the data of the NR and as can be seen from the BDS_NO that there are three

different type of BDS_NO given each indicating a different type of account.

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The BDS_NO indicating ‘1’ is for EFT account

The BDS_NO indicating three digit numbers is for CAG account

The BDS_NO indicating five digit numbers is for R.K.PURAM Account.

The total of each of those is taken and worked on in a manner similar to the collection file

for RCC account.

We collect the total data of EFT and format it to make it SAP enabled. After formatting

the file it looks like this

EFT

inco 11032006 67314052.00       1       Incoinco 16032006 78191697.00       1       Incoinco 22032006 58844035.00       1       Incoinco 30032006 317093484.00       1       Incoinco 17032006 29890.00       1       Incoinco 29032006 175.00       1       Incoh100 31032006 1020165641.00     1020165641         h100

67

The next we have formatted is CAG, after formatting it becomes

CAG

inco 01032006 1263487.00       773       incoinco 01032006 2000000.00       774       incoinco 02032006 63000.00       775       incoinco 03032006 1406140.00       775       incoinco 03032006 275900.00       776       incoinco 03032006 885500.00       777       incoinco 03032006 350000000.00       778       incoinco 03032006 90000.00       779       incoinco 03032006 30000.00       779       inco

The next to format is R.K.PURAM

R.K.PURAM

inco 21032006 146257132.00       34836       incoinco 22032006 75729712.00       34837       incoinco 23032006 160290887.00       34838       incoinco 25032006 110926054.00       34839       incoinco 27032006 62392699.00       34840       incoinco 28032006 79903433.00       34841       incoinco 31032006 150586092.00       34842       incoinco 31032006 134127662.00       34843       incoh100 31032006 2180826023.00     2180826023         h100

After formatting the files we convert them into text file and then import on SAP for reconciliation

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MAJOR FUNCTIONS PERFORMED

1.RECONCILIATION

BANK RECONCILIATION STATEMENT

Definition

Bank Reconciliation Statement is prepared on a particular date to reconcile the bank

balance in the cashbook with the balance as per passbook by showing all the causes of

difference between the two.

The difference between the two balances arises due to some entries, which have

been recorded in the cashbook but not in the passbook. Similarly, there may be some

entries recorded in the passbook but not in the cashbook. Besides, disagreement between

the two balances can happen on account of errors committed either by the customer or by

the bank while recording entries in their respective books.

Reconciliation and identification of open items

At state office matching of the transactions as per bank statements and cashbook shall be

carried out on monthly basis and unmatched items can be identified and listed in the

following manner:

DCR booked in bankbook but not credited by the bank.

Amount debited in bank statement but not booked in the bankbook on account of

dishonors, overdue interest and other bank charges etc.

Amounts credited by bank but not booked in bankbook.

69

Difference in amount between the amounts booked as per DCR and amount

credited by bank.

Causes of difference in Cashbook and Bankbook

1. Cheques issued but not yet presented for payment.

2. Cheques paid into the bank but not yet cleared.

3. Interest allowed by the bank.

4. Interest and expenses charged by the bank directly.

5. Interest and dividend collected by the bank directly.

6. Direct payments by the bank on our behalf.

7. Direct payment into the bank by the customer.

Time frame for completing the reconciliation And Clearance of open items

State offices must complete the bank reconciliation in respect of all locations

under them by 12th of following month.

The open items emerging out of the reconciliation should be analyzed and

cleared within three days of the completion of the bank reconciliation.

It is the responsibility of the Divisional manager to ensure the timely response on

the report by state office.

Reports

70

The reports to state office should be sent by 20 th of the following month and also a report

to the regional office confirming that there are no open items. It should be informed to

HO on monthly basis by mentioning “status on the key issues”.

Importance

It helps to bring out any errors that may have been committed either in the

cashbook or in the bankbook.

Any undue delay in the clearance of cheques will be shown up by the

reconciliation.

It helps in the detection of frauds.

Accuracy of the entries can be easily checked and a regular check on it can be

done.

Reconciliation of collection account

In collection account reconciliation, DCR’s are deposited in bank against which

credit is given by the bank in our collection account.

DCR is an instrument, which contains the details, as well as instruments for

depositing in the bank. It is nothing but pay-in slip.

Upon receipt of instruments like cheques, DD’s/pay orders, cash receipt is

prepared.

With the reference of these cash receipts DCR’s are prepared and submitted along

with receipted instruments with the bank. Bank in its regular course provides

credit in our collection account.

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The day end credit is transferred to SBI, CMP Mumbai in respect of CMP

branches.

In case of RCC branches this day end credit is transferred SBI CAG Mumbai

through SBI CAG New Delhi

Format of reconciliation ofCollection account

Reconciliation of withdrawal account

Withdrawal account is prepared to see the day-to-day expenses of IOCL and to

make the various payments during a particular month.

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Opening balance.Receipts (+)

Bank Transfers (-)

 G.TOTAL

   

G.TOTALBANK AMOUNT.

CASH AMOUNTBALANCE  

It is prepared to see how much amount is there in the accounts.

It is also prepared for the detection of frauds in case of overpayment to any

customer.

It is prepared to analyze the amount in the account of IOCL, previous month’s

balance, bank charges and the cancellation of cheques etc. during the month.

WITHDRAWAL ACCOUNT

73

Cheques issued during the month

(+) Cheques issued during previous month which were not presented

2.PREPARATION OF CASH BUDGET

Cash budget is defined as a statement showing projected payment and collection for each

month in advance. The Northern Region office takes the projected data from the four

state offices and then compiles that data to form the cash budget that has two parts i.e.

collection and withdrawal. Collection includes receipts from parties such as IFFCO, NFL

74

(-) Bank Transfer

(+) Bank Charges

(-) Unlinked debits of The previous month

(+) Unlinked debits of The current month

(-) Draft Cancelled

(+) J.V. Passed

(-) J.V. Passed

Cheque issued but not presented

(National Fertilizers Ltd.), CFCL (Chambal Fertilizers Corporation LtD.), IAC (Indian

Airlines Corporation). Withdrawal includes payment for sales tax and excise duty.

The format for advising the cash budget w.e.f May 2003 is given as

under.

CASH BUDGET FOR THE MONTH __________

1. Payments

Rs. In crores

Dates Sales

Tax/Excise

Duty payments

Other major payments e.g. oil purchase

from CPCL/BRPL/KRL etc

Other

payments

01.05.08

02.05.08

03.05.08

04.05.08

-

-

31.05.08

Total

2.Collections

Rs. In crores

Dates Collection from major customers e.g.

NR- (IFFCO, NFL, CFCL, DIL, IAC

etc)

ER- (HPL, NOC, IBP etc)

All other Collections

75

WR- (GSFC, GNFC, Zuari Agro etc)

SR – (SPIC, PPN, MCFL etc)

01.05.08

02.05.08

03.05.08

04.05.08

-

-

31.05.08

Total

3.REALIZATION STATEMENTS

Realization statement is a type of bank statement, which we get on a daily basis from

SBI. It gives us a picture of the total amount credited in our account against the DCRs

deposited.

If there are any discrepancies with in the two then they are taken up with the bank

immediately to avoid delay in receiving of funds.

4.FOLLOW UP OF PAYMENTS

Another very important function of banking is to follow up with the head office for

collections and payments made through RCC.

76

The bankers also provide IOCL with RCC papers on a daily basis. These papers give us a

clear picture of the total credits and debits ofthe entire Northern Region including all the

state offices. These papers are helpful in locating any wrong debits, if received by us.

Flagships Brands

Servo

IndianOil's SERVO is the largest selling

lubricant brand in India, with one of the largest ranges

of automotive and industrial lubricants. Developed

exclusively at IndianOil's world-class R&D Centre at Faridabad, there is a SERVO

lubricant for virtually every single application. With over 42% market share and 450

grades, the country's leading SERVO brand lubricants from IndianOil are sold through

over 8,100 IndianOil petrol/diesel stations, over 1,300 SERVO Shops and a countrywide

network of bazaar traders.

77

Indane

Indian Oil reaches Indane brand cooking gas to

the doorsteps of over 35 million households in over

2,000 markets through the country's largest network of

over 4,000 distributors. The Corporation’s 82 LPG

plants bottle about 3,380 thousand tonnes of LPG per annum. Compact 5 kg Indane

cylinders were launched in 75 rural and hilly markets of 11 states, i.e. J & K, Himachal

Pradesh, Punjab, Uttar Pradesh, Arunachal Pradesh, Meghalaya, Assam, Orissa, West

Bengal, Madhya Pradesh and Tamil Nadu, with plans to introduce them in 500 markets in

rural areas.

Premium Fuel

The launch of premium fuels - XtraPremium and

XtraMile (originally IOC Premium and Diesel Super

respectively), marks a new beginning for

IndianOil and its customers. XtraPremium is, in fact, the only petrol in India with 91

Octane and doped with Multifunctional Additives. The maiden launch of these branded

fuels took place in Delhi on Sept. 24, 2002. Subsequently, XtraPremium sales have been

extended to 200 cities and 750 petrol & diesel stations, and XtraMile to 850 cities and

1750 petrol and diesel stations by the end of the financial year 2003 – 2004.

Aviation Service

Indian Oil’s ISO-9002 certified Aviation Service,

with 68% market share, meets the fuel and lubricants needs

78

of domestic and international flag carriers, Defence Services and private aircraft

operators through 93 aviation fuelling stations. Between one sunrise and the next,

IndianOil refuels over 900 aircrafts. In fact, the refuelling never stops and neither does

our customer service, which is round the clock. The wing’s foreign exchange earnings

during the year 2002-03 touched Rs. 898 crore.

Auto Gas

Auto gas (LPG) has been introduced in

Hyderabad, Bangalore and Mumbai markets. This

alternative fuel is a good business proposition in the

long term, and IndianOil intends to further expand its

marketing in a big way.

DATA ANALYSIS

INDIANOIL MAJOR PRODUCTS

IndianOil continues to lay emphasis on infrastructure development. Towards this end, a

number of schemes have been initiated with increasing emphasis on project execution in

compressed schedules as per world benchmarking standards. Schemes for improvement

and increased profitability through debottlenecking / modifications / introduction of value

added products are being taken up in addition to grassroots facilities. Project systems

have been streamlined in line with ISO standards.

 

GRASSROOTS REFINERY-CUM-PETROCHEMICALS PROJECT AT PARADIP

Project Cost: Rs. 25,646 crore

Expected Commissioning: By end of 2011-12

79

Benefit: The project will help in partly meeting deficit of distillates viz. LPG, Naphtha, MS,

Jet/Kero, Diesel and other products, in the eastern part of the country. The complex will

generate intermediate petrochemicals feedstock.

Brief Description: A 15 MMTPA grassroots refinery-cum-petrochemicals complex (along

with a product pipeline to Ranchi) is planned to be constructed at Paradip in the state of

Orissa. The Refinery will have, apart from a Crude and Vacuum Distillation Unit, a

Hydrocracking Unit, a Delayed Coker Unit and other secondary processing facilities. It will

also have an integrated gasification combined cycle plant for production of steam, power and

hydrogen from petroleum coke for captive use in the refinery. This will be the most modern

refinery in India with nil residue production and the products would meet stringent

specifications. 3344 acre of land has been taken over by IndianOil and necessary

infrastructure development jobs prior to setting up of the

main refinery are progressing.This complex envisages production of integrated

petrochemicals like Paraxylene, Polypropylene, and Styrene.

 

RESIDUE UPGRADATION AND MS/HSD QUALITY IMPROVEMENT PROJECT

AT GUJARAT REFINERY

Project Cost: Rs. 5,693 crore

Expected Commissioning: January 2010

Benefit: The project envisages setting up of a number of units like VGO-HDT, ATF-Merox,

FCC-Merox, LPG-Merox, ISOM, Coker, DHDT, HGU (PDS) and SRU.

Brief Description: The objectives of the project are multifold. It shall ensure meeting

product quality requirement of MS/HSD to EURO-III/IV levels, processing increased

quantity of high sulphur crude and improvement in distillate yield.

80

Last Updated: August 09, 2007

 

NAPHTHA CRACKER AND POLYMER COMPLEX AT PANIPAT (HARYANA)

Project Cost: Rs. 14,439 crore

Expected Commissioning: November 2009

Benefit: This project is a cornerstone for IndianOil's entry into petrochemicals and a new

business line for growth. For the State of Haryana, this project shall lay the foundation for

creation of a world-class petrochemicals hub, which will engender significant industrial

activity in the coming years.

Brief Description: The project envisages setting up of a Naphtha Cracker based on captive

utilisation of naphtha from Panipat, Mathura and Koyali refineries of IndianOil. With a

capacity of 800,000 MT/year of ethylene production, the Cracker complex will have

associated units viz. hydrogenation, butadiene extraction, benzene extraction etc. besides

downstream polymer units like swing unit (LLDPE/HDPE), a dedicated HDPE unit,

Polypropylene unit and MEG unit.

 

CHENNAI-BANGLORE PRODUCT PIPELINE

Project Cost: Rs. 232.11 crore

Expected Commissioning: July 2009(or 24 months from Forest & Environment Clearance)

Benefit: The project consists of laying 14"/12" diameter 290 km long product pipeline from

CPCL Refinery (Manali, Chennai) in Tamil Nadu to Banglore in Karnataka

Brief Description: The pipeline would ensure uninterrupted, regular and economical

81

transportation of petroleum products to Bangalore-fed areas in a cost-effective manner.

 

DADRI-PANIPAT R-LNG SPUR PIPELINE

AUGMENTATION OF MUNDRA – PANIPAT CRUDE OIL PIPELINE

Project Cost: Rs. 204.74 crore

Expected Commissioning: December 2008

Brief Description: Project consists of laying a 22" diameter 20 KM long loopline in Kot-

Beawar section and conversion of Radhanpur scraper station to pumping station while adding

pumping units at Mundra, Kot, Sanganer and Rewari.

Benefit: This is a low cost expansion scheme of Mundra-Panipat crude oil pipeline system

for meeting the additional crude oil requirement of Panipat refinery to the tune of 3 MMTPA.

82

Project Cost: Rs. 250.66 crore

Expected Commissioning: January 2009

Benefit: The 132 km long 30 inch diameter spurline carrying regassified LNG (R-LNG) will

stretch from GAIL India’s Dadri terminal in UP to Panipat.

Brief Description: The proposed R-LNG pipeline would provide for an economical means of

feeding natural gas to Panipat refinery.

 

PANIPAT-JALANDHAR LPG PIPELINE

Project Cost: Rs.186.72 crore

Expected Commissioning: August 2008

Benefit: The pipeline with feed IndianOil's LPG bottling Plants at Nabha and Jalandhar in a

cost-effective manner.

Brief Description: Project consists of laying a 10" diameter 275 KM long LPG pipeline

from Kohand (near Panipat refinery) in Haryana to Jalandhar via Nabha in Punjab.

 

66

STATEMENT OF PURPOSE

Indian oil is a public sector company and has a broad area of working .it has a

continuosly increasing turnover. The debtors and inventories are increasing at a higher

rate due to increase in sales. The study will cover the preparation of reconciliation of

I.O.C.L. A single mistake in the preparation of the reconciliation can cause a big problem

in the future.

The study is conducted to understand the various reconciliations prepared in

I.O.C.L. for its proper functioning, the problems encountered in the preparation of the

same and to provide effective solutions

83

ANNEXURES

FINANCIAL PERFORMANCE

AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31ST MARCH 2006 (Rs. Crore)

UNAUDITED RESULTS FOR AUDITED RESULTS

FOR

AUDITED CONSOLIDATED

RESULTS NINE

MONTHS ENDED

31.12.2006

THREE MONTHS ENDED

THE YEAR ENDED FOR THE YEAR

ENDED

31.03.2007 31.03.2006 31.03.2007 31.03.2006 31.03.2007 31.03.2007

1. FINANCIAL:

1. Gross Turnover 135087.62 48523.52 40587.63 183611.14 150979.44 175638.60 148727.38 Less: Excise Duty 13063.04 4735.07 2711.79 17798.11 14022.70 22796.89 16762.00 Net Sales 122024.58 43788.45 37875.84 165813.03 136956.74 152841.71 131965.38

2. Net Sales/Income from Operations

123024.19 44212.91 38216.23 167237.10 138304.62 154324.62 133458.35

3. Grant from 0.00 6571.44 0.00 6571.44 0.00 6992.02 0.00

84

Government of India (Special Oil Bonds)

4. Other Income 1332.59 1198.61 288.06 2531.20 1473.67 2357.21 1436.58 5. Total Expenditure              S7 a)

(Increase)/Decrease in Stocks

(1600.74) (998.59) (2124.51) (2599.33) (1653.90) (2934.20) (2169.30)

b) Purchase of Products and Crude for resale

66504.50 23755.79 22144.65 90260.29 72771.07 65227.80 57316.65

c) Consumption of Raw Materials

48362.98 19883.09 12992.22 68246.07 49706.14 77833.63 56957.11

d) Staff Cost 1323.84 537.99 652.03 1861.83 1885.52 2221.07 2258.63 e)  Other Expenditure 6263.85 2375.59 3087.81 8639.44 8347.76 10228.04 9703.46

120854.43 45553.87 36752.20 166408.30 131056.59 152576.34 124066.55 6. Interest 740.54 281.65 175.85 1022.19 583.13 1251.90 768.06

7.

Gross Profit after Interest but before Depreciation and Taxation(2+3+4-5-6)

2761.81 6147.44 1576.24 8909.25 8138.57 9845.61 10060.32

8. Depreciation 1623.05 580.21 566.59 2203.26 2183.39 2552.42 2524.57

9. Profit Before Tax (7-8)

1138.76 5567.23 1009.65 6705.99 5955.18 7293.19 7535.75

10.

Provision for Taxation - Current Tax 67.00 1550.63 595.21 1617.63 1029.43 1945.02 1384.75 - Fringe Benefit Tax

40.22 16.87 0.00 57.09 0.00 62.94 0.00

- Deferred Tax 146.99 (30.84) (478.48) 116.15 34.37 169.33 250.09 254.21 1536.66 116.73 1790.87 1063.80 2177.29 1634.84

11. Net Profit (9-10) 884.55 4030.57 892.92 4915.12 4891.38 5115.90 5900.91 12.

Minority Interest/Others

183.48 431.68

13.

Profit for the Group (11-12)

4932.42 5469.23

14.

Paid-up Equity Share Capital (Face Value : Rs. 10 each)

1168.01 1168.01 1168.01 1168.01 1168.01 1168.01 1168.01

15.

Reserves excluding revaluation reserves

- - - 28134.66 24816.35 29472.93 26281.96

16.

Earning per Share (Rs.) (Basic and Diluted)

7.57 34.51 7.65 42.08 41.88 42.23 46.83

17.

Aggregate of Non-Promoter Shareholding a) Number of Shares

209934345

209934345

209934345

209934345

209934345

209934345

209934345

b) Percentage of Shareholding (%)

17.97 17.97 17.97 17.97 17.97 17.97 17

.97 II. PHYSICAL (IN MMT)

85

1. Product Sales a)Domestic(including Gas sales) 35.72 11.80 12.55 47.52 48.86 b) Export 1.62 0.47 0.61 2.09 1.96

2. Refineries Throughput

28.43 10.09 9.02 38.52 36.63

3. Pipelines Throughput

33.81 11.54 10.42 45.35 43.03

SEGMENT-WISE RESULTS

(Rs. Crore)

UNAUDITED RESULTS FOR AUDITED RESULTS

FOR

AUDITED CONSOLIDATED

RESULTS

NINE MONTHS ENDED

31.12.2006

THREE MONTHS ENDED

THE YEAR ENDED FOR THE YEAR

ENDED

31.03.2007 31.03.2006 31.03.2007 31.03.2006 31.03.2007 31.03.2006

1. SEGMENT REVENUE

a) SALE OF PETROLEUM PRODUCTS

110,340.04 40,210.95 35,517.67 150,550.99 128,578.35 136,924.47 123,367.05

b) OTHER 13,158.55 4,608.80 2,983.66 17,767.35 10,418.87 18,574.42 11,142.25

86

BUSINESS ACTIVITIES SUB-TOTAL

123,498.59 44,819.75 38,501.33 168,318.34 138,997.22 155,498.89 134,509.30

LESS: INTER-SEGMENT REVENUE

406.48 104.26 88.74 510.74 265.37 717.61 497.44

TOTAL REVENUE

123,092.11 44,715.49 38,412.59 167,807.60 138,731.85 154,781.28 134,011.86

2. SEGMENT RESULTS :

a) PROFIT BEFORE TAX, INTEREST INCOME, INTEREST EXPENSE AND DIVIDEND FROM EACH SEGMENT

i) SALE OF PETROLEUM PRODUCTS

1,098.93 5,280.33 1,259.57 6,379.26 6,138.00 7,289.85 8,127.12

ii) OTHER BUSINESS ACTIVITIES

(172.78) (16.50) (28.47) (189.28) (236.48) (221.77) (275.53)

Sub-total 926.15 5,263.83 1,231.10 6,189.98 5,901.52 7,068.08 7,851.59

LESS: UNREALISED SEGMENT MARGINS

5.62 2.18 2.47 7.80 4.82 7.80 4.82

Sub-total of (a)

920.53 5,261.65 1,228.63 6,182.18 5,896.70 7,060.28 7,846.77

b) INTEREST EXPENDITURE

740.54 281.65 175.68 1,022.19 582.96 1,251.44 767.92

c) OTHER UN-ALLOCABLE EXPENDITURE

             

NET OF UN-ALLOCABLE INCOME

(958.77) (587.23) 43.30 (1,546.00) (641.44) (1,484.35) (456.90)

PROFIT BEFORE TAX (a - b - c)

1,138.76 5,567.23 1,009.65 6,705.99 5,955.18 7,293.19 7,535.75

3. CAPITAL EMPLOYED:

(SEGMENT ASSETS - SEGMENT LIABILITIES)

a) SALE OF PETROLEUM PRODUCTS

40,878.96 43,456.39 40,873.65 43,456.39 40,873.65 51,034.16 48,357.02

87

b) OTHER BUSINESS ACTIVITIES

3,726.88 3,585.70 2,694.29 3,585.70 2,694.29 4,102.16 3,226.92

c) OTHERS (CORPORATE)

(17,672.39) (17,739.42) (17,583.58) (17,739.42) (17,583.58) (24,422.47) (24,175.38)

TOTAL 26,933.45 29,302.67 25,984.36 29,302.67 25,984.36 30,713.85 27,408.56

CONCLUSION

After undergoing an in-depth study of the report, one can easily recognize that

Indian Oil ensures proper accounting for each and every rupee transacted through

bank.

Utmost care is taken while implementing all the control measures and there is no

deviation from the laid down procedures. Various checklists of control have

been made as exhaustive as possible in dealing with the banking transactions.

The functions, activities, roles and responsibilities of the concerned work groups

are also being performed very smoothly.

Further, in view of the large number of accounts being operated by IOCL,

spread over 500 places across the country, a grievances settlement procedures

has been very efficiently worked out by IOCL and SBI, which would lead to

88

early redressal of any problems or unresolved issues with IOCL location against

SBI branches.

Undoubtedly, it is because of this incredible expertise an synchronize

functioning that Indian Oil has a monopoly in the down stream sector, but still

certain improvements are yet to take place.

LIMITATIONS

Time limitation as the duration of the project is only 8 weeks.

The report is limited to the Indian Oil Bhavan (Northern Region).

It is based on consultation, discussion with all concerned officials.

Responses, which come, are very slow.

The respondents were not interested in revealing all the data, as it

was confidential to the organization

89

RECOMMENDATIONS

The CMP facility has been administered at nearly about 85% of the total number

of branches of IOCL. This is because rest of the 15% of the branches is yet to be

computerized. The facility should be extended to all of its branches because that

would results in saving interest on bank borrowings.

Since cost of financing is an important and major component of the over all

expenditure, there is a need to exercise due control and take suitable measures to

reduce the burden of financing cost which comprises of interest on bank

borrowings and bank charges.

It should be ensured that there is no withholding of credit balances beyond Rs.

1000 in collection account under any circumstances.

In case of holidays for IOCL but working day for bank, it should be ensured that

the DCR is deposited in the bank even on such day.

90

Immediate arrangements should be made to recover overdue interest form the

customers where the same is debited to bank.

The interest rate on bank borrowings should be reduced to certain extent.

BIBLIOGRAPHY

Banking manual of IOCL

Capital budget manual of IOCL

Closing manual of IOCL

Material provided at IOCL

IOCL NEWS

www.indianoilcorp.com

www.iocl.com

www.google.com

www.indianoilcorporation.com

Annual Report 2007-2008

91

GLOSSARY

IOC- Indian Oil Corporation

NR- Northern Region

DSO-Delhi State Office

PSO-PunjabStateOffice

RSO-RajasthanStateOffice

UPSO-Uttar Pradesh State Office

RCC-Regional Cash Credit

CMP-Cash Management Product

DCR-Daily Credit Report

92

93