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PRODUCTION ACCOUNTING

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					SUMMER TRAINING REPORT
               ON
   PRODUCTION ACCOUNTING
                 At
   INDIAN OIL CORPORATION LIMITED




                 1
                          TABLE OF CONTENT

PARTICULARS

 Acknowledgement
 Declaration
 Preface
 Executive summary
 Objective and scope of study
 Introduction to the topic
 Introduction of iocl(about the company)
 Mathura refinery at mathura
 Mission, objective & goal of finance dept.
 Organigational structure
 Financial performance
 Product and services
 Section wise segregation of finance dept.
 Introduction to the project report
 About oil accounting
 Accounting process
 Accounting of customs duty on crude oil Excise procedure and accounting
 Research methodology
 Steps in research methodology
 Objective of the research methodology
 Method of data collection
 Objective, project cost, operating cost
 Need & analysis
 Phashing of expenditure
 Financial analysis
 Findings
 Recommendations
 Bibliography
 Glossary



                                           2
                OBJECTIVE OF DOING THIS PROJECT

       To know about the practical implication of Finance function in any organization as
an MBA student. While pursuing this project in IOCL, our main objective was to gain an
idea about the workings of Finance Department as a whole.


                                SCOPE OF STUDY

       Due to the paucity of time available, we could only get an overview of the topics
of our interest area and not a detail analysis. Further, our study was limited to Mathura
Refinery (IOCL) and its Financial Department only. All our study is based on the latest
information available and not on the basis of past records.




                                             3
                     INTRODUCTION TO THE TOPIC
                              “OIL ACCOUNTING”

                                    Crude oil




                                                                     Indigenous oil
Imported (from outside country




                supply


                  Bombay High               Low Sulphur     High Sulphur


     (custom duty not paid)                               (custom duty paid)




       Indigenous crude is supplied by O.N.G.C. and O.I.L .i.e Bombay High this crude
supplies are received through pipelines by the inland refineries as per crude intake
programme agreed upon with the supplier. The quantity is determined on the basis of dips
of the receiving tank.
       Imported crude is received by tankers at Haldia and Vadinar. The payments are
made on the basis of bill of lading quantity or derived bill of lading quantity in respect of
part transfer or receipt of crude to/from other oil companies custom duty is not paid on
indigenous oil but on imported oil custom duty is paid crude oil is imported from the
different countries at Vadinar(in Gujarat) and then transfer to Mathura Refinery through
pipelines imported (from diff. countries)

                                              4
 Vadinar        through           pipelines           Mathura Refinery
(custom duty)


                          HS-petrol
                      HSD-Diesal
                      SKO-kerosene
                      ATF(aviationturbine fuel) processing
                      Naptha
                      oil




                                                    Marketing Division




                                                       Customer
                                              (on which exise duty paid)




                                       5
6
                INDIAN OIL CORPORATION LIMITE




India’s No.1 Fortune ‘Global 500’ Company
   World’s 19th largest petroleum company
   No.1 in oil Trading among national companies in SEA
   Country’s largest Commercial Enterprise
   All India Retail network of 22,000 sales points
   SERVO lubes and greases with 450 grades

                                     7
          India’s Oil Company to cross $29bn turnover
          Product’s sales of over 47million tones in 2003-04
          Controlling 10 out of country’s 18 refineries
          Own 7500km network of pipelines
          Indane cooking gas to over 38 million people
    Overseas Offices:
               Sri lanka
               Mauritius
               Dubai


Indian Oil Corporation Limited
       Indian Oil Corporation Limited (Indian Oil) is the country's largest commercial
enterprise, with a sales turnover of Rs. 220779.35 crore and profits of Rs. 7499.47 crore
for fiscal year 2006-07.
       Indian Oil is India’s No.1 Company in Fortune magazine's prestigious listing of
the world's 500 largest corporations, /-ranked 170 for the year 2005 based on fiscal 2004
performance.-/ it is also the 19th largest petroleum company in the world. Indian Oil has
also been adjudged No.1 in petroleum trading among the national oil companies in the
Asia-Pacific region.




                                             8
CORPORATE HISTORY OF IOCL




         Indian Oil Corporation is the largest commercial enterprise in India, engaged in
the business of refining, transportation & marketing of petroleum products throughout the
country. Indian Oil Corporation Ltd. (Indian Oil) was formed in 1964 through the
merger of Indian       Oil Company Ltd. (Est. 1959) and Indian Refineries Ltd. (Est.
1958).
         It is currently India's largest company by sales with a turnover of Rs. 2, 47,479
crore (US $ 61.70 billion), the highest–ever for an Indian company and profit after tax of
Rs. 6,963 crore (US $ 1.74 billion) for the year 2007-08.
         Indian Oil 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.


                                        Beginning in 1959 as Indian Oil Company Ltd.,
                                        Indian Oil Corporation Ltd. was formed in 1964
                                        with the merger of Indian Refineries Ltd. (Estd.
                                        1958).
                                        As India's flagship national oil company, Indian Oil
                                        accounts for 56%       petroleum products market
share among PSU companies, 42% national refining capacity and 69% downstream
pipeline throughput capacity.

                                                 9
      The Indian Oil group of companies owns and operates 10 of India's 18 refineriy
with a current combined rated capacity of 54.20 million metric tonnes per annum
(MMTPA) or one million barrels per day (bpd). These include two refineries of
subsidiary Chennai Petroleum Corporation Ltd and one of Bongaigaon Refinery and
Petrochemicals Limited. Indian Oil owns and operates the country’s largest network of
cross-country crude oil and product pipelines of nearly 7,730 km, with a combined
capacity of 56.85 MMTPA.




                                         10
IOCL STRUCTURE
Indian Oil carries its activities through its five divisions namely:
         1) Refinery Division
         2) Pipe Line Division
         3) Marketing Division
         4) Assam Oil Division
         5) Research and Development Division


REFINERIES
Refineries                                    Year of commencement
Guwahati                                      1962
Barauni                                       1964
Gujarat                                       1965
Haldia                                        1975
Mathura                                       1982
Panipat                                       1999
         Besides the above refineries, namely Digboi refinery is in AOD with installed
capacity of .5 million tones. One more proposed refinery Paradeep refinery is also under
construction with the capacity of 6.0 m


1)Marketing Division
         Indian Oils Marketing Division maintained its dominance in the downstream
                                 sector during the year 2006-07.Besides retaining large
                                 volume consumers, it consolidated its position in the retail
                                 segment, opening 1,332 new petrol/diesel stations (retail
                                 outlets) during the year. Out of these, 763 were low-cost,
                                 small-format Kisan Seva Kendra (KSK) outlets in rural
                                 markets. With this, Indian Oil now has a countrywide retail

                                               11
      network of 16,455 petrol/diesel stations, including 1,343 KSK outlets. The
      Corporation plans to add 1,600 more outlets during 2007-08,including 1,000
      KSKs.
      The customer base for Indane LPG cooking gas grew to 4.67 crore at the end of
      2006-07, with enrolment of 31.5 lakh new customers during the year.
2)Refineries Division


                          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 54.20 million metric tonnes per annum (MMTPA)
                          or one million barrels per day (bpd).
                           Indian Oil accounts for 42% of India's total refining capacity.
3)Pipelines Division
                            Indian Oil owns and operates India's largest network of
                            cross-country crude oil and product pipelines of nearly 7,
                            7300 km, with a combined capacity of 56.85 MMTPA.
                            Indian Oil owns & operates 69% of India's downstream
                            pipeline throughput capacity.


4) Research & Development Division
      Indian Oil R&D developed 186 lubricant formulations during the year, of which
160 were commercialized. About 45 approvals were also received from OEMs (Original
Equipment Manufacturers). Eighteen new patents were filed, of which 12 were approved.
This takes the total number of patents to nearly 120, including over 50 international
patents. As part of commercialization of in-house developed technologies, a novel Needle
Coke technology was licensed to Numaligarh Refineries Ltd., the first time to a company
outside the Indian Oil Group.

                                           12
IOCL BRANDS
    SERVO
    With over 42% market share and 450 grades,
    The SERVO range of lubricants is used in
    Almost every application covering automotive,
    Industrial and marine sectors.
    INDANE LPG GAS
   Indian Oil Indane LPGas is used in 40 Million homes as cooking fuel and commands
   over 48% market share in India.
    INDIAN OIL AVIATION SERVICE
Indian Oil Aviation Services has a market share of 65% with a network of 95 Aviation
Fuel Stations (AFS) Meets complete Aviation Fuel requirements of the Defense services


 AUTO GAS
   Auto gas (LPG) has been introduced in Hyderabad, Bangalore and Mumbai markets.


    PREMIUM FUELS
              XtraPremium is, in fact, the only Petrol in India
           with 91 Octane and doped with Multifunctional
           Additives.
            XtraMile, Indian Oil’s new generation High
               Speed Diesel with world-class additives has
               taken a leadership position in the market.
XTRA POWER
    Indian Oil’s XtraPower Fleet Card Program is a complete fleet           management
solution for Fleet Owners / Operators and Corporaters which facilitates cashless purchase
of fuel & lubes from designated retail outlets of Indian Oil through flexible prepaid and
credit facilities

                                             13
  ‘Swagat’ HIGHWAY FLAGSHIP RETAIL OUTLETS
There are 111 such ‘Swagat’ Flagship ROs planned across the country of which 45
‘Swagat’ Flagships have already been commissioned with a complement of fuel and non-
fuel. Non-fueling offering through ‘Best-in-class’ alliance on exclusive basis wherever
possible (communication, food/rest, healthcare, parking, vehicle care.)




XTRA CARE
The launch of XtraCare was the Culmination of a series of plans in retail design, product
and Service up gradation, capability training, automation, loyalty programme, retail site
management techniques all benchmarked To global standards. While the industry
standard is to take Samples on a quarterly basis, Indian Oil has moved several steps
Ahead by introducing fortnightly random sampling with specific




                                            14
BRANDS




         15
                        CRUDE OIL PIPELINES


                                    Year            of Length   Capacity
S.No Name of the Pipeline
                                    commissioning     (km)      (MMTPA)
A.    PRODUCT PIPELINES
1.    Guwahati-Siliguiri            1964              435       0.818

2.    Koyali - Ahmedabad            1966              116       1.10

3.    Barauni - Kanpur              1966              745       3.50

4.    Haldia- Barauni               1967              525       1.25

      Haldia-Mourigram          –
5.                                  1972              277       1.35
      Rajbandh

6.    Mathura - Jalandhar           1982              763       3.70

7.    Panipat - Bhatinda            1996              219       1.50

8.    Koyali-Dahej Pipeline         2006              103       2.60

9.    Koyali- Navagam               2003              78        1.80

      Koyali-    Viramgam       -
10.                                 2003/2005         1056      4.10
      Sidhpur – Sanganer

11.   Mathura - Tundla              2003              56        1.20

12.   Panipat Rewari Pipeline       2004              155       1.50

      Chennai Trichy Madurai
13.                                 2005              683       1.80
      Pipeline

14.   Digboi- Tinsukia              1956              75        1.00




                                       16
17
                MATHURA REFINERY




   INTRODUCTION OF MATHURA REFINERY
   FEATURES
   FINANCIAL PERFORMANCE 2007-08
   FINANCIAL GOALS
   FUNCTION OF FINANCE DEPT.
   FINANCIAL OBJECTIVES
   GUIDING PRINCIPLE FOR FINANCIAL CHECKS AND ACCOUNTING
   SECTIONS OF FINANCE DEPT.




                                18
INTRODUCTION OF MATHURA REFINERY




      Mathura Refinery, commissioned in 1982, presently operates @ 8.0 MMTPA
crude processing level and is meeting the product demand of North -West region of the
country including the National Capital Delhi.
      The Refinery processes low sulphur crudes from Bombay High, Nigeria, and high
sulphur crudes from Middle East Countries. The process configuration of the Refinery
employs the state-of-the-art technologies with minimal impact on the environment.
      Various steps have been taken by Mathura Refinery to monitor and control the
emission of Sulphur Dioxide. Mathura Refinery is the only refinery in the country to have
set up the concern of community and archeological sites. These Ambient Air Monitoring


                                           19
Stations were commissioned before commissioning of the Refinery in 1981 and being
continuously operated thereafter.
       Mathura Refinery has taken many initiatives to produce more and more clean fuels
in stages in the interest of environment, public health and preservation of national
monuments around. Its noteworthy efforts are stage-wise implementation of various
projects like Catalytic Reforming Unit,


Diesel Hydrodesphurisation Unit and Hydro cracker for quality upgradation of
automobile fuels.
       The Refinery has full-fledged ETP comprising of physical, chemical and
biological treatment facilities. The treated effluent from the Refinery fully meets the
MINAS (Minimal National Standards), the prescribes effluent discharge standards.


For   the   protection    of   the   land   environment,
Mathura Refinery has initiated biodegradation of oily
sludge through "Oilivorous-S", an oily sludge degrading
bacterial consortium developed by IOC(R&D) in
collaboration with Tata Energy Research Institute.


                            A beautiful ecological park has been developed in an area of
                           4.45 acres. During the recent survey, the experts from the
                           BNHS (Bombay Natural History Society) have identified 96
                           species of birds of which 30 migratory ones in the park
                           giving    a    testimony   of    richness   of    life   in   the
                           ecosystem.Mathura     Refinery    has   done     extensive    tree
plantation in and around Refinery. The Refinery has also taken extra-ordinary initiatives
to provide green cover to the archeological heritage sites especially the Taj Mahal



                                            20
MAJOR FEATURES


   Mathura Refinery is the second biggest refinery in India with a capacity of 8.0
     MT.
   Its main products are Liquefied Petroleum Gas, Naphtha (Fertilizer use), Aviation
     Turbine Fuel, Superior Kerosene, Bitumen, Furnace Oil, Heavy Petroleum Stock,
     Light Diesel Oil, High Speed Diesel, Motor Spirit, Residual Fuel Oil, Heavy
     Petroleum Stock, MS-93 etc.
   It is the major supplier for various petroleum products in Northern India.
   It is an ISO 14001 and ISO 9001 certified unit of Indian Oil.
   Its capacity utilization is more than hundred percent.
   Phased dismantling of the Administered Price Mechanism (APM) is one of the
     strengths for the corporation as it gives the scope to the organization to compete in
     the coming competitive scenario.
   Mathura Refinery prepares annual budgets for rural development every year.
   IOC Mathura is just 56 Kms. away from Taj Mahal so it has to incur a lot of
     expenditure so as to ensure that the pollution is minimum.
   A pace setter among the Indian Refineries has become a model for synthesizing
     refining technology with environment.
   Power is supplied for the whole processing through Thermal Power Station (TPS)
     in which 2 of the 3 turbines are used at a time having a capacity of 12.5 MW per
     turbine and total capacity of 3 turbines is 37.5 MW (Mega Watt).
   The Raw Material for refinery is basically Crude Oil from Bombay offshore and
     “imported crude oil from Australia in the east and Nigeria and Venezuela”.
     Products are dispatched from this refinery through Rail, Road and Mathura, Delhi,
Ambala




                                           21
STRUCTURE
Broadly Mathura Refinery apart from its Headquarter governed by following departments
namely:
   1. Personnel and Administration Department
   2. Training Department
   3. Management Services Department
   4. Vigilance Department
   5. Finance Department
   6. Internal Audit Department
   7. Medical Department
   8. Materials Department
   9. Production Department
   10. Fire and Safety Department
   11. Power and Utilities Department
   12. Maintenance Department
   13. Process Project Department
   14. Technical service Department
   15. Project Department


1. Personnel Department
       The primary function of the department are planning & organizing manpower
requirement, estimating vacancies, recruitment to seek and attract qualified applicants to
fill vacancies at lower level, organizational planning to determine the organizational
structure,   selection,   staffing,   internal        transfers   and   promotions,   recreation,
communication, employee discipline, performance evaluation, medical services,
grievance handling etc.
       The primary objectives of personnel department are to design and develop an
organizational structure with well defined relationships commensurate with the business

                                                 22
plans and corporate strategies, promote and develop cooperative attitude among
employees for fostering harmonious relations and cultivate the sense of belonging, evolve
progressive and pragmatic personnel policies, promote and inculcate the culture of
employees’ participation in management, inculcate productivity consciousness among the
employees etc.


2. Training Department
       Indian Oil conducts structured training programmes for its employees both in
general management and functional management disciplines. It also provides them
opportunities to avail of membership of professional bodies. Monetary incentives are also
available for those acquiring additional qualifications.
       The Indian Oil Institute of Petroleum Management (IIPM) at Gurgaon conducts
round-the-year Management Development Programmes on organizational goals and
strategies, diversification and globalization plans. It has also provided specialized training
to employees of other international oil companies having strategic alliances with Indian
Oil, besides consultancy services in the area of petroleum management.
To nurture management leaders in the Indian energy sector, IIPM offers a one-year,
postgraduate programme in Management with specialization in Energy, in collaboration
with the Indian Institute of Management (IIM), Ahmedabad, a premier management
institute in India.


3. Management Services Department
       The department is primarily responsible for fulfilling the data base requirement,
EDP requirements, programming developing & maintenance.


4. Vigilance Department
       The department is primarily responsible for running of the organization free of
frauds, mistakes etc. in each department.

                                             23
        The Vigilance Department at the Corporate Office provides guidance, supervision
and control of all the Vigilance functionaries of the Corporation. Its major work area
comprises handling and investigation of complaints received from individuals, Ministry
of Petroleum & Natural Gas, CVC, PMO, Indian Oil Management, and other sources,
preventive vigilance like surprise inspections, joint surprise inspections, regular
surveillance/scrutiny of procurement and contract files, scrutiny of property returns of
employees, coordination with Central Bureau of Investigation (CBI), Central Vigilance
Commission (CVC), Chief Technical Examiner (CTE), Ministry of Petroleum & Natural
Gas (MOP&NG) and regular investigations, etc.


5. Internal Audit Department
       The department is primarily responsible for routine check-up of general day-to-
day working of the organization in order to have the organization free of frauds, mistakes
etc. in each department.


6. Medical Department
       The department is working under the personnel & administration department and
is responsible for the medical awareness and medical requirements of the employees.


7. Materials Department
       The department is primarily responsible for making an integrated approach to the
improvement in Total Materials Management with active involvement of all concerned at
the grass root level.
       The main function of the department are planning material cycle by avoiding over
stocking, locking up of capital, developing new sources of supply, maintain good
suppliers relations, to procure desired quality material at the appropriate time and at
reasonable prices, to maintain an effective inventory control system, to encourage
progressive indigenous development of imported spares/equipment, to ensure prompt

                                           24
dealings with impartiality, integrity and courtesy towards vendors and suppliers, to
promote ancillary and auxiliary industries, transportation, receipts, inspection,
warehousing, preservation, issue, accounting, to help in physical verification and
reconciliation of stores, economic disposal of surplus and scrap, inventory control
including codification, standardization, variety reduction, value analysis, ABC analysis,
FSN analysis etc.


8. Production Department
       The primary function of the department is to receive the crude oil and refining it
through distillation process in order to converting it into the finished product.
Products which are being refined in the Mathura Refinery are
       Liquefied Petroleum Gas, Naphtha (Fertilizer use), Aviation Turbine Fuel,
Superior Kerosene, Bitumen, Furnace Oil, Heavy Petroleum Stock, Light Diesel Oil,
High Speed Diesel, Motor Spirit, Residual Fuel Oil, Heavy Petroleum Stock, MS-93.
Among the given products of Mathura Refinery, Sulphur is the by- product, which
Refinery produces because of environmental factor.


The main processing units are :-
   1) CDU (Crude Distillation Unit)
   2) VDU (Vacuums Distillation Unit)
   3) FCCU (Fluid Catalyst Cracking Unit)
   4) GCU (Gas Concentration Unit)
   5) VBU (Visbreaker Unit)
   6) BBU (Bitumen Blowing Unit)
   7) SRU (Sulphur Recovery Unit)
   8) ARU (Ammine Regeneration Unit)
   9) PRU (Poly Propylene Recovery Unit)
   10) CRU (Catalytic Reformer Unit)

                                             25
   11) MSPF (Matching Secondary Process Facilities Unit)
   12) DHDS (Diesel Hydro Desulphurization Unit)
   13) HGU (Hydrogen Generation Unit)
   14) GT (Gas Turbine)-Phase 2 etc.
   15) MSQ
   16) DHDT


9. Fire and Safety Department
The department is primarily responsible for fire & safety Arrangement and awareness in
the organization in order to have The organization and its employee working in safety
environment. Its main function is to prevent and overcome the hazardous Situations.


10. Power and Utilities Department
       The department is primarily responsible for providing and maintaining the power
supply and public utility works in refinery as well as in township.


11. Maintenance Department
   Maintenance department has its three divisions namely:
    Mechanical maintenance – responsible for mechanical maintenance work in the
       refinery.
    Instrumentation maintenance – responsible for instrumental maintenance work in
       the refinery.
    Civil maintenance – responsible for civil maintenance work in the refinery.
12. Process Project Department
       The department is primarily responsible for project work implementing in the
refineries mainly of process units. Its main function is to procurement of material, plant
construction and its commissioning.



                                            26
13. Technical service Department
      The department is primarily responsible for technical aspects of the refineries
mainly production and working of units.


14. Project Department
The department is primarily responsible for complete all new projects of the refineries
which are meant for enhance capacity, quality, improvement and optimum utilization of
resources.




                                          27
                                         VISION


       A major, diversified, transnational, integrated energy company, with national
leadership and a strong environment conscience, playing a national role in oil security
and public distribution


                                        MISSION


    To achieve international standards of excellence in all aspects of energy and
       diversified business with focus on customer delight through value of products and
       services, and cost reduction.
    To maximize creation of wealth, value and satisfaction for the stakeholders.
    To attain leadership in developing, adopting and assimilating state-of-the-art.
    To provide technology and services through sustained Research and Development.
    To foster a culture of participation and innovation for employee growth and
       contribution.
    To cultivate high standards of business ethics and Total Quality Management for a
       strong corporate identity and brand equity.
    To help enrich the quality of life of the community and preserve ecological
       balance and heritage through strong environment conscience.


                                       OBJECTIVES


    To serve the national interest in the oil and related sectors in accordance and
       consistent with government policies.
    To ensure and maintain continuous and smooth supplies of petroleum products by
       way of crude Refining, Transportation and marketing activities and to provide



                                              28
   appropriate assistance to the consumer to conserve and use petroleum product
   efficiently.
 To earn a reasonable rate of interest on investment.
 To work towards the achievement to self-sufficiency in the field of oil refining by
   setting up adequate capacity and to build up expertise in lying of crude oil and
   petroleum product pipelines.
 To create a strong research and development base in the field of oil refining and
   stimulate the development of new product formulations with a view to
   minimize/eliminate their imports and to have next generation products.
 To maximize utilization of the existing facilities in order to improve efficiency and
   increase productivity.
 To optimize utilization of its refining capacity and maximize distillate yields from
   refining of crude oil to minimize foreign exchange to outgo.
 To minimize fuel consumption in refineries and stock losses in marketing
   operations to effect energy conservation.
 To further enhance distribution network for providing assured service to customers
   throughout the country through expansion of reseller network as per marketing
   plan/government approval.
 To avail of all viable opportunities, both national and global, arising out of the
   liberalization policies being pursued by the Government of India.
 To achieve higher growth through integration, mergers, acquisitions and
   diversification by harnessing new business opportunities like petrochemicals,
   power, lube business, consultancy abroad and exploration and production.




                                        29
        MISSION, OBJECTIVE AND GOAL OF FINANCE DEPARTMENT
A)      FINANCIAL MISSION
     1) To provide high quality financial staff support for decision making and control to
        all levels of management, corporate, divisional unit and location to enable the
        achievement to overall corporate objectives and goals.


     2) To play a lead role in scanning the domestic and international financial
        environment, the formulation and implementation of all financial policies and
        plans for different time spans consistent with and conducive to the business plan
        for expansion, diversification, productivity etc…


     3) To interact pro-actively with the relevant government agencies on pricing and
        investment and with financial institutions, depositors and creditors, with
        sensitivity and promptness for mobilization and provision of funds for
        uninterrupted operations and project execution at optimal costs.


     4) To maintain, review and update all relevant accounting records, systems and
        procedures for discharging the fiduciary responsibilities and enabling compliance
        with statutory obligations.


     5) To inculcate financial awareness, costs benefit attitudes and system orientation in
        the entire organization.


     6) To develop the human resources, system and techniques of finance for continuing
        innovation and contribution towards IOC corporate excellence.




                                             30
B)     FINANCIAL OBJECTIVES


     1) To ensure adequate return on capital employed and maintain a reasonable annual
        dividend on its equity capital.
     2) To ensure maximum economy in expenditure.
     3) To generate sufficient internal resources for financing partly/wholly expenditure
        on new capital projects.
     4) To develop long term corporate plans to provide adequate growth of the activities
        of the corporation.
     5) To continue to make an effort in bringing reduction in the cost of production of
        petroleum products by means of systematic cost control measures.
     6) The Endeavor to complete all plan projects within stipulated time and within
        stipulated cost estimate.


(C)     FINANCIAL GOALS


     1) To inculcate cost consciousness in user departments.
     2) Development of Standard Refining cost at each unit level.
     3) Proper implementation of budgetary control and submission of MIS in time.
     4) To keep the level of inventories below the level fixed by the Board and
        outstanding debts, loans, advances and claim at bare minimum.
     5) To ensure payment on due date to various agencies.
     6) Monitor capital expenditure to ensure completion within stipulated time and cost.
     7) Optimize utilization of working capital efficient management of funds.




                                             31
   FLOW OF FINANCE DEPARTMENT
(REFINERIES AND PIPELINES DIVISION)


             DIRECTOR (R&P)


            ED (FINANCE) HO


             G.M. (FINANCE)


              DGM (FINANCE)




                     CFMs




                 SFMs




                  FMs




                 DFMs




                 SACOs



                 ACOs



                32
SECTION WISE SEGREGATION IN REFINERY’S FINANCE DIVISION


A-1: MAIN ACCOUNTS
       Cash budget is prepared in this section and the same is to be produced before HO.
All other section of finance department provides the information to A-1 section for
preparing list “B”. List “B” details include 20 items approximately. Some of them are
mentioned below.
              Employment and Housing accommodation statistics.
              Payment of sales tax, Excise duty, Entry tax and other tax and duties.
              Loss on disposal/write-off of –
                   (a) Assets
                   (b) Stores and spares showing original cost, book value and reason for
                   disposal of each item under various categories.
              Details of staff welfare expenses etc.


       Asset management is controlled by A-1 section. For assets management, they
prepare the master of assets, which includes name, cost centre and other details for
capitalization of assets. Further, receiving debit, credit notes and reconciliation also form
a part of this section.


A-2: PURCHASE
       Generally A-2 section deals with the payment of purchase items only. After
purchase, the material is kept into stores. Store Department makes Goods Receipt
Vouchers (GRV) and sends it to the purchase i.e. A-2 section. Here the GRV is checked
with the purchase order (PO) and payment is made on its basis.
       Section dealing with purchases is responsible for
                Scrutiny & concurrence of purchase proposals
                Deposits and advance payment to suppliers.

                                              33
               Passing of bill for supplies received.
               Pricing of goods receipts notes.
               Accounting of cash purchases made by the materials department.
               Arrangement for insurance of transit risk.
               Maintenance of books of accounts.
               Sales tax matters.


A-3: WORKS
       A/3 work section mainly deals with payment or running contracts. Its considers
only plants maintenance, roads, painting, welding, water etc. First and final payments are
made on the basis of work completion.


A-4: PAYROLL
       This section mainly deals with the payment to employees for their work. Rules for
pay and allowance are prescribed by head office from time to time. The eligibility for
special type of allowance such as special allowances, shift allowance etc. is determined
by personnel department and intimations and sent to the finance department for
employees eligible for such allowance.
Function dealing with this section can be broadly classified as:
        Scrutiny & concurrence of proposals from personnel department.
        Payment of salaries and allowances.
        Advances to employees.
        Deductions from pay bills.
        Other welfare schemes including gratuity.
        Personal claims and other payments.
        Statutory and statistical requirements.




                                            34
       A-4 also maintains the data to transfer and new recruitment of persons and adds it
to master information. If a person is transferred to another unit, the LPC (last pay
certificate) is required to be added into master information.


A-5: STORES AND MODVAT
       MODVAT stands for Modified Value Added Tax, which is now known as
CENVAT i.e. Central Value Added Tax. It is a scheme, which provides relief to final
manufacturers on the excise duty borne by the suppliers in respect of goods manufactured
by them. Under this scheme, a manufacturer can take credit of excise duty paid on raw
materials and components used by him. The normal excise duty rate is 16%. However it
depends upon the Tariff class under which the product is classified.
The section dealing with accounting of stores shall have the following functions:
    Passing and accounting of transportation bills.
    Accounting of receipts, issues, return and transfer of materials.
    Accounting of imported materials for capital works and operations/ maintenance.
    Stock verification.
    Accounting for sale of surplus materials.




A-6: TA/LTC/MEDICAL
       This section maintains in-transfer and out-transfers accounting for claim
settlement and also handles the bill payment of official tour of employees. HO. Claim of
Leave Travel Concession (LTC) controls all foreign tours; this section also deals
encashment of LTC and medical payment.




                                             35
A-7: MISCELLANEOUS SECTION
   The function of the Miscellaneous Section includes the following:
      1. Accounting of cash imp rest and advances for company expenses;
      2. Passing of bills of miscellaneous nature
      3. Miscellaneous recoveries from outsiders
      4. Inter-sectional coordination.


A-8: PRODUCTION ACCOUNTING
      This section maintains production accounts, including crude accounting, custom
duty payments, product bill accounts, bitumen drum accounts and stock valuation
accounts. A-8 Keeps records of input in terms of crude oil and output in terms of the
company’s final products.
The basis functions of the production accounts are:
    Crude oil quantity and value accounting for the receipts, consumption and stock.
    Accounting of inter-divisional/ inter-unit transfer of products for ex-refinery value
      and excise duty.
    Accounting of consumptions of own fuel/products.
    Maintenance of pool accounts and audit thereof.
    Value of stocks
    Costing.


A-9: CASH / BANK
      This section mainly deals with making payments. No fixed limit is established by
the organization for making payments. The organization has special current accounts with
State Bank of India. These accounts are the sources of payments. The balance at the end
of the day, becomes nil by transferring the amount to the head office. The employees of
the organization are paid through cash up to Rs.20000 and by cheque for over and above
Rs. 20000.

                                           36
       Perks such as TA, LTC and medical. Salary, on the other hand, is paid through
cheques.
Cash section shall be responsible for:
    Receipts of cash, cheques and bank drafts
    Payment of cash, cheques and bank drafts.
    Handling of bank deposits/ with drawls, custody of cash and transfer of funds.
    Security arrangement for cash handling.
    Safe custody of valuables and documents.
    Petty cash imprest.
    Maintenance of subsidiary cash credit account and special current account.


A-10 & A-11: PROJECT (WORKS) & PROJECT (PURCHASE)
       These sections deal with payment regarding capital expenses. In case of project
(Works), Services Entry Sheet is an important document to be produced by the in-charge
engineer.


A-12: PF & ADVANCES
       The scheme of the provident fund is the same as in case of any government
undertaking i.e. 12% of the dearness allowance is kept aside for this purpose and the
company contributes the same amount. All the employees irrespective of their position in
the organization are entitled to 9.5% interest on provident fund. This rule is applied
uniformly to all the units and branches of the refineries division of Indian Oil Corporation
limited.


A-13: OIL ACCOUNT
Here are some basic functions of the oil accounting:
        Accounting of crude oil receipts
        Accounting of customs duty on crude oil

                                            37
     Accounting of finished product receipts
     Dispatch of products;
     Excise procedure and accounting
     Material balance & Production statistics.


PRODUCTS OF MATHURA REFINERY
     LPG
     Benzene
     Toluene
     Naphtha
     Motor spirit
     Motor spirit (used for imported cars.)
     Aviation Turbine fuel
     Superior Kerosene
     High Speed Diesel
     Light Diesel Oil
     Low Sulphur Heavy Stock
     Fuel Oil
     Bitumen
     N – Heptane
     Aluminum Rolling
     Linear Alkyl Benzene




                                        38
            INTRODUCTION TO THE PROJECT REPORT
                  ABOUT FINANCE AND OIL ACCOUNTING

Accounting of Crude Oil receipts


       Indigenous crude is supplied by O.N.G.C. and O.I.L. On-shore crude supplies are
received through pipelines by the inland refineries as per crude intake programme agreed
upon with the supplier. The quantity is determined on the basis of dips of the receiving
tank. Presently the off-shore indigenous crude supplied by ONGC is determined on the
basis of the dips of receiving tanks at Vadinar. The measurement and accounting of crude
oil receipts is done as per mutually accepted procedures with the suppliers and the
payments are made on dry crude.
       Imported crude is received by tankers at Haldia and Vadinar. The payments are
made on the basis of bill of lading quantity or derived bill of lading quantity in respect of
part   transfer    or   receipt   of   crude   to/from   other   oil   companies.   Off-shore
indigenous/imported crude is transported to inland refineries through pipelines.


Loss of crude Oil
In Case of imported crude
       The difference between bill of lading/derived bill of lading quantity and the
quantity received in the refinery's/shore tanks is taken as ocean loss.


In case of indigenous crude oil
       The difference between the quantity pumped from shore tanks and the quantity
received in refinery tanks on dry crude basis is considered as pipeline transportation loss.




                                               39
MEASUREMENT
The quantity of crude oil received is determined by dips of the receiving tanks. Before
receipt of crude oil into the receiving tanks, dips and temperature of the crude oil in the
tanks shall be taken jointly by the representatives of crude suppliers (for indigenous
crude) and customs Department (for imported crude) and the refinery.
       After receipt, dips and temperature are again taken after allowing for the usual
settling time. The dip memos serve as a basic documentary evidence for the crude
supplies received. Dip memos contain all necessary details such as tank dip, tank
temperature etc. and are sent to the Oil Accounting Section for volume calculations.
                      and also
       Measurement is occur through dips with the help of calibration charts then convert
in to units like


Metric Tones            29.5kl                   Nkl               15c




in MTR Refinery        India level               natural        international


       then out turn statement are prepared which consist of density, opening & closing ,
volume Bombay High decide the rate and it come in refinery and this rate multiply with
quantity which come price which decide Market and sale to customer


ACCOUNTING OF CUSTOMS DUTY ON CRUDE OIL
       In case of indigenous crude/BH Crude, customs duty is not payable. However, in
case of imported crude, customs duty is payable at the rates applicable from time to time
       For imported crude, refineries should declare certain tanks as bonded tanks for the
purpose of receipt and storage of non-duty paid crude oil.



                                            40
       For receipt of imported crude, a Bill of Entry for home consumption is required to
be filed with customs before arrival of the ships on the basis of Bill of Lading quantity.
       After completion of the receipt in the tanks and due settling time, crude oil tank
operation report (Annexure-XII (2) is prepared on the basis of dip memos. A copy of the
same is filed with Customs by Haldia / Vadinar.
       Crude received through a particular tanker may be partly dispatched to Gujarat
Refinery, partly to Mathura Refinery; the allocation of full tanker shall be made to one
refinery for proper accounting. The allocation of tankers will be done by SMPL, Vadinar.
       The crude oil accounting in Refinery shall also be on first in first out basis for
imported crude processed with reference to Inter warehousing Bill of Entry/Inter Bill of
Entry related to the tankers allocated to a refinery.


ACCOUNTING OF RECEIPT OF PRODUCTS
       Finished products are procured from outside for blending of consumption
requirements. Such supplies may be received under excise bond and all excise formalities
have to be complied with. The section shall maintain a proper record of all quantity
received. The re-warehoused certificate (AR3A) shall be returned to the supplier
promptly- For transit losses, claims shall be processed with the carriers.


EXCISE PROCEDURE AND ACCOUNTING
PROCEDURE
       Petroleum products comes under the category of Excisable goods under the
Central Excise & Salt Act, 1944. It is mandatory for the refinery to comply with all the
excise formalities prescribed under the rules.




                                              41
 EXCISE DUTY PAID AT THE TIME OF CLEARNCE OF PRODUCT
     After 5 June ’08       || -- 14 % + 3% Edu.Cess --||


     Motor Spirit       || -2.5 % BCD + Rs. 5.35/ltr + Rs. 6.00/ltr CVD + Rs. 2.00/ltr- ||


     HSD            || -- 2.5 % BCD + Rs. 1.60/ltr + Rs. 2.00/ltr -- ||


     LPG            || -- Duty Free -- ||


     Kerosene       || -- Duty Free -- ||


     All Other Products || -- 14 % -- ||


     Commercial Products || -- 8% -- ||


EXCISE ACCOUNTING


  1. In case of indigenous crude/BH Crude, customs duty is not payable.
  2. In case of Imported crude, refineries should declare certain tanks as bonded
     tanks for the purpose of receipt and storage of non-duty paid crude oil.
  3. In case of dispatch of crude from Vadinar to Gujarat/Mathura Refinery, SMPL
     Vadinar office shall file Inter warehousing Bills of Entries for clearance of
     Quantities on non-duty paid crude.
  4. Crude Oil accounting in Refinery shall also be on First In First Out basis for
     Imported crude processed with reference to Inter warehousing Bill of Entry/Inter
     Bills of entry related to tankers allocated to a refinery.
  5. Customs duty shall be paid for Total Quantity as specified in Inter Bill of Entry.



                                            42
CUSTOMS DUTY PAID AT THE TIME OF IMPORT


Before 5 June ’08
||--5 % + Rs. 50/MT NCCD + 2% Edu.Cess + 1 % SHEDU. Cess. --||


After 5 June ’08
|| --0 % + Rs. 50/MT NCCD + 2% Edu.Cess + 1 % SHEDU. Cess. --||


UPCOMING PROJECT
    Grassroots Refinery –Cum- Petrochemicals Project at Paradip.
      Project Cost: - Rs. 25,646 crore.
      Expected Commissioning : By End 2011-12


    Residue Up gradation & MS/HSD Quality Improvement Project at Gujarat
      Refinery.
      Project Cost: - Rs. 5,693 crore.
      Expected Commissioning : January 2010


    Improvement in Diesel Quality & Capacity Expansion at Haldia Refinery
      Project Cost: - Rs. 5,693 crore.
      Expected Commissioning: December 2009


    Naphtha Cracker & Polymer Complex at Panipat (Haryana)
      Project Cost: - Rs. 14,439 crore.
      Expected Commissioning: November 2009


    Chennai-Bangalore Product Pipeline
      Project Cost: - Rs. 232.11 crore.

                                          43
Expected Commissioning: July 2009(or 24 months from          Forest & Environment
Clearance)


    Dadri –Panipat at R- Ling Pipeline
      Project Cost: - Rs. 250.66 crore.
      Expected Commissioning: January 2009


    Augmentation of Mundra- Panipat at Crude Oil Pipeline
      Project Cost: - Rs. 204.74 crore.
      Expected Commissioning: December 2008


    Panipat Refinery Expansion from 12 MMTPA To 15 MMTPA
      Project Cost: - Rs. 806 crore.
      Expected Commissioning : December 2008


    Koyali- Ratlam Product Pipeline
      Project Cost: - Rs. 322.92 crore.




                                          44
                         RESEARCH METHODOLOGY


         Research methodology may be treated as the heart of the projects. Without a
proper and well-organized plan it is impossible to complete the projects and draw
conclusive and prepare results.
         The main objective was to collect the appropriate data, which works as a base for
drawing a conclusion and getting result.
         Research methodology is a systematic way, which consists of series of action or
steps necessary to effectively carry out research and the desired sequencing of these
steps.
         The marketing research is processes of involve a number of inner related
activities, which overlap and rigidly follow a particular sequence. It consists of following
steps:
         1. Formulating the objective of the study.
         2. Designing the methods of data collection.
         3. Selecting the sample plan.
         4. Collecting the data.
         5. Processing and analyzing the data.
         6. Reporting the findings.




                                             45
STEPS IN RESEARCH METHODOLOGY
                     OBJECTIVE OF STUDY




                        RESEARCH DESIGN




                         SAMPLE DESIGN




                       DATA COLLECTION




                         DATA ANALYSIS




                      REPORTING OF FINDING




                           46
                         OBJECTIVE OF THE RESEARCH
Main Objective
       Gain an idea about the workings of Finance Department as a whole.
Sub Objective
       1) To ensure adequate return on capital employed and maintain a reasonable
          annual dividend on its equity capital.
       2) To ensure maximum economy in expenditure.
       3) To generate sufficient internal resources for financing partly/wholly
          expenditure on new capital projects.
       4) To develop long term corporate plans to provide adequate growth of the
          activities of the corporation.
RESEARCH DESIGN
       A research design specifies the methods and procedures for conducting a
particular study. Broadly speaking research design can be grouped into three categories-
Exploratory Research, Descriptive Research and Casual Research.
       An exploratory research on the discovery of ideas and is generally based on
secondary data. It is primarily investigation. This is because a researcher engaged in an
exploratory study may have to change his focus as a result of new ideas and relationships
among the variables.
       A descriptive study is undertaken when the researcher wants to know the
characteristics of certain groups such as age, sex, educational level, etc. In contrast to
exploratory studies, descriptive studies are well structured.
       A casual research is undertaken when the researcher is interested in knowing the
cause and effect relationship between two or more variables. Such studies are based on
reasoning along well-tasted lines.
       According to the research problem the researcher have done Descriptive and
Casual research for my project work.



                                             47
SAMPLE DESIGN
       In this project, the researcher selects the sample survey to determine and achieve
the desired result. For this he takes small samples of customers from the given area and
conducted my research with the help of simple random sampling. His area was Sambhal.


SOURCE UNIT
       It is also known as sampling frames from which sample to be drawn it contains the
names of all items (in case of finite universe unit only). If source list is not available,
Researcher has to prepare it. This list should be comprehensive, correct and reliable and
appropriate. It is extremely important for the source list to be as representative of the
population as possible.


THE UNIVERSE OF STUDY
       The first step in developing any sample design is to clarify deigns the set of
objectives. Technically called the universe to be studies. The universe can be finite or
infinite. In finite universe the number of items is certain but in case of infinite universe
the number of items is infinite. The population of city, the number of workers in the
factory is examples of finite universe. His universe was finite and he was given the area
of Sambhal.


SAMPLING
       There are two ways of doing research. The first one is to study the whole
population, which called census method. The second method is to study a few units or
that universe that represents virtually the whole universe. These units are called samples
and this method is called sampling method.
       In presents study due to the initiation of time only 100 customers outlets was
surveyed by me.



                                             48
       In the present simple random technique is used to choose the respondent
(samples). The reason for selecting this technique is
              1.      It is free from any type of bias.
              2.      The respondents give true and actual information.
              3.      It is possible to accurate information.


SAMPLING UNIT
       A decision has to be taken concerning a sampling unit before selecting a sample.
Sampling unit may be geographical one such as a State, District, Village, etc. on a
construction unit such as house, etc or it may be social unit such as family club, scroll,
etc. or it may be individual. The researcher will have to decide one or more of such units
that has to select for his study. I have been provided a list of retail outlets in Sambhal.


SIZE OF SAMPLE
       This refers to the number of items to be selected from the universe to constitute a
sample. This is a major problem before a researcher. The size of sample should neither be
excessively large nor too small, it should be optimum.
       The size of consumers must be kept in view for these limits. The parameters of the
research in interest study must be kept in view while deciding the size of sample.
       In my research study, sample size was 100 customers Sambhal.




                                              49
                       METHOD OF DATA COLLECTION
Data Source:
Secondary Data :
      1. Annual General Reports
      2. FCCU Catalogue
      3. Plant Records
      4. Library and Websites


      There are two methods of data collection one is Observational method and second
is Survey method. Once the decision in favor of collection of primary data is taken, one
has to decide the mode of collection.
      Observational method suggests that data collected through one’s observation and
while in Survey method field surveys are commonly used to collect the data primary from
the respondents.
      In my research I use survey and observational method both. I have done survey
with the help of Direct Personal interviews to get the detailed information about my
problem of research and for this purpose I prepare a structured Questionnaire form to
elicit the necessary data from the Respondents.


COLLECTION OF SECONDARY DATA
      Secondary data means data are already available. They refer to the data, which
have already been collected and analyzed by someone else. When the researcher utilizes
secondary data, then he has to look into various sources from where he can obtain them.
In this case he is certainly not confronted of original data. Secondary data may either be
published data or unpublished data it is mainly through books, magazines and
newspapers.



                                           50
       The researcher must be careful while collecting the secondary data, as he must be
sure of its reliability, otherwise secondary data may not fulfill the desired objective.
       For the collection of the secondary data in this report different information sources
were taken as a base. The major source of information was the Internet.


ANALYSIS OF THE STUDY AND INTERPRETATION
the necessary data for my ANALYSIS:
Analysis of the project was done on the basis of the parameters mentioned below.


NPV (Net Present Value)
         T
               CFt                   CF1          CF2                      CFT
NPV     1  r 
        t 0
                     t
                          CF0 
                                   (1  r ) 1
                                              
                                                (1  r ) 2
                                                            ......... 
                                                                         (1  r ) T

Internal Rate of Return (IRR) :
         T
                CFt                         CF1            CF2                        CFT
NPV     1  IRR 
        t 0
                          t
                               CF0 
                                        (1  IRR ) 1
                                                     
                                                       (1  IRR ) 2
                                                                     ......... 
                                                                                  (1  IRR ) T



Payback Period:


                                                                       AbsolueValue of NCR in that year
Payback Period  ( Last Year With a negative NCF ) 
                                                                     Total Cash Flow in the following year


Risk analysis:
       Risk analysis of capital investment is one of the most complex controversial and
slippery areas in finance, risk refers to variability, several measures of variability have
been used to denote risk like Mean, Standard Deviation, Coefficient of variation etc, the
methods of risk analysis commonly used in practice are: (1) conservative estimation of
revenues, (2) safety margin in cost figures, (3) flexible investment yardsticks, (4)
acceptable overall certainty index. The analysis of risk factor in practice can be improved



                                                              51
if the profitability distribution of the key factors underlying an investment project is
developed and information is communicated in this form.


Need:
        It is clear from the above that Mathura Refinery will not be in a position to meet
revised MS Specifications with the existing facilities. Therefore, there is a need to
provide facilities for achieving revised MS Specification at Mathura Refinery.


Analysis of Alternatives
        Project Authorities have analyzed following alternatives for generating high
octane MS component :
Alternative 1 : Reformer for generating high octane reformate
Alternative 2 : Alkylation Unit for Generating high octane Alkyl ate.
Alternative 3 : Isomerisation Unit for generating high octane Isomer ate.
Alternative 4 : MTBE Unit for generating high octane MTBE.


Alternative 1 was rejected on the problem on high Benzene content and high investment
cost.


Alternative 2 was rejected due to the use of Hydrofluoric Acid (HF) as Catalyst which is
not eco-friendly and due to high investment cost.


Alternative 3 was rejected due to very low capacity of the plant (63 TMTPA against
minimum economic size of 150 TMTPA)


Alternative 4 was using blending of MTBE has been found to be just meeting the
blending requirement for making 911 TMTPA MS with relatively low investment in the
post FCC revamp operation.

                                            52
                            TECHNICAL EVALUATION:


LOCATION SITE :
      The proposed facilities shall require about one acre land and shall be located
inside the existing battery area of Mathura Refinery. The required area has been
envisaged to be generated by knocking off the idle equipments of Caustic and Acid
Treatment Facilities on the West side of the existing PDF Unit.


CAPACITY:
      The proposed Capacity of 40,000 TMTPA MTBE Plant is based on Cracked LPG
generation in the post FCCU revamp operation.


TECHNOLOGY:
      The proposed technology is based on the technology of M/S. CD Tech.,
Netherlands, who has alliance with M/s. ABB Lummis. Proposed technology has a
unique feature that reaction and product purification takes place in a single column. The
same technology has been used world wide for making MTBE from FCC LPG feedstock.


FACILITIES:
   The facilities envisaged under the project are as under :
    Splitter facility separation of C3 and C4 components of FCC LPG.
    Unit comprising of reactor / distillation columns along with purification system for
      production of MTBE.
    Two new tanks of 5000 M3 Capacity each for storage of MTBE along with
      blending facilities in finished MS pool.
    Associated pumps, piping’s, instrumentation etc.




                                            53
                     PHASING OF EXPENDITURE


        The proposed project to create facilities at Mathura Refinery to produce 40,000
TPA of MTBE is expected to complete within 30 months from the date of approval.
These facilities will be operative from the fourth year after the commencement of the
project. The expected cost of the project as discussed earlier is 45.00 Crores. The
investment is decided to divide in three financial years talking several factors into
consideration. The schedule of phasing of expenditure is shown as under.


Year                                         Amount (Rs. In Crore)
1st Year                                     9.0
2nd Year                                     18.0
3rd Year                                     18.0
Total                                        45.0




                                           54
COMPLETION SCHEDULE:
       The project on providing facilities at Mathura Refinery to produce 40,000 TPA of
MTBE is scheduled for completion within 30 months from the date of approval


ADDITIONAL MANPOWER REQUIRED:
       Impact of proposal for providing the facilities at Mathura Refinery to produce
40,000 TPA of MTBE on the deployment of manpower is one of the very important
factors to be taken into consideration.
       Total 30 numbers of additional manpower is envisaged for the proposal facilities.
This has been taken into consideration while working out operating cost and economics
of the project. However, efforts will be made to generate required additional manpower
from within by redeployment/ restructuring.




                                           55
                           FINANCIAL ANALYSIS


      The estimated cost for the project works out at Rs. 4500 lakhs inclusive of foreign
exchange of Rs 4.3 crore based on budgetary offer and in house data available for the
various ongoing projects. The cost estimates are expected to be within an accuracy level
of +/- 20%. FE component is Rs. 435 lakhs. The Projects cost includes design change
allowance @ 10% and contingency @ 10%.


Basis of financial calculation (Free Pricing):
      The financial analysis of the project with operational life of 15 Years with cash
flow analysis has been done.
    The depreciation rate @ 25% at written down value (WDV) of plant & machinery
      and 10% WDV for Civil items has been considered for income tax calculation.
    Corporation tax has been calculated @ 35% with surcharge. On tax “10% on profit
      after adjustment of depreciation.
    The financial analysis has been worked out free pricing mechanism.
    Capacity utilization has been considered as 75% for the first year and 100% for the
      second year.




                                           56
                            PROJECT COST


 N            PARTICULARS                         F. EX.   I. C.    Total
 o.

 1        Land                                    0.0      0.0      0.0
 2        Site Development                        -        50.0     50.0
 3        Process Design, Engineering             79.0     108.0    187.0
 4        Royalty & know- how                     82.0     28.7     110.7
 5        Plant & Machinery                       266.4    2931.9   3198.3
 6        Water    Supply       &   public        -        20.0     20.0
          Health
 7        Office equipments & furniture           -        25.0     25.0
 8        Construction                Site        -        70.0     70.0
          Requirement
 9        Construction period expenses            -        45.0     45.0
 10       Start up Expenses                       9.5      3.5      13.0
          Sub Total (1 to 10)                     436.9    3282.1   3719.0
          Design Change allowance @               43.6     328.21   371.9
          10%
          Sub Total                               480.5    3610.3   4090.9
          Contingency @ 10%                       48.05    361.03   409.1
          Grand Total                             528.6    3971.3   4500.0



Project cost Rs. 45 crore




                                             57
PROJECT COST ESTIMATES
     Need for realistic cost estimates
             The importance of making an accurate cost estimate4 cannot be over
      stressed. It will have a direct bearing on the economic viability of the scheme.
      While over-estimation may cause blockage of funds which otherwise could be
      utilized profitability for some other purpose, under estimation would necessitate
      repeated approvals for cost overruns and may also affect the project completion
      schedules.
   Basis
             It is essential that the basis adopted for cost estimation of all major
      components be included. Generally, cost estimates for major equipments, imported
      goods, proprietary items etc. shall be on the basis of current budgetary quotations.
      Detailed work ups, copies of quotations etc, must be enclosed with the proposal.
      The effort shall always be to base the cost estimates on a sound basis.
   Escalation
             All cost estimates shall be as on the date of submission of the proposal and
      the rate of escalation adopted for different cost estimates shall be indicated, along
      with basis.
   Foreign exchange requirements
             The foreign exchange requirements are to be worked out separately and
      shown. The need to import equipments /process etc. involving outgo of Foreign
      exchange are to be critically reviewed, indigenous availability fully explored and
      foreign exchange component of the proposal kept to the bare minimum.




                                           58
OPERATING COST: (RS/LAKHS)
    Catalyst                 90.00    120.00   120.00
    Salaries                 67.50    90.00    90.00
    Chemicals                97.50    130.00   130.00
    Utilities                82.50    110.00   110.00
    R & M (2.5 %)            84.75    113.00   113.00
    Gen. Admen. (0.5%)       20.25    27.00    27.00
    Consumables (0.10%)      3.75     5.00     5.00
    Insurance (0.10%0        5.25     7.00     7.00
    Total                    451.50   602.00   602.00




                              59
                           DEPRECIATION


Year   Plant &     WDV         Other      WDV    Total    WDV
       Machinery   Dep.        Civil      Dep.            Dep.
                   @ 25 %      Items      10%
1      3198.3      79935       25.0       2.5    3223.3   802.1
2      2398.7      599.6       22.5       2.2    2421.2   601.9
3      1799.0      449.7       20.3       20.    1819.3   451.7
4      1349.3      337.3       18.2       1.8    1367.5   339.1
5      1012.0      252.9       16.4       1.6    1028.4   254.6
6      758.9       189.7       14.7       1.4    773.7    191.2
7      569.2       142.3       13.3       1.3    582.5    143.6
8      426.9       106.7       11.9       1.1    438.8    107.9
9      320.1       80.1        10.7       1.1    330.9    81.2
10     240.1       60.1        9.7        0.9    249.8    61.1
11     180.1       45.1        8.7        0.8    188.8    45.8
12     135.1       33.7        7.8        0.7    142.9    34.5
13     101.3       25.3        7.1        0.7    108.3    26.1
14     75.9        18.9        6.3        0.6    82.3     19.6
15     56.9        14.3        5.7        0.5    62.7     14.8




                                60
                                     FINDINGS


       The proposed project for providing facilities for production of MTBE at FCC unit
in Mathura Refinery is found feasible in Financial, Technical Analysis. The decision to
accept or reject a capital Budgeting project depends on an analysis of the cash flows
generated by the project and cost of the project as well as the tools of capital Budgeting
are considered for measuring financial feasibility of project: from the Financial analysis
the following points can be concluded to accept this project.


    The Project cost is 4500 lakhs and Sales realization from the difference of input
       and output of MTBE is calculated to be 2041 lakhs.
    The Payback Period is 4.1 years means the amount of time that it takes
       for a to recovery its initial cost here calculated at 4.1 years.
    From the estimated cash flow of the project the Internal Rate of Return (IRR) is 17
       % which represents that the project is feasible to accept.
    The Net Present value of the project is calculated at $890. 48
    From the technical analysis and studying the market demand scenario the project
       is found viable to accept.
    As shown in financial analysis the sales realization is considered as operating
       income and the operating cost is also calculated at 602 lakhs.




                                               61
                                RECOMMENDATIONS:


       In the proposed Project the process by which I study the different aspects of
proposal, and decides about feasibility and viability of the project, represents that
payback, net presents value, and IRR are the methods available for measuring the firm’s
return on an investment project.


       Payback Period is 4.1 years, which represents the amount of time that is takes for a
Capital Budgeting project to recover its initial cost. The Internal Rate of Return (IRR) of
a project is 17% means it is the discount rate at which the Net Present Value (NPV) of a
project equals zero. The Net Present value of Projects is $890.48 that equal to the sum of
the presents value of all the cash Flows associated with the projects.




                                             62
                             BIBLIOGRAPHY



Matter is taken from:


    www.galaxy.com( Internal site of Mathura Refinery)


    www.iocl.com


    www.mysap.com


    Project Manthan


    Development Report of Mathura Refinery


    Manual of S.A.P




                                      63

				
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Description: Indian Oils Marketing Division maintained its dominance in the downstream sector during the year 2006-07.Besides retaining large volume consumers, it consolidated its position in the retail segment, opening 1,332 new petrol/diesel stations (retail outlets) during the year. Out of these, 763 were low-cost, small-format Kisan Seva Kendra (KSK) outlets in rural markets. With this, Indian Oil now has a countrywide retail network of 16,455 petrol/diesel stations, including 1,343 KSK outlets. The Corporation plans to add 1,600 more outlets during 2007-08,including 1,000 KSKs.