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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 By


Ms. KAKOLI BOSE VIPUL
ASST.MANAGER (F) ENROLLMENT NO.

SESSION

MAHARAJA AGRASEN INSTITUTE OF


1
MANAGEMENT STUDIES
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PREFACE

This is to certify that Mr.VIPUL Doing BBA at Maharaja Agrasen Institute


Of 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 12


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

FIGURES

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

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TABLE OF CONTENTS
Sl.NO. Page No.

CHAPTER-1 INTRODUCTION

1.1 Overvie of industry as a whole 6


1.2 Profile of the organization 8
1.3 Competition information 13
1.4 S.W.O.T Analysis 14

CHAPTER-2 OBJECTIVE & METHODOLOGY

2.1 Significance 19
2.2 Mangerial usefulness of study 20
2.3 Objective 26
2.4 Scope of study 30
2.5 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
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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
were formed to search for oil in 1956 and 1959 respectively. To refine crude oil, Indian

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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

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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

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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

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9,300 km

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

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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

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

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.

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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

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pump set oils, besides auto fuels and kerosene. SERVOXpress has been launched recently as 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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12
Table 1.1

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13
Table 1.2
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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.

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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.

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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.
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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
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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

18
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.
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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 national and multinational companies will also be lured into this field.

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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
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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.

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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

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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.

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• To provide the products with best satisfaction to the retailers (Industries,
Aviation) as well as to the customers.
• 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
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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:

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• 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

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3. SKILLS:

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.
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4 . STRUCTURE FOR THE MARKETING DIVISION

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

MARKETING

AVIATION L.P.G PETROL


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AIRLINES AIRFORCE

Fig 1.1

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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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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.

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• 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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]
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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.

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• 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.

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• 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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35
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.

DATE-06-02-2006

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DIVISIONS AT IOCL

36
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

37
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
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Marketing

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
38
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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39
Fig 1.5
Indianoil’s Marketing Network for the year 2006-07

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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

40
SERVO 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.

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TYPES OF ACCOUNTS

All the accounts that IOCL has are broadly divided into:

41
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.

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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.

42
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.
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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.

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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.

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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
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:
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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.

1. 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: -
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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
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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.

2. 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.

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• 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.

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.
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• 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.

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.

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3. 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:

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# 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/-

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• 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.

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.

53
• 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.

• 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.

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4. 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:

54
• The note for opening of the account in limits should be duly approved by Finance In-
charge of the region.

• 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.

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• 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:

55
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.

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.

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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

56
• 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.

• 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.

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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

57
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.

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

TYPES

RCC CMP
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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.

58
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.

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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:

59
A B C D E F G H I J K
DCR
NUMBER
IN THE
INCO FOR CASE CHEQUE
COLLECTIO AMOUNT OF NUMBER
N/OUT FORDATE ININ AMOUNT COLLECT IN THECHRGES
WITHDRAW TEXT NUMBEWR IN TEXTION CASE OFIN TEXT INCO IN
AL IN TEXTFORMAT( FORMAT FORMAT( TEXT WITHDR FORMATE TEXT
FORMATE BOTH) (BOTH) BOTH) FORMAT AWAL (BOTH) FORMATE

INCO 1102005 10000.00 01 INCO


CHRG 1102005 100.00 M01006 CHRG
EDEB 1102005 5000.00 EDEB

ECRE 1102005 5000.00 ECRE


TRANSFE
TRANSFER 1102005 1000000.0 1000000 R

Table 1.3

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And we finally come out of this type of file

16000.0
inco 27032006 0 124 inco
115000.
inco 29032006 00 126 inco
chrg 30032006 1500.00 128 chrg
ecre 31032006 7500.00 129 ecre
inco 31032006 5000.00 130 inco
h000 311032006 145000 145000 h000

Table 1.4

60
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

61
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A B C D E F G H I
J K E F G H I J K
141220
chrg 05 440.00 m01006 chrg
281220
chrg 05 55.00 m01006 chrg
011220
ede 05 2800.00 eded
281220
Out 05 3400.00 198441 out
271220
Out 05 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

62
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
After formatting the file looks like this

LOC_CODE CREDIT_DT AMNT BDS_NO REMARKS STATE


24 1/3/06 365944 1 GEN Clg. 1000
24 2/3/06 3456 1 GEN Clg. 1000
369400

25 1/3/06 45678 774 GEN Clg. 1000


25 1/3/06 1999666 775 GEN Clg. 1000
2045344

26 1/3/06 5678 34835 GEN Clg. 1000


26 2/3/06 288190 34836 GEN Clg. 1000
5123356

TOTAL = 7538100

567 1/3/06 400000 456 GEN Clg. 1100


678 1/3/06 12059 457 GEN Clg. 1100
412059

987 2/3/06 40646 7726 ONBRANCH Clg. 1200


998 2/3/06 1906472 7727 ONBRANCH Clg. 1200
1947118

1234 3/3/06 791303 976 GEN Clg. 1300


1235 3/3/06 805640 977 ONBRANCH Clg. 1300
1596943

657 4/3/06 4695971 1234 GEN Clg. 1400


789 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.

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The file has the following features:

63
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

64
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 Inco


inco 16032006 78191697.00 1 Inco
inco 22032006 58844035.00 1 Inco
inco 30032006 317093484.00 1 Inco
inco 17032006 29890.00 1 Inco
inco 29032006 175.00 1 Inco
h100 31032006 1020165641.00 1020165641 h100

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

CAG
inco 01032006 1263487.00 773 inco
inco 01032006 2000000.00 774 inco

65
inco 02032006 63000.00 775 inco
inco 03032006 1406140.00 775 inco
inco 03032006 275900.00 776 inco
inco 03032006 885500.00 777 inco
inco 03032006 350000000.00 778 inco
inco 03032006 90000.00 779 inco
inco 03032006 30000.00 779 inco

The next to format is R.K.PURAM

R.K.PURAM

inco 21032006 146257132.00 34836 inco


inco 22032006 75729712.00 34837 inco
inco 23032006 160290887.00 34838 inco
inco 25032006 110926054.00 34839 inco
inco 27032006 62392699.00 34840 inco
inco 28032006 79903433.00 34841 inco
inco 31032006 150586092.00 34842 inco
inco 31032006 134127662.00 34843 inco
h100 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

66
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.
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 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.

67
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.

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Reports

The reports to state office should be sent by 20th 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

68
 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.

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• 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.

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

69
• In case of RCC branches this day end credit is transferred SBI CAG Mumbai
through SBI CAG New Delhi

Format of reconciliation of
Collection account

Opening balance.
Receipts (+)

Bank Transfers (-)

G.TOTAL

G.TOTAL
BANK AMOUNT.

CASH AMOUNT
BALANCE

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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.

• 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.

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WITHDRAWAL ACCOUNT

Cheques issued during the


month

(+) Cheques issued during previous


month which were not presented

(-) 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

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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

(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 Other major payments e.g. oil purchase Other
Tax/Excise from CPCL/BRPL/KRL etc payments
Duty payments
01.05.08
02.05.08
03.05.08
04.05.08
-
-
31.05.08
Total
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2.Collections

73
Rs. In crores
Dates Collection from major customers e.g. All other Collections
NR- (IFFCO, NFL, CFCL, DIL, IAC
etc)
ER- (HPL, NOC, IBP etc)
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

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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.

74
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.
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.

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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

75
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.

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.

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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

76
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
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.

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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

77
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
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
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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

78
quality requirement of MS/HSD to EURO-III/IV levels, processing increased quantity of high
sulphur crude and improvement in distillate yield.
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.
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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
transportation of petroleum products to Bangalore-fed areas in a cost-effective manner.

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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.

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.

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66

STATEMENT OF PURPOSE
80
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

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ANNEXURES

FINANCIAL PERFORMANCE

81
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31ST MARCH 2006
(Rs. Crore)
AUDITED
AUDITED RESULTS
UNAUDITED RESULTS FOR CONSOLIDATED
FOR
RESULTS
NINE THREE MONTHS FOR THE YEAR
THE YEAR ENDED
MONTHS ENDED ENDED
ENDED
31.03.2007 31.03.2006 31.03.2007 31.03.2006 31.03.2007 31.03.2007
31.12.2006
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
Net Sales/Income
2. 123024.19 44212.91 38216.23 167237.10 138304.62 154324.62 133458.35
from Operations
Grant from
Government of
3. 0.00 6571.44 0.00 6571.44 0.00 6992.02 0.00
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 (Increase)/Decreas
(1600.74) (998.59) (2124.51) (2599.33) (1653.90) (2934.20) (2169.30)
a) e in Stocks
Purchase of
b) Products and 66504.50 23755.79 22144.65 90260.29 72771.07 65227.80 57316.65
Crude for resale
Consumption of
c) 48362.98 19883.09 12992.22 68246.07 49706.14 77833.63 56957.11
Raw Materials
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
Gross Profit after
Interest but
before
7. 2761.81 6147.44 1576.24 8909.25 8138.57 9845.61 10060.32
Depreciation and
Taxation
(2+3+4-5-6)
8. Depreciation 1623.05 580.21 566.59 2203.26 2183.39 2552.42 2524.57
Profit Before Tax
9. 1138.76 5567.23 1009.65 6705.99 5955.18 7293.19 7535.75
(7-8)
10 Provision for
. Taxation
- Current Tax 67.00 1550.63 595.21 1617.63 1029.43 1945.02 1384.75
- Fringe Benefit
40.22 16.87 0.00 57.09 0.00 62.94 0.00
Tax
- 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
183.48 431.68
. Interest/Others
13 Profit for the 4932.42 5469.23

82
. Group (11-12)
Paid-up Equity
14 Share Capital
1168.01 1168.01 1168.01 1168.01 1168.01 1168.01 1168.01
. (Face Value : Rs.
10 each)
Reserves
15 excluding
- - - 28134.66 24816.35 29472.93 26281.96
. revaluation
reserves
Earning per
16
Share (Rs.) (Basic 7.57 34.51 7.65 42.08 41.88 42.23 46.83
.
and Diluted)
Aggregate of Non-
17
Promoter
.
Shareholding
a) Number of 20993434 20993434 20993434 20993434 20993434 20993434 20993434
Shares 5 5 5 5 5 5 5
b) Percentage of 17
17.97 17.97 17.97 17.97 17.97 17.97
Shareholding (%) .97
II. PHYSICAL (IN MMT)

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
Refineries
2.
Throughput 28.43 10.09 9.02 38.52 36.63
Pipelines
3.
Throughput 33.81 11.54 10.42 45.35 43.03

SEGMENT-WISE RESULTS

(Rs. Crore)

83
AUDITED
AUDITED RESULTS
UNAUDITED RESULTS FOR CONSOLIDATED
FOR
RESULTS
THREE MONTHS FOR THE YEAR
THE YEAR ENDED
ENDED ENDED
NINE MONTHS
ENDED

31.12.2006 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 110,340.04 40,210.95 35,517.67 150,550.99 128,578.35 136,924.47 123,367.05
PRODUCTS
b) OTHER
BUSINESS 13,158.55 4,608.80 2,983.66 17,767.35 10,418.87 18,574.42 11,142.25
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 406.48 104.26 88.74 510.74 265.37 717.61 497.44
REVENUE

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

2. SEGMENT RESULTS :

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

i) SALE OF
PETROLEUM 1,098.93 5,280.33 1,259.57 6,379.26 6,138.00 7,289.85 8,127.12
PRODUCTS
ii) OTHER
BUSINESS (172.78) (16.50) (28.47) (189.28) (236.48) (221.77) (275.53)
ACTIVITIES

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

LESS:
UNREALISED
5.62 2.18 2.47 7.80 4.82 7.80 4.82
SEGMENT
MARGINS
Sub-total of
920.53 5,261.65 1,228.63 6,182.18 5,896.70 7,060.28 7,846.77
(a)

84
b) INTEREST
740.54 281.65 175.68 1,022.19 582.96 1,251.44 767.92
EXPENDITURE

c) OTHER UN-
ALLOCABLE
EXPENDITURE
NET OF UN-
ALLOCABLE (958.77) (587.23) 43.30 (1,546.00) (641.44) (1,484.35) (456.90)
INCOME
PROFIT
BEFORE TAX 1,138.76 5,567.23 1,009.65 6,705.99 5,955.18 7,293.19 7,535.75
(a - b - c)

3. CAPITAL EMPLOYED:

(SEGMENT ASSETS - SEGMENT LIABILITIES)

a) SALE OF
PETROLEUM 40,878.96 43,456.39 40,873.65 43,456.39 40,873.65 51,034.16 48,357.02
PRODUCTS
b) OTHER
BUSINESS 3,726.88 3,585.70 2,694.29 3,585.70 2,694.29 4,102.16 3,226.92
ACTIVITIES

c) OTHERS
(17,672.39) (17,739.42) (17,583.58) (17,739.42) (17,583.58) (24,422.47) (24,175.38)
(CORPORATE)

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

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CONCLUSION

85
• 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
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.

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LIMITATIONS

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

86
• 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

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87
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.

• 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.

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BIBLIOGRAPHY

88
• 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

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GLOSSARY

89
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

90