Chennai Petroleum Corporation Ltd.
|BSE: 500110||Sector: Oil & Gas|
|NSE: CHENNPETRO||ISIN Code: INE178A01016|
|BSE LIVE 15:45 | 20 Nov||417.20||
|NSE 15:59 | 20 Nov||416.10||
|Mkt Cap.(Rs cr)||6,213|
|Mkt Cap.(Rs cr)||6212.53|
Chennai Petroleum Corporation Ltd. (CHENNPETRO) - Director Report
Company director report
On behalf of the Board of Directors of your Company it gives me great pleasure toreport yet another year of exemplary performance of your Company and to present the 51 stAnnual Report on the working of your Company together with the Audited Statement ofAccounts Auditors' Report and the Report of the Comptroller & Auditor General ofIndia on the Accounts for the year ended March 312017.
Your Company has prepared the financial statements in line with the provisions of theCompanies Act 2013 and the IndAS Accounting Standards issued by the Institute of CharteredAccountants of India.
The highlights of Standalone & Consolidated financial results are as under:
Compliance with IndAS
Your Company has prepared the financial statements as per the requirements of IndAS asstipulated under Section 133 of the Companies Act 2013 read with the relevant rulesthereunder. These financial statements have been prepared in accordance with IndAS for thefirst time being mandatory from 1 st April 2016 and the previous year's figures have beenaccordingly restated.
Highlights of Standalone Financial Performance during the year 2016-17:
The year 2016-17 was a hallmark year for the Company and the highlights are as under
The turnover registered an increase of 16% at Rs. 40586 crore as compared toRs. 34953 crore in the previous year on account of increase in both the quantity ofproducts sold and price variation.
The Company registered its second highest Profit Before Tax since inception atRs. 1365 crore in the current year with an increase of 80% as compared to Rs. 759 crorein the previousyear.
The Total Comprehensive Income witnessed a steep increase of 38% at Rs. 1024crore as compared to Rs.740 crore in the previous year.
The Gross Refining Margin in the current year rose to $ 6.05/bbl as compared to$5.27/bbl in the previous year. Dividend
The Board recommended a Preference dividend of 6.65% payable to Indian Oil CorporationLtd. the holding Company as per the terms and conditions of the offer document on thepaid-up Preference Share Capital of the Company for the financial year 2016-17 whichamounts to Rs. 0.665 per preference share and the same has been accounted for as part ofFinance Cost in line with IndAS requirements.
In view of the excellent financial performance your Board is happy to recommend adividend of 210% on Equity Share Capital for the financial year 2016-17 amounting to Rs.21 /- per equity share which is the highest ever.
The book value per share of your Company improved significantly from Rs. 158.58 as on31 st March 2016 to Rs. 222.54 as on 31 st March 2017 registering an increasing of 40%.
Reserves and Surplus
The Reserves and Surplus as on 31 st March 2017 were noticeably higher at Rs. 3164.81crore as compared to Rs. 2212.43 crore as on 31 st March 2016.
The value addition during the year improved to Rs. 2805 crore as compared to Rs. 2078crore in the previous year. Digital India Initiative
Your Company continuously monitors the promotion of payments through digital means toachieve a cashless campus and endeavours to extend the necessary support to all itsstakeholders in achieving the objectives of the Government of India for moving towards acashless economy. In this regard the company has implemented a 100% e-payment ande-collection system through digital means for all its stakeholders viz. employeesvendors contractors service providers etc. In addition awareness camps were alsoconducted for the CISF personnel who are providing security to our Refinery at Manali andtheir families students of the CPCL Polytechnic College family members of CPCL employeesat the township in CPCL CBR Refinery women contract labourers etc.
During the year through constant persuasion and campaigns your Company has ensuredopening of bank accounts by all contract workmen.
Contribution to Exchequer
Your Company has consistently been the largest contributor in Tamil Nadu to both Stateand Central Exchequer in the form of duties and taxes. The details are as under:
In recognition of its contribution towards revenue and industrial growth your Companywas awarded the Highest Tax Payer Award 2015-16 by the Central Excise Department for beingthe top assessee in the Chennai Zone.
Public Deposit Scheme
Your Company has not accepted any public deposits during the year 2016-17 and no publicdeposit was outstanding as on 31 st March 2017.
Transfer of Unclaimed Dividend to IEPF
Your Company has transferred to the Investor Education and Protection Fund the requiredamount as per Section 124 of the Companies Act 2013 within the stipulated time.
(TMT = Thousand Metric Tonnes)
Your Company achieved a throughput of 10.256 million metric tonnes per annum (MMTPA)during the year 2016-17 and exceeded the MoU target of 10.250 MMTPA after a gap of sevenyears despite the impact of Cyclone Vardah. The distillates yield was the highest ever at72.6% as against the previous best of 72.5% in 2015-16. The Fuel & Loss for the yearwas lower at 9.1 wt.% as compared to 9.3 wt.% in the last year. The Energy Intensity Index(Ell) was the lowest at 101.3 against the previous lowest of 101.9 in the year 2014-15.
Your Company successfully completed OHCU revamp shutdown in February 2017 improvingits capability of handling coker streams and enhancing its capacity. The MS production wasthe highest at 1105 TMT as against the previous best of 1050 TMT in 2014-15; theisomerate production was the highest at 166 TMT as against the previous best of 135 TMTachieved in 2011-12.
During the year Manali Refinery achieved a crude oil throughput of 9725 TMT in2016-17 as compared to the previous year's figure of 9100 TMT. It processed one new crudeE.A. blend (Low-Sulphur category) from Nigeria which was added to the regular basket.
During the year Cauvery Basin Refinery achieved a crude oil throughput of 530.8 TMT in2016-17 as compared to the previous year's figure of 543.6 TMT. The distillate yieldduring the year was at 78.2 wt% as compared to 79.3 wt% in the previous year. Natural gasprocessed in 2016-17 was 72.0 TMT as compared to the previous year's figure of 79.2 TMT.Fuel & Loss was at 4.2 wt.% as compared to 4.0 wt.% in the previous year.
During the severe Cyclone Vardah on 12th December 2016 which hit Chennai directlyyour Company's employees have shown great courage and commitment in ensuring safeoperations of major units and utility systems. Subsequently the affected units wererestarted within the shortest possible time and product supply to the market wasmaintained.
The Central Pollution Control Board (CPCB) has directed your Company to establishon-line connectivity of stack emission data to CPCB immediately similar to the oneexisting with TNPCB since 2015. Your Company initiated immediate action and completed thejob by 8th May 2017 and intimated compliance to CPCB.
Your Company signed an MoU with Indian Oil Corporation Limited the holding Companysetting the performance parameters and targets for the year 2016-17 as per the guidelinesissued by the Department of Public Enterprises (DPE). Your Company has received VeryGood' rating from DPE in respect of the MOU for the year 2015-16.
M/s.Indian Oil Corporation Limited the holding company markets a majority of the fuelproducts produced by your Company.
The details of sales of major products through direct marketing by your Company during2016-17 over the previous year are tabled below:
During the year 29 new customers were registered for supply of food grade hexanepropylene sulphur and paraffin wax. Four customer meets were conducted during the year atvarious locations.
During the year fresh agreements were signed with Indian Additives Ltd. and KothariPetrochemicals Ltd. for sale of fuel oil and lean Poly Butylene Feedstocks respectively.
In recognition of its contribution to exports your Company was conferred with theExport Excellence Award for the year 2014 under "Top Exporter in SouthernRegion" in Gold category by Federation of Indian Exports Organisation (FIEO).
RESEARCH AND DEVELOPMENT (R&D)
Your Company's R&D Centre attaches importance for continuous upgradation oftechnologies building R&D capabilities and expertise in various areas of refineryoperations.
The R&D policy of your Company lays emphasis on providing technological inputs tomeet the corporate objective of technical excellence in all aspects of refineryoperations; promoting indigenous technologies for refinery processes in association withnational laboratories/academic institutions; and developing new products and upgrading thequality of the existing petroleum products.
Major R&D projects undertaken during the year include the following:
Project on "Development of Low-aromatic and Ultra Low-Sulphur Jet Fuel forAir Breathing Engine Applications (JP-7)"
Development of an eco-friendly low-cost synthetic process for production ofexotetra- hydrodicyclopentadiene (JP-10)
Development of Naphtha Isomerisation Catalyst Process (lab-scale)
Renewable crude and liquid hydrocarbon fuels from algae to bio-crude. Theproject was initiated after obtaining approvals from Scientific Advisory Committee (SAC)on Hydrocarbons of the Ministry of Petroleum & Natural Gas.
Your Company lays emphasis on conceiving developing and implementing projects keepingin view operational necessities. Project schedules and costs are being monitored regularlyto ensure effective and timely implementation. Your Company achieved Plan and Non-planexpenditure of Rs. 1134 crore and Rs. 135 crore respectively totaling Rs. 1269 croreduring the year.
As a part of its growth strategy the Company has undertaken the following projectsaimed at capacity expansion value addition reliability improvement and qualityUp-gradation.
Resid Upgradation Project
Your Company is implementing the Resid Upgradation Project at an estimated cost of Rs.3110 Crore to increase distillate yield and maximise the processing of high-sulphurheavy crudes. The project consists of new secondary processing units like Delayed CokerUnit (DCU) Sulphur Recovery Unit Revamp of Once-through Hydrocracker Unit (OHCU) andaddition of associated utilities and offsite facilities. The revamp of OHCU has beencompleted and commissioned during March 2017. The DCU has been mechanically completedduring February 2017 and other associated utilities Soffsite facilities are under variousstages ofconstruction/commissioning.
New Crude Oil Pipeline
A new crude oil pipeline with additional safety features from Chennai Port to ManaliRefinery as a replacement for the existing 30-inch pipeline is under implementation atan estimated cost of Rs. 258 crore. The project is expected to be mechanically completedby February 2018.
Diesel Hydrodesulphurisation (DHDS) unit Revamp Project:
In order to enable production of entire diesel from Manali Refinery meet BS-IV qualitynorms your Company is revamping the existing DHDS unit from 1.80 MMTPA to 2.34 MMTPA atan estimated cost of Rs. 367 crore. All major equipment including a new reactor havebeen received and erected.
BS-VIAuto Fuels Quality Project:
As per the directives of the Government of India the entire production of diesel fromCPCL along with other refineries in the rest of the country has to meet BS-VI qualitynorms with effect from 1 st April 2020.
For complying with the requirement of BS-VI diesel norms the existing DieselHydro-treating (DHDT) unit is being revamped to increase the capacity from 1.8 to 2.4MMTPA along with a new Sulphur Recovery Unit and other associated facilities. Further tomeet the requirement of BS-VI petrol norms installation of a new FCC GasolineDesulphurisation unit with a capacity of 0.6 MMTPA along with other associated facilitiesis under implementation. The project is expected to be mechanically completed by June2019.
Cauvery Basin Refinery
A 150 KW rooftop grid-connected solar power plant was successfully installed at thecontrol room and substation-1 building of Crude Distillation Unit.
To enable direct coastal loading of diesel from Cauvery Basin Refinery (CBR) provisionof new diesel storage tanks of 2x10 tkl (thousand kilolitres) capacity coastal loadingpumps and associated pipelines is nearing completion.
Re-Gasified Liquefied Natural Gas (R-LNG):
It is proposed to replace Naphtha and Fuel Oil with RLNG to be supplied by IOCL. Thiswill require revamping Hydrogen Generation Units (HGU) Modifications in Gas Turbines (GT)and Boilers. The project is expected to be mechanically completed from December 2019onwards.
Refinery Expansion Project at CBR
Your Company is examining the feasibility of a new 9-MMTPA Refinery Expansion Projectat CBR. Pre-feasibility study for the same was carried out through M/s. Engineers IndiaLtd.
Your Company firmly believes that information technology is integral to all facets ofits operations to sustain growth and profitability. During the year an IT AssetManagement System has been implemented to classify IT assets based on the criticality andto maintain an IT asset register. In order to strengthen cyber-security a new log serverfor auditing was installed and CCTV camera surveillance was provided at the Manali DataCentre.
HEALTH SAFETY AND ENVIRONMENT
Your Company endeavours to achieve best standards of excellence in the healthcare ofits workers and has an Occupational Health Services Centre with the latest equipmentmanned by qualified professionals.
The OHS Centre is the first to be set up in the oil industry and acts as a resourcecentre for providing professional and technical assistance to other industries. It ismanned round-the-clock with two life-support ambulances to manage all medical emergencies.
As part of health surveillance a majority of the employees underwent comprehensivemedical examination. In addition the health of the contract workers security personneland canteen workers was checked as per the statutory requirements.
Health awareness programmes were also conducted for the benefit of the employees.During the year occupational hygiene surveys were carried out at Manali and CBR as perschedule to evaluate employees' exposure to noise heat light and chemical hazards.
Your Company continuously strives to attain all-round improvement in its safetyperformance by adhering to the best safety standards and demonstrating its concern notonly for the safety of its employees but also that of its contractors customers and thecommunity at large.
Significant safety initiatives undertaken during the year include the following:
Replacement of old fire tender with a new one.
Provision of automatic rim-seal fire detection and protection system for allClass-A large-scale floating-roof storage tanks in Manali and CBR Refineries.
Inspection of usage of spark arrestors approved by Petroleum and ExplosivesSafety Organisation (PESO) for all vehicles including bitumen trucks contractors'vehicles and transport cabs entering the refinery.
Speed checkof vehicles inside the refinery using radar speed-gun' tomonitor and maintain speed limits.
Safety Audits: Third-party occupational health & safety audit carried out byM/s. Bureau Veritas Certification India Private Ltd. Chennai; pre-commissioning safetyaudits by OISD teams for the revamped OHCU plant and DCU-Resid Project; firstcomprehensive safety audit by PESO.
Onsite emergency mock-drills were conducted at Manali Refinery in September 2016 andFebruary 2017. Monthly mock-drills conducted with creation of different scenarios.
Environment protection and ecological balance continues to remain one of the avowedobjectives of your Company. Significant environmental initiatives undertaken during theyear include the following:
Proposal for online connectivity of the balance stacks and effluent analysers toTNPCB & CPCB initiated.
Emergency Response and Disaster Management Planning (ERDMP) re-certificationaudit carried out by Disaster Management Institute Bhopal in line with the guidelines ofMoP&NG.
Leak Detection and Repair (LDAR) programme carried out on a regular basis as perthe environment rules.
* Online stack monitoring station ambient air quality monitoring system and online ETPmonitoring system are in operation at Cauvery Basin Refinery. Online data connectivity toState Pollution Control Board / Central Pollution Control Board from continuous ambientair quality monitoring Stations is being complied with.
* Secondary seals have been provided in Class-A petroleum storage tanks in CauveryBasin Refinery to reduce fugitive emissions.
In recognition of its efforts in environment preservation CBR was bestowed withGreen Award' for industries from TNPCB for the year 2014 in June 2016 for thesecond consecutive year.
Your Company accords utmost priority to various energy conservation measures besidesmonitoring and analysing fuel consumption and optimising plant operations on a regularbasis.
Major energy conservation measures implemented by your Company during the year resultedin an estimated savings of about 14000 SRFT/annum. The details of energy conservationmeasures are given in Annexure I.
In recognition of its efforts to minimise energy consumption your Company has beenawarded the OGCF-2016 Award for Furnace/Boiler Efficiency by the Centre for HighTechnology.
RELIABILITY IMPROVEMENT INITIATIVES
Major initiatives were undertaken at Manali Refinery during the year to ensurereliability of equipment processes and product quality chief among them being:
Successful implementation of the recommendations of "Special Task ForceReliability Committee" which improved the operating factor of N2/02 plant resultingin savings in liquid Nitrogen procurement.
* Successful execution of Logics modification in DCS software for the PSA systemresulting in safeguarding the Hydrogen Reformer from possible tripping during changeoverfrom 12-bed operation to 10-bed operation.
Execution of major overhaul of all three Make-up Gas Compressors at OHCUincluding replacement of third- stage cylinder resulting in improvement in availabilityand reliability of compressors.
Successful re-routing of 30-inch crude oil receipt line from Chennai port toManali Refinery for a length of about 1.2 kms for accommodating fourth railway line nearTiruvottiyur without affecting crude oil receipt and additional demurrage.
* Upgradation of fire-water piping for a length of 4 km completed reducing fire-waterleaks and improving the reliability of FW network.
Intelligent pigging of 20-inch crude oil receipt line from CPCL oil jetty to CBRcarried out for the first time ever. HUMAN RESOURCES
The CPCL family has a firm foundation of discipline and productive work culture withhighly motivated employees which has enabled your Company to turnaround and scale newpeaks of performance during the year.
The total manpower of your Company as on 31st March 2017 was 1645 comprising 805supervisors and 840 non-supervisors (1637 as on 31 st March 2016 comprising of 804supervisors and 833 non-supervisors).
During the year three Communication Meetings were conducted with collectives byFunctional Directors and Managing Directortofacilitate information-sharing.
Your Company continuously undertakes training and development initiatives to enable itsemployees realise their full potential and give their best. During the year 2016-17 theCompany achieved an overall performance of 2.1 training man-days by organising technicaltraining soft skills and health improvement programmes for the benefit of the employees.During the year 1946 employees were nominated for 79 internal programmes on OperationsMaintenance Management Development and other topics and 345 employees were nominated forvarious programmes on functional areas conducted by external agencies.
Your Company has been following the Presidential Directives and various instructions ofthe Government relating to the welfare of the SC ST OBC and Persons with Disabilities.Out of the total manpower there were 392 SC employees (previous year: 399) and 38 STemployees (previous year 37) as on 31 st March 2017 constituting 23.83% and 2.31% of thetotal manpower respectively.
The statistics relating to representation of SCs/STs/OBCs in the prescribed proforma ason 1 st Jan. 2017 is given in Annexure-ll.
Your Company is implementing the provisions of the Disabilities Act 1995 by way of 3%reservation for physically challenged and disabled persons. In line with the provisionstwo backlog vacancies were cleared through a special recruitment drive. In additionvarious concessions and relaxations are being extended to physically challenged persons inthe recruitment process in line with Government guidelines.
COMPLIANCE WITH SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION PROHIBITION ANDREDRESSAL)ACT 2013
Your Company gives utmost importance to prevention of sexual harassment of women atworkplace. There is an Internal Complaints Committee to handle sexual harassmentcomplaints and conduct enquiries if any in line with Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013. There were no complaints ofsexual harassment during the year.
Sensitisation programme on the Act was conducted for women employees on 24.08.2016.
Your Company endeavors to provide equal opportunity for women in employment. As on31.03.201786 women employees are on the rolls of the Company of whom 46 are in thesupervisory grade and 40 are in non-supervisory grade constituting 5.71% of the totalsupervisory employees and 4.76% of the total non-supervisory employees.
Recognising the efforts in the area of women empowerment Women In Public Sector(WIPS) a forum under the aegis of the Standing Conference of Public Enterprises (SCOPE)awarded your Company the Best Enterprises Award for theyear 2016 under Mini Ratnacategory.
CORPORATE SOCIAL RESPONSIBILITY (CSR) & SUSTAINABLE DEVELOPMENT (SD)
Your Company firmly believes in the concept of inclusive development and rightly alignsits objectives and business goals by looking beyond financial considerations whiledischarging its social obligations.
The CSR and Sustainable Development activities of your Company focus on educationhealth sanitation and community initiatives. Even though the Company was not mandatorilyrequired to incur any expenditure on CSR during 2016-17 in view of losses suffered in thepast a sum of Rs.l 87.51 lakh was spent during the year 2016-17 on various CSR & SDprojects and initiatives under broad categories like health education skill developmentetc.
Your Company has been in the forefront in playing the role of a responsible corporatecitizen. In December 2016 when Chennai city was battered by Cyclone Vardah sareessewing machines tri-cycles for the disabled brass iron boxes etc. valuing Rs.3.71 lakhwere distributed among the poor and needy dwelling in the neighbourhood of ManaliRefinery. CBR contributed a sum of Rs.l lakh to the District Collector Nagapattinamtowards purchase of lifebuoys and lifejackets.
The CSR Policy of the Company can be accessed at the website of the Company under thelink http://www.cpcl.co.in/policies .
A detailed report on CSR activities as per the provisions of the Companies Act 2013along with CSR Highlights during theyear are attached at Annexure-lll to the report.
The company also published a report on Corporate Sustainability for the year 2015-16and the same is available in the link
Significant measures undertaken in the areas of sustainable development include thefollowing:
Installation of a 20-KW solar power plant on the roof-top of the CorporateOffice building in Teynampet Chennai.
Installation of a 150-KW grid-connected roof-top solar power plant at CBRControl Room and Substation-1.
The Vigilance Department of your Company is headed by the Chief Vigilance Officer whohas been appointed on deputation by the Central Vigilance Commission. Your Companycontinues to vigorously pursue and lay greater emphasis on preventive vigilance measures.Vigilance Department assists the management in promoting transparency accountabilityintegrity and honesty amongst employees.
Integrity Pact has been implemented as per the guidelines of the Government. Thethreshold limit was reduced to Rs.l crore so as to enhance coverage of contracts underIntegrity Pact.
Your Company gives importance to timely redressal of public grievances. Contact detailsof Public Grievance Officer are displayed on the website of the Company under the link
In line with the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 and DPE Guidelines on Corporate Governance a separate section on CorporateGovernance forms part of this Annual Report.
The Certificate received from the Auditors of the Company regarding compliance ofconditions of corporate governance as required under SEBI (LODR) Regulations 2015 as wellas compliance with the guidelines on corporate governance issued by the Department ofPublic Enterprises Government of India is annexed and forms part of this Report(Annexure-IV)-
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report as required under SEBI (LODR) Regulations2015 is annexed and forms part of the Annual Report (Annexure-V).
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report covering initiatives taken with regard toEnvironment Social and Governance perspective prepared in accordance with SEBI (LODR)Regulations 2015 forms part of the Annual Report- Annexure-VI.
The composition of the Committee as on 31.3.2017 is as under:
Mr. Mrutunjay Sahoo Independent Director - Chairman.
Dr. P.B. Lohiya Independent Director Member
Mr. K.M. Mahesh Government Director Member Director (Finance) is a permanentinvitee.
The recommendations of the Audit Committee during the year were accepted by the Board.
The Board of Directors of your Company has formulated a code of conduct for theDirectors and Senior Management Personnel which was circulated to all concerned andhosted on the company's website. The code can be accessed at
Your Company has a documented Risk Assessment and Management Policy. The Committeeconstituted for this purpose identified the risks applicable to the Company both internaland external suggested risk minimisation measures and formulated the Risk ManagementPolicy.
The Action Taken Report on the Risk Management Policy for the year 2016-17 was reviewedby the Audit Committee and the Board at the Meeting held on 15th May 2017.
INTERNAL FINANCIAL CONTROLS
Your Company has adequate Internal Financial Controls for ensuring the orderly andefficient conduct of its business including adherence to the Company's policiessafeguarding of its assets prevention and detection of frauds and errors accuracy andcompleteness of the accounting records and timely preparation of reliable financialinformation which is commensurate with the size of the Company and the nature of itsbusiness to protect the interests of the Company.
Your Company has an Internal Audit Department with qualified professionals to carry outaudits covering various areas of operations. Internal audit plans are reviewed by theAudit Committee. The Statutory Auditors in their report dated 15th May 2017 have opinedthat the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31 st March 2017 based on internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Internal Financial ControlsOver Financial Reporting issued by the Institute of Chartered Accountants of India.
REMUNERATION TO AUDITORS
M/s. R Subramanian & Company LLP Chennai and M/s. S Viswanathan LLP Chennai wereappointed as Joint Statutory Auditors of the Company for the financial year 2016-17 by theComptroller and Auditor General of India. The Board of Directors of the Company fixed aremuneration of Rs.l 6 Lakhs p.a. (Rs. 8.00 Lakhs to each of the Joint Statutory Auditors)in addition to out-of-pocket expenses if any and applicable service tax.
There are no qualifications in the Statutory Auditors report dated 15.05.2017 on theannual accounts for the financial year 2016-17.
M/s. M Krishnaswamy & Associates Cost Accountants Chennai was appointed as theCost Auditor of Manali Refinery and Cauvery Basin Refinery of the Company for thefinancial year 2016-17 at a total remuneration of Rs. 200000/- p.a. plus applicabletaxes and out-of-pocket expenses if any to conduct the audit of Cost Accounts maintainedby the Company subject to ratification by the shareholders in the Annual General Meeting.
The cost audit for the year 2015-16 was carried out and the cost audit report was filedwith the Ministry of Corporate Affairs in the prescribed form within the stipulated timeperiod. The cost audit report for the year 2016-17 would also be filed within thestipulated time.
The Secretarial Audit Report for the year 2016-17 confirms that the Company hascomplied with all the applicable provisions of the Companies Act 2013 and the rules madethereunder and other applicable acts rules guidelines standards etc. except theclause relating to appointment of Independent Directors including one woman Directorseparate meeting of independent directors and composition of Nomination and RemunerationCommittee.
Two Independent Directors were appointed on 23rd February 2017 based on thecommunication from the Government of India.
The Nomination and Remuneration Committee has been reconstituted with the induction oftwo Independent Directors on 10th April 2017. Effective that date the Company iscomplying with this requirement.
The appointment of additional Independent Directors including one woman Director isunder the consideration of the Government of India. The requirement relating to a separatemeeting of Independent Directors will be complied with from the financial year 2017-18.
The report duly certified by a Practicing Company Secretary is attached as Annexure-VII to this Report.
Your Company being a Government Company the selection and appointment of Directorstheir terms of appointment and the remuneration payable to them are decided by theGovernment of India as per applicable guidelines and not by the Board of Directors. Inview thereof the terms of reference of Nomination & Remuneration Committee do notinclude the terms provided under the Companies Act 2013. The performance evaluation ofall directors excluding directors representing Naftiran Intertrade Company one of thepromoters of the company is
carried out by the Administrative Ministry (MoP&NG) Government of India as perapplicable guidelines. The above is in line with the exemption provided to GovernmentCompanies by the Ministry of Corporate Affairs.
PUBLIC PROCUREMENT POLICY FOR MSMEs
Your Company complied with the Public Procurement Policy for MSMEs as per thedirectives of the Government of India by achieving a target of 34% which is higher thanthe 20% target set for annual procurement from MSEs. The sub-target of 4% for procurementearmarked for enterprises owned by SC/ST entrepreneurs was met by way of procurement fromother micro and small enterprises in line with the policy.
Your Company has also undertaken various initiatives to identify the entrepreneurs forprocurement of goods and services from MSEs owned by SC/ST enterprises byway of conductingvendor development programmes seeking list of SC/ST entrepreneurs from State Governmentetc.
Indian Additives Limited (IAL):
Your Company entered into a joint venture with Chevron Chemicals Company (now ChevronOronite Company) in the year 1989 for manufacture of lube additives components andpackages. The share capital of IAL is Rs.23.66 crore. CPCL and Chevron hold 50% each inthe share capital of IAL.
IAL achieved a turnover of Rs.642.41 crore during the year 2016-17 as against Rs.650.28 Crore in the previous year. The Total Comprehensive Income for 2016-17 was Rs.55.27 Crore as against Rs.51.10 Crore in the previous year. The Board of IAL hasrecommended a dividend of 50% for the financial year 2016-17.
National Aromatics and Petrochemicals Corporation Limited (AROCHEM):
Your Company entered into a Joint Venture with M/s. Southern Petrochemicals IndustriesCorporation Ltd. (SPIC) in the year 1989 for manufacture of PTA Paraxylene Orthoxyleneand Benzene. The share capital of AROCHEM is Rs. 5 lakh. CPCL and SPIC hold 50% each inthe share capital of AROCHEM. Consolidation in respect of financials of this JV Companyhas not been incorporated in the preparation of Consolidated Financial Statements sincethis JV is not operational. The investments have been fully provided for diminution invalue.
RELATED PARTY TRANSACTIONS (RPTs)
In line with the provisions of the Companies Act 2013 and SEBI Listing Regulations2015 a policy on material RPTs was framed which can be accessed on the website of thecompany at link https://www.cpcl.co.in/policies. Your Company has undertaken transactions with related parties during the year. Thesetransactions are in the ordinary course of business and on arms length basis. As per theRPT Policy approval of Audit Committee has been obtained for all RPTs. During the yearthere was no material RPTs. The disclosures related to Related Party Transactions inaccordance with applicable accounting standards are provided at Notes to the AnnualAccounts.
REPORTON ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
Statutory details of Energy Conservation and Technology Absorption R&D activitiesand Foreign Exchange Earnings and Outgo as required under the Companies Act 2013 and theRules prescribed thereunder are given in the Annexure-I and form part of this Report.
PARTICULARS OF EMPLOYEES
As per the provisions of Section 197 of the Companies Act 2013 and the Rules madethereunder Government Companies are exempted from inclusion in the Directors' Report thestatement of particulars of employees drawing remuneration in excess of the limitsspecified under the Act and Rules notified thereunder.
BOARD OF DIRECTORS
The following changes have occurred in the Board of the Company
1. The tenure of Mr. G. Ramaswamy Independent Director was completed on 08.10.2016.
2. Mr. Mrutunjay Sahoo IAS and Dr. P.B. Lohiya have been appointed as Non-OfficialIndependent Directors on 23.02.2017 based on the communication from Government of IndiaMinistry of Petroleum and Natural Gas.
3. Mr. Mohammed Bagher Dakhili has been appointed as Director on 23.01.2017 in place ofMr. Yasin Rezazadeh based on the communication from Naftiran Intertrade Company Ltd.Tehran Iran.
4. Mr. Farzad Bahrami has been appointed as a Director on 23.02.2017 in place of Mr.Alireza Zamani based on the communication from Naftiran Intertrade Company Ltd.TehranIran.
5. The tenure of Mr. B Ashok Chairman was completed on 31.05.2017.
Your Directors take this opportunity to place on record the excellent services andguidance rendered by him during his tenure as Chairman. Your Directors take pride instating that his guidance and contribution on various aspects steered CPCL to showresounding physical and financial performance during the year and also to come out of BIFRreporting.
6. Mr. S.M. Vaidya ED (Operations) IOCL has been appointed as a Director at the BoardMeeting held on 23rd June 2017.
7. Mr. Sanjiv Singh has been appointed as the Non-Executive Chairman by the Ministry ofPetroleum and Natural Gas effective 16.06.2017.
8. Mr. S. Venkataramana Director (Operations) ceased to be a director on attaining theage of super-annuation on 30.06.2017. Mr. Gautam Roy Managing Director is holding theadditional charge of the post of Director (Operations) effective 01.07.2017 in terms ofthe letter dated 30.06.2017 from Ministry of Petroleum and Natural Gas Government ofIndia.
The Company received Certificates of Independence from Mr. Mrutunjay Sahoo IAS andDr. P.B.Lohiya Independent Directors confirming that they meet the criteria prescribedfor Independent Directors under the provisions of the Companies Act 2013 and SEBI (LODR)2015. Two Independent Directors have been appointed on 23.02.2017 and the requirementrelating to a separate meeting of Independent Directors will be complied with from thefinancial year 2017-18.
During the year five meetings of the Board of Directors were held. The details of themeetings attended by each Director are provided in the Corporate Governance Report.
No significant or material orders were passed by the Regulators or Courts or tribunalsthat impact the going concern status and company's operation in future.
VIGIL MECHANISM / WHISTLE-BLOWER POLICY
The Company framed a whistle-blower policy wherein the employees are free to report anyimproper activity resulting in violation of laws rules regulations or code of conduct byany of the employees to the Competent Authority or Chairman of the Audit Committee asthe case may be. Any such complaint is reviewed by the Competent Authority or Chairman ofthe Audit Committee. The confidentiality of those reporting violations is maintained andthey are not subjected to any discriminatory practice. No employee has been denied accessto the Audit Committee. The policy on Vigil Mechanism / Whistle-Blower can be accessed onthe Company's website at the link https://www.cpcl.co.in/policies .
During the year no complaint has been received under the Whistle-Blower Policy.
DETAILS OF LOANS / INVESTMENTS/GUARANTEES
Your Company has not provided Loans / Guarantees / Security to any person bodycorporate or joint venture during the year.
EXTRACT OF ANNUAL RETURN
As required under the provisions of the Companies Act 2013 the extract of AnnualReturn for the financial year ended 31 st March 2017 in the prescribed form MGT-9 isattached at Annexure-VIII to this report.
Pursuant to the requirements under Section 134(5) the Companies Act 2013 with respectto Directors' Responsibility Statement it is hereby confirmed that:
i) in the preparation of the annual accounts for the financial year ended March 312017 the applicable accounting standards have been followed and that there are nomaterial departures from the same;
ii) the Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that were reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company at the end of the financial year andof the profit or loss of the Company for the year under review;
iii) the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
iv) the Directors have prepared the annual accounts for the financial year ended 31stMarch 2017 on a going concern basis;
v) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and operating effectively.
vi) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and such systems are adequate and operating effectively.
RIGHT TO INFORMATION
Your Company complies with The Right to Information Act 2005. In accordance with theprovisions of the RTI Act necessary disclosures have been made on the website of thecompany.
During the year 48 applications under the RTI Act were received and responded in time.
OFFICIAL LANGUAGE POLICY
Concomitant with the policy of the Government of India for Official LanguageImplementation your Company endeavors to promote the progressive use of Hindi in officialwork. The Official Language Implementation Committee meets every quarter to reviewdiscuss and provide guidance for effective implementation of the Official Language Policyin the Company.
STATUS OF BIFR REPORTING
With the increase in net worth to Rs. 3361 crore as on 31 st March 2016 your Companyis out of reporting requirement to BIFR from 1 st April 2016. Formal communication wassent to BIFR in October 2016 in this regard. The net worth as on 31 st March 2017 was Rs.4314 crore including preference share capital.
Your Board of Directors acknowledge with sincere appreciation the unstinted supportcooperation and sincere efforts of all the employees who have contributed to the excellentperformance of the company.
Your Board of Directors also extend their profound thanks to the Government of Indiaparticularly the Ministry of Petroleum & Natural Gas other ministries the Governmentof Tamil Nadu Indian Oil Corporation Ltd Naftiran Intertrade Company Ltd. PetroleumPlanning and Analysis Cell Oil Industry Development Board Oil Industry SafetyDirectorate Centre for High Technology as well as regulatory and statutory authoritiesfor their continued cooperation guidance and support.
The Board would like to express its gratitude to all its stakeholders includingbankers customers contractors vendors etc. for their continued support and confidencereposed in the Company.
Your Directors also place on record their appreciation of the services rendered byother directors viz. Mr. G Ramaswamy Mr. Yasin Rezazadeh Mr. Alireza Zamani and Mr. S.Venkataramana during theirtenure.