Directors' Report 2015-2016
To the Shareholders of Chennai Petroleum
On behalf of the Board of Directors of your Company it is my great pleasure to presentthe 50th Annual Report on the working of your Company together with theAudited Statement of Accounts Auditors' Report and the Report of the Comptroller &Auditor General of India on the Accounts for the year ended March 31 2016.
|CRUDE THRUPUT (in TMT) ||2015 - 16 ||2014 - 15 |
|Imported ||7243 ||8451 |
|Indigenous ||2401 ||2331 |
|Total ||9644 ||10782 |
|PRODUCTION (in TMT) ||2015 - 16 ||2014 - 15 |
|Light Ends ||2093 ||2153 |
|Middle Distillates ||4914 ||5636 |
|Lube Base Stocks ||188 ||201 |
|Wax ||21 ||25 |
|Heavy Ends ||1561 ||1840 |
|Intermediates ||(13) ||12 |
|Others ||(22) ||(20) |
|Fuel & Loss ||902 ||935 |
|Total ||9644 ||10782 |
|Financial || ||( Rs. in Crore) |
| ||2015 - 16 ||2014 - 15 |
|Gross Turnover ||34953 ||47878 |
|Profit before Interest || || |
|Depreciation and Tax ||1362 ||(112) |
|Interest ||309 ||404 |
|Depreciation and Amortization ||266 ||226 |
|Profit / (Loss) before Tax ||787 ||(742) |
|Provision for Taxation ||16 || |
|- Income Tax (Net) || ||- |
|[Pertaining to earlier years] || || |
|- Deferred Tax ||- || |
|- Deferred Tax [Prior period item] ||- ||(703) |
|Profit / (Loss) after Tax ||771 ||(39) |
|Value Added ||2078 ||466 |
Highlights of Financial Performance during the year 2015-16 :
Your Company after incurring losses for the last three financial years has turnaroundin 2015-16 by posting a Profit Before Tax of Rs. 787 crore and Profit After Tax of Rs. 771crore. This was mainly due to improvement in operating areas support from Holding CompanyIndianOil and softening of prices in international market and better Working Capital /Borrowings Management.
However there has been a decline in turnover due to steep fall in crude and productprices and reduction in thruput.
We are pleased to inform that your company has received "Nil" comments fromthe Comptroller and Auditor General of India vide letter dated 04.07.2016 on the accounts(both stand alone and consolidated) for the Financial Year 2015-16.
Your Company has increased its Authorized Share Capital from Rs. 400 Crore comprisingof 400000000 (Forty crore) equity shares of Rs. 10/- each to Rs. 1400 Crore (Rupeesone thousand four hundred crore) comprising of 400000000 (Forty crore) equity shares ofRs. 10/- each and 1000000000 (one hundred crore) preference shares of Rs. 10/- each bycreation of 1000000000 (one hundred crore) preference Shares of Rs. 10/- each videspecial resolution passed by the shareholders through postal ballot on 16.07.2015.
Capital Infusion by IOCL
Your Company has allotted 1000000000 (one hundred crore) Non-Convertible CumulativeRedeemable Preference Shares (NCCRP Share) of Rs. 10/- each amounting to Rs.10000000000 (Rupees one thousand crore) to Indian Oil Corporation Limited the holdingCompany on private placement preferential allotment basis on 24.09.2015. The NCCRP Sharesis not listed in any Stock Exchange.
The Preference shares are entitled to a dividend rate equivalent to the Post tax yieldof AAA rated corporate bond i.e. prevailing 10 year G-Sec yield plus spread on AAA ratedcorporate bond i.e. 6.65% p.a. The coupon rate on preference shares would be adjusted toreflect the subsequent changes in tax laws with the consent and approval of preferenceshare holders by way of special resolution.
The Board recommended a Preference dividend of 6.65% as per the terms and conditions ofthe Offer document on the paid up Preference Share Capital of the Company on pro-ratabasis from the date of allotment i.e. 24.09.2015 for the financial year 2015-16 whichcomes to Rs. 0.345 per preference share.
Considering the available surplus for distribution of dividend to equity shareholdersafter statutory appropriations the Board recommended an Equity dividend of 40% on paid-upEquity Share Capital of the Company as on 31.03.2016 amounting to Rs. 4/- per equityshare.
The book value per share of your Company improved from Rs. 111.15 as on 31.03.2015 toRs. 154.23 as on 31.03.2016
Reserves and Surplus
The Reserves and Surplus as on March 31 2016 was higher at Rs. 2147.67 crore ascompared to Rs. 1506.08 crore as on March 31 2015.
The value addition during the year improved significantly to Rs. 2078.37 crore ascompared to Rs. 466.40 crore in the previous year.
|Contribution to Exchequer || || |
|The details are as under: || || |
| || ||( Rs. in Crore) |
|Particulars ||2015 - 16 ||2014 - 15 |
|Central Exchequer ||8882.06 ||5984.52 |
|State Exchequer ||444.12 ||738.22 |
|Total ||9326.18 ||6722.85 |
Public Deposit Scheme
Your Company has not accepted any public deposits during the year 2015-16 and no publicdeposit was outstanding as on 31.03.2016.
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.
As you are aware the State of Tamil Nadu especially Chennai City had experiencedunprecedented rains and consequent floods in Dec 2015. Your Company through itsdedicated employees ensured operations of critical plants and utilities in theseextremely difficult and challenging conditions. The product pipelines were operatedcontinuously to enable petroleum products availability during the heavy rains and floodsensuring that there was no shortage of products in the market. Your Company also ensuredthat no significant damage to plants and equipments were caused during the period. Theunits were restarted in the shortest possible time immediately after the improvement inthe conditions. The total thruput of the company during the year was 9644 TMT as comparedto 10782 TMT in the previous year. The distillates yield was the highest at 72.5% asagainst the previous best of 72.1% in 2014-15. The Fuel and Loss for the year was higherat 9.32% as compared to 8.65% in the last year due to refinery shut down and start upactivities due to floods and partly due to low crude processing in Manali Refinery.
Manali Refinery processed two new crudes viz. Al Shaheen Qatar condensate crude fromQatar and Akpo crude from Nigeria. By processing these new crudes the Company realizesthe benefit of adding new crudes to the basket.
During the year Cauvery Basin Refinery achieved a crude thruput of 543.56 TMT in2015-16 as compared to the previous years 531.26 TMT. Natural gas processed in2015-16 was 79.213 TMT as compared to previous years 67.078 TMT. The Fuel &Loss was 4.37 wt% as compared to 4.08 wt % in the previous year. Coastal movement of HighFlash HSD started for the first time in October 2015.
Consolidated Financial Statements
In line with the provisions of the Companies Act 2013 and the Accounting Standardsissued by the Institute of Chartered Accountants of India your Company has prepared theConsolidated Financial Statements for the first time including Indian Additives Limitedone of the joint ventures on proportionate consolidation basis. The highlights of theConsolidated Financial Results are as follows:
| || ||( Rs. in Crore) |
|Particulars ||2015 - 16 ||2014 - 15 |
|Turnover ||35277.40 ||48170.15 |
|Profit Before Tax ||824.92 ||(727.46) |
|Profit After Tax ||790.30 ||(33.25) |
Consolidation in respect of financials of Joint Venture viz. M/s. National Aromaticsand Petrochemicals Corporation Limited has not been incorporated in the preparation ofconsolidated financial statements of your company in view of the following reasons:
The investments have been fully provided for diminution in value.
The said Joint Venture is not operational.
CPCL decided to exit from the Joint Venture and the process in this regard isalready initiated.
Your Company signed a MoU incorporating performance parameters with Indian OilCorporation Limited the holding Company for the year 2015-16 as per the guidelinesissued by the Department of Public Enterprises (DPE). Your company has been ratedExcellent rank by DPE in respect of MOU for the year 2014-15.
Majority of the fuel products produced by CPCL are being marketed by M/s.Indian OilCorporation Limited.
The details of sales achieved by direct marketing during 2015-16 over previous year aretabled below:
| || ||(Figures. in TMT) |
|S. No. ||Product ||2015-16 ||2014-15 |
|1 ||LABFS ||54.05 ||45.74 |
|2 ||Naphtha ||180.31 ||156.51 |
During the year your company produced two new products which received good responsefrom the market:
VG-40 grade Bitumen making the total number of Bitumen grades in CPCL to 3numbers.
380 CST Bunker Fuel for Chennai Port.
During the year supply of MEK feedstock to CETEX commenced and augmented. Eighteen newcustomers have been added during the year for supply of Food Grade Hexane PropyleneSulphur and Paraffin Wax.
Your Company has achieved the highest plan expenditure of Rs. 1272 crore for planprojects during the year.
In order to provide intrinsically safe storage in line with the recommendations of theExternal Safety Audit construction of Mounded Bullet storage facilities for LPG Propaneand Petrochemical Feedstocks (Propylene & Butylene) (Total 12 Mounded bullets.) wastaken up for implementation at an estimated cost of Rs. 279 crore. These Mounded Bulletshave been commissioned in a phased manner by March 2016.
Cauvery Basin Refinery
New crude oil storage tanks - Tank G was commissioned in December 2015 and Tank H wascommissioned in August 2015 which enabled to maximize crude parcel sizes thereby reducingcrude oil transportation costs.
As a part of growth strategy the Company has undertaken following projects aimed atcapacity expansion value addition and quality Upgradation.
Resid Upgradation Project
In order to increase the distillate yield and maximize the processing of high sulphurheavy crudes the company is implementing the Resid Upgradation Project at an estimatedcost of Rs. 3110 Crore. The project consists of new secondary processing units likeDelayed Coker Unit Sulphur Recovery Unit Revamp of Once through Hydrocracker Unit andaddition of associated utilities and offsite facilities. The project is expected to bemechanically completed during 2016-17.
New Crude Oil Pipeline
A new crude oil pipeline with enhanced safety features is under implementation fromChennai Port to Manali Refinery at an estimated cost of Rs. 258 Crores as a replacementfor the existing 30" pipeline. All statutory clearances have been obtained and ordershave been placed for supply of materials. The project is expected to be mechanicallycompleted during 2016-17.
BS-IV Diesel Project:
Your Company is Revamping the existing DHDS unit from 1.80 MMTPA to 2.34 MMTPA at anestimated cost of Rs. 367 Crores in order to meet BS-IV Diesel quality norms with effectfrom 1st April 2017. The project is scheduled to be mechanically completedduring 2016-17.
Cauvery Basin Refinery
Installation of 2 x 10 TKL new Diesel storage tanks alongwith coastal loading pumps& associated pipelines is in progress which will enable direct coastal loading ofDiesel from CBR post April 2017. This project is expected to be commissioned by March2017.
As per the directive of the Government of India the entire production of Diesel fromCPCL along with rest of the country has to meet BS-VI quality norms with effect from 1stApril 2020.
BS-VI Diesel Project:
In order to comply with the requirement of BS-VI Diesel norms the existing DHDT unitwill be revamped to increase the capacity from 1.8 to 2.4 MMTPA along with a new SulphurRecovery Unit and other associated facilities.
BS-VI MS Project:
To meet the requirement of BS-VI MS norms installation of a new FCC GasolineDesulphurization unit with a capacity of 0.6 MMTPA along with other associated facilitiesis under consideration.
INDIAN ADDITIVES LIMITED
Your Company has only one operational Joint Venture viz. Indian Additives Limited(IAL) with Chevron Chemical Company (now Chevron Oronite Company) which was formed inthe year 1989 for the manufacturing of Lube Additives. IAL achieved a turnover of Rs.651.45 crore during the year 2015-16 as against Rs. 587.62 Crore in the previous year.The Profit after Tax for 2015-16 was Rs. 51.10 Crore as against Rs. 23.52 Crore in theprevious year. The Board of IAL has recommended a dividend of 50% for the financial year2015-16.
Your Company always maintains continuous uptime of SAP operations during the year. Inorder to strengthen the Vendor management a modified system in SAP was introduced duringthe year with more mandatory features. For improvement of the information security a Newfirewall Checkpoint software was installed. In addition online Medical claim system andTravel system were introduced in the ESS Portal for the benefit of the employees.
RESEARCH AND DEVELOPMENT (R&D)
Your company lays focus to fundamental R&D for sustainability of its businessadvanced technical services building capabilities and promote growth to be an efficientuser of technology.
During the year a Report on Technical Feasibility Study of Producing DearomatisedKerosene using Hydrocracker Kerosene was completed.
Two Indian Patents and One International Patent were filed on the following R&Dprocesses: a) Algae to Bio Crude jointly with M/s Aban. b) Low sulfur Fuel oil Jointlywith IIP.
Your Company is committed to conducting business with a strong sense of safety.Detailed instructions and procedures are laid out for carrying out the jobs in therefinery. Your company takes utmost precaution in every activity adopting appropriatestrategy for identifying assessing and controlling accidents. Procedures are developed tominimise risks and improve Emergency response.
During the year as per the OISD norms Rim seal fire detection and protection systemfor large size floating roof tanks is being implemented in a phased manner. Separateradiography work permit was introduced. Radiography awareness program was conducted forthe benefit of employees. To inculcate safety awareness your Company conducted programsfor truck drivers cab drivers at CPCL truck crew and workers at Project sites. Chlorinesafety training was conducted for employees and workers at TTP.
Onsite Emergency Mock Drills were conducted in Manali Refinery in September 2015 andFebruary 2016. In addition monthly mock drills were conducted with different scenarios.
External Safety Audit (ESA) was conducted in Cauvery Basin Refinery by Oil IndustrySafety Directorate (OISD) during March 2016. Oil spill mock drill was conducted inChidambaranar Oil Jetty of CBR during May 2015.
International Ship and Port facility Security (ISPS) code verification audit wasconducted in Chidambaranar Oil Jetty of CBR during July 2015 and Endorsement was done byMercantile Marine Department
In recognition of its commitment to safety Cauvery Basin Refinery of your Company wasbestowed with Best Safety Practices Award in 2015 by Confederation of Indian Industry.
Your Company continues to accord utmost priority in carrying out its operations with astrong environment conscience by effectively complying with the Environmental Laws andRegulations.
Significant initiatives taken in the areas of Environment protection and safety includethe following:
Leak Detection and Repair (LDAR) program was carried out as per the Environmentrules on regular basis.
Emergency Response & Disaster Management Planning (ERDMP) re-certificationwas obtained from Disaster Management Institute Bhopal in line with the guidelines ofMoP&NG.
Rain water harvesting facility to replenish ground water has been provided in 10buildings.
In Cauvery Basin Refinery Online ETP analysers in discharge line has beeninstalled and commissioned in line with the requirements of TNPCB/CPCB. CO analyzer inStack was commissioned in Oct 2015 and online data connectivity to TNPCB/CPCB servers hasbeen established.
In Cauvery Basin Refinery the first ever Bioremediation process of crude Tank1B sludge after mechanical treatment was completed in Oct 2015.
In appreciation of its initiatives in the areas of Environmental protection yourCompany was awarded the Governance Now PSU Award for Green Initiatives and "ResearchInnovation" in the Miniratna Category I of CPSEs. The Cauvery Basin Refinery of yourCompany was selected for the "Green Award" for industries from TNPCB for theyear 2014.
Your Company continues its efforts to implement various measures aimed at reducing theenergy consumption and achieving energy conservation which are expected to yield a savingto the extent of 12012 SRFT / annum.
During the year the following Major Energy Conservation measures were taken up:
SRU Incinerator Waste Heat Boiler tubes were replaced and put back in servicewhich resulted in additional steam generation.
Strengthening of Insulation of High heat loss steam / process lines
Improvement of PSA II Hydrogen Recovery by replacing switching valves andadsorbent
Plant-79 ARU hot lean amine routed to DHDT bypassing the cooler
OHCU heavy naphtha directly routed to CCR bypassing NHT reactor system
Replacement of PRDS system with new valves
The details of proposals implemented for energy conservation are given in Annexure 4.
QUALITY MANAGEMENT TPM / ISO
Your Company has taken various steps to encourage all employees to actively participatein the TPM movement and this has resulted in enhancing the volume of the productionemployee morale and job satisfaction. During this year one third of our employees formedsmall groups and carried out 209 improvements in the areas of Safety Energy Equipmentreliability and Quality.
Your Company always supports a participative culture in Management through aconsultative approach with the Collectives and establishing a harmonious relationship forindustrial peace and productivity.
The total manpower of your Company as on 31st March 2016 was 1637comprising of 804 supervisors and 833 non-supervisors (1628 as on 31st March2015 comprising of 744 supervisors and 884 non-supervisors).
During the year to promote employees participation by way of information sharingCommunication meetings by Functional Directors and Managing Director were conducted withEmployees working in nine departments. Towards developing a culture of care and trust twoOpen House meetings with Chairman Managing Director and Directors were conducted.
Your Company continues to lay utmost thrust and emphasis for developing its humanresources by organizing formal training programme aimed at developing the technical andNon-technical skills of the employees. Innovative programs on physical and mental healthof the employees like yoga meditation etc were also conducted. Your Company has achieved112 Man-days against the MOU target of 110 Man-days for "Project ManagementTraining" and 142 Man-days against the MOU target of 120 Man-days for "Trainingon Safety and Environment".
Your Company has been scrupulously following the Presidential Directives and variousinstructions of the Government relating to the welfare of the SC ST OBC and differentlyabled persons. Out of the total manpower there were 399 SC employees (previous year: 396)and 37 ST employees (previous year: 37) as on 31.03.2016 constituting 24.37% and 2.26% ofthe total manpower respectively.
The reports relating to representation of SCs / STs / OBCs in the prescribed proformaas on 01.01.2016 is given in the Annexure 1.
Your Company is implementing the provisions of the Disabilities Act 1995 by way of 3%reservation for differently abled persons. In addition various concessions andrelaxations are being extended to physically challenged persons in the recruitmentprocess.
Your Company gives utmost importance for prevention of sexual harassment of women atworkplace. An Internal Complaints Committee is in place to deal with 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.
WELFARE OF WOMEN
Your Company is committed to diversity and inclusiveness and is keen on achieving Womendevelopment and gender equality. As on 31.03.2016 86 women employees are on the rolls ofthe Company of whom 44 are in the Supervisory Grade and 42 are in Non supervisory Gradeconstituting 5.22% of the total Supervisory employees and 5.04% of the totalNon-supervisory employees respectively. International Women's day was conducted on 7thMarch 2016 on the theme "Step it Up for Gender Equality".
Sensitization programme on Sexual Harassment at Work Place (Prevention Prohibition& Redressal) Act 2013 was conducted for the benefit of women employees.
CORPORATE SOCIAL RESPONSIBILITY & SUSTAINABILITY DEVELOPMENT
Corporate Social Responsibility is the corner stone of success for your company whichactively plays the role of a responsible corporate citizen by looking beyond financialconsiderations while discharging its social obligations.
The CSR and SD activities focuses on health education women empowerment environmentprotection and renewable sources of energy for ensuring sustainable development of thesociety to which it belongs. Even though the company is not required to spend any amounton CSR in view of losses during preceding 3 financial years a sum of Rs. 133.02 lakhs wasspent during the year 2015-16 for various CSR&SD Projects and initiatives.
Your company contributed a sum of Rs. 1.00 crore to the Chief Ministers PublicRelief Fund when Chennai was battered by heavy rains and unprecedented floods during thefirst week of December 2015. Your company also distributed flood relief materials likesarees Umbrellas fish carts fish nets etc. valuing Rs. 19.80 lakhs to the poor and theneedy residing in the neighbourhood of its Manali Refinery. Further the company conductedthree medical camps for the benefit of the flood affected people.
The CSR Policy of the Company can be accessed at the website of the Company under thelink http://www.cpcl.co.in/corporate_information-cor_governance.htm.
A detailed report on CSR activities as per the provisions of the Companies Act 2013along with CSR Highlights during the year are attached at Annexure-2 to the report.
The company has also published a report on Corporate Sustainability for the year2014-15 and the same is available in the linkhttps://www.cpcl.co.in/corporate_information-cor_governance.htm
Initiatives taken by the company in the areas of sustainable development include thefollowing:
CPCL is the pioneer in renewable energy in oil sector. CPCL commissioned 22 windmills with an installed capacity of 17.6MW at Pushpathur TamilNadu. The power generatedfrom the Windmill is being used to meet the energy requirement of CPCLs Desalinationplant through wheeling arrangement with TNEB.
Solar Photo Voltaic System was installed at CPCL Polytechnic totaling 25KW. Itis planned to install 20kW Solar PV Panel at Corporate Office during the year 2016-17
Greening of CPCL and its environs is another facet of environmental protectionwith planting and maintaining of trees and shrubs.
OCCUPATIONAL HEALTH SERVICES (OHS) CENTRE
Your Companys Occupational Health Service is constantly endeavoring to promotethe health of its workers including contract workers and also prevention of illness byensuring a safe work environment by a well established schedule of work environmentmonitoring of the various hazards in the refinery.
Persistent efforts were undertaken for promoting the awareness amongst the employees onvarious health care issues by conducting several health awareness programs. As part ofHealth surveillance 87% of the employees underwent comprehensive medical examination. Inaddition the health of the Contract workers doing critical jobs security personnel andcanteen workers were examined as per the statutory requirements.
Regular training programs were conducted for improving the awareness of employees onthe hazards in their work place and first aid care. OHS medical laboratory continued itsfocus on sustaining the high quality standards by participating in the internationalrecognized EQAS conducted by Biorad.
Your Company aims to provide timely response to public grievances and a GrievanceRedressal System is in place. Details and contact number of Public Grievance Officer aredisplayed in the website of the Company under the linkhttps://www.cpcl.co.in/grievances.htm. As on 31.03.2016 there were no complaints pending.
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.
Madras Stock Exchange (MSE) vide letter dated May 26 2014 made a request to SEBI forits exit as stock exchange and intimated that the majority of the shareholders in itsExtra-Ordinary General Meeting of the Shareholders on May 26 2014 passed the specialresolution for voluntary exit of the stock exchange. SEBI has given an exit order datedMay 24 2015 allowing the exit of Madras Stock Exchange Limited as a stock exchange.Presently the shares of the company are listed in BSE Limited and NSE.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report covering initiatives taken with regard toEnvironment Social and Governance perspective has been prepared in accordance with SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 and forms part of theAnnual Report - Annexure-7.
The Composition of the Committee as on 31.3.2016 is as under:
Mr. G.Ramaswamy Independent Director Chairman.
Mr. S.Krishna Prasad Director(Finance) Member
Mr. K.M.Mahesh Government Director- Member
Mr. Yasin Rezazadeh Director -NICO Member
The recommendations of the Audit Committee during the year were accepted by the Board.
Being a Government Company the company has requested Ministry of Petroleum and NaturalGas Government of India to consider appointment of minimum one additional independentdirector immediately to comply with the quorum requirement of minimum two independentdirectors.
The Secretarial Audit Report for the year 2015-16 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 the clauserelating to appointment of Independent Directors including one Woman Director andcomposition of Audit Committee/Nomination and Remuneration Committee.
The appointment of additional independent directors including one Woman Director isunder the consideration of Government of India. The company has written to Government ofIndia to appoint one independent director immediately to ensure compliance with thecomposition of Audit Committee / Nomination and Remuneration Committee.
The report duly certified by a Practicing Company Secretary is attached as Annexure-3 to the Report.
Your Company being a Government Company the selection and appointment of Directorsterms of appointment and the remuneration payable to Directors is decided by theGovernment of India as per the Government 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 Inter trade Company one of thepromoters of the company is carried out by the Administrative Ministry (MoP&NG)Government of India as per applicable Government guidelines. The above is in line with theexemption provided to Government Companies by the Ministry of Corporate Affairs.
CODE OF CONDUCT
The Board of Directors of your Company has enunciated a code of conduct for theDirectors and Senior Management Personnel which has been circulated to all concerned andhas also been hosted on the companys website. The code can be accessed athttp://www.cpcl.co.in/code_conduct.htm. The Directors and Senior Management Personnel haveaffirmed compliance with the code of conduct.
RISK MANAGEMENT POLICY
To ensure alignment of Risk Management system with the corporate and operationalobjective and to improve upon the existing procedure the Executive Committee of thecompany constituted a Committee comprising of officials from various functional areas toidentify the risks in the present context prioritize them and formulate proper actionplan for implementation. The Committee has formulated the Risk Management Policy.
The Action Taken Report on the Risk Management Policy for the year 2015-16 was reviewedby the Audit Committee and Board at the Meeting held on 22.05.2016 and 23.05.2016respectively.
INTERNAL FINANCIAL CONTROLS
Your Company has adequate Internal Financial Controls for ensuring the adherence tocompanys policies safeguarding of its assets ensuring the accuracy andcompleteness of the accounting records and timely preparation of reliable financialinformation.
Further the Statutory Auditors in their report dated 23.05.2016 have opined thatCompany has in all material respects an adequate internal financial controls system overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as at 31st March 2016 based on the internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
M/s.R.Subramanian & Company Chartered Accountants and M/s.S.Viswanathan LLP.Chartered Accountants were appointed as Joint Statutory Auditors of the Company for thefinancial year 2015-2016 by the Comptroller and Auditor General of India. The Board ofDirectors of the Company fixed a remuneration of Rs. 13 lakh ( Rs. 6.50 lakh to each ofthe Joint Statutory Auditors) in addition to the out-of-pocket expenses if any andapplicable service tax.
There are no qualifications in the Statutory Auditors report dated 23.05.2016 on theannual accounts for the financial year 2015-16.
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 2015-16 at a total remuneration of Rs. 170000/- p.a. plus applicabletaxes and out of pocket expenses if any to conduct the audit of Cost Accounts maintainedby the company subject to the ratification by the shareholders in the Annual Generalmeeting.
The cost audit for the year 2014-15 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 2015-16 would also be filed within thestipulated time.
PUBLIC PROCUREMENT POLICY FOR MSMEs
Your company has complied with the Public Procurement Policy for MSMEs as per thedirectives of the Government of India. Necessary provision has been made in the tendersindicating the eligibility of MSMEs to participate in the tender. The target of 20% forprocurement from MSME's was met in 2015-16.
RELATED PARTY TRANSACTIONS (RPTs)
In line with the provisions of the Companies Act 2013 and SEBI (LODR) Regulations2015 a policy on material RPTs was framed which can be accessed on the website of theCompany at link https://www.cpcl.co.in/InvestorCenter Grievances. Your Company hasundertaken transactions with related parties during the year. These transactions are inthe ordinary course of business and on arms length basis. As per the RPT Policy approvalof Audit Committee has been obtained for all RPTs. During the year there were no materialRPTs. The disclosures related to Related Party Transactions in accordance with applicableaccounting standards are provided at Notes to the Annual Accounts.
RIGHT TO INFORMATION
The Right to Information Act 2005 is applicable to your company. In accordance withthe provisions of the RTI Act necessary disclosures have been made in the website of thecompany.
During the year 69 applications under the RTI Act were received and responded in time.
The vigilance department of your company takes many proactive initiatives in the areasof preventive vigilance and surprise inspections. Several periodical surprise and majorinspections of the commercial activities were conducted during the year and correctiveactions recommended wherever necessary.
Vigilance Awareness Week Program was observed from 25th to 31stOctober 2015 with the theme- "Preventive Vigilance as a tool of GoodGovernance". Various programs including Interaction Meet with Contractors VendorsCustomer Meet Lecture sessions Essay competitions and Slogan competitions were conductedboth in Manali and Cauvery Basin Refinery. Further to create awareness among students andyouth on ethics integrity morals ill effects of corruption etc. several programsincluding debates oratorical and essay competitions were conducted in various collegesand schools.
Periodical Review Meetings were held with Independent External Monitors to monitorimplementation of Integrity Pact in CPCL. An "Interactive Meet" was alsoorganized with Independent External Monitors for major Contractors/Vendors duringVigilance Awareness Week-2015.
In line with CVC's guidelines Notice Inviting Tenders tender documents and details ofPurchase Orders/ Contracts awarded including those on nomination basis were hosted in thewebsite of the company.
OFFICIAL LANGUAGE POLICY
In compliance of Official Language Act 1963 Official Language Rules 1976 and ordersissued by Government of India from time to time constant efforts were made during theyear for increased use of Hindi in Official work.
The Official Language Implementation Committee meets every quarter to review theprogress of implementation of Official Language Policy.
During the year 30 employees passed Hindi Examinations conducted by Hindi TeachingScheme under the Department of Official Language Ministry of Home Affairs during 2015-16.
As part of the Hindi day celebrations many Hindi Competitions were conducted andwinners of the competitions were awarded prizes during the celebration.
Your Company was awarded the Rajbhasha Shield 2014-15 for securing the consolationposition among Public Sector Undertaking (Bigger) category for the best performance in theprogressive use of Official Language during the year 2014-15.
Particulars of employees drawing a remuneration of Rs. 60 lakhs or more perannum if employed throughout the financial year or Rs. 5 lakhs per month if employed forpart of the financial year during 2015-16 as required under Section 197 of the CompaniesAct 2013 and rules made thereunder
As per the provisions of Section 197 of the Companies Act 2013 and rules madethereunder Government companies are exempted from inclusion of the statement ofparticulars of employees drawing remuneration of Rs. 60 lakh or more per annum ifemployed throughout the financial year or Rs. 5 lakh per month if employed for part ofthe financial year. The information has therefore not been included as part of theDirectors' Report.
Statutory details of Energy Conservation and Technology Absorption R&Dactivities and Foreign Exchange Earnings and Outgo as required under the Companies Act2013 and the rules prescribed thereunder are given in the Annexure and form part of thisReport (Annexure-IV).
Certificate received from the Auditors of the Company regarding compliance ofconditions of Corporate Governance as required under SEBI (LODR) Regulations 2015 andalso the compliance with the guidelines on Corporate Governance issued by Department ofPublic Enterprises Government of India is Annexed and forms part of this Report(Annexure-5).
Management Discussion and Analysis Report as required under SEBI LODRRegulations 2015 is annexed and forms part of the Report (Annexure-6).
REPORTING UNDER SECTION 23(1)(B) OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS)ACT 1985
The peak networth of the company during the last 4 years prior to FY 2014-15 was Rs.3793 crore and the networth as on 31.03.2014 was Rs. 1722 crore. In line with theprovisions of Sick Industrial Companies (Special Provisions) Act 1985 CPCL had reportedthe fact of such erosion of more than 50% of peak networth to BIFR in October 2014. Theloss for the financial year ended 31.03.2015 was Rs. 39 crore and consequently thenetworth further reduced to Rs. 1655 crore as on 31.03.2015. This has been reported toBIFR vide letter dated 12.10.2015 based on the approval of shareholders in the AGM heldon 07.09.2015. Due to various measures both short term and long term undertaken by thecompany during the year the Networth (Standalone) as on 31.03.2016 improved to Rs. 3297crore and the company is not required to report to BIFR in this regard.
Mr.K.M.Mahesh Deputy Secretary (LPG) Ministry of Petroleum & Natural GasGovernment of India has been appointed as a Director on the Board of CPCL effective12.01.2016 in place of Ms.Perin Devi.
The Company has received a Certificate of Independence from Mr.G.Ramaswamy IndependentDirector confirming that he meets the criteria prescribed for Independent Directors underthe provisions of the Companies Act 2013 and SEBI (LODR) Regulations 2015. Since thecompany has only one independent director a separate meeting of Independent Directorscould not be held as per provisions of the Companies Act 2013 and SEBI (ListingObligations & Disclosure Requirements) Regulations 2015.
During the year 6 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 and material orders were passed by the Regulators or Courts ortribunals which impact the going concern status and company's operation in future.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has framed a whistle blower policy wherein the employees are free to reportany improper activity resulting in violations of laws rules regulations or code ofconduct by any of the employees to the Competent Authority or Chairman of the AuditCommittee as the case may be. Any such complaint is reviewed by the Competent Authorityor Chairman of the Audit Committee. The confidentiality of those reporting violations ismaintained and they are not subjected to any discriminatory practice. No employee has beendenied access to the Audit Committee. The policy on Vigil Mechanism / Whistle Blower canbe accessed on the Companys website at the link https://www.cpcl.co.in/investorcentre grievances/.
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 and joint ventures 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 31st March 2016 in prescribed form MGT-9is attached at Annexure-VIII to this report.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirements under Section 134(5) of the Companies Act 2013 withrespect to Directors Responsibility Statement it is hereby confirmed that
i) in the preparation of the annual accounts for the financial year ended March 312016 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 judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe 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 March31 2016 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.
Your Board of Directors acknowledge the committed and sincere efforts of all theemployees who have contributed to the performance of the company.
The Board would like to profoundly thank the Government of India particularly theMinistry of Petroleum & Natural Gas Other Ministries Indian Oil Corporation LtdNaftiran Intertrade Company Ltd Petroleum Planning and Analysis Cell Oil IndustryDevelopment Board Oil Industry Safety Directorate Centre for High Technology and thevarious State Governments regulatory and statutory authorities for their continuedcooperation guidance and support.
The Board would like to express its gratitude to all its stakeholders like bankerscustomers contractors vendors etc. for their continued support and confidence reposedin the Company.
Your Directors place on record their appreciation of the valuable contributions made byMrs.Perin Devi Director during her tenure.
| ||For and on behalf of the Board |
|Date : 01.08.2016 ||(B. Ashok) |
|Place : Chennai ||Chairman |