It gives me great pleasure to present to you the 64th Annual Report for the year2015-16.
The year 2015-16 saw HPCL scale new heights and record its best ever performancesignificantly surpassing the highest ever profit and sales recorded during the previousyear. The Profit after tax increased significantly by 41% to reach ' 3863 crore in aturbulent year for the Oil Industry which saw low crude oil prices and consequent stresson the financial health of Oil exporting countries. The average combined Gross RefiningMargin (GRM) from Mumbai and Visakh refineries more than doubled from USD 2.84 per barrelin 2014-15 to USD 6.68 per barrel in 2015-16. The combined Gross Refining Margin (GRM) foryour refineries is the highest among Public Sector Oil companies. The Refining throughputincreased by about 1 million tonne to reach 17.2 million tonnes. Sales including exportsincreased by 2.26 million tonnes to reach 34.21 million tonnes. In Domestic sales we haveincreased our market share by 0.31% among Public Sector Oil companies to reach a marketshare of 21.25% as of 31st March 2016.
The year saw oil prices plunge to decade lows witnessing decrease from US $ 55 perbarrel in March 2015 to below US $ 30 in January 2016. The lower oil prices eased burdenon the country's import bill and has also benefitted the downstream Oil companies. Fallingprices in conjunction with aggressive push for direct benefit transfer of LPG subsidy havereduced the subsidy outgo.
Low prices also tend to push up demand either directly or indirectly via substitution.During 2015-16 the consumption of Petroleum products in India witnessed a double digitgrowth for the first time in last 2 decades and increased by 11% to reach 183 milliontonnes. Today India is the third largest consumer of Oil in the world behind US andChina. The steps by Government of India (GoI) to improve infrastructure impetus tomanufacturing through Make-in-India campaign reforms in mining innovative schemes forincreasing LPG usage and increased public affordability for private car usage and airtravel contributed to the increase in domestic demand. The momentum gained by Indianeconomy which grew at 7.6% during 2015-16 making India one of the fastest growing economyin the world helped in creating a positive economic environment and points to continuedincrease in the domestic consumption.
Consumption of all petroleum products except SKO and Lubes increased in the countryduring 2015-16. Diesel was the main driver of growth accounting for the 40% of incrementaldemand followed by Petrol and LPG. Continuing the growth trend from last year Dieselconsumption recorded a positive growth mainly due to increased usage of public transportand goods carrier vehicles. Petrol consumption increased by an impressive 15% due to swingin the auto industry sales towards petrol engine vehicles and increase in the number ofusers of two-wheeler vehicles. Industrial fuel consumption which had been stagnating alsoincreased. Consumption of Fuel Oil / LSHS which had been dropping for last seven yearswent up by about 12% due to increased usage in Industrial sectors like Power and Steel.Increased pace of highway construction was reflected in Bitumen consumption increase of15%. LPG consumption grew by 9% due to shift in household fuel use away from Kerosene andincreased domestic penetration. ATF consumption grew at 9% due to fall in aviation fuelprices and increased passenger traffic.
To cater to the increased demand both the refineries at Mumbai and Visakh maximisedthroughput and achieved the best ever refining throughput of 17.2 Million tonnes during2015-16 with a capacity utilisation of 116%. Both the Refineries maximised the productionof BS IV fuels and recorded the highest ever production of Petrol Diesel LPG Bitumenand Lube Oil Base Stock (LOBS) during the year. The refinery performance was improved byadoption of technology initiatives on commercial scale like Isotherming technology atMumbai Refinery for revamping the existing Diesel Hydro Desulphurisation (DHDS) unit whichresulted in enhanced capacity improvement in energy efficiency and production of superiorquality of Diesel; and Pressure Swing Adsorption (PSA) facility at Visakh refinery torecover hydrogen from Net gases from the Continuous Catalytic Reformer (CCR) unit. Severalother initiatives were taken at the refineries to improve product quality energyefficiency profitability and reduce carbon footprint.
The Corporate R&D Centre has developed and demonstrated commercially a number ofprocess/product technologies in multifaceted areas including Hydrogen purification fromCCR off Gas Raffinate yield improvement Effluent treatment Descaling of furnace tubesPressure drop reduction in hydroprocessing reactors etc. A state-of-the-art R&D Centreis also being set up at Bengaluru.
Strategic expansion of pipeline network judicious expansion and revamp of primarydistribution network of Terminals & Depots coupled with strategic commissioning of newdealerships / distributorships in previous years helped us to leverage the opportunity ofincreased demand and increase our market sales (including exports) to 34.21 milliontonnes. In Domestic sales your company achieved a growth of 9.3% over previous year andincreased market share by 0.31% amongst public sector oil companies to reach a volume of33.9 million tonnes. The volume increase of 2.9 million tonnes in domestic sales overprevious year is the highest ever volume increase in a year for your company. In RetailMotor fuel sales our growth at 7% was significantly higher than major PSU competitors. Werecorded double digit growth rate of 14% in Petrol sales and a significant growth of 5% inDiesel sales despite the re-entry of private players after deregulation of diesel prices.Your company maintained its No. 2 position in overall LPG Sales with a growth of 8.6% andcontinued the market leadership position in Non-Domestic Bulk LPG segment. In Industrialand Consumer sales your company recorded a remarkable growth of 23% well higher than theIndustry growth of 10% by growing in all major product segments of Industrial fuels viz.39% growth in diesel sales 27% growth in Bitumen sales 30% increase in naphtha sales and18% increase in Fuel oil sales. In Aviation fuel sales we consolidated our position byregistering a growth of about 21% and achieving a market share gain of 1.13%. We continueto be India's largest Lube marketer for the third consecutive year with 20% growth intotal lubricants sales. Your company consolidated the new business line of Natural Gas byrecording a sales volume of 36 TMT during the year by SPOT sourcing from domesticsuppliers.
To increase energy security reduce fossil-fuel carbon emissions and resultantpollution your company has been in the forefront in implementing the Ethanol Blending Planand achieved 3.3% blending which is higher than the Industry average and has startedmarketing Bio-diesel during the year 2015-16.
The Marketing infrastructure was strengthened during the year by commissioning andcommencing operations of the 443 km long Rewari- Kanpur pipeline. A new state-of-the-artterminal was commissioned at Kanpur in Uttar Pradesh and a new Depot at Bokaro inJharkhand. These commissioning's will help in further consolidating our market position innorth central and eastern parts of the country. LPG infrastructure was augmented with thecommissioning of a new 120 TMTPA LPG Plant at Solapur in Maharashtra and an 8.4 TMTPA LPGmounded storage facility at MLIF Mangalore. New Aviation Service Facilities (ASF) werecommissioned at Chandigarh and at Dharamshala in Himachal Pradesh.
Your Company has maintained its leadership in implementation of PAHAL scheme for LPGcustomers with over 4 crore of active HP gas customers joining the initiative as of 31stMarch 2016. To provide the benefits of LPG to less privileged people more than 27 lakhLPG consumers have surrendered subsidy under 'GiveItUp' campaign initiated by Governmentof India which has benefitted over 13 Lakh BPL families as of 31st March 2016. Yourcompany is actively participating in the Pradhan Mantri Ujjwala Yojana (PMUY) to providefree LPG connections to women of BPL households in rural areas thereby providing cleanercooking environment and avoiding health hazard to women. Your company has also been in theforefront of the Swachh Bharat Abhiyan by undertaking a number of initiatives at variouslocations across the country during the year. Under Swachh Vidyalaya program 1245 toiletswere constructed in schools. Your company conducts the business with an objective ofinclusive growth of all stakeholders and an amount of ' 71.76 crore was utilised to touchthe lives of people through various CSR initiatives.
To limit the carbon footprint and increase the share of clean energy in the energy mixyour company achieved 44.7 Million kWh of electricity generation through wind farms inRajasthan and Maharashtra.
Your company secured 'Excellent' rating with a Memorandum of Understanding (MOU) scoreof 1.12 in terms of the MOU signed with the Government of India for the year 2014-15.
All the operating joint ventures and subsidiaries improved their financial performancesduring the year which resulted in your company achieving the highest ever consolidated netprofit of ' 4921 crore during 2015-16. The year saw HPCL-Mittal Energy Ltd (HMEL) achieveits best ever operational and financial performance. HMEL processed 10.71 MMT of crude oilwith capacity utilization of 119% and registered a Profit after Tax of ' 1826 crore.
The all-round excellent performance achieved during the year was on the strength ofemployees of your company who are dedicated competent and committed to deliver cuttingedge performance. We have undertaken a number of human resource management initiativesaimed at developing a vibrant workforce and meet the dynamic needs of customers.
Forecasts for India's GDP growth in 2016-17 predict strengthening of economic activity.A good monsoon is predicted this year which will increase the rural incomes and energyconsumption. Implementation of 7th Pay commission recommendations will provide furthersupport to consumption. Various initiatives undertaken by Government of India and the"Startup India" initiative will lend further support to the investment cycle.The short-term outlook for global oil market is uncertain and the crude oil prices willdepend on demand supply rebalance scenarios and production outages. Concerns over futureeconomic growth related to the United Kingdom's vote to exit the European Union and theeasing of supply disruptions in Canada contributed to further fall in oil prices. Theglobal oil inventory builds coupled with US shale gas production may prevent oil pricesfrom rising too quickly.
As per the projections by IEA demand for Oil in India will rise to about 330 milliontonnes by the year 2030 and 450 million tonnes by 2040 making India the source of highestincrease in global oil demand. This growth follows from the fact that about 260 millionnew passenger vehicles are projected to be added and LPG increasingly will substituteKerosene and fuelwood as the cooking fuel in households. This calls for both increasingthe refining capacity as the country will become a net importer of petroleum products from2021-22 onwards and building marketing infrastructure to cater to the increased demand.
To participate in the growth increase market share and also increase efficiency &reduce emissions we have planned significant investments over the next 5 years. Majorprojects planned include expansion of Visakh Refinery to 15 MMTPA and Mumbai refinery to9.5 MMTPA with facilities to produce BS VI compliant fuels. Your company received theEnvironmental clearance for Visakh Refinery Modernization project (VRMP) from Ministry ofEnvironment & Forests. On the Marketing Infrastructure front expansion of theexisting pipelines of Visakh-Vijayawada-Secunderabad pipeline and Mundra-Delhi pipelinewith associated terminal facilities and New POL Depots LPG Plants and Lube Blendingplants have been planned to ensure future growth and meet increased demand. The consortiumof HPCL and APGDC is progressing for setting up of City Gas Distribution Network in EastGodavari and West Godavari District in Andhra Pradesh for which authorization has beenreceived from PNGRB.
With demand for oil projected to grow in India HPCL is well positioned to scalegreater heights. We have crafted well laid out plans to meet the business challengesachieve sustained Growth and Profitability ensure Safety & Probity in our operationsand exceed the stakeholder's expectations.
Our customers business associates and shareholders have always been a source ofstrength and have placed trust in us. The Ministry of Petroleum & Natural Gas hasguided and supported us in all our efforts. We have also received support from variousother departments of Central / State Governments and local authorities for smooth conductof the business. I thank all of them for their support.
We look forward to your continued support in all our endeavours.
Mukesh Kumar Surana