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Chennai Petroleum Corporation Ltd.

BSE: 500110 Sector: Oil & Gas
NSE: CHENNPETRO ISIN Code: INE178A01016
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OPEN 124.85
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VOLUME 76627
52-Week high 151.80
52-Week low 63.75
P/E 90.42
Mkt Cap.(Rs cr) 1,777
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 124.85
CLOSE 122.10
VOLUME 76627
52-Week high 151.80
52-Week low 63.75
P/E 90.42
Mkt Cap.(Rs cr) 1,777
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Chennai Petroleum Corporation Ltd. (CHENNPETRO) - Director Report

Company director report

To the Valued Shareholders of Chennai Petroleum

On behalf of the Board of Directors of your Company it is my proud privilege to reportanother year of landmark performance of your Company and to present the 52ndAnnual 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 312018.

PERFORMANCE REVIEW

FINANCIALS:

Your Company has prepared the financial statements in line with the provisions of theCompanies Act 2013 and the Ind AS Accounting Standards issued by the Institute ofChartered Accountants of India.

Financials (Standalone and Consolidated)

The highlights of the Standalone and Consolidated Financial Results are as under:

('Rs in crore)

Particulars Standalone Consolidated
2017-18 2016-17 2017-18 2016-17
Gross Turnover 44135 40586 44136 40586
Profit Before Finance Cost Depreciation and Tax 2124 1978 2118 1972
Finance Cost 321 273 321 273
Depreciation Amortisation and Impairment 345 340 345 340
Profit Before Tax

(before Share of Profit of Joint Ventures)

1458 1365 1452 1359
Share of Profit of Joint Ventures - - 20 27
Profit Before tax 1458 1365 1472 1386
Tax Expense 545 335 545 335
Profit After tax 913 1030 927 1051
Less: Appropriations
Dividend on Equity Shares 313 60 313 60
Corporate Dividend Tax 64 12 65 13
Capital Redemption Reserve 200 200 200 200
Debenture Redemption Reserve 50 50 50 50
Retained Earnings 286 708 299 728

The highlights of Standalone Financial Performance during the year 2017-18:

The year 2017-18 was another remarkable year for the Company and the performancehighlights are as under:

• The Company's turnover registered an increase of 9% at Rs. 44135 crore ascompared to Rs. 40586 crore in the previous year on account of increase in both thequantity of products sold and price variation.

• The Profit Before Tax clocked at Rs. 1458 crore in the current year was thesecond highest since inception registering an increase of 7% as compared to Rs. 1365crore in the previous year.

• However the Profit After Tax was lower at Rs. 913 crore in the current year ascompared to Rs. 1030 crore in the previous year mainly on account of recognition ofDeferred Tax Assets in respect of balance carry-forward losses in full in FY 2016-17.

• The Gross Refining Margin in the current year marginally rose to 6.42/bbl ascompared to 6.05/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 2017-18 whichamounts to Rs. 0.665 per preference share and the same has been accounted for as part ofFinance Cost in line with Ind AS requirements.

Based on the financial performance the Board is pleased to recommend for approval ofthe members a dividend of 185% for 2017-18 (Rs.18.50 per equity share). The dividend onequity shares would entail a cash outgo of Rs.331.57 crore including dividenddistribution tax.

Partial Redemption of Preference Shares

The Board of Directors of the Company at the meeting held on 5th April2018 has accorded approval for the partial redemption of non-convertible cumulativeredeemable preference shares to the extent of Rs.500 Crores out of the total outstandingamount of Rs.1000 Crores. Accordingly in terms of the issue offer for partialredemption of nonconvertible cumulative redeemable preference shares to the extent ofRs.500 Crores was made to Indian Oil Corporation Limited. Based on the acceptance of theoffer by IndianOil the same has been remitted to Indian Oil Corporation Limitedsubsequently on 6th June 2018.

Unsubscribed Share Capital

The Board of Directors of the Company at its meeting held on 5th April2018 accorded approval subject to the approval of the shareholders of the Company in theGeneral Meeting for the following:

• For cancellation of unsubscribed equity share capital of Rs.208689000consisting of 20868900 equity shares of Rs.10/- each comprising partial subscriptionto the Rights Issue made by the Company in 1984 by the Government of India andnon-subscription by Amoco India Inc. to the Rights Issue made by the company in 1984;

• For cancellation of 219700 forfeited equity shares of Rs.10/- each totallingRs.2197000/- (187900 equity shares forfeited on 26.9.2003 and 31800 equity sharesforfeited on 26.10.2006)

Book Value

The book value per share of your Company improved considerably from Rs.222.54 as on 31stMarch 2017 to Rs.258.98 as on 31st March 2018 registering an increasing of16%.

Share Value

The highest and lowest market value of shares quoted in Stock Exchange for the periodfrom 1st April 2017 to 31st March 2018 are as under: (in ')

Stock Exchange High Low
NSE 480.50 310.50
BSE 477.10 310.80

Reserves and Surplus

The Reserves and Surplus as on 31st March 2018 increased to Rs. 3707.49crore as compared to Rs.3164.80 crore as on 31st March 2017.

Value Addition

The value addition during the year 2017-18 improved to Rs. 2953 crore as compared toRs. 2805 crore in the previous year.

Digital India Initiative

In line with the directives of the Government of India your Company is takinginitiatives to identify opportunities for implementation of new digital technologies toimprove the efficiency and safety of its operations. These include facilitating andconducting several camps for opening of bank accounts for contract workmen through StateBank of India and Punjab National Bank thereby achieving 100% bank account opening foraround 6000 contract labourers of CPCL and convening meetings to create awareness andencourage payments through digital means among all stakeholders

Your Company registered 77407 digital transactions during the financial year 2017-18surpassing the target set by Ministry of Petroleum and Natural Gas as part of the DigitalIndia campaign.

Contribution to Exchequer

Your Company has been making significant contributions to both State and CentralExchequers in the form of duties and taxes. The details are as under:

 

Particulars 2017-18 2016-17
Central Exchequer 12571 13270
State Exchequer 714 436
Total 13285 13706

Public Deposit Scheme

Your Company has not accepted any public deposits during the year 2017-18 and no publicdeposit was outstanding as on 31st March 2018.

Transition to GST

Your Company has ensured smooth transition to the Goods and Services Tax (GST) regimewith effect from 1st July 2017 and achieved 100% registration of its vendorsand contractors. A GST Outreach Programme was conducted on 5th July 2017 atChennai for the benefit of contractors vendors and various other service-providers.

The total contribution to the exchequer towards GST for the period 1st July2017 to 31st March 2018 was Rs. 1064.16 crore.

However since Motor Sprit (petrol) High Speed Diesel and Aviation Turbine Fuelcontinued to be outside the purview of GST under-recoveries on account of restrictions inavailing of input tax credit proportionately are being borne by the Company.

Transfer of Unclaimed Dividend to IEPF

Your Company has transferred the required amount to the Investor Education &Protection Fund(IEPF) as per Section-124 of the Companies Act 2013 within the stipulatedtime.

The Ministry of Corporate Affairs (MCA) Government of India had notified the InvestorEducation & Protection Fund Authority (Accounting Audit Transfer and Refund) Rules2015 in September 2016 and further amended them by a notification dated 26thOct. 2017 providing for the transfer of the Equity Shares to IEPF in respect of thosedividend amounts that remained unclaimed for seven consecutive years or more on or before30th November 2017. In line with the above the Company has transferred303281 equity shares of Rs.10/- each in respect of shareholders whose dividend hasremained unclaimed for seven consecutive years from the financial year 2009-2010 to theInvestor Education Protection Fund on 28th November 2017.

PHYSICAL:
CRUDE OIL THRUPUT (in TMT) 2017-18 2016- 17
Imported 8660 8092
Indigenous 2129 2164
Total Thruput 10789 10256
PRODUCTION (in TMT)
Light Ends 2261 2186
Middle Distillates 5660 5290
Lube Base Stock 169 160
Wax 24 21
Heavy Ends 1634 1748
Intermediates differential 32 (41)
Other Inputs (28) (47)
Fuel & Loss 1037 938
Total Output 10789 10256
Distillate Yield 73.2 72.6

(TMT = Thousand Metric Tonnes)

Operational Performance

Your Company achieved the highest ever crude oil throughput of 10.789 million metrictonnes per annum (MMTPA) during the year 2017-18 as against the previous best of 10.779MMTPA during 2014-15. The distillates yield was the highest ever at 73.2% as against theprevious best of 72.6% in 2016-17. The Energy Intensity Index (EII) recorded the lowest at100.7 against the previous lowest of 101.3 in the year 2016-17. Your Company has achievedthe MoU targets for all these physical parameters.

Your Company clocked the highest ever Once-thru Hydro Cracker Unit (OHCU) throughput of2164 TMT as against the previous best of 2007 TMT in 2013-14. The Fluidised CatalyticCracking Unit (FCCU) throughput achieved was also the highest at 1084 TMT as against theprevious best of 1075 TMT in 2014-15.

Production of Motor Spirit was the highest at 1107 TMT in 2017-18 as against theprevious best of 1105 TMT in 2016-17. HSD production (including raw diesel) also recordedthe highest at 4599 TMT as against the previous best of4474 TMT in 2014-15.

During the year Manali Refinery achieved a crude oil throughput of 10289 TMT whichsurpassed the previous year's figure of 9725 TMT. The distillates yield during the yearwas also higher at 72.3 wt.% as compared to 71.6 wt.% in the previous year. Fuel &Loss was higher at 9.7 wt.% as compared to 9.3 wt.% in the previous year. During the yearCauvery Basin Refinery achieved a crude oil throughput of 500 TMT as compared to theprevious year's figure of 531 TMT. The distillate yield during the year was at 79.1 wt% ascompared to 78.2 wt% in the previous year. Natural gas processed in 2017-18 was 73.1 TMTas compared to the previous year's figure of 72 TMT. Fuel & Loss was at 4.6 wt.% ascompared to 4.2 wt.% in the previous year.

Your Company processed two new low-sulphur crude oil grades (Okono from Nigeria andMadanam indigenous grade) which were added to the regular basket.

MoU PERFORMANCE

Your Company had signed an MoU with Indian Oil Corporation Limited the holdingCompany setting the performance parameters and targets for the year 2017-18 as per theguidelines issued by the Department of Public Enterprises (DPE). Your Company has scored'Excellent' rating from DPE in respect of the MOU for the year 2016-17.

MARKETING

M/s. Indian Oil Corporation Limited the holding company markets a majority of thefuel products produced by your Company.

The details of sales of products by your Company through direct marketing during2017-18 as compared to the previous year are tabled below:

SALE QTY (IN MT)
PRODUCT 2017-18 2016-17
A: Downstream Products
Naphtha 194178 209411
LABFS 64445 58112
Butene (MEKFS) 19940 16167
Propylene 30130 26056
PBFS (+LPBFS) 11969 9382
B: Other Products
Paraffin Wax 21654 23223
Hexane 3171 3554
Micro Crystalline Wax(MCW) 214 0
Sulphur 39423 36765
Petcoke 60373 0
TOTAL 445497 382670

During the year direct sale of products recorded an increase of 16.5% from 382 TMT to445 TMT.

Yet another feature during the year was the production and marketing of MicroCrystalline Wax (MCW) an import substitute product. Sale of Petcoke another new productcommenced in December 2017. Direct marketing of Fuel Oil (FO) to Indian Additives Limitedthrough a dedicated line was also commenced during the year.

Your Company was conferred with two prestigious awards by the Federation of IndianExport Organisations (FIEO) for outstanding performance in exports. They were "TopExporter - Southern Region Export Excellence Awards" in the Public Sector categoryfor the years 2015-16 (Silver) and 2016-17 (Gold).

RESEARCH & DEVELOPMENT (R&D)

Your Company continues to lay greater emphasis on building in-house R&Dcapabilities and provide technical inputs and support to refinery operations for optimumutilisation of facilities and feedstock.

The major R&D projects undertaken during the year were:

• Pilot plant studies to develop catalyst for producing missile fuel and JP-10 inassociation with Indian Institute of Technology Madras.

• Bio-lab for growth of micro algae culture.

• Fifty litres of low-aromatic and ultra-low Sulphur Jet Fuel (JP-7) for airbreathing engine applications of DRDO.

• Lab-scale studies to convert Reduced Crude Oil (RCO) from Cauvery Basin Refinery(CBR) to low-sulfur low-viscosity premium grade Fuel Oil.

• De-waxing studies using 100% Un-Converted Oil (UCO) and UCO+Light Neutral (LN)distillate blends to produce premium grade Lube Oil Base Stock (LOBS).

PROJECTS

Your Company pursues projects that enhance product quality meet operationalnecessities and help upgrade environmental standards. Your Company achieved Plan andNon-plan expenditure of Rs. 931.92 crore and Rs. 88.40 crore respectively totalingRs.1020.32 crore during the year.

Resid Upgradation Project

Your Company has successfully implemented the Resid Upgradation Project comprisingmainly of new secondary processing units like Delayed Coker Unit (DCU) Sulphur RecoveryUnit (SRU) and Revamp of Once-through Hydrocracker Unit (OHCU) at a cost of Rs. 3110crore. This project was implemented to increase distillate yield and maximise theprocessing of high-sulphur heavy crudes. The DCU has been commissioned in November 2017and dispatch of Petcoke commenced. This will add significantly to the profitability of therefinery.

The unit was dedicated to the nation by the Hon'ble Minister for Petroleum &Natural Gas Skill Development & Entrepreneurship in February 2018. The new CoolingTower DM plant and SRU were also commissioned in June 2017 December 2017 and March 2018respectively.

Diesel Hydro-Desulphurisation (DHDS) unit Revamp Project:

Your Company has successfully revamped the existing DHDS unit at Manali Refinery from1.80 MMTPA to 2.34 MMTPA capacity at a cost of Rs. 310 crore; this has enabled productionof diesel meeting Bharat Stage IV (BS-IV) quality norms. The revamped unit wascommissioned in February 2018.

Ongoing Projects

The Company has undertaken the following projects for enhancing reliability andupgrading quality.

New Crude Oil Pipeline

Your Company is implementing a new 42-inch diameter crude oil pipeline to replace theexisting 30-inch pipeline from Chennai Port to Manali Refinery. The project estimated tocost Rs. 258 crore with state-of-the art safety features is slated for commissioningduring the current year.

BS-VI Auto Fuels Quality Project

As a part of BS-VI auto fuels quality project your Company is revamping the existingdiesel hydro-treating (DHDT) unit to increase its capacity from 1.8 to 2.4 MMTPA alongwith a new Sulphur Recovery Unit. A new 0.6 MMTPA capacity FCC gasoline desulphurisationunit with associated facilities is also being installed to comply with the directives ofthe Government of India for supply of diesel and petrol meeting BS-VI quality norms witheffect from 1st April 2020. The estimated cost of the project is Rs. 1858crore.

All the major equipment have been ordered and construction is in progress. The projectis expected to be mechanically completed by Sept. 2019.

Regassified LNG (R-LNG) Project

Your Company proposes to implement an R-LNG Project at an estimated cost of Rs. 421crore. This project will use R-LNG as feed in the Hydrogen Generation Units and as fuel inHydrogen Reformer Gas Turbines Utility Boilers & Process Heaters. A ProjectManagement Consultant has been engaged. The project is expected to be mechanicallycompleted in phases from November 2018 onwards. Significant benefits are envisaged oncommissioning of this project. Cauvery Basin Refinery

Future Projects

Your Company has obtained in-principle approval to set up a 9.0 MMTPA refinery at CBRNagapattinam at an estimated cost of Rs. 27460.74 crore (30% accuracy) for meetingthe future energy needs of Tamil Nadu. A detailed feasibility study is being carried outby M/s. Engineers India Limited.

INFORMATION TECHNOLOGY

Your Company has taken several steps to assimilate advances in information technologyto upgrade existing systems. Major initiatives undertaken during the year include thefollowing:

• Developed and implemented the new weigh-bridge system software for migrationfrom the existing Jay Instruments and Systems Pvt Ltd (JISL) system to Rice Lake systemwhich included additional features for sale of new product Petcoke

• Established network connectivity to mounded bullet control room new SulfurRecovery Unit (SRU) control room SRU operator cabin and SRU sub-station. Also establishedfibre connectivity to new weigh-bridges at DCU plant.

• IT security audit carried out by Standardisation Testing and QualityCertification (STQC)

• Based on the directives of the Government of India Information Security Policywas reviewed and a new IT policy was framed in line with the changes happening in the ITfield.

HEALTH SAFETY AND ENVIRONMENT

Health

Your Company lays utmost emphasis on prevention of work-related health hazards andprovision of adequate medical services to the employees. Towards achieving this end yourCompany constantly monitors the hazards that could affect the health of the workers andensures that the same are within acceptable levels.

As part of health surveillance 95% of the employees underwent annual health check-up.Contract employees scheduled to work at heights and in confined spaces were ensured oftheir physical fitness to do their respective jobs.

Timely action was taken on all medical emergencies both illnesses and injuries andthe cases referred to hospitals for appropriate measures. Health awareness and screeningprograms were conducted at Occupational Health Services (OHS) for employees and contractworkers.

Safety

Your Company remained committed to the highest standards of safety and evinced utmostconcern for the safety of its employees and refinery assets while carrying out itsoperations. Ensuring safe working conditions is one of the avowed objectives of yourCompany and continuous efforts are on to further bolster its safety record.

Major initiatives on safety management undertaken during the year include thefollowing:

• Fire-fighting capabilities were augmented by procuring one foam-nurser of 16000litres capacity at a cost of Rs. 130 lakhs.

• Audits were done to ensure 100% usage of spark arrestors approved by thePetroleum and Explosives Safety Organisation (PESO) for all vehicles including bitumentrucks contractors' vehicles and transport cabs entering the refinery.

• Internal safety audits were carried out by in-house multidisciplinary teams andtheir recommendations were implemented in a time-bound manner; Pre-commissioning safetyaudits were carried out by OISD teams for the Resid DCU SRU plants and revamped DHDSunits; External safety audit was carried out by a five-member OISD team during the firstweek of Feb.'18 and an action plan was drawn to implement its recommendations.

• On-site emergency mock-drills were conducted at Manali Refinery in October 2017and February 2018. Monthly mock-drills were conducted by creating different emergencyscenarios.

Environment

Your Company continues to demonstrate its concern for environment protection bydevoting considerable resources to meet the applicable environmental norms andregulations by undertaking several initiatives.

Key initiatives taken for environment protection include the following:

• Connection of emission parameters of all the heaters boilers and gas turbinesto CPCB and TNPCB since October 2017.

• Connection of effluent parameters and web camera of Zero Liquid Discharge (ZLD)to Central Pollution Control Board (CPCB) and Tamilnadu Pollution Control Board (TNPCB)since July 2017.

• Continuous real-time data transfer to both CPCB and TNPCB.

• Leak Detection and Repair (LDAR) programme carried out on a regular basis as perthe environment rules.

• In Cauvery Basin Refinery online stack monitoring system ambient air qualitymonitoring system and online Effluent Treatment Plant (ETP) monitoring system are inoperation. Online data connectivity to the State Pollution Control Board / CentralPollution Control Board from these three systems is being complied with. Greenhouse gasemission inventorisation is being carried out every year.

ENERGY CONSERVATION

Your Company continues to give focussed attention to energy conservation and makespersistent efforts to monitor and optimise energy usage.

Significant energy conservation measures implemented by your Company during the yearresulted in an estimated savings of about 11000 Standard Refinery Fuel Ton (SRFT)/annumrepresenting about 0.11% savings on Fuel & Loss. The details of energy conservationmeasures are given in Annexure I.

In recognition of your Company's efforts to minimise energy Award to CPCL at the 21stRTM consumption your Company has been adjudged the winner for 'Boilers and FurnacesEfficiency' under Group-II Category (Fired Duty 500-1000 MM Kcal per hour) by the Centerfor High Technology Ministry of Petroleum and Natural Gas. The Award was given at the 21stRefinery Technology Meet (RTM) held at Visakhapatnam on April 20th 2017.

RELIABILITY IMPROVEMENT INITIATIVES

In order to ensure stable and safe operations your Company has undertaken majorinitiatives to improve reliability of equipment processes and product quality.Significant among them are the following:

• Naphtha and High Sulfur Diesel (HSD) fuel control valves reassigned to dedicatedmodules from the earlier single module system for facilitating uninterrupted fuel supplyto Gas Turbine (GT) and to prevent shutdown.

• Reduction of regeneration downtime by replacing 40 Programmable Logic Controller(PLC)-based sequence valves in new Demineralisation (DM) plant

• Installation of dedicated spare pump for vacuum bottom service in CDU 1.

• Upgradation of Refinery-3 Distributed Control System(DCS) operating system fromCentum CS 3000 to Centum VP with Windows 7 platform for cyber security compliance.

• Implementation of auto sequence in Safety Integrity Level (SIL) 3 safety PLC forimproving the reliability of Ref 1 & 2 Instrument air system.

HUMAN RESOURCES

Your Company believes that its human resource pool has a vital role to play in theemerging competitive scenario in the industry. Accordingly many initiatives have beentaken for the development and growth of the employees to face future challenges.

The total manpower of your Company as on 31st March 2018 was 1709comprising 832 supervisors and 877 non-supervisors (1645 as on 31st March2017 comprising 805 supervisors and 840 non-supervisors).

During the year a Memorandum of Settlement under Section 12 (3) of the IndustrialDisputes Act 1947 on work- related items/facilities (Long Term Settlement-II) was signedbetween management and the recognised union on 2nd August 2017. Activeparticipation of Functional Directors in meetings with the Employees' Union OfficersAssociation and other welfare bodies on various occasions helped promote a cordialindustrial relations climate.

Your Company gives utmost importance to training & development of its employees.During the year 2017-18 an overall performance of 2.56 average training man-days peremployee were achieved with training programmes on Talent Management and CareerProgression for executives. Eligible employees were also nominated for various internalmanagement development programmes general programmes and programmes on Operations andMaintenance besides to various external training programmes.

Your Company has been meticulously following the Presidential Directives and variousinstructions of the Government relating to the welfare of the SC ST OBC and Persons withDisabilities. Out of the total manpower there were 394 SC employees (previous year: 392)and 42 ST employees (previous year: 38) as on 31st March 2018 constituting23.05% and 2.45% of the total manpower respectively.

The statistics relating to representation of SCs/STs/OBCs in the prescribed proforma ason 1st Jan. 2018 is given in Annexure-II.

Your Company is implementing the provisions of the Rights of Persons with DisabilitiesAct 2016 by way of 4% reservation for physically challenged and disabled persons. Inaddition various concessions and relaxations are being extended to physically challengedpersons in the recruitment process in line with the Government guidelines.

COMPLIANCE WITH SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION PROHIBITION ANDREDRESSAL) ACT 2013

Your Company is committed to prevention of sexual harassment of women at the workplaceand takes prompt action in the event of reporting of such incidents. In this regard anInternal Complaints Committee has been constituted to deal with sexual harassmentcomplaints and conduct enquiries if any. Further a hand-book on Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 released by theMinistry of Women and Child Development Government of India has been uploaded on theintranet to sensitise all employees about the provisions of the Act. There were nocomplaints of sexual harassment during the year.

WOMEN EMPOWERMENT

Your Company gives special focus to the various facets of women development plans andprogrammes. As on 31st March 2018 87 women employees are on the rolls of theCompany of whom 51 are in the supervisory cadre and 36 are in non-supervisory cadreconstituting 6.12% of the total supervisory employees and 4.10% of the totalnon-supervisory employees.

International Women's Day 2018 was celebrated by the women employees of CPCL on 8thMarch 2018 with the theme 'Face Adversity Walk Dauntless'. One of the women employeeswon the Women Achievers Award at the Indian Women Convention 2017.

CORPORATE SOCIAL RESPONSIBILITY (CSR) & SUSTAINABLE DEVELOPMENT (SD)

Your Company's CSR activities focus on improving the lives of the poor and needy. Thethrust areas of Corporate Social Responsibility (CSR) activities inter alia include safedrinking water healthcare & sanitation education & employment enhancingvocational skills empowering women & socially/economically backward groupsenvironment sustainability etc. The programmes are undertaken predominantly in thevicinity of the Company's major installations/establishments to improve the quality oflife of the communities which include marginalised groups such as SCs STs OBCs anddisabled.

During the year your Company has spent an all-time high amount of Rs. 918.18 lakhstowards community development activities. Of this an amount of Rs.123.22 lakhs has beenspent on various CSR activities by Cauvery Basin Refinery. An amount of Rs. 446.79 lakhsout of the total budget constituting 48.66% has been spent on activities under SwachhBharat Abhiyan as against the requirement of 33% as per DPE guidelines.

A detailed report on CSR activities as per the provisions of Companies Act 2013 alongwith CSR highlights during the year are attached as Annexure- III.

The Company also published a report on Corporate Sustainability for the year 2016-17and the same is available at the link

In recognition of its various CSR initiatives your Company was conferred theHumanitarian Award sponsored by Thakkar Bapa Vidyalaya Samithi by Shri M. Venkaiah NaiduHon'ble Vice President of India.

VIGILANCE

The Vigilance Department of your Company has been focussing its attention onstreamlining systems and procedures on a continuous basis and conducting periodicalinspections.

Several training programmes were organised for the benefit of employees highlightingthe importance of public procurement preventive vigilance compliance with guidelinessystems and procedures etc. aimed at capacity building and bridging the knowledge gap ofthe personnel with the help of case studies.

Inauguration of Vigilance Awareness Week 2017

Vigilance Awareness Week-2017 was organised from 30th October 2017 to 4thNovember 2017 with the theme "My Vision - Corruption-free India." A compendiumof CVC guidelines on tenders and contracts was compiled and released for the benefit ofall stakeholders.

There are no pending vigilance cases as on 31st May 2018.

PUBLIC GRIEVANCES

Your Company always ensures timely redressal of public grievances. Contact details ofPublic Grievance Officer are displayed on the website of the Company under the link.During the year 2017-18 six public grievances were received and disposed of in time.

CORPORATE GOVERNANCE

In line with the SEBI Listing Obligations and Disclosure Requirements (LODR)Regulations 2015 and DPE Guidelines on Corporate Governance a separate section onCorporate Governance 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 toEnvironmental Social and Governance perspective prepared in accordance with SEBI (LODR)Regulations 2015 forms part of the Annual Report- Annexure-VI.

AUDIT COMMITTEE

The composition of the Committee as on 31st March 2018 is as under:

• Mr. Mrutunjay Sahoo Independent Director - Chairman.

• Dr. P.B Lohiya Independent Director Member

• Mrs. Perin Devi Government Director Member Director (Finance) is the permanentinvitee.

The recommendations of the Audit Committee during the year were accepted by the Board.

CODEOFCONDUCT

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. The Directors and seniormanagement personnel have affirmed compliance with the code of conduct and the same wasinformed to the Board at the meeting held on 10th May 2018.

RISK MANAGEMENT

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 mitigation measures and formulated the Risk ManagementPolicy.

The Action Taken Report on the Risk Management Policy for the year 2017-18 was reviewedby the Audit Committee and the Board at the meeting held on 27.06.2018.

INTERNAL FINANCIAL CONTROLS

Your Company has put in place adequate internal financial controls for ensuring theefficient conduct of its business in adherence with laid-down policies safeguarding ofits assets prevention and detection of frauds and errors accuracy and completeness ofthe accounting records and timely preparation of reliable financial information which iscommensurate with the size of the Company and the nature of its business to protect itsinterests of the Company.

Your Company has an Internal Audit Department headed by a Deputy General Manager with amix of qualified professionals to carry out extensive audits throughout the year. Internalaudit plans are reviewed by the Audit Committee.

The Statutory Auditors in their report dated 10th May 2018 have opinedthat the Company has in all material respects adequate internal financial controls systemover financial reporting and such internal financial controls over financial reportingwere operating effectively as at 31st March 2018 based on internal controlover financial 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 2017-18 by theComptroller and Auditor General of India. The Board of Directors of the Company fixed aremuneration of Rs.18 lakhs towards statutory audit fees (Rs. 9.00 lakh to each of theJoint Statutory Auditors) in addition to out-of-pocket expenses if any and applicableGST.

There are no qualifications in the Statutory Auditors report dated 10th May2018 on the annual accounts for the financial year 2017-18.

COST AUDITORS

M/s. M Krishnaswamy & Associates Cost Accountants Chennai were appointed as theCost Auditor of Manali Refinery and Cauvery Basin Refinery of the Company for thefinancial year 2017-18 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 2016-17 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 2017-18 would also be filed within thestipulated time.

SECRETARIAL AUDIT

The Secretarial Audit Report for the year 2017-18 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 applicable secretarial standardsetc. except the clause relating to appointment of Independent Directors.

The appointment of additional Independent Directors is under the consideration of theGovernment of India.

One separate meeting of Independent Directors was held on 11th Oct 2017.

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 and 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 per applicable guidelines. The above is in line with the exemptionprovided to Government Companies by the Ministry of Corporate Affairs.

PUBLIC PROCUREMENT POLICY FOR MSMEs

Your Company complied with the Public Procurement Policy for Micro Small and MediumEnterprises (MSME) as per the directives of the Government of India by achieving a targetof 23.3% of the total procurement / service excluding crude oil and natural gas which ishigher than the 20% target set for annual procurement from Micro and Small Enterprises(MSE). 0.68% was achieved against the sub-target of 4% for procurement earmarked forenterprises owned by SC/ST entrepreneurs and the remaining 3.32% of 4% was achieved by wayof procurement from other micro and small enterprises in line with the policy.

Several initiatives were undertaken to identify the entrepreneurs for procurement ofgoods and services from MSEs owned by SC/ST enterprises by way of conducting vendordevelopment programmes.

JOINTVENTURES

Indian Additives Limited (IAL):

Your Company has a joint venture with Chevron Chemicals Company (now Chevron OroniteCompany) in the year 1989 for manufacture of lube additives components and packages. Theshare capital of IAL is Rs. 23.66 crore. CPCL and Chevron hold 50% each in the sharecapital of IAL.

IAL achieved a turnover of Rs. 639.46 crore during the year 2017-18 as against Rs.643.45 crore in the previous year. The Profit After Tax for the year 2017-18 was Rs. 39.33crore as against Rs. 55.27 crore in the previous year. The Board of IAL has recommended adividend of 50% for the financial year 2017.18.

National Aromatics and Petrochemicals Corporation Limited (AROCHEM):

Your Company has another 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 at thelink. 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 were no material RPTs. The disclosures related to Related Party Transactions inaccordance with applicable accounting standards are provided at Notes to the AnnualAccounts.

REPORT ON ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS

Statutory details on 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. Ms. Perin Devi Director Ministry of Petroleum and Natural Gas Government of Indiahas been appointed as Government Director on the Board of CPCL in place of Mr.K.M.Maheshbased on the communication No.C-31033/1/2016-CA/FTS:42979 dated 24.11.2017 received fromMinistry of Petroleum and Natural Gas Government of India effective 24.11.2017. Withthis appointment CPCL has complied with the requirement of appointment of 1 WomanDirector.

2. Mr. Gautam Roy the then Managing Director was holding the additional charge of thepost of Director (Operations) based on the communication from Ministry of Petroleum andNatural Gas vide letter dated 30.06.2017 and 20.09.2017 from 01.07.2017 to 29.01.2018after superannuation of Mr. S. Venkataramana on 30.06.2017. Mr. G. Aravindan has beenappointed as Director (Operations) effective 30.01.2018.

3. Mr. S.N.Pandey has been appointed as Managing Director effective 01.02.2018 inplace of Mr.Gautam Roy who superannuated on 31.01.2018.

4. Mr. B.V.Rama Gopal Director (Refineries) IOCL has been appointed as a Director atthe Board meeting held on 05.04.2018 in place of Mr.S.M.Vaidya.

5. Mr. S.Krishna Prasad the then Director (Finance) superannuated on 31.01.2018. Mr.Rajeev Ailawadi has been appointed as Director (Finance) effective 08.05.2018. Mr.S.N.Pandey Managing Director was holding the additional charge of Director (Finance)from 01.02.2018 till 07.05.2018.

BOARD MEETINGS

During the year seven meetings of the Board of Directors were held. The details of themeetings attended by each Director are provided in the Corporate Governance Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

No significant or material orders were passed by the regulators or courts or tribunalsthat impact the going concern status and the Company's operations in future.

PERFORMANCE EVALUATION OF BOARD ITS COMMITTEES AND INDIVIDUAL DIRECTORS

The provisions of Section 134 (3) (p) require a listed entity to include a statementindicating the manner of formal evaluation of performance of the Board its Committees andof individual Directors. However the said provisions are exempt for Government Companiesas the performance evaluation of Directors is carried out by the Administrative Ministryi.e. Ministry of Petroleum and Natural Gas (MoP&NG) as per laid-down evaluationmethodology.

POLICY FOR SELECTION AND APPOINTMENT OF DIRECTORS AND THEIR REMUNERATION

The provisions of Section 134 (3) (e) regarding the policy on Directors appointment andremuneration including criteria for determining qualifications positive attributesindependence of a Director and other matters provided in Sec 178(3) are exempted forGovernment Companies.

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 31st March 2018 in the prescribed formMGT-9 is attached at Annexure-VIII to this report.

COMPLAINCE WITH SECRETARIAL STANDARDS

Your Company complies with the applicable Secretarial Standards issued by the Instituteof Company Secretaries of India (ICSI).

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 31st2018 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 31stMarch 2018 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 152 applications under the RTI Act were received and responded intime.

OFFICIAL LANGUAGE POLICY

Your Company continues to take constant efforts to effectively implement the provisionsof the Official Language Act and Rules to ensure improvised use of Hindi in its day-to-dayfunctioning. The Official Language Implementation Committee meets periodically to reviewthe progress of usage of Hindi in the Company.

The First Sub-Committee of Committee of Parliament on Official Language helddiscussions with the officials of the Company on 17th Feb 2018 on issuesrelated to Official Language.

ACKNOWLEDGEMENT

Your Board of Directors take this opportunity to place on record their sincereappreciation of the commitment initiative and hard work put in by the members of the CPCLfamily.

Your Board of Directors gratefully acknowledge the support cooperation and guidanceextended by the Government of India particularly the Ministry of Petroleum & NaturalGas other ministries the Government of Tamil Nadu Indian Oil Corporation Ltd. NaftiranIntertrade Company Ltd. Petroleum Planning and Analysis Cell Oil Industry DevelopmentBoard Oil Industry Safety Directorate Centre for High Technology and other regulatoryand statutory authorities.

Your Directors are thankful to all its stakeholders including bankers customerscontractors vendors etc. for the continued confidence reposed by them on the company.

Your Directors also place on record their appreciation of the valuable contributionsmade by other Directors viz. Mr. Gautam Roy Mr. S.Krishna Prasad Mr. S.VenkataramanaMr. K.M.Mahesh and Mr. S.M.Vaidya during their tenure on the Board.

For and on behalf of the Board

(Sanjiv Singh) Chairman DIN:05280701

Place: New Delhi Date: 14.07.2018

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