Acknowledgement

I take this opportunity to express my grateful thanks to all those who have contributed
towards this work & without whom these work have not taken its present shape. I would like
to thank Mr.Radhakanth das, HPCL Visakhapatnam my company guide and other
employees of the company especially Mr.S.K.Mishra, HR Manager who gave the
information about Recruitment and selection process in Hindustan Petroleum Corporation
Limited for their cordial help and support.

I thank my faculty guide Mr. T. NarayanaRao, Assistant Professor, M.B.A

Department, School of Management studies, M.V.G.R College of Engineering,
Vizianagaram for valuable guidance throughout the project work. Without his deep
involvement and inspiration, this report would not have been completed. I am so thankful to
him.

I am also thankful to our beloved Dr. K.S.S. Rama Raju, Professor and Head of the
Department, and other faculty members for their constant support, help, encouragement, co-
operation and valuable suggestions throughout the progress of the report.

I am very thankful to our honourable Principal, Dr.K.V.L.Raju for extending his

utmost support and cooperation in providing all the provisions for the successful completion of
the project.

I am highly indebted to the staff of our Central Library from where 1 have drawn more
material in relation to my project work.

Finally, a special thanks to my family members and friends for their constant support, without
which I would not have been able to complete my report.

J.DIVYA HARIKA
 CONTENTS
Page No

Preface

Chapter-I – Introduction (1-5)

• Introduction 1
• Need for the study 2
• Objectives of the study 3
• Limitations of the study 4
• Frame work of the study 5

Chapter-II - Hindustan petroleum Corporation Limited- A bird’s eye view

(6-47)
• An overview of Oil Industry 6
• Company profile 24
• Functional Departments 34
• Awards and achievements 46
• Organization chart 47

Chapter-Ill- Recruitment and Selection process- Concept

(48-75)
• Recruitment process 55
• Methods of Recruitment 57

Chapter-IV- Study on Recruitment and Selection process

(76-93)
• Objectives of Recruitment at HPCL 76
• Employee classification and status 78
• Recruitment of management employees 80
• Recruitment procedure - Non- management employees 89
• Process of Selection at HPCL 90
• Selection committee 91

Chapter-V- Summary, Findings and Recommendations (94-96)

• Summary 94
• Findings 95
• Recommendations 96

Bibliography
 PREFACE
The Recruitment and Selection decision is of prime importance as it is the vehicle for
obtaining the best possible person-to-job fit that will contribute significantly towards the
Company’s effectiveness. It is also becoming increasingly important, as the company evolves
and changes, that new recruits show a willingness to learn, adaptability and ability to work as
part of a team. The Recruitment and Selection procedure ensures that these criteria are
addressed.

In this project I have studied Recruitment and Selection process of HPCL and attempted
to provide some ways so as to make recruitment more effective and to reduce the cost of hiring
an employee.

I am privileged to be one of the students who got an opportunity to do my training with

HPCL. My involvement in the project has been very challenging and has provided me a
platform to leverage my potential in the most constructive way.

During the training period I have studied deeply the Recruitment and Selection process
of hiring in HPCL to find out the existing shortcomings and thereby recommended
suggestions.

This project highlights Recruitment and Selection process in HPCL. The chapters in
this book present a variety of topics related to task of recruiting. These topics include the
duties and responsibilities of human resources; time-limited appointments and succession
planning; diversity; and the vibrant opportunities of area studies. This project also includes
various practices followed by HPCL.
INTRODUCTION
“HPCL-HINDUST AN PETROLEUM CORPORATION LIMITED” was

commissioned by Caltex Oil Refining India Ltd., (CORIL) in 1957. It is the first oil refinery
on the East Coast and the first major industry in the city of Visakhapatnam, Andhra Pradesh.
The installed capacity of the refinery was 0.65 million metric tons per annum (MMTPA) in
1957.founded in 1974 Hindustan petroleum corporation limited (HPCL ) a fortune 500
company, is one of the largest integrated petroleum refining and marketing company in India.
CORIL was taken over by the Government of India & merged with Hindustan Petroleum
Corporation Limited in 1978. HPCL, a fortune 500 company, is one of the major integrated oil
refining and marketing companies in India. It is a Mega Public Sector Undertaking (PSU) with
Navaratna status.

For every organization it is important to have a right person on a right job. Recruitment and
Selection plays a vital role in this situation. Shortage of skills and the use of new technology
are putting considerable pressure on how employers go about Recruiting and Selecting staff. It
is recommended to carry out a strategic analysis of Recruitment and Selection procedure.

With reference to this context, this project is been prepared to put a light on Recruitment
process. This project includes Meaning and Definition of Recruitment, Need and Purpose of
Recruitment, Evaluation of Recruitment Process, Recruitment Tips. Sources of Recruitment
through which an Organization gets suitable application. Scientific Recruitment and Selection,
which an Organization should follow for, right manpower. Job Analysis, which gives an idea
about the requirement of the job.

Recruitment and Selection are simultaneous process and are incomplete without each other.
They are important components of the organization and are different from each other. Since all
the aspect needs practical example and explanation this project includes Recruitment and
selection process of HPCL.
 NEED FOR THE STUDY

The objectives of Human Resource Department are Human Resource Planning,

Recruitment and Selection, Training and Development, Career planning, Transfer and
Promotion, Risk Management, Performance Appraisal and so on. Each objective needs special
attention and proper planning and implementation.

Every organization shall pay attention on human resources. It includes their recruitment
to retirement. Selection of right people for right place is crucial one. Of course it requires a
careful study and process. It involves stages like recruitment, selection and training of
personnel. Failing in this process the organization will be affected severally. Sometimes the
organization is depended on outsourcing of these activities. Apart from it, various methods are
practiced by organization in recruiting its personnel as per policies and practices of it.

The selected organization namely Hindustan Petroleum Corporation Limited

Visakhapatnam is recruiting, selecting the personnel on behalf of the other organization
requirement. In this connection a study is attempted on recruitment and selection process in
HPCL Visakhapatnam.
 OBJECTIVES OF THE STUDY

The main purpose was to cover all the aspects of recruitment. Learning was in the form
of visit to HPCL and to meet different people from different backgrounds in the organization
and find out what keeps them together and still together after the entry of a new face
(employee) in their phase.

 To focus on profile of the selected organization i.e. Hindustan Petroleum Corporation

Limited Visakhapatnam.

 To study the practices of recruitment and selection process in HPCL.

 To ensure all recruitment and selection procedures comply with the council’s equal
opportunity policy.

 To offer suggestions for the improvement of practices in HPCL.

 LIMITATIONS OF THE STUDY

• Inter-firm comparison was not possible because of time constraint.

• The information furnished is subjected to availability.

• Keeping in view the hectic schedule of the employee data is collected by referring
various manuals, journals, information brochures, past reports/ statements etc.

• As HPCL is a public enterprise, it has to perform according to the guidelines prescribed

by the government.
 FRAMEWORK OF THE STUDY

chater-1 This chapter highlights the general Introduction, Main Objectives, Need and its
Significance and the major Limitations towards my study.

Chapter-2 This chapter throws a light on the profile of the industry and the profile of the
organization.

Chapter-3 This chapter highlights on the theoretical background of the studyon Recruitment
and Selection process.

Chapter-4 In this chapter the data collected is complied, processed, prepared and shown to
make the findings, towards my study.

Chapter-5 This chapter mainly outlines about the Summary, Findings and suggestions to the
study conducted and conclusion is prepared on the basis of analyzed data and certain
recommendations, have been added which can be helpful for the company, to improve its
performance.
 INTRODUCTION OF OIL INDUSTRY

India is not endowed with nearly enough oil reserves to domestically meet its ever-burgeoning
energy requirements completely is a well-known fact. However, that has in no way affected
the buildup of domestic crude oil refining capacity adversely, which is nearly 3/4 times the
domestic crude oil production. The total refining capacity in India today is around 132.47
million metric tons per annum (mtpa) as against domestic crude production is around 34.7
mtpa. With the wholehearted backing of the Government for over 50 years, the growth in the
refining capacity, and consequently in the sector has been happening at a steady rate. Starting
off with merely one refinery in the country in 1947, which was located at Digboi, the number
of refineries now stands at 18, amply compensating for the existing levels of demand. Also, a
number of refinery projects are at different stages of development presently, which will boost
the nation’s refining capacity to 210 million tons per annum by 2011. Moreover, as an offshoot
of the Government policies, most of the refineries are in the public sector, with the sole
exception of Reliance Industries.

There have been some developments on the regulatory front as well. The petroleum industry
has now been freed from the Government shackles with respect to pricing of .certain products.
The Administered Price Mechanism (APM), which was previously in effect for determining
the prices of most petroleum products was done away with April 2002 onwards, thereby
exposing these products to the price volatility in accordance with the trends in the international
markets for the first time. Consequently, refining margins were hurt to some extent, while
marketing margins benefited. Overall, this freshly deregulated sector has seen impressive
growth over the years, and is poised to play an even important role in the future.

In the recent times the benchmark WTI crude prices have stayed consistently above $60 per
barrel mark which meant higher prices of petroleum products. Indian government, however,
did not allow the oil PSUs to raise the prices of petrol, diesel, LPG for domestic use and
kerosene distributed through PDS in accordance with the -.sing cost of crude oil. This has put
the oil marketing companies under heavy subsidy burden, due to which they are incurring
losses.
Demand & Supply pattern

India today has a refining capacity of 132.47 million TPA of crude throughput, which is
excess of domestic demand for petroleum products estimated at around 111 million TPA India
has become a net exporter of petroleum products and is expanding the refining capacity
aggressively to become the refining hub of Asia-Pacific region. Petroleum refineries sector has
been identified as one of the key sectors to drive country’s export growth in the years to come.

Industry Product

The crude oil that is obtained subsequent to exploration and production activities carried
out is a mixture of hydrocarbons with other elements including sulphour, nitrogen, oxygen. It
can be classified into four categories on the basis of its quality, into light, heavy sweet, and
sour. The lighter the crude oil, that is, if its specific gravity is less than 0.8672, the richer are
the product mixes. The sulphur content of the crude oil determines its sweetness/sourness.
Crude oil with more than 0.5% sulphur content is classified as sour content. This determines
further processing of the oil, as a high degree of sulphur content results simultaneously in
higher processing costs, but lower selling price. Sweet crude on the other hand requires little
processing, and hence has higher realization, to complement the existence of higher demand
for it.

The process of separation of crude oil into various fractions on the basis of physical
properties such as viscosity and ignition temperature is called refining. A variety of products
can be obtained on further processing or refining of the crude oil, which can be "--filer
classified into three broad categories of distillates (usage based products). These include heavy
distillates such as furnace oil and bitumen; middle distillates like diesel, kerosene, and
Aviation Turbine Fuel (ATF); and light distillates such as LPG and petrol. Some of these
products have been discussed in the following lines-
1. LPG

LPG may be defined as those hydrocarbons, which are in gaseous state at normal atmospheric
pressure, but may be condensed to liquid state at normal temperature on application of
moderate pressures, and is mostly a mixture of propane and butane. LPG is used in its gaseous
form, although it is stored and transported in the liquid state, as its volume condenses nearly
250 times from its gaseous state. LPG finds many applications, right from being used as a
domestic cooking fuel to various industrial applications, and even as a new age alternate fuel
in the automotive segment.

2. Motor Spirit

Motor spirit, Petrol and Gasoline are different terms for the same product, and mean a mixture
of the lighter fractions of petroleum composed of hydrocarbons, having boiling points in the
range of approximately 30-0C-215-0C. It is used as fuel for internal combustion engines such
as passenger cars, 2 wheelers, 3 wheelers etc.

3. Diesel

Diesel denotes any fuel suitable for burning in diesel or compression ignition engines. It is
sold in India in two main grades, which are High Speed Diesel (HSD), a 100% distillate fuel,
and Light Diesel Oil (LDO), a blend of distillate fuel with a small proportion of residual fuel.
HSD finds applications in high speed diesel engines operating above 750 rpm i.e. buses,
lorries, generating sets, locomotives, pumping sets etc, in addition to others such as gas
turbines requiring distillate fuels. On the other hand, LDO is generally used for stationery
diesel engines operating below 750 rpm.

4. Superior Kerosene (SKO)

SKO is a refined petroleum distillate, which is less volatile than gasoline, with a boiling
between 1500C and 3000C. Kerosene, with its distillation range overlapping that of gasoline
and HSD has a variety of applications.
5. Naphtha

Naphtha is a general term used to describe special boiling point spirits having a boiling range
of approximately 30-170 degrees Celsius. This volatile product is marketed in two types, High
Aromatic Naphtha (HAN) and Low Aromatic Naphtha (LAN), and consists essentially of
paraffinic, naphthenic and aromatic hydrocarbons. Its most common applications are in the
fertilizer plants and in petrochemical industries as a feed stock.

6. Furnace Oil

Furnace Oil, Bunker Oil, or Fuel Oil is a dark viscous residual fuel that is obtained on
blending mainly heavier components from crude distillation unit, short residue and clarified
oil. Fuel oil is the general term applied to any oil used for generation of power or heat, and can
include distillates, and blends of distillates and residue such as LDO.

7. Bitumen

Bitumen is a non-crystalline solid or viscous material having adhesive properties that can be
derived from petroleum either by natural or refinery processes. It is usually made as an end
product on distillation, or as an extract from selected petroleum oils. Bitumen is at times used
synonymously with asphalt, especially in the U.S., but normally asphalt is generally taken to
mean a mixture of refinery bitumen with a substantial proportion of solid mineral matter.
Bitumen is mostly used for road construction, surfacing airfield runways, and in hydraulic
applications such as canal lining, dam construction, etc. It also has multiple industrial
applications.

Of the various products that are processed in refineries, the four most crucial are High Speed
Diesel (HSD), Superior Kerosene (SKO), Liquid Petroleum Gas (LPG), and Motor Spirit
(MS), These products together account for more than 60% of the overall sales of petroleum
products in the country.

Of these, HSD is the highest selling of all fuels, accounting for about 40% of sales volumes of
oil companies. Moreover, a whopping 85% of the sales of automotive fuels comprise of HSD,
with the highest volumes being through retail sales to trucks, heavy vehicles, and the
agricultural segment. Apart from this, HSD is also sold to bulk customers like railways and
state transport companies, although the margins in these kinds of sales are on the lower side.
Kerosene is currently being sold in India through two mediums, the first being through the
public distribution system (PDS), and the other medium being the normal market. The second
medium will be the sole means of selling this product in the next three years as the kerosene
subsidies are being phased out. The LPG and the MS segments are also fast growing segments,
providing good margins to the oil companies. The overall size of the market of these products
is well over Rs 200000 crore in India, and is growing at a very rapid rate as the demand for
energy in the country is constantly on the upswing.

New Refinery Projects

A number of new projects are coming up domestically as well as internationally in a bid to

increase the refining capacity worldwide. Recently, Saudi Arabia declared its plans to double
its oil refining capacity to six million barrels per day (bpd) within five years. The kingdom has
earmarked $20 billion for the upgrade program, which involves raising the capacity of eight
refineries Riyadh owns inside and outside Saudi Arabia within five years, besides building
new refineries locally and abroad. Saudi Arabia presently has around 3 million bpd refining
capacity, of which around 2 million bpd are produced in the kingdom. The Gulf kingdom also
plans to hike its crude output capacity from the current 11 million bpd to 12.5 million bpd in
2011.

China is also planning to increase its refining capacity by about one-third by 2011 as it races to
keep up with surging demand for oil and refined products. Similarly, Iran is planning to
increase its refining capacity by 0.9 million barrel per day in next couple of years.

In India also, a number of refinery projects are at different stages of development, which will
boost the nation’s refining capacity to 230 million tons per annum by 2012 from present
132.47 million. Over six Greenfield refinery projects are at different stages of development,
while two capacity expansions projects are under way. Reliance Industries (RIL) will be a
major contributor along with its arm Reliance Petroleum, with a refining capacity of 60 million
tons in four years

Apart from RIL, Nagarjuna Oil Corporation, Essar Oil, Bharat Petroleum Corporation
(BPCL), Hindustan Petroleum Corporation (HPCL) and Indian Oil Corporation (IOC) are in
the fray to build-up refineries. Both IOC and RIL have started expansion in their existing
refineries.
BPCL’s 6 mtpa refinery at Bins is estimated to cost around Rs 9,100 crore. It is also raising the
capacity of its Mumbai refinery to 240,000 bpd. Whereas, after almost a decade since it was
planned, HPCL is set to finalize its plans on setting up the 9 million tones Guru Go bind Singh
Oil Refinery at Bhatinda in Punjab IOC’s proposed refinery at Para dip would have 15 mtpa
capacities.. The exploration and production major ONGC is also working out the details for its
proposed 7.5 million tones Kakinada refinery in Andhra Pradesh.

Foreign players are also eyeing opportunities arising out of Indian expansion in petroleum
refining sector. Recently, World’s 4th largest petroleum company Chevron picked up 5% stake
in Reliance’s new refinery venture with a right to increase the stake to 29%. Kuwait, Saudi
Arabia and four other oil producing states in the Arabian Gulf, which sold about $300bn of
crude oil last year, are investing in Asian oil-consuming countries to benefit from higher
demand. Kuwait Petroleum Corp is considering setting up exploration and oilprocessing
ventures with Indian Oil Corp (IOC). Similarly, Saudi Aramco and Emirates National Oil
Company (ENOC) are planning substantial investments.

Prices of Petro products and related issues

The dismantling of the APM was a landmark happening in petroleum sector, as the domestic
crude oil producers were able to fix prices as per those prevailing in the international markets.
In other words, it moved towards a Market Determined Price Mechanism (MDPM). It was also
theoretically supposed to make the prices of diesel and petrol more susceptible to changes in
the crude oil prices, on both the upward and downward sides. The prices of MS, ATF, and
diesel were also permitted to be market determined. The Government has also decided to do
away with the subsidies provided on LPG and kerosene in a phased manner, over the next 3-5
years. In spite of these steps, the core issue that persists is that pricing of petro products
remains a politically sensitive issue, which makes their complete decontrol a difficult decision
to make. This can be easily highlighted by the assurances affected by the MoP&NG at the time
of dismantling the APM, with regard to putting in mechanisms in the system to contain the
impact that international oil market volatilities may have on the domestic markets.
Industry Structure & Size

The activities in the sector can be classified into refining activities and marketing activities.
While the former are technology intensive, the latter are more logistics intensive. In other
words, the marketing activities require the setting up of an effective retail network at
appropriate locations in order to ensure the availability of the products at appropriate locations
in appropriate quantities. On the other hand, refining activities necessitate the use of the most
recent and efficient technologies in order to ensure minimum loss of input and satisfactory
process completion to achieve desired product slate As such, there are 18 refineries in India,
engaged in the process of putting into production distillates. The players in the refining sector
are Indian Oil Corporation (IOC) with 7 refineries, Hindustan Petroleum Corporation (HPCL)
with 2 refineries, Chennai Petroleum with 2 refineries and BPCL, Kochi Refineries (KRL),
Bongaigaon Refineries (BRPL), Numaligarh (NRL), Mangalore Refineries (MRPL), ONGC
and Reliance Industries with one refinery each. . While IOC has the highest crude throughput
capacity of 41.35 mtpa by virtue of the number of refineries it commanded, the sole private
player, RIL, has the highest crude throughput capacity of 33 mtpa at a single refinery at
Jamnagar, which is the 5th largest refinery at a single location in the world.

Competitive Scenario

The trend in the deregulated markets that is being followed by the players is to move towards
integration of refining and marketing activities on a greater scale. Moreover, the oil PSUs are
also venturing into oil exploration and production activities. Bearing testimony to this are the
entries of downstream players like Reliance, IOC and Essar Oil into the oil exploration field,
while the exploration major ONGC is moving into refining operations, albeit in a small way in
the form of commissioning a 0.1 MT mini refinery in Andhra Pradesh.

Oil Marketing

At present, there are four PSUs namely, IOC, HPC, BPC and IBP (subsidiary of IOC)
marketing oil products in the country. In addition, certain private players like Reliance, Essar
and Shell have also been granted marketing rights for transportation fuels. Some additional
players like ONGC, who have also been granted mark rights for transportation
fuels, are in the process of setting up retail outlets to integrate across the entire hydrocarbon
value chain.

Indian Oil Corporation (IOC)

IOC is one of the biggest integrated Oil Company in India. It also had a retail market share
(including that of IBP) of 42.2% in MS, and 48.3% in HSD. Additionally, it also owns the
biggest retail, pipeline, and crude oil networks in India, and is one of the Indian companies in
the Fortune 500 list.

It has a lot of history behind it, being incorporated way back in 1959 as Indian Oil Company,
being set up initially only for the purpose of arranging the supply of petroleum products from
refineries in Barauni and Guwahati, being set up then by Indian refineries. Subsequently they
were merged, and Indian Oil Corporation came into existence in 1964. The Indian Oil group
(with subsidiary IBP) added 1,547 petrol pumps during FY06, raising its tally to 15,247 petrol
pumps.

Hindustan Petroleum Corporation Limited (HPCL)

HPCL was incorporated in 1974, on the nationalization and merger of Esso India and Lube
India. It now has two refineries in Mumbai and Visakh with capacities of 5.5 MMTPA and 7.5
MMTPA respectively. HPCL is an integrated company, having its operations in the refining as
well as marketing activities. A few of the key strengths of the company are-

1. HPCL currently constitutes 10% of the refining capacity in India, and has interests in 20%
of the product pipelines.

2. HPCL has the second largest retail outlet and LPG distributor networks in the country.

3. The company was also able to achieve a phenomenal 110.3% capacity utilization in its
refineries in 2011-2012.

4. The company aims to improve its market share by focusing on customer relationship
management, and focusing on providing additional value added services.

5. Hindustan Petroleum (HPCL) reported the year profit as the company incurred a huge net
profit of Rs. 911.43 crores for the year of Mar-2012.
6. For the year ended Mar-2012, the sales of the company were higher at Rs. 188,130.95crores.
The operating margins were 196.59 of the corresponding previous year. The other income of
the company was higher at Rs. 1,025.59 crores.

Bharat Petroleum Corporation Limited (BPCL)

BPCL was incorporated in 1952 when the Government entered into a joint venture with 3urma
Oil and Shell Petroleum. Subsequently, the company was nationalized by way of acquiring a
100% equity stake in 1976, but subsequently the Government has let go a par.

BPCL is the second largest refining and marketing company in India. The company along with
its subsidiaries owns 15% of the refining capacity and 9% of the product pipelines. It .as a
19% market share in the country in terms of sales, and a retail market share of 32.2% in MS,
and 24% in HSD.

• The company has the third largest retail outlet and LPG distributor network in the
country.

• The company has also adopted innovative marketing strategies such as introducing
value added highway retailing among others, in order to improve its retail sales.

In line with the other oil refining and marketing companies Bharat Petroleum (BPCL) also
ended. Government’s decision not to revise petrol and diesel prices in line with -.sing crude
prices internationally had an adverse impact as the company recorded. The company is
presently in the process of amalgamating its subsidiary Kochi Refineries (KRL) with itself
with effect from 1st Apr 04. The company held a meeting of the shareholders of the company
and has obtained the necessary approval. The company is now waiting for the approval from
the Department of Company Affairs.

Mangalore Refinery & Petrochemicals (MRPL) - ONGC

Set up as a joint venture between HPCL and the Aditya Birla group in 1988 as a standalone
refinery, MRPL is now a subsidiary of ONGC, which has a 71% holding in it, and is also
planning to buy out the balance HPCL HPCLcurrently constitutes 10% of the refining capacity
in India, and has interests in 20% of the product pipelines.
HPCL has the second largest retail outlet and LPG distributor networks in the country. The
company was also able to achieve a phenomenal 110.3% capacity utilization in its refineries in
2011-12.The company aims to improve its market share by focusing on customer relationship
management, and focusing on providing additional value added services.

Hindustan Petroleum (HPCL) reported for the year profit as the company incurred a huge net
profit of Rs 911.43 crores for the year ended Mar-2012. Inability to charge higher prices
despite rising crude oil prices stake. ONGC is expanding the scope of its operations to be
become an integrated player. The acquisition of MRPL was in order to facilitate its entry in the
downstream industry. Apart from MRPL, ONGC is also having a mini plant, with ^capacity of
0.13 lakh tones. Moreover, the company also is working on plans to enter the marketing and
retailing businesses. The company hopes to put in place a retail network of 1700 outlets in
place over the next 3-4 years. The company is anticipated to take advantage of its real estate
throughout the country for this purpose.

Reliance Industries Limited (RIL)

Reliance Petroleum was incorporated in 199las Reliance Refineries, but changed its name to
the former in 1993, and has since merged with its parent company RIL. Its refinery is a
standalone, and is at Jamnagar, on the country’s western coast. The refinery was
commissioned in July 1999, and it commenced its operations in 2000-01. It is India’s largest
standalone refinery, and constitutes 24% of the country’s refining capacity. Additionally, the .
Jamnagar refinery is also the world’s fifth largest refinery at a single place. RIL also owns
23% of the product pipelines in the country.RIL is a private integrated player in India, and has
established a retail network of more than 1300 units. Earlier, RIL had marketing agreements
with the oil PSUs till March 2004 to market about 14 million tones of its petroleum products.
Now RIL has plans to set up about 4300 more outlets throughout the country subsequently. Its
foray into marketing is expected to improve its marketing margins, and complete its attempt at
downstream integration.

Reliance Industries (RIL), the largest private Sector Company in India. The company posted
2% rise in revenues and a 15% fall in reported PAT after the operating margins slipped 110
basis points. Small reductions in interest, depreciation and tax provisions could not bring any
respite for the company. The refining margins continued to suffer as the company recorded a
46% plunge in the PBIT from refining.
Demand Drivers

The growth of demand of petroleum products is highly interlinked with that of the country’s
economic performance. Economic growth spurs on increased industrial production, as well as
encourages spending on energy consuming goods by virtue of putting in increased disposable
income in the consumer’s hands, driving up the demand for oil and petroleum products. With a
healthy GDP growth rate forecast for coming years, the effect is likely to be seen in the form
of increased demand for energy resulting in better capacity utilization in the refineries, and
improved margins.

The industrial demand is deemed to be more inelastic than the retail demand, but any increase
r. power capacity, growth in tourism sector and better agricultural sector performance has a
positive impact on petroleum companies. Moreover, a large population base combined with a
w per capita consumption of petroleum products currently seen in India leaves ample room ' r
rapid growth in the sector.

The retail demand varies as per the consumers’ economic wellbeing. The auto or
transportation sector is the single most important consumer sector in this respect, although
there are other important segments like domestic appliances, etc. Increased spending power in
the hands of the consumer is likely to see more spending on automobiles, leading to an
increased demand for automobile fuel, driving on demand for fuel further. The lower interest
rate regime may also see an increased propensity to consume, as opposed to investing in
secure debt, driving on industrial growth.

Global Scenario

Although the OPEC nations are the biggest group in the production of oil, the biggest
companies in the business are not from these countries. The bigger international players are ail
integrated players, engaging in all or at least most upstream and downstream activities either
independently, or through strategic alliances or partnerships. Some of the global majors in the
business are ExxonMobil, British Petroleum, Royal Dutch Shell, and Chevron Texaco. These
global giants have been engaged in the process of acquiring equity oil in various parts of the
world for many years, on the back of strong support of their respective Governments.

I: the lot, ExxonMobil is the biggest, having its operations in all the continents excluding
Oceania. This $191 billion company has marked its presence in 51 significant deep water
discoveries, has interests in more than 750 deep water blocks, and is present in the most
Active deep water regions throughout the globe including West Africa, the Caspian Sea, the
Gulf Mexico, and South America. In fact, the smaller of the oil majors, Chevron Texaco at
$99.6 billion, is much larger than any Indian player is currently. The Malaysian Government c
company Petronas is also an emerging major in this industry, with interests in 34 countries.

Petroleum owns either fully, or in part, 25 refineries with their share of refinery capacity being
3.5 million barrels of crude oil per day. Of these, 5 are in the U.S., 14 are in Europe the
balance is in other parts of the world. It is also the third largest integrated oil iv :n the world,
with an estimated global market share of 3% of oil & gas production, refining capacity and
over 10% retail sales of refined oil products in the major global in which they operate. Their
lubricants business is in for a major boost following the acquisition of Castrol.Chevron Texaco
has a crude oil input of over 2 million barrels per day refineries, and is the second largest U.S.
based integrated Energy Company, active in SO countries. It has are fining capacity of 2.3
million barrels per day, and has 23 fully c or joint venture

Refineries and has a strong retail network as well.

The crude oil prices, and consequently those of petroleum products too, have been on the •er
side, despite the war in Iraq ending, and the situation in Nigeria easing to some extent, a:: too
much significant softening of prices is being seen contrary to expectations.

Critical Success Factors

Once the industry is truly free from the shackles of the government, prices of the controlled
products like MS and HSD will move as per the import parity prices. The key factors, which
would be playing a determining role in the profitability of a company, will be:

Crass Refining Margins

Post deregulation of refinery sector the margins of Indian refiners has moved in line with
changes in regional refining margins. Reliance Petroleum (RPL) has the highest gross refinery
margins in the domestic refiners due to its high complexity. Among the PSU oil companies
BPCL has highest refinery margins, and its refinery margins have raised most post decontrol.
Post deregulation companies will have to reconfigure their product slate, which cir result in the
further increase in gross margins. The primary forces that influence refinery
Margins are crude prices, type of crude processed, duty protection, transportation costs and

production of high value products, refinery complexity and product quality.

Cost of crude

Crude oil which is 85 -90% of total cost is most critical element in the refinery operations. The
cost of crude directly reflects in the bottom line of companies. Refinery needs to have very
efficient crude procurement and risk hedging mechanism so as to handle the volatility in the
crude oil prices. Presently only RPL has established risk hedging for crude oil and products,
whereas for PSUs, IOCL acts as sole canalizing agent, which at present is not hedging and
plans to start from this year. Presently it either enters in the long-term contracts for
procurement of crude oil with National Oil Companies of oil producing countries or float
monthly tenders. Post deregulation individual oil companies will be allowed to procure and
hedage for crude oil and petroleum products in oil market. HPCL has already established its
international trading desk and plan to buy crude by entering into term contracts and through
tender process. The import of the crude oil in the country as percentage of total crude oil
processed is 70%. RPL imports almost all of its crude oil requirements. While IOCL and its
Subsidiaries imports 65% of their total requirement. BPCL with its subsidiaries import around
46% while HPCL and MRPL import around 68% of their total crude requirement.

Type of crude oil used for processing

Long term forecasts for crude oil supplies clearly indicate deterioration in crude quality.
Therefore, refineries will have to process more of heavier sour crude’s, which will give lesser
of quantity of heavier distillate products and more of heavier residual products. The big
challenge would be in maintaining productivity particularly of middle distillates and fuel oil.
BPCL refinery at Mumbai can handle more than 42 varieties of crude oil. RPL refinery can
most handle all types of crude oil. The IOCL refineries, which are low on complexity scale
process light crude or a mix of heavy and light crude (ratio between Arab heavy and Arab light
being 80:20). HPCL is also changing its refinery configuration to process greater varieties of
crude oil. Going forward the ability of Indian refiners to process heavier and sour crude will
determine their refinery margins.
Location of a refinery

The location of a refinery also has an influence on its competitiveness and profitability. The
refineries which are on the west coast of India have proximity to the Gulf countries and hence
car source crude oil at lower freight cost. Refineries which are located at the coast, depth
(Draft) of port is an important parameter. As transporting crude oil by a VLCC tanker is 20-
25% cheaper as compared to transporting it through Suezmax or Panamax vessels. Presently
only RPL has oil jetty at Jamnagar which can handle the VLCC which gives it advantage to
save its freight cost per barrel. RPL refinery at Jamnagar is at the shortest distance from
Middle Eastern countries. BPCL, KRL, HPCL & MRPL are also beneficiaries due to the close
proximity of their refineries to ports. Refineries which are located have in the North Eastern
region has product evacuation problems because of which they are not able to operate at
required capacity utilization. The IOCL refining capacity is located in the interior parts of
country. It has built vast pipeline network, out of the 3 crude oil and 11 products pipeline it
owns 2 and 8 respectively. Going forward, it is expected that refineries which are on west and
has products pipeline to the high consumption areas will benefit the most, as they will get
benefit of less freight cost on raw material as well as petroleum products.

Refinery Products Slate

The margins after the deregulation are going to be higher on the Light distillates and middle
distillates, the ability of refinery to produce higher quantity of light and middle distillate and
very less bottom of the barrel products will be a key determinant in its margins. The output of
RP L and BPCL is highest in percentage terms of light distillates. BPCL is increasing the hare
of light distillates in its production every year. RPL due to its high complexity has very low
products of heavy ends; it produces only petroleum coke, which it plans to use as feed in its
power plant.

Important tariff Protection

This is the single most important factor in protecting the local refinery margins. Products sold

In the local market enjoy an import parity price which includes landed cost plus import duty.
Previously the import duty on the petroleum products were less than the duty on the crude oil
which use to create an anomaly now this has been corrected and duty structure on import duty
res been rationalized.
Pipeline network

In this de regulated era, the transportation charge through the pipeline is expected to increase
which will provide upside in the bottom line of companies who presently own the pipelines.
The transportation charge will be 70-80% of that of alternative mode of transportation. The
major beneficiary of this will be IOCL, as it has a pipeline network of 6,523 km across India,
with a total capacity of 43.45 MMT of which its throughput of products and crude oil during
2000-01 stood at 39.44 MMT, operating at 90 % efficiency. HPCL and BPCL also have
product pipelines with a total capacity of 7.77 MMT and 3.5 MMT respectively.

Environmental Conditions

Recent tightening of environment regulations has forced refineries to produce green Fuels by
upgrading the quality of auto fuels i.e. Petrol & Diesel. These major Challenges have led to a
re look at the refinery configuration and technology being Adopted with a view to streamline
operations for achieving better productivity and Profitability In order to reduce the pollution
level the Government has come up with the guideline to reduce the level of impurities in the
Diesel and Petrol It has adopted the Euro standards, which are named as Bharat standard.

Marketing network and infrastructure

The Oil PSUs have shifted focus from dealers to customers as after deregulation the Sector
will transform from a sellers market to a buyer’s market. Since the key products are
commodities; differentiation is on service and additional amenities offered to the customer
Aggressive marketing in the period prior to deregulation has helped these companies to move
up the learning curve and understand customers. PSUs are revamping their Retail outlets with
an investment in the range of 0.8 to Mn the entire infrastructure is been revamped, remodeled,
resisted, jubilee outlets Service and brand image are being built. As the marketing margins are
going to be higher for companies with a high proportion of owned/leased retail networks, they
have actively bought out the retail outlets controlled by the dealers. Presently company
controlled retail outlets for IOCL are 35%. HPCL and BPCL are better positioned with around
56% and 65% company controlled retail outlets respectively. Once the deregulation comes in
full play in the industry, it is expected that the retail segment will be gathering further
momentum as a number of foreign and private players will be entering the market. PSUs with
their formidable infrastructure and network will continue to be in advantageous position.
The marketing margins will be mainly guided by the following factors:

Product portfolio

The light distillate such as MS, ATF, Naphtha and LPG are considered to be high value
products, whereas heavy distillates are considered to be low value products. The margins in re
deregulated scenario will be higher on the high value products and moreover demand growth
rate for the high value products is higher than low value products. Presently BPCL markets
highest percentage of high value products in its sales volume. In absolute terms IOCL has the
highest sales volume of high value products.

Sales Composition

It implies whether a product is sold through a retail network or directly to the consumer.
Presently the regulated products are being sold majority from the retail network whereas the
deregulated products are wholesale products are sold directly to end consumers. In deregulated
scenario retail products are going to give highest margins. Presently IOCL has the highest
share of Diesel and Petrol in the retail market due to its sheer size.

Share of own refinery products to total sales

The trend in the global industry is 70% of the products sales should be from the own refinery.
The divestment of the Govt's stake in the stand-alone refineries has bridged these anomalies to
a large extent for the oil PSU. The other success factors that play a major role in upstream
sector are the application of better recovery techniques, alliances with overseas players,
diversifying business interest into other geographical regions and organizational restructuring.

In downstream sectors, factors like modernizing processing plants, strategic alliance,

strengthening of import infrastructure and increasing scale of operations would be the critical
factors.

Government policy

The government introduced administered price mechanism (APM) in year 1970 to ensure
standard pricing and fair returns to all refining and marketing companies. Also, in the interest
of weaker sections of society, it subsidized the prices of kerosene, LPG and high speed diesel
(HSD). This had an impact of rising of oil pool deficit and frequent need of Government
decision to hike Petro product prices, which was always a political problem. To do away with
this problem, it recommended replacement of APM with market-determined pricing
mechanism. APM was dismantled from 1st April 2002. With respect, the following key
recommendations were announced in the union Budget 2002-03: The pricing of petroleum
products will become market determined. The Oil Pool Account will be dismantled on April
1,2002 and the outstanding balances will be liquidated by issue of oil bonds to the concerned
oil companies.

Private companies will be permitted in distribution subject to specified guidelines.

A. Petroleum Regulatory Board will be set up to oversee the sector.

B. Subsidies to refineries in the North-East will continue on a rationalized basis.

C. Freight subsidies will continue to be provided for LPG and kerosene to far-flung areas.

D.As a result of the dismantling of APM, the price of diesel will come down by around 50
paisa per liter and of petrol by around Re 1 perliter.

E. These changes in prices will come into effect from March 1, 2002, initially as part of the Oil
Pool Account.

F. The 1997 Government decision on the dismantling of APM mandated the subsidy on LPG
and kerosene oil to be reduced to 15% and 33% respectively by April 1, 2002. Accordingly,
the price of LPG is being raised by about Rs 40 per cylinder and of kerosene oil for PDS by
about Rs 1.50 per liter from March 1, 2002.

G. The subsidies on LPG and kerosene will be on a specified flat rate basis from April 1, 2002.
The retail prices will then vary as the price of crude oil changes inlntemational markets.

H. These subsidies will be borne by the consolidated fund from April 1, 2002. But Govt, later
rolled back the price of LPG cylinder by Rs 20 per cylinder.

I.As a result of the dismantling of APM, the price of diesel will come down by around 50 paisa
per liter and of petrol by around Re 1 per liter. These changes in prices will come into effect
from March 1, 2002, initially as part of the Oil Pool.

J. The 1997 Government decision on the dismantling of APM mandated the subsidy on LPG
and kerosene oil to be reduced to 15% and 33% respectively by April 1, 2002.
K. As a result of the dismantling of APM, the price of diesel will come down by around 50
paisa per liter and of petrol by around Re 1 per liter. These changes in prices will come into
effect from March 1, 2002, initially as part of the Oil Pool

L. The 1997 Government decision on the dismantling of APM mandated the subsidy on LPG
and kerosene oil to be reduced to 15% and 33% respectively by April 1, 2002. Accordingly,
the price of LPG is being raised by about Rs 40 per cylinder and of kerosene oil for PDS by
about Rs 1.50 per liter from March 1, 2002.The subsidies on LPG and kerosene will be on a
specified flat rate basis from April 1, 2002. The retail prices will then vary as the price of
crude oil changes in international markets

M. These subsidies will be borne by the consolidated fund from April 1, 2002. But Govt, later
rolled back the price of LPG cylinder by Rs 20 per cylinder.

In view of the abolition of Administered Price Mechanism on petroleum products and in order
to provide for the subsidy on LPG.

COMPANY PROFILE
-HPCL- HINDUSTAN PETROLEUM CORPORATION LIMITED” was

commissioned by Caltex Oil Refining India Ltd., (CORIL) in 1957. It is the first oil refinery
on the East Coast and the first major industry in the city of Visakhapatnam, Andhra Pradesh.
The installed capacity of the refinery was 0.65 million metric tons per innum (MMTPA) in
1957.founded in 1974 Hindustan petroleum corporation limited HPCL ) a fortune 500
company, is one of the largest integrated petroleum refining and marketing company in India.
CORIL was taken over by the Government of India & merged with Hindustan Petroleum
Corporation Limited in 1978.

Visakh refinery is fuels based refinery generating major products of mass consumption like
petrol, diesel and Kerosene. Hence, crude meeting general purpose characteristics can be
processed with the existing refinery configuration. Visakh refinery has flexibility to process
wide range of crude procured across the globe & ranging from very high sulphur to low and
non-bituminous category to bituminous lubes base crude’s.

HPCL mostly emphasis on maintaining a sound asset base determined by operational

excellence they ensure that capital is interest to build the future within a disciplined financial
framework.

Their strategies nurture our core competitions while positioning the company to take
advantage of emerging opportunities. The commitments, experience and talent of their
employees play a noble role in executing their strategies. Thus, they are focusing more on
sharing expertise, learning & systems across are wide spread network to leverage their
strengths. These principles stood there in good stead in last financial year wherein the impact
of the lower sales as well as net income from operators due to lower demand realization were
mitigated by the reduction in expenditure while in refineries are interested in new systems &
process to produce fuels with specification their never the less continue to focus on improving
efficiency & profitability.

Above all this lays the fact that HPCL believes itself to be more than just about oil.In its
commitment to people & the natural environment, HPCL in fact is a rare jewel. Visakh
Refinery consists of three crude / vacuum distillation Units, one with a capacity of 1.5
MMTPA and other two having a capacity of 3.0 MMTPA each. Fluid catalytic cracking unit
has been provided as a secondary processing unit. There are two FCC units with a capapacity
of 0.4MMTPA and 0.95MMTPA (after Revamp) respectively. This is only one of two
refineries in India with two FCCUs. Besides these, refinery has Propylene Recovery Unit
(0.023MMTPA Capacity). Bitumen blowing Unit (0.225MMTPA Capacity) and various
product-treating units.

The product quality standards with respect to sulphur content have been made more stringent
of late. To meet these new standards Diesel Hydrae-De- sulphurisation Unit (DHDS) has been
set up in the refinery at an approximate cost of Rs.794 chores. The commissioning of DHDS
facilities is in progress.

The various process units of Visakh Refinery have been provided by leading process censors
technology suppliers. Visakh Refinery was among the first in India to have digitals controls for
refinery operations and advanced controls were added later on to the existing units to facilitate
accuracy in tank gauging along with optimization / improvement n product blending. The
project, first of its kind in India has recently been implemented in Mumbai refinery of HPCL.

the performance of Visakh Refinery has been excellent in past in all relevant areas like crude
through put, distillate production, R&D, specific energy consumption etc. the fire - .-.dent in
September 1997, gave a temporary setback to the refinery operations, which has been over
come in a short period by the concerted efforts of all the employees.

visakh Refinery attaches utmost importance to conservation of energy by regular monitoring

and analysis of fuel and utilities consumption, optimizing plant operations and proper up keep
of plant and machinery. The refinery has own national energy conservation awards Ministry of
power. Government of India Various energy conservation projects like Efficiency furnaces.
Captive power plant, CDU / CTU integration, co Boiler, OM&S.

Automation, improved Preheat Recovery etc. with a total investment of Rs. 214 chores have
been implemented / after under implementation. The fuel and loss for Visakh Refinery for the
year 1999-2000 was 5.4 wt % on crude as against the target of
6.8 wt%. The specific energy consumption was 140.2 MBTU / BBL / NRGF, which is the
lowest ever.Concen for environment has always been a way for life of Visakh Refinery ever
since it went on stream in 1957. Over the years the refinery has invested large amounts in
various projects to meet the stringent emissions and discharges norms applicable to the
refinery. There are two Effluent Treatment Plants for treating wastewater to MINA’s standards
before discharge to the sea. Sulphur Recovery Unit based on state-of the-art locate-n
technology was commissioned in 1994 to reduce sulphur dioxide emissions from the refinery.
In the refinery for on-line measurement of air quality these measures ensure that the impact of
refinery operations on the surrounding environment is minimal.

Visakh Refinery has always kept in mind its responsibility towards the society at large,
especially the weaker sections. Two tribal villages near Visakhapatnam-manyapallem and
Itchapuram have been adopted with the aim of uplifting them and making them self- reliant.
Various activities medical camps, adult/children education has been undertaken. Manyapalem
has already achieved 100% literacy. A school building has been constructed at Itchapuram for
primal-} education. The refinery has also distributed high yielding varieties of coconut and
fruit saplings. To supply drinking water, with bore wells have been dug and water storage in
Manyapalem. Safety of both man and machine has to be given the utmost attention in any
industrial context. Visakh Refinery has received a number of awards given by various national
and international agencies for the excellent safety track record of the refinery. The refinery is
equipped with a firewater network, which is kept pressurized around the clock to handle
emergencies arising during operations. There is a separate Fire & safety department manned
by qualified with the relevant equipment.
BRIEF HISTORY OF THE COMPANY

Hindustan Petroleum Corporation Limited (HPCL) is the result of a successful convergence of

four established companies. Today the second largest integrated oil refining and marketing
company in India, HPCL was born of a merger of ESSO, lube India Ltd, Caltex Oil Refining
India Ltd and Kosan Gas Company Ltd.

Oil derrick in Okemah, Oklahoma,

Petroleum, in one form or another, has been used since ancient times, and is now important
ACROSS society, including in economy, politics and technology. The rise in importance was
mostly due to the invention of the internal combustion engine and the rise in commercial
aviation.

INCORPORATION

The company was first incorporated as Standard Vacuum Refining Company of India in July
1952 and later named as ESSO India Limited from March 1962. On July 12 th, 1974 when
ESSO and Lube India were nationalized, the company was renamed as HPCL with effect from
July 15th, 1974. Subsequently, Caltex was nationalized by Government of India and merged
with HPCL in 1978. In the following year, the undertakings of Kosan I as Company Limited,
the concessionaries of HPCL in the domestic LPG market, were merged with HPCL. Hence,
HPCL which is as amalgamation of various undertakings has been growing by leaps and
bounds.
PROFILE OF HPCL

CORPORATE VISION

"To be a World Class Energy Company known for caring and delighting the customers with
high quality products and innovative services across domestic and international markets with
aggressive growth and delivering superior financial performance. The Company will be a
model of excellence in meeting social commitment, environment, health and safety norms and
in employee welfare and relations.”

CORPORATE MISSION

'HPCL, along with its joint ventures, will be a fully integrated company in the hydrocarbons
sector of exploration and production, refining and marketing; focusing on enhancement of
productivity, quality and profitability; caring for customers and employees caring for
environment protection and cultural heritage. It will also attain scale dimensions by
diversifying into other energy related fields and by taking up transnational operations.” in
order to achieve Vision objectives and to play effective roles in the emerging operating
environment, the following corporate values have been made, which would be an integral part
of decision making process.

OBJECTIVES OF HPCL

• To serve the nation’s vital interest in the oil and related sectors.

• To maintain continuity of supplies through their refinery and marketing net- work at
optimum cost to provide up to date technical assistance to the customer to conserve and put the
most efficient use, valuable energy resources.

• To earn a reasonable return of investment.

• To work towards achievement of self-reliance n the field of oil refining, formulation

and distributions system.

• To Create strong research and development base in the field of oil refining and
stimulate R&D in developing new petroleum products so as to minimize their imports.
• To maximize utilization of the existing facilities in order to improve efficiency and
increase productivity.

• To keep in pace with the developments of international petroleum refining technology.

JOINT VENTURES

Mangalore Refinery

The corporation’s first joint venture, the Mangalore refinery and petrochemicals Ltd. Formed n
association with the Adyta Birla Group has achieved a milestone by expanding the refinery’s
capacity from 3 MMTPA to 9MMTPA during September 1999, three months ahead of
schedule in spite of carious difficulties and constraints like undulating terrain of tile ate and
heavy monsoon.

Punjab Refinery

Preliminary activities for HPCL’s proposal to set up a 9MMTPA Refinery at Bhatia, in the
state of Punjab, are in progress. Environmental clearance for the project including for the "Led
project Crude oil terminal at Mundari in Gujarat have been received. In a bid to select a joint
venture partner for the project, a confidentiality Agreement has been signed with Ms Total
Final ELF for the same. HPCL Board has approved commencing the project as its own project
and subsequently include joint Venture partner, have so required.

Mangalore- Bangalore product pipeline

A JV subsidiary company M/s Petro net MHB Ltd. has been incorporated for implementation
of 364KM long product pipeline from Mangalore to Bangalore. However the project has not
secured financial closure by M/s. Petro net. Nevertheless HPCL is going ahead with placement
of various orders for implementation of the project in order not to impede the progress.
LPG Infrastructure Project

A joint venture company M/s. South Asia LPG Company Pvt. Ltd has been incorporated with
equal equity participation from HPCL & M/s total Final A. France for construction of LPG
cavern storage of 60000 MT for receipt of LPG imports at Visakha. This would be this would
be and largest of its kind in India.

Visakh refinery

Selection of technical partner for HPCL’s joint venture project with APGENCO for setting up
a finery -residue based 500 MW power plant at Visakh , at an estimated cost of Rs.2208 is at
an advanced stage. The detailed feasibility report is also expected be finalized shortliy.

Bitumen Emulsion

Colas, HPCL’s Bitumen Emulsion Company under joint venture with M/s. Colas S.A of
Frances, is operating with plants at Vashi, New Mumbai and Bahadurgarh, near Delhi, its third
plant near Chennai was commissioned during the year.

HPCL- Mittal Energy Limited (HEMEL)

HPCL-Mittal Energy ltd (HMEL) is a joint venture between Hindustan Petroleum an Limited
and Metal Energy investment pvt limited (MEI) , Singapore , an L.N group company , for
implementation of Guru Go bind Singh Refinery , green field refinery project located at
Bathinda, Punjab, both partners hold 49% equity HMEL and balance 2% is held by Indian
Financial Institutions, the refinery m has high distillate yield with zero bottoms , production
clean fuel E CRO-III / IV specification with environment friendly operations. It is single
largest investment in Punjab. The configuration comprising of primary and secondary - CDU /
VDU, VGO-HDT, FCC, NCU / ISOM, HGU, DHDT, SRU, DCU and polypropylene
manufacturing facilities translates into one of the highest Nelson j index among all present and
proposed refineries in India.
Hindustan Colas Limited (HINCOL)

Hindustan Colas Limited (HINCOL), a joint venture company promoted by HPCL and colas
S.A of France on July 17, 1995 has reported another year of excellent growth n its physical as
well as financial performance.

The main problem in front of the Petroleum industry in India is obviously the gross under
recoveries due to the inability of the OMCs to charge market driven prices. Presently,

The OMCs are bleeding money on sale of petrol, diesel, domestic LPG and PDS kerosene end
no concrete solution is in sight.

The major shortcoming of the refining sector is undoubtedly the excessive dependence upon
foreign sources for supply of crude oil, thereby making it especially vulnerable to the extreme
volatility in the international crude oil market. The problems have been further compounded
by the fact that India’s biggest oil field, the Mumbai High Offshore has reached a plateau in
production of late.

Another cause for concern is the increased availability of natural gas for fertilizer and power
plants. Traditionally, petroleum products such as naphtha and furnace oil have found
application in these plants. But natural gas has been found to be an effective substitute for
these products, and with quite a few natural gas fields being discovered in recent times, the
chances of natural gas finding increased usage in these industries is quite high. In brief,
alternate sources of fuel like natural gas may adversely affect volume growth of petroleum
products, both in the domestic market as well as the overseas market.

The sector is also in for an increased bout of competition, as not only is the domestic private
sector entering the refining and marketing sector, many MNC majors have also evinced a great
deal of interest in the Indian market, especially in the marketing sector. This move however
may prove to be harmful for the domestic refineries already in a position of oversupply, as the
MNCs merely plan to import the petroleum products in India, rather than setting up production
facilities in India.

With deregulation in prices introduced in important petroleum products such as MS and HSD,
the refining margins, and the marketing margins will alternatively take a hit as per the
fluctuations in the crude oil prices to the extent to which they have not been hedged. This has
laid even more onus on risk management for the players in the sector. For example, most of
the players were able to post good profits due to inventory gains during 2002-03. The situation
may reverse, and similar losses may also be incurred.
Direct sales/Lubes

Indian lubricant market comprises about 0.90 MMTPA of the automotive segment and 0.60
MMTPA of the industrial segment. The large sector industries account for around 50% of the
industrial market, and the balance is distributed across diverse sectors such as sugar, marine ,
fisheries , fertilizers etc.

LPG

MGSBU in non domestic (ND) segment has achieved a growth of 12.8% with 353 TMT sales
an all time high .LPG SBU has maintained market leadership position with 3" : o market share
in ND segment .The competitive advantage was sustained through commissioning of exclusive
distributorship for ND segment at high potential locations apart from investment in
infrastructure for long term contracts. LPG SBU has focused - conversions to eco friendly fuel
by introducing Liquid Off take Valve for Non domestic cylinders (NDC). LPG SBU also
enrolled 12.8 lakhs new consumers increasing total customer strength to 2.7 chores.

Pipeline

New terminals , depots and related marketing infrastructure were constructed during 2008-09
at a cost of approximately 34 chores .These facilities would ensure that products are made
available to consumers in the vast retail network without interruption.

Depots / Terminals

During the year 6 new POL depots /terminals with a tank age of 63700 KL at Balsa ore,
Panewadi (manmade), Bekutchi, Tirunelveli, Kappalur (Madurai) and Makalu (Hubble).
Additional tanker of 352550 KL at locations was completed. As part of our pursuit of quality
assurance they have obtained IS09002 accreditation of select Bottling Plants, product
Pipelines, retail Outlets and Lube plants.

Refining

All Refineries achieved a total Crude Thru of 10.557 MMT against a total installed capacity of
10 MMTPA with Mumbai Refinery recording 6003 TMT. Achieving 109% capacity
utilization and exceeding MOU Excellent target of 5950TMT. Visakh refinery achieved crude
thru put of 4554 TMT despite turnaround and batter7 limit shutdown for VREP-2
Commissioning. All Refineries achieved MOU targets of distillate yields (69.1 WT% vis-a-vis
66.0 wt %) and fuel & loss (5.7 wt% Vis-a-vis 7.0 wt %). DHDS project at Mumbai Refinery
successfully commissioned in March 2000. It is expected to commission at Visakh refinery
shortly. As part of the Visakh Refinery expansion project, a new Crude Distillation of 3
MMTPA was successfully commissioned at Visakh Refinery in January ).Mumbai refinery
received the national safety Council (Maharashtra chapter) award for longest accident free
period in 3 years and also the Jawaharlal lull Nehru Award instituted MOP&NG for best
improvement in Energy conservation.

HRD

The recommendations of M/s Andersen Consulting on restructuring the organization are g

implemented and strategic Business Units (SBUs) have been formed at the corporate level for
Retail, LPG, Lubes and direct sales departments. A new division called supply and ling has
been created with the main objective of facilitating trading in products and crude PSU Oil
companies’ rest to be associated with process of imports and exports.

Information Technology

The corporation addressed successfully the issue ofY2K bug by concerning all its computer
hardware, software applications and embedded systems for Y2K readiness, well in time. The
enterprise Resource Planning (ERP) system has provided essential support to main business
processes of the corporation. Various add-on applications based on ERP tern have been put in
place to exploit the full potential of the ERP system the benefits of implementing the ERP
system have now started accruing to your corporation. The system has substantially reduced
the time taken for closing the quarterly, half yearly and annual accounts. Standardization of
business processes in the tern has resulted in better management control. Cost of operation can
be easily deed in the system which helps the managers in controlling them.

PORTS / EXPORTS

The total crude oil products during the year were 15.7 Million metric tons (MMT) of which
4.2 MMT was indigenous procurement and the balance 11.5 MMT was import m countries
such as Iran, Saudi, Arabia etc. the product imports during the year :re 1921 Thousand metric
tons (TTM) with diesel accounting for bulk of the ports . The products exports during the year
were 1543 TMT. Naphtha, FO, Diesel (l%s)
formed bulk of the exports. The shipping division successfully met all the chartering
requirements of the crude oil and LPG imports as well as coastal movement of LPG and lube
oil base stock, coastal movement of product was met using vessels under time charter.

REFINERIES

HPCL has two refineries. On the west coast is the Mumbai Refinery with a capacity of 5.5
million metric tons per annum, while the other at Visakhapatnam on the east coast has a
capacity of 7.5 million metric tons per annum. Both the refineries produce a number of value
added products like petrol, high speed diesel oil, superior kerosene oil liquefied petroleum gas,
naphtha, aviation turbine fuel and others over 300 grades of Lubes, specialties and greases.

FUNCTIONAL DEPARTMENTS

Human Resources

Attrition of experienced manpower continues to be of concern. On an average, over 150

officers leave every year for better opportunities both within and outside the country. Large
scale recruitment and training appears to be the only solution. A number of HR initiatives have
been introduced to make the Corporation a great place to work.

The HR initiatives are aimed at enhancing the motivation, morale and capability of employees
across the organization. The Balanced Scorecard System as a tool for performance evaluation
both at the Corporate and Departmental level has been fully implemented, providing valuable
and timely MIS to the top Management. This MIS enables the Management to know the actual
performance vis-a-vis the target set for both the Dept as well as for the Corporation.

The Balanced Scorecard tool to set up performance targets and evaluation, Competency
Mapping and Development Centers to enhance employees’ capabilities and Six Sigma for
quality improvement have yielded rich dividends and are being constantly upgraded to higher
levels of sophistication. Such initiatives give the management the confidence to take on bigger
challenges in its pursuit of growth. Greater emphasis has been laid on training not only to
enhance the capabilities of the employees but also update their
skills in respective functional areas as well as related areas. This includes both the in house
training and external training. Industrial Relations climate continued to be harmonious in all
the locations of Marketing Division, MUMBAI Refinery and VISAKH Refinery and there was
no loss of production and loss of man-hours during the year.

The Employees Portal also offers a number of self-learning programs which prepares the
employee to take on technical and behavioral challenges. Officers are also sponsored for part-
time MBA programs of reputed institutions.

HR spirits

• Satisfaction of customers

• Pride

• Integrity

• Role model

• Involvement & commitment

• Transparency

• Spirit of Team work

HR VISION

"Excellence in harnessing the full potential of the employees for becoming a Global Energy
Company.”

HR MISSION

"Your needs are our Business."

Products Manufactured

VISAKHA refinery manufactures about 14 type’s products. These products are used in
different areas of operations.
The products manufactured and their uses are as follows:

• Liquefied Petroleum Gas (LPG): It is used for cooking purposes in heaters, burners in
industries.

• Gasoline / Petroleum: - It is used for motor vehicles engines, rail engines.

• Naphtha: - It is used for fertilizers.

• Mineral Turpentine Oil (MTO):- It is used in paint industries as solvents.

• Aviation turbine fuel (ATF):- It is used for aviation engines in aircrafts, planes.

• Kerosene: - It is mostly used for lighting & cooking stoves.

• High speed diesel (MSD):- It is used for heavy vehicles engine including rail engine

• Light diesel Oil (LDO):-It is used for engines which are used in agriculture etc.

• Fuel Oil: - This is mostly used in industries for heaters.

• Asphalt: - This is used for making roads & water frostings.

• Low sulphur Heavy stock (LSHS):- It is used as fuel in industries & for boilers from
low sulphur crude processing. This is used in ships also.

• JuteBatchOil (JBO):- It is used in Jute Industries.

• Wash-Oil - B (WO):- As lubrication for lather machines in it are used detergent

industries.

• Propylene: - It is used as raw materials for petrochemical industries.

The finished products are supplied to the following industries:

• Coromandel Fertilizers Limited (LPG, Naphtha, LSHS)

• Visakha Steel Plant (Wash Oil)

• HPCL, Visakha terminal

• Indian Oil Corporation Ltd.

• Bharat Petro Chemicals Ltd.

• Andhra Petroleum chemicals Ltd (Propylene)

Marketing

The marketing operations of HPCL are divided into three Strategic Business Units, Retail ;:
uprising of Petrol, Diesel and Automotive Lube sales, Direct Sales comprising of Lubes ird
Industrial & Government sales and LPG.

Our Marketing Network

2009-10 2008-09 2007-08 2006-07 2005-06 2004-05

Regional Offices 101 90 91 86 85 85

Terminals/Installations/TOPS 42 42 42 37 36 36

Depots 100 100 93 93 92 100

LPG Bottling Plants 44 43 43 42 41 40

ASFs 32 21 16 13 13 10

Retail Outlets 9140 8539 8329 7909 7313 6667

5KO/LDO Dealers 1638 1638 1648 1648 1648 1648

IPG Distributors 2395 2250 2232 2238 2202 2153

LPG Customers (in crores) 2.91 2.69 2.52 2.39 2.28 2.17

The strengthening of the marketing network over the years has lead to dominance in the narket
reflected in its growth and leading to best quality of service. HPCL was one of the first
companies to understand the nation's energy requirements and take necessary measures ::
fulfill the expectations. Its increasing infrastructure facilities are due to the successful
realization of set targets and sustained quality of service and customer relations.

HPCL presently owns and operates two coastal refineries at Mumbai and Visakhapatnam
Hong with a joint venture refinery at Mangalore. Another Refinery of 9 MMTPA is under
construction in Bhatinda, Punjab by HMEL, a Joint Venture with Mittal Energy Investments
Pvt. Ltd. A massive infrastructure comprising two cross country pipelines and an extensive
network of terminals, depots, LPG Bottling plants, Lube Filling Plants and Aviation Service
Facilities (ASF) contributes to India's growth every year.
Storage and Distribution

HPCL has extensive nationwide network comprising of pipe lines, terminals and depots for re
storage and distribution of petroleum products across the country.

SHARE HOLDERS

HPCL has rewarded the shareholders with issue of bonus shares in the ratio 1:2 during fiscal
year 1999-2000.Further for the fiscal year 1999-2000 , an interim Dividend of 80% has been
declared. Inventor’s meetings were held both in India and abroad wherein corporation’s
performance and future strategies and were shared with investors, fund who reposed in faith r
HPCL in-spite of subdued climate of investments. Their shareholder family is large and is
presently over one lakh. They have always endeavored to reward their shareholders with
attractive dividends. The record of the Corporation in this regard is creditable.

FUTURE PLANS

HPCL has ventured into new business opportunities to access additional revenue streams and v
emerge as an integrated energy company. The corporation’s foray into the upstream sector f
exploration and production sector would provide access to equity oil to ensure energy purity.
An investment outlay of nearly Rs. 11500 crores has been earmarked during Xlth 5 year plan
till 2012, of which outlay on upstream activities is projected at Rs. 2000 crores. E&P blocks
are in India and in overseas situated at Oman and Australia each. An LPG cavern storage
facility being set up in Visakhapatnam, a joint venture with TOTAL, is nearing is nearing
completion. The project is the first of its kind in south and south-east Asia.

The HPCL has recently signed a memorandum of understanding (MOU) with the
visakhapatnam Port Trust (VPT) valid for 30 years to facilitate the farmer’s proposal to set up
a single point mooring facility (SPM) in the inner Harbour. As per the MOU, VPT would
provide 384 acres of land for this purpose to HPCL; the latter also assured to increase its
production capacity at the refinery from 7.5 MMTPA to 15 MMTPA through cargo thru put of
crude oil from 2015 onwards and the additional traffic on account of petroleum products rising
out of the refinery expansion. The VPT would also reduce the wharf age rate for crude oil
handled at off-shore tanker terminal (OSTT) from the existing price of Rs.67.74 per -.etric ton
to Rs.39 per metric ton which would offer an attractive wharf age of Rs.17 per
metric ton for the crude oil handled at SPM. This would also help HPCL to recognize the
existing tank age facilities to comply with Euro III/IV norms as per the center’s directive.

GOVERNMENTPOLICIES

In administered price mechanism (APM) the government tried to balance the stakeholder’s i.e.
reasonable return to refineries. Subsidy to users of kerosene and LPG and a cushion against
volatile international prices for auto fuel users. In effect the APM transferred its financial
burden to the exchequer on April 2 of2004 the administered prices mechanized was
dismantled. However the companies have been advised not to raise the prices for three month
after the APM withdrawal.

A price revision after APM has taken place and the government has finally allowed their eins
of control to be handed over to the oil marketing companies. A mechanism has been set lace
for regularly fortnightly revision of prices by the oil companies along with quarterly eview of
excise duty by the government to check the excessive velocity. This method is for rotecting the
domestic consumers from volatility of the international market. The pvemment has reduced the
excise duty on petrol and diesel by 2% during the last revision. It - ras filled recently 32% for
petrol and 18% for diesel.

Recently Government has. allowed oil companies to enter retail marketing, a field where ;tum
are high competition may keep acid on prices besides benefiting consumer in other rays too.
The government has opened the lucrative marketing sector with the condition that ew entrants
should have an investment or commitment to invest at least Rs.2000 crores in le upstream or
downstream or related infrastructure.

GENESIS OF HPCL

HPCL is a public sector undertaking by government of India monitored by ministry of

petroleum and natural gas assets of EESO India and Tube India Ltd. Were taken over and
merged in 1974. It was in the 1978 that Caltex Refinery and Marketing Operations were taken
over by the government and amalgamated with HPCL.

[PCL -was formed as “Schedule B” Corporation later elevated to status of “Schedule A”

corporation on June 5th 1987. After completion of major expansion projects at visakhapatnam
and Mumbai Refineries, the corporation new processes a combined refining capacity of 10
million tons per annum.The corporation has a large dealer network, owner 054 retail outlets
and a large number of resellers throughout India. HPCL is integrated
petroleum refining and marketing of petroleum products in India on the other and HPCL deals
with selling various products like batteries and also same petrochemicals.

It also earns commission on international bunker operations as a part of investment process in

public sector undertakings the Government to financial institutions, mutual funds and banks
solid shares of HPCL. The current shareholding pattern is

• Government of India more than 50%

• Mutual funds and other financial institutions 36.14%

• Employees and other 0.80%

HPCL Visakh refinery is the first industry set up Visakhapatnam followed Coromandal
fertilizers, Bharat Heavy Plates and Vessels Hindustan Polymers Ltd.

OUR ROOTS

1952: The Company was incorporated in the name of Standard Vacuum Refining Company
of India Limited on July 5, 1952

1962: On 31st March, 1962 the name was changed to ESSO Standard Refining Company of
India Limited.

1974: Hindustan Petroleum Corporation Limited comes into being after the Takeover and
merger of erstwhile EssoandLubelndiaUndertaking

1976: Caltex Oil Refining Ltd. is taken over by the Government of India and subsequently
merged with HPCL in 1978.

1979: Kosan Gas Company, the concessionaries of HPCL in the domestic LPG Market are
taken over and merged with HPCL.

LOCATION DETAILS
HPCL accounts for about 20% of nation’s refining capacity. On the west coast is the Mumbai
Refinery with a capacity of 5.5 Million Metric tons per Annum while the other at
Visakhapatnam, on the East Coast, has a capacity of 7.5 Million Metric tons per Annum

Mumbai Refinery - Salient features

HPCL’s Mumbai refinery, one of the most complex refineries in the country, is constructed on
an area of 321 acres. This versatile refinery which is the first of India’s modem refineries,
symbolizes the country’s industrial strength and progress in the oil industry. Mumbai Refinery
has grown over the years as the main hub of petroleum products. The refineiy has reached to
present level through several up gradation and restructuring processes. A chronological
summary of the developments is provided below:

• M/s Esso commissioned in 1954 with a crude processing capacity of 1.25 MMTPA.

• Lube refinery, Lube India Ltd, was commissioned in 1969 with a capacity of 165
TMTPA of Lube Oil Base Stock (LOBS) production.

• Crude processing capacity increased to 3.5 MMTP A during 1969

• Government of India took over Esso and Lube India and formed HPCL in 1974.

• Expansion of fuels block was carried out by installation of new 2 MMTPA crude units
in 1985.
• Second expansion of Lube Refinery took place to increase the capacity of the refinery
to 335 MMTPA, so far the largest in India.

• The current installed capacity of the refinery is 6.5 MMTPA.

Visakh Refinery-Salient Features

The Visakh Refinery is also an important contributor to HPCL's Petroleum products

requirements Visakh Refinery was commissioned with an installed capacity of 0.65 Million
Metric Tonnes Per Annum (MMTPA) by Caltex Oil Refining (India) Ltd. in 1957. This was
one of the first major industries of Visakhapatnam and first oil refinery on the East
Coast. .After the nationalization, HPCL has transformed itself into a mega Public Sector
Undertaking and it is second largest integrated oil company in India. The summary of
development of the refinery is given below:

• The first East Coast Oil refinery was commissioned as Caltex Oil Refining India Ltd.
(CORIL) in 1957 with a crude processing capacity of 0.65 MMTPA.

• The refinery was subsequently taken over by Government of India in 1976 and merged
with HPCL in 1978.
• The refinery's crude refining capacity increased to 4.5 MMTPA during the first
expansion in 1985.

• The refinery's crude refining capacity increased to a further 7.5 MMTPA during the
second expansion in 1999 and is currently 8.3MMTPA effective April 2010.

• Diesel Hydro desulphurization (DHDS) project was commissioned in the year 2000 to
meet BS-I/II specification of diesel. The facilities were further augmented in 2005 by addition
of 2nd Reactor in DHDS unit for supplying BS-III grade diesel

some of the crude processed at Refinery includes:

S.NO COUNTRY CRUDE NAME

1 Kuwait Kuwait

2 Iran Iran Mix, Blend

3 Iraq Basrah Light

4 UAE Dubai, Ummshaif, Upper Zakkum, Murba

5 Saudi Arab Arab Mix , Arab Medium

6 North Yemen Masila

7 Libya Essider

8 Angola Qua Iboe, Bonny Light, Escravos, Forcados

9 Malaysia Cabind, Nemba, Palanca

10 UK Brent Blend

11 Australia Skua

12 Indonesia Minas

13 Pakistan Badin Blend

Besides these crude’s, Refinery as also processed indigenous crude like Bombay High, awa,
Krishna Godavari Basin crude, RatnaHira, Panna.

Brief Description of Process Facilities

visakh Refinery had an installed capacity of 0.0675 MM’ITA 1957. The crude processing
opacity was raised to 1.5 MMTPA though put level over a period of modifications. The crude
processing was further expanded to 4.5 MPTA level during 1985 by adding new crude f
(vacuum) FCC units and related utilize off side facilities utilizing available space in an
integrated manner. The refinery is capable of processing both imported (Basrah) and
indigenous (Bombay high crude). A total number of 36 types of crude like IN, Dubai have
been successfully processed by this refinery. Currently 70% of the crude is processed in
Bombay refinery.

Product State of the refinery includes LPG, LAN, HAN, MS, MTO, ATF and JBO, WASH IL,
SLO, PISD, FO, LS, HS, Bitumen and sulphur. The performance of Visakh refinery has been
excellent in past in all relevant areas like crude thru put, distillate production, R&D, specific
energy consumption etc the fire incident in September 11 , 1977 gee a temporary setback to
the refinery operations , which has overcome in short period by the concerted e Torts of all the
employees. Visakh refinery attaches utmost importance to conversation of energy by regular
monitoring and analysis feel utility consumption, optimizing plant operations and proper
upkeep of plant and machinery. The refinery has out national energy conservation awards from
ministry of power, Government.

Manpower Particulars

The manpower in the organization is of different categories and cadres. In HPCL (VR), the
manpower is broadly divided into managerial & Non-managerial categories. The employees n
the non-marketing categories are represented by RW, which means refinery 'Orkers.*HPCL
has no posts classified under group “B” as the entry in non-management grades has been re-
classified in group “C” effective 1.1.1994.

Infrastructure
1-eeping pace with Nation’s energy requirements the J/PC’I Infrastructure today boasts of
Icfineries, cross-pipelines, LPC extensive network of retail outlets, regional offices, terminals
depots that truly make us an industry leader.

E.H.S. Policy

Environment, Health & Safety have continued to gain increasing importance, a rightly so, in »•
e v of the ecological imbalance that the world is facing at large. HPCL as a responsible C :
rporate Citizen has always strived to strike a right balance between operating its business n i
maintaining a sense of harmony with its surroundings.

1 v the PEOPLE who make their working environment safe by adopting safe work practices
JEC it is these work practices that form a part of any Environment, Health & Safety (EHS) ::
hey. The objective of EHS Policy is not only to bring about awareness, but to also promote i
dilution free environment; and create a healthy surrounding and safe working conditions :
constantly guiding all our actions within a consciously recognized and adopted set of
®andards.
_
*.e EHS Policy is a testimony to HPCL's Commitment towards protection of environment as
* e have a great responsibility to not only protect the health & safety of our colleagues but _so
hand over a safe world to the future generation to come. I am confident; all our a: [leagues will
follow the EHS Policy, not only in word but in spirit, and actively contribute : vards achieving
its objectives.

AWARDS AND ACHIEVEMENTS

• HPCL has been honoured by Chid Rights & You (CRY) with the prestigious ‘CRY
Child Rights Champion 2012-13’ Gold Award for demonstrating extraordinary commitment to
the Rights of Children in India.

• HPCL was conferred with INDIASTAR 2012 Award by the Indian Institute of
packaging (IIP), as recognition of excellnce in packaging for ‘TamperGard security Labels on
210 Litres Oil Metal Barrels’.

• HPCL ranks 336 in Fortune Global 500 list- Hindustan Petroleum Corporation Ltd.
HPCL is ranked 336th position during 2010-11 in the prestigious list of Fortune Global 500
Companies.

• HPCL ranks 1054 in Forbes 2000 list.

• Scope CSR Award for the Year 2009-10- HPCL received the SCOPE Gold Trophy
Meritorious Award for Corporate Social Responsibility & Responsiveness from Her
Excellency The President of India Smt. PratibhaDevisinghPatil.

• Golden Peacock Award for CSR-2011 during the 6th International Conference on CSR
organized at Delhi on April29,2011.

• Readers’ Digest Trusted Brand Gold Award 2011- HPCL has been conferred with our
service brand, Club HP with the Gold award for the 6 th consecutive year at the 13th Reader’s
Digest Trusted Brand survey.

• “Excellence in Quality” Award by M/s BOSCH for supplies of Lubricants for their
Aftermarket Sales.

• Golden Peacock HR Excellence is Awarded to Organizations that follow excellent

Human Resources practices and strategies which are directly contributing to the business.

• Indira Gandhi RajbhashaPuraskar-conferred by Govt.of India, Ministry of Home

Affairs-RajbhashaVibhag for the year 2009-10 under PSU category.
A THEORETICAL DISCUSSION ON RECRUITMENT AND SELECTION PROCESS

Recruitment means to estimate the available vacancies and to make suitable arrangements for
selection and appointment. Recruitment is understood as the process of searching for fed
obtaining applicants for the jobs, from among whom the right people can be selected.

A. formal definition states, “It is the process of finding and attracting capable applicants for
employment. The process begins when new recruits are sought and ends when their applicants
are submitted. The result is a pool of applicants from which new employees are selected”. In
this, the available vacancies are given wide publicity and suitable candidates are encouraged to
submit applications so as to have a pool of eligible candidates for scientific

Selection. In recruitment, information is collected from interested candidates. For this different
source such as newspaper advertisement, employment exchanges, internal promotion, etc. are
used.

In the recruitment, a pool of eligible and interested candidates is created for selection of most
stable candidates. Recruitment represents the first contact that a company makes with potential
employees.

DEFINITION OF RECRUITMENT

According to EDWIN FLIPPO, ’ "Recruitment is the process of searching for prospective

employees and stimulating them to apply for jobs in the organization. ”
ED FOR RECRUITMENT

• The need for recruitment may be due to the following reasons / situation: Vacancies due
to promotions, transfer, retirement, termination, permanent disability, death and labor
turnover.

• Creation of new vacancies due to the growth, expansion and diversification of business
activities of an enterprise. In addition, new vacancies are possible due to job specification.

PURPOSE AND IMPORTANCE OF RECRUITMENT

• Determine the present and future requirements of the organization on conjunction with
its personnel-planning and job analysis activities.

• Increase the pool of job candidates at minimum cost.

• Help increase the success rate of the selection process by reducing the number of
visibly under qualified or overqualified job applicants.

• Help reduce the probability that job applicants, once recruited and selected, will leave
the organization only after a short period of time.

• Meet the organization’s legal and social obligations regarding the composition of its
work force.

• Begin identifying and preparing potential job applicants who will be appropriate candidates.

• Increase organizational and individual effectiveness in the short term and long term.

• Evaluate the effectiveness of various recruiting techniques and sources for all types of
job applicants.

Recruitment is a positive function in which publicity is given to the jobs available in the
organization and interested candidates are encouraged to submit applications for the purpose
of selection.
Recruitment represents the first contact that a company makes with potential employees. It is
through recruitment that many individuals will come to know a company and eventually
decided whether they wish to work for it. A well-planned and well-managed recruiting effort
will result in high quality applicants, whereas, a haphazard and piecemeal efforts will result in
mediocre ones.

Recruitment - searching for and attracting candidates - external or internal - for job vacancies.
New people are found and brought into the organization. This involves communicating with
actual or potential job seekers, motivating them to apply and persuading candidates that they
really want to come and work for the firm. The objectives are to attract candidates of the right
quality in the right number.

Competition and inertia exist in a labour market. Many candidates must decide to cave their
present job; the best may not be looking for a job change. With high employment labor
shortage), good candidates may be scarce. Conversely where there is high employment, some
good candidates may be reluctant to move from the-situation-they-know into the-situation-they
don't-know. Recruitment occurs across all occupations from school and college leavers to the
unskilled and semi-skilled, to technologically oriented staff and successful senior managers.
The police service, forces and even judiciary have recruitment problems and systems.

FACTORS AFFECTING RECRUITMENT

There are a number of factors that affect recruitment. These are broadly classified into two
categories:

• Internal factors

• External factors.

Internal factors

The internal factors also called endogenous factors are the factor within the organization that
affects recruiting personnel in the organization. Some of these are mentioned here.

• Size of the organization: The size of an organization affects the recruitment process.
Experience suggests that larger organization find recruitment less problematic than
organization with smaller size.