New IOC chairman hits the ground running-I: Promises to deliver August 25: The new IOC chairman, 57-year old B Ashok, seems to have hit the ground running. He has identified 6 key focus areas for IOC, which he shared in the first board meeting he chaired after his appointment: 8Need to sustain leadership in core areas of business, which includes petrochemicals and gas segments. 8To achieve operational excellence through safe and reliable means. 8Invest in people to build capability and create a leadership pipeline. 8Leverage the assets of IOC for effective project implementation and quick-win solutions to improve margins. 8To inculcate financial prudence. 8Build and sustain IOC`s brand reputation. Ashok has over 33 years of experience behind him. This is his profile: 8He has wide experience in roles across the Marketing Division. 8As head of Retail Sales, he managed IOC`s 24,000 strong retail network. 8As State Head in two major states, he handled the complete business portfolio of IOC in these states 8He also headed the overseas business of IOC in South East Asia, based out of Kuala Lumpur 8Till recently, he was on the Board of Lanka IOC, a subsidiary of IOC. 8Additionally he has also headed Corporate Communications during his career at IOC. Details New IOC chairman hits the ground running-II: Retail outlet automation work to be speeded up August 25: The new IOC chairman wants automation work to be prioritized to ensure that all retail outlets (ROs), including KSKs are fully automated by 2020-21. 8Airing strong views on the subject in a recent IOC board meeting, he said that the existing automation plan had to be accelerated to cover high selling ROs initially so as to be able to achieve 85% to 90% automation in terms of throughput in the next 2 years. 8As per the existing plan, in terms of coverage of cities, during 2014-15, 100% RO automation has been completed in 4 cities (Mysore, Pondicherry, Bellary and Ghaziabad) and 2 more cities (Bhubaneswar and Jodhpur) are expected to be covered by end August, 2014. Prior to 2014-15 RO automation has been completed in 4 cities (Chandigarh, Mangalore, Jamnagar and Baroda). 8In terms of numbers, as on March 31, 2014 around 6,000 ROs have been automated, and work is in progress to to automate 975 ROs selling 175 KLs and above per month. 8Recently, the company has given the go ahead for Phase V of the project, where 3000 ROs, including KSKs, selling 125 KLs and above per month, would be automated at a financial implication of Rs.202.14 crore. 8But clearly, the pace of automation is not something the new IOC chairman is happy about. He is of the view that the process has to be speeded. In keeping with his directions, it is likely that the automation targets will be redrawn. Details New IOC chairman hits the ground running-III: Must prepare for private sector competition, he says August 25: In his maiden board meeting as the chairman of the board, B Ashok has highlighted the need for IOC to be prepared to counter private sector competition. 8He pointed out some areas of opportunity where IOC needed to work on, including branding and advertising campaigns, pursuing initiatives like fleet card campaigns, ensuring allocations of CNG stations at IOC`s outlets at domestic rates and installation of solar lamps in ROs. Details of the suggestions made: 8Branding and advertisement campaign to be planned for cities where 100% automation has been achieved. This would enable IOC to face competition from various private companies who are anticipated to enter the market as the under recoveries on HSD are reducing and full deregulation is likely by the year end. 8The petroleum ministry to be requested to allocate CNG to IOC at domestic rates so that CNG facilities can also be installed at the existing retail outlets, which would provide leverage to IOC to face stiff competition from the private sector. 8Aggressively pursue initiatives like the fleet-card campaign, to build its capability to face competition from the private sector. 8Another measure that would really contribute to the cause according to Ashok, would be the installation of solar lamps at all ROs. Solar units must be implemented in those ROs where power supply is a constraint. Notably, 1400 ROs are already solar powered and over 1000 ROs are planned to be converted in 2014-15. Ashok wants the process to be accelerated and he wants the company to look at the possibility of installing solar chargers for inverters at ROs to overcome power supply constraints. Details New IOC chairman hits the ground running-IV: Measures soon to fish out CPCL from trouble August 25: The new IOC chairman is keen to fish the ailing Chennai Petroleum Corporation Ltd (CPCL), an IOC subsidiary, that had been posting continuing losses, out of trouble. 8Notably, CPCL posted a loss of Rs. 1767 crore in 2012-13 and a further loss of Rs. 304 crore in 2013-14. These losses have not only eroded 50% of the net worth of the company over the last 4 years, but also attracted the provision of Sick Industrial Companies (Special Provisions) Act, 1985. Consequently, CPCL is required to report to the BIFR of such erosion and steps are being taken to mitigate the crisis. 8The first priority is to ensure that CPCL stays out of the stranglehold of the BIFR. He wants the issue to tackled on a war footing and has flagged this as a key item for action in the next board meeting of the company. 8He has asked for a detailed proposal on what measures, including capital infusion and fiscal support, should be taken to get the company out of trouble. 8Ashok is also looking for a solution on how to handle the consequences of the 15% equity held by the Iranian entity, NICO, in CPCL. As a result of sanctions imposed by US and European Union on Iran and its business entities, CPCL finds itself in a spot while accessing borrowings, insurance coverage or raising funds. Details New IOC chairman hits the ground running-V: Safety to be strengthened, line patrolling to be intensified August 25: Safety and security of cross-country pipelines is high up on the priority list of the new IOC Chairman, particularly when it comes to combating pilferage. 8He has ordered that the frequency of line patrolling must be increased and the possibilities of hiring detective agency to identify gangs of pilfers be examined to enable deterrent action. 8Although issues relating to pilferage have already been taken up to the highest level of police and district administration in all the states, the chairman has expressed the need to beef up preventive action. 8The chairman has also called for significantly increasing the frequency of health check-up for ageing pipelines. 8Ashok admitted that corrective action is being taken, including recoating and repair of pipelines, using of sleeves and even replacement of pipeline sections, but he emphasized that more should be done. 8Till now, based on integrity assessment studies, 17.8 km of pipe sections have already been replaced during 2003-04 and 2013-14. Further, replacement of 58.3 km pipe sections were in progress in the Haldia-Barauni pipeline and Barauni-Kanpur pipeline, and there is also a plan to replace the existing 141 km long Koyali-Viramgam section of Koyali-Sanganer pipeline. 8But Ashok said that further efforts had to be made as the policy was that of zero tolerance on safety related issues. Details New IOC chairman hits the ground running-VI: Directs McKinseys to come up with five interventions that will have immediate impact August 25: Maximizing profitability is top priority for B Ashok. 8In this context, he has directed McKinsey, the consultants working on Project Samriddhi, a process and profitability enhancement initiative, to speed up its work. 8The McKinsey programme focuses on identifying opportunities to improve profitability and margins, while also building capabilities and implementing systems and processes, for ensuring long-term sustainability. 8While acknowledging that the project has shown significant progress across both opportunity identification as well as long term sustainability, the Chairman felt that more was required to be done. The main themes of the McKinsey project are: 8Building leaders for tomorrow with capability building workshops on technical and leadership skills 8Role modeling by IOC top management through regular messages and communication by Chairman, Directors and town hall addresses by the top management 8Seamless cross-functional OWR (Optimisation war room) team to plug margin leakages across the value chain. 8Active communication and engagement through regular monthly programme update newsletters, team building and idea generation workshops. 8Cascaded review architecture like Monthly Director reviews, Weekly ED and PMO reviews But the new chairman has asked the consultant to look at five key areas 8Enhancing spot purchase in comparison to term contract 8Look at procurement of crude on spot basis through tendering in comparison to setting up of a trading desk 8More importantly, Ashok said that there was a need for identification of at least five or six interventions that could be immediately implementable so that it provides the requisite momentum to the study. Details New IOC chairman hits the ground running-VII: Wants External Safety Audit exceptions addressed quickly August 25: The new IOC chairman in his maiden board meeting made it clear that he wanted pending External Safety Audit (ESA) exceptions resolved quickly. 8Pointing to the 875 pending OISD ESA recommendations of refineries, pipelines and marketing installations as on March 31, 2014 and 529 EA points added during the quarter April-June, 2014, the chairman asked all concerned units to expedite resolution of the outstanding exceptions. 8He said that the number of exceptions were far too high for comfort. 8Ashok was briefed that 725 pending ESA recommendations in the marketing divisions were expected to be liquidated on priority by June, 2015 while in the pipelines division, all ESA recommendations pending for more than 2 years were expected to be liquidated by December 2014. 8Further, old ESA recommendations, which are not implementable, based on risk analysis and possible mitigation measures, were taken up with the OISD for liquidation. 8But clearly, Ashok seems to be taking a lead in monitoring the exceptions, suggesting that their liquidation would be an indication of efficiency of the management. The website carries here, for reference purposes, details of the quarterly compliance report of External Safety Audit (ESA) recommendations of refineries, pipelines and marketing installations for the quarter April-June, 2014, detailing the status of all recommendations, completion schedule and age profile of pending recommendations, location wise numbers of most critical ESA recommendations, reasons for delay at each location and details of pending recommendations across divisions. Details New IOC chairman hits the ground running-VIII: Wants justification for taking LSTK route for Paradip Polypropylene project August 25: B. Ashok is looking at every IOC project with a fine comb. 8When a proposal for implementing the Rs 3150 crore polypropylene project at Paradip and the Rs 3076 crore Distillate Yield Improvement (DCU) project through the LSTK route, by a hybrid tendering mechanism came up for approval, the new chairman said that the LSTK route had the capability of raising the costs of the projects, thereby reducing the IRRs. 8He admitted that the timely completion and cost containment were some of the advantages of the LSTK system but yet wanted a full justification from the refinery division on its recommendations. 8Clearly, Ashok is going to question all established norms in IOC. 8The refinery division subsequently got back on Ashok`s query, claiming that while costs are higher, the IRRs are high too under the LSTK route. 8The polypropylene project will have an IRR of 39.2% with completion in 39.5 months whereas the DCU at Haldia would have an IRR of a respectable 20.1% with completion in 39 months. 8A final decision on the mode of implementation of the project is awaited. Details New IOC chairman hits the ground running-IX: Conciliation Policy gets the nod August 25: The B. Ashok led IOC Board has approved a Conciliation Policy that would speed up dispute resolution between contractors and the management in the company. 8In doing so, IOC is following similar mechanisms that are working successfully in companies such as GAIL and ONGC. 8The conciliation process is quicker than arbitration process since it does not entail extensive procedural requirements. 8IOC is drawing up a list of eminent people who could constitute these Conciliation Committees. 8The total number of meetings that the Conciliation Committee can have over a dispute is six, unless mutually agreed by both parties. 8An apex dispute settlement committee made up of IOC Directors will vet the recommendations of the Conciliation Committees for final approval. Details New IOC chairman hits the ground running-X: Briefs August 25: 8Non-reduction in excise duty on HSD a cause of concern: The Chairman was concerned over the fact that the petroleum ministry has not yet taken a decision on the reduction of excise duty on HSD. --Reduction of duty on petrol, however, has brought in good tidings, as it will enable the company to sell branded petrol, which was earlier discontinued due to higher price variation between normal and branded petrol. --The chairman has now asked for the issue of excise duty on branded HSD to be taken up with the finance ministry, through the petroleum ministry, because that needs to be reduced as well. 8IOC chairman believes Air India will clear outstandings with IOC before year end, with the equity infusion of Rs.6,500 crore: Air India has committed to make monthly payments of Rs.48 crore to IOC towards settlement of old outstandings and Rs.20 crore towards interest on old outstandings. --The additional payments were received for June and the first fortnight of July, 2014. --With the Parliament having approved an equity infusion of Rs.6,500 crore in Air India, it is expected that the majority of the outstandings would be cleared by the air carrier by September, 2014 on receipt of the funds from the government. --Since the funds under consideration are large, the chairman wanted the team to ensure close follow-up.
Posted on: Tue, 26 Aug 2014 03:42:20 +0000
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