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A SUMMER TRAINING PROJECT REPORT

ON
INVENTORY MANAGEMENT

AT

INDIAN OIL CORPORATION LIMITED

SUBMITTED IN PARTIAL FULFILMENT OF THE


REQUIREMENT
OF
MASTERS OF BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF SUBMITTED


BY
MS. CHANDRA VIKAS KUMAR
FACULTY MBA 2008-2010
SRM UNIVERSITY REG NO. 35084151

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SRM INSTITUTE OF MANAGEMENT &
TECHNOLOGY
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DECLARATION

I VIKAS KUMAR ,a bonafide student of SRM INSTITUTE OF MANAGEMENT &


TECHNOLOGY , REG No. 35084151 MBA (3rd Semester) hereby declare that the Final
Project entitled “INVENTORY MANAGEMENT” is an original work and the same has
not been submitted to any other institute for the award of any other degree.

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VIKAS
KUMAR

PREFACE

Knowledge has two aspects - theoretical and practical and no theoretical concept is complete
without having knowledge of its practical application. A few weeks professional training
programme was introduced as a part of curriculum of M.B.A. This summer training programme
proves beneficial to the future managers as they are confronted with the problems of actual
work environment during their training period.

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As per the curriculum requirement , I did 6 weeks training in INDIAN OIL CORPORATION LTD.
In INDIA, PANIPAT. Working in such a big concern, no matter for a very small period was really
a matter of pride. My area of work in that concern was confined to Finance department and
moreover it was not possible for me to cover all the areas of Finance department in such a short
period of time so I concentrated my working on the project assigned to me i.e. INVENTORY
MANAGEMENT. So the learning during the training in INDIAN OIL CORPORATION LTD., a
report of that is being presented in the following pages.

VIKAS KUMAR

ACKNOWLEDGEMENT

Intention, dedication, concentration and work are very much essential to complete any
task.But still it needs lot of support, guidance, co-operation of people to make it
successful.
Heart full thanks to all the respective persons who support and guide me.
I have no words to express a deep sense of gratitude to the management of

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INDIAN OIL CORPORATION LIMITED for giving me an opportunity to pursue my
internship.
I sincerely thank Mr. L.D. Batra (T&D Manager) for giving me more than just a training
place and an opportunity for understanding of what is “a good professional culture”
I express my deep sense of indebtness towards Mr. Rakesh Kumar Dubey (Finance
Manager, Panipat region) for providing me valuable information .
I would like to thank Mr.Siddhartha for guiding and helping me immensely throughout
my training.
I also offer my sincere thanks to DR. N K SINHA, H.O.D. of Master of Business
Administration, SRM Institute of Management & Technology, who gave me his
valuable suggestion for preparing this report. I also convey my regards to Ms.
CHANDRA, Faculty, who guides me during the completion of the project.
I also thank my parents and all my well wishers, who helped me directly or indirectly in
some way to make this project.
At last I also convey my regards to almighty for the blessing , without which virtually
this project would not have been possible.

VIKAS KUMAR

EXECUTIVE SUMMARY

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My project is based on “INVENTORY MANAGEMENT” at Indian Oil Corporation
Limited, PANIPAT.
INVENTORY MANAGEMENT Analysis is a post mortem of the organization’s inventory
system. It measures the ability of the organization to meet its material requirement
efficiently or not. Its helps in calculating the appropriate amount of money should invest
in the inventory without make it obsolete, timely consume and replace by new
inventory.
In this project, I analyzed the different aspects of inventory at Panipat Refinery. My
prime objective is to interpret the policies and procedures adopted in maintaining the
proper inventory.
In this study, I had used Descriptive Research Design. This research design is about
the characteristics of particular things. The engraved data is collected from various
websites, manuals, monthly periodicals and different time periods.
My analysis of the study undertaken is quite satisfactory which shows that refinery has
good system of maintaining inventory.
The report includes the inventory turnover ratio of three years and analysis of moving
and non moving inventory items, along with the data of raw material in stock as in
stores and in transit.
.

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CONTENTS

PARTICULARS PAGE NO.

CHAPTER 1- INTRODUCTION OF THE COMPANY 7-36

A) Introduction of the company


B) SWOT ANALYSIS
C) Introduction of Panipat Refinery

CHAPTER 2- INTRODUCTION OF THE TOPIC 37-47

CHAPTER 3- RESEARCH METHODOLOGY 48-54


A) Research Methodology
B) Objective of the study
C) Research Design
D) Method of Data Collection / Survey period

CHAPTER 4- ANALYSIS & INTERPRETATION 55-62

CHAPTER 5- CONCLUSION 63-65

BIBLIOGRAPHY 66

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CHAPTER – 1

A) COMPANY’S INTRODUCTION

B) INTRODUCTION OF PANIPAT
REFINERY

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INTRODUCTION 0F THE COMPANY

HISTORY OF INDIAN OIL CORPORATION LTD.


The Indian Oil Corporation Ltd. operates as the largest company in India in terms of
turnover and is the only Indian company to rank in the Fortune "Global 500" listing. The
oil concern is administratively controlled by India's Ministry of Petroleum and Natural
Gas, a government entity that owns just over 90 percent of the firm. Since 1959, this
refining, marketing, and international trading company served the Indian state with the
important task of reducing India's dependence on foreign oil and thus conserving
valuable foreign exchange. That changed in April 2002, however, when the Indian
government deregulated its petroleum industry and ended Indian Oil's monopoly on
crude oil imports. The firm owns and operates seven of the 17 refineries in India,
controlling nearly 40 percent of the country's refining capacity.

1958
 Indian Refineries Ltd. formed in August with Mr Feroze Gandhi as the
Chairman.

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1959
 Indian Oil Company Ltd. established on 30th June 1959 with Mr S.
Nijalingappa as the Chairman.

1960
 Agreement for supply of Kerosene and Diesel signed with the then USSR.

 MV Uzhgorod carrying the first parcel of 11,390 tonnes of Diesel for


IndianOil docked at Pir Pau Jetty in Mumbai on 17th August 1960.

1962
 Guwahati Refinery inaugurated by Pt. Jawaharlal Nehru, Hon’ble Prime
Minister of India.

 Construction of Barauni Refinery commenced.

1963
 Foundation laid for Gujarat Refinery

 Indian Oil Blending Ltd. (a 50:50 Joint Venture with Mobil) formed.

1964
 Indian Refineries Ltd. merged with Indian Oil Company with effect from
1st September, 1964, and Indian Oil Company renamed as Indian Oil Corporation
Ltd.

 Barauni Refinery commissioned.

 The first petroleum product pipeline from Guwahati to Siliguri


commissioned.

1965
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 Gujarat Refinery inaugurated by HE Dr. S.Radhakrishnan, President of
India.
Barauni-Kanpur product pipeline and Koyali- Ahmedabad product pipeline
commissioned.

 IndianOilPeople maintained the vital supply of Petroleum products to


Defence Services during Indo-Pak war.

1967
 Haldia Barauni product pipeline commissioned.Bitumen and marine
bunkering businesses commenced.

1968
 Techno-economic studies for Haldia-Calcutta, Bombay-Pune and
Bombay-Manmad Pipelines submitted to Government.

1969
 Marketing of Madras Refineries Ltd. products commences.

1970
 Acquired 60% majority shares of IBP Co. Ltd. The same was offloaded in
favour of the President of India in 1972.

1971
 Dealership/reservation extended to war widows, disabled Defence
personnel, freedom fighters, etc. for the first time after the Indo-Pak war.

1972

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 R&D Centre established at Faridabad.

 SERVO, the first indigenous lubricant, launched.

1973
 Foundation-stone of Mathura Refinery laid by Mrs. Indira Gandhi, Hon’ble
Prime Minister of India.

1974
 Indian Oil Blending Ltd. became the wholly-owned subsidiary.

 Marketing Division attained a new watershed with market participation of


64.2%.

1975
 Haldia Refinery commissioned. Multipurpose Distribution Centres
introduced at 132 Retail Outlets pioneering rural convenience.

1977
 Nutan wick stove launched by R&D Centre.

1978
 Phase-wise commissioning of Salaya-Mathura crude oil pipeline begins.

1981
 Digboi Refinery and Assam Oil Company's (AOC) marketing operations
vested in IndianOil and it became Assam Oil Division (AOD) of IndianOil.

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1982
 Mathura Refinery and Mathura-Jalandhar Pipeline commissioned.

1983
 Massive augmentation of LPG storage and distribution facilities
undertaken.

 Proposal for the 6 MMTPA Refinery at Karnal submitted.

1984
 Taluka Kerosene Depots (TKDs) commissioned for improved availability of
kerosene in rural and hilly areas in addition to Multipurpose DistributionCentres.

 Foreshore Terminal at Kandla Port commissioned.

 Integrated Corporate Planning – a 10-year Perspective Plan and 5-year


Long Range Plan – initiated.

1985
 New office complex for Registered Office of the Corporation and
HeadOffice of Marketing Division in Mumbai completed.

1986
 A new Foreshore Terminal at Madras commissioned.

1987
 Test marketing of 5 kg LPG cylinders begins in 1986-87 in Garo Hills and
Kumaon.

1989

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 Salaya-Mathura crude oil pipeline suitably modified for handling Bombay
High Crude during winter.

1990
 Kandla-Bhatinda product pipeline project approv

 First LPG Bottling Plant of Assam Oil Division (AOD) commissioned at


Silchar.

1991
 Digboi Refinery modernisation project initiated.

 Bunkering facility at Paradip commissioned.

1993
 New era Micro-processor based Distributed Digital Control Systems
replacing the pneumatic instrumentations began in refineries.

1994
 India's first Hydrocracker commissioned at Gujarat Refinery.

 Vision-2000, the Retail Visual Identity programme launched to upgrade


retail outlets.

1995
 1,443 km. long Kandla-Bhatinda product pipeline commissioned.
 First lndane Home Shoppe launched.

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1996
 State-of-the-art LPG Import Terminal at Kandla (capacity of 6,00,000
tonnes per annum) commissioned.
 First batch of one-year International MBA (iMBA) programme passes out
of IndianOil Institute of Petroleum Management (IIPM).

1997
 Business Development received renewed thrust with new functional
group.

 Indian Oil enters into LNG business through Petronet LNG -a JV


company.
1998
 Panipat Refinery was commissioned.
 Haldia, Barauni Crude Oil Pipeline (HBCPL) was completed.
 The Administrative Pricing Mechanism (APM) was withdrawn from the
Refining Sector effective 1" April 1998. Phase-wise dismantling of APM began.
1999
 Indian Hydrocarbon Vision -2025" was announced at PETROTECH-99,
organised by Indian Oil on behalf of the oil Industry.
 Diesel Hydro-desulphurisation Units commissioned at Gujarat, Panipat,
Mathura and Haldia Refineries.
 Manthan -- the IT re-engineering project was launched.
2000
 Indian Oil crossed the turnover of the magical mark of Rs l ,00,000 Crore
-- the first Corporate in India to do so.

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 Indian Oil entered into Exploration & Production (E&P) with the award of
two exploration blocks to Indian Oil and ONGC consortium under NELP-1
 Y2K compatibility achieved.
 JNPT Terminal was commissioned.

2001
 Digboi Refinery completed 100 years of continuous operation.
 Chennai Petroleum Corporation Ltd. (CPCL) and Bongaigaon Refinery
and Petrochemicals Ltd. (BRPL) were acquired.
 Fluidised Catalytic Cracker Unit at Haldia Refinery was commissioned.
 Augmentation of Kandla-Bhatinda Pipeline (KBPL) to 8.8 MMTPA
completed.
 Eight Exploration blocks awarded to the Indian Oilled consortium under
NELP-II.
2002
 APM dismantled. Pricing of Petroleum products decontrolled.
 IBP Co. Ltd. was acquired with management control.
 Barauni Refinery expansion project completed.
 New generation auto fuels IOC Premium and Diesel Super introduced.

2003
 Lanka IOC Pvt. Ltd. (LIOC) launched in Sri Lanka.

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Retail operations began in Sri Lanka. Indian Oil became the first Indian Petroleum
Company to begin downstream marketing operations in overseas market. Lanka IOC
became an independent oil company in Sri Lanka
 Gasahol, 5% ethanol blended petrol, was introduced in select states.
 INDMAX unit at Guwahati Refinery commissioned.
2004
 Indian Oil turned a Gas marketer by sale of regasified LNG.
 Indian Oil Mauritius Ltd.’s 18 TMT state-of-the-art Oil Storage Terminal at Mer
Rouge commissioned
 Lanka IOC Pvt. Ltd. (LIOC) launched in Sri Lanka.
 Gasahol, 5% ethanol blended petrol, was introduced in select states.
 INDMAX unit at Guwahati Refinery commissioned.
 Foundation Stone of Panipat Refinery Expansion and PX/PTA projects laid.
 Maiden LPG supplies to Port Blair.

2005
 The year marked Indian Oil's big ticket entry into the high stakes business of
E&P.
 Indian Oil's Mathura Refinerywas the first refinery in India to attain the
capability of producing entire quantity of Euro-III compliant diesel by
commissioning the Rs 1046 crore DHDT (Diesel hydrotreating unit).
 Indian Oil breached the Rs 150, 000 crore mark in sales turnover by clocking
Rs 150, 677 in turnover in fiscal 2004.
 Indian Oil signed a JV agreement with GAIL to enter the city gas distribution
projects in Agra and Lucknow.

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 Indian Oil allowed by Government of India to charter crude oil ships on its own
instead of going through Transchart, the chartering wing of the Ministry of
Shipping.
2006
 Panipat Refinery capacity enhanced from 9 to 12 MMTPA
 World-scale Paraxylene/Purified Terephthalic Acid (PX/PTA) plant
commissioned at Panipat as mother plant for polyester industry
 Chennai-Trichy-Madurai product pipeline dedicated to the nation.
2007
 Marketing subsidiary IBP Co. Ltd. merged with parent company.
 Concept of SERVOXpress Centres as one-stop shops for autocare
services launched.
 Mundra-Panipat crude oil pipeline with facilities for handling heavy crude
oil commissioned.
 Lanka IOC commissions Lube Blending Plant and laboratory for testing fuels
and lubricants at Trincomalee
 Concept of ‘LNG at the doorstep’ launched for customers located away from gas
pipelines
2008
 SERVO lubricants launched in Oman.
 IndianOil Chairman elected as President of World LP Gas Association.

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INDIAN OIL CORPORATION LTD.

 Indian Oil Corporation Ltd. (Indian Oil) was formed in 1964 through the merger of
Indian Oil Company Ltd. (Estd. 1959) and Indian Refineries Ltd. (Estd. 1958).
 At Indian Oil, corporate social responsibility (CSR) has been the cornerstone of
success right from inception in the year 1964. The Corporation’s objectives in this key
performance area are enshrined in its Mission statement: "…to help enrich the quality of
life of the community and preserve ecological balance and heritage through a strong
environment conscience”
 .From a fledgling company with a net worth of just Rs. 45.18 crore and sales of 1.38
million tonnes valued at Rs. 78 crore in the year 1965, Indian Oil has since grown over
3000 times.
 Indian Oil Corporation Ltd. (Indian Oil) is India's largest commercial enterprise, with a
sales turnover of Rs. 2,47,479 crore (US $ 61.70 billion) and profits of Rs. 6,963 crore
(US $ 1.74 billion) for the year 2007-08.
 Indian Oil is also the highest ranked Indian company in the prestigious Fortune
'Global 500' listing, having moved up 19 places to the 116th position in 2008. It is also the
18th largest petroleum company in the world.

 Indian Oil has ambitious investment plans of Rs. 43,250 crore in the next five years.
By 2011-12, the Indian Oil Group, with 80 MMTPA refining capacity in its fold, would be

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playing a key role in realising India’s bid to emerge as an export-oriented hub for finished

products.

PRODUCTS

Indian Oil is not only the largest commercial enterprise in the country it is the flagship
corporate of the Indian Nation. Besides having a dominant market share, Indian Oil is
widely recognized as India’s dominant energy brand and customers perceive Indian Oil
as a reliable symbol for high quality products and services.
Benchmarking Quality, Quantity and Service to world-class standards is a philosophy
that Indian Oil adheres to so as to ensure that customers get a truly global experience
in India.
Indian Oil is a heritage and iconic brand at one level and a contemporary, global brand
at another level. While quality, reliability and service remains the core benefits to the
customers.

 Autogas

 Indian Oil Aviation Service

 Bitumen

 High Speed Diesel


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 Bulk / Industrial Fuel

 Indane Gas

 SERVO Lubricants & Greases

 Marine Fuels & Lubricants

 MS / Gasoline

 Petrochemicals

 Special Products

 Superior Kerosene Oil

 Crude Oil

INDIAN OIL PERFORMANCE 2008-2009

The Corporation's refineries surpassed 100% capacity utilisation and clocked the
highest ever throughput of 51.4 million tonnes. Breaching the 10,000 km mark in length,
the pipelines network registered the highest ever operational throughput of 59.5 million
tonnes of crude oil and petroleum products.
During the year 2008-09, IndianOil's sales volume registered a growth of 5.6% and
went up to an unprecedented 62.6 million tonnes of petroleum products as compared to
59.30 million tonnes during the previous year. Sales of natural gas also went up to 1.7
million tonnes in 2008-09. In addition, product exports rose to 3.64 million tonnes from
3.38 million tonnes in the previous year.

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Among new businesses, Natural Gas marketing and Petrochemicals generated
revenues of Rs. 2425 crore and Rs. 2760 crore during the year 2008-09.

Core Performance

Financial Performance
 IndianOil’s gross turnover (inclusive of excise duty) for the year 2008-09 reached
a new high of Rs. 2,85,337 crore up by 15.3% as compared to Rs. 2,47,457
crore in the previous year. The Profit After Tax was Rs. 2,950 crore.
 For the year 2008-09, IndianOil has received Special Oil Bonds worth Rs.
40,383 crore from the Government of India in addition to Rs. 18,210 crore
received from upstream companies towards subsidy-sharing.
 The Gross Refining Margin for April-March 2009 is USD 3.69 per barrel as
compared to USD 9.02 per barrel during the previous year
Marketing
 IndianOil maintained its dominance in the market place and clocked the highest
ever level of sales during the year 2008-09.
 Domestic sales grew by 5.6% from 59.30 million tonnes in the previous year to
62.6 million tonnes in the year 2008-09.
Refineries
 For the year 2008-09, IndianOil's eight refineries achieved the highest ever
throughput of 51.4 million tonnes and 103.4% capacity utilisation, registering
8.4% growth in crude oil processing over the previous year.
 IndianOil refineries clocked the lowest overall specific energy consumption of 64
MBTU/BBL/NRGF (MBN) during the year as against 67 in 2007-08.

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IndianOil imported a record quantity of 47.8 million tonnes of crude oil in 2008-
09 as against 46.11 million tonnes in 2007-08.
 During the year, IndianOil entered into term contracts with Angola and Brunei for
import of low sulphur crude oil and over 95% of the LPG imports were finalised
through term contracts.
Pipelines
 During the year, IndianOil's network of underground highways breached the
10,000 kilometre mark and registered the highest ever operational throughput of
59.5 million tones.
 Compared to the previous year, the crude oil pipelines registered a 6.7% growth
at 38.2 million tonnes.
 The year was marked by the commissioning of a record number of pipeline
projects, the foremost being the Paradip-Haldia crude oil pipeline and IndianOil's
first Panipat-Jalandhar LPG pipeline.
 Other projects commissioned during the year include the Koyali-Ratlam product
pipeline, ATF Pipeline from CPCL (Manali) to Chennai AFS .
Projects
 IndianOil is implementing projects of over Rs. 60,000 crore currently. Major ones
among them are: 15 MMTPA refinery at Paradip (Rs. 29,777 crore);
 capacity augmentation of Panipat Refinery (from 12 to 15 MMTPA, Rs. 1007.83
crore);
 MS quality improvement projects at Panipat (Rs. 1,131 crore),
New Businesses

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 IndianOil took big strides in new businesses during the year 2008-09.

VARIOUS DIVISIONS OF IOCL

REFINERIES DIVISION
Indian Oil controls 10 of India’s 18 refineries – at Digboi, Guwahati, Barauni,
Koyali, Haldia, Mathura, Panipat, Chennai, Narimanam and Bongaigaon – with a
current combined rated capacity of 54.20 million metric tones per annum
(MMTPA)* (one million barrels per day). Indian Oil registered a record
throughput of 36.63 millions tones during the year 2004-05 with a capacity utility
of 88.6%. Indian Oil accounts for 42% of India’s total refining capacity. Overall
Energy consumption of Indian Oil refineries was lowest at 109 MBTU/BBL/NRGF
against earlier best of 111, achieved in 2003-04. Gross Refining Margin (GRM)
rose by almost one dollar per barrel during the year 2004-05. It is expected to
be the highest at US$ 6.25/bbl for the year 2004-05 as against $5.30/bbl in
2003-04. All refinery units are accredited with ISO 9002 and ISO 14001
certifications.

DIGBOI REFINERY (UPPER ASSAM)


The Digboi Refinery in North Eastern India is India’s oldest refinery and was
commissioned in 1901. Originally a part of Assam Oil Company, it became part
of Indian Oil in 1981, its original refining capacity has been 0.5 MMTPA since
1901.

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Modernization project of this refinery has been completed and the refinery now
has an increased capacity of 0.65 MMTPA. The Digboi refinery produces
distillates, heavy ends and excellent quality wax from indigenous crude oil
produced at the Assam Oil fields. Petroleum products are supplied mainly to
northeastern India primarily through road and by rail wagons. A new Delayed
Coking Unit of 1,70,000 TPA capacity was commissioned in 1999. A new
solvent dewaxing unit for maximizing production of microcrystalline wax was
installed and commissioned in 2003. The refinery has also installed
Hydrotreater to improve the quality of diesel.

GUWAHATI REFINERY

The Guwahati Refinery in North East India – the first Public Sector refinery of the
country-was commissioned in 1962 with a capacity of 0.75 MMTPA which was
subsequently increased to 1.0 MMTPA through debottlenecking projects.The
refinery processing only indigenous crude oil from the Assam oil fields. It
supplies petroleum products to North-Eastern India and surplus products
onwards to Siliguri in West Bengal in 2003. Hydrotreater unit for improving the
quality of diesel has been commissioned in 2002. In 2003, the refinery installed
an IndMax Unit a novel technology developed by Indianoil’s R & D center for
upgrading heavy ends into LPG, motor spirit and diesel oil.

BARAUNI REFINERY
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The Barauni Refinery in Eastern India was commissioned in 1964 with a capacity
of 2.0 MMTPA. The refining capacity was increased to 3.0 MMTPA by 1969 and
further to its current capacity of 6.0 MMTPA through low cost revamping and
debottlenecking. Matching secondary processing facility such as RFCC (Resid
Fluidised Catalytic Cracker) and hydrotreater facilities for diesel quality
improvement have been added. With the commissioning of the 6.0 MMTPA
Haldia-Barauni crude oil pipeline, the refinery now received imported crude for
processing. A CRU (Catalytic Reformer Unit) was also added to the refinery in
1997 for production of unleaded motor spirit. Projects are also planned for
meeting future fuel quality requirements. Barauni refinery supplies distillate
products beside eastern India to northern India through a product pipeline to
Kanpur in Uttar Pradesh.

GUJARAT REFINERY

The Gujarat Refinery at Koyali in Gujarat in Western India is IndianOil’s largest


refinery. The refinery was commissioned in 1965. Its facilities include five
atmospheric crude distillation units. The major units include CRU, FCCU and
the first Hydro cracking unit of the country.Through a product pipeline to
Ahmedabad and a recently commissioned product pipeline connecting to BKPL
product pipeline
and also by rail wagons/trucks, the refinery primarily serves the demand for
petroleum products in Western and Northern India.When commissioned, the

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Gujarat refinery had a design capacity of 3.0 MMTPA. It was increased to 4.3
MMTPA by the revamping of three distillation Units. In 1978, its processing
capacity was further increased to 7.3 MMTPA by the addition of a crude
distillation unit. Subsequently the crude capacity was increased to 9.5 MMTPA
by 1990 and then by 12.5 MMTPA in 1999. Since it has been increased to its
present capacity of 13.70 MMTPA by low cost debottlenecking.

HALDIA REFINERY

Haldia Refinery, the fourth in the chain of seven operating refineries of IndianOil,
was commissioned in January 1975. It is situated 136 km downstream of
Kolkata in the district of East Midnapur, West Bengal, near the confluence of
river Hoogly and river Haldi. The refinery had an original crude oil processing
capacity of 2.5 MMTPA. Petroleum products from this refinery are supplied to
eastern India through two product pipelines as well as through Barges, tank
wagons and tank trucks.Products like MS, HSD and Bitumen are exported from
this refinery.Refinery was increased to 2.75 MMTPA through de-bottlenecking in
1989-90. Refining capacity was further increased to 3.75 MMTPA in 1997 with
the installation/commissioning of second Crude distillation unit of 1.0 MMTPA
capacity.Diesel Hydro Desulphurisation (DHDS) unit was commissioned in 1999,
for production of low sulphur content (0.25%wt.) High Speed Diesel. With
augmentation of this unit, refinery is producing BS-II and Euro-III equivalent HSD
at present.
MATHURA REFINERY
The Mathura Refinery was commissioned in 1982 with an original capacity of 6.0
MMTPA. The capacity was increased to 7.5 MMTPA by debottlenecking and
revamping. With its fluid catalytic cracking units, the refinery mainly produces

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middle distillates and supplies them to Northern India through a product pipeline
to Jalandhar, Punjab via Delhi. A hydro cracker for increasing middle distillates
was also completed in 2000. The present capacity of the refinery is 8 MMTPA.
In order to meet future fuel requirements, facilities for improvement in quality of
MS & HSD are under installation and planned to be completed by 2005.

PANIPAT REFINERY
IndianOil’s seventh refinery, commissioned in 1998, is located at Panipat, 125
kms away from Delhi, the capital of India, in the state of Haryana in Northern
India. The main units are OHCU (Once-through-hydro cracker), RFCC, CCRU
(Continuous Catalytic Reformer unit) besides other secondary treatment units.
This 6 MMTPA refinery caters to the high demand centers of Northern India. The
product to increase the capacity of Panipat refinery to 15 MMTPA is already
under implementation, which also takes into account future fuel quality
requirements for 2005. The expansion project is expected to be completed in
2005.

MARKETING DIVISION
The Marketing Division of IOCL handles the responsibility of delivering
petroleum products to the customers. The Marketing Division has set up various
marketing terminals where storage tanks are built up to hold the products. The
petroleum products are transferred to the marketing terminals by the Pipelines
Division, which charges the Marketing Division for the same. Indian Oil caters to
over 53.2% of India’s petroleum consumption.
Indian Oil’s Marketing Network is spread throughout the country with over
23,000 sales points (the largest in the country

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RESEARCH & DEVELOPMENT DIVISION

Indian Oil owns world-class “research and development” centre headed by


Director. It provides services to all other divisions of the Corporation and bin that
sense it is a form of “SHARED SERVICE UNIT.” Established in 1972 for the
development of lube as well as refining process technologies, the Indian Oil R &
D Centre at Faridabad near New Delhi has completed around 30 years of
glorious service to the nation. It is one of its kind in Asia and has grown into a
major technological development center of international repute in the down
stream areas of lubricants, pipelines and refining processes.
Over the years, it has successfully perfected the state-of-the-art lube formulation
technology meeting latest national and international specifications with approvals
from major original equipment manufacturers. Indian Oil markets around 450
grades of lubricants under the brand name “SERVO” based on its R&D
technology. It has extensive laboratory and pilot plant facilities to successfully
pursue projects in lube, refining and pipeline areas making it a unique
technology centre. Its rich reservoir of highly qualified / specialized scientific and
technical manpower has elevated this center to global status. Creativity and
innovative research has led to technological innovations, some of which have
received prestigious national and international awards.

ASSAM OIL DIVISION

The assets of the erstwhile Assam Oil Company were taken over by IOCL in the
year 1981. It is kept as a separate division in IOCL. Assam Oil Division owns

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the Digboi refinery and is also into marketing. It owns one petrol pump on the
Delhi-Mathura Road.

MISSION

To achieve international standards of excellence in all aspects of energy and diversified


business with focus on customer delight through value of products and services, and
cost reduction.
To maximize creation of wealth, value and satisfaction for the stakeholders.
To attain leadership in developing, adopting and assimilating state-of-the-art
technology for competitive advantage.
To provide technology and services through sustained Research and Development.
To foster a culture of participation and innovation for employee growth and contribution.
To cultivate high standards of business ethics and Total Quality Management for a
strong corporate identity and brand equity.
To help enrich the quality of life of the community and preserve ecological balance and
heritage through a strong environment conscience.

VISION

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A major, diversified, transnational, integrated energy company, with national leadership
and a strong environment conscience, playing a national role in oil security and public
distribution.

VALUES

Care – Stands for Innovation –Stands for


 Concern  Creativity
 Empathy  Ability to learn
 Understanding  Flexibility
 Cooperation  Change
 Empowerment

Passion - Stands for Trust - Stands for


 Commitment  Delivered Promises
 Dedication  Reliability
 Pride  Dependability
 Inspiration  Integrity
 Ownership  Truthfulness
 Zeal & Zest  Transparency

OBLIGATIONS

Towards customers and dealers

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To provide prompt, courteous and efficient service and quality products at fair and
reasonable prices.

Towards suppliers
To ensure prompt dealings with integrity, impartiality and courtesy and promote
ancillary industries.

Towards employees
Develop their capability and advancement through appropriate training and career
planning.

Expeditious redressal of grievances


Fair dealings with recognized representatives of employees in pursuance of healthy
trade union practice and sound personnel policies.

Towards community
To develop techno-economically viable and environment-friendly products for the
benefit of the people.
To encourage progressive indigenous manufacture of products and materials so as to
substitute imports.
To ensure safety in operations and highest standards of environment protection in its
manufacturing plants and townships by taking suitable and effective measures.

Towards Defence Services


To maintain adequate supplies to Defence Services during Norman and emergency
situations as per their requirement at different locations.

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CORPORATE OBJECTIVES

 To serve the national interests in the Oil and related sectors in accordance and
consistent with Government policies.
 To ensure and maintain continuous and smooth supplies of petroleum products by way
of crude refining, transportation and marketing activities and to provide appropriate
assistance to the consumer to conserve and use petroleum products efficiently.
 To earn a reasonable rate of interest on investment.

 To work towards the achievement of self-sufficiency in the filed of Oil refining by setting
up adequate capacity and to build up expertise in laying of crude and petroleum
product pipelines.
 To create a strong research and development base in the field of Oil refining and
stimulate the development of new product formulations with a view to
minimize/eliminate their imports and to have next generation products.
 To maximize utilization of the existing facilities in order to improve efficiency and
increase productivity.
 To optimize utilization of its refining capacity and maximize distillate yield from refining
of crude to minimize foreign exchange outgo.

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 To minimize fuel consumption in refineries and stock losses in marketing operations to
effect energy conservation.
 To further enhance distribution network for providing assured service to customers
throughout the country through expansion of reseller network as per Marketing
Plan/Government approval.
 To avail of all viable opportunities, both national and global, arising out of the
liberalization policies being pursued by the Government of India.
 To achieve higher growth through integration, mergers, acquisitions and diversification
by harnessing new business opportunities

FINANCIAL OBJECTIVES

To ensure adequate return on the capital employed and maintain a reasonable annual
Dividend on its equity capital.
To ensure maximum economy in expenditure.
To manage and operate the facilities in an efficient manner so as to generate adequate
internal resources to meet revenue cost and requirements for project investment,
without budgetary support.
To develop long-term corporate plans to provide for adequate growth of the activities of
the corporation.
To endeavor to reduce the cost of production of petroleum products by means of
systematic cost control measures.
To endeavor to complete all planned projects within the stipulated time and cost
estimates.

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PRINCIPAL SUBSIDIARIES
Indo Mobil Ltd. (50%); Avi-Oil Ltd. (25%); Indian Oil tanking Ltd. (25%); Petronet India
Ltd. (16%); Petronet VK Ltd. (26%); Petronet CTM Ltd. (26%); Petronet CIPL Ltd.
(12.5%); IndianOil Petronas Ltd. (50%); Indian Oil Panipat Power Consortium Ltd.

(26%); Indian Oil TCG Petrochem Ltd. (50%); Librizol India Pvt. Ltd. (50%).

PRINCIPAL COMPETITORS
Bharat Petroleum Corporation Ltd.

Hindustan Petroleum Corporation Ltd.

Royal Dutch/Shell Group of Companies.

SWOT ANALYSIS
STRENGTHS
HIGH FOREIGN EXCHANGE DEBT.
IOCL has managed to significantly cut its borrowing cost due to high share of foreign
exchange debt. Its share of foreign exchange borrowings is increasing with foreign
exchange loans crossing 50% of its total debt compared to 42% at the end of the last
financial year.

HIGHEST MARKET SHARE


As India's flagship national oil company, Indian Oil accounts for 56% petroleum
products market share, 42% national refining capacity and 67% downstream pipeline
throughput capacity.

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EXPERTISE IN OIL & GAS INDUSTRY
Indian Oil is one of the leaders in providing engineering, construction and consultancy
services to the pipeline industry. Highly qualified professionals with vast experience
execute pipeline projects from concept to commissioning and provide services for
construction supervision and project management.

FOREIGN SUBSIDIARIES AND JOINT VENTURES


Indian Oil is strengthening its existing overseas marketing ventures and simultaneously
scouting new opportunities for marketing and export of petroleum products in foreign
markets. Two wholly owned subsidiaries are already operational in Sri Lanka and
Mauritius, and regional offices at Dubai and Kuala Lumpur are coordinating expansion
of business activities in Middle East and South East Asia regions. The Corporation has
launched eleven joint ventures (listed separately) in partnership with some of the most

respected corporate from India and abroad .

WEAKNESSES
STRINGENT CORPORATE POLICIES
The decisions relating to administration are taken at the corporate level. Even minor
proposals are to be referred to the top management. This leads to a delay in decision-
making.

LACK OF MARKETING EFFORTS


Among the public sector oil companies, Indian Oil Corporation is the only one to follow
a weak marketing strategy. It in only in the recent years that the company has started to
market its products. However, still the efforts seem to be weak when compared with the
competitors like BPCL and HPCL.

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PROMOTION POLICY
Most of the public sector companies seem to suffer from these lacunae. The employees
are promoted mainly on the basis of experience and not on the efforts and initiatives
displayed by the employee in his work. This results in demotivation and lack of interest
for their work on the part of the hardworking employees, who then tend to shift jobs to
satisfy their need for self-esteem.

TENDER PROCESS
The policy of selection of the lowest bidder tends to affect the quality of the
products/services on some occasions. A more simplistic procedure is also likely to
generate some savings for the company, since tendering process leads to expenses on
account of advertisement.

OPPORTUNITIES
Exploration and Production
Indian Oil is metamorphosing from a pure sectoral company with dominance in
downstream in India to a vertically integrated, transnational energy behemoth. The
Corporation is making investments in E&P and import/marketing ventures for oil and
gas in India and abroad, and is implementing a master plan to emerge as a major
player in petrochemicals by integrating its core refining business with petrochemical

activities.

THREATS
Entry of Big Private players
The opening up of the oil sector for private players poses a threat even for this well-
established company. With Indian players like Reliance and Essar and foreign players
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like Shell planning their entry into the Indian scenario, the road seems to be tough for
Indian Oil.

INTRODUCTION TO PANIPAT REFINERY


Panipat Refinery is the seventh refinery of Indian Oil. It is located in the historic district
of Panipat in the state of Haryana and is about 23 km from Panipat City. The original
refinery with 6 MMTPA capacity was built and commissioned in 1998 at a cost of Rs.
3868 crore. Panipat Refinery has doubled its refining capacity from 6 MMT/yr to 12
MMT/yr with the commissioning of its Expansion Project.

The major secondary processing units of the Refinery include Catalytic Reforming Unit.
In order to improve diesel quality, a Diesel Hydro Desulphurisation Unit (DHDS) was
subsequently commissioned in 1999.

Referred as one of India’s most modern refineries, Panipat Refinery was built using
global technologies from IFP France; Haldor-Topsoe, Denmark; UNOCAL/UOP, USA;
and Stone &Webster, USA. It processes a wide range of both indigenous and imported

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grades of crude oil. It receives crude from Vadinar through the 1370 km long Salaya-
Mathura Pipeline which also supplies crude to Koyali and Mathura Refineries of
IndianOil.

Petroleum products are transported through various modes like rail, road as well as
environment-friendly pipelines. The Refinery caters to the high-consumption demand
centres in North-Western India including the States of Haryana, Punjab, J &K,
Himachal, Chandigarh, Uttaranchal, as well as parts of Rajasthan and Delhi.

The LPG produced from the refinery is pumped through a dedicated pipeline to
IndianOil’s Kohand Bottling plant where bottling and bulk despatches are done. Panipat
Refinery has also developed new products like 96 RON petrol, and sub Zero diesel for
the Indian army. It is already operating above 100% capacity for the last four years.

PRODUCTS FROM REFINERY

With the expansion of Panipat Refinery to 12.0 MMTPA total high speed diesel
produced from entire refinery will meet BS-II and BS-III Grade required for NCR. After
stabilisation of units, the high value product yield from the refinery will be further
improved by reducing the production of black oil like HPS and Bitumen. With state-of
the-art matching secondary processing facilities was approved at a cost of Rs.4165
crore.

LPG
NAPHTHA

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BITUMEN

MOTOR
SULPHUR SPIRIT

ATF
HEAVY
PETROLEUM
STOCK

SKO
HSD

INTEGRATED POLICY

ON
QUALITY, SAFETY, HEALTH & ENVIRONMENT (QSHE)

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''PRISM''
(Panipat Refinery Integrated System of Management)
Integrated Policy
On
Quality, Safety, Health & Environment

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CHAPTER-2

INTRODUCTION OF THE TOPIC

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INTRODUCTION OF THE TOPIC

INVENTORY MANAGEMENT

MEANING

Inventory management is concerned with keeping enough products on hand to avoid running
out while at the same time maintaining a small enough inventory balance to allow for a
reasonable return on investment. Excessive level of inventory results in large inventory
carrying cost . An efficient system of inventory management will determine :-
A) What to purchase?
B) How much to purchase?
C) From where to purchase?
D) Where to store?
Inventory management is the active control program which allows the management of sales,
purchases and payments.
Inventory management software helps create invoices, purchase orders, receiving lists,
payment receipts and can print bar coded labels. An inventory management software system
configured to ware house, retail or product line will help to create revenue for the company.
The petroleum refining industry has effectively embraced the software solutions to optimize
the business supply chain to maximize the profit margins and create order in the chaos of
numerous opportunities and challenges. The supply chain of a typical petroleum refining
company involves a wide spectrum of activities, starting from crude purchase and crude
transportation to refineries, refining operations, product transportation and finally delivering
the product to the end user.

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WHO SHOULD ATTEND
Factory and inventory control professionals, manufacturing and production control
managers, industrial engineers, plant managers, material and purchasing managers,
factory superintendents and customer/technical service managers who can benefit from
enhancing their inventory management techniques.

WHAT WILL COVER


 The strategic role of inventory management techniques .

 Establish the optimal inventory level.

 Inventory planning and replenishment.

 Distribution center and warehousing operations.

 Inventory accuracy and audits.

 Inventory management, measurement and reporting.

 Inventory forecasting and demand management.

 Lead-time analysis and reduction.

TYPES OF INVENTORY
 Raw Material : An inventory of raw material allows separation of production scheduling
from arrival of basic inputs to the production process.

 Work –In – Progress : An inventory of partially completed units allows the separation
of different phases of the production process.

 Finished Goods : An inventory of finished goods allows separation of production from


selling.

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 Cash & Marketable Securities : Cash & Marketable Securities can be thought of as an
inventory of liquidity that allows separation of collection from disbursement.

OBTECTIVES OF INVENTORY MANAGEMENT

Inventory of finished goods should be maintained at sufficient high level so that the
demand of customers may be fully satisfied .Similarly , inventory of raw – materials should
also be sufficient so that manufacturing process can be run smoothly. In case of
inadequate inventory of finished goods , there is always risk of being out – of – stock and
in case of inadequate inventory of raw materials , there is always a risk of manufacturing
process being halted. Therefore the major responsibility of inventory management is to
determine the sufficient level of inventory required in business .
Since inventory is a major asset and it involves a lot of funds ,inventory level should not be
excessive. Excessive inventory increases costs because extra funds are involved in it
.Therefore , inventory management also tries to minimize the sufficient level of inventory.
Thus , both inadequate & excessive quality of inventory is undesirable in the business.
Inventory management should maintain the inventory at sufficient level so that it is neither
excessive nor short of requirement.
The Term inventory management includes two conflicting tasks :-
1) To maintain a sufficient large size of inventory to meet the demand of finished goods
& to meet the demand of raw material by production department.

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2) To keep the investment in inventories at minimum level by efficiently organizing the
purchase & sales operations.

MAIN OBJECTIVES
 To ensure a continuous supply of raw material.
 To maintain sufficient inventory of raw materials in periods of short supply.
 To maintain sufficient inventory of finished goods so that the demand of the customers
are duly met.
 To minimize the carrying costs of inventory namely cost of godown , insurance
expenses, cost of funds involved in inventory etc.
 To arrange for sale of slow moving items.
 To control investment in inventory & keep it at an optimum level.

RISKS & COSTS OF EXCESSIVE INVENTORY

 Excessive carrying cost.


 Risk of loss of liquidity.
 Risk of price decline.
 Risk of deterioration of goods.
 Risk of obsolescence.

RISKS OF INADEQUATE INVENTORY

 Risk of break – down in manufacturing process.


 Risk of not meeting demand of customers.

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COST OF INVENTORIES
Relevant inventory costs which change with the level of inventory are lister below :-

Ordering Cost :- The cost of ordering includes :


 Paper work costs , typing & dispatching
 Order inspection cost , checking & handling.
Carrying Cost :- Carrying cost involves :
 Capital Cost.
 Storage & handling cost.
 Insurance.
 Taxes.
 The cost of funds invested in inventory.
Stock out cost :- Stock out cost involves :
 Expenses of placing special orders.
 Expediting income orders.
 Cost of production delays.

NEED OF INVENTORIES

 Transactive Motive
 Precautionary Motive
 Speculative Motive

ACCOUNTING OF STORES

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GENERAL OUTLINES OF STORES FUNCTIONS

The Authority for receipt, storage and issue of all materials is centralized in the
Materials Department subject to exception permitted in certain cases. The user
Departments shall not be permitted to have any stock of materials with them in the form
of sub-stores. However, in certain cases a nominal stock of a few urgent items can be
permitted for meeting emergencies. Items issued from stores to user . shall be charged
off from inventory. However, a list of items of Rs. One lakh and above is lying in sub
stores of plant as on 31st March shall be included in inventory in the financial ledger as
material at site account which shall be reversed in the next year.
Details procedure as prescribed in the Materials Management Manual is to be followed
for all functions of the stores section of the Materials . a general outline of the functions
is as under:

 Receipt & Transportation.


 Custody & Issue.
 Inventory Control .
 Surplus Stores .
 Disposal of surplus, unserviceable assets & scrap materials.

FUNCTIONS OF FINANCE – STORES SECTION

The section dealing with accounting of stores in the Finance. shall have following
functions:

 PASSING AND ACCOUNTING OF TRANSPORTATION BILLS

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All railway/streamer/air freight inward receipt and the road transport consignment notes
shall be received in the stores Section of Materials. For taking the delivery of the
consignments. The Stores shall enter these documents in a Daily Receipt Register.
Transport bills will be initially received by the Materials t. and sent to Finance . duly
verified with reference to the purchase order and also linking the same with the GR
Notes The certified bills of freight received from stores section shall be priced doing
YMIROOTH transactions wherever the freight bill is directly linked to a Purchase order.
The Finance will release payment only after due checking of bills with reference to the
transport contract and other relevant documents. In case the freight bill cannot be
linked to Purchase order the same shall be charged to freight expenditure account. For
all freight bills, passed payment vouchers shall be prepared and signed by the
authorized officers after which the same shall be forwarded to the Cash Section for
preparation of cheque and payment to vendor.

 ACCOUNT OF RECEIPTS, ISSUES, RETURN AND TRANSFER OF


MATERIALS

In SAP the reservations are prepared through a Maintenance order in case of


maintenance job (TCODE IW31). The same captures the total details of location,
equipment, etc. For issue of chemicals and misc materials direct reservations are
created (T-CODE MB21). In case of capital job reservations are created by giving
Network No. which is attached to a Project No. (TCODE CN21).

 NON-MOVING ITEMS AND DISPOSAL OF SURPLUS AND SCRAP


MATERIALS

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All items (except for non valuated stock items) which are not moving for two years shall
be classified into three categories as under:-
a) "Category I" shall contain all items with inventory value exceedingRs.10,00,000 and
above..
b) "Category II" shall contain all items with inventory value above Rs.1,00,000 and upto
Rs.10,00,000
c) "Category III" shall contain all items with inventory value above Rs.50,000 and upto
Rs.1,00,000
d) “Category IV” shall contain items with inventory value upto Rs.50,000

 FREQUENCY OF STORES VERIFICATION

Stock verification should be so arranged that :


a) All items, the stock value of which exceeds Rs.1,00,000/- are verified at least twice a
year.
b) All items, the stock value of which exceeds Rs,25,000 and upto Rs.1 lacs are verified
atleast once in two years, and
c) All remaining items below Rs.25,000/- are verified once in five years. The Accounts
Officer will draw up annual and monthly schedules for the above verification in
consultation with the Stores Officer in accordance with the value given in annual
inventory statements.
The Accounts Officer will arrange to maintain proper records of the stock verification
sheets for the discrepancies prepared by stock verifiers.

TECHNIQUES OF INVENTORY MANAGEMENT


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1) Determination of stock Level :-

(A) Minimum Level = Rerdering Level – ( Normal Consumption * Normal Reordering


Period )
(B) Maximum level = Reordering Level + Reordering Quantity – ( Minimum Consumption *
Minimum Reordering Period )
(C) Danger Level = Consumption * Maximum Reorder Period

2) Inventory Turnover Ratio :-

Inventory Turnover Ratio = Cost of good sold / Average inventory at cost

3) Economic Order Quantity :-


Economic Order Quantity is the quantity where ordering cost is equal to non – ordering
cost.
EOQ is made up of two parts :

a)Ordering Cost – These costs are associated with the purchasing or ordering of
materials. This cost of ordering includes :
 Paper work cost , typing & dispatching
 Order inspection cost , checking & handling.

b) Non - Ordering Cost - These are the costs for holding the inventories. This cost
involves:
 Capital Cost.
 Storage & handling cost.
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 Insurance.
 Taxes.
 The cost of funds invested in inventory.

4) A-B-C Analysis :-
The materials are divided into three categories viz , A, B & C
Category – A :
Under this almost 10% of the items contribute to 70% of value of consumption.
Category – B :
Under this category 20% of the items contribute about 20% of value of consumption.
Category – C :
Under this category 70% of the items contribute about 10% of value of consumption.

5) VED Analysis :-
The VED Analysis is used generally for spare parts. The requirements & urgency of spare
parts is different from that of materials. Spare parts are classified as:
Vital (V) , Essential (E) , Desirable (D)
Vital spare parts:
These are most for running the concern smoothly.
Essential spare parts:
Necessary but stock kept at low figures.
Desirable spare parts:
May be avoided at times.

6) HML Classification:

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The HML( High, Medium, Low) Classification is similar to ABC Classification , but in this
case instead of the assumption value of the item , the unit value of the item is considered.

7) XYZ Classification:
The XYZ Classification has the value of inventory stored as the basis of differentiation. X
items are those whose inventory values are high while Z items are those whose value is
low.

In Indian Oil Corporation Limited A-B-C Analysis technique is used for inventory
management.

INVENTORY MANAGEMENT &VALUATION

 Average Cost Method:


For determining the valuation of inventories , consistency from year to year is of prime
importance & for this average cost method is appropriate. In this method , weighted
average prices are taken with price of each type of material in stock are taken together.

 First – In - First – Out Method:


Under FIFO Method , items received first are assumed to be used first & therefore prices
charged are those paid for early purchase. Care has to be taken to ensure that each
quantity is issued at the correct price.

 Base Stock Method:

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Under this method , the base quantity is carried forward at the cost of the original stock. If
a quantity of goods larger than the base stock is owned at the end of any period , the
excess will be carried at its identified cost or at the cost determined under FIFO Method.

 Last – In- First – Out Method:


Under LIFO , it is assumed that the stock sold or consumed in any period are those most
recently acquired or made. The result at the LIFO Method is to charge current revenues
with amount approximating current replacement cost.

CHAPER – 3

RESEARCH
METHODOLOGY
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RESEARCH METHODOLOGY

Solving a research problem by using various research methods in a systematic manner is


research methodology. It may be understood as a science of studying how research is
done scientifically. Researcher not only need to know how to develop certain indices or
tests, how to calculate the mean, mode, or standard deviation or chi – square, how to
apply particular research techniques, but they also need to know which of these methods
or techniques are relevant and which are not, and what would they mean and indicate and
why. Researcher also need to understand the assumptions underlying various techniques
and they need to know the criteria by which they can decide that certain techniques and
procedures will be applicable to certain problems and others will not. All this means that it

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is necessary for the researcher to design this methodology for his problem as the same
may differ from problem to problem.

It certainty offers an opportunity to researcher to justified his choice by comparing it is


relative advantage and disadvantage with those alternatives, which have been rejected.
This part is divided into four sections:-
1. Research design.
2. sample design.
3. Data collection method
4. Analysis pattern.

OBJECTIVE OF THE STUDY

Main Objective

The objective of the study is to assess and analyze the inventory in Panipat refinery.

Sub Objectives
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1) To study how sufficient large size of inventory is maintained in the Panipat Refinery
to meet the demand of finished goods & to meet the demand of raw material.
2) To study about the investment in inventories.
3) To study the continuous supply of raw material.
4) To know how the funds are utilized.
5) To extend the knowledge.

However the main objective of this study is to fill the gap between different aspect
of theoretical and practical knowledge of financial management and to develop the
required skill to take decision on sight for the best use of my theoretical knowledge.

RESEARCH DESIGN

Meaning of research
“Research in common parlance refers to a search for knowledge”. Research can be
explained as a movement, a movement from known to unknown. It is actually a voyage of
discovery.
 Research always starts with a question or problem.

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 Its purpose is to find answers to questions through the application to the scientific
method.
 It is a systematic and intensive study directed towards a more complete knowledge
of the subject studied.
So Research is scientific and systematic search for gaining information and knowledge on
a specific topic or phenomena.

Research Design
“Research Design is the plan and structure of investigation so conceived as to
obtain answers to research questions.”

Nature of Research
Descriptive Research design is used for study.
Descriptive research as the name suggests is designed to describe something – for
example the characteristics of users of a given product ; the degree to which product use
varies with income, age, sex or other characteristics; or the number who saw a specific
television commercial.
To be of maximum benefit, a descriptive study must only collect data for a definite purpose.
Your objective and understanding should be clear and specific. It is a kind of survey
method.

This project study is related with the inventory management so the data is collected in this
regard only.
I studied the various types of inventory through out the training period.

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METHODS OF DATA COLLECTION

TYPES OF DATA

PRIMARY DATA SECONDARY DATA

This project is mainly based on the secondary data and information beside this primary
data is also used.

1) Primary data:- primary data are to be collected by the researcher , they are not
present in reports or journals etc. and can be collected through a number of method
which can be classified as follow

 Personal interview of sample.


 Telephonic interview.
 E- Mails.
 Observations.
 Questionnaires.
 Interviews.

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Primary data for my project : The primary data for my research is the dispatch registers
maintained by the company to know the purchase and stock of inventory in the
organization.

2) Secondary data:- Secondary data are the data collected for some purpose other than
the research situations; such data are available from the sources such as books, company
reports, journals, rating organization, census department etc.. The secondary data are
readily available and therefore they are less costly and less time consuming. Sources of
secondary data are

 Internets.
 Book and journals.
 Company reports.
 Census department.
 Research work of others.

Secondary data for my project: Mainly the used in this project is secondary. The data is
the already maintained in the manuals.

SURVEY PERIOD
Survey period is 6 weeks from June 15th, 2009 to July 24th, 2009. It is not enough periods
for the study to get the accurate a specific result of the study.

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CHAPTER – 4

ANALYSIS
&
INTERPRETATION

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STORES and SPARES
PARTICULARS 2006-2007 2007- 2008-2009
Rs.LAKHS 2008 Rs. LAKHS
Rs.
LAKHS
AT REFINERY 21980 31823 47994

IN 4693 3037 2471


TRANSIT
TOTAL 26673 34860 50465

Analysis
Panipat refinery is a big processing plant which requires the materials, tools and other
required items on time because delay in availability of these materials may cause a big
loss to the company so by the year their manufacturing capacity is increasing their
demand is also increasing so they increase their capacity of materials in stores and
also give orders to their vendors so they also available the goods on time. Because

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vendors also need time to manufacture the goods according to the need and order by
the company and supply to their place.

PROCESS CHEMICALS
PARTICULARS 2007-08 2008-09

AT REFINERY 4172 16139

IN TRANSIT Nil Nil

TOTAL 4172 16139

Analysis

As while refining and manufacturing of petroleum from crude oil there is need of some
chemicals which are highly acidic handle with great care and caution so this type of
chemicals refinery manufacture themselves so have their storage at refinery itself there
is no amount is in transit. They have sufficient capacity to produce and store at their
place itself.

INVENTORY TARGET vs. ACTUAL


FOR THE YEAR 2008-09

PARTICULARS TARGET ACTUAL


CHEMICALS 12651 16139
STORES& SAPRES 30200 31854
TOTAL 42851 47993

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Analysis
Due to increasing manufacturing capacity of plant, company set the target amount of
chemicals and stores & spares for the year 2007-2008 with a high amount of chemicals
out of which company used the actual amount of 4172.43 means company’s
processing is going on in a better direction they have sufficient amount to use further if
they required.

But in stores and spares company required material above the settled target because
stores & spares have no limitation they can be fail by using, breakdown while working,
or may get free or obsolete, so many reasons may cause their demand high of stores &
spares.

INVENTORY TURNOVER RATIO


It is computed by dividing the cost of goods sold by the average inventory. Thus,
Inventory Turnover Ratio=Cost of Goods Sold/Avg. Inventory

PARTICULARS 2006-07 (Rs 2007-08 (Rs 2008-09 (Rs


in lakh) in lakh) in lakh)
SALES 2146123 3318902 4065554
Av. INVENTORY 226842 363536 350792
INVNTORY 9.46 9.12 11.58
TURNOVER RATIO

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Analysis

As inventory turnover ratio indicates how fats inventory is sold. A high ratio is good from
the view point of the liquidity and vice versa. A low inventory turnover ratio signifies that
inventory does not sell fast and stays on the shelf or warehouse for a long time.

As the refinery having a high turnover ratio which signifies that inventory is not staying
in a shelf or warehouse for a long time they can be easily sold after manufacturing so it
means company have a good sales in comparison to the average inventory of the
refinery.

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ABC ANALYSIS
2007-08 2008-09
PARTICULARS Materials Value Materials Value Inventory
Value
A Segment 2077 4.42% 949 1.88% 70%
B Segment 6147 13.07% 5300 10.5% 20%
C Segment 38792 82.51% 44216 87.62% 10%

Analysis
A B C system is an inventory management technique that divides inventory into three
categories of descending importance based on the rupee investment in each. The
items included in group A involve the largest investment. The group C consists of items
of inventory which involve relatively small investment although the number of items is
high. The B group stands in midway.

Same process is followed in the refinery, as they have nearly 51000 items in their
inventory list so out of all the items they categories the items on the basis of their
number and investment in the A B C category because while using they required very

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quickly without any delay in time so by dividing such category it helps in easy finding
and accounting of these materials.

CHAPTER - 5

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CONCLUSION

CONCLUSION
After studying the inventory management of Panipat refinery and by seeing the last
year’s performance and records it has resulted that refinery has sufficient inventory
system due to which they have a good working status.

As we have seeing the data of stores & spares, oil in tanks and pipelines, chemicals
and A B C analysis from which we know that refinery has approx 51000 items in their
inventory and all they will be utilized on time, some of them stored in stores for the time
of emergency but after a time they also get change because of obsolesce.

In year 2008-09 they have fewer inventories in comparison to last year because of new
technologies and set up. The vendors try to provide best technology to their customers
so the companies try to store less and after receiving an order they place the new order

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for the material, spares & stores items. With the help of A B C system they divide their
51000 items on the basis of the investment and number of parts. Inventory
management of the refinery is need only up gradation which already done by refinery
stores manager and keepers because if the parts, chemicals, spares, coils, pipes, wires
etc may get outdated or their manufacturing date get expired may cause a high
damage to the plant so to avoid any damage or loss we have to be use the new
inventory according to time and check before use as it will not have any hole or
possibility of damage.

As inventory storing, ordering and keeping all will be based on the capacity of the plant
and the Panipat refinery plant is one of the biggest plant out of the IOCL plants, so it
required a good amount of inventory to be stored in their stores to avoid the breakage
of the plant manufacturing process as breakdown of one day may cause a high loss of
earning for the plant as the reason due to which plant get stop is nearly about 5lakh-
20lakh but the profit ratio of one day is near 2crore-7crore so we should be alert and
attentive towards the inventory system of the plant. For example the plant requires the
air fin coolers for the plant which would be supplied from Gujarat by a vendor; they
required minimum time to manufacture them near 6-8 months so for that we have to
place the order before 8 months so we get on time.

Although the sales of IOCL are increasing and which has resulted in the increase in
income, still the company is not able to manage an increase in profits because of a
simultaneous increase in the amount of expenditure. The IOCL has earned handsome
amount of profits even the profits have been decreasing from past few years. But, this
state is temporary due to high price in world crude oil prices and another reason is that
the mostly amount of oil is imported from the outside which may also a reason of
reducing the profit ratio as comparison to the expectation and capacity of the company.
The study has its own importance in its own way. With the help of this study one can
know about the existence and survival and success of IOCL and efforts, and related to
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the topic i.e. ‘INVENTORY MANAGEMENT’, of the Panipat refinery that they have a
transparent process which can easily be understand and adjust by the employees as
they have a proper management that after receiving order get check all the goods and
approved by their higher authorities to avoid the loss and damage of health and wealth.

BIBLIOGRAPHY
WEB
• www.google.com

• www.iocltenderexpress.com

• www.iocl.com

• www.investopedia.com

BOOKS
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MANAGEMENT ACCOUNTING (M Y KHAN)

MANAGEMENT ACCOUNTING (RAVI M. KISHOR)

OTHERS
✔ Company Generals

✔ Manuals related to stores and spares

✔ Sap accounting manuals

✔ Data related to balance sheet and generals

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