26 Sahil Arora IOCL

Economic Analysis of IOCL

Project Report
University Business School, Panjab University

Chandigarh
Submitted To:Dr.Manoj Kumar Sharma

UBS, PU
Submitted by:Sahil Arora

MBA-B
Page 1 of 66
TABLE OF CONTENTS
1. INTRODUCTION.........................................................................................5
1.1 HISTORY...............................................................................................6
1.1.1 ORIGIN............................................................................................7
1.1.2 EVOLUTION OF INDIAN OIL INDUSTRY..............................................7
1.1.3 INDIAN REFINERIES.........................................................................8
1.1.4 INDIAN OIL CORPORATION...............................................................9
1.2 STRUCTURE OF IOCL...........................................................................12
1.2.1 BOARD OF DIRECTORS...................................................................12
1.2.2 CHAIRMAN....................................................................................13
1.3 PRESENT STATUS.................................................................................14
1.3.1 MARKET SHARE.............................................................................14
1.3.2 FINANCIAL STATUS........................................................................15
1.3.3 INTERNATIONAL RANKINGS...........................................................15
2. DEMAND ANALYSIS.................................................................................16
2.1 DETERMINANTS OF DEMAND..............................................................16
2.1.1 PRICE OF COMMODITY...................................................................16
2.1.2 PRICE OF SUBSTITUTES..................................................................17
2.1.3 PRICE OF COMPLEMENTS...............................................................18
2.1.4 INCOME OF CONSUMER..................................................................19
2.1.5 NUMBER OF BUYERS......................................................................20
2.1.6 STATE OF ECONOMY......................................................................21
3. DEMAND FORECASTING...........................................................................22
3.1 TIME SERIES METHODS.......................................................................22
3.2 CAUSUAL METHODS............................................................................23
3.2.1 TURNOVER vs R & D EXPENSE.........................................................24
3.2.2 TURNOVER vs MARKETING EXPENSE..............................................25
3.2.3 TURNOVER vs RAW MATERIAL........................................................25
3.2.4 TURNOVER vs COMPENSATIONS......................................................26
3.2.5 TURNOVER vs PER CAPITA INCOME.................................................26
4. COST ANALYSIS.......................................................................................28
4.1 SALES vs VARIABLE COST.................................................................28
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4.2 SALES vs FIXED COST.......................................................................30

4.3 SALES vs RAW MATERIALS................................................................32
4.4 SALES vs POWER, FUEL, WATER CHARGES.........................................34
4.5 SALES vs COMPENSATION TO EMPLOYEES.........................................36
4.6 SALES vs RENT AND LEASE RENT......................................................38
4.7 SALES vs REPAIR AND MAINTAINENANCE..........................................40
4.9 SALES vs INSURANCE PREMIUM PAID................................................42
4.10 SALES vs ADVERTISING EXPENSE....................................................44
4.11 SALES vs DISTRIBUTING EXPENSE...................................................46
5. PRODUCTION ANALYSIS...........................................................................48
5.1 COBB-DOUGLAS PRODUCTION FUNCTION............................................48
6. MARKET STRUCTURE..............................................................................55
6.1 COMPETITORS OF IOCL........................................................................55
7. CONDUCT OF IOCL...................................................................................58
7.1 VISION................................................................................................58
7.2 VALUES..............................................................................................59
7.3 OBJECTIVES........................................................................................60
7.4 OBLIGATIONS......................................................................................61
7.5 STRATEGIES........................................................................................61
8. PERFORMANCE INDICATOR......................................................................62
8.1 PROFITABILITY...................................................................................63
8.2 CORPORATE SOCIAL RESPONSIBILITY..................................................63
9. SWOT ANALYSIS......................................................................................64
9.1 STRENGTHS........................................................................................64
9.2 WEAKNESSES......................................................................................65
9.3 OPPURTUNITIES..................................................................................65
9.4 THREATS.............................................................................................66
10. BIBLIOGRAPHY......................................................................................67
1. INTRODUCTION
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Indian Oil Corporation Limited, or Indian Oil, is an Indian state-owned oil and gas company
with its Registered Office at Mumbai, India. Indian Oil Corporation Ltd. is Indias largest
company by sales with a turnover of Rs. 328,744 crore and profit of Rs. 7,445 crore for the
year 2010-11.
Indian Oil's product range covers petrol, diesel, LPG, auto LPG, aviation turbine fuel,
lubricants, naphtha, bitumen, paraffin, kerosene etc. Xtra Premium petrol, Xtra Mile diesel,
Servo lubricants, Indane LPG cooking gas, Autogas LPG, Indian Oil Aviation and more.
PRODUCTS:
Indian Oil's product range covers petrol, diesel, LPG, auto LPG, aviation turbine fuel,
lubricants, naphtha, bitumen, paraffin, kerosene etc. Xtra Premium petrol, Xtra Mile diesel,
Servo lubricants, Indane LPG cooking gas, Autogas LPG, Indian Oil Aviation are some of its
brands.
Recently Indian Oil has also introduced a new business line of supplying LNG (liquefied
natural gas) by cryogenic transportation. This is called "LNG at Doorstep".
Indane
Indane is today one of the largest packed-LPG brands in the world. Having launched LPG
marketing in the mid-60s, Indian Oil has been credited with bringing about a kitchen
revolution, spreading warmth and cheer in millions of households with the introduction of
the clean and efficient cooking fuel.
The Indane network delivers 1.2 million cylinders a day to the doorsteps of over 53 million
households, making Indian Oil the second largest marketer of LPG globally, after SHV Gas
of The Netherlands.
Petrol
Automotive gasoline and gasoline-oxygenate blends are used in internal combustion sparkignition engines. These spark ignition engine fuels are primarily used for passenger cars.
They are also used in off-highway utility vans, farm machinery and in other spark ignition
engines employed in a variety of service applications.
Xtra Premium
Xtra Premium petrol is a much sought-after fuel among discerning motorists who are in many
ways emotionally attached to their wheels. Regular use of xtra premium gives the vehicle a
superior pick-up, smoother drive, better mileage and lower emission.
Diesel
Diesel is used in diesel engines, a type of internal combustion engine. Automotive diesel fuel
serves to power trains, buses, trucks, and automobiles, to run construction, petroleum drilling
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and other off-road equipment and to be the prime mover in a wide range of power generation
& pumping applications.
Xtramile
Indian Oils xtra mile Super Diesel, the leader in the branded diesel segment, is blended with
world-class multi-functional fuel additives. Commercial vehicle owners choose xtra mile
because they see a clear value benefit in terms of superior mileage, lower maintenance costs
and improved engine protection.
Auto Gas
Auto Gas (LPG) is a clean, high octane, abundant and eco-friendly fuel. The use of LPG as
an automotive fuel has become legal in India with effect from April 24, 2000, albeit within
the prescribed safety terms and conditions.
Indian Oil has setup 319 Auto LPG Dispensing Stations (ALDS) covering 174 cities across
India.
Natural Gas
Over the years, Natural Gas has emerged as the 'fuel of choice' across the world. Demand for
Natural Gas in India is primarily driven by the fertiliser and power sectors, which account for
almost two-third of the countrys gas consumption.
The Corporation entered the Natural Gas business in March 2004. Since then, by leveraging
its inherent strengths and countrywide reach, Indian Oil has significantly enhanced its
customer base. In the year 2009-10, it clocked sales of 1.683 MMTPA (million metric tonnes
per annum).
Servo Lubricants
Indian Oil's SERVO is the brand leader among lubricants and greases in India. With over 500
commercial grades and 1,500 formulations encompassing literally every conceivable
application, SERVO serves as a one-stop shop for complete lubrication solutions in the
automotive, industrial and marine segments.
1.1 HISTORY
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
10 of the 20 refineries in India, thus controlling 50 percent of the country's refining capacity.
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1.1.1 ORIGIN
Indian Oil owes its origins to the Indian government's conflicts with foreign-owned oil
companies in the period immediately following India's independence in 1947. The leaders of
the newly independent state found that much of the country's oil industry was effectively in
the hands of a private monopoly led by a combination of British-owned oil companies
Burmah and Shell and U.S. companies Standard-Vacuum and Caltex.
An indigenous Indian industry barely existed. During the 1930s, a small number of Indian oil
traders had managed to trade outside the international cartel. They imported motor spirit,
diesel, and kerosene, mainly from the Soviet Union, at less than world market prices.
Supplies were irregular, and they lacked marketing networks that could effectively compete
with the multinationals.
Burmah-Shell entered into price wars against these independents, causing protests in the
national press, which demanded government-set minimum and maximum prices for
kerosene--a basic cooking and lighting requirement for India's people--and motor spirit. No
action was taken, but some of the independents managed to survive until World War II, when
they were taken over by the colonial government for wartime purposes.
During the war, the supply of petroleum products in India was regulated by a committee in
London. Within India, a committee under the chairmanship of the general manager of
Burmah-Shell and composed of oil company representatives pooled the supply and worked
out a set price. Prices were regulated by the government, and the government coordinated the
supply of oil in accordance with defence policy.
1.1.2 EVOLUTION OF INDIAN OIL INDUSTRY
Wartime rationing lasted until 1950, and a shortage of oil products continued until well after
independence. The government's 1948 Industrial Policy Resolution declared the oil industry
to be an area of the economy that should be reserved for state ownership and control,
stipulating that all new units should be government-owned unless specifically authorized.
India remained effectively tied to a colonial supply system, however. Oil could only be
afforded if imported from a country in the sterling area rather than from countries where it
had to be paid for in dollars. In 1949, India asked the oil companies of Britain and the United
States to offer advice on a refinery project to make the country more self-sufficient in oil. The
joint technical committee advised against the project and said it could only be run at a
considerable loss.
The oil companies were prepared to consider building two refineries, but only if these
refineries were allowed to sell products at a price ten percent above world parity price. The
government refused, but within two years an event in the Persian Gulf caused the companies
to change their minds and build the refineries. The companies had lost their huge refinery at
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Abadan in Iran to Prime Minister Mussadegh's nationalization decree and were unable to
supply India's petroleum needs from a sterling-area country. With the severe foreign
exchange problems created, the foreign companies feared new Iranian competition within
India. Even more important, the government began to discuss setting up a refinery by itself.
Between 1954 and 1957, two refineries were built by Burmah-Shell and Standard-Vacuum at
Bombay, and another was built at Visakhapatnam by Caltex. During the same period the
companies found themselves in increasing conflict with the government.
The government came into disagreement with Burmah Oil over the Nahorkatiya oil field
shortly after its discovery in 1953. It refused Burmah the right to refine or market this oil and
insisted on joint ownership in crude production. Burmah then temporarily suspended all
exploration activities in India.
Shortly afterward, the government accused the companies of charging excessive prices for
importing oil. The companies also refused to refine Soviet oil that the government had
secured on very favourable terms. The government was impatient with the companies'
reluctance to expand refining capacity or train sufficient Indian personnel.
1.1.3 INDIAN REFINERIES
In 1958, the government formed its own refinery company, Indian Refineries Ltd. With
Soviet and Romanian assistance, the company was able to build its own refineries at
Noonmati, Barauni, and Koyali. Foreign companies were told that they would not be allowed
to build any new refineries unless they agreed to a majority shareholding by the Indian
government.
In 1959, the Indian Oil Company was founded as a statutory body. At first, its objective was
to supply oil products to Indian state enterprise. Then it was made responsible for the sale of
the products of state refineries. After a 1961 price war with the foreign companies, it emerged
as the nation's major marketing body for the export and import of oil and gas.
Growing Soviet imports led the foreign companies to respond with a price war in August
1961. At this time, Indian Oil had no retail outlets and could sell only to bulk consumers. The
oil companies undercut Indian Oil's prices and left it with storage problems. Indian Oil then
offered even lower prices. The foreign companies were the ultimate losers because the
government was persuaded that a policy of allowing Indian Oil dominance in the market was
correct. This policy allowed Indian Oil the market share of the output of all refineries that
were partly or wholly owned by the government. Foreign oil companies would only be
allowed such market share as equalled their share of refinery capacity.
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1.1.4 INDIAN OIL CORPORATION

In September 1964, Indian Refineries Ltd. and the Indian Oil Company were merged to form
the Indian Oil Corporation. The government announced that all future refinery partnerships
would be required to sell their products through Indian Oil.
It was widely expected that Indian Oil and India's Oil and Natural Gas Commission (ONGC)
would eventually be merged into a single state monopoly company. Both companies grew
vastly in size and sales volume but, despite close links, they remained separate. ONGC
retained control of most of the country's exploration and production capacity. Indian Oil
remained responsible for refining and marketing.
1.1.4.1 PERIOD OF INDUSTRIALIZATION
During this same decade, India found that rapid industrialization meant a large fuel bill,
which was a steady drain on foreign exchange. To meet the crisis, the government prohibited
imported petroleum and petroleum product imports by private companies. In effect, Indian
Oil was given a monopoly on oil imports.
A policy of state control was reinforced by India's closer economic and political links with
the Soviet Union and its isolation from the mainstream of western multinational capitalism.
Although India identified its international political stance as non-aligned, the government
became increasingly friendly with the Soviet Bloc, because the United States and China were
seen as too closely linked to India's major rival, Pakistan. India and the USSR entered into a
number of trade deals. One of the most important of these trade pacts allowed Indian Oil to
import oil from the USSR and Romania at prices lower than those prevailing in world
markets and to pay in local currency, rather than dollars or other convertible currencies.
For a time, no more foreign refineries were allowed. By the mid-1960s, government policy
was modified to allow expansions of foreign-owned refinery capacity. The Indian Oil
Corporation worked out barter agreements with major oil companies in order to facilitate
distribution of refinery products.
1.1.4.2 LARGEST PURCHASER
In the 1970s, the Oil and Natural Gas Commission of India, with the help of Soviet and other
foreign companies, made several important new finds off the west coast of India, but this
increased domestic supply was unable to keep up with demand. When international prices
rose steeply after the 1973 Arab oil boycott, India's foreign exchange problems mounted.
Indian Oil's role as the country's monopoly buyer gave the company an increasingly
important role in the economy. While the Soviet Union continued to be an important supplier,
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Indian Oil also bought Saudi, Iraqi, Kuwaiti, and United Arab Emirate oil. India became the
largest single purchaser of crude on the Dubai spot market.
1.1.4.3 NATIONALISATION OF REFINERIES
The government decided to nationalize the country's remaining refineries. The Burmah-Shell
refinery at Bombay and the Caltex refinery at Visakhapatnam were taken over in 1976. The
Burmah-Shell refinery became the main asset of a new state company; Bharat Petroleum Ltd.
Caltex Oil Refining (India) Ltd. was amalgamated with another state company, Hindustan
Petroleum Corporation Ltd., in March 1978. Hindustan had become fully Indian-owned on
October 1, 1976, when Esso's 26 percent share was bought out. On October 14, 1981,
Burmah Oil's remaining interests in the Assam Oil Company were nationalized, and Indian
Oil took over its refining and marketing activities. Half of India's 12 refineries belonged to
Indian Oil. The other half belonged to other state-owned companies.
1.1.4.4 GROWTH OF IOCL
By the end of the 1980s, India's oil consumption continued to grow at eight percent per year,
and Indian Oil expanded its capacity to about 150 million barrels of crude per annum. In
1989, Indian Oil announced plans to build a new refinery at Pradip and modernize the Digboi
refinery, India's oldest. However, the government's Public Investment Board refused to
approve a 120,000 barrels-per-day refinery at Daitari in Orissa because it feared future overcapacity.
By the early 1990s, Indian Oil refined, produced, and transported petroleum products
throughout India. Indian Oil produced crude oil, base oil, formula products, lubricants,
greases, and other petroleum products. It was organized into three divisions. The refineries
and pipelines division had six refineries, located at Guwahati, Barauni, Gujarat, Haldia,
Mathura, and Digboi. Together, the six represented 45 percent of the country's refining
capacity. The division also laid and managed oil pipelines. The marketing division was
responsible for storage and distribution and controlled about 60 percent of the total oil
industry sales. The Assam Oil division controlled the marketing and distribution activities of
the formerly British-owned company.
Indian Oil also established its own research centre at Faridabad near New Delhi for testing
lubricants and other petroleum products. It developed lubricants under the brand names Servo
and Servo prime. The centre also designed fuel-efficient equipment.
1991- Reform in the downstream hydrocarbon sector, the sector in which Indian Oil was the
market leader began as early in 1991 and continued throughout the decade.
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1993- The firm teamed up with Balmer Lawrie & Co. and NYCO SA of France to create AviOil India Ltd., a manufacturer of oil products used by defence and civil aviation firms.
1994- Indo Mobil Ltd. was formed in a 50-50 joint venture with Exxon Mobil. The new
company imported and blended Mobil brand lubricants for marketing in India, Nepal, and
Bhutan.
1996- Indian Oil was involved in the formation of ten major ventures from 1996 through
2000.
1997- The government announced that the Administered Pricing Mechanism (APM) would
be dismantled by 2002.
1998- To prepare for the increased competition that deregulation would bring, Indian Oil
added a seventh refinery to its holdings in 1998 when the Panipat facility was commissioned.
1999- According to a Hindu article, Indian Oil Corporation's strategy at this time was "to
become a diversified, integrated global energy corporation." The article went on to claim that
"while maintaining its leadership in oil refining, marketing and pipeline transportation, it
aims for higher growth through integration and diversification.
2000- Indian Oil and ONGC traded a 10 percent equity stake in each other in a strategic
alliance that would better position the two after the APM dismantling, which was scheduled
for 2002.
2002- In early 2002, Indian Oil acquired IBP, a state-owned petroleum marketing company.
The firm also purchased a 26 percent stake in financially troubled Haldia Petrochemicals Ltd.
In April of that year, Indian Oil's monopoly over crude imports ended as deregulation of the
petroleum industry went into effect. As a result, the company faced increased competition
from large international firms as well as new domestic entrants to the market.
During the first 45 days of deregulation, Indian Oil lost Rs7.25 billion, a signal that the
India's largest oil refiner would indeed face challenges as a result of the changes.
Future Expectations- Nevertheless, Indian Oil management believed that the deregulation
would bring lucrative opportunities to the company and would eventually allow it to become
one of the top 100 companies on the Fortune 500--in 2001 the company was ranked 209.
With demand for petroleum products in India projected to grow from 148 million metric tons
in 2006 to 368 million metric tons by 2025, Indian Oil believed it was well positioned for
future growth and prosperity.
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1.2 STRUCTURE OF IOCL

The decision making process of IOCL follows the following pattern:
BOARD OF DIRECTORS
CHAIRMAN
FUNCTIONAL DIRECTORS
EXECUTIVES
1.2.1 BOARD OF DIRECTORS

1. Shri Makarand Nene: Director (Marketing)
A Mechanical Engineer, Mr. Nene has over 33 years experience in the downstream petroleum
business. Joining IOC in 1978, he held several key portfolios and handled varied assignments
in core business functions such as LPG, Supply & Distribution (S&D), Operations, Shipping,
Commercial etc. He joined as director on 1st October, 2011. Prior to his elevation, he was
Executive Director (Supplies) at IOCs marketing headquarters in Mumbai.
2. Shri P. K. Goyal: Director (Finance)
A charted accountant by profession, Mr. Goyal joined Indian Oil on 7 th June, 1977. He joined
as Director on 2nd May, 2011. Prior to his elevation to the Board of Directors, he was
Executive Director (International Trade, Information Systems and Optimisation) at Indian
Oil's Corporate Office.
3. Shri Raj Kumar Ghosh: Director (Refineries)
A graduate in chemical engineering from IIT Kharagpur, Mr. Ghosh has over three decades of
experience in hydrocarbon industry. He joined as Director on 1st September, 2011. Prior to his
elevation, he was working as executive director-refineries at IOC headquarters.
4. Shri K. K. Jha: Director (Pipelines)
A Mechanical Engineering graduate from Vikram University Ujjain (Madhya Pradesh), Mr.
Jha joined Indian Oil in 1976. He joined as Director on 1st September, 2009.
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5. Dr. R. K. Malhotra: Director (Research & Development)

A Mechanical Engineer from IT, BHU and PhD (Energy Studies) from IIT Delhi, Dr.
Malhotra has more than 33 years of research experience in the application of fuels and
lubricants in downstream petroleum sector. He joined as Director on 5 th August, 2010. Prior
to his elevation to the Board, Dr. Malhotra was Executive Director of Indian Oil's world-class
Research and Development Centre at Faridabad.
6. Shri Sudhir Bhalla: Director (Human Resources)
An Honours Graduate from Delhi University with a LLB (Labour Laws) and a Masters in
Social Work, Mr. Bhalla has over three decades of experience in HR at Indian Oil and has
handled the entire gamut of activities in the HR function. He joined as Director on 27 th
October, 2010. Prior to his elevation, he was Executive Director (HR) of Indian Oil's
Refineries Division.
7. Shri A. M. K. Sinha: Director (Planning & Business Development)
A Mechanical Engineer, Mr. Sinha has over 33 years of diverse experience with the Indian
Oil Corporation Limited. He joined as Director on 16 th march, 2011. Prior to his elevation, he
was Executive Director (Corporate Planning & Economic Studies) at corporate office of
Indian Oil.
1.2.2 CHAIRMAN
Shri R. S. Butola
Born on May 5, 1954, Mr. Butola is an MBA from the Faculty of Management Studies, Delhi
with specialisation in Finance, and is a certified member of the Indian Institute of Bankers
(CAIIB).
He became the chairman of IOCL on 28th February, 2011.
Mr. Butola joined ONGC in 1991 as Deputy General Manager (F&A) and was appointed as
Director (Finance) of OVL, the overseas investment arm of the state explorer in 2002.
In a career spanning about three decades out of which two decades was in the hydrocarbon
industry, Mr. Butola has shouldered various responsibilities prominent among which is the
appraisal and evaluation of the Mumbai High Redevelopment Scheme. Under his
stewardship, OVL built a formidable E&P portfolio comprising both discovered and
producing assets in over 15 countries.
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1.3 PRESENT STATUS

With over 34,000-strong workforce, Indian Oil has been helping to meet Indias energy
demands for over half a century.
At Indian Oil, operations are strategically structured along business verticals - Refineries,
Pipelines, Marketing, R&D Centre and Business Development E&P, Petrochemicals and
Natural Gas. To achieve the next level of growth, Indian Oil is currently forging ahead on a
well laid-out road map through vertical integration upstream into oil exploration &
production (E&P) and downstream into petrochemicals and diversification into natural gas
marketing and alternative energy, besides globalisation of its downstream operations. Having
set up subsidiaries in Sri Lanka, Mauritius and the United Arab Emirates (UAE), Indian Oil is
simultaneously scouting for new business opportunities in the energy markets of Asia and
Africa.
1.3.1 MARKET SHARE
Indian Oil and its subsidiary (CPCL) account for over 48% petroleum products
market share, 34.8% national refining capacity and 71% downstream sector pipelines
capacity in India.
The Indian Oil Group of companies owns and operates 10 of India's 20 refineries with
a combined refining capacity of 65.7 million metric tonnes per annum (MMTPA, .i.e.
1.30 million barrels per day approx.).
Indian Oil's cross-country network of crude oil and product pipelines, spanning
10,899 km with a capacity of 75.26 MMTPA, is the largest in the country. With a
throughput of 68.5 million tonnes, it meets the vital energy needs of the consumers in
an efficient, economical and environment-friendly manner.
Validating the trust of 56.8 million households, Indane has earned the coveted status
of 'Super brand' in the year 2009 and now has a customer base of 61.8 millions.
Indane is present in almost 2764 markets through a network of 5456 distributors
(51.8% of the industry). About 7780 bulk consumer pumps are also in operation for
the convenience of large consumers, ensuring products and inventory at their
doorstep.
Indian Oil has 19,463 petrol and diesel stations (46.4% of the industry), including
3517 Kisan Seva Kendras (KSKs) in the rural markets.
Indian Oil's ISO-9002 certified Aviation Service commands an enviable 63% market
share in aviation fuel business, successfully servicing the demands of domestic and
international flag carriers, private airlines and the Indian Defence Services. The
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Corporation also enjoys a 65% share of the bulk consumer, industrial, agricultural and
marine sectors.
Indian Oil is currently investing Rs. 47,000 crore in a host of projects for
augmentation of refining and pipelines capacities, expansion of marketing
infrastructure and product quality up gradation.
1.3.2 FINANCIAL STATUS
For the financial year ended 31 March 2011, the net profit of the company was Rs.
7,445.48 crore while the same was Rs. 10,220.55 crore for the year 2010.
For the financial year ended 31 March 2011, the total turnover of the company was
Rs. 328,744 crore while the same was Rs. 271,095 crore for the year 2010.
For the financial year ended 31 March 2011, the total assets of the company were Rs.
114,403 crore while the same was Rs. 99,875 crore for the year 2010.
1.3.3 INTERNATIONAL RANKINGS
Indian Oil is the highest ranked Indian company in the Fortune 'Global 500' listing,
98th position in 2011.
It is also the 18th largest petroleum company in the world.
It is the number 1 petroleum trading company among the National Oil Companies in
the Asia-Pacific region.
IOCL was featured on the 2011 Forbes Global 2000 at position 243.
It is 5th most valued brand in India according to an annual survey conducted by Brand
Finance and The Economic Times in 2010.
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2. DEMAND ANALYSIS
The term demand signifies the ability or the willingness to buy a particular commodity at a
given point of time. There are a number of factors and circumstances that affect a buyer's
willingness or ability to buy a good. The fundamental objective of the demand theory is to
identify and analyse these factors.
2.1 DETERMINANTS OF DEMAND
As per the law of demand, price is an inverse function of demand. This means that as the
price of commodity decreases, its demand increases with other factors remaining constant.
But demand has other dimensions as well. All the factors which affect the demand of a
commodity including its price are known as Determinants of Demand.
IOCL has various products. But for a better analysis, I have limited my research to Petrol
only.
2.1.1 PRICE OF COMMODITY
The basic demand relationship is between potential prices of a good and the quantities that
would be purchased at those prices. Generally the relationship is negative meaning that an
increase in price will induce a decrease in the quantity demanded.
Given below is the data for the price of petrol and the consumption of petrol over the past 4
years.
Year
2007
2008
2009
2010
2011
Price
(Rs./Litre
)
46.41
48.65
43.36
50.98
67.47
Consumptio
n
(000 Tonne)
9286
10332
11257
12818
14202
Change in
Price (%)
4.826546003
-10.87358684
17.57380074
32.34601805
Change in
Consumption
(%)
11.26426879
8.952768099
13.86692725
10.79731627
Elasticity
2.333816
-0.82335
0.789068
0.333807
*The price of petrol taken is the average price of petrol in the metropolitan cities.
The elasticity of demand i.e. ratio of percentage change in consumption of petrol to the
percentage change in the price of petrol is varying. Hence, it can be concluded that petrol has
now become an essential commodity and its demand which is continuously increasing do
not vary a lot with price.
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But if we look at the percentage change in consumption of petrol, we can observe that there is
a decline. This is probably due to a very high percentage increase in the price of petrol in that
particular year.
A graph showing the variation of quantity of petrol consumed with the change in price over a
period of 4 years is shown below.
From the graph, it is very much clear that the demand of petrol is continuously increasing
irrespective of the changing price.
An official from the Loni Kalbhor petroleum terminal, the major source of fuel to the city,
said: "Before the increase in petrol prices, 15 lakh litres of petrol was being dispatched from
here daily. After the rise in prices, it has come down to 13.5 lakh litres per day."
2.1.2 PRICE OF SUBSTITUTES
Substitutes are those goods which can be used to replace each other. Substitutes have a
negative effect on the demand of the commodity i.e. with the decrease in price of the
substitutes, the demand of the commodity decreases. Petrol is mostly used in automobiles and
it has various substitutes like diesel and CNG. A table comparing the prices of these three
commodities is shown below.
Year
2007
2008
2009
2010
2011
Price of
Petrol(Rs./Litre)
46.41
48.65
43.36
50.98
67.47
Price of
Diesel(Rs./Litre)
32.85
34.04
32.76
38.5
43.66
Price of
CNG(Rs./Kg)
19.1
18.9
21
21.9
27.5
Page 16 of 66
From the table it is very clear that the price of petrol is far ahead as compared to the price of
diesel as well as CNG.
From the above graph it is clear that the prices of all the three commodities are continuously
rising but still CNG is very cheap as compared to petrol. This has encouraged the consumers
to shift towards CNG.
This is proven through a survey by Indraprastha Gas Ltd (IGL), which showed that in the
Delhi region alone, around 5,000 vehicles are switching to CNG every month.
2.1.3 PRICE OF COMPLEMENTS
Complements are those goods which are used together. Complementary goods have a positive
effect on the commodity i.e. with the decrease in price of the complementary commodity the
demand of original commodity increases. As petrol is used in automobiles, hence
complementary goods for petrol include cars, motorcycles, etc. With the increase in sales of
cars and motorcycle, the demand of petrol will also increase.
Year
2006
2007
2008
2009
2010
2011
Price of Toyota
Camry
$18,445
$18,470
$18,570
$19,145
$19,395
$20,195
Price of Land
Cruiser
$56,215
$56,215
$64,100
$64,755
$65,970
$68,920
Price of Honda
Civic
$14,560
$14,810
$14,810
$15,305
$15,455
$15,605
Page 17 of 66
is clear from the table that the price of all the models is continuously increasing over the
years. The increase in prices directly affects the sales. A decrease in the sales of automobile
will further decrease the sale of petrol.
As per the data released by SIAM, the total car sales in India stood at 138,521 units in
October 2011as compared to 1,81,704 units sold in October 2010.
2.1.4 INCOME OF CONSUMER
Apart from the price of various commodities, a persons income also plays a very important
role in deciding the demand of a product. When the consumers income increases, the
demand of the good also increases unless its a giffins good.
The income levels of Indians have increased phenomenally over last few years and so is the
standard of living. Here are some of the answers based on the survey conducted by CLSA:
Over 70 million households (34% of total) earn Rs. 80,000 to Rs. 18,00,000 per
annum.
Six hundred thousand households earn more than Rs. 18,00,000 per annum.
Independent studies suggest 1.6 million households earn over Rs 40 lakh per annum
and about 1,00,000 people have more than Rs. 4 crore in assets.
Real Incomes increased by 12%; However, real GDP per capita has grown at 10%
over FY02-07.
50% of the people have seen incomes rise in the past 12 months; 9% have seen their
Incomes decline.
Of those with income increases, one-third saw a more than 10% rise.
63% expect their incomes to rise in the next 12 months; average expected increase is
12.7%.
83% of people believe that they are better off than 10 years ago 84% expect further
improvement in their lives over the next five years.
With this much increase in the income of people they can afford to spend more in the goods
they need. The above data shows that there is an increase in the real income of the Indian
population. Moreover, as petrol is not a giffins good, its demand will increase with the
increase in consumers income.
Page 18 of 66
Sharad Pawar said that the purchasing power of a majority of the people, including the rural
population had increased. This was a result of the Central government pumping Rs 25,000
crore into the National Rural Employment Guarantee Scheme, giving good prices to farm
produce and the implementation of the 6th Pay Commission recommendations.
2.1.5 NUMBER OF BUYERS
The demand of any commodity directly depends upon its number of buyers. It is a fact that
the demand for a commodity which has a large number of buyers will surely increase.
Buyers as a whole come from the population itself. Moreover, in case of petrol, number of
buyers directly depends upon the number of people with motorcycles and cars. A table
showing the growth of population as well as the sales of automobile sector is given below.
Year
2006
2007
2008
2009
2010
Population
(Million)
1,122
1,138
1,154
1,170
1,186
Sales of
Maruti
6,74,924
7,64,842
7,92,167
10,18,365
12,71,005
Sales of
Hyundai
2,99,513
3,27,161
4,89,316
5,59,880
6,03,819
Sales of
Bajaj
22,81,230
27,21,824
24,51,407
21,04,154
28,52,580
It is clear from the above table that the population of India is continuously increasing, hence
broadly it can be said that the number of buyers for petrol are also increasing.
But the demand of petrol cannot be judged by the overall increase in population as the whole
population do not buy petrol. So we should look at the potential users of petrol. For this,
those people are considered who owns cars and motorcycles. It can be seen from the table
that the sale of major players in automobile sector is continuously increasing. These users of
automobile will further increase the demand of petrol as well.
Of the total population, a majority share of petrol is consumed by the urban population. Also,
in the urban population itself, a majority share is occupied by the people in age group 20-50.
It is mainly in this age group that people buy cars and motorcycles.
Of the total population, 27.8% of the people contribute towards urban population. Also,
64.3% of the population lies in the age group of 15-64 years. It is an interesting fact that the
median age in India is 25.1 years.
Page 19 of 66
2.1.6 STATE OF ECONOMY

The state of economy means the financial status of the country and its population. A country
passing through recession will surely reduce its demand on the other hand a country running
under smooth conditions will be having a normal demand.
To judge the financial status of the economy, I have taken two factors: GDP and Per Capita
Income. GDP shows the growth of the overall economy while per capita income shows the
individual level growth. A table is given below showing the trend of these two parameters
over the years.
Year
2006
2007
2008
2009
2010
GDP ( Rs. Crore)

36,92,485
42,93,672
49,86,426
55,82,623
65,50,271
Per Capita Income (Rs.)

27,123
31,198
35,820
40,605
46,492
It can be observed from the table that Indian economy is growing at a good pace over the past
few years. This directly affects the financial conditions of the country which is reflected by a
continuous increase in per capita income. An increase in per capita income means an increase
in the buying power of individual which can increase the demand.
India is now the fourth-largest economy behind the US, China and Japan. India's per capita
income is projected to grow by 17.3 per cent to Rs 54,527 in 2010-11 from Rs 46,492 in the
year-ago period, according to the official data.
Page 20 of 66
3. DEMAND FORECASTING
Demand forecasting is the activity of estimating the quantity of a product or service that
consumers will purchase at a given time. Demand forecasting involves techniques including
both informal methods, such as educated guesses, and quantitative methods, such as the use
of historical sales data or current data from test markets.
Broadly speaking, there are two approaches to demand forecasting- one is to obtain
information about the likely purchase behaviour of the buyer through collecting experts
opinion or by conducting interviews with consumers, the other is to use past experience as a
guide through a set of statistical techniques. The first method is usually found suitable for
short-term forecasting, the latter for long-term forecasting.
In this study, I have used quantitative methods of forecasting. These methods are based on an
analysis of historical data concerning the time series of the specific variable of interest and
possibly other related time series.
3.1 TIME SERIES METHODS

In this method, past trend of a particular variable is used to base the future forecast of the
variable. As this category of forecasting methods simply uses time series on past data of the
variable that is being forecasted, these techniques are called time series methods.
A table showing the turnover of IOCL is given below. Least square method is applied on it
for future estimation.
Year
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Sum
Turnover in Crore (Y)

1,19,884
1,30,203
1,50,729
1,83,172
2,20,779
2,47,457
2,85,398
2,71,095
3,28,744
19,37,461
X
1
2
3
4
5
6
7
8
9
45
X^2
1
4
9
16
25
36
49
64
81
285
XY
119884
260406
452187
732688
1103895
1484742
1997786
2168760
2958696
1,12,79,044
Y =Na+ b X
XY =a X +b X 2
Solving the above two equations we get:
Page 21 of 66
A
B
82628.53
26528.98
The general equation of least square method is given below:

Y =a+bX
Putting the value of a and b in the above equation, we can estimate the future value of
turnover.
Year
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Actual Turnover
Rs. Crore)
1,19,884
1,30,203
1,50,729
1,83,172
2,20,779
2,47,457
2,85,398
2,71,095
3,28,744
-
Estimated Turnover
( Rs. Crore)
1,09,158
1,35,686
1,62,215
1,88,744
2,15,273
2,41,802
2,68,331
2,94,860
3,21,389
3,47,918
3,74,447
From the table it is clear that the actual value of turnover is very close to the estimated value
of turnover by the least square method. Hence this method can be used for forecasting.
3.2 CAUSUAL METHODS
In this method, the forecaster examines the cause-and-effect relationships of the variable with
other relevant variables such as advertisement, interest, and number of employees. Thus, this
type of forecasting technique uses historical data of many relevant variables to produce the
forecast for the variable of interest.
The widely known causal method is called regression analysis, a statistical technique used to
develop a mathematical model showing how a set of variables are related. This mathematical
relationship can be used to generate forecasts. In the terminology used in regression analysis
contexts, the variable that is being forecasted is called the dependent or response variable.
The variable or variables that help in forecasting the values of the dependent variable are
called the independent or predictor variables.
Page 22 of 66
For this study, I have taken the total turnover as the dependent variable while raw material,
compensation, rent, marketing expense, etc. as the dependent variable. It has been assumed
that there is a direct relationship between the dependent and independent variables.
A table showing the values of all the independent and dependent variable is given below.
Year
2003
2004
2005
2006
2007
Turnove
r (Y)
1,19,884
1,30,203
1,50,729
1,83,172
2,20,779
R&D
(X1)
90.42
85.5
125.73
89.01
80.98
Marketing
Expense
(X2)
602.79
959.02
1480.51
1851.33
2308.64
2008
2,47,457
122.12
2632.06
2009
2,85,398
189.48
2714.02
2010
2,71,095
243.34
3685.17
2011
3,28,744
208.6
4601.48
Raw
Material
(X3)
37772.26
38655.35
53003.59
74560.17
88482.51
101494.2
2
137085.7
6
116556.2
9
142880.9
1
Compensatio
n (X4)
1742.96
1589.28
1850.52
1860.19
2620.86
Per Capita
Income
(X5)
18,899
20,936
22,946
25,956
27,123
2913.9
31,198
5618.37
35,820
5741.05
40,605
6435.55
46,492
* All figures in Rs. Crore except Per Capita Income which is in Rupees.
3.2.1 TURNOVER vs R & D EXPENSE
It is a fact that turnovers of an organization are directly affected by the research and
development expenses. An organization with a good research and development team will be
having increasing sales. The pattern can be identified by applying regression analysis.
The two equations of regression analysis are stated below:
Y =Na+ b X
2
XY =a X +b X
Solving the above equations we get the values of a and b as:
A
B
86,110.63
941.13
Page 23 of 66
From the above values of a and b, we can estimate the future values by changing the
expenditure in R & D.
Year
2011
2012
2013
Assumed R & D
Expense
208
235
260
%age change in
R&D
12.98076923
10.63829787
Estimated
Turnover
281865.7
307276.2
330804.4
%age change in
Turnover
9.015108969
7.657019971
These values can be really helpful in finding out the companys expense policy. This data will
help the company to decide on what to spend on R & D.
From the above table it is clear that the percentage change in the R & D expense is higher
than the percentage change in turnover. Hence, IOCL should not spend much on R & D.
3.2.2 TURNOVER vs MARKETING EXPENSE
Marketing expense includes commissions, discounts, sales promotion, etc. The various
discounts and promotional schemes help an organization improve its sales. Applying
regression analysis, we get the values of a and b as:
a
b
87250.38
55.3
From the above values of a and b, we can forecast the demand.
Year
2011
2012
2013
Assumed Marketing
Expense
4600
4800
5000
%age change
in Marketing
4.347826087
4.166666667
Estimated
Turnover
341630.4
352690.4
363750.4
%age change
in Turnover
3.237416811
3.135894824
From the above table we can decide upon the marketing expense.
A 4% increase in marketing expense increases the turnover by 3%. So the firm can invest in
marketing to increase their sales.
3.2.3 TURNOVER vs RAW MATERIAL
For increasing the turnover, an organization needs finished goods to sell. In order to increase
the production, it is necessary to increase the stock of raw material. Applying regression
analysis to the given data, we get the values of a and b as:
Page 24 of 66
a
54617.69
b
1.82
A table is shown below, giving the estimate turnover values.
Year
2011
2012
2013
Assumed Raw
Material
142880
152000
162000
%age change in
Raw Material
6.382978723
6.578947368
Estimated
Turnover
314659.29
331257.69
349457.69
%age change
in Turnover
5.275038916
5.494212074
The above table shows that an increase in the expense on raw material increases the
turnover.
3.2.4 TURNOVER vs COMPENSATIONS
Compensations to employees means giving benefits to them in the form of bonus, medical
aids, etc. giving compensations to employees can motivate them to work well thereby
increasing the productivity. Applying regression analysis to the given data, we get the values
of a and b.
a
b
99475.01
34.13
The table below shows the variations of turnover with compensations to employees.
Year
2011
2012
2013
Assumed Raw
Material
6430
6700
7200
%age change in
Raw Material
4.199066874
7.462686567
Estimated
Turnover
318930.91
328146.01
345211.01
%age change in
Turnover
2.889371871
5.200428919
It is clear that with the increase in expenditure on raw material the total turnover also
increases. But the change is not equal in both the cases.
3.2.5 TURNOVER vs PER CAPITA INCOME
Per capita income is a very important factor in determining the sales of any organization. Per
capita income indicates the purchasing power of individuals. An increased per capita income
will ensure an increased sales for an organization as the consumer will be having money to
purchase different products. Applying regression analysis to the given data, we get the values
of a and b.
Page 25 of 66
a
-12397
b
7.9
The table below shows the variations of turnover with per capita income.
Year
2011
2012
2013
Assumed Raw
Material
46490
50000
55000
%age change in
Raw Material
7.550010755
10
Estimated
Turnover
354874
382603
422103
%age change in
Turnover
7.81375925
10.32401732
From the above table it is clear that with the increase in per capita income, the turnover
increases. The percentage change in turnover is higher as compared to the percentage
change in per capita income which simple means the sales increases with the increase in
purchasing power of the individuals.
4. COST ANALYSIS
Cost analysis is done in order to find out the percentage share of each cost and compare it
with the sales. This is done in order to find out which cost is giving the maximum returns.
Page 26 of 66
4.1 SALES vs VARIABLE COST

Year
Sales
Variable Cost
%age
Mar-89
15163.32
9511.22
0.627252
Mar-90
17488.73
10801.2
0.617609
Mar-91
19567.68
12819.42
0.655132
Mar-92
20732.54
13339.98
0.643432
Mar-93
24301.66
17011.22
0.700002
Mar-94
23714.75
15941.08
0.672201
Mar-95
39407.26
21961.52
0.557296
Mar-96
46131.19
28735.98
0.622919
Mar-97
61558.46
39951.21
0.648996
Mar-98
59516.02
35621.61
0.598521
Mar-99
69572.82
44695.18
0.642423
Mar-00
95947.11
67955.68
0.708262
Mar-01
122517.6
80709.92
0.658762
Mar-02
115182.42
74931.76
0.650549
Mar-03
124378.83
74753.5
0.601015
Mar-04
135908.93
82258.55
0.605248
Mar-05
156768.6
91594.08
0.584263
Mar-06
199430.91
112569.34
0.564453
Mar-07
238498.44
130897.97
0.548842
Mar-08
270559.59
149964.75
0.554276
Mar-09
330003.39
165868.7
0.502627
Mar-10
291384.51
151519.41
0.519998
Mar-11
357421.98
191153.29
0.534811
Page 27 of 66
400000
250000
350000
300000
250000
200000
150000
200000
150000
100000
100000
50000
Annual Rs. Crore

Sales
Annual Rs. Crore
variable cost
50000
0
%age
400000
350000
300000
250000
200000
150000
100000
50000
0
%age 0.627251816
0.617609169
0.655132341
0.643432016
0.700002387
0.672201056
0.557296295
0.62291868
0.648996255
0.598521373
0.642423004
0.708261875
0.658761843
0.650548582
0.601014658
0.605247573
0.58426292
0.564452822
0.548842039
0.554276232
0.502627261
From the above figures it is clear that the variable cost of the firm holds a higher
share in the total cost of the firm.
Page 28 of 66
4.2 SALES vs FIXED COST

Year
Sales
Fixed Cost
%age
Mar-89
15163.32
5406.22
0.356533
Mar-90
17488.73
5858.31
0.334976
Mar-91
19567.68
6504.2
0.332395
Mar-92
20732.54
6673.49
0.321885
Mar-93
24301.66
6880.21
0.283117
Mar-94
23714.75
7066.47
0.297978
Mar-95
39407.26
16610.91
0.421519
Mar-96
46131.19
17367.14
0.376473
Mar-97
61558.46
20174.09
0.327722
Mar-98
59516.02
21939.1
0.368625
Mar-99
69572.82
16849.19
0.242181
Mar-00
95947.11
27669.91
0.288387
Mar-01
122517.6
36812.02
0.300463
Mar-02
115182.42
34970.56
0.30361
Mar-03
124378.83
45094.19
0.362555
Mar-04
135908.93
46887.81
0.344994
Mar-05
156768.6
60953.4
0.388811
Mar-06
199430.91
83638.24
0.419385
Mar-07
238498.44
100526.57
0.421498
Mar-08
270559.59
114871.73
0.424571
Mar-09
330003.39
151646.53
0.45953
Mar-10
291384.51
135221.96
0.464067
Mar-11
357421.98
162891.44
0.45574
Page 29 of 66
180000
400000
160000
350000
140000
300000
120000
250000
100000
200000
80000
150000
60000
40000
100000
20000
50000
Sales
fixed cost
%age
0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
%age
From the above figures it is clear that the fixed cost of the firm are
comparatively lesser than the variable cost of the firm.
Page 30 of 66
4.3 SALES vs RAW MATERIALS

Year
Sales
Raw materials, stores & spares
Mar-89
15163.32
4727.86
Mar-90
17488.73
5094.05
Mar-91
19567.68
5685.69
Mar-92
20732.54
5747.88
Mar-93
24301.66
5838.33
Mar-94
23714.75
5971.33
Mar-95
39407.26
13346.28
Mar-96
46131.19
15404.27
Mar-97
61558.46
18002.01
Mar-98
59516.02
19356.97
Mar-99
69572.82
13663.5
Mar-00
95947.11
22835.15
Mar-01
122517.6
32290.96
Mar-02
115182.42
29033.29
Mar-03
124378.83
37772.26
Mar-04
135908.93
38655.35
Mar-05
156768.6
53003.59
Mar-06
199430.91
74560.17
Mar-07
238498.44
88482.51
Mar-08
270559.59
101494.22
Mar-09
330003.39
137085.76
Mar-10
291384.51
116556.29
Mar-11
357421.98
142880.91
%age
0.311796
0.291276
0.290565
0.27724
0.240244
0.251798
0.338676
0.333923
0.292438
0.32524
0.196391
0.237997
0.263562
0.252064
0.303687
0.284421
0.338101
0.373865
0.370998
0.375127
0.415407
0.400009
0.399754
Page 31 of 66
400000
160000
350000
140000
300000
Sales Indian Oil Corpn. Ltd.
250000
200000
120000
100000
Raw materials, stores & spares Indian Oil Corpn. Ltd.
80000
150000
60000
100000
40000
50000
20000
4.4 SALES vs POWER, FUEL, WATER CHARGES
Page 32 of 66
Year
Sales
Power, fuel & water charges
%age
Page 33 of 66
Mar-89
15163.32
212.91
Mar-90
17488.73
217.06
Mar-91
19567.68
254.68
Mar-92
20732.54
241.87
Mar-93
24301.66
247.3
Mar-94
23714.75
286.13
Mar-95
39407.26
367.83
Mar-96
46131.19
339.28
Mar-97
61558.46
352.23
Mar-98
59516.02
404.91
Mar-99
69572.82
258.34
Mar-00
95947.11
342.86
Mar-01
122517.6
406.44
Mar-02
115182.42
411.6
Mar-03
124378.83
444.29
Mar-04
135908.93
2997.83
Mar-05
156768.6
272.72
Mar-06
199430.91
335.06
Mar-07
238498.44
415.3
Mar-08
270559.59
498.75
Mar-09
330003.39
598.02
Mar-10
291384.51
1137.43
Mar-11
357421.98
2058.61
0.014041
0.012411
0.013015
0.011666
0.010176
0.012065
0.009334
0.007355
0.005722
0.006803
0.003713
0.003573
0.003317
0.003573
0.003572
0.022058
0.00174
0.00168
0.001741
0.001843
0.001812
0.003904
0.00576
Page 34 of 66
400000
3500
350000
3000
300000
250000
2500
2000
200000
150000
100000
50000
0
1500
1000
Sales Indian Oil

Corpn. Ltd.
Power, fuel & water
charges Indian Oil
Corpn. Ltd.
500
0
Page 35 of 66
4.5 SALES vs COMPENSATION TO EMPLOYEES

Year
Sales
Compensation to employees
Mar-89
15163.32
185.84
Mar-90
17488.73
214.09
Mar-91
19567.68
244.62
Mar-92
20732.54
272.93
Mar-93
24301.66
317.85
Mar-94
23714.75
341.71
Mar-95
39407.26
421.05
Mar-96
46131.19
594.93
Mar-97
61558.46
607.31
Mar-98
59516.02
741.72
Mar-99
69572.82
758.94
Mar-00
95947.11
1243.51
Mar-01
122517.6
1898.13
Mar-02
115182.42
1545.59
Mar-03
124378.83
1742.96
Mar-04
135908.93
1589.28
Mar-05
156768.6
1850.52
Mar-06
199430.91
1860.19
Mar-07
238498.44
2620.86
Mar-08
270559.59
2913.9
Mar-09
330003.39
5618.37
Mar-10
291384.51
5741.05
Mar-11
357421.98
6435.55
%age
0.012256
0.012242
0.012501
0.013164
0.013079
0.014409
0.010685
0.012896
0.009866
0.012463
0.010909
0.01296
0.015493
0.013419
0.014013
0.011694
0.011804
0.009327
0.010989
0.01077
0.017025
0.019703
0.018005
Page 36 of 66
400000
7000
350000
6000
300000
250000
200000
150000
100000
50000
0
5000
4000
3000
2000
Sales Indian Oil

Corpn. Ltd.
Compensation to
employees Indian Oil
Corpn. Ltd.
1000
0
4.6 SALES vs RENT AND LEASE RENT
Page 37 of 66
Year
Sales
Rent & lease rent
Mar-89
15163.32
15.66
Mar-90
17488.73
28.37
Mar-91
19567.68
30.91
Mar-92
20732.54
37.25
Mar-93
24301.66
48.64
Mar-94
23714.75
31.87
Mar-95
39407.26
35.4
Mar-96
46131.19
48.14
Mar-97
61558.46
50.77
Mar-98
59516.02
72.92
Mar-99
69572.82
90.3
Mar-00
95947.11
110.24
Mar-01
122517.6
147.44
Mar-02
115182.4
178.03
Mar-03
124378.8
170.88
Mar-04
135908.9
184.11
Mar-05
156768.6
197.62
Mar-06
199430.9
177.83
Mar-07
238498.4
275.97
Mar-08
270559.6
368.18
Mar-09
330003.4
377.72
Mar-10
291384.5
238.17
Mar-11
357422
271.8
%age
0.001033
0.001622
0.00158
0.001797
0.002002
0.001344
0.000898
0.001044
0.000825
0.001225
0.001298
0.001149
0.001203
0.001546
0.001374
0.001355
0.001261
0.000892
0.001157
0.001361
0.001145
0.000817
0.00076
4.7 SALES vs REPAIR AND MAINTAINENANCE

Year
Mar-89
Sales
Repairs & maintenance
15163.32
81.47
%age
0.005373
Page 38 of 66
Mar-90
17488.73
98.07
0.005608
Mar-91
19567.68
109.05
Mar-92
20732.54
126.03
0.005573
0.006079
Mar-93
24301.66
145.5
Mar-94
23714.75
166.23
0.005987
0.00701
Mar-95
39407.26
199.21
Mar-96
46131.19
226.21
0.005055
0.004904
Mar-97
61558.46
254.64
Mar-98
59516.02
308.49
Mar-99
69572.82
323.51
Mar-00
95947.11
384.47
Mar-01
122517.6
443.81
Mar-02
115182.42
454.94
Mar-03
124378.83
484.04
Mar-04
135908.93
499.47
Mar-05
156768.6
642.35
Mar-06
199430.91
665.65
Mar-07
238498.44
842.65
0.004137
0.005183
0.00465
0.004007
0.003622
0.00395
0.003892
0.003675
0.004097
0.003338
0.003533
Mar-08
270559.59
1025.7
Mar-09
330003.39
1026.02
0.003791
0.003109
Mar-10
291384.51
1389.17
Mar-11
357421.98
1461.54
0.004767
0.004089
Page 39 of 66
4.9 SALES vs INSURANCE PREMIUM PAID

Year
Mar-89
Sales
Insurance premium paid
15163.32
8.7
%age
0.000574
Page 40 of 66
Mar-90
17488.73
9.86
Mar-91
19567.68
12.23
Mar-92
20732.54
13.58
Mar-93
24301.66
16.16
Mar-94
23714.75
19.68
Mar-95
39407.26
17.22
Mar-96
46131.19
19.59
Mar-97
61558.46
21.59
Mar-98
59516.02
28.5
Mar-99
69572.82
39.17
Mar-00
95947.11
46.58
Mar-01
122517.6
61
Mar-02
115182.4
73.44
Mar-03
124378.8
82.91
Mar-04
135908.9
88.69
Mar-05
156768.6
83.98
Mar-06
199430.9
84.47
Mar-07
238498.4
79.58
Mar-08
270559.6
67.9
Mar-09
330003.4
54.92
Mar-10
291384.5
44.62
Mar-11
357422
71.07
0.000564
0.000625
0.000655
0.000665
0.00083
0.000437
0.000425
0.000351
0.000479
0.000563
0.000485
0.000498
0.000638
0.000667
0.000653
0.000536
0.000424
0.000334
0.000251
0.000166
0.000153
0.000199
Page 41 of 66
Page 42 of 66
4.10 SALES vs ADVERTISING EXPENSE

Year
Mar-89
Sales
Advertising Expenses
15163.32
2.06
%age
0.000136
Mar-90
17488.73
2.69
Mar-91
19567.68
2.28
Mar-92
20732.54
0.000154
0.000117
0
Mar-93
24301.66
Mar-94
23714.75
Mar-95
39407.26
0
0
0
Mar-96
46131.19
Mar-97
61558.46
Mar-98
59516.02
41.94
Mar-99
69572.82
Mar-00
95947.11
0
0
0.000705
0
0
Mar-01
122517.6
Mar-02
115182.42
Mar-03
124378.83
0
0
0
Mar-04
135908.93
Mar-05
156768.6
Mar-06
199430.91
0
0
0
Mar-07
238498.44
Mar-08
270559.59
Mar-09
330003.39
Mar-10
291384.51
Mar-11
357421.98
0
0
0
0
0
Page 43 of 66
45
400000
40
350000
35
30
25
20
15
10
300000
250000
200000
150000
Annual Rs. Crore

Sales
Annual Rs. Crore
Advertising expenses
100000
50000
4.11 SALES vs DISTRIBUTING EXPENSE
Page 44 of 66
Year
Sales
Distribution expenses (including outward freight)
Mar-89
15163.32
399.78
Mar-90
17488.73
466.14
Mar-91
19567.68
555.74
Mar-92
20732.54
637.37
Mar-93
24301.66
764.93
Mar-94
23714.75
796.15
Mar-95
39407.26
24.3
Mar-96
46131.19
31.56
Mar-97
61558.46
42.62
Mar-98
59516.02
22.94
Mar-99
69572.82
4267.53
Mar-00
95947.11
3971
Mar-01
122517.6
4242.67
Mar-02
115182.4
4171.34
Mar-03
124378.8
4099.18
Mar-04
135908.9
4003.6
Mar-05
156768.6
4358.44
Mar-06
199430.9
4188.9
Mar-07
238498.4
4762.71
Mar-08
270559.6
5005.64
Mar-09
330003.4
5877.07
Mar-10
291384.5
6255.43
Mar-11
357422
6966.34
%age
0.026365
0.026654
0.028401
0.030742
0.031476
0.033572
0.000617
0.000684
0.000692
0.000385
0.061339
0.041387
0.034629
0.036215
0.032957
0.029458
0.027802
0.021004
0.01997
0.018501
0.017809
0.021468
0.019491
Page 45 of 66
8000
400000
7000
350000
6000
300000
5000
250000
4000
200000
3000
150000
2000
100000
1000
50000
Annual Rs. Crore

Sales
Annual Rs. Crore
Distribution expenses
(including outward
freight)
5. PRODUCTION ANALYSIS
A production function is the technical relationship between physical inputs and physical
outputs over a given period of time.
Page 46 of 66
Normally a production function is written as:

Q=f ( L , K , l , R , E)
where,
Q=Output
L=Labour
l=Land
R=Raw Material
E=Efficiency Parameter
5.1 COBB-DOUGLAS PRODUCTION FUNCTION

The Cobb-Doughlas production function was was proposed by Wicksell and tested by W.
Cobb and Paul H. Douglas in 1928. The Cobb-Douglas production function is represented as:
Q= A K L
Where , are constants. A is the technological parameter, is the elasticity of output with
respect to capital and is the elasticity of output with respect to labour.
It measures the elasticity of output with respect to employee expenses
which shows the change in output (income or sales) with respect to one
unit change in employee input. This elasticity is measured by function .
Similarly function measures the elasticity of output with respect to total
capital of the company which will tell us the change in output with respect
to one unit change in capital. Further this analysis i.e. calculation of
production function will exhibit either one of three returns to scale
scenarios for the company. Returns to scale refer to the degree by which
level of output changes in response to given change in all the inputs in a
production system.
1) The production function can exhibit constant returns to scale which
will indicate that proportional increase in all inputs (capital and
employee) will yield an equal proportional increase in output. If
employee and capital both are doubled, then output will be doubled.
For this + will be equal to 1.
2) The production function can exhibit decreasing returns to scale
which will indicate that proportional increase in all inputs (capital
and employee) will yield a less than proportional increase in output.
Page 47 of 66
If employee and capital both are doubled, then output will be less
than doubled. For this + will be less than 1.
3) The production function can exhibit increasing returns to scale which
will indicate that proportional increase in all inputs (capital and
employee) will yield a more than proportional increase in output. If
employee and capital both are doubled, then output will be more
than doubled. For this + will be greater than 1.
Now calculation of production function for IOCL has taken following
parameters in consideration:
Output: - The output for the company has been shown by the total
sales of the company.
Employee Cost: - The total employee cost has been shown by the
total compensation that is paid to the employees of the company.
Capital: - The total capital cost has been taken as net worth of the
company which has been calculated as the sum of total share
capital plus reserves. Total share capital includes equity share
capital + preference share capital + share application money.
Sales
(in
millions)
Year
Land
2003
Employee
Cost
(in
millions)
1243788.3
18543.2
Total
Capital
(in
millions)
189279.9
2004
1359089.3
19719.2
230474.1
2005
1567686
21952.7
259843.6
2006
1994309.1
22029
293026.7
2007
2384984.4
29024.3
348572.9
2008
2705595.9
32122.8
410862.5
2009
3300033.9
59172.5
440032.6
2010
2913845.1
60467.5
505528.3
2011
3578711.6
67297
553323.2
2012
4629077.7
53000.9
578767
Page 48 of 66
Sales
(in
millions
)
Employe
e Cost
(in
millions)
Year
Land
2003
1243788
18543.2
2004
1359089
19719.2
2005
1567686
21952.7
2006
1994309
22029
2007
2384984
29024.3
2008
2705596
32122.8
2009
3300034
59172.5
2010
2913845
60467.5
2011
3578712
67297
2012
4629078
53000.9
AP
(Averag
e
Produc
t)
67.0751
7
68.9221
3
71.4119
9
90.5310
8
82.1719
9
84.2266
5
55.7697
2
48.1886
2
53.1778
8
87.3396
1
MP
(Margin
al
Product
)
67.0751
7
636.721
5
897.038
9
3.99077
6
-836.849
1508.03
2
-950.549
-170.819
1368.84
-418.483
Page 49 of 66
Year
Land
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1
1
1
1
1
1
1
1
1
1
Sales
(in
millions
)
1243788
1359089
1567686
1994309
2384984
2705596
3300034
2913845
3578712
4629078
Total
Capital
(in
millions
)
189279.9
230474.1
259843.6
293026.7
348572.9
410862.5
440032.6
505528.3
553323.2
578767
AP
(Averag
e
Product
)
6.571159
5.896929
6.033191
6.805896
6.842139
6.585161
7.499521
5.76396
6.46767
7.998171
MP
(Margin
al
Product)
6.571159
2.798962
7.102494
12.85664
7.03334
5.147111
20.37833
-5.8964
13.91083
41.28181
Page 50 of 66
Sales
(in
millions
)
Employe
e Cost
(in
millions)
2003
1243788
18543.2
2004
1359089
19719.2
2005
1567686
21952.7
2006
1994309
22029
2007
2384984
29024.3
2008
2705596
32122.8
2009
3300034
59172.5
2010
2913845
60467.5
2011
3578712
67297
Year
Total
Capital
(in
millions
)
189279.
9
230474.
1
259843.
6
293026.
7
348572.
9
410862.
5
440032.
6
505528.
3
553323.
Employe
e
Cost/Sal
es (%)
Total
Capital/S
ales (%)
1.490865
15.21802
1.450913
16.95798
1.400325
16.57498
1.104593
14.69314
1.21696
14.61531
1.187273
15.18566
1.793088
13.33418
2.075179
17.34918
1.880481
15.46152
Page 51 of 66
2012
4629078
53000.9
2
578767
1.144956
12.50286
YEAR WISE PATTERN OF SALES vs TOTAL CAPITAL vs

EMPLOYEE COST
a Employee Cost/Sales pattern (%):
Page 52 of 66
b Total Capital/Sales pattern (%):
Production function can be defined as

Output = f(L,K), where L is the employee cost and K is the capital cost.
O = A.KL
where , are the constants. A is the technological parameter, is the
elasticity of output with respect to capital and is the elasticity of output
with respect to employee.
To obtain the values of , we will use regression analysis. Taking log on
both the sides
Log O =Log A + Log K + Log L
Page 53 of 66
The various logarithmic values for sales, employee and capital are
calculated. Then we use regression analysis to calculate the values of , .
Year
log O (Sales)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
6.094746
6.133248
6.195259
6.299792
6.377486
6.432263
6.518518
6.464466
6.553727
6.665494
log K (Total
Capital)
5.277104
5.362622
5.414712
5.466907
5.542294
5.613697
5.643485
5.703745
5.742979
5.762504
log L
(Employee
Cost)
4.26818468
4.29488929
4.34148794
4.34299478
4.46276175
4.50681339
4.77211992
4.78152201
4.8279957
4.72428324
Using SPSS software we get the values of A, alpha and beta.

A= 2.4428
= 0.0533
= 1.2712
+ = 0.0533 +1.2712 = 1.3245 > 1
This indicates that proportional increase in all inputs (capital and employee) will
yield more than proportional increase in output. If employee and capital both are
doubled, then output will be more than doubled.
6. MARKET STRUCTURE
Page 54 of 66
A market is a set of conditions in which buyers and sellers meet each other for the purpose of
exchange of goods and services for money.
Markets are classified according to the number of firms in the market and by the commodity
to be exchanged. The economists on the basis of variation in the features of market describe
four market models:
1. Perfect Competition
There are large number of buyers and sellers and the product is homogeneous. A new
firm can easily enter the market while an old firm can also make an exit from the
market.
2. Monopoly
There is a single seller who caters the need of large population. The firm determines
its own prices which may vary according to the type of customers. There is restriction
on entry and exit in this type of market.
3. Monopolistic Competition
There are large numbers of buyers in comparison to sellers in the market. The
products are slightly differentiated. A new firm can easily enter the market while an
old firm can also make an exit from the market.
4. Oligopoly
Oligopoly is a market where few interdependent firms exist but some firms are more
dominating. The sellers offer either homogeneous or differentiated product. There is
restriction on entry and exit in this type of market.
6.1 COMPETITORS OF IOCL

Indian Oil Corporation has two major domestic competitors, Bharat Petroleum and Hindustan
Petroleum. Both are state-controlled, like Indian Oil Corporation. There are two private
competitors, Reliance Industries and Essar Oil.
1. Bharat Petroleum:
Bharat Petroleum Corporation Limited (BPCL) is a state-controlled oil refining and
marketing company headquartered at Mumbai, India. In 2011, Fortune Global 500 ranked the
company at 272.
Bharat Petroleum owns refineries at Mumbai and Kochi (Kochi Refineries) with a capacity of
12and 9.5 million metric tonnes per year respectively. Its subsidiary at Numaligarh has a
capacity of 3 million metric tonnes per year. On 25 May 2011, the Bina Refinery in Madhya
Pradesh with a capacity of 6 million metric tonnes per year was commissioned.
Page 55 of 66
2. Hindustan Petroleum:
Hindustan Petroleum Corporation Limited (HPCL) is an Indian state-owned oil company
headquartered at Mumbai, India and is a Fortune 500 company of India listed at number 336.
HPCL operates 2 major refineries producing a wide variety of petroleum fuels & specialties,
one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum (MMTPA) capacity
and the other in Vishakapatnam, (East Coast) with a capacity of 8.3 MMTPA.[4] HPCL holds
an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited (MRPL), a stateof-the-art refinery at Mangalore with a capacity of 9 MMTPA. Another Refinery of 9
MMTPA is under construction in Bathinda, Punjab by HMEL, and a Joint Venture with Mittal
Energy Investments Pvt. Ltd.
3. Essar Oil
Essar Oil is an Indian integrated oil and gas company that is part of the Essar group based in
Mumbai.
Essar Oil operates a major refinery in Gujarat, India, which made it the second largest nonstate refiner in India in 2009.
4. Reliance Industries
Reliance Petroleum Limited was set up by Reliance Industries Limited (RIL), one of India's
largest private sector companies based in Mumbai. Currently, RPL is subsidiary of RIL, and
has interests in the downstream oil business. RPL also benefits from a strategic alliance with
Chevron India Holdings Pte Limited, Singapore, and a wholly owned subsidiary of Chevron
Corporation USA (Chevron), which currently holds a 5% equity stake in the Company.
A table showing the yearly sales of IOCL and its competitors is shown below.
Sales (Rs. Crore)
2011
2010
2009
2008
2007
IOCL
3,28,744
2,71,095
2,85,398
2,47,457
2,20,779
BPCL
1,63,218
1,31,500
1,45,392
1,21,684
1,07,452
HPCL
1,42,396
1,14,888
1,31,802
1,12,098
96,918
Essar Oil
53,119
42,401
41,816
576
484
From the above data it is clear that IOCL holds the maximum share in the market.
Page 56 of 66
The above graph shows the percentage share of various organizations. It can be clearly seen
that IOCL possesses the majority share. The total share of IOCL is approximately equal to the
combined share of HPCL, BPCL and Essar Oil.
Thus we can conclude that petroleum industry has only a few firms and is dominated by a
single firm. This is the characteristic of oligopoly market.
7. CONDUCT OF IOCL
Page 57 of 66
The conduct of a firm describes the behaviour of the firm to the basic condition prevailing in
the market. These conditions include price competition, price discrimination, price leadership
behaviour, mergers, acquisitions, research and development, policy, innovations, etc.
7.1 VISION
7.2 VALUES
Page 58 of 66
Indian Oil nurtures the core values of Care, Initiative, and Passion & Trust across the
organization in order to deliver value to its stakeholders.
Care stands for:
Concern
Empathy
Understanding
Co-operation
Empowerment
Innovation stands for:
Creativity
Ability to learn
Flexibility
Change
Passion stands for:
Commitment
Dedication
Pride
Inspiration
Ownership
Zeal & Zest
Trust stands for:
Delivered promises
Reliability
Dependability
Integrity
Truthfulness
Transparency
7.3 OBJECTIVES
Page 59 of 66
To serve the national interests in oil and related sectors in accordance and consistent
with Government policies.
To ensure maintenance of continuous and smooth supplies of petroleum products by
way of crude oil refining, transportation and marketing activities and to provide
appropriate assistance to consumers to conserve and use petroleum products
efficiently.
To enhance the country's self-sufficiency in crude oil refining and build expertise in
lying of crude oil and petroleum product pipelines.
To further enhance marketing infrastructure and reseller network for providing
assured service to customers throughout the country.
To create a strong research & development base in refinery processes, product
formulations, pipeline transportation and alternative fuels with a view to
minimizing/eliminating imports and to have next generation products.
To optimise utilisation of refining capacity and maximize distillate yield and gross
refining margin.
To maximise utilisation of the existing facilities for improving efficiency and
increasing productivity.
To minimise fuel consumption and hydrocarbon loss in refineries and stock loss in
marketing operations to effect energy conservation.
To earn a reasonable rate of return on investment.
To avail of all viable opportunities, both national and global, arising out of the
Government of Indias policy of liberalisation and reforms.
To achieve higher growth through mergers, acquisitions, integration and
diversification by harnessing new business opportunities in oil exploration &
production, petrochemicals, natural gas and downstream opportunities overseas.
To inculcate strong core values among the employees and continuously update skill
sets for full exploitation of the new business opportunities.
To develop operational synergies with subsidiaries and joint ventures and
continuously engage across the hydrocarbon value chain for the benefit of society at
large.
Page 60 of 66
7.4 OBLIGATIONS
Towards customers and dealers: To provide prompt, courteous and efficient service
and quality products at competitive prices.
Towards suppliers: To ensure prompt dealings with integrity, impartiality and
courtesy and help promote ancillary industries.
Towards employees: To develop their capabilities and facilitate their advancement
through appropriate training and career planning. To have fair dealings with
recognised representatives of employees in pursuance of healthy industrial relations
practices and sound personnel policies.
Towards community: To develop techno-economically viable and environmentfriendly products. To maintain the highest standards in respect of safety, environment
protection and occupational health at all production units.
Towards Defence Services:- To maintain adequate supplies to Defence and other
para-military services during normal as well as emergency situations.
7.5 STRATEGIES
Cost Leadership: As per the Government regulations, all the player in downstream
petroleum sector have to maintain same prices, infact subsidize the main commodities like
Motor spirit, High speed diesel, kerosene and LPG. For the subsidized products, Government
allots Oil bonds to Oil PSUs in order to partially compensate for the under-recoveries and to
some extent by upstream Oil Companies (ONGC, OIL).In this way IOCL has overall cost
leadership vis--vis private players.
Differentiation: Indian Oil is the pioneer in launching state-of-the-art petrol stations with
digital dispensers, modern canopies, standardized signage and efficient lighting systems way
back in the mid-1990s. The new retail-branding template introduced by Indian Oil set in
motion a revolution in the petroleum retail business in the country. Following are the
evidence of differentiation by IOCL.
Xtra Care: Indian Oil's XTRA care E branded full service petrol stations is a result of a
series of processes in retail design, product and service up gradation, capability training,
automation, loyalty programs, retail site management techniques all benchmarked to global
standards. Today XTRA care petrol stations are synonymous in India with world-class
petroleum retailing.
While the industry standard is to take samples on a quarterly basis, Indian Oil has moved
several steps ahead by introducing fortnightly random sampling with specific importance
given to RON (Research Octane Number) sampling which is truly the definitive test for
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quality and quantity. The surveillance audits by BV are being done on a more comprehensive
basis. The scale and spread of XTRA care pumps is also an industry record.
Another vital differentiator in the Indian Oil XTRA care is the importance given to the
frontline customer attendants. They are trained at three levels of competencies- customer
service, personal hygiene/grooming and customer complaint redressals. XTRA care dealers
also undergo extensive training on 'Retail Site Business Management.
Kisan Seva Kendra: Kisan Seva Kendra is a unique award-winning retail outlet model
pioneered by Indian Oil to cater to the needs of the customers' in the rural segment. Today
Indian Oil's KSKs have merged as a dominant player in the rural markets, riding on the rapid
growth of upcoming second and third tier roads in the rural areas. The KSKs come with a
fresh perspective enabling dealers to tap the huge demand driven in by consumers there.
Swagat: The Swagat retail network are large format sites designed exclusively to cater to
travellers on the highways. With spacious parking lots, dhabas, eateries, retail stores and
restroom, the Swagat outlets provide customized services to owners of both light motor
vehicles as well as heavy motor vehicles.
Focus: IOCL plans to prune its retail outlets in the current year (2011), owing to the fact that
it plans to improve the efficiency of current 15000 outlets. Its plans to improve by its
differentiating factors like Xtra care, Swagat and Seva Kendra.
IOCL to use its Indian surplus funds to expand operations in Sri Lanka ,where it is operating
as Lanka IOC Plc.,.It is planning to establish 300 retail outlets which require investment tothe
tune of 6 billion Sri lankan rupess ( INR 260 crore),each outlet requiring about Sri Lankan
rupee 2 Crore. Srilankan market has a demand of 3.5 MTPA with current capacity of
2.2 MTPA
8. PERFORMANCE INDICATOR
Performance Indicators, also known as key performance indicator (KPI), help an organization
define and measure progress toward organizational goals. Once an organization has analyzed
its mission, identified all its stakeholders, and defined its goals, it needs a way to measure
progress toward those goals. Key Performance Indicators are those measurements.
8.1 PROFITABILITY
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One of the methods to judge the performance of an organization is to compare the overall
profit over the years. A table is shown below comparing the profits of IOCL over the past
years.
Year
Gross Profit (Rs. Crore)
2010-11
16,336
2009-10
18,872
2008-09
11,319
2007-08
14,334
2006-07
14,622
2005-06
9,931
2004-05
8,722
2003-04
12,013
2002-03
10,863
It can be seen from the above table that the gross profit of IOCL is showing an increasing
curve over the years. However, during the last year, the profits of IOCL decreased. This may
be due to increasing prices of crude oil.
8.2 CORPORATE SOCIAL RESPONSIBILITY
At Indian Oil, corporate social responsibility (CSR) has been the cornerstone of success right
from inception in the year 1964.
As a constructive partner in the communities in which it operates, Indian Oil has been taking
concrete action to realise its social responsibility objectives, thereby building value for its
shareholders and customers. The Corporation respects human rights, values its employees,
and invests in innovative technologies and solutions for sustainable energy flow and
economic growth, touching the lives of millions of people positively by supporting
environmental and health-care projects and social, cultural and educational programmes.
Besides focusing primarily on the welfare of economically and socially deprived sections of
society, Indian Oil also aims at developing techno-economically viable and environmentfriendly products & services for the benefit of millions of its consumers, while at the same
time ensuring the highest standards of safety and environment protection in its operations.
9. SWOT ANALYSIS
SWOT analysis is done to find out the strengths, weaknesses, opportunities and threats for an
organization. The analysis helps an organization to overcome its weaknesses and grab the
opportunities they have.
Page 63 of 66
9.1 STRENGTHS
IOCL have a lot of advantage over others in the oil industry. These are given below:
One of the biggest strength of the company is that it is state owned. This led the
company to have great infrastructure with the governments support.
The oil sector is an industry wherein not many competitors can enter owing to the
scale and government intervention. Hence, IOCL can easily maintain its position.
The Indian Oil Group of companies owns and operates 10 of India's 20 refineries with
a combined refining capacity of 65.7 million metric tonnes per annum. Thus Indian
Oil owns 50% of the refineries of India.
Indian Oil and its subsidiaries have a dominant share of the petroleum products
market and downstream sector pipelines capacity in India.
Its cross-country network of crude oil, product and gas pipelines, spanning 10,899 km
with a capacity of 75.2 MMTPA, is the largest in the country.
Indian Oil has 19,463 petrol and diesel stations (46.4% of the industry), 8000 LPG
distributors, and 6492 kerosene/LDO dealers.
Indian Oil has set up subsidiaries in Sri Lanka, Mauritius and the United Arab
Emirates (UAE).
Indian Oil's ISO-9002 certified Aviation Service commands an enviable 63% market
share in aviation fuel business, successfully servicing the demands of domestic and
international flag carriers, private airlines and the Indian Defence Services.
Indian Oil has a concerted social responsibility programme to partner communities for
health, family welfare, education, environment protection, providing potable water,
sanitation, and empowerment of women and other marginalised groups.
9.2 WEAKNESSES
IOCL, along with the above mentioned strengths, have some weaknesses as well which they
should work upon. These are given below:
The company has limited upstream operations. IOCL sources most of its requirements
of crude oil from different parts of the world, including the Middle East, Southeast
Asia and West Africa. Since IOCL does not provide for most of its crude oil needs
Page 64 of 66
from internal sources, it is greatly exposed to risks of fluctuating international oil

prices.
The total borrowings of IOCL have been increasing over the past years.
9.3 OPPURTUNITIES
IOCL have a lot of opportunities to expand in its market. IOCL can further improve its
performance by the given means.
Driven by rapid economic growth, the demand of energy in India is likely to grow by
40% in the next five years. By 2012, Indias consumption of energy (excluding
biomass) is expected to reach the equivalent of 550 million tons of oil annually, up
from about 385 million tons in 2005. Increasing energy consumption in India is likely
to increase demand for IOCs oil products, particularly LPG and diesel, which are
used in the commercial and industrial sectors.
The demand for refined oil and petroleum products in India is also expected to
increase over the years. As a result the company has doubled its refining capacity
from 6 million metric tonnes (MMT) per annum to 12 million metric tonnes (MMT)
per annum.
IOCL has always great opportunities to get into mergers & acquisitions with
companies across the globe in order to expand at a global level.
9.4 THREATS
IOCL is the leading player in its sector hence it possess the biggest threat from competitors.
Competition in downstream segment has increased due to the entry of private sector
companies. Indian Oil faces intense competition from other national and local
companies such as Hindustan Petroleum Corporation Limited, Bharat Petroleum
Corporation, and Shell.
Page 65 of 66
Increasing crude oil prices and government subsidies could put pricing pressure on the
company. There has been a continuous increase in the prices of crude oil which has
lead to a decrease in consumption of crude oil products.
If the Govt. Policies allow the private players to set their own price, the private player
can seriously harm the market share of IOCL.
10. BIBLIOGRAPHY
http://www.iocl.com
http://www.mypetrolprice.com
http://petroleum.nic.in
http://censusindia.gov.in
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Economic Analysis of IOCL

Economic Analysis of IOCL

University Business School, Panjab University

Submitted To:Dr.Manoj Kumar Sharma

Submitted by:Sahil Arora

Economic Analysis of IOCL

Economic Analysis of IOCL

4.2 SALES vs FIXED COST.......................................................................30

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

1.1.4 INDIAN OIL CORPORATION

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

1.2 STRUCTURE OF IOCL

1.2.1 BOARD OF DIRECTORS

Economic Analysis of IOCL

5. Dr. R. K. Malhotra: Director (Research & Development)

Economic Analysis of IOCL

1.3 PRESENT STATUS

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

2.1.6 STATE OF ECONOMY

GDP ( Rs. Crore)

Per Capita Income (Rs.)

Economic Analysis of IOCL

3.1 TIME SERIES METHODS

Turnover in Crore (Y)

Economic Analysis of IOCL

The general equation of least square method is given below:

Economic Analysis of IOCL

Economic Analysis of IOCL

From the above values of a and b, we can forecast the demand.

Economic Analysis of IOCL

Economic Analysis of IOCL

Economic Analysis of IOCL

4.1 SALES vs VARIABLE COST

Economic Analysis of IOCL

Annual Rs. Crore

Economic Analysis of IOCL

4.2 SALES vs FIXED COST

Economic Analysis of IOCL

Economic Analysis of IOCL

4.3 SALES vs RAW MATERIALS

Raw materials, stores & spares

Economic Analysis of IOCL

Sales Indian Oil Corpn. Ltd.

Raw materials, stores & spares Indian Oil Corpn. Ltd.

4.4 SALES vs POWER, FUEL, WATER CHARGES

Economic Analysis of IOCL

Power, fuel & water charges

Economic Analysis of IOCL

Economic Analysis of IOCL

Sales Indian Oil

Economic Analysis of IOCL