ADATIYA JATIN H.

A Project Report On DISTRIBUTION CHANNEL ATESSAR ENERGY INDIA LIMITED. , VADINAR, District- Jamnagar GUJARAT Under the guidance of Mr. RAJESH GAUTAM , HOD OF MCO DEPARTMENT ESSAR OIL LTD VADINAR JAMNAGAR. Submitted by ADATIYA JATIN H submitted to Gujarat technological university College guide MR. RAJESH SIR SHREE S.P. PATEL MBA COLLEGE OF MANAGEMENT JUNAGADH, 360002 1 ACKNOWLEDGEMENT With a deep sense of gratitude and respect I would like to extend my heartiest thanks to all those who provided me immense help and guidance during my training period. I express my gratitude to Mr. RAJESH GAUTAM (H.O.D OF MCO.DEPARTMENT) and MR.DILIP TRIVEDI for his timely help and for showing keen interest in my work, which enabled me to complete it in assigned span of time. I am also thankful to entire staff of Essar energy (India) Limited, Vadinar for their , suggestions and moral support throughout the duration of my project. I would also like to give my sincere regards to my project guide Mr. Rajesh Gautam and all the faculty members the college for their guidance, which helped me a lot in developing the skills required to fulfill this project. Last but not the least I would like to mention here that I am greatly indebted to each and everybody who has been associated with my project at any stage but whose name does not find a place in this acknowledgement. 2 DECLARATION I undersigned ADATIYA JATIN H a student of MBA SEM 2 here by declare that I have prepared this project report at ESSAR OIL LTD at Jamnagar under MR.RAJESH GAUTAM H.O.D. of MCO DEPARTMENT. I declare that project work present in this report in my own work..This report is base purely on my work done at ESSAR OIL LTD. I also declare that this project is not copied from anywhere else. PLACE: Amreli DATE: ADATIYA JATIN H 3 PREFACE I personally belives that practice knowledge person cannot get deep knowledge about any area so thought training I know that how to work in the company, I would like to thank GTU to give chance to get training in the company because of our structure. During my training in ESSAR OIL LTD I am able to express my knowledge and able to work with time management. I would like to tell that this report is prepare with my own effort and prepare for academic purpose only. As we say the the words in our daily life that “ practice make perfact action makes man practical” to concern on these two words like practice and action we have work in the area where all set the appropriate knowledge learn the corporate culture ADATIYA JATIN H 4 TO WHOM IT MY CONCERN This is to certified that Mr. ADATIYA JATIN H student of S.P.PATEL MBA COLLEGE JUNAGADH. GTU has satisfactory completed the summer intership in ESSAR OIL LTD vadinar jamnagar during 1.june to 15.july 2010 and found sincere and hard working in period of training. DATE GUIDE; MR .Rajesh Gautam HOD of MCO department Essar oil ltd 5 EXECUTIVE SUMMERY A Summer Internship has been an outstanding experience from ‗HOW‘to ‗WOW‘. In Summer Internship, first of all, we have been given ‗Health-Safety-Fire-Environment Workshop‘ to teach us that how we have to keep our self safe in the refinery. Then after, we have studied the whole activities going on in different – different departments. I have made a project on General Management including projects of Marketing. In marketing project, we have been given a topic of ―distribution channel. It is all about the product are supply by many type of channel. Here, we have to analyze the whole procedure of different channel of distribution and we have also seen that how the product was supply by many channel. In general project we have seen many department like MCO, WAREHOUSE, POWER, RAB...ETC…after seen those entire department my knowledge was increase very much. 6 CONTENTS Particular Industry overview Essar group overview Essar base: management team Essar global management committee Product of essar oil ltd Essar vision Essar mission Production department Human resource department Finance department Marketing department Swot analysis RESERCH TOPIC Literature review Introduction distribution channel Research objective Calculation of hypothesis test Data analysis Key findings Suggestion conclusion bibliography annexure Page no. 8 10 20 21 24 25 26 27 31 36 49 65 70 71 76 81 85 87 88 89 90 91 7 INDUSTRY OVERVIEW According to a survey, World Crude Oil Refining Capacity was 83.1 million barrels per day. But, to keep pace with rising demand this capacity has to reach the level of 93 million barrels per day by 2010.This means the global Oil Refinery Industry has to grow at an average Growth Rate of 1.8% per year. Oil Refinery Industry holds immense importance for all the oil producing countries. If we focus on the global trend of this Oil Refinery Industry then we will see that this industry has experienced a lot of ups and downs over the decades. In the period from 1970s to 1990s considerable amount of investment was made in the Oil Refinery Industry. But because of the oil shocks of 1973-74 and 1979-80 and because of the Asian Financial Crisis, the market demand was quite low. This resulted in surplus refining capacity of global Oil Refinery Industry. But, the present scenario is different. As the Demand for Refined Petroleum and other Refined Products is increasing, Surplus Refining Capacity of the industry is diminishing very fast. So, in today world, the Oil Refinery Industry has to concentrate on additional capacity building so that the Growing Market Demand can be met accordingly. This additional capacity building naturally requires Heavy Investment. But because of the uncertainty of the investment returns, returns from the oil refinery were very low last three decades. But many companies are not willing to invest in new oil refinery plants may be because of the factor that any Oil Refinery Plant requires at least five years to be established and this long period increases the risk of investing. 8 But, the good news is that in the recent years the rates of return are improving. At present, the average margin per barrel has reached a level which is enough to cover the Capital Cost. 9 ESSAR GROUP OVERVEIW 10 Beginning of Essar Group: The Essar group was founded over three decades ago by the Ruia family and is headed by Chairman Shashi Ruia and Vice-Chairman Ravi Ruia. The Ruia family has been in business and trading since the 1800s, when the family first moved to Mumbai from Rajasthan in Western India. In 1956, Nand Kishore Ruia, the group founder, moved south to Chennai to begin independent business activities. In 1969, following the untimely demise of Nand Kishore Ruia, his sons Shashi and Ravi Ruia took over the group. Along with a team of seasoned professionals, the Ruias have built the perfect platform for Essar's accelerating growth. With a strong foundation at India‘s industrial core and in the sunrise services sector, Essar has stayed firmly in the forefront of new opportunities. An early start has made us a key player in India's exploding telecom market. Similarly, we set up India‘s first independent power plant and its first new generation private steel plant. The name of the company ‗ESSAR‘is getting from the first letter of the two brothers ‗SHASHI‘ and ‗RAVI‘ ‗S‘ as ‗ESS‘ and ‗R‘ as ‗AR‘ thus the combination of them make ―ESSAR‖. Reaching Millions of Lives: For decades, they have quietly reached the lives of millions of people with the steel to build cars, the oil to fuel factories, the power to light up thousands of lives and the pipelines to bring drinking water to remote villages. Today, they have come closer by connecting customers with their cellular phone services and talking to thousands of people through their call centres, a countrywide chain of fuel outlets and marketing steel at the retail level. Essar Group is a multinational conglomerate in the sector of oil, steel, energy, power, communication, shipping ports and logistics. Essar began as a construction company in 1969 and diversified into manufacturing, services and retail. 11 Some of the companies run under the Essar Group are: Essar Oil  Essar Oil has a 13.5 Million Matric Tonnes Per annum (MMTPA) refinery in Jamnagar, west coast of India and over 1,350 Essar oil branded retail outlets across India. Essar is planning to increase its capacity to 34 MMTPA and open 3,000 outlets countrywide.  Essar‘s global portfolio of onshore and offshore oil and gas blocks with about 70,000 sq.km. is available for exploration. Essar has over 2,80,000 Barrels Per day of crude refining capacity that is being expanded to 6,80,000 barrels Per Day, with a goal to reach a global capacity of 1 million Barrels Per Day. Essar has 50% stake in Kenya Petroleum Refineries Ltd., which operates a refinery in Mombasa, Kenya, With a capacity of 80,000 Barrels Per Day. Essar‘s Exploration & Production business has participating interests in several hydrocarbon blocks for exploration & production of oil and gas. This includes: 1. The Ratna and R-series blocks on Bombay High. 2. An E&P block in Mehsana, Gujarat, which has currently started commercial production. 12 3. Coal Bed Methane block at Raniganj in West Bengal. 4. Two E&P blocks in Assam. 5. Essar has an overseas E&P assets include three onshore oil and gas blocks in Madagascar, Africa and one offshore block each in Vietnam and Nigeria. A refinery in Jamnagar has the capability to produce petrol and diesel suitable for use in India as well as advanced international markets. It also produces LPG, Naphtha, light diesel oil, aviation turbine fuel and kerosene. The refinery has been designed to handle a diverse range of crude – from sweet to sour and light to heavy. It is supported by an end-to-end infrastructure set up including SBM (Single Buoy Mooring), crude oil tankage, water intake facilities, a captive power plant(currently 125 MV, being expanded to 1,200 MV)product jetty and dispatch facilities by road, rail and sea. A refinery is strategically located in Jamnagar, Vadinar coast, a natural all-weather; deep draft port that can accommodate very large crude carries. Vadinar also receives 70% of India‘s crude imports. Essar Steel Essar is a fully integrated flat carbon steel manufacturer – from iron ore to ready-tomarket products with a current capacity of 14 million tonnes per annum (MTPA) capacity. With our aggressive expansion plans in India, as well as in Asia and America, we aim to achieve a capacity of 20 to 25 MTPA. Its steel products have wide acceptance in sectors like automotive, white goods, construction, engineering and shipbuilding. Essar Steel is one of India's largest exporters of flat products, exporting to the highly demanding US and European markets, and to the growing markets of South East Asia and the Middle East. A number of major client companies have approved Essar steel for their use including Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway, and Maruti Suzuki. 13 Essar Power Essar power is India‘s first new generation independent power plant set up as soon as the power sector was opened up to private sector. Essar power has India‘s first multi-fuel power plant, with the lowest manpower to megawatt ratio and one of the lowest capital per mega watt in India. Essar Power has two gas-based plants, of 500MW and 515MW capacities, and one liquid fuel-based 32MW power plant in Hazira, a 120MW co-generation plant in Vadinar and a 25MW coal-based plant in Visakhapatnam. Work is currently under way to expand the current generation capacity of 1,200MW to 6,000MW by 2012, with a target to reach 10,000 MW in the near future. The company will set up three coal-based plants of 1,200MW each in Gujarat, Madhya Pradesh and Jharkhand, aggregating 3,600MW. An additional 1,200MW (co-generation plant of equivalent capacity) is also under development in Vadinar to supply power and steam to the expanded refinery. As the first private company with a license to enter the transmission and power trading segments, Essar is now a fully integrated, end-to-end player in the power sector By using the latest technology and equipment, Essar generates and supplies power at very competitive price points. Essar currently has complete fuel linkages secured for all projects under execution. Essar power is exploring opportunities for new projects based on thermal, wind and hydro energy. 14 The investments made towards the projects under execution is over USD4 billion. Work is currently under way to increase generation capacity to 6000MW. The company will set up 3 coal based plant of 1200 MW each in Gujarat, Madhya Pradesh and Jharkhand, aggregating 3600 MW. An additional 1200 MW (co-generation plant of equivalent capacity) is also under development in Vadinar to supply power and steam to the expanded refinery. With a license to enter the transmission, distribution and power training segments, Essar Power is now a fully integrated, end-to-end player in the power sector. By using the latest technology and equipment, Essar power can generate and supply power at very competitive price points. The also has the capability to generate power projects for other companies. Essar Power is exploring opportunity for new projects based on thermal, wind and hydro energy. It is also committed to reducing emissions form its plants and earning carbon credits. The 500 MW combined cycle power plant at Hazira is eligible for Certified Emission Reductions (CERs) under the Kyoto Protocol‘s Clean Development Mechanism (CDM). Essar Shipping ports and logistics Essar Shipping Ports & Logistics Ltd is an end-to-end logistics provider with sea and surface transportation services, oilfield drilling services, dry and liquid terminals, tankage and associated pipelines. It provides supply chain management services to client in oil and gas, steel and power generation industries. The sea transportation business provides transportation management services for a crud oil and petroleum products, and dry bulk cargo to global energy, steel and power industries. With an experience of more than 220 ship years, it owns a diverse fleet of 26 vessels, which is being expanded to 38 vessels. Essar‘s integrated business model provides opportunities to cater to the complete supply chain management services to clients in oil and gas, steel and power generation industries. 15 We are one of India‘s largest operators of ports and, building a cargo handling capacity (both dry and bulk cargo) of over 150 million tons. Essar ports and terminals business operates a crude oil and petroleum products terminal at Vadinar and includes the construction of a dry bulk port at Hazira and a coal jetty at Salaya, all in the state of Gujarat. The Vadinar terminal is an all-weather, deep-draft port, which provides crude oil and petroleum products storage, handling and terminal services. The port has a Single Point Mooring system capable of handling crude capacity of up to 27mmtpa, and marine facility for export of petroleum products of up to 6.5mmtpa. The dry bulk port being constructed at Hazira involves setting up a 30mtpa all-weather, deep-draft port and jetty facility. Essar's logistics business provides end-to-end logistics services – from ships to ports, lighterage services, intra-plant logistics and dispatch of finished products. We own trans-shipment assets to provide lighterage support services, and onshore and offshore logistics services. We also operate a fleet of 4,200 trucks (38 of which we own) to provide inland transportation of steel and petroleum products. Essar‘s sea transportation business provides transportation management services for crude oil and petroleum products, and dry bulk cargo to the global energy, steel and power industries. Essar Telecom Vodafone-Essar is a joint venture of Essar Communication Holdings Ltd and the UKbased Vodafone Group. It is one of India‘s largest cellular service companies. 16 Essar Telecom Infrastructure is one of the largest independent telecom infrastructure service provisioning companies in the country. It builds telecom tower infrastructure and shares it with several telecom operators in India. It has a pan-India presence in telecom tower infrastructure with more than 4,500 telecom towers operational. Essar has a 14 per cent stake in Indus Towers, India‘s largest tower company, which has over 100,000 towers. Essar Communications Holdings Limited acquired a 49 per cent stake in Econet Wireless International Limited by subscribing to fresh capital in the company. Essar and Econet Wireless Kenya have launched 'yu' — Kenya‘s third mobile cellular network. This is a GSM-based mobile services network in Kenya with close to a million subscribers. Essar has launched India‘s first national chain of multi-service outlets in the telecom retail space. The Mobile Store ltd currently runs over 1300 ―The Mobile Store‖ outlets. Over 2500 Stores outlets are expected across 650 cities. Essar Construction Essar Constructions/Projects is a 4000 people strong global engineering procurement and construction company headquartered in Dubai. It has offices in India, China and the Czech Republic. It provides complete construction solution under one roof. It operates through five main businesses. 1. Essar Construction: 17 This division has over four decades of experience in executing projects involving industrial plants, civil and irrigation projects, lying of onshore pipelines, and highway and expressways. With a pipeline division certified at ISO 9001, it has developed capabilities to undertake turnkey projects. 2. Essar Offshore Subsea: The marine construction expertise within Essar oil, Essar shipping, Essar project and Essar construction has now demerge in to a single entity namely Essar Offshore Subsea Ltd (EOSSL). The business provides Engineering Procurement, Construction and Installation (EPCI) services in this sector in domestic as well as overseas markets. In the high-growth oil & gas sector, EOSSL provides EPC service for offshore logistics support and marine construction projects. 3. Global Supplies: The global supplies team specializes in procurement, with a presence in India, Chine, Middle East and Europe. It has excellent relationships with vendors across the globe, giving it the ability to procure materials in a timely manner and at a competitive price. Technical Visit to Oil Dispatch Centre, ESSAR 4. Heavy Engineering Services: Has modern facilities for manufacturing pressure vessels, reactors, vacuum vessels, cranes etc. the business is strategically located in the waterfront at Hazira on the west coast of India. 5. Project management Consultants: An independent team of project management consultants ensures compliance to processes in project execution. The team is also pitching for third party projects. Essar projects also own a vast bank of sophisticated construction equipment used in large projects. Essar BPO (Agies Ind Ltd.): 18 This has led Essar to emerge as one of the biggest corporate group not only in India, but gained huge reputation and image internationally. Essar group has played a major role not only in present but also in past. Their contribution to the nation is a significant one. On I.T. Front Essar has incorporated Aegis Communication Group which provides multichannel customer relationship management, including database management, analytical services and market intelligence to progressive companies. Aegis has a strong team of 13000 Employees and provides services to blue-chip and multinational companies through a network of nine client‘s services in US and ten in India. The Base of Essar Group - Management Team: Shri. Shashi Ruia Chairman Essar Group Shri. Ravi Ruia Vice Chairman Essar Group 19 Shri. Prashant Ruia Group Chief Executive Essar Group Shri. Anshuman Ruia Promoter Director Essar Group Smt. Smiti Kanodia Promoter Director Essar Group Shri. Rewant Ruia Promoter Director Essar Group Global Management Committee: Promoter Directors: Mr. Adil Malia Mr. J Mehra Mr. Naresh Nayyar Mr. Sanjay Mehta Mr. Rajiv Sawhney Mr. Alwyn Bowden Mr. Aparup Sengupta Mr. V G Raghavan Mr. Vikash Saraf Mr. Shishir Agarwal Mr. Pradeep Mittal Group President - Human Resources CEO-Steel Business Group CEO-Energy Business Group CEO-Shipping & Logistics Business Group CEO-Telecom Business Group CEO-Projects Business Group CEO-Aegis BPO Services CFO-Essar Group Director Strategy & Planning - Essar Group CEO-Exploration & Production Business CEO-Minerals & Mining Business 20 Mr. S M Lodha Corporate Governance Group President-Assurance & Cost Control The Essar Group has a strong corporate governance structure. Decision making on key issues is made by committees comprising professionals drawn from diverse businesses. Global Management Committee: The committee sets directions for the Group, takes strategic decisions and develops policies that have a bearing on all Group companies Shri. Shashi Ruia Shri. Ravi Ruia Shri. Prashant Ruia Shri. Anshuman Ruia Smt. Smiti Kanodia Shri. Rewant Ruia Mr. Adil Malia Mr. J Mehra Mr. Naresh Nayyar Mr. Sanjay Mehta Mr. Rajiv Sawhney Mr. Alwyn Bowden Mr. Aparup Sengupta Mr. V G Raghavan Mr. Vikash Saraf Mr. Shishir Agarwal Mr. Pradeep Mittal Mr. S M Lodha Chairman - Essar Group Vice Chairman - Essar Group Group Chief Executive - Essar Group Promoter Director - Essar Group Promoter Director - Essar Group Promoter Director - Essar Group Group President - Human Resources CEO - Steel Business Group CEO - Energy Business Group CEO - Shipping & Logistics Business Group CEO - Telecom Business Group CEO - Projects Business Group CEO - Aegis BPO Services CFO - Essar Group Director – Strategy & Planning - Essar Group CEO - Exploration & Production Business CEO - Minerals & Mining Business Group President - Assurance & Cost Control. Group Investment Committee: The committee facilitates fast and efficient decision making for the Group's investment plans, including all new capital investment decisions and capital allocation across businesses/projects. Promoter Directors 21 Mr. J. Mehra Mr. Naresh Nayyar Mr. Sanjay Mehta Mr. Rajiv Saxena Mr. V.G. Raghavan Mr. Vikash Saraf Global Finance Committee: CEO - Steel Business Group CEO - Energy Business Group CEO - Shipping & Logistics Business Group Head - Mergers & Acquisitions CFO - Essar Group Director –Strategy & Planning - Essar Group The committee approves all financing and credit proposals and provides oversight to the treasury operations. GFC reviews the key terms and structure of loans and credit agreements based on the prevailing credit policy and financing terms. Mr. V G Raghavan Mr. Mahadev Iyer Mr. P Sampath Mr. V Ashok Mr. V Suresh Mr. S. Subramaniam Mr. Tapash Bhattacharya Mr. C.M. Sharma Mr. Neeraj Gupta Mr. Amar Fadia Mr. N S Paramsivam Bhattacharyya Dr. Paritosh Basu Mr. Komal Seshagiri Mr. Mahabir Agarwal Bankers: Allahabad Bank Axis Bank 22 CFO - Essar Group CFO - Steel Business Group CFO - Energy Business Group CFO - Shipping & Logistics Business Group CFO - Power Business Group CFO – Telecom Business Group CFO – Projects Business Group CFO – Aegis Ltd CEO - Essar Capital Ltd. Head, Corporate Finance - Essar Group Group Head - Forex & Treasury Mr. Partha Group Head – Forex & Treasury Group Controller – Essar Group General Counsel, Finance – Essar Group Convenor Bank of Baroda Central Bank of India HDFC Bank ltd ICICI Bank ltd IDBI Bank ltd Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab Bank of India State Bank of India State Bank of Patiala Syndicate Bank PRODUCTOF THE ESSAR OIL IMIED • WHITE OIL AVIATION TURBINE fUEL HIGH SPEED DIESEL MOTOR SPIRIT KEROSIN 23 DIESEL • BLACK OIL BITUMIN FERNISH OIL • LPG VISSION 24 We will be a respected global entrepreneur, through the power of Positive Action‖. The vision of Essar Group can be defined by the seven E’s: Effectiveness: Doing the right thing at the right time. Efficiency: Doing things the right way by conserving resources, being cost effective and simple. Entrepreneurship: Creating and leveraging opportunities, taking initiative and innovations. Improvement: Through self esteem, self respect, self worth and trust Education: Learning, communicating and sharing information and knowledge Ethics: Having transparent business operations Environmental Harmony: Adding value to society and creating sustainable developmen 25 MISSION We are committed to innovative growth, through our personal passion, reinforced by a professional mind set, creating value for all those we touch and also to create enduring value for customers and stakeholders in core manufacturing and service businesses, through world-class operating standards, state-of-the-art technology and the 'positive attitude' of our people. 26 PRODUCTION DEPARTMEMT 27 Oil Exploration & Production Essar Oil was among the first private sector company in India who had participated in 1993’s bidding round for exploration blocks. It currently has participation interest in several blocks in India and overseas for exploration, production and development of oil, gas and coal bed methane. In order to strike a right balance between Exploration as well as Production, Essar Oil has constantly looked out for new opportunities. Company’s current Geo-graphical areas of focus are Indian sub-continent, the Middle East, Saharan Africa, Australia, Russia etc. Company’s current E&P portfolio comprises Nine Onshore and Three Offshore blocks for oil, gas and CBM in India, Madagascar, Myanmar and Nigeria with total acreage of about 46,000 sq. km. in onshore and 4,600 sq. km. in offshore, held under Essar Exploration & Production Limited. In the early 1990's and undertake drilling, hydro-fracturing and de-watering of 3 CBM wells, in the Cambay Basin, near Mehsana, Gujarat, India. EEPL was setup and is also currently augmenting, a highly enriched technical team and highly motivated management team, consisting of specialists in finance, business development, logistics, human resources, and project consultancy. 28 Refinery Division Essar Oil Refinery at Vadinar in Jamnagar, Gujarat is ideally located in India's West Coast in close place to the crude rich Gulf States. Vadinar is an all-weather deep-draft natural port. More than 60% of India's crude imports land in and around this region. The company has already embarked up gradation of the expanding the refining capacity at Vadinar from the present capacity 10.5 MMTPA to 34 MMTPS with an investment of close to Rs.10 Billion (USD 2.2 billion). The refinery is fully integrated with its own dedicated 120 MW co-generation power plant, port and terminal facilities. It includes a Single Point Mooring (SPM) capable of handling vessels up to 350, 000 DWT with a capacity; marine product dispatch capacity of 14 MTPA; rail -car and truck loading facilities. 29 . 30 HUMAN RESOURCE DEPARTMENT 31 At the Essar Group, they believe that excellent individuals build excellent companies. And by transforming each employee into a highly motivated, satisfied and productive team member, they will create an outstanding organization. They also understand that each individual has unique talents and expectations from the organization. Based on those principles, human resources development at Essar is customized, flexible and well planned. Every Essar employee is meticulously selected and given the freedom to be innovative, within a work culture that is non-bureaucratic and result-oriented. They work with employees to develop personalized and flexible individual plans for career growth, retention and compensation within a carefully structured work framework. Through extensive career mapping, they offer a choice of career paths that could include job rotations across functions and Group Companies. Essar's wide range of businesses and exciting pace of growth presents a range of opportunities and exposure that only a few others can match. The Group has a very serious commitment to continuous training and development. Essar Learning Centre provides year-round training. Thus, a career with Essar will offer a unique opportunity to unlock your own potential and realize excellence. Recruitment and Selection: Recruitment and Selection are one of the vital function of HRM. It’s “the discovering of potential applicants an anticipated organizational vacancies”. Recruitment at EOL For new position arising due to project expansion and for other higher positions ECL first prefers departmental candidates if they are suitable to job. Then priority is given to relatives of employees. If still suitable candidates are not found then it goes for other sources of recruitment. RECRUITMENT PROCESS : 32 Identify Manpower Requirement Identify Manpower Requirement Issuing Employee Requisition Form Issuing Employee Requisition Form Acquire Resumes Through: Acquire Resumes Through: Acquire Approval for Budget Manpower Requirement Acquire Approval for Budget Manpower Requirement Available Application Data Bank Available Application Data Bank Contacts / Reference /Head Hunting Contacts / Reference /Head Hunting By Absorbing PR to RR By Absorbing PR to RR Campos Interview Campos Interview Advertisement Advertisement Executive Search Firm Executive Search Firm Screening & Short Listing of Resumes Screening & Short Listing of Resumes Receipt of Applications from Candidates Receipt of Applications from Candidates Interviews Interviews Reference Check Reference Check Selection Selection Issuing Offer Letter Issuing Offer Letter 33 Interviews at EOL: At Essar, usually semi-structured interviews are conducted so as to know the inside out of candidates. Interviewers often make observations and take notes of candidates response given during the interview, body language, subject knowledge, way of reply and behavior, nervousness, aggression, overall impression created by the candidate, check leadership qualities, analytical skills, communication skills, personality and attitude, etc. Due weightage is given to the habits and actual facts noticed during the interview for the final selection. Past work experience is also assessed so as to predict the future performance. Types of Appointments Permanent Appointment: All the regular roll employees are permanent employees and are employed in different levels i.e. M-11 to M-01 (lower to higher). Services of such employees are transferable to any part of India as per requirement of the company. Contractual Appointment: Such employees are appointed for a particular project. As soon as the project gets complete, they are released or the company may extend their services for another project if they are suitable to job. They are known as project roll employees. Their services are non transferable. Consultants/Advisers: certain highly experience personnel, usually above the age of 50 are appointed on contractual bases for specific project or assignment in different functional areas for specific time duration to guide existing employees and share their experience and impart knowledge of respective field. Trainees: Fresh graduate/Post graduate Engineers, Diploma Engineers and fresher from management field are appointed as trainees by campus interviews. If they succeed in training 34 which last usually for one year they will be absorbed in the management cadre as per their qualification. DET are put at M-11, MT and GET at M-10 level. 35 FINANCE DEPARTMENT 36 Introduction Financial management involves the application of general management principles to particular finance operations. It is that part of management which is concerned mainly with raising funds in the most economic and suitable manner, using these funds as profitability as possible; planning future operations; and controlling current performances through Financial accounting Cost accounting,, Budgeting, Statistics and other means. Financial management provides the best guide for future resource allocation by a firm. Financial management is important because it has an impact on all the activities of a firm. Financial management is concerned with those managerial decisions which result in the acquisition and financing of long term and short term assets of a firm. Financial planning One of the most important functions of finance manager is that of planning. Financial planning is essentially concerned with the economical procurement and profitable use of funds – a use which is determined by realistic inventories decisions. Financial planning helps management to avoid waste by providing policies and procedures which make possible a closer coordination between various functions of the business enterprise. Financial planning is responsibility of top level management. Budget: Budget generally refers to a list of all planned expenses and revenues. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. In summary, the purpose of budgeting is to: 37  Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. 1. Enable the actual financial operation of the business to be measured against the forecast. In Essar, for the simplicity of work, the budget section is divided in two sub-sections:  Capital Expenditure Budget  Operating Expenditure Budget Capital Expenditure Budget: Capital expenditures (CAPEX) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year. Capex are used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings. In accounting, a capital expenditure is added to an asset account ("capitalized"), thus increasing the asset's basis (the cost or value of an asset as adjusted for tax purposes). Capex is commonly found on the Cash Flow Statement as "Investment in Plant Property and Equipment" or something similar in the Investing subsection. For tax purposes, capital expenditures are costs that cannot be deducted in the year in which they are paid or incurred, and must be capitalized. The general rule is that if the property acquired has a useful life longer than the taxable year, the cost must be capitalized. The capital expenditure costs are then amortized or depreciated over the life of the asset in 38 question. As stated above, capital expenditures create or add basis to the asset or property, which once adjusted, will determine tax liability in the event of sale or transfer. Capital expenditures include amounts spent on: 1. Acquiring fixed assets 2. Fixing problems with an asset that existed prior to acquisition 3. Preparing an asset to be used in business 4. Legal costs of establishing or maintaining one's right of ownership in a piece of property 5. Restoring property or adapting it to a new or different use 6. Starting a new business In Essar, for budget planning purpose, each and every department is assigned a cost center code. Each department has to define its budget by estimating the assets they want to buy in that year. According to that, budget is allocated to the various cost centers by the budget department. Each department has to manage within the allocated budget. If at the end of the year they found that their expenses are more than the budget allocated to them, than that department has to give justification about the over expenditure to the budget department. Hence, Capex budget play an important role in defining the functions of different departments. Operating Expenditure Budget: An operating expense, operating expenditure, operational expense, operational expenditure or OPEX is an on-going cost for running a product, business, or system. Its counterpart, a capital expenditure (CAPEX), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a photocopier is the CAPEX, and the annual paper and toner cost is the OPEX. For 39 larger systems like businesses, OPEX may also include the cost of workers and facility expenses such as rent and utilities. In business, an operating expense is a day-to-day expense such as sales and administration, or research & development, as opposed to Production, costs, and pricing. In short, this is the money the business spends in order to turn inventory into throughput. Operating expenses also include depreciation of plants and machinery which are used in the production process. On an income statement, "operating expenses" is the sum of a business's operating expenses for a period of time, such as a month or year. In throughput accounting, the cost accounting aspect of Theory of Constraints (TOC), operating expense is the money spent turning inventory into throughput. In TOC, operating expense is limited to costs that vary strictly with the quantity produced, like raw materials and purchased components. Everything else is a fixed cost, including labour unless there is a regular and significant chance that workers will not work a full-time week when they report on its first day.            Accounting expenses License fees Maintenance and repairs Advertising Office expenses Supplies Attorney fees and legal fees Utilities, such as telephone Insurance Property management Property taxes 40    Travel and vehicle expenses Leasing commissions Salary and wages For OPEX, the budget allocation is done in the same way as is done in CAPEX. For budget planning purpose, each and every department is assigned a cost center code. Each department has to define its budget by estimating the assets they want to buy in that year. According to that, budget is allocated to the various cost centers by the budget department. Each department has to manage within the allocated budget. If at the end of the year they found that their expenses are more than the budget allocated to them, than that department has to give justification about the over expenditure to the budget department.  For Micro Forge Ltd. the main sources of fixed capital are equity shares. To maintain appropriate fixed capital the company follows various measures. The company maintains the liquidity. Excess loans taken from the bank is repaid. Fixed capital is mainly required for the fixed assets like machineries, land and building and other assets. Following are the cost of fixed assets of Micro Forge Ltd.  Land : - Rs. 60.11 Crores  Buildings : - Rs. 249.99Crores  Plant and machinery : - Rs. 12029.58 Crores  Furniture and fixtures : - Rs. 2,00 Crores  Office equipment : - Rs. 12.93 Crores  Vehicle : - Rs. 5.12 Crores Source of finance When a firm wants to invest in long term or short term assets, it must find the means to finance them. The firm can rely to some extent on funds generated internally. 41 However, in most cases internal resources are not enough to support investment plans. When that happens the firm may have to curtail its investment plan or seek external sources of finance. Most firms choose the later course of action. They supplement internal funding with external funding rising from a variety of sources. The following sources of long-term finance commonly employed by business firms:  Retained Earnings.  Equity Capital.  Preference Capital.  Debentures.  Term Loans. The following sources of short term finance are commonly employed by business firms:  Short Terms Loans.  Commercial Banks.  Public Deposits.  Finance Companies.  Accrual Accounts.  Indigenous Bankers  Advances from Customers.  Miscellaneous Sources. Micro Forge Ltd. has planned the sources of finance on the basis of their requirements. For long term finances sources employed by the company are equity shares, debentures etc. For short term finances the sources employed by the company are loans from banks, loans from financial institution. 42 Capital structure Capital structure is sometime known as the financial plan. It is the permanent financing of the firm represented by long term share capital by equity shares and preference shares. In capital structure the proportion of capital is to decide with regard to use of debt and equity. The requisition of proportion arises because if company issues only ownership capital then it cannot satisfy the main objective i.e. to maximize the shareholders return and if the company issues more borrowed capital then it has to pay compulsory interest and thus it reduces shareholders capital. Thus the mixture of debt and equity is called capital structure. Capitalization is the sum total of all kinds of long term securities as well as surplus which are not meant for distribution. The amount of capital at any time should not exceed not should be less than the amount required in both the situation company will be the loser. Capitalization means the total amount of a company capital of total volume of its capital stock. In other words, we can say that the capitalization means the total borrowed capital and ownership capital of the firm. If the resource funds and retained profit increases with the growth of company it means capitalization of the company is increasing. Ownership capital: Equity Shares: - Rs.1218.13 Crores. Reserves: Rs. 2807.56Crores. Working capital management: 43 Working Capital may be regarded as the lifeblood of a business. Its effective provisions can do much to ensure success of a business, while its inefficient management can lead not only to loss of profits but also to the ultimate downfall of what otherwise might be considered as a promising concern. The term working capital is commonly used for the requirement of capital for daily operation of a business i.e. for purchase of raw material, payment of salaries and wages to the employees, rent for the building, electric charges, etc. and working capital is concerned with the problem that arrives to attempt to manage, current assets, relationship that exist between them. Current assets means, “Those assets which are easily converted into cash within one year.” Inventory: Inventories are being managed by two methods namely FIFO and Weighted average Amount of Inventory is as follows: Raw material = Rs.1137.05crore Work-in-progress = Rs.614.22crore Traded/finished goods = Rs.289.31crore Store and spare parts = Rs.184.04crore Other consumables = Rs.26.31crore Total = Rs.2250.93crore. Sundry Debtors (Unsecured) : Rs. 1165.35Crores Cash And Bank Balances : Rs. 1174.63Crores 44 Ratio Analysis: The relationship of one item to another expressed in a simple mathematical form is known as the ratio. A company keeps fit by ensuring that among other things, its various financial proportions are kept healthy. A ratio is a quotient of two numbers. It must be interpreted against some standards. In accessing the financial stability of a firm, a management should, apart from profitability, be interested in relative figure rather than in absolute figures. In fact, an analysis of financial statements is possible only when figures are expressed as percentages and ratio. There is a growing body of evidence that ratios can be directly helpful as a basis of marketing predictions. It is of major importance for financial analysis. To evaluate the financial conditions and the purpose of a firm the financial analyst needs certain yardsticks. The yardstick frequently used is a ratio or an index relating to pieces of financial data to each other. There are two ways to analyze a ratio: 1) In a trend analysis, the behavior of the ratio across the time is studied. 2) In a comparative analysis, the performance of a firm at a single point of time relative either to other firms in a industry or to some other generally excepted industry standard 45 FINANCIAL RATIO: Ratios Reported EPS (Rs) Dividend per share Gross profit margin (%) Net profit margin (%) Debt/Equity Ratio Fixed assets turnover ratio Current ratio Quick ratio Inventory turnover ratio Dividend payout ratio (net profit) Earnings retention ratio Mar ' 09 -4.27 4.36 -1.34 2.87 2.86 0.88 0.43 20.25 100.00 Mar ' 08 -0.35 -9.33 -7.21 2.90 1.06 0.97 0.34 0.11 - Financial performance: (Rs. In Crore) Financial Parameters Turnover Net Profit/ (Loss) Financial year ended 31st march 2007 2008 473.98 651.93 *(166.79) *(210.86) (41.18) 2009 41,855.97 *(721.24) (513.51) (as computed u/s 198) Net profit/(loss) after tax (67.49) as per statement of profit and loss * includes loss for the preceding financial year/s. Share Capital: 46 During the year, pursuant to shareholders approval obtained at Extraordinary General Meeting held on 18th December, 2007, the company allotted 27,771,948 equity shares of Rs. 10/- each of the overseas depository for Global Depository Shares (GDSs) on issue of GDSs aggregating to US$129.418 million to promoters on preferential issue basis. Authorized share capital: Rs.5,000.00crore Issued share capital: Rs.1263.46crore Paid up share capital: Rs.1201.53crore Financial Highlights: Company has posted a gross turn over of Rs.41,856 crore this year. The EBIT was Rs.1,203 crore. The depreciation of the rupee and the unprecedented volatility in crude prices were major factors that cost the erosion of the operating profits. For the above period, the company reported a net loss of Rs.514crore. The company has also reported a GRM of US$8.89bbl for the period. Internal control system and internal audit: A company pays a lot of attention to a proper system of internal control commensurate with the size and nature of business after having successfully implemented the SAP across the company, these year company embarked upon a message exercise of developing standard operating procedure and clearly defining the limits of delegation. SOPs across all functions of the business have been developed and are been regularly monitored. In developing these SOPs company has benchmarked the best practices in the oil industry globally. The company has well developed management information system to earn real time basis to effectively monitor the performance. 47 Fixed assets: Gross Depreciation Net Rs.13, 364.74crore Rs.758.90crore Rs.12605.84crore MARKETING 48 DEPARTMENT 49 Consumer is the key of the market and his need and wants are the goal of the business activities. Under this concept, the following steps are taken place: First of all the needs and wants of consumers are discovered.  Then these needs and wants are converted into good and services. Then we made Sales for the product . Then these goods and services are physically distributed from producer to customer. The major aim of behind these steps is to satisfy the need of the customers in the most effective manner. Essar is reaching out to consumers deep in India's heartland with the mission to create enduring value for customers and stakeholders in core manufacturing and service businesses, through world-class operating standards, state-of-the-art technology and the 'positive attitude' of their people. Let‘s understand how the Marketing practically applied under the Essar oil Ltd. 50 Oil is a product whose demand is always Latent demand i.e. (a strong demand that can‘t be satisfied by existing product) so its production remain on continuous basis. A product planning is a company plan for marketing its products. Product planning means planning for the product to be produced or what need or what requirements the products the product should satisfy. Essar Oil Limited produces its products on continuous basis and so it does not have to do much product planning. As Essar Oil's Refinery has a production capacity of 13.5 Million Matric Tonnes Per Annum (MMTPA) or 280,000 (BPD.) billions per day. Domestic demand coupled with demand from refiners could offer potential market for Essar – IOCL, Reliance, HPCL, BPCL etc. Structure of marketing department: Marketing department S&D MCO ROAD MCO MCO RAIL Marketing MCO MARINE 51 SUPPLY AND DISTRIBUTION (S & D) Supply and distribution: MCO ( Marketing Co-Ordination Office) GANTRY TANKFARM (DISPATCH TANK) MCO ROAD 52 MCO RAIL S&D department is a part of the marketing department; which is responsible for seeking of availability of refinery products to customers and also seeks that all the refinery products are being distributed properly in the domestic market. To ensure proper distribution of refinery products, S&D on behalf of EOL has entered in to purchase and sales agreement with several oil marketing companies like IOC, HPCL and BPCL. It has also entered in to similar contract with private players like RIL, SHELL. MCO MARKETING CO-ORDINATION OFFICE MCO is a part of marketing department which is basically responsible for operational activities i.e. distribution of petroleum products Presently Essar oil distributes its products through all four modes such as Road, Rail, Sea and pipeline. In order to carry out the distribution process smoothly MCO has been divided into two division namely MCO –Rail and MCO-Road 53 MARKETING COORDINATION OFFICE MCO ROAD MCO RAIL For smoother distribution MCO works as a heart bit and ensure smoothly evacuation of finish products of refinery to the customer within stipulated time with high level of customer satisfaction. MCO operations arrange the Oil Products from the refinery and store them in the tank farm and based on the daily requirements from customers, the products are made available at TT IN Gantry. N-E GATE MCO ROAD SECURITY CHECK ROAD DISTRIBUTION FOLLOWED BY ESSAR TIME OFFICE TURN AROUND TIME TT PARKING GANTRY Approx. (2 Hrs 25 Min) MCO OUTGATE OFFICE TT OUT 54 N-E Gate Office TT Parking Marketing Co-ordination Office (MCO) Layout: Out Gate Time Office Securi ty T L C B Building 1 MCO Building 2 Cantee n 55 Gantr y PROCESS DISCRIPTION OF ROAD DISTRIBUTION N-E GATE:  The process of truck loading starts from here.  NE Gate Office is the entry gate for TTs to enter into the refinery.  This office is situated at North-East side of refinery. That’ why it is called ‘NorthEast Gate (NE Gate)’.  There are three windows in this office:  Window – 1 ,Window – 2, Window – 3  In Window – 1, the activity of creating database including information like TT Number, Driver’s Name, and Cleaner (Khalasi)’s Name, Transporter’s Name and other details.  For this, different-different forms have been generated according to the customers.  In Window – 2 & 3, an activity of putting TTs into the Online Vehicle Tracking System (VTS) is done. In these two windows, basically, checking is done. The following is the Check List Slip issued at NE Gate Office to TT drivers and the mentioned things are checked. Documents Checklist: 56  Valid Original Driving License & Registration Book  Valid Insurance Certificate & Fitness Certificate (Original or notarized)  Valid Explosive License & Calibration Certificate ( Original or notarized) SECURITY CHECK: Physical Checklist  Approved Spark Arrester (Welded in front of TTs towards driver's side  DCP fire extinguisher (2 No. 10 KG. Working condition)  Value manifold: Flange cover tightened  Electrical Junction Box & double pole wiring. No electrical loose wires  Regd. No. printed on the body / number plate  Emergency Information Panel printed properly on the body ( All the three sides)  Crew wearing proper PPEs. ( Helmet / shoes / socks)  Extra load with mollified intentions e.g. iron plates, stone bags, extra water bags / buckets, extra jack and Tommy bars and any other items  Driver and cleaner training and have TREM card  Proper Earthing Strip is available  General overall conditions of Tank Lorries Additional Check List in case of LPG Tankers  LPG height barriers, Earthling Strip of cabin / compartment  LPG emergency kit ( For LPG carriers only) 57  Condition of pressure guage ( For LPG carriers only)  Condition of temperature guage ( For LPG carriers only) After all these checking if everything is all right, then the particular TT is entered into the Online Vehicle Tracking System TIME OFFICE:  Time Office is the second place after the TTs have been entered into the Vehicle Tracking System.   Between NE Gate to Time Office TTs are checked by security. Once the process gets over, TTs are parked in the parking in front of Time Office where it has a capacity of 700 TTs.  First of all, mails are received from the parties in which Purchase Orders / Indents have been placed. After that it is checked the amount has been received in advance to Essar.  After entering into the time office area, the driver sits in the truck while the khalasi comes to the Window – 1 and produce the Check List Slip to the officer, sitting in Window – 1.  After this, an Outbound Delivery Number is generated. Here, Outbound Delivery Numbers are generated according to the No. of products placed in the indent.  At Window – 2, shipments are generated for PSUs (Here, the procedure is going on according to shift wise.) and then it is delivered to particular drivers.  At Window – 3, Terminal Automation System (TAS) is made by which we can trace any TT in the refinery. Then, Filling Authorisation Note (FAN) is generated 58 in which all the information like TT Number, Products to be loaded, in what quantity, Gantry No., Bay No., etc. are recorded. After that Touch Key is issued.  At Window – 4, planning for FO and Bitumen is done. Generally, in Time Office, the work at window – 4 is somewhat more important and with full of responsibility. It is also called “The Hot Seat” and it becomes hotter as day passes.  The average time taken at Time Office is 10 to 15 minutes. GANTRY:   The Gantry is the place where all the TTs are loaded. First of all, trucks are parked in the bays. Then ‘Earthing Strip’ connected to TTs and then Touch Key is Batch Control Unit Machine.   After that loading is started in TT. In each Gantry, there is one officer to handle all operations. This officer is called ‘Gantry Officer’. touched at There are six Gantries in MCO. 1) Gantry – 1 2) Gantry – 2 White Oil White Oil MS / HSD First two bays – SKO 59 Last six bays - HSD 3) Gantry – 3 4) Gantry – 4 5) Gantry – 5 LPG LPG Black Oil All bays LPG All bays LPG First Eight bays – Bitumen Last four bays – FO 6) Gantry – 6 White Oil All bays – HSD Gantry Dispatch Tanks PIT TANK FARM (DISPATCH TANK) :  Tanks Farm is the area which comes under the S&D Department. Generally, S&D Department has four different areas like TLCB, RLCB, Gantry and Tank Farms.  Tanks Farm is the area which act as an intermediately between PIT Area and Gantry.  First of all, crude oil is refined in the refinery. Then sample from each product like MS, HSD, SKO, ATF, FO, Bitumen, LPG is taken for testing in lab and after testing these products are certified. 60  After this, all these products are stored safely Product Intermediate Tanks (PIT). According to the requirements, products are transferred from PIT to Tanks Farm Area by pipelines.  In Tank Farm, there are 24 tanks. 1. 2. 3. 4. 5. 6. 7. 8. 9. HSD MS FO LPG ATF SKO – 5 Tanks – 4 Tanks – 4 Tanks – 4 Sphere – 1 Tank – 2 Tanks Bitumen – 2 Tanks Ethanol – 2 Tanks  Tanks Farm Area is also known as “Dispatch Tanks”. There are some rules and regulations and procedure before storing products in the tanks Farm Area.   First of all, samples from Dispatch Tanks are collected for testing. These samples are again tested and certified in the lab. The result from testing at both places PIT and Dispatch Tanks should be same.  Once the sample is same then only, products are allowed to transfer to Tanks Farm Area. If there is inequality in testing then retesting is done.  Testing the sample always proves to be correct. There are very less chance retesting for inequalities in the products. 61    1) 2) 3)    In each and every tank, a minimum level of 1.5Metre is kept. Maximum tank height is 20 Metres. There are three pipelines connected to each tanks. These are Inlet Outlet Water Inlet pipeline is for product receipt. Outlet pipeline is for product dispatch. Water pipeline is to sort out water from tanks at the time of raining. MCO (Marketing co-ordinate office)   Here the MCO road officer will prepare the excise invoice other related document. After receiving the documents like Invoices, TT will be allowed to go to its destination. OUT GATE OFFICE:  Out Gate Office is the last place after the TTs have been loaded.  Here, before going out side of the refinery, the driver parks the truck near by road and goes to Out Gate Office with Invoice / Bill, Indent and FAN.  The Officer, sitting at Out Gate Office do the checking as following: 1) Check TT Number 2) Check Products and its quantity in Invoice / Bill and Indent both. 62 3) Check Invoice No.  After all these procedures, Essar bill’s copies and FAN are kept in Out Gate Office and Company’s (IOCL, HPCL, BPCL) Indent / bill is given to TT driver / cleaner by stamping on it.  At last, TTs are made ‘Out from Vehicle Tracking System’ and then allowed to go outside the refinery. Product distribution process Refinery (Product produced) PIT (Product Intermediate Tank) Dispatch Tank Gantry 63 Tank Truck/ Tank Wagon MCO-RAIL DISRRIBUTION PROCEDURE MCO-Rail was set up for supplying bulk oil products to customers (Basically OMC like HPCL, IOCL, and BPCL etc.) through the means of Railways. Planning procedure For effective distribution process; a co-ordination meeting is being organized between EOL Marketing departments, OMC & Railway authorities. In this meeting EOL gives their entire month production planning to OMC and based on their requirement and availability of tank wagon; OMC release their purchase order to EOL. Other Information For rail dispatch, railway authorities are providing two types of wagons which are: WAGONS BTPN (BOGIE TYPE NEW WAGON) CONVENTIONAL 64 BTPN are new generation tank wagons and railway authorities are replacing the conventional wagons by BTPN tank wagons. Average capacity of BTPN tanks in 54 Tons and in 1 Rake of BTPN Tanks consists of 48 tank wagons. Conventional tanks are just used for transporting Furnace Oil, average capacity of these tanks is 22 tons and 1 rake consists of 72 tank wagons. Free Time i.e. Time allowed to fill one rake is 6 hours for white oil products i.e. MS, HSD, SKO and ATF. For Black oil products i.e. Furnace Oil free time is 7 hours. Demurrage charges are being levied by railway authorities if loading timing exceeds the free time. Demurrage charges are being charged @ Rs. 100/Hr/Wagon for BTPN tanks and Rs. 50/Hr./Wagon for conventional tanks. For loading ATF, rake previously loaded with SKO is only required because of quality requirements (moisturizer has to be very low). Essar oil initially pays the freight charges to railway and later on recover from the OMC’s.  Total No. of Gantry – 2 Nos  No. of tanks field by each Gantry – 48 Tank Wagons  Total No. of Spurs (platforms) – 2 No  Yard where 4 rakes can be parked  Fully computerized operation controlled room; where tank filling operations and detailed can be controlled and monitored.  Date related to Wagons i.e. their capacity, Dip (mm) unique for each tank wagon etc. are being stored and made available through computers using SAP system. 65 SWOT ANALYSIS 66 STRENGTH:  Essar group has and integrated set up including oil production, shipping, power production refinery and marketing.  Availability of retail outlet bulk consumer for product executive.  Location advantage : conductive industrial material climate all whether port, high draft to handle vlcc (very large crude carrier)  Refinery design to process high sulphur crude .  Flexibility to take dynamic design and being a private sector.  Land available for expansion.  Availibility experienced Group Company for construction. WEAKNESS:  No participate in CNG and LPG market absence of pipeline.  Absence of pipeline network ownership non viable logistic in. 67  No R&D facility. OPPORTUNITY:        High demand of petrol product . High demand of polypropylene & petro chemical. High demand for pipeline throughout. Scope for value addition, yield improvement backward and forward integration  .  High demand for bitumen especially after IOC panipat completes the cooker.   Current crude & reject price conducive to high gross margins. THREATS: Proximity to sensitivity area.  Intensified competition.  Price volaticity. 68  Dependence on imported crude.  Sricker environment legislation.  No black oil handling by JETTY the asphalt from VB tarto be converted into drills for easy transportation and possible expert.  Increasing demand for LNG & CNG. RESEARCH TOPIC DISTRIBUTION CHANNEL 69 LITRETURE REVIEW Although the concept of the distribution channel was popularized in the early 1970’s. Its roots can be traced back to the early distribution channel in 1960’s. distribution channel is very important and effective to the company and sales depend on the channel of the distribution. There are many researchers about the distribution channel of the company. M.P.CARROL. observed and research in 1975’s that sales of the company depend upon the distribution channel and hofstede, 1990 research and finding the effectiveness of the distribution channel of the company. Cameron and Qwin (1999) have developed distribution channels idea about the market distributer and valuable function of the marketing department of the company. 70 DISTRIBUTION CHANNEL Distribution channel means Path or Pipeline through which goods and services flow through the customer with the help of intermediate called distributor, retailer and trader. Distribution is the fourth element in the marketing mix. Distribution channel has three types of flow which are as follows: 1) Goods and services flow through manufacturer to customer. 2) Cash flow through customer to manufacturer. 3) Information flow is flown from both way customers to manufacturer and manufacturer to customer. Every organization has to develop distribution channel and their strategy. What are the distribution strategy organization has to follow are as follows: 1) Market Behavior means in what way consumer want to buy the product. Through retailer, through trader or through distributor according to that organization has to decide their distribution channel. 71 2) Producer Behavior means in what way producer want to sale their product. It means according to demand producer decide their distribution channel. 3) Product behavior means organization has to decide the distribution channel according to their product shape and size. For example some product needs small distribution channel compare to other product. Distribution channel has three different types of intensity mainly intensive distribution, selective distribution and exclusive distribution. 1) Intensive distribution means to provide saturation coverage of the market by using all available outlets. Intensive distribution is usually required where customer have a range of acceptable brand to choose from. 2) Selective distribution involves a producer using limited number of outlets in geographically area to sell product. Major advantage is that a producer can choose best area where there product demand is more. This is the most used distribution in all organization. 3) Exclusive distribution is an extreme form of selective distribution where only one wholesaler, one retailer is used in specific geographical area. TYPES OF DISTRIBUTION CHANNEL 72 There are different types of distribution channel used by an organization depends on the product shape & size and customer demand. There are mainly two elements in the distribution channel retailer and distributor. Consumer Consumer Manufacturer Manufacturer Retailer Manufacturer Distributors Rerailer Consumer (Distribution Channel diagram) These are main distribution channel used by company. Some company doesn’t need retailer and distributor. These company directly sale their product to the customer for example dell manufacturing company. Some companies produce goods and create their own outlets to sale the product for example reliance store. Many companies need distributor and retailer because they buy product from other company and distribute these product to their retail outlet for example Indian Oil Corporation. Some time in distribution channel traders are also seen but they also work as a retailer they purchase the product and sold to the ultimate customer. The first channel called direct marketing channel and remaining two called indirect marketing channel. 73 ESSAR OIL DISRIBUTION CHANNEL ESSAR Oil Ltd. is private manufacturing company of petroleum products. ESSAR has different range of product and they used different distribution channel for their different product. ESSAR mainly manufacture the products like MS (motor spirit), HSD (high speed diesel), SKO (super kerosene oil), ATF (aviation turbine fuel), FO (furnace oil), BITUMEN and LPG (Liquefied Petroleum Gas). ESSAR oil has nearly 3000 customer but 70% of their products are purchased by public sector unit (PSU) like IOCL, BPCL and HPCL. ESSAR also has retail outlets which is nearly about 1350. Except PSU the other customers are called direct customer of ESSAR. ESSAR used different kind of distribution channel for their different product. Now let’s understand different distribution channel for different products. INDIRECT DISTRIBUTION CHANNEL: ESSAR used indirect distribution channel to sale their products to PSU. PSU are distributor and their own outlets are called retail outlets or retailer. Retailers are sold these products to end user or customer. The diagram of distribution channel of PSU is as below. ESSAR OIL PSU PSU RETAIL OUTLET CONSUMERS 74 ESSAR also used indirect distribution channel to sell their products to their own retail outlets. These retailers are sold products to end user or consumers. The distribution channel for ESSAR own retail outlets are shown below. ESSAR OIL ESSAR RETAIL OUTLETS CONSUMER R ESSAR is used indirect distribution channel to sell their products to traders. These traders are sold products to end user or consumers. The distribution channel for TRADERS is shown below. ESSAR OIL TRADERS CONSUMERS R DIRECT DISTRIBUTION CHANNEL: ESSAR is used direct distribution channel to sell their products to direct customers. The distribution channel is shown below. ESSAR OIL DIRECT CONSUMER 75 RESEARCH OBJECTIVE Find out the truth which is hidden and which has not been discovered yet. Know the effectiveness of the direct and indirect distribution channels of company adopted for the marketing and for sales the products of the essar oil ltd and so, find out systematic solution of the problem or question. To get new idea and suggestion after the research. And find out the external and internal sources which are affected to the market and distribution channel of company. • To know the distribution channel of the company is effective or not. 76 • To get accurate and correct answer for question of the research on distribution channel of ESSAR OIL LTD. • Sales are always depends on the distribution channel so , that this channel is effective for the sales or not. • The main objective for this study is to check and if there were any problem than solve it. • And last but not the least the objective is that to check customer is satisfied or not. RESEARCH METHODOLOGY: RESEARCH DESIGN Research in common parlance refers to a search for knowledge The Advanced Learner’s dictionary of current English lays down the meaning of research as “a careful investigation or inquiry especially through search for new facts in any branch of knowledge.” “Research design is a plan, structure and strategy of investigation conceived so as to obtain answer to research question and to control variance.” 77 The definition consists of three important terms – plans, structure, and strategy. The plan is an outline of the research scheme on which the researcher is to work. The structure of research is a more specific outline or the scheme and the strategy shows how the research will be carried out, specifying the method to be used in the collection and analysis of data. TYPES OF RESEARCH DESIGN There are mainly three types of research design exploratory, descriptive and casual. I used Descriptive – Cross Sectional Design. Descriptive research:Descriptive research is a type of research that is primarily concerned with describing the nature or conditions and degree in detail of the present situation (Landsman 1988: 59). The emphases are on describing rather than on judge or interpret. Cross Sectional Design:Cross sectional studies are two types – field studies and surveys. RESEARCH PLAN SOURCES OF DATA Statistical data can be classified in to categories: Primary and secondary. I used primary data in my research PRIMARY DATA 78 Primary data is one which is collected by the investigator himself for the purpose of specific inquiry or study. Such data is original in a character and is generated by surveys conducted by individuals or research institutions. Primary Data are those data which are not readily available in the market, we have to find it out or create it out though the views of the different people in that area of that topic. For example: - by preparing questionnaire 1. Interviewing and getting guideline from the employer and manager of the company. 2. Observing the task of the managers and getting knowledge and procedure of the work. METHOD OF PRIMARY DATA I collect primary data with use of randomly selection method. There are large size of the distributers so, I collect questions of answers and other information from the selected randomly person which are related with the distribution channels of the Alex company or distributers. RESEARCH APPROACH Basically, there are two approaches in collection of primary data. Observation and Survey I used survey in my research Survey: There are four methods by which data can be collected in a survey. The methods are – Personal survey, Mail survey, and Telephone survey and personal interview survey I used personal interview and telephonic survey methods 79 RESEARCH INSTRUMENTS I used a structured questionnaire. A structured questionnaire is a formal list of questions framed so as to get the fact. I use three types of questionnaire one for PSU another for Retail Outlets and last for Direct customer and End User. SAMPLING THE SAMPLING PROCEDURE:There are several steps involved in this process: DEFINING THE POPULATION:I have conducted the survey of distribution channel of Essar oil ltd. Vadinar in Gujarat. The specifications are as under: 1. Element: 2. Sample units: 3. Extent 4. Time : : PSU, Retail outlets and direct customer & traders. petroleum companies and direct customer. Gujarat 45 days (1st June to 15th July, 2010) FRAME IDENTIFYING THE SAMPLING:I have classified Gujarat state for my sampling frame. SPECIFYING THE SAMPLING UNITS:The sampling units are the basic units containing the elements of target population. The sample unit in my research is petroleum companies. Like BPCL, HPCL, IOCL and petroleum RO, traders and direct customer. DETERMINING THE SAMPLE SIZE One has to decide how many elements of the target population are to be 80 Choose. I have chosen a sample size of 3 for PSU, 25 for direct customer and 25 for retail outlets. SPECIFYING THE SAMPLING PLAN This means that one should indicate how decision made so far is to be implemented. All expected pertinent issue in sampling survey must be answered by the sampling plan. The sampling plan is as under: SELECTING THE SAMPLE:This is the final step in the sampling process. A good deal of field work and office work is introduced in the actual selection of the sample elements. However it depends mainly upon the sampling plan and sample size required. CONTACT METHOD:There are three methods by which respondents can be contacted. The methods are – Personal interview, Mail interview and Telephone interview. We use different method for different customer for data collection as:- Personal interview Telephone Interview PSU (public sector unit). Direct customer & traders and retail outlets CALCULATION OF HYPOTHESIS 1) CALCULATION FOR PSU: The sample size of PSU is 3 so used t distribution because sample size is less than 30. ESSAR oil thinks that the present distribution channel is 90% effective so we have to check whether the system is 90% effective or not and that’s why we used hypothesis method to check that effectiveness. There are five step to check whether this data is effective or not. 81 Step 1:H0: ESSAR oil distribution channel is 90% effective. H1: ESSAR oil distribution channel is not 90% effective. Step 2:Number 1 2 x= Range 85-90 90-95 Mean value 87.5 92.5 Frequency 1 2 ∑x n = 87.5*1+92.5*2 3 x = 90.83 µ0 = 90 s= ∑ x −x n −1 ( ) 2 Where S = Variance of the given data. X = Mean value X = Population mean = µ0 N = Sample size 82 s= ∑ x −x n −1 ( ) 2 = (87.5-90)2 + (92.5-90)2 2 S2 = 6.125 S = 2.4748 Now, find out the value of tcal. tcal = s x−µ n 0 = 90.83-90 2.4748 = 0.83 1.43 = 0.5827 Step 3:ttab = (n-1 df , α level of significance) 83 = (2, 0.10) = Step 4:The value of tcal is less than the value of ttab. 2.920 Step 5:- Conclusion The value shows that the distribution channel of ESSAR oil ltd is 90% effective. CALCULATION RESULT: SR.NO 1 2 CUSTOMER NAME PSU DIRECT CUSTOMERS & TRADERS RETAIL OUTLETS tcal 0.5827 1.47 0.83 ttab 2.920 1.711 1.71 CONCLUSION EFFECTIVE EFFECTIVE EFFECTIVE 3 84 CONCLUSION: PSUs, Retail Outlets, Direct Customers & Traders are satisfied with existing Distribution channels of ESSAR OIL LTD. They think that present distribution channels are Effective. DATA ANALYSIS For the research data is very important and without data we cannot get any idea so, data is very useful to the research. I collected the all the data about the distributers of company. 85 NAME OF CITY JAMNAGAR RAJKOT AHMEDABAD SURAT BARODA BHAVNAGAR VAPI RETAIL OUTLET 2 1 3 3 2 1 2 DIRECT CUSTOMER 3 2 4 3 2 1 2 PSU: (PUBLIC SECTOR UNIT) • • • IOCL (Indian oil corporation limited) BPCL (Bharat petroleum corporation limited) HPCL (Hindustan petroleum) 86 CHART OF SALES AND PSU 70% 60% 50% 40% 30% 20% 10% 0% 2008 2010 S S ALE PS U CHART OF RETAIL OUTLET 20% 15% 10% 5% 0% 2008 2010 S S ALE RT E AIL CHART OF DIRECT CUSTOMER 87 60% 50% 40% 30% 20% 10% 0% 2008 2010 S S ALE DIR CTCUS . E T KEY FINDINGS More analysis is of no use unless some findings are derived from it. On the basis of the distribution channel one can get the overall idea about the position of the company in the market. The following findings have been arrived on the basis of the research on the distribution channel. • As per the hypothesis test I have find out the positive answer of the all distribution channel. • Currently there were distribution channel is 90% effective from the research and hypothesis test. • • There are currently company have its own 1284 retail outlet in the country . The distribution channel of the essar oil ltd is (1) by road (2) by rail (3) by marine. • The product of the company which is WHITE OIL, BLACK OIL, LPG. Is more distributing by road. 88 • • There is no more facility in rail distribution. In the field area there are such camera facility for hacking a theft and for reduce any accident. • As per my finding there are some changes which essar group should improve and overall the distribution channel is very good. SUGGESION For the suggestion to the company about the distribution channel of the product of the essar oil ltd. Sales of products are dependent on all indirect distribution channels of the company and by findings, observe and hypothesis test these channels are more effective and important to the company. Company has to improve the Channels, Company has to increase a more retail outlet and also increase a more gantry facility for more distribute a product in same time. And company should increase a more track facility in rail distribution because currently there were only 2 tracks for fill up the product. So that’s why company should think about that and adopt a step for improve a distribution channel. That is my overall suggestion to the essar oil ltd for its distribution channel for improves amore sales and how to increase sales and distribution channel. 89 CONCLUSION From the above discussion I can conclude that in the essar group there were many departments that I have saw and I have research on the distribution channel in marketing department. A distribution channel of the essar oil ltd which is (1) by road (2) by rail (3) by marine. There were three distribution channel of essar oil ltd. All of three are very effective and useful for company according to current situation and it’s also being useful in future. If company wants to improve the more sales than they should increase more capacity of gantry facility in road and more increase railway track in the company for more sales of the product . And this way company finds out the problems and solves the any problems of the company and adopted the systematic research procedure. 90 BIBILIOGRAPHY www.essar.com (ESSAR group information)   Google (images and distribution channel of different oil company)  Statistics for Management by Richard I. Levin & Devid S. Rubin. (Calculating hypothesis) 91 ANNEXURE-1 QUESTIONNAIRE FOR PSU 1) Do you get delivery on time? Yes No 2) How much time-leg you consider while receiving an order? Within 24 hours Within 36 hours Within 48 hours More than 48 hours 92 3) Do you get proper quantity of product which is ordered by you? 100% 96%-100% 91%-95% Less than 90% 4) Are you satisfied with existing product’s Quality? Fully Satisfied Partially Satisfied Partially Dissatisfied Dissatisfied 5) Does your TT (Truck and Tankers) Crew get proper facilities in Essar? Yes No 6) Which mode of transportation would you prefer? By Road 93 By Rail By Marine By Pipeline 7) Is there enough infrastructure facility provided by ESSAR to your officers & workers? Yes No 8) How much evaporations losses you consider while receive the product? Less than 5% 5%-10% 10%-15% More than 15% 9) Which suggestions do you want to give for better service? ANNEXURE-2 94 QUESTIONNAIRE FOR DIRECT CUSTOMERS AND TRADERS 1) Do you get delivery on time? Yes No 2) How much time-leg you consider while receiving an order? Within 24 hours Within 36 hours Within 48 hours More than 48 hours 3) Do you get proper quantity of product which is ordered by you? 100% 96%-100% 91%-95% Less than 90% 4) Are you satisfied with existing product’s Quality? Fully Satisfied 95 Partially Satisfied Partially Dissatisfied Dissatisfied 5) Which mode of transportation would you prefer? By Road By Rail By Marine By Pipeline 6) Is ESSAR providing you price list information whenever changes in the price of product occur? Regularly Sometimes At the time of order placed Never 7) Which suggestions do you want to give for better service? 96 ANNEXURE-3 QUESTIONNAIRE FOR RETAIL OUTLETS 1) Do you get delivery on time? Yes No 2) How much time-leg you consider while receiving an order? Within 24 hours Within 36 hours Within 48 hours More than 48 hours 97 3) Do you get proper quantity of product which is ordered by you? 100% 96%-100% 91%-95% Less than 90% 4) Are you satisfied with existing product’s Quality? Fully Satisfied Partially Satisfied Partially Dissatisfied Dissatisfied 5) Which mode of transportation would you prefer? By Road By Rail By Marine By Pipeline 98 6) Is ESSAR providing you price list information whenever changes in the price of product occur? Regularly Sometimes At the time of order placed Never 7) How would you rate the marketing channel of the ESSAR? Excellent Good Average Poor 8) Which suggestions do you want to give for better service? 99 ANNEXURE-4 CALCULATION FOR DIRECT CUSTOMER AND TRADER: The sample size of direct customer and retail outlets are 25 so used t distribution because sample size is less than 30. ESSAR oil thinks that the present distribution channel is 90% effective so we have to check whether the system is 90% effective or not and that’s why we used hypothesis method to check that effectiveness. There are five step to check whether this data is effective or not. Step 1:H0: ESSAR oil distribution channel is 90% effective. H1: ESSAR oil distribution channel is not 90% effective. Step 2:Number 1 2 3 4 x= Range 75-80 80-85 85-90 90-95 Mean value 77.5 82.5 87.5 92.5 Frequency 2 2 7 14 ∑x n = 77.5*2+82.5*2+87.5*7+92.5*14 25 x = 89.1 100 µ0 = 90 s= ∑ x −x n −1 ( ) 2 Where S = Variance of the given data. X = Mean value X = Population mean = µ0 N = Sample size s= ∑ x −x n −1 ( ) 2 = (77.5-90)2 + (82.5-90)2 + (87.5-90)2 + (92.5-90)2 24 S2 = 9.37 S = 3.06 Now, find out the value of tcal. 101 tcal = s x−µ n 0 = 89.1-90 3.06 SQRT 25 = 0.9 0.61 = Step 3:ttab = (n-1 df , α level of significance) = (24, 0.10) = 1.711 Step 4:The value of tcal is less than the value of ttab. 1.47 Step 5:- Conclusion The value shows that the distribution channel of ESSAR oil ltd is 90% effective 102 ANNEXURE-5 CALCULATION FOR RETAIL OUTLETS: The sample size of retail outlets are 25 so used t distribution because sample size is less than 30. ESSAR oil thinks that the present distribution channel is 90% effective so we have to check whether the system is 90% effective or not and that’s why we used hypothesis method to check that effectiveness. There are five step to check whether this data is effective or not. Step 1:H0: ESSAR oil distribution channel is 90% effective. H1: ESSAR oil distribution channel is not 90% effective. Step 2:Number 1 2 3 4 Range 75-80 80-85 85-90 90-95 Mean value 77.5 82.5 87.5 92.5 Frequency 2 2 5 16 x= ∑x n = 77.5*2 + 82.5*2 + 87.5*5+92.5*16 25 x = 89.5 103 µ0 = 90 s= ∑ x −x n −1 ( ) 2 Where S = Variance of the given data. X = Mean value X = Population mean = µ0 N = Sample size s= ∑ x −x n −1 ( ) 2 = (77.5-90)2 + (82.5-90)2 + (87.5-90)2 + (92.5-90)2 25 S2 = 9.37 S = 3.06 Now, find out the value of tcal. tcal = s x−µ n 0 = 89.5-90 3.06 SQRT 25 104 = 0.50 0.61 = 0.83 Step 3:ttab = (n-1 df , α level of significance) = (24, 0.10) = Step 4:The value of tcal is less than the value of ttab. 1.71 Step 5:- Conclusion The value shows that the distribution channel of ESSAR oil ltd is 90% effective. 105