A PROJECT REPORT

ON

COMPARITIVE STUDY OF DEALERS

PROFITABILITY IN HPCL
AT
HINDUSTAN PETROLEUM CORPORATION
LTD.
SUBMITTED BY

VIJAY KUMAR
*2009-2011*
POST GRADUATE DIPLOMA IN MANAGEMENT
(MARKETING)
SIKKIM MANIPAL UNIVERSITY
 ACKNOWLEDGEMENT

“Success is the result of one’s own efforts and hard work” however every accomplishment
requires, not only efforts and hard work but also motivation, encouragement, proper guidance of
many great personalities and this work is no different in order to bring this report successfully. I am
indeed indebted to those who had extended their full support, co-operation, guidance and timely
instructions.

I would like to express my gratitude to my project guide Mr. Rajesh Singh (Manager
E&P) who took his precious time to teach & was always there in the hour of need. Without
him my training would not have been possible .It is indeed a great pleasure & privilege to
express my sincere thanks to dealers
 DECLARATION

I hereby declare that the project entitled as “comparative study of dealer’s

profitability in HPCL” submitted to SIKIM MANIPAL UNIVERSITY in partial
fulfilment of the requirement for the reward of the degree of Post Graduate Diploma
in Management is a record of the original project work done by me during the
academic year 2009-2011

Name of the student registration signature

Vijay Kumar
 TABLE OF CONTENT

CHAPTER No. TITLE

Chapter 1 executive summary

Chapter 2 fuel industry

Chapter 3 the company: HPCL

Chapter 4 corporate social responsibility

Chapter 5 products and services

Chapter 6 financial technique

Chapter 7 data collection and analysis

Chapter 8 research finding and recommendation

Bibliography
The fuel industry
 The Indian Petroleum Industry is a case in point for exhibiting the giant leaps India
has taken after its independence towards its march to attain a self-reliant economy.

During the Independence era of 1947, the Indian Petroleum Industry was controlled by
foreign companies and India's own expertise in this sector was limited. Now, after 60 years,
the Indian Petroleum Industry has become an important public sector undertaking with
numerous skilled personnel and updated technology that is comparable to the best in the
world. The vim and the achievement during these years is the growth of productivity in
petroleum and petroleum-based products. Even the consumption has multiplied itself nearly
30 times in the post-independence era.

An important advancement in the petroleum industry came with the Industrial Policy
Resolution, 1956 which signified the promotion of industries. The ONGC originally set up as
a Directorate in 1955, was transformed into a Commission in 1956. In 1958, the Indian
Refineries Ltd., a government undertaking, came into existence. The Indian Oil Company
(IOC), also a government undertaking, was set up in 1959 with the purpose of marketing
petroleum-related products. Indian Oil Corporation Ltd. was formed in 1964 with the merger
of the Indian Refineries Ltd. and the Indian Oil Company Ltd. Presently, 17 refineries operate
under the Indian Petroleum Industry.

Growth of the Indian Petroleum Industry

In the post-independence era, India grew tremendously in terms of infrastructure in the

petroleum industry, which in turn helped increase the production of petroleum and
petroleum-related products.
  1947-57:- 3 refineries were set up in Mumbai and Visakhapatnam by transnational
oil corporations doing business in Indian
 1957-67:- another 3 refineries were established in Guwahati, Barauni, and Koyali by
Indian Refineries Ltd.
 1967-77:- 2 more were set up in Chennai by Iranian companies and in Haldia by
Indian Oil Ltd.
 1977-87:- 2 more refineries were commissioned. The one at Bongaigaon was the first
to have an amalgamated petroleum refinery-cum-petrochemicals unit. The other was
established at Mathura.
 1987-97:- 2 more were set up at Nagapattinam and Mangalore.
 1998-07:- refineries at Panipat and Numaligarh were set up.

Future of Indian petroleum industry

The future of Indian petroleum industry has good potential but it needs developmental
activities in this sector to strengthen itself.

The world at present is experiencing a lot of changes of mammoth proportions. The

Petroleum Industry in India is one of the harbingers of huge economic growth. The arena for
business has now gone global since trade boundaries are fast dissolving. These developments
present India with tremendous opportunities in the future to be one of the major players in the
export of petrochemical intermediaries.

Today, India imports more than 70% of its oil requirements. The search for more oil led India
to sift through the international markets comprising of the emerging energy-trading countries
- China, Russia, and Iran. India has made new partnerships with Venezuela, Burma, Middle
East nations, and Pakistan.

The long-term energy strategies of India have to emphasize on the methods of using energy
effectively and efficiently, and to enhance energy self-sufficiency. To lift the Indian economy
to enhanced economic standards innovation, diplomacy, creativity, and vision are the need of
the hour.

India has to compete for conventional energy sources and for that there must be
developmental activities for energy efficient buildings and vehicles. The main problems with
the Petroleum Industry in India are related to infrastructural developments. The lack of proper
storage facilities, enhancements in refining capacities, and fluctuating import prices plays
important role in the development of the sector. The target of improvement for the growth of
the economy for India should be in the area of the petrochemical sector. The need for
intermediary products for the manufacturing of the end use products is an important sector to
tap in. With the per capita consumption for the petrochemical products in India being low and
the production of these products being high, India may become one of the leading exporters
of such intermediary products.

The future of Indian petroleum industry depends on:

• Demand for petroleum is growing in leaps and bounds

• Shifting focus to more production of olefin - ethylene, propylene, butadiene,
• Price and availability of crude oil and gas as feedstock would still be critical factors
• The demand of the end products would affect the demand of the intermediary product

Petroleum companies

There are three stages in the process, upstream: exploration and downstream: refining and
marketing. After extracting the crude oil from the reserves, it is processed in refinery to yield
various petroleum products, which are further marketed. Petroleum products are obtained
through a two-stage process: distillation and chemical processing. Distillation involves
breaking crude oil into light distillate, medium distillate and heavy distillate. Chemical
processing is done to add value to products. ONGC and Oil India dominate the upstream
segment. Together they contribute 87% of India's oil production.

In the downstream segment, major players include IOC, HPCL, BPCL and Reliance.
Independent refineries have now become subsidiaries of these bigger players. As of July 2005
there were a total of 18 refineries in the country comprising 17 in the public sector and one in
the private sector with a combined refining capacity of 127 MMTPA. IOC dominates the
refining capacity with a total share of nearly 32% of the current refining capacity.

Refining sector got deregulated in FY99 whereas marketing sector deregulation began to
take shape on 1st April 2003. However, there is still political intervention in the pricing of
certain petroleum products. For instance, subsidy on LPG and PDS kerosene still continues.

Supply

While domestic players supply about 30% of crude oil required, remaining 70% is
imported. Petroleum products are in surplus.

Demand

Demand for petroleum products is relatively inelastic. The per capita consumption of India is
one of the lowest in the world and demand is expected to remain stagnant going forward.

Barriers to entry

Capital intensive. It takes about Rs 5 bn - Rs 10 bn per m tonnes to set up a refinery. Also, the
size of refinery and its location matter for the viability of refinery. The new players wanting
to enter the retail segment need to pump in a minimum of Rs 20 bn in the sector in order to be
eligible for the retail marketing business.

Bargaining power of suppliers

High, since crude availability of country are only about 30% of the requirements. Also the
petroleum products are a commodity product. OPEC has the power to manipulate prices.

Bargaining power of customers

Currently low. But in future it is expected that there may be price differential in these
products on account of increasing competition and this would lead to higher bargaining
power to the consumers.

Competition

Although the government has opened up the sector to private players, prices of major
products such as petrol, diesel, LPG and kerosene are government controlled and to that
extent, the oil PSUs have formed a cartel. However, with substantial increase in private
competition, this scenario is likely to change.

Petroleum companies, also known as Oil companies or Oil & Gas companies, have
formed a key part of the global economy for the last decade, since petroleum or crude oil has
become our main fuel source.

Not only have these petroleum companies become amongst the biggest companies in the
world, but thanks to the fundamental importance of this limited resource, they have also
become embroiled in a complex political world of government and national objectives,

Moreover, administrating their employees who have to work in extreme temperatures in

extended shifts is an important part of the operations of an oil company.

The petroleum industry in India is one of the oldest industries in the world, with oil
being struck as early as 1867 at Makum near Margherita in Assam, nine years after Col.
Drake's discovery in Titusville. Since then the industry has come a long way. Today, after
over fifty years of independence, the oil sector, has seen the growth of giant national
companies, like ONGC. India represents one of the most exciting oil markets in the world
today.

Major Players in integrated refining and marketing are HPCL, BPCL and IOC.
The company Hindustan Petroleum Corporation
limited
HINDUSTAN PETROLEUM CORPORATION LIMITED
(HPCL)

1952: The Company was incorporated in the name of Standard Vacuum Refining
Company of India Limited on July 5, 1952
1962: On 31st March,1962 the name was changed to ESSO Standard Refining
Company of India Limited.
1974: Hindustan Petroleum Corporation Limited comes into being after the takeover and
merger of erstwhile Esso and Lube India Undertaking
1976: Caltex Oil Refining Ltd. is taken over by the Government of India and
subsequently merged with HPCL in 1978.
1979: Kosan Gas Company, the concessionaries of HPCL in the domestic LPG market,
are taken over and merged with HPCL.
HPCL thus comes into being after merging four different organisations at different
points of time.

HPCL, a fortune 500 company, is regarded as one of the major integrated oil refining and
marketing companies in India. It is a Mega Public Sector Undertaking (PSU) with Navaratna
status. HPCL has achieved its market leadership through efficiency in production and
management with an annual turnover of over Rs 1,03,837 Crores ($ 25,142 Millions) during
FY 2007-08, 16% Refining & Marketing share in India and a strong market infrastructure.
Corresponding figures for FY 2006-07 are: Rs 91,448 crores ($20,892 Million).

HPCL accounts for about 16% of the market share and 10.3% of the nation's refining
capacity with two coastal refineries, one at Mumbai (West Coast) having a capacity of 5.5
MMTPA and the other in Vishakapatnam (East Coast) with a capacity of 7.5 MMTPA.
HPCL also holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals
Limited (MRPL), a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In
addition, HPCL is progressing towards setting up of a refinery in the state of Punjab in the
joint sector.

HPCL owns the country's largest Lube Refinery with a capacity of 335,000 metric Tonnes
which amounts to 40% of the national capacity of Lube Oil production. HPCL has given
India a firm ground in this sector with its world class standard of Lube Base Oil.
HPCL has returned "Excellent" performance for fifteen Consecutive years upto 2005-06,
since signing of the first MOU with the Ministry of Petroleum & Natural Gas. HPCL won the
prestigious MOU Award for the year 2006-07 for Excellent Overall Performance, and for
being one of the Top Ten Public Sector Enterprises who fall under the 'Excellent' category.
HPCL performance for the year 2007-08 also qualifies for "Excellent" rating.

The Corporation over the years has moved from strength to strength on all fronts. Our
refining thru put has increased three fold between 1984/85 to 2007/08, rising from 4.47
million tonnes in 1984/85 to 13.70 million tonnes currently.
Consistent excellent performance has been made possible by highly motivated workforce of
over10,800 employees working all over India at its various refining and marketing locations.
HPCL continually invests in innovative technologies to enhance the effectiveness of
employees and bring qualitative changes in service. Some of the initiatives that broke new
grounds are, Business Process Re-Engineering exercise, Creation of Strategic Business Units,
ERP implementation, Organizational Transformation, Balanced Score Card, Competency
Mapping, Benchmarking of refineries, terminals for product specifications, ISO certification
of Refineries, Supply Chain Management

Mission, Vision & SHE Policy

Mission

HPCL, along with its joint ventures, will be a fully integrated company in the hydrocarbons
sector of exploration and production, refining and marketing; focusing on enhancement of
productivity, quality and profitability; caring for customers and employees; caring for
environment protection and cultural heritage.

It will also attain scale dimensions by diversifying into other energy related fields and by
taking up transnational operations.

VISION (2020)

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

Safety Policy
As an integral part of its business, HPCL believes that no work or service or activity is so
important or urgent that safety be overlooked or compromised. Safety of the employees and
public, protection of their as well as Corporation’s assets shall be paramount. Corporation
considers that safety is one of the important tools to enhance productivity and to reduce
national losses. The Corporation will constantly Endeavour to achieve and maintain high
standards of Safety in its operations

Health Policy

To provide a structured program to look after and promote the health of vital “Human
Resource”, essential for productivity and effectiveness of the Corporation.

Environment Policy

The Corporation is committed to conduct its operation in such a manner as compatible with
environment and economic development of the community. Its aim is to create an awareness
and respect for the environment, stressing on every employee’s involvement in environmental
improvement by ensuring healthy operating practices, philosophy and training.
Company layout
HPCL's infrastructure is at par with that of the best global corporations in the hydrocarbons
sector. For over a quarter century now, HPCL has been
consistently breaking new grounds in production and
marketing. A glimpse of the vast marketing network already
developed is given below in a table.

Our Marketing Network

2007-08 2006-07 2005-06 2004-05

Regional Offices 91 86 85 85
Terminals/Installations/TOPs 42 37 36 36
Depots 93 93 92 100
LPG Bottling Plants 43 42 41 40
ASFs 16 13 13 10
Retail Outlets 8329 7909 7313 6667
SKO/LDO Dealers 1648 1648 1648 1648
LPG Distributors 2232 2238 2202 2153
LPG Customers (in crores) 2.52 2.39 2.28 2.17
From the table it can be easily noticed how the marketing network has been strengthened
over the years. The dominance that is reflected in numbers is equally translated through the
best quality of service.

HPCL was one of the first companies to understand the nation's energy requirements and take
necessary measures to fulfil the expectations. The corporation's increasing growth function is
due to the successful realization of targets and sustained quality of service and customer
relations.

HPCL presently owns and operates two coastal refineries at Mumbai and Visakhapatnam
along with a joint venture refinery at Mangalore. A massive infrastructure comprising two
cross country pipelines and an extensive network of terminals, depots, bottling plants and
aviation servicing facilities contributes to India's growth every year

Type of Retail Outlet Dealerships /Licence Fees :

HPC is setting up 3 types of outlets:

1. Company Owned: In case the outlet is developed under company owned category,
the land only will be taken on lease for a period of 20 years with renewal option of 20
years, rental will be paid by HPCL, and will not be recovered from the dealership. The
superstructure will be provided by the company and SSLF as applicable will be charged
at a higher rate, which at present, is Rs.43/- per KL for MS and Rs.36/- per KL for
HSD.

2. Dealer Leased: In case the outlet is to be developed under this category, the land and
superstructure, will be taken from the selected candidate on lease for a period of 15
years with a renewal option of 15 years. The rental will be paid by HPCL and recovered
from the dealership as additional licence fee. The Service Station Licence Fees (SSLF)
as applicable will be charged at a lower rate which, at present, is Rs.13/- per KL for MS
and Rs.11/- per KL for HSD.

3. Dealer Owned : On strategic consideration, company may decide to develop certain

retail outlets on Dealer owned basis. In such cases, the land and superstructure will not
be taken on lease from the selected candidate. The Service Station Licence Fees (SSLF)
as applicable will be charged at a lower rate which, at present, is Rs. 13/- per KL for
MS and Rs.11/- per KL for HSD.
 Corporate social responsibility

Corporate Social Responsibility

HPCL is committed to create a positive impact on the society and contribute to socio-
economic development including measures for improving the quality of life of
underprivileged classes of the society. Since its inception, HPCL has tried to follow
Corporate Social Responsibility in the true sense. This sense of responsibility comes from a
feeling that not every achievement of the company is reflected in its balance sheets. The
relevance that a company achieves by virtue of its socio-economic participation surpasses the
profit and loss measurements by far. In this respect HPCL has proceeded in the truly
corporate manner, planning investments in social causes methodically, executing the various
steps with utmost care and securing distinctive developments for the poor and the
downtrodden masses. HPCL has provided sustained value for the above mentioned
investments all the time and has contributed to the living standards of underprivileged masses

When it comes to social contribution our country never lacked goodwill among corporate
citizens but competent contributors were never in good numbers as far as management and
execution skills are concerned. HPCL has surely paved the way in the right direction with
exemplary contributions. HPCL's initiatives have created value in the following diverse ways
–

1. HPCL's initiatives have made notable differences in fields as diverse as education,

infrastructure, welfare measures, health and hygiene, vocational training &
employment generation, training in self-reliance, amenities for the sufferers of natural
disasters and environmental protection. The most commendable feature of the support
is that HPCL has taken innovative measures to infuse self reliance in masses to secure
long lasting improvements.
 2. HPCL has categorized different projects of social relevance according to national and
regional significance. The investment has been made according to solid result oriented
plans with every detail of the prospect taken into consideration.
3. The funds for different CSR projects have been consistently allocated in a transparent
manner. HPCL follows an allocation process based on complete evaluation and
benchmark standardization.
4. A Foundation has been established to take up projects of National significance. This
initiative has helped to identify the impacts of projects keeping national interest in
mind.

HPCL has set exemplary organizational competency in carrying out complex and demanding
projects. The implementation process is supported by adequate checks and balances including
reporting, assessment and appraisal by world class professionals.

HPCL took its first step in this direction during the year 1985-86 with a modest budget
allocation of Rs.18 lacks for undertaking various welfare activities for the benefit of SC/STs
and other weaker sections of the Society under the Special Component Plan/Tribal Sub-Plan
and Welfare Plan for Weaker Sections. Later the corporation expanded the scope and
allotment of such projects in manifolds to uphold its "Socially Responsible Corporate citizen"
Image and to address the huge welfare expectation which the society was increasingly resting
on the corporation. Budget for the CSR projects subsequently rose every year and larger
portions of underprivileged masses were gradually incorporated into the schemes. The
corporation went beyond the parameters of the SC/ST Component Plan to extend support.
The fund has been arranged by virtue of a policy decision to allocate certain percentage of the
net profit for each financial year to Component Plan and CSR activities and to operate the
CSR policy on Triple Bottom Line principle i.e. Economic, Social & Environment. The
Expenditure for the year 2005-06 stands at a whopping Rs.7 crores for SCP projects and Rs. 8
crores for other CSR projects

An "HPCL Foundation" is being set up to finance the CSR projects and also monitor
implementation of distinct schemes like AIDS prevention, vocational training for
unemployed youth, education of rural children, computer training, healthcare facilities, etc.

A Corporate approach towards development:

The current projects bear the mark of a well thought of corporate mindset .To summarise
HPCL's approach towards social welfare we have to mention the following points-

1. Strategic approach to every issue is the key to HPCL's success.

2. HPCL has meticulously secured the input-output-outcome balance.
3. HPCL has underlined the social problems accurately and has taken result oriented
initiatives.
 4. The advanced planning regarding allocation of resource and correct evaluation of
performance against benchmark have represented organizational competence.

The success of HPCL lies in the maintenance of social responsibilities amid profit
driven and competitive business environment. Apart from directly contributing to the
betterment of weaker sections of the society, HPCL has been associated with
healthcare, education, environmental protection, agricultural development, rural
reconstruction, water supply development etc. It can be said that the corporation has
touched lives qualitatively acting as a corporate social ambassador. HPCL has always
seen itself as a contributing participant in India's overall development. The
corporation has stood the test of time being true to citizen's expectations.

Products and services

REFINERIES

Without refining, the rich resources of crude petroleum of nature would remain
latent. Value-added products from crude petroleum like petrol, diesel, kerosene,
liquefied petroleum gas, naphtha and many more products would not be
available for growth and development of a nation. The two coastal refineries at
Mumbai and Vishakhapatnam and one joint venture refining facility at Mangalore
Refinery & Petrochemicals Limited have been sustaining almost 20% of India’s
refining requirements. HPCL refineries upgrade the crude petroleum into many
value-added products and over 300 grades of lubricants, specialties and greases.
The Lubricating Oils Refinery set up at Mumbai is largest refinery in India.

LPG
its endeavour to improve the customer satisfaction, HPCL has launched the ‘Ji
Haan’, services in 2002, aimed at reinforcing a strong positive service orientation
of HP Gas.

Rural India is an emerging potential market and no business venture can afford
to ignore it. However, the specific barriers to the penetration of LPG in rural India
are cost - both one-time and recurring – non-availability of LPG owing to a poor
distribution system, easy availability of alternative, cheap fuel and low level of
product awareness and its benefits. HP GAS has charted out a detailed strategy
to address all these barriers and entered rural markets with the launch of 5 Kg
cylinders.

As part of its social commitment as a responsible corporate, HPCL has

introduced an innovative scheme, HP GAS Rasoi Ghar or the concept of
community kitchen, for the upliftment of the poorest of the poor by providing a
common cooking platform for a village, where users have to pay only on the
basis of the time utilized for cooking. This eliminates both the barriers of one-
time high deposit as well as the recurring cost of refills. The company is already
operating nearly 1024 such Rasoi Ghars across the country, benefiting more than
15,000 families. Moreover, stalls have been set up in major rural melas such as
Pushkar Mela, Sonpur Mela and the like to increase awareness of the benefits of
LPG.

INTERNATIONAL OPERATION(MANAGING THE OVERSEAS TRADE

ACTIVITIES )

At the initial stages, the International Division started out with handling import
facilitation for large consumer of Fuel Oils. The divisions also engaged in direct
export of lubricating oils to countries like Nepal, Bangladesh, Malaysia, Sri Lanka
and Saudi arabia. In order to expand its operations and tab export market, the
Division has started appointing distributors for marketing to lubricating oils &
specialty products.
 Presently, distributors in Nepal, Bangladesh & Sri Lanka are regularly
marketing HP Products in these countries and we are actively looking at
appointing distributors in Africa & Malaysia.

With the rapid changes that are taking place in the Indian Petroleum scenario,
the International Division is fast gaining a reputation in the markets. Apart from
handling exports of surplus refinery products for HPCL, the International Division
has started facilitation of Naphtha exports for the Oil & Natural Gas Commission
(ONGC) and is actively seeking new opportunities.

HPCL has exported bulk petroleum products such as Naphtha, Fuel Oils and
Gasoline mostly to countries in Far East.

BULK FUEL & SPECIALITIES(CATERING TO MARKETING OF BULK FUELS &

PETROLEUM PRODUCTS)

HPCL’s petroleum products cover numerous applications. From automobile,

aviation marine and power plant fuels to being used in the manufacture of
products such as fertilizers, carbon black, jute, insecticides, cosmetics, edible oil,
fabrics compact discs and medicines.

We are the second largest producers of Bitumen in India with annual sales of
more than 600 Thousand Metric Tonnes (TMT). Ongoing R&D to meet the fast
changing and critical needs of customers have resulted in several product
improvements like rubber & polymer modified bitumen and emulsions.

For over 25 years, HPCL has been providing fuelling services at all the major
Indian ports. We are the marine lube partners of Total Lubrifiants, France ,
manufacturing and supplying the TOTAL brand of marine lubes.

HPCL is one of the largest suppliers of fuel to state owned and Independent
Power Plants (IPPs).We also cater to the Industries requirement of Specialities
like Hexane, Solvents, MTO etc
AVIATION (WE WORK HARD ON GROUND TO KEEP YOU FLYING)

HP Aviation offers into-plane fuel service at the major airports in India. Hindustan
Petroleum’s Aviation Service Facilities, Intermediate Storage Installations and
Laboratories handling Jet Fuel are approved and periodically audited by the
Directorate General of Civil Aviation, Government of India (DGCA). HP Aviations
installations at Mumbai, Delhi, Chennai, Kolkata, Cochin and Calicut are certified
to the ISO 9001:2000 standards.

RETAIL (HIGH QUALITY-PERSONALIZED “VEHICLE & CUSTOMER CARE”

The retail business unit of HPCL is oriented towards delivering better and faster
service to consumers. Recognizing that our consumers will be better served by
offering them a wide range of non-fuel services, the corporation has seized the
opportunity through some extensive market research banked initiatives.

Our new retail brand, ‘Club HP’ seeks to redefine the way fuel is retailed in
India. Offering the promise of outstanding care for the costumer and the vehicle,
Club HP will create a large base of loyal consumers who will look for the distinct
red and blue logo whenever they need fuel for their vehicle. Club HP outlets offer
one stop convenience so that one can do many things in same window of time -
pay his bills, shop for groceries, visit the ATM, get a quick check done on their
vehicle and even arrange servicing and repairs if need arises.

Club HP outlets in major cities offer new generation fuels, blended with
specially imported multi-functional additives. Power, our branded petrol has
created a niche for itself and is already a favourite of the discerning consumers.
Turbojet, the first branded diesel to be launched in country, is proving to the
equally the favourite of the personal diesel vehicle owners in urban markets.
Financial techniques
Earning of profit is considered as main objective of a business. Every business
manager tries to earn maximum profit or at least satisfactory profit. Though the actual profit
earning is left on luck but profit planning should be well designed. For measuring and
forecasting the profit of a business the financial experts use the technique of breakeven
analysis or cost volume profit analysis (CVP). CVP analysis is the analysis of three variables
cost volume and profit. The CVP techniques give information about profit structure of the
firm which depends on cost and sales volume.

By BEP we know that on which point the firm is at break even or there is no profit no
loss the firm suffers a loss before this point and earns profit after this point. The BEP analysis
is that technique by which the relation of cost and revenue of a firm or its unit which the sales
volume is studied and the profit is known at different levels of sales. Costs are divided into
fixed and variable cost and it is analyses in relation to revenue.

Computation of BEP:-
there are two techniques of calculating breakeven point

i. Algebraic technique

ii. Chart technique

ALGEBRIC TECHNIQUE
In algebraic technique the BEP can be calculated in two ways

i. Equation method:-

S-V = F+P

Where:-

S= sales

V= variable cost
 F= fixed cost

P= profit

ii. Contribution margin technique: - the second algebraic method of calculating

BEP is contribution marginal technique the excess of sales over variable cost
is called contribution margin the contribution is available first for the
absorption of fixed cost and then net profit.

Contribution: - (C) = S-V

Where

S= sales

V= variable cost

Profit volume ratio(p/v ratio) : - The contribution margin ratio or p/v

ratio is an indication of profitability of business this ration express the
percentage relation between contribution and sales.

P/V ratio = C/S * 100

Where

C= contribution

S= sales

BEP = F

P/V ratio

Where

F= fixed cost

Margin of safety (%) = S- BEP *100

S
CHART TECHNIQUE
B.E.P. chart is a graphic representation of relation of cost volume and profit in BEP
chart the BEP is the point where the total cost line cuts the total revenue line. BEP chart is
that chart which shows the following:-

 Expected profit at different levels

 Relation between variable cost and fixed cost

 Margin of safety

 BEP

 Relation between contribution and profit volume

The construction of chart first we draw a straight line parallel to OX axis

consisting fixed cost above the fixed cost line variable cost line is plotted which
shows that there is a increase in cost with increase in production this line is called
total cost line after this the sales line is plotted with zero point this line increase at
same rate of increase in sales

In the chart BEP point is where the total cost line cuts total revenue line at this
production level there is no profit or loss to the firm.

After BEP point entire sales area is called margin of safety and explains that the
drop in sales up to the point of BEP the firm would not suffer any loss
Data collection and analysis
The no of dealers of HPCL in Rajasthan is 337 out of which in Jodhpur district there
are 210 dealers where as in proper Jodhpur there are 11 dealers. A survey was conducted at a
list of few dealers and on the basis of those data a comparative study on the profitability of
the dealers of hpcl was conducted

A dealer’s survey was done at 4 major outlets of HPCL in the city of Jodhpur in
which primary data about the revenue generated and expenses incurred by these outlets were
calculated and on the basis of these data P/V ratio, BEP and margin of safety is calculated
and various recommendations were made.
Marwar auto parts
Revenues:-
Heads Yearly Monthly
Sales:-
Petrol MS 1040500
(1031.219kl*1009) = 1516340
HSD 325775
(2548.466kl*595) = 170270
Power 30 267675
(272.160kl*1197) = 52885
Turbojet
(248.568kl*685) =

TOTAL 3052885 267675

Expenses:-
Heads Yearly Monthly
Fixed cost:-
Salary 828931 69078
Bank charges 166156 13846
Office exp 14134 1178
Depreciation 50000 4166
Total (a) 1059221 88268
Variable cost :-
Water exp. 2283 190
Bank interest 783680 65306
Telephone 31028 2585
Electricity 189796 15816
Stationery 34275 2856
Pump repairing 77851 6487
Miscellaneous 473551 39462
Total (b) 1592424 132702
Grand total (a+b) 2651645 220970

Profit: -

Yearly: - 3052885-2651645= 401240

Monthly: - 267675-220970= 46705

Omkarsingh Tak
Revenue:-
Heads Yearly Monthly
Sales
Petrol MS 331084
(328.133*1009) 475708
HSD 321732
(799.510*595) 67396
Power 11 99660
(268.782*1197) 95920
Turbojet (98.389*685)

Total 1195920 99660

Expenses:-
Heads Yearly Monthly
Fixed cost
Salary 300000 25000
Bank charges 36000 3000
Depreciation 15000 1250
Total 351000 29250
Variable cost
Bank interest 37109 3092
Electricity 48000 4000
Miscellaneous 60000 5000
Telephone 12000 1000
Water exp. 36000 3000
Stationery 12000 1000
repairs 21000 1750
Total 226109 18842
Profit: -
Yearly: - 1195920-577109=618811
Monthly: - 99660-48092=51568

Krishna fillings
Revenues:-
Heads Yearly Monthly
Sales:-
Petrol 621417
(615.875*1009) 1027444
Diesel 198397
(1726.798*595) 77292
Power 1 160379
(165.746*1197) 924550
Turbojet
(112.836*685)

Total 1924550 160379

Expenses:-
Heads Yearly Monthly
Fixed cost
Salary 732000 61000
Depreciation 19752 1646
Bank charges 32400 2700
Insurance 18000 1500
Total 802152 66846
Variable cost
Bank interest 5216
62600
Electricity 4600
55200
Repairs 4058
48700
Printing and 750
9000
stationery 1900
22800
Telephone and 750
9000
mobile 40684
488200
Water exp.
Miscellaneous
Total 695500 57958
Grand total 1497652 124804
Profit: -
Yearly: - 1924550-1497652=426898
Monthly: - 160379-124804=35575

Bhagat ki kothi
Revenue:-
Heads Yearly Monthly
sales:-
petrol 527100
(501.046*1052) 1140934
HSD 362177
(1808.136*631) 64024
Power 2094235
(292.078*1240)
Turbojet
(87.584*731)
Total 2094235 174520
Expenses:-
Heads Yearly Monthly
Fixed cost
Salary 817740 68145
Depreciation 12000 1000
Bank charges 28000 2333
Total 857740 71478
Variable cost
Bank interest 64338 5362
Electricity 48000 4000
Telephone 24000 2000
Water expenses 48000 4000
Repairs 30000 2500
Printing and 25200 2100
stationary
Miscellaneous 240000 20000
Total 479538 39962
Profit: -
Yearly:-2094235-1337278=756957
Monthly:- 174520-39962=111440

Marwar automobiles
Monthly

Sales revenue (S) = 267675

Fixed cost (F) = 88268

Variable cost (V) =132702

Contribution (C) = S-V

=267675 – 132702
 =134973

P/V ratio= C*100/S

= 134973*100/267675

=50.42%

BEP = F

P/V ratio

= 88268/50.42%

=175065

Margin of safety = S-BEP *100

= (267675-175065) *100

267675

= 34.6%
1. The above chart shows the avg. monthly breakeven point for
Marwar automobile i.e. 175065 Rs. out of total sales revenue i.e.
267675 Rs. At this point there is no profit no loss situation and
sales revenue below this point will result in loss and above this point
will give him profit.

2. Margin of safety = 92610 which is calculated by deducting BEP sales

from total sales revenue if the sales decrease till BEP there will be
no loss in business.
1. The above chart shows different volume combinations of Petrol & Diesel that dealer
needs to maintain to be profitable all the time. The chart can help dealers in remaining
profitable in case sale of one of the product goes down by equally focusing on other
product. Any combination above BEP line is profitable for the dealer. Some of the other
observations are:

 if only petrol is sold then 173.5kl is to be sold on BEP

 if only diesel is sold then 295kl is to be sold on BEP

 Omkarsingh tak
Monthly

Sales revenue (S) = 99660

Fixed cost (F) = 29250

Variable cost (V) =18842

Contribution (C) = S-V

=99660-18842

=80818

P/V ratio= C*100/S

= 80818*100/99660

=81%

BEP = F

P/V ratio

= 29250/81%

=36111

Margin of safety = (S-BEP) *100

= (99660-36111) *100
 99660

= 63.8%

1. The above chart shows the avg. monthly breakeven point for
Omkarsingh tak i.e. 36111 Rs. out of total sales revenue i.e. 99660
Rs. At this point there is no profit no loss situation and sales
revenue below this point will result in loss and above this point will
give him profit.

2. Margin of safety = 63549 which is calculated by deducting BEP sales

from total sales revenue if the sales decrease till BEP there will be
no loss in business.
1. the above chart shows that if the dealer sales only petrol or diesel what quantity he should
sale to be at or above BEP level

 if only petrol is sold then 35.7kl is to be sold on BEP

 if only diesel is sold then 60.6kl is to be sold on BEP

 Krishna filling
Monthly

Sales revenue (S) = 160390

Fixed cost (F) = 66846

Variable cost (V) =57958

Contribution (C) = S-V

=160390-57958

=102432

P/V ratio= (C*100)/S

= (102432*100)/160390

=63.9%

BEP = F

P/V ratio

= 66846/63.9%

=104610

Margin of safety = S-BEP *100

= (160390-104610) *100

267675

= 34.8%
1. The above chart shows the avg. monthly breakeven point for
Krishna filling i.e. 104610 Rs. out of total sales revenue i.e. 160390
Rs. At this point there is no profit no loss situation and sales
revenue below this point will result in loss and above this point will
give him profit.

2. Margin of safety = 55780 which is calculated by deducting BEP

sales from total sales revenue if the sales decrease till BEP there will
be no loss in business.
2. the above chart shows that if the dealer sales only petrol or diesel what quantity he should
sale to be at or above BEP level

 if only petrol is sold then 103.6kl is to be sold on BEP

 if only diesel is sold then 175.8kl is to be sold on BEP

Bhagat ki kothi
Monthly

Sales revenue (S) = 174520

Fixed cost (F) = 71478

Variable cost (V) =39962

Contribution (C) = S-V

=174520-39962

=134558

P/V ratio= (C*100)/S

= (134558*100)/174520

=77%

BEP = F

P/V ratio

= 71478/77%

=92828

Margin of safety = (S-BEP) *100

= (174520-71478) *100

174520

= 47.8%
1. The above chart shows the avg. monthly breakeven point for bhagat
ki kothi i.e. 92828 Rs. out of total sales revenue i.e. 174520 Rs. At
this point there is no profit no loss situation and sales revenue
below this point will result in loss and above this point will give him
profit.

2. Margin of safety = 81692 which is calculated by deducting BEP sales

from total sales revenue if the sales decrease till BEP there will be
no loss in business.
3. the above chart shows that if the dealer sales only petrol or diesel what quantity he should
sale to be at or above BEP level

 if only petrol is sold then 92kl is to be sold on BEP

 if only diesel is sold then 156kl is to be sold on BEP

1 The above chart shows the profit volume ratio of the four outlets which is an
indication of profitability of these outlets. This ratio explains the relation between
contribution (sales – variable cost) and sales. The more the ratio more is the
profitability of business.

2 Sales of marwar auto mobile is highest still the P/V ratio is lowest which means that
the variable cost of marwar automobile is very high as compared to other outlets

3 Sales of omkar singh tak is lowest still the P/V ratio is very high which means that the
variable cost of this outlet is reasonably less
1. The difference between actual sales revenue and BEP sales revenue as percentage of
sales is margin of safety. In other words if the margin of safety is less a little decrease
in sales will result in reasonable loss of profit.

2. The margin of safety for marwar automobile and Krishna filling is 34% which is
comparatively less then bhagat ki kothi and omkar singh tak

1. The above chart shows the profitability of the four outlets

 2. Sales for marwar auto mobile is highest still the profitability is the least which means
that the total cost of this outlet is about 82.5% of revenue which is very high.

Recommendations:-
• Sales at various outlets can be increased by providing other facilities at petrol pump
such as:-

 Facility for ticket reservation

 Service station

 Installation of PUC machines

 ATMs

 Food Counters

• Contracts with travel vehicles, transporters, bus operators can be made so as to make
them a loyal customer of HPCL which will increase the sales.

• More awareness should be created among the consumers about the loyalty cards to
increase the sales.

• The workers at the outlet should be trained to establish customer relationship which
will increase the sales further.

• Various schemes or campaigns should be conducted frequently to increase repeat

purchase as well as footfalls.

• Frequent feedbacks should be collected to understand the changing customer needs of

different markets.

• The dealers should be encouraged to focus on marketing intelligence so that new

avenues of sales, information on competitor customers and other infrastructural
changes can be best utilised for boosting the sales.

• With the increase of sales the variable costs have increased with a very high proportion
therefore dealers are suggested to control their expenditure mainly miscellaneous
expenses.