A REPORT ON

SUMMER INTERNSHIP/ PROJECT WORK

for
ONGC Ltd, Cambay

Submitted to
INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)
CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)
CHANGA
Affiliated to

Charotar University Of
Science and Technology
(CHARUSAT)
Prepared by

Sanooj S Nair

ID No.:09MBA20

M.B.A. First Year

Under the Guidance of

Ms. Vaishali Shah

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)

CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)

AT. & PO. CHANGA – 388 421 TA: PETLAD DIST. ANAND, GUJARAT

JULY 2010

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 ACKNOWLEDGEMENT
I feel privileged to express my deep gratitude to all the executive and staff members of
ONGC Cambay for their co-operation and guidance during my internship programmed.

I am thankful to Mr. R.P Bhatt who gaves me a chance to work with them and learn from the
experience by granting me the permission to have the project training in the prestigious
organisation.

I wish to convey my special gratitude to Mr. H T Jadav,, Mr J B Trivedi for providing me

guidance and information related to this project.

I wish to convey my special gratitude to all the Finance Officer for providing favourable
support during my summer training and also for helping me during the preparation of report
by providing all the required information.

I would also like to thank my mentor and project – coordinator, Ms. Vaishali Shah for
assigning me a project of such a great learning experience and acquainting me with real life
project financing and appraisal.

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 Contents
Sr no. Topic Page No.

1. Executive Summary 4

2. Introduction 5

3. Company Details 6

4. History 7

5. Performance for the last Four years 12

6. Organisation Structure 16

7. Milestone & Achievements 17

8. Drilling Details 23

9. Competitors Details 24

10. Product, Price and Demand 25

11. Shareholders 26

12. Board Function 27

13. Accounting of ONGC 28

14. Enterprise Resource Planning 30

15. Production \ Operations 33

45

16. Human Resource Management

17. Finance Function 50

18. Research Methodology 60

19. Ratio Analysis 61

20. Findings 78

21. Conclusion 79

22. Bibliography 80

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 EXECUTIVE SUMMARY
Oil & Natural Gas Corporation Limited (ONGC) is the premier company in the Indian
upstream of Petroleum Sector and it constantly thrives to retain this position. Born in 1956
this corporation produce more than 1 million barrels daily holding a reserve base of 6 billions
tons of oil and oil-equivalent gas in India. The company undertakes various activities like
drilling, discovering, producing, transporting, processing and refining, retailing and
marketing of hydrocarbons.

This project is a sincere effort towards understanding the Production-Operation, accounting

principles and their applications in the real business with the use of modern computer
technology. A brief insight into the oil prospecting and production chain helps to comprehend
the related costs proficiently.

Further, this report gives us an idea about the various business components such as Working
Capital, Finance-Administration & Accounting, Cost & budgeting, Asset Management,
Purchasing, and Evaluation Of Computer System being used for the management of all these
business areas.

Introduction

The largely state owned, Oil and Natural Gas Corporation (ONGC) dominates India’s energy
sector. It has 38,033 employees (2005) and produces 77 percent of India’s domestic

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petroleum and 81 percent of its natural gas. Its total assets in 2005 amounted to $19.81 billion
and its profits for 2004 were $2.16 billion. The market value of the firm is estimated to be
around $27.86 billion. Based on six different operational criteria, the Petroleum Intelligence
Weekly (PIW) ranked the ONGC as the 3nd largest oil company in the world, remaining flat
in the ranking from the year before. The 2006 Fortune Global 500 rankings placed the ONGC
as 402nd in terms of sales revenues, up from a 544th ranking the year before.

The Cambay Basin is a narrow elongated rift graben located on the west northwest margin of
Indian platform. This basin is flanked by Saurashtra craton in the west, Aravalli Swell in the
northeast and Deccan craton in the east and south east. The northern limits of the basin
extend up to Sanchar, while in the south it extends into GULF OF CAMBAY. The thick pile
of sediments is mainly tertiary in age except for a few marginal parts where thin layers of
Mesozoic sedimentary are encountered below Deccan Trap. An extensive geophysical and
geological survey in the Cambay Basin has been carried out. The pale depositional
environments, study and correlation of sedimentary sequences provided important cues for
the probable locales of source and reservoir rocks in the basin. Based on these studies the
historical well LUNEJ-1 spudded on the 25th July 1958 and drilled to the depth of 2191
meters and produced oil. This well drilled near village Lunej about 7km from Cambay city
was the first well drilled in the Cambay Basin. This historic well was visited by then Prime
Minister of India Pandit Jawaharlal Nehru along with Shri K.D Malaviya and other
dignitaries in 1960. It has been decided recently to dedicate it to the Nation as a monument by
our Director Exploration Shri Y B sinha. After this well a project was established in Cambay
city situated SE of Ahmadabad at a distance of around 90kms.The Oil & Gas fields under the
project are Juni-Akhol, Chaklasi, Kathana and Padra which are located within a distance of
27 to 79kms area. Under CRC set up of ONGC the Cambay Project was redesignated as
Cambay Forward base under Ahmadabad-Cambay-Tarapur Block (block-II) of Cambay
Basin. Till today Cambay project/forward base has drilled.

COMPANY DETAILS

Vision Statement

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To be a world class Oil and Gas Company integrated in energy business with dominant
Indian leadership and Global Presence.

Mission Statement

 World Class

• Dedicated to excellence by leveraging competitive advantages in R&D and

technology with involved people.
• Imbibe high standards of business ethics and organizational values.
• Abiding commitment to Health, Safety and Environment to enrich quality of
community life.
• Foster a culture of trust, openness and mutual concern to make working a stimulating
& challenging experience for our people.
• Strive for customer delight through quality products and services

 Integrated in Energy Business

• Focus on domestic and international Oil & Gas exploration and production business
opportunities.
• Provide value linkages in other sectors of energy business.
• Create growth opportunities and maximize shareholders value.

 Dominate Indian Leadership

• Retain dominant position in Indian Petroleum sector and enhance India’s energy
availability.

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 COMPANY HISTORY

1947 - 1960

During the pre-independence period, the Assam Oil Company in the northeastern and Attock
Oil company in northwestern part of the undivided India were the only oil companies
producing oil in the country, with minimal exploration input. The major part of Indian
sedimentary basins was deemed to be unfit for development of oil and gas resources.

After independence, the national Government realized the importance oil and gas for rapid
industrial development and its strategic role in defense. Consequently, while framing the
Industrial Policy Statement of 1948, the development of petroleum industry in the country
was considered to be of utmost necessity.

Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of
India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889)
and the Oil India Ltd. (a 50% joint venture between Government of India and Burma Oil
Company) was engaged in developing two newly discovered large fields Naharkatiya and
Moran in Assam. In West Bengal, the Indo-Stanvac Petroleum project (a joint venture
between Government of India and Standard Vacuum Oil Company of USA) was engaged in
exploration work. The vast sedimentary tract in other parts of India and adjoining offshore
remained largely unexplored.

In 1955, Government of India decided to develop the oil and natural gas resources in the
various regions of the country as part of the Public Sector development. With this objective,
an Oil and Natural Gas Directorate was set up towards the end of 1955, as a subordinate
office under the then Ministry of Natural Resources and Scientific Research. The department
was constituted with a nucleus of geoscientists from the Geological survey of India.

A delegation under the leadership of Mr. K D Malviya, the then Minister of Natural
Resources, visited several European countries to study the status of oil industry in those
countries and to facilitate the training of Indian professionals for exploring potential oil and
gas reserves. Foreign experts from USA, West Germany, Romania and erstwhile U.S.S.R
visited India and helped the government with their expertise. Finally, the visiting Soviet
experts drew up a detailed plan for geological and geophysical surveys and drilling
operations to be carried out in the 2nd Five Year Plan (1956-57 to 1960-61).

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In April 1956, the Government of India adopted the Industrial Policy Resolution, which
placed mineral oil industry among the schedule 'A' industries, the future development of
which was to be the sole and exclusive responsibility of the state.

Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it
would not be possible for the Directorate with its limited financial and administrative powers
as subordinate office of the Government, to function efficiently. So in August, 1956, the
Directorate was raised to the status of a commission with enhanced powers, although it
continued to be under the government. In October 1959, the Commission was converted into
a statutory body by an act of the Indian Parliament, which enhanced powers of the
commission further. The main functions of the Oil and Natural Gas Commission subject to
the provisions of the Act, were "to plan, promote, organize and implement programmes for
development of Petroleum Resources and the production and sale of petroleum and petroleum
products produced by it, and to perform such other functions as the Central Government may,
from time to time, assign to it ". The act further outlined the activities and steps to be taken
by ONGC in fulfilling its mandate.

1961 - 1990

Since its inception, ONGC has been instrumental in transforming the country's limited
upstream sector into a large viable playing field, with its activities spread throughout India
and significantly in overseas territories. In the inland areas, ONGC not only found new
resources in Assam but also established new oil province in Cambay basin (Gujarat), while
adding new Petroliferous areas in the Assam-Arakan Fold Belt and East coast basins (both
inland and offshore).

ONGC went offshore in early 70's and discovered a giant oil field in the form of Bombay
High, now known as Mumbai High. This discovery, along with subsequent discoveries of
huge oil and gas fields in Western offshore changed the oil scenario of the country.
Subsequently, over 5 billion tones of hydrocarbons, which were present in the country, were
discovered.

After 1990

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The liberalized economic policy, adopted by the Government of India in July 1991, sought to
deregulate and de-license the core sectors (including petroleum sector) with partial
disinvestments of government equity in Public Sector Undertakings and other measures. As a
consequence thereof, ONGC was re-organized as a limited Company under the Company's
Act, 1956 in February 1994.

After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of
Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its
shares through competitive bidding. Subsequently, ONGC expanded its equity by another 2
per cent by offering shares to its employees.

During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant and Gas
Authority of India Limited (GAIL) - the only gas marketing company, agreed to have cross
holding in each other's stock. This paved the way for long-term strategic alliances both for
the domestic and overseas business opportunities in the energy value chain, amongst
themselves. Consequent to this the Government sold off 10 per cent of its share holding in
ONGC to IOC and 2.5 per cent to GAIL. With this, the Government holding in ONGC came
down to 84.11 per cent.

In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC diversified
into the downstream sector. ONGC will soon be entering into the retailing business. ONGC
has also entered the global field through its subsidiary, ONGC Videsh Ltd. (OVL). ONGC
has made major investments in Vietnam, Sakhalin and Sudan and earned its first hydrocarbon
revenue from its investment in Vietnam.

Global Ranking

 ONGC ranks 3rd Oil & Gas Exploration & Production (E&P) Company in the world
and 23rd among leading global energy majors as per Platts 250 Global Energy Companies
List for the year 2009

 ONGC ranks 24th among the Global publicly-listed Energy companies as per ‘PFC
Energy 50” (Jan 2008)

 Finance Asia 100 list ranks ONGC no 1 among Indian Blue Chips.

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  Occupies 155th rank in “Forbes Global 2000” list 2010 of the world’s biggest
companies for 2010 based on sales, profits, assets and market capitalisation.

 ONGC ranked 402nd position as per Fortune Global 500 - 2009 list;, based on
revenues, profits, assets and shareholder’s equity.

Competitive Strength

• All crudes are sweet and most (76%) are light, with sulphur percentage ranging from
0.02-0.10, API gravity ranging from 26°-46° and hence attracts a premium in the market.

• Strong intellectual property base, information, knowledge, skills and experience.

• Maximum number of Exploration Licenses, including competitive NELP rounds.

• ONGC owns and operates more than 11000 kilometers of pipelines in India, including
nearly 3200 kilometers of sub-sea pipelines. No other company in India operates even 50
per cent of this route length.

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Cambay Sub Asset- Performance for the last Four years

 Oil Production
The Cambay Sub asset has achieved Oil production of 0.194 Mmt against the MOU of 0.147
Mmt which is 132% for the year 2009-10.

 Gas Production & Gas Sale

The Gas production is 9.13 Mmm3 against the plan of 7.10 Mmm3, which is 128.6% and Gas
sale is 5.80 Mmm3 against the plan of 5.00 Mmm3, which is 116% for the year 2009-10.

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  Drilling Performance

A total number of 10 wells (6 Dev +4 Expl) have been completed against the plan of 13 (8
Dev + 5Expl) Wells, which is 77% for the year 2009-10.

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  Work Over Performance

27 wells were planned for work over by considering 3 work over rig, whereas, actual rig

available was only two rigs. Even in these two rigs, one rig was under repair for considerable
time. Thus the number of effective days available is only 231 days and worked over 20 wells.
The oil gain generated is 221 TPD against the plan of 96 TPD, which is 230% for the year
2009-10.

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14
  Field Development Activity

The Cambay Sub Asset established in april-2006. The Sub Surface Team generated 61
development locations in Akholjuni, Kathana, Siswa, Anklav and Padra fields, out of which
44 development locations were released in last few years, which effected the increase in
production of Cambay Sub Asset.

This growth of Cambay Sub Asset has been possible with the dedicated efforts of the
employees of Cambay Sub Asset and continuous support and guidance from ED-Asset
Manager, and his team of Ankleshwar Asset. The employees of Cambay Sub Asset express \
their gratitude to the board of Director’s and especially to Director- Onshore for his keen
interest in developing Cambay.

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ORGAISATION STRUCTURE

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17
MILESTONE OR ACHIEVMENTS

• Prime Minister hands over ‘Public Sector Company of the Year’ Award to ONGC
March 24, 2005,ONGCNews

ONGC has bagged the Business Standard Star Public Sector Company Award for
2004, in the Public Sector category.

• ONGC enters retail – launches OVaL - completes integration March 19, 2005, ONGC
News March 19, 2005 will remain a red letter day for ONGC. The cycle – Drilling to
Dispensing – was completed on this day by ONGC. Super CEO- Subir Raha -
Business India March 19, 2005 Courtesy: Business India

• ONGC secures Award for its Safety Initiatives February 14, 2005, ONGC New

ONGC’s high standards in Safety, both in its Offshore and Onshore petroleum
operations, have got it the Safety Initiatives Award, constituted by the Institution of
Engineers (India).

• ONGC receives Biggest Wealth Creator Award January 21, 2005, ONGC News
ONGC received Biggest Wealth Creator Award amongst all the companies listed on
Indian Stock exchanges. C&MD Mr. Subir Raha accepted the award on behalf of
38004 ONGCians, colleagues from OVL, MRPL & ONGC Nile-Ganga BV, at an
exclusive function organized in Mumbai on January 19, 2005. The Award was
presented by Mr. Ajay Primal, Chairman, Nicholas Piramal India Limited.

• Mr. Subir Raha bags SCOPE Individual Excellence Award for his outstanding
contribution to Public Sector Management ONGC News, 13th January, 2004 Mr.
Subir Raha, ONGC’s C&MD, has won the ‘SCOPE Award for Excellence and
Outstanding Contribution to the Public Sector Management – Individual Category’,
for the year 2002-03. The award carries a gold plaque and a purse of 1lakh rupees.

• ONGC Bags NPMP Awards In Creativity And Finance ONGC News, 4th July 2003
ONGC’s production engineers dominated the stage in the “Creativity and Innovation”
category of NPMP awards for 2001-02, which were distributed by the Petroleum
Minister Mr. Ram Naik on July 3, 2003.

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 • ONGC Bags Three Greentech Foundation Awards ONGC News, 2nd July 2003
ONGC has bagged three Greentech Excellence awards for maintaining the highest
standards of safety at its installations and operational areas.

• Dr J V S S Narayana Murthy Wins National Mineral Award 2001 ONGC News, 22nd
January 2003 Harvesting the fruits of information technology needs two professionals
– one from software development, and another from the specialist knowledge domain.
It is indeed rare to find someone who excels in both.

• Partha P Mitra Awarded National Mineral Award-2001 ONGC News, 22nd January
2003 The National Mineral Award for 2001 was conferred on ONGC's SG (S),
Mumbai High Asset, Mr Partha P Mitra in recognition of his contribution to the area
of application of innovative technique for mineral exploration.

• Four ONGC Scientists Bag National Mineral Award-2001 ONGC News, 24th
December 2002.

Four ONGC geoscientists, Dr Anil Bhandari, DGM (Geology), Mr Narendra Kumar

Verma, Chief Geologist, Dr J V S S Narayana Murthy, Suptdg Geophysicist (S) and
Mr Partha Pratim Mitra, Suptdg Geophysicist (S) have bagged the National Mineral
Awards 2001 for their outstanding contribution in the field of Fundamental/Applied
Geosciences. (12)AG Pramanik Elected Member Of European Academy Of Science
ONGC News, 26th November 2002 (13) Mr. Y B Sinha Elected Director Of
International Body On Open Software ONGC News, 25th November 2002

ONGC PRODUCT DETAILS

ONGC Ltd. has following product profile

a. Crude Oil

b. Petroleum

• Gas oil

• Jet/kero

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 • LPG

• MS/ Naphtha

c. Petrochemical

• Mixed Xylenes

• Para Xylenes

• Propylene

• Benzene

ONGC Ltd. Cambay production of Crude Oil, Natural Gas and Crude Oil processing &
Transportation. Their customer are:

1. IOCL (Crude Oil)

2. GAIL (Natural Gas)

3. GSPC/NIKO (Processing of Crude Oil)

4. HERAMEC Ltd. (Processing of Crude Oil)

PLANT LOCATIONS / ASSETS / MAJOR PROJECTS OF ONGC

ASSET/ Institutes
BASIN Regions Services
PLANT
Keshava Drilling
Deva Services
Mumbai High Western Mumbai Malaviya
Asset, Mumbai Offshore Basin Region Institute of
Petroleum
Exploration
Neelam & Institute of Well
Western Western
Heera Asset Drilling Services
Onshore Basin Region
Mumbai Technology
Basin & K G Basin Eastern Region Institute of Geo-
Satellite Asset, Reservoir Physical

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 Mumbai Studies Services
Institute of Logging
Uran Plant, Southern Oil & Gas Services
Cauvery Basin
Uran Region Production
Technology
Institute of Engineer
Assam &
Hazira Plant, Engineering ing Services
Assam Arakan Central Region
Hazira & Ocean
Basin
Technology
Geo-data
Ahmedabad
CBM – BPM Processing &
Asset,
Basin Interpretation
Ahmedabad
Centre
Ankleshwar Institute of
Asset, Frontier Basin Management
Ankleshwar Development
Institute of
Mehsana Asset Petroleum
Safety

Rajamundry
Asset

Karaikal Asset

Assam Asset

Tripura
Asset,
Agartala

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ONGC OFFICE

22
 EXPLORATORY ACTIVITIES

Concerted exploration efforts in the area started as early as mid-fifties. However , efforts to it
received enormous boost with the discovery of oil in Lunej (Cambay-1). At present
Cambay have 3 producing fields:

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Juni-Akhol

Kathana

Padra

The Cambay Forward Base also looks after the Production & work over operations in
addition to drilling activities.

RIGS

1. IPS-700M-9(Cardwell) - Drilling Rig

2. AK-50-XIII - Work over Rig

3. BAK-XI - Work Over Rig

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 Drilling Map of ONGC

ONSHORE: (ON LAND)

Northern: Dehradun (Head Quarter) Corporate Office

Delhi – Regional Office

Himachal Pradesh

Jammu

Central: Kolkata – Regional Office

West Bengal

North East: Assam

Tripura

Western: Baroda – Regional Office

Cambay, Mehsana, Ahmedabad, Ankleshwar

Southern: Rajamundry (Andhra Pradesh)

Karaikal (Tamil Nadu)

OFFSHORE (IN WATER)

Several regions in Mumbai where drilling on in shallow waters.

Fields:

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1. Mumbai High

2. Heera/Ratna

3. Neelam

4. Bassein

5. Marginal/satellite fields

Exploratory drilling work is in progress in deep water basin of rivers such as Krishna, Kaveri
& Godavari.

WESTERN ONSHORE BASIN

Western Onshore Basin was part of the erstwhile Western Regional Business Centre (WRBC)
before April 1999. In view of the OTP implementation, where Basins and Asses have been
made independent entities, Western Onshore Basin came into existence on 1st March 1999
with five of its Forward Bases, which monitor the exploratory drilling activities; they are
Cambay Forward Base, Jodhpur Forward Base, Ankleshwar Forward Base, Ahmadabad
Forward Base & Mehsana Forward Base.

All these Forward Bases extends necessary support to the Head Office at Baroda to fulfill the
exploratory targets for the Western Onshore. Cambay Forward Base activities in Cambay
Basin were initiated in the year 1958 with the drilling of the first discovery well Lunaj-1 in
the Cambay Project. As on 01/04/2003, 262 structures/prospects have been drilled, out of
which 90 structures have been found to be oil/gas bearing. The exploration in this basin is
still at active stage with a production rate of approximately 6.0 MMT oil per annum.

COMPETITORS DETAILS

Competitors are a force that inspires the company to do better. In every industry each
company has its own competitors, it is hard to find any industry, where only one company
dominates or holds the overall market. In the same way, ONGC Ltd has many competitors in
domestic as well as international market.

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In International Market, company faces the competition mainly from Scotland, Australia and
UK companies. But, the company defeats their competitors through the supreme quality. In
domestic market, ONGC faces completion from its rivals. Major Competitors of the company
are Oil India Ltd, Reliance Ltd etc whereas in the International market ONGC faces
competition from Cairn Energy Ltd, Oilex Ltd etc. Major competitors of ONGC Ltd are
Cairn Energy Ltd from International market and Reliance Ltd from domestic market.

PRODUCT PRICES & DEMAND

Crude oil price, average WTI (West Texas Intermediate) spot, which was in a moderate band
of $45-47 per barrel five years back, started increasing steadily based on demand build up
particularly from the developing economies; raising concerns about sustaining supplies.
Subsequently, along with demand build up, the price got entangled in the commodity boom
and volatility ruled till the current global economy meltdown. Crude oil price peaked to $147
per barrel on 11th July 2008; Currently 11 June 2010 its price was $75 per barrel.
Steep rise in oil prices was distressful not only for the energy deficient economies but also for
the developed economies, as gradually it got detached from consumer spending and
confidence. Rightly so, high oil price is considered to be one of the prime reasons for global
economy meltdown last year.
DEMAND &SUPPLY
The economic downturn has set back the global crude oil and gas demand clock by about four
years. As per CERA (Cambridge Energy Research Associates), the demand shock has
completely given way to recession shock and has taken the global oil demand level to that of
pre-2005.
Between 2003 and 2007, crude oil demand grew by 7.6 million barrels per day (mb/d)
compared to 4.3 mb/d growth in the preceding five years; peaking to 87.2 mb/d in the fourth
quarter of 2007. As cracks in global economy became visible, crude oil demand gradually
started melting; lowering to 82.6 mb /d in the second quarter of 2009 (Source: IEA; Oil
Market Report 11th June 2009).
Decline in global oil demand has temporarily diminished the threat of supply crunch, as
spare production capacity with OPEC is now expected to reach 7.78 mb/d by the next year, or
8% of global demand as per the International Energy Agency (IEA). However, this demand

27
destruction is temporary. The moment the world is out of this crippling recession, demand for
oil and gas is bound to bounce back.

Shareholders

Sl No. Name No. Of Share % of total

Share
1 President of India 1585740673 74.14
2 Indian Oil Corporation Limited 164480857 7.69
3 Life Insurance Corporation of India 93119661 4.35
4 Gail (India) Limited 51400267 2.40
5 ICICI Prudential Life Insurance 11212995 0.52
Company Ltd
6 Lazard Asset Management LLC A/C 10594633 0.50
Lazard Emerging Markets Portfolio
7 Bajaj Allianz Life Insurance Company 9806582 0.46

28
 Ltd.
8 Franklin Templeton Investment Funds 6156829 0.29
9 Government Of Singapore 4863332 0.23
10 Pru India Equity Open Limited 4068658 0.19

BROAD FUNCTIONS

Following are the broad function of Cambay Forward Base under CRC structure:

1. Stacking of released locations and Handling over a Drilling & Oil Mining

2. Land acquisition

3. Preparation of approach roads and drill sites

4. Preparation of GTO (Geological Technical Order) and other related technical data.

5. Collection of subsurface geological data during drilling

6. Monitoring of day to day drilling operations for healthy/timely well completion.

7. Planning, provisioning and inventory control of casing, well heads, floating equipments,
centralizers etc.

8. Co-ordination with other services such as Logging, WSS (well stimulation service),
Cementing, Logistic.

9. Planning and monitoring production testing.

10. Planning and execution of work over jobs

11. Documentation of the data for each well

12. Budget preparation

13. Well completion reports

14. Cost reduction planning

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15. Other miscellaneous jobs related to exploratory and development drilling and work over
jobs in Cambay Forward Base.

ACCOUNTING OF ONGC

Accounting Standards

The peculiar nature of Exploration and Production Industry requires establishment of

‘industry-specific’ accounting principles in relation to expense recognition, measurement and
disclosures. ONGC being and Exploration and Production company follows all the
Accounting Standards and Guidance notes issued by The Institute of Chartered Accountants
of India. The company also follows the Guidance Note on Accounting for Oil & Gas
Producing Activities issued by ICAI, specifically for up-stream companies.

The company is all geared up to comply with the recently issued Cost, Audit and Tax Rules
made mandatory form this year onwards.

Accounting Methods

There are two major methods used for the accounting for the Upstream Oil Industries doing
Exploration & Production business across the world.

Successful Efforts Methods (SEM)

Under the successful efforts method, generally only those costs that lead directly to the
discovery, acquisition or development of specific, discrete mineral reserves are capitalized
and become part of capitalized costs of the cost center. Costs that are known at the time of
incurrence which fail to meet this criterion are generally charged to expense in the period
they are incurred. When the outcome of such costs is unknown at the time they are incurred,
they are recorded as capital work-in-progress and written off when the costs are determined
to be non-productive.

Full Cost Method (FCM)

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Under the full cost method, all costs incurred in prospecting, acquiring mineral deposits,
exploration and development are accumulated in large cost centers that may not be related to
geological factors. Because of the differences between offshore and onshore operations in the
E&P industry, it is suggested that there should be separate cost centers for offshore and
onshore operations within a country. The capitalized costs of each center are depreciated as
the reserves in each cost center are produced.

Evaluation

Overall, the advantages of the Successful Efforts Method for outweigh its disadvantages
particularly keeping in view its conceptual superiority over the full cost method. Accordingly,
the successful Efforts Method is recommended to be the preferred method. ONGC generally
follows the Successful Efforts Method of Accounting.

Successful Efforts costing reflects the traditional concept of an asset: An asset is an economic
resource expected to provide future benefits. Under this method, those costs that clearly do
not relate to future benefits are not capitalized.

Successful Efforts accounting come closer than other cost-based accounting methods to
reflecting management’s successes or failures in its efforts to find new oil and gas
reserves/deposits. Also, this method is consistent with the traditional concept of matching
according to which expenses are recognized in the statement of profit & loss on the basis of a
direct association between the costs incurred and the earning of specific items of income.

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 ENTERPRISE RESOURCE PLANNING

ICE PROJECT:

The “PROJECT ICE” (Information Consolidation for Effectiveness) was conceived as total
ERP (Enterprise Resource Planning) solution to develop integrated, flexible and standardized
architecture for Information Network to position ONGC towards fundamental competitive
advantage

ONGC’s IT ROADMAP

Since 1997, ONGC has embarked on three IT Projects

Brief: Automation of Finance Department

PROJECT KUBER Started: 1997

Live: Mid-1999

Brief: Automation of Human Resource

PROJECT SHARMIK Started: Mid-1999

Live: April-2004

Brief: Automation and Integration of entire Enterprise

PROJECT ICE Started: October-2002

Live: December-2004

SELECTION OF ERP PLATFORM AND PROJECT SETUP:

INTRODUCTION TO ERP:

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Enterprise Resource Planning (ERP) is one of the elates information technology based
business tools being implemented in various organization across the globe. It is one of the
most advance business management applications available in the market today, and supports
most of the business processes of manufacturing and distribution companies in a wide variety
of Indus-tries. Since ONGC is an exploration and production company, this software package
meets the business requirements of ONGC very well, with little custom8ization. ERP is a
fully integrated business management system covering Accounting (finance and controlling),
Logistics (materials, production, sales & distribution, plant maintenance, quality
management, project management, production planning, etc) and human resources. ERP
seeks to streamline and integrate operation processes and information flows in a company to
synergize its resources, i.e., men, material, money and machinery. ERP will provide real
time, online information for decision making or analysis. This is, whenever data is entered
into the information system, it is processed and stored immediately. Since the transactions are
simultaneous, the information or data based on these transactions is also up-to-date and
readily available at any given time. In traditional manufacturing and distribution systems,
individual functions such as forecasting, production planning, master scheduling,
requirements planning, production scheduling, quality control etc operated in isolation i.e,
without proper integration with each other.
ERP – SAP FOR ONGC
ONGC has selected SAP R/3 software package for ERP implementation. SAP is a state-of
the-art business information system developed by M/s SAP AG of Germany. It is particularly
well suited for large companies involved in high-volume and complex business activities
spread across many locations. It has earned worldwide recognition for its functionality and its
integration of the best business practices.
SAP stands for System Applications and Products in data processing. The letter ‘R’
represents Real Time, and the number ‘3’ is indicative of 3-tier architecture or model, on
which the soft-ware has been designed.
In ONGC, the various business areas to be covered under ERP are:
1. Finance, Treasury, Controlling and Investment management
2. Exploration and Production
3. Materials management and services
4. Maintenance management
5. Human resource management
6. Project management systems

33
7. Production planning
WHY ERP?
The emerging business environment has put the following demands on the industry:
• Aggressive cost control initiatives
• Need to analyze costs and revenues on product or customer group basis
• Flexibility to respond to changing business requirements
• Changes in the way of doing business

ERP integrates and automates most business processes and shares information enterprise –
wide in real time, thereby enhancing customer service and corporate image. ERP provides
complete integration of the system not only across the departments but also across the
companies under the same management. It bridges information gaps across a company and
focuses on key issues such as productivity enhancement, customer service, cash management,
inventory, quality control, prompt delivery, etc. ERP not only addresses the current
requirements of the company but also provides an opportunity for improvements and
refinements in the business processes on a continues basis.

34
 PRODUCTION /OPERATION

The oil and gas industry comprises two parts: ‘upstream’-the exploration and production
sector of the industry; and ‘downstream’—the sector which deals with refining and
processing of crude oil and gas products, their distribution and marketing. Companies
operating in the industry may be regarded as fully integrated, (i.e. have both upstream and
downstream interests), or may concentrate on a particular sector, such as exploration and
production, commonly known as an E&P company, or just on refining and marketing (a
R&M company). In the upstream sector, much reliance is placed upon service and upon
contractor companies who provide specialist technical services to the industry, ranging from
geophysical surveys, drilling and cementing, to catering and hotel services in support of
operations. This relationship between contractors and the oil companies has fostered a close
partnership, and increasingly, contractors are fully integrated with the structure and culture of
their clients. Scientific exploration for oil, in the modern sense, began in 1912 when
geologists were first involved in the discovery of the Cushing Field in Oklahoma, USA. The
fundamental process remains the same, but modern technology and engineering have vastly
improved performance and safety.

Activity Potential requirement on

ground
Desk study: identifies area with favorable
None
geological conditions

Aerial survey: if favourable features Low-flying aircraft over study area

revealed,

• Access to onshore sites and marine

Seismic survey: provides detailed

35
 information on geology resource areas
• Possible onshore extension of marine
seismic lines
• Onshore navigational beacons
• Onshore seismic lines
• Seismic operation camps

Exploratory drilling: verifies the presence or • Access for drilling unit and supply
absence of a hydrocarbon reservoir and units
quantifies the reserves • Storage facilities
• Waste disposal facilities
• Testing capabilities
• Accommodation

Appraisal: determines if the reservoir is • Additional drill sites

economically feasible to develop • Additional access for drilling units
and supply units
• Additional waste disposal and storage
facilities

Development and production: produces oil • Improved access, storage and waste
and gas from the reservoir through formation disposal facilities
pressure, artificial lift, and possibly advanced • Wellheads
recovery techniques, until economically • Flow lines
feasible reserves are depleted • Separation/treatment facilities
• Increased oil storage
• Facilities to export product
• Flares
• Gas production plant
• Accommodation, infrastructure
• Transport equipment

Decommissioning and rehabilitation may • Equipment to plug wells

36
occur for each of above phases • Equipment to demolish and remove
installations
• Equipment to restore site
The principal steps in the process and relates these to operations on the ground are as:
Exploration surveying
In the first stage of the search for hydrocarbon-bearing rock formations, geological maps are
reviewed in desk studies to identify major sedimentary basins. Aerial photography may then
be used to identify promising landscape formations such as faults or anticlines. More detailed
information is assembled using a field geological assessment, followed by one of three main
survey methods: magnetic, gravimetric and seismic.
The Magnetic Method depends upon measuring the variations in intensity of the magnetic
field which reflects the magnetic character of the various rocks present, while the Gravimetric
Method involves the measurements of small variations in the gravitational field at the surface
of the earth. Measurements are made, on land and at sea, using an aircraft or a survey ship
respectively.
A seismic survey, is the most common assessment method and is often the first field activity
undertaken. The Seismic Method is used for identifying geological structures and relies on
the differing reflective properties of sound waves to various rock strata, beneath terrestrial or
oceanic surfaces. An energy source transmits a pulse of acoustic energy into the ground
which travels as a wave into the earth. At each point where different geological strata exist, a
part of the energy is transmitted down to deeper layers within the earth, while the remainder
is reflected back to the surface. Here it is picked up by a series of sensitive receivers called
geophones or seismometers on land, or hydrophones submerged in water.
Special cables transmit the electrical signals received to a mobile laboratory, where they are
amplified and filtered and then digitized and recorded on magnetic tapes for interpretation.

37
Dynamite was once widely used as the energy source, but environmental considerations now
generally favour lower energy sources such as vibroseis on land (composed of a generator
that hydraulically transmits vibrations into the earth) and the air gun (which releases
compressed air) in offshore exploration. In areas where preservation of vegetation cover is
important, the shot hole (dynamite) method is preferable to vibroseis.
Exploration drilling
Once a promising geological structure has been identified, the only way to confirm the
presence of hydrocarbons and the thickness and internal pressure of a reservoir is to drill
exploratory boreholes. All wells that are drilled to discover hydrocarbons are called
‘exploration’ wells, commonly known by drillers as ‘wildcats’. The location of a drill site
depends on the characteristics of the underlying geological formations. It is generally
possible to balance environmental protection criteria with logistical needs, and the need for
efficient drilling. For land-based operations a pad is constructed at the chosen site to
accommodate drilling equipment and support services. A pad for a single exploration well
occupies between 4000–15 000 m2. The type of pad construction depends on terrain, soil
conditions and seasonal constraints. Operations over water can be conducted using a variety
of self-contained mobile offshore drilling units (MODUs), the choice of which depends on
the depth of water, seabed conditions and prevailing meteorological conditions- particularly
wind speed, wave height and current speed. Mobile rigs commonly used offshore include
jack ups, semi-submersibles and drill ships, whilst in shallow protected waters barges may be
used. Land-based drilling rigs and support equipment are normally split into modules to make
them easier to move.

38
Drilling rigs may be moved by land, air or water depending on access, site location and
module size and weight.

Once on site, the rig and a self-contained support camp are then assembled. Typical drilling
rig modules include a derrick, drilling mud handling equipment, power generators, cementing
equipment and tanks for fuel and water. The support camp is self-contained and generally
provides workforce accommodation, canteen facilities, communications, vehicle maintenance
and parking areas, a helipad for remote sites, fuel handling and storage areas, and provision
for the collection, treatment and disposal of wastes. The camp should occupy a small area
(typically 1000 m2), and be located away from the immediate area of the drilling rig—
upstream from the prevailing wind direction. Once drilling commences, drilling fluid or mud
is continuously circulated down the drill pipe and back to the surface equipment. Its purpose
is to balance underground hydrostatic pressure, cool the bit and flush out rock cuttings. The
risk of an uncontrolled flow from the reservoir to the surface is greatly reduced by using
blowout preventers—a series of hydraulically actuated steel rams that can close quickly
around the drill string or casing to seal off a well. Steel casing is run into completed sections
of the borehole and cemented into place. The casing provides structural support to maintain

39
the integrity of the borehole and isolates underground formations. Drilling operations are
generally conducted around-the clock. The time taken to drill a bore hole depends on the
depth of the hydrocarbon bearing formation and the geological conditions, but it is commonly
of the order of one or two months. Where a hydrocarbon formation is found, initial well tests
—possibly lasting another month—are conducted to establish flow rates and formation
pressure. These tests may generate oil, gas and formation water—each of which needs to be
disposed of. After drilling and initial testing, the rig is usually dismantled and moved to the
next site. If the exploratory drilling has discovered commercial quantities of hydrocarbons, a
wellhead valve assembly may be installed. If the well does not contain commercial quantities
of hydrocarbon, the site is decommissioned to a safe and stable condition and restored to its
original state or an agreed after use. Open rock formations are sealed with cement plugs to
prevent upward migration of wellbore fluids. The casing wellhead and the top joint of the
casings are cut below the ground level and capped with a cement plug.
Appraisal
When exploratory drilling is successful, more wells are drilled to determine the size and the
extent of the field. Wells drilled to quantify the hydrocarbon reserves found are called
‘outstep’ or ‘appraisal’ wells. The appraisal stage aims to evaluate the size and nature of the
reservoir, to determine the number of confirming or appraisal wells required, and whether
any further seismic work is necessary. The technical procedures in appraisal drilling are the
same as those employed for exploration wells, and the description provided above applies
equally to appraisal operations. A number of wells may be drilled from a single site, which
increases the time during which the site is occupied. Deviated or directional drilling at an
angle from a site adjacent to the original discovery borehole may be used to appraise other
parts of the reservoir, in order to reduce the land used or ‘foot print’.
Development and production
Having established the size of the oil field, the subsequent wells drilled are called
‘development’ or ‘production’ wells. A small reservoir may be developed using one or more
of the appraisal wells. A larger reservoir will require the drilling of additional production
wells. Multiple production wells are often drilled from one pad to reduce land requirements
and the overall infrastructure cost. The number of wells required to exploit the hydrocarbon
reservoir varies with the size of the reservoir and its geology. Large oilfields can require a
hundred or more wells to be drilled, whereas smaller fields may only require ten or so. The
drilling procedure involves similar techniques to those described for exploration; however,
with a larger number of wells being drilled, the level of activity obviously increases in

40
proportion. The well sites will be occupied for longer, and support services— workforce
accommodation, water supply, waste management, and other services—will correspondingly
increase. As each well is drilled it has to be prepared for production before the drilling rig
departs. The heavy drill pipe is replaced by a lighter weight tubing in the well and
occasionally one well may carry two or three strings of tubing, each one producing from
different layers of reservoir rock. At this stage the blowout preventer is replaced by a control
valve assembly or ‘Christmas Tree’.
Most new commercial oil and gas wells are initially free flowing: the underground pressures
drive the liquid and gas up the well bore to the surface. The rate of flow depends on a number
of factors such as the properties of the reservoir rock, the underground pressures, the
viscosity of the oil, and the oil/gas ratio. These factors, however, are not constant during the
commercial life of a well, and when the oil cannot reach the surface unaided, some form of
additional lift is required, such as a pumping mechanism or the injection of gas or water to
maintain reservoir pressures. It is now quite common to inject gas, water, or steam into the
reservoir at the start of the field’s life in order to maintain pressures and optimize production
rates and the ultimate recovery potential of oil and gas. This in turn may require the drilling
of additional wells, called injection wells. Other methods of stimulating production can be
used, such as hydraulic fracturing of the hydrocarbon bearing formation, and acid treatment
(particularly in limestone) to increase and enlarge flow channels. ‘
Once the hydrocarbon reaches the surface, it is routed to the central production facility which
gathers and separates the produced fluids (oil, gas and water). The size and type of the
installation will depend on the nature of the reservoir, the volume and nature of produced
fluids, and the export option selected. The production facility processes the hydrocarbon
fluids and separates oil, gas and water. The oil must usually be free of dissolved gas before
export. Similarly, the gas must be stabilized and free of liquids and unwanted components
such as hydrogen sulphide and carbon dioxide. Any water produced is treated before
disposal.
Routine operations on a producing well would include a number of monitoring, safety and
security programmes, maintenance tasks, and periodic down hole servicing using a wire line
unit or a work over rig to maintain production. The operator will be able to extract only a
portion of the oil present using primary recovery (i.e. natural pressure and simple pumping)
but a range of additional recovery methods are available as discussed above. For example,
secondary recovery uses water flood or gas injection, and tertiary methods employing
chemicals, gases or heat may also be used to increase the efficiency of oil recovery.

41
The infrastructure required for development drilling in onshore operations is similar to that
described above for exploration. However, once drilling is completed, the individual
wellhead assemblies and well sites are considerably smaller than when the drill rig was on
site. Typically, each well requires an area of some 10 m2 surrounded by a security fence.
Often the well sites are concentrated within a central area, which includes processing
facilities, offices and workshops, and this would typically occupy an area of several hectares,
depending upon the capacity of the field. Since the production operation is a long-term
development, the temporary facilities used in exploration are replaced by permanent facilities
and are subject to detailed planning, design and engineering and construction. The temporary
workforce associated with exploration activity is replaced by a permanent workforce, usually
accommodated in the local area and, where desirable, fully integrated with the local
community: indeed a large proportion of the workforce may be recruited locally and receive
specialized training. Similarly, the local infrastructure will need to provide a variety of
requirements in addition to labour, such as materials supplies, education, medical, etc.

42
In offshore production developments, permanent structures are necessary to support the
required facilities, since typical exploration units are not designed for full scale production
operations. Normally, a steel platform is installed to serve as the gathering and processing
centre and more than 40 wells may be drilled directionally from this platform. Concrete
platforms are sometimes used. If the field is large enough, additional ‘satellite’ platforms may
be needed, linked by subsea flow lines to the central facility. In shallow water areas, typically
a central processing facility is supported by a number of smaller wellhead platforms.

43
Recent technological developments, aimed at optimizing operations, include remotely
operated subsea systems which remove the requirement for satellite platforms. This
technology is also being used in deep water where platforms are unsuitable, and for marginal
fields where platforms would be uneconomic. In these cases, floating systems—ships and
semi submersibles—‘service’ the subsea wells on a regular basis. Recent advances in
horizontal drilling have enhanced directional drilling as a means of concentrating operations
at one site and reducing the ‘footprint’ on land of production operations and the number of
platforms offshore. The technology now enables access to a reservoir up to several kilometres
from the drill rig, while technology is developing to permit even wider range. This further
minimizes the ‘footprint’ by reducing the need for satellite wells. It also allows for more
flexibility in selecting a drill site, particularly where environmental concerns are raised.
Decommissioning and Rehabilitation
The decommissioning of onshore production installations at the end of their commercial life,
typically 20–40 years, may involve removal of buildings and equipment, restoration of the
site to environmentally-sound conditions, implementation of measures to encourage site re
vegetation, and continued monitoring of the site after closure. Planning for decommissioning

44
is an integral part of the overall management process and should be considered at the
beginning of the development during design, and is equally applicable to both onshore and
offshore operations. Section 6 provides more detailed discussion on decommissioning and
rehabilitation. By their nature, most exploration wells will be unsuccessful and will be
decommissioned after the initial one-to-three months of activity. It is, therefore, prudent to
plan for this from the outset, and ensure minimal environmental disruption.
Decommissioning and rehabilitation will, subsequently, be simplified.

45
 HUMAN RESOURCE MANAGEMENT

 HR Vision
“To build and nurture a world class Human capital for leadership in energy business.”
 HR Mission
"To adopt and continuously innovate best-in-class HR practices to support business leaders
through engaged, empowered and enthused employees".

 HR Objectives
• Enrich and sustain the culture of integrity, belongingness, teamwork, accountability
and innovation.
• Attract, nurture, engage and retain talent for competitive advantage
• Enhance employee competencies continuously.
• Build a joyous work place.

• Promote high performance work systems.

• Upgrade and innovate HR practices, systems and procedures to global benchmarks.

• Promote work life balance.

• Measure and Audit HR performance

• Promote work life Balance Integrate the employee family into the organisational
fabric

Training and Development

An integral part of ONGC’s employee-centred policies is it’s thrust on their knowledge

upgradation and development. ONGC Academy, previously known as Institute of
Management Development (IMD), which has an ISO 9001 certification, along with 7 other
training institutes, play a key role in keeping our workforce at pace with global standards.
ONGC Academy, is the premier nodal agency responsible for developing the human resource
of ONGC. It also focuses on marketing its HRD expertise in the field of Exploration &
Production of Hydrocarbons. ONGC’s Sports Promotion Board, the Apex body, has a
Comprehensive Sports Policy through which top honours in sports at national and
international levels have been achieved.
Transforming The Organization

46
ONGC has undertaken an organization transformation exercise in which HR has taken a lead
role as a change agent by evolving a communication strategy to ensure involvement and
participation among employees in various work centers. Exclusive workshops and
interactions/brainstorming sessions are organized to facilitate involvement of employees in
this project.

 Participative Culture

Policies and policy makers at ONGC have always had the interests of the large and multi-
disciplined workforce at heart and have been aware of the nuances and significance of cordial
Industrial Relations. By enabling workers to participate in management, they are provided
with an Informative, Consultative, Associative and Administrative forum for interactive
participation and for fostering an innovative culture.

In fact, ONGC has been one of the few organizations where this method has been
implemented. It has had a positive impact on the overall operations since it has led to
enhanced efficiency and productivity and reduced wastages and costs.

Sports
Around 150 sportspersons including 95 international level performers are on the rolls of
ONGC representing your Company in 15 different games.
 ONGC hosted the ONGC Nehru Cup International Invitational Tournament during
2007-08.
 Chess Queen Koneru Humpy was conferred with Padmashri and Badminton ace
Chetan Anand received the Arjuna Award.
 Reigning World Billiards Champion Pankaj Advani retained his title after an 'all
ONGC Final' in which Dhruv Sitwala was the Runner-up.
 Arjuna Awardee Virender Sehwag became the first Indian and third cricketer to score
two triple Test centuries.
 ONGC Company won the Petroleum Minister's PSPB Trophy for Overall Best
Performance in 2007-08 for the fifth year in succession.

47
 CORPORATE SOCIETY RESPONSIBILITY

 Corporate social responsibility (CSR), also known as corporate responsibility,

corporate citizenship, responsible business, sustainable responsible business (SRB), or
corporate social performance, is a form of corporate self-regulation integrated into a
business model.

 CSR is the deliberate inclusion of public interest into corporate decision-making, and
the honouring of a triple bottom line: People, Planet, Profit.

WHY CSR REQUIRED?

Corporate social responsibility is more important factor in any type of business for run
smoothly and effectively. Some importance are:
 To raise credit of the business in the market.
 To gain prestige in society by people trust.
 To use natural resources for general people.
 To expand business by people’s believed.
 To earn credit as well as profit from the society.
 To build strong attraction of people towards the business.

ACTIVITIES:
• ONGC India is responsible for protecting the environment, health and safety of our
people and communities worldwide.
• ONGC’S commitment to SHE (Safety, Health, Environment) performance is an
integral part of our business, and achieving cost-effective solution is essential to our long-
term success.
• The dedication to the causes of environment and safety in ONGC is amply
demonstrated by the fact that a separate institute named Institute of Petroleum Safety,
Health and Environment Management (IPSHEM) had been set up way back in 1989 to
deal with these issues.
• Oil and Natural Gas Corporation Limited ONGC’s safety policy seeks to provide safe
and healthy working conditions and enlist the active support of all staff in achieving these
ends.

48
 • The development activities of ONGC have been planned on sound ecological
principle and incorporate appropriate environmental safeguards.

ISSUES/ PROBLEMS AREA:

 In 1994, the Nagaland government asked the Oil and Natural Gas Corporation
(ONGC) to shut shop in the state. Because the state government claims to have resolved
old issues but local people and militant groups dispute that. They have also raised the
issue of pollution from oil wells.
 ONGC Company has been facing hurdles in its efforts to invite global bids for high
tech drilling operations as the local industry has been obstructing the induction of foreign
technology.
 The jack-up drilling rig Transocean Nordic, which was slated to be re-deployed from
Bengal offshore to the Mahanadi basin, got one of its legs stuck under the sea bed. The
loss is estimated at $74,000 per day only on the hiring charges of the rig alone.

CSR AT ONGC
CSR at ONGC began as a philanthropic activity where the company contributed to several
socio-economic developmental programs like building schools and hospitals, developing
agriculture and cottage industry, building infrastructure facilities, etc., around its areas of
operation on an ad hoc basis.
 In May 2006, ONGC Ltd. (ONGC), a major Indian public sector company in the
petroleum industry, received the 'Golden Jubilee Award for Corporate Social
Responsibility. Since its inception, ONGC had regularly contributed to various CSR
initiatives in the areas of health, education, infrastructure, and culture.
 In 2003, it decided to allocate 0.75% of its net profit each year for various socio-
economic developmental programs undertaken by the company.
 In 2004, it drafted a Corporate Citizenship Policy - a written guideline which was to
provide a direction to the company's.

49
Corporate level Program
 ONGC's CSR programs at the corporate level focused on disaster relief management
and water management projects. When disasters struck India, ONGC provided relief
and helped state and central governments in rehabilitating those affected.
 In 1999, the company provided immediate relief like food, drinking water, temporary
shelters, medicine, clothing, etc. ONGC doctors provided medical treatment round the
clock.

Community Development Programs

ONGC was involved in various community development programs like promoting literacy
and higher education by providing grants or scholarships to the economically disadvantaged,
donating money for the construction and renovation of schools, promoting healthcare by
organizing medical camps, eye camps, through mobile dispensaries, etc.

Environment Protection Programs:

 During 1983-1988, ONGC took several measures to reduce pollution and support
conservation of resources through the utilization of waste.
 ONGC created a separate department called the Department of Environment (DoE) to
ensure that environmental safeguards were in place.

Safety:
In 1989, ONGC set up the Institute of Petroleum Safety, Health and Environment
management (IPSHEM) with the objective of improving the safety, health, and environment
standards in the Indian petroleum industry.

Other CSR Activities:

ONGC also participated in promoting sports and games like cricket, football, hockey,
athletics, basketball, chess, golf, billiards, and volleyball in India.

50
 FIANANCE FUNCTION

Fixed Capital is that part of which is required for the purchase of fixed assets like Land and
Building, Plant and machinery etc. The fixed capital provides the basic means for the
business to earn its return. But by themselves, these fixed assets would not produce anything.
For instance, to operate the machines, we require men, materials, power, tools, accessories
etc. These factors involve expenses. In addition, we have to maintain certain current assets
like stocks, stores, equipments, etc. All these require enough resources to keep the wheels of
the business in motion. Therefore, in addition to the amount of fixed capital every business –
whether new or growing requires Working Capital. Working Capital is that portion of a
business concern’s total capital, which is employed in term of operations. Without working
capital, fixed capital would be idle and ineffectual.
A number of definitions have been formulated: perhaps the most widely acceptable would be;
“WORKING CAPITAL represents the excess of CURRENT ASSETS over CURRENT
LIABILITIES”
The same may be designated in the following equation:
WORKING CAPITAL= CURRENT ASSETS – CURRENT LIABILITIES
Funds thus invested in current assets keep revolving fast and are being constantly converted
in to cash and this cash flows out again in exchange for other current assets. Thus it is known
as revolving or circulating capital or short term capital.
TWO CONCEPT OF WORKING CAPITAL :-
a. Gross Working Capital.
b. Net Working Capital.
Gross working capital is the total of all current assets. Net working capital is the difference
between current assets and current liabilities. Though the later concept of working capital is
commonly used it is an accounting concept with little sense to say that a firm manages its net
working capital. What a firm really does is to take decisions with respect to various current
assets and current liabilities. The constituents of current assets and current liabilities are
shown in table A.

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TABLE A:
Constituents of Current Assets and Current Liabilities
PART –A: CURRENT ASSETS
 Inventories – Raw materials and components, Work in progress,
 Finished goods, other.
 Trade Debtors.
 Loans and Advances.
 Investments.
 Cash and Bank balance.
PART –B: CURRENT LIABILITIES
 Sundry Creditors.
 Trade Advances.
 Borrowings.
 Provisions

Working Capital Management

Working Capital Management refers to management of current assets and current liabilities.
The major thrust of course is on the management of current assets This is understandable
because current liabilities arise in the context of current assets. Working Capital Management
is a significant fact of financial management. Its importance stems from two reasons:
 Investment in current assets represents a substantial portion of total investment.
 Investment in current assets and the level of current liabilities have to be geared quickly
to change in sales. To be sure, fixed asset investment and long term financing are
responsive to variation in sales. However, this relationship is not as close and direct as it
is in the case of working capital components.
The importance of working capital management is effected in the fact that financial manages
spend a great deal of time in managing current assets and current liabilities. Arranging short
term financing, negotiating favorable credit terms, controlling the movement of cash,
administering the accounts receivable, and monitoring the inventories consume a great deal
of time of financial managers.
The problem of working capital management is one of the “best” utilization of a scarce
resource. Thus the job of efficient working capital management is a formidable one, since it

52
depends upon several variables such as character of the business, the lengths of the
merchandising cycle, rapidity of turnover, scale of operations, volume and terms of purchase
& sales and seasonal and other variations.
Types Of Working Capital
Working Capital may be classified in to two ways:-
a) On the basis of concept.
b) On the basis of time.

Types Of
Working
Capital

On the
On the
basis of
basis of
B\S
the Time
concept.

Temporar
Gross Net Regular
y
Working Working Working
Working
Capital Capital Capital
Capital

Seasonal
Working
Capital

Specific
Working
Capital

53
Permanent or Fixed Working Capital
Permanent or Fixed Working capital is the minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current assets.

There is always a minimum level of current assets that is continuously required by the
enterprise to carry out its normal business operation. For example every firm has to maintain
minimum level of raw materials, work in process, furnished goods and cash balance. The
minimum level of current assets is called permanent or fixed working capital as their part of
working capital is permanently blocked in current assets. With the growth of business there is
an increase in current assets.
Temporary or Variable Working Capital
Temporary or Variable Working Capital is the amount of working capital that is required to
meet the seasonal demands and some special exigencies. Variable working capital can be
further classified as:-
 Seasonal Working Capital.
 Special Working Capital
Most of the enterprises have to provide additional working capital to meet the special and
seasonal needs. The capital required to meet the seasonal needs of enterprise is called
Seasonal working capital. Special working capital is the part of working capital which is
required to meet the special exigencies such as part of working capital which is required to
meet special exigencies such as launching of extensive marketing campaigns for conducting
research etc. is called Special working capital.
Factors Determining Working Capital
Requirements
With the type of business and the ambition of proprietors the amount is bound to vary. For
instance, a small business would need lesser amount of working capital than a larger business
engaged in the same line. As the business expands the amount needed would grow. Similarly,
business with seasonal demand would require larger amount of working capital. Therefore, an
estimate of requirements of working capital will differ from concern and from industry to
industry. Further, cyclical changes, periods of prosperity and depression cause wide
variations in the demand for working capital. Other unexpected happenings are likely to
create unusual demands for working capital. There is no concrete formula to decide the

54
amount of workings capital required by a business. There are also business in which fixed is
small ion relation to working capital. The Major determinants of the proportion of fixed to
working capital are as follows:-
 Nature of Business
Business units selling service (like public utilities) instead of a commodity, have little need
for working capital, as they have little demand for large inventories. Generally they operate in
cash and prepay basis. But trading concerns (merchandising companies) make a greater use
of working capital, since inventory represents a major item of investment. A relatively small
proportion will consist of working capital in case of manufacturing concerns. Larger working
capital will require in labor intensive industries than in highly mechanized industries. In
chemical or engineering industries, working capital would be relatively larger.
 Size of Business
The working capital requirements of a concern are directly influenced by the size of the
business which may be measured in terms of scale of operations. Greater the size of a
business unit generally larger will be the requirement of working capital. However, in some
cases even a smaller concern may need more working capital due to high overhead charges
Insufficient use of available resources and other economic disadvantages of small size
 Manufacturing Process/ Length of the production cycle
In manufacturing business, the requirements of working capital increase in direct proportion
to length of manufacturing process, longer the process period of manufacture, longer is the
amount of working capital required. The longer the manufacturing time, the raw materials
and other supplies have to be carried for a longer period in the process with progressive
increment of labor and service costs before the finished product is finally obtained.
Therefore, if there is alternative process of production, the process with the shortest
production period should be chosen.
 Working Capital Cycle
In manufacturing concern, working capital cycle starts with the purchase of raw materials and
ends with realization of cash from the sale of finished goods. The cycle involves the purchase
of raw materials and ends with the realization of cash from the sale of finished products. The
cycle involves purchase of raw materials and stores, its conversion in to stock of finished
goods through work in progress with progressive increment of labor and service cost,
conversion of finished stick in to sales and receivables and ultimately realization of cash and
this cycle continuous again from cash to purchase of raw materials and so on.

55
 Market Condition
The degree of competition prevailing in the market places has an important bearing on
working capital needs. When competition keen, a larger inventory of finished goods is
required to promptly serve customer who may not be inclined to wait because other
manufacturers are ready to meet their needs, further, generous credit terms may have to be
offered to attract customers in a highly competitive market. Thus, working capital needs
tends to be high because of greater investment in finished goods inventory and accounts
receivable. If the market is strong and completion weeks a firm can manage with a smaller
inventory of finished goods because customers can be served with some delay. Further in
such situation the firm can insist on cash payment and avoid lock – up of funds in accounts
receivable, it can even ask for advance payment, partial or total.
 Business Cycle
Business Cycle refers to alternate expansion and contraction in general business activities. In
a period of born i.e. when the business is prosperous there is a need for larger amount of
working capital due to increase in sales, rise in prices, optimistic expansion of business etc.
On the country at he time of depression i.e. when there is a down swing of the cycle, business
contracts, sales decline, difficulties are faced in collections from debtors and firms may have
a large amount of working capital lying ideal.
 Rate of Growth Of business
The working capital requirements of a concern increase with the growth and expansion of its
business activities. Although it is difficult to determine the relation between growth in the
volume of the business and in the growth of the working capital of the business, yet it may be
concluded that for normal rate of expansion in the volume of the business, we may have
retained profits to provide for more working capital but in the first growing concerns, we
shall require larger amount of capital.
 Earning Capacity And Dividend policy
Some firms have more earning capacity than others due to the quality of their products,
monopoly conditions etc. Such firms with high earning capacity may generate cash profits
from operations and contribute to their capital. The dividend policy of a concern also
influences the requirements of the working capital. A firm that maintains steady high rate of
cash dividend irrespective of its generation of profits needs more capital than the firm retains
larger part of its profits and does not pay high rate of cash dividend.
 Price Level Changes

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Changes in the prices level also effects the working capital requirements. Generally the rising
prices will require the firm to maintain larger amount of working capital as more funds will
require maintaining the same current assets. The effect of rising prices may be different for
different firms. Some firms may be affected much while some other may not be affected at all
by the rise in prices.
 Other Factors
Certain other factors such as operating efficiency, management ability, irregularities a supply,
import policy, asset structure, importance of labor, banking facilities etc. also influences the
requirement of working capital.
Estimate Of Working Capital Requirements:
To avoid the storage of working capital at once an estimate of working capital requirements
should be made in advances so that arrangement can be made to procedure adequate working
capital. But estimation of working capital requirements is not an easy task and a large number
of factors have to be considered before starting this exercise.
Factors Requiring Consideration While Estimating Working Capital:-
Total costs incurred on materials, wages and overheads.
1) The length of time for which raw materials are to remain in stores before they are issued
for production.
2) The length of the production cycle or work in progress, i.e. the time taken for conversion
of raw materials into finished goods.
3) The length of sales cycle during which finished goods are kept waiting for sales.
4) The average period of credit allowed to customers.
5) The amount of cash required to pay day-to-day expenses of the business.
6) The average amount of cash required to make advance payment.
7) The average period expected to be allowed by suppliers.
8) Time lag in the payment of wages and other expenses.
Financing Of Working Capital:-
The working capital requirements of a business concern can be classified as:-
a) Permanent or Fixed working capital requirements.
b) Temporary or variable capital requirements.
In concern, a part of working capital investments are as permanent investment in fixed assets.
This is so because there always a minimum level of current assets which are continuously
required by the enterprise to carry out its day-to-day business operations and this minimum

57
cannot be expected to reduce at any time. This minimum level of current assets gives rise to
permanent or fixed working capital as this part of working capital is permanently blocked in
current assets. Similarly some amount of working capital may be required to meet the
seasonal demands and some special exigencies such as rise in prices, strikes etc. this
proportion of working capital gives rise to temporary or variable working capital which
cannot be permanently employed gainfully in business.
The fixed proportion of working capital should be generally financed from the fixed capital
sources while the temporary or variable working capital requirements of a concern may be
met from the short term sources of capital. The various sources for the financing of working
capital are:-
Permanent or Fixed Sources of Working Capital:-
1) Shares
2) Debentures
3) Public Deposits
4) Loans from financial institutions
Temporary or Variable Sources of Working Capital:-
1) Commercial banks
2) Indigenous bankers
3) Trade creditors
4) Installment credit
5) Advances
6) Accounts receivable- credit/factoring
7) Accrued expenses
8) Commercial paper
Commercial banks are the most important sources of short term capital. The major portions
of working capital loans are provided by commercial banks. They provide of wide variety of
loans tailored to meet the specific requirements of a concern. The different forms in which
the banks normally provide loans and advances are as follows:-
a) Loans
b) Cash credits
c) Overdrafts
d) Purchasing and discounting of bills
In addition to the above mentioned forms of direct finance, commercial banks help their
customers in obtaining credit form their suppliers through the letter of credit arrangements. It

58
is always a test to the prudence of a financial manager to obtain the correct amount of
working capital at the right time, at a reasonable cost and at the most favorable terms.
• Management Of Inventory
• Management Of Cash
• Management Of Receivables

Operating cycle

Operating cycle refers to the time duration required to convert sales, after the conversion of
recourses into inventories, into cash .the operating cycle of a manufacturing company like
ONGC includes:
1.) Accusation of resources such as raw materials, labor, power and fuel etc.
2.) Manufacture of the product which includes conversion of materials into work-in-progress
into finished goods.
3.) Sale of the product either for cash or on credit. Credit sales create account receivables for
collection.

Components Of Working Capital Are Calculated As Follows:

59
1) Raw Materials Storage Period= Average stock of raw Materials / Average cost of raw
material consumption per day.
2.) W-I-P Holding period=Average WIP in inventory /Average cost of production per day.
3.) Stores and spares conversion period= Average stock of Stores and spares / Average
consumption per day.
4.) Finished goods conversion period= Average stock of finished goods /Average cost of
goods sold per day.
5.) Debtors collection period=Average book debts /Average credit sales per day.
6.) Credit period availed=Average trade creditors /Average credit purchase per day.

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 RESEARCH METHODLOGY

For Every Comprehensive research a proper research methodology is indispenensable & it

has to be properly conceived. The methodology adopted by me is as follows:-
Research Design
 Problem Identification
1. Find out Ratios related to working capital management of ONGC and compare with
last 5 years.
2. Find deviation of calculated from standard or Norms
3. Calculating the working capital requirement of ONGCL Information needed
4. Information about firm’s assets, liabilities, revenue, expenditure, bankers, investment
etc.
5. Information about firm’s loan, security, stock level & other financial information.
 Data Collection
Data collection source was secondary i.e.
• Annual reports of ONGC
Analysis & Interpretation
The data collected and analyzed subjectively as well as graphically where it is possible. The
analysis is based upon available information & interpreted accordingly.

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 RATIO ANALYSIS
Ratio analysis is a widely used tool for financial analysis. It is defined as the systematic use
of ratio to interpret the financial statement, so that the strength and weakness of a firm as well
as its historical performance and current financial condition can be determined. The term
ration refers to the numerical and quantitative relationship between two items/variables. The
relationship can be expressed as:-
 Percentage
 Fraction
 Proportion of numbers
The rational of ratio analysis lies in the fact that it makes related information comparable. A
single figure by itself has no meaning but when expressed in terms of a related figure, it
yields significant inferences. Ratio analysis thus, a quantitative tool enables analysis to draw
quantitative answers such as:-
• Is the net profit adequate?
• Are the assets being used efficiently?
• Is the firm solvent?
• Can the firm meet its current obligations and so on?

UTILITY OF RATIO ANALYSIS

The use of ratio was started by banks for ascertaining the liquidity and profitability of the
company’s business for the purpose of advancing loan to them. It gradually become popular
and other creditors began to use them profitably. Now even the investor calculates ratio from
the published account of the company before investing their savings. The ratio analysis
provides useful information to management, which would help them in taking important
policy decision. Diverse group of people make use of ratios, to determine the particular
aspect of the financial position of the company, in which they are interested.
 Profitability

62
Useful information about the trend of profitability is available from the profitability ratios.
The gross profit ratio, net profit ratio and ratio of return on investment give a good idea of
profitability of business.
 Liquidity
In fact, the use of this ratio is to ascertain the liquidity of the business. The current ratio and
liquid ratio will tell whether the business will be able to meet its current liabilities as and
when they mature.
 Efficiency
The turnover ratio are excellent guides to measures the efficiency of managers. For e.g. the
stock turnover will indicate how efficiency the sales are being made, the debtors turnover
shows the efficiency of collection department and assets are used in business.
 Inter- firm comparison
The absolute ratio of the firm are not of much use, unless they are compared with similar
ratio of other firm belongs to the same industries.
 Indicate Trend
The ratio of the last three to five years will indicate the trend in the respective fields.
 Useful for budgetary Control
Regular budgetary reports are prepared in business where the system of budgetary control in
use. If various ratios are prepared in these reports, it will give a fairly good idea about various
aspect of financial position.
 Useful for decision making
Ratios guide the management in making some of the important decision.

Classification of Ratio
Ratios can be classified into four broad group
1. Liquidity Ratio
2. Leverage / Capital structure
3. Ratio Profitability Ratio
4. Activity / Efficiency Ratio

Liquidity Ratios
Liquidity is the most important factor in successful financial management. A firm should
have enough money to meets its short term liabilities, as and when they become due for

63
payment. If affirm fails to meet its short term liabilities frequently, its prestige and
creditworthiness would be adversely affected. A very high degree of liquidity is also bad; idle
assets earn nothing. Therefore it is necessary to strike a proper balance between high liquidity
and lack of liquidity.

 Current Ratio:
This most widely used ratio shows the proportion of current assets to current liabilities. It is
also known as ‘Working Capital Ratio’. It is a measure of short term financial strength of
business and shows whether the business will able to meet its current liabilities. Generally, it
is believed that ratio of 2:1 is good and shows a comfortable working capital position. But
this ratio is differing company by company. The formula for calculating this ratio is as
under:-
Current Ratio = Current Assets/ Current Liabilities

Company Mar 2007 Mar 2008 Mar2009

ONGC Ltd 1.4 1.56 1.45
HOEC 2.23 1.98 1.11
RIL 0.77 1.01 1.08
Cairn India 1.77 0.16 20.48

25

20
ONGC
15
HOEC
RIL
10
CAIRN INDIA
5

0
2007 2008 2009

Interpretation:- This calculation implies that the fluctuation in the current ratio. As
compared to previous year the current year’s ratio shows the better liquidity position. In the

64
previous year this ratio is 1.56:1 and in the 2008-09 year it is 1.45:1 which shows decrease in
liquidity. The reason behind that cash balance and receivable is decreasing.

From the above graph we can see a fluctuation in the current ratio. In the year 2008 the ratio
was 1.56:1 while in 2009 it has decreased to 1.45:1. This shows that the company’s ability to
meet the current obligations has comparatively decreased in the year 2009. In the year 2008 it
was 1.56 which showed a good margin of safety. The reason behind this is that the cash
balance and the receivables is decreasing.

 Acid Test / Quick Ratio:

The Acid test ratio is the ratio between quick current assets and current liabilities and is
calculated by dividing the quick assets by the liquid liabilities. Most people believe that
liquid ratio is acid test ratio, but sometimes business is able to repay its liquid quick assets.
The reason behind that is emergency requirement cash and business cannot get it from
debtors, so quick assets include cash balance + investment certificate that can be immediately
transferable into cash. The satisfactory ratio is 1:1 but lower limit is 0.5:1. Here quick assets
do not include stock. = Quick Assets (Current assets-Inventories) /Current Liabilities
Company Mar 07 Mar 08 Mar 09
ONGC ltd 1.28 1.39 1.27
HOEC 1.48 1.51 0.83
RIL 0.69 0.94 0.9
Cairn India 1.78 0.16 20.48

25

20

ONGCltd
15
HOEC
RIL
10
Cairn India

0
2007 2008 2009

65
Interpretation:- So, as per the current year ratio of the company is up to some extent
satisfactory. This ratio shows the repay ability of the company which is satisfactory as per
lower level all over the year. As compared to previous year in current year it is not good. In
2007-08 it is 1.39:1 and in 2008-09 year it is 1.27:1. This shows that the company can repay
its current obligations in time as its also not having any problem in the debtors collection.

CAPITAL STRUCTURE/LEVERAGE RATIO

The second category of financial ratios is leverage or capital structure ratios. The long term
creditors would judge the soundness of a firm on the basis of the long term financial strength
measured in terms of its ability to pay the interest regularly as well as repay the instalment of
the principal of due dates or in one lump sum at the time of maturity.

 Total Debt Equity Ratio:

This ratio can be called as a proprietary ratio and it is another form of it. It establishes
relationship between the outside long term & short term liabilities and owner’s funds. This
ratio is obtained by dividing the total debt by Net worth. = Total Debt / Net worth

Company Mar 07 Mar 08 Mar 09

ONGC ltd 0.24 0.18 0.2

HOEC 0.34 0.15 0.12

RIL 0.45 0.46 0.65

Cairn India -- -- --

66
 0.7

0.6

0.5
ONGCltd
0.4 HOEC
0.3 RIL
Cairn India
0.2

0.1

0
2007 2008 2009

Interpretation:- This ratio shows the Rs0.20 of liabilities against the Re1. of owner’s
capital. This shows that the company is well enough to finance itself instead of borrowing
money from outside sources. It is good for company as the interest burden is low. Because of
Net worth is increase year by year. Cairn India’s data are not available.

PROFITABILITY RATIO

Profit is the main objective of any business enterprise. Besides, profitability is the measure of
efficiency. The owners invest their funds in expectation of receiving reasonable return. Hence
profitability ratios are very important from the view point of various shareholders.
 Gross Profit Ratio:

Gross profit margin ratio reflects the efficiency with which management produces each unit
of product. It expressing the relationship between Gross Profit earned to Net Sales. This ratio
usually expressed as percentage. = Gross Profit/Sales * 100

Company Mar 07 Mar 08 Mar 09

ONGC ltd 52.54 42.99 43.58

HOEC 88.12 92.44 77.02

RIL 13.95 13.14 13.35

Cairn India -- -6,250.96 -3,829.26

67
 100
90
80
70
60 ONGCltd
50 HOEC
40 RIL
30
20
10
0
2007 2008 2009
Interpretation:- Gross profit ratio shows the relation between gross profit and sales. That
means how much proportion of gross profit is there in the sales. The ratio shows that in the
year 2007 the company had a good management of the production but in the later year it
decreased to almost 10% which is not a good sign. But in the year 2009 it has again tried to
maintain speed between the cost of goods sold and the sales revenue.

 Net Profit Ratio

Net Profit is obtained when operating expense, interest and taxes are subtracted from the
gross profit. The net profit ratios measured by dividing PAT (Profit After tax) by sales. This
ratio indicates the firm’s capacity to withstand adverse economic conditions. = PAT X 100 /
Sales

Company Mar 07 Mar 08 Mar 09

ONGC ltd 25.79 25.93 23.5

HOEC 1.93 24.53 41.94

RIL 10.64 14.45 10.65

Cairn India -494.77 -252.62 34.35

68
 45
40
35
30
ONGCltd
25
HOEC
20
RIL
15
10
5
0
2007 2008 2009
Interpretation:- Net profit ratio shows the relationship of PAT with the sales. This ratio is in
2007 it is 25.79%, in 2008 it is 25.93% and in Mar 2009 it is 23.50% which means PAT is
always near to 20% to 30%.

 Earnings Per Share

Financial analyst regards the earning per share as an important measure of profitability. EPS
measures the profit available to the equity shareholders on a per share basis, that is the
amount that they can get on every share held. It is computed by dividing the PAT to the No.
of equity share. =Profit After Tax / No. of equity share.

Company Mar 07 Mar 08 Mar 09

ONGC ltd 73.14 78.09 75.4

HOEC 0.32 1.85 4.1

RIL 85.71 133.86 97.28

Cairn India -0.17 -0.44 0.29

69
 160
140
120
100 ONGCltd
80 HOEC
60 RIL
40 Cairn India

20
0
-20 2007 2008 2009

Interpretation:- The earning per share is increasing. But in 2007 & 2009 EPS has decreased
because PAT has decreased in 2007 & 2009. In the year 2008 it has increased from
Rs73.14 to Rs78.09 means there is a increase of Rs 4.95. But then it has again decreased
to Rs 75.4 in the year 2009 meaning a fall of Rs 2.64.When EPS is maximum it is good for
shareholders. They get good return. So from this we can say that the stakeholders got a
good return during the year 2008.

ACTIVITY RATIO

The activity ratio measures the efficiency with which assets are being used in business. They
are also known as Turnover Ratio. The efficiency with which the assets are used would be
reflected in the speed and rapidly with which assets are converted into sales. The greater the
rate of turnover or conversation, the more efficient is the utilization / management, other
things being equal.

 Inventory Turnover Ratio

This ratio indicates how fast inventory is sold. A low ratio would signify that inventory does
not sale fast but stays on the self or in the warehouse for long time= COGS / Inventory

70
 Company Mar 07 Mar 08 Mar 09
ONGC ltd 19.99 122.77 111.98

HOEC 5.24 11.29 17.18

RIL 10.65 10.57 12.92

Cairn India -- -- --

140
120
100 ONGCltd
80 HOEC
60 RIL
40 Cairn India
20
0
2007 2008 2009

Interpretation:- Here, we have taken total inventory as base. The overall result of this ratio
shows year by year fluctuating increasing of inventory turnover. In the year the inventory
ratio was very poor but then in the consecutive years it has improved in an excellent
manner. In 2007 it was only 19.99 while in the year 2008 and 2009 it has increased to
122.77 times and 111.98 times respectively. The result of 2008 & 2009 it is increasing rate.

NET WORKING CAPITAL TURNOVER RATIO

Net working capital turnover ratio is obtained by net working capital joining to sales. The
excess of current assets over current liabilities is called working capital. It is found for
measuring firm liquidity. It also measures the firm potential reserve of funds. Net working
capital turnover ratio= Sales / Net working capital.

Company Mar 07 Mar 08 Mar 09

ONGC ltd 152.97 148.96 144.51

71
 HOEC 425.91 650.67 203.61

RIL 14.03 33.69 26.94

700
600
500
ONGCltd
400
HOEC
300
RIL
200
100
0
2007 2008 2009

Interpretation:-

As per the balance sheet data of the creditor the working capital turnover ratio is different for
the different years. The ratio is 144.51 in 2008-09 and 148.96 in 2007-08. So it means that
higher the ratio better the working capital condition of the company. Though it is trying to
maintain its working capital turnover, it has been decreasing year by year.

FINDINGS FOR ONGC LIMITED

72
  The company having good working capital position.

 The absolute liquidity of the ONGC Limited is in favours.

 The collection policy of the company is very good.

 The creditor’s turnover ratio is 1.50 in 2008-09 as compare to 2007-08 the ratio is
1.68.

 Inventory turnover ratio is highest in the year 2007-08 as compare to the other year
but in current year which is little bit lower than previous year but it is obvious that in
heavy industries like ONGC Limited had good Inventory Turnover Ratio in comparison
with other industries

CONCLUSION

73
The study involves practical and conceptual over view of decisions concerning current assets
like cash and bank balance ,inventories( like raw materials ,WIP, finished goods ), sundry
debtors, loans and advances, other current assets and current liabilities like sundry creditors,
securities and other deposits, other current liabilities and provisions of ONGC. With the
objective of maximizing the overall net profit of the bank and complete synchronization and
co ordination among the working capital components which shall contribute to optimum level
of operations. Mismanagement of each or any of these components shall be detrimental to the
objectives of efficient operation, profitability and maximization of overall value of the bank.
The working capital limits would be considered only after the project nearing completion and
after ensuring control over the inventory. Eligible working capital limits would be assessed
by cash Budget method And Projected production method depending the market condition,
scale of operation, nature of activity/enterprise and duration/length of operating cycle etc.

BIBLIOGRAPHY

74
 • Prasanna Chandra, “Financial Management”, Tata McGraw Hill, New Delhi.

• Annual reports

Website: -

1. www.ongcreports.com

2. www.ongcindia.com

3. www.moneycontrol.com

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