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RELIANCE INDUSTRIES LIMITED
ANNUAL REPORT 2007-2008
Your Directors are pleased to present the 34th Annual Report and the audited accounts for the financial year ended March 31, 2008.
The financial performance of the Company for the financial year ended March 31, 2008 is summarised below:
2007-2008 2006-2007 Rs. crore $ Mn* Rs.crore $ Mn*Profit before Depreciation,Interest & Tax 28,934.64 7,212 20,524.51 4,722Less: Interest 1,077.36 269 1,188.89 274Depreciation 6,627.85 6,812.16Less: Transfer fromRevaluation 1,780.71 1,997.01Reserve 4,847.14 1,208 4,815.15 1,108Profit before Tax 23,010.14 5,735 14,520.47 3,340Less: Provision forCurrent Taxation 2,604.96 649 1,617.10 372Provision forFringe Benefit Tax 47.00 12 40.34 9Provision forDeferred Tax 899.89 224 919.63 212Profit after Tax 19,458.29 4,850 11,943.40 2,747Add: Balance in Profitand Loss Account 2,765.37 689 3,029.09 697Excess provisionfor tax for earlier years 48.10 12 0.51 -Amount Available for Appropriation 22,271.76 5,551 14,973.00 3,444
General Reserve 16,000.00 3,988 10,565.17 2,430Dividend on Equity Shares 1,631.24 406 1,440.44 331Tax on dividend 277.23 69 202.02 47Balance carried to Balance Sheet 4,363.29 1,088 2,765.37 636 22,271.76 5,551 14,973.00 3,444
* 1 $ = Rs 40.12 Exchange Rate as on March 31, 2008 (1 $ = Rs 43.47 as on March 31, 2007)
Results of Operations
During the year, the Company has scaled new heights and set several new benchmarks in terms of sales, profits, networth and assets. This was a landmark year for the Company as it delivered record financial and operating performance amidst challenging and volatile market conditions. Turnover for the year was Rs. 1,39,269 crore ($ 34.7 billion) against Rs.1,18,354 crore ($ 27.2 billion) in the previous year, reflecting a growth of 18%. During the year, exports were higher by 25% at Rs.83,492 crore ($ 20.8 billion).
Profit after tax, including exceptional item, for the year was Rs.19,458 crore ($ 4.9 billion) as against Rs.11,943 ($ 2.7 billion) crore for the previous year, registering an increase of 63%. Profit after tax, excluding exceptional item was Rs. 15,261 crore ($ 3.8 billion), representing an increase of 28% and the Compounded Annual Growth Rate (CAGR) of 30% over the past five years.
Exceptional item of Rs. 4,733 crore ($ 1.2 billion) represents gains primarily arising out of transactions concerning shares of Reliance Petroleum Limited, a subsidiary of the Company.
The Company is one of India's largest contributors to the national exchequer primarily by way of payment of taxes and duties to various government agencies. During the year, a total of Rs.13,696 crore ($ 3.4 billion) was paid in the form of various taxes and duties.
Your Directors have recommended a dividend of Rs. 13/- per Equity Share (last year Rs. 11/- per Equity Share) for the financial year ended March 31, 2008, amounting to Rs.1,631 crore - the highest ever payout by any private sector company in India. The dividend will be paid to members whose names appear in the Register of Members as on May 9, 2008; in respect of shares held in dematerialised form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as on that date.
The dividend pay out for the year under review has been formulated in accordance with the Company's policy to pay sustainable dividend linked to long term performance, keeping in view the Company's need for capital for its growth plans and the intent to finance such plans through internal accruals to the maximum.
The Company has the highest domestic credit ratings of AAA from CRISIL and Fitch. Moody's and S&P have reaffirmed investment grade ratings for international debt of the Company, as Baa2 and BBB, respectively. The Company's international rating from S&P is higher than the country's sovereign rating.
Employees Stock Option Scheme
Members' approval was obtained at the Annual General Meeting held on June 27, 2006 for introduction of Employees Stock Option Scheme.
Employees Stock Option Scheme was approved and implemented by the Company and Options were granted to employees in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (the SEBI Guidelines'). The Employees Stock Compensation Committee, constituted in accordance with the SEBI Guidelines, administers and monitors the Scheme.
The applicable disclosures as stipulated under the SEBI Guidelines as at March 31, 2008 are given below:
a. Options Granted 29,763,000b. Exercise Price Options granted Exercise Price
28,728,000 1,284* 27,000 1,684* 1,008,000 2,292*
* Plus applicable taxes, as may be levied on the Company
c. Options Vested Nil
d. Options Exercised Nil
e. The total number of shares arisingas a result of exercise of Options Nil
f. Options Lapsed 1,711,600
g. Variation in terms of Options Nilh. Money realised by exercise of Options Nili. Total number of Options in force 28,051,400j. Employee wise details of Options granted to:i. Senior Management Personnel
1. Shri Nikhil R. Meswani 7,00,0002. Shri Hital R. Meswani 7,00,0003. Shri Hardev Singh Kohli 50,000
ii. Any other employee who receiveda grant in any one year of Optionsamounting to 5% or more ofOptions granted during that year Nil
iii. Identified employees who weregranted Options, during any oneyear, equal to or exceeding 1% ofthe issued capital (excludingoutstanding warrants andconversions) of the Companyat the time of grant Nil
k. Diluted Earnings Per Share (EPS)before exceptional items pursuant toissue of shares on exercise of Optionscalculated in accordance withAccounting Standard (AS) 20Earnings Per Share' Rs. 104.98
As the exercise would be made at the market price prevailing as on the date of the grant plus applicable taxes as may be levied on the Company, the issuance of equity shares pursuant to exercise of Options will not affect the profit and loss account of the Company.
The Company has received a certificate from the Auditors of the Company that the Scheme has been implemented in accordance with the SEBI Guidelines and the resolution passed at the Annual General Meeting held on June 27, 2006. The Certificate would be placed at the Annual General Meeting for inspection by members.
Management's Discussion and Analysis Report:
Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.
The Company has entered into various contracts in the areas of oil & gas, refining and petrochemicals businesses. While benefits from such contracts will accrue in the future years, their progress is periodically monitored.
Additionally, some of the major events of the year include the following:
* During the year the Company's Oil and Gas Exploration & Production business made significant offshore discoveries in the east and west coast of India. RIL surpassed its previous record and had 9 discoveries. Three gas discoveries were made in the Krishna basin in deep water (KG-D6-R1, KG-V-D3-A1 & B1). Two more gas discoveries were made in the Krishna basin in shallow water (KG-III-05-P1 & J1). A deep water discovery was made in the Cauvery basin (CY-D5-A1) yielding both oil and gas. An oil discovery was made in the deep waters of the prolific Krishna basin (KG-D4-MD1). One gas discovery each was made in the shallow waters of the Gujarat-Saurashtra basin (GS-01-B1) and Mahanadi basin (NEC-25-J1). In order to assess their commerciality, appraisal process is underway. The development plan for MA field (Dhirubhai-26) has been approved by the Management Committee. The development plan for Sohagpur Coal Bed Methane blocks (East and West) approved by the DGH.
* During the year, the Company signed an agreement to acquire certain polyester (capacity) assets of Hualon, Malaysia. It is a leading polyester producer in Malaysia with a capacity of half a million tonnes per annum along with downstream textile manufacturing capabilities spread over two locations in Malaysia, namely Nilai and Malacca. This acquisition was the second international acquisition in the polyester sector after the Company acquired Trevira in Europe. This acquisition will help the Company consolidate its position as the world's largest polyester manufacturer with an annual capacity of 2.5 million tonnes, which represents an increase of 25% over its existing capacity. With this acquisition, Reliance's global market share in polyester fibre and yarn will exceed 7%.
* In the Refining & Marketing business, the Company took over majority control of Gulf Africa Petroleum Corporation (GAPCO) and started shipping products to the East African markets. GAPCO owns and operates large storage terminal facilities and a retail distribution network in countries like Tanzania, Uganda and Kenya. It owns and operates large coastal storage terminals in Dar es Salaam (Tanzania), Mombassa (Kenya), and Kampala (Uganda). It has other wellspread depots in East and Central Africa and operates nearly 250 retail outlets.
* The Company also signed MoU with GAIL (India) Limited to explore opportunities of setting up petrochemical plants in feedstock rich countries outside India.
Ministry of Corporate Affairs, Government of India, vide order No. 47/108/2008-CL-III dated April 16, 2008 has granted approval that the requirement to attach various documents in respect of subsidiary companies, as set out in sub-section (1) of Section 212 of the Companies Act, 1956, shall not apply to the Company. Accordingly, the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. Financial information of the subsidiary companies, as required by the said order, is disclosed in the Annual Report. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection by any investor at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies.
Reliance Petroleum Limited (RPL), a listed subsidiary of the Company, has set a rapid pace on all fronts in the implementation of a world-class, complex greenfield refinery at Jamnagar in Gujarat. The project has made rapid strides during the year and achieved overall progress of 90%. Based on the progress made so far, RPL expects to complete the refinery project ahead of its initial schedule of December, 2008. During the year, the Company sold 20.80 crore equity shares, representing 4.62% of the equity share capital of RPL out of its holding of 75%. After this sale, the shareholding of the Company in RPL stands at 70.38%. The sale of shares monetized only a small portion of the Company's holding in RPL and helped to broadbase the shareholding of RPL, besides unlocking value for the Company's shareholders.
Reliance Retail Limited (RRL), another subsidiary of the Company, launched its first store in November 2006 through its convenience store format Reliance Fresh'. Since then RRL has rapidly grown to operate 590 stores across 13 states at the end of Financial Year 2007-08. RRL launched its first Reliance Digital' store in April 2007 and its first and India's largest hypermarket Reliance Mart' in Ahmedabad in August 2007. This year, RRL has also launched its first few specialty stores for apparel (Reliance Trends), footwear (Reliance Footprints), jewellery (Reliance Jewels), books, music and other lifestyle products (Reliance Timeout), auto accessoriesand service format (Reliance Autozone) and also an initiative in the health and wellness business through Reliance Wellness'. In each of these store formats, RRL is offering a unique set of products and services at a value price point that has not been available so far to the Indian consumer. Overall, RRL is well positioned to rapidly expand its existing network of 590 stores which operate in 57 cities.
Reliance Ventures Limited, a subsidiary of the Company in a joint venture with Haryana State Industrial Investment Development Corporation (HSIIDC), is promoting Reliance Haryana SEZ Limited (RHSEZ) to develop the two SEZs in Haryana State. The proposed SEZs will function as an integrated package with all the required infrastructure facilities to ensure sustainable development of medium and large scale industries and service activities with sufficient provision for future growth and expansion.
More details of the above subsidiaries of the Company are covered in Management's Discussion and Analysis Report forming part of the Annual Report.
In terms of Article 155 of the Articles of Association of the Company, Shri R.H. Ambani, Shri S. Venkitaramanan, Prof. Ashok Misra and Shri Nikhil R. Meswani, Directors, retire by rotation and being eligible, offer themselves for reappointment at the ensuing Annual General Meeting. Brief resume of the Directors proposed to be reappointed, nature of their expertise in specific functional areas, names of companies in which they hold directorships and memberships /chairmanships of Board Committees, shareholding and relationships between directors inter-se, as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges in India, are provided in the Report on Corporate Governance.
Pursuant to an intimation from the Promoters, the names of the Promoters and entities comprising group' as defined under the Monopolies and Restrictive Trade Practices ('MRTP') Act, 1969 are disclosed in the Annual Report for the purpose of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.Directors' Responsibility Statement Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed that:
(i) in the preparation of the annual accounts, the applicable accounting standards read with requirements set out under Schedule VI to the Companies Act, 1956, have been followed and there are no material departures from the same;
(ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2008 and of the profit of the Company for the year ended on that date;
(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and
(iv) the Directors have prepared the annual accounts of the Company on a going concern' basis.
Consolidated Financial Statements
In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.
Auditors and Auditors' Report
M/s. Chaturvedi & Shah, Chartered Accountants, M/s. Deloitte Haskins & Sells, Chartered Accountants and M/s. Rajendra & Co., Chartered Accountants, Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.
The Company has received letters from all of them to the effect that their reappointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for such reappointment within the meaning of Section 226 of the said Act.
The Notes on Accounts referred to in the Auditors' Report are self-explanatory and therefore do not call for any further comments.
The Central Government had directed an audit of the cost accounts maintained by the Company in respect of textiles, polyester and chemicals businesses. The Central Government has approved the appointments of Shri S. N. Bavadekar, Cost Accountant, for conducting the cost audit for textiles, a part of the polyester business and a part of chemicals business, M/s. V.J. Talati & Co., Cost Accountants, for conducting the cost audit of a part of the chemicals business, M/s. Diwanji & Associates, M/s. Kiran J. Mehta & Co., Cost Accountants for conducting cost audit of a part of the chemicals business and M/s. Bavadekar & Co., M/s. V. Kumar &
Associates, M/s. K. G. Goyal & Associates and Shri R. C. Srivastava, Cost Accountants, for conducting the cost audit of a part of the polyester business for the financial year ended March 31, 2008.
Secretarial Audit Report
As a measure of good corporate governance practice, the Board of Directors of the Company appointed Dr. K.R. Chandratre, Practicing Company Secretary, to conduct Secretarial Audit of the Company. The Secretarial Audit Report for the financial year ended March 31, 2008, is provided in the Annual Report.
The Secretarial Audit Report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, Securities Contracts (Regulation) Act, 1956 and all the Regulations of SEBI as applicable to the Company, including the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992.
Particulars of Employees
In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the Directors' Report.
However, having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company.
Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo
The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in the Annexure-I to this Report.
Transfer of Unpaid and Unclaimed amounts to IEPF
Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends and interest on debentures which remained unpaid or unclaimed for a period of 7 years have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.
The Company is committed to maintain the highest standards of Corporate Governance. The Directors adhere to the requirements set out by the Securities and Exchange Board of India's Corporate Governance practices and have implemented all the stipulations prescribed. The Company has implemented several best corporate governance practices as prevalent globally.
The Report on Corporate Governance as stipulated under Clause49 of the Listing Agreement forms part of the Annual Report.
The declaration regarding compliance with RIL Code of Business Conduct and Ethics for Directors and Management Personnel forms part of Report on Corporate Governance.
The requisite Certificate from the Auditors of the Company, M/s. Chaturvedi & Shah, M/s. Deloitte Haskins & Sells and M/s. Rajendra & Co., confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is attached to this Report.
Your Directors would like to express their appreciation for assistance and co-operation received from the financial institutions, banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the executives, staff and workers of the Company.
For and on behalf of the Board of Directors
Mukesh D. AmbaniChairman & Managing Director
MumbaiApril 21, 2008
Annexure - I
Particulars required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.
A. CONSERVATION OF ENERGY
(a) Energy conservation measures taken: Some major energy conservation measures carriedout during the year are listed below:
1) At Hazira Manufacturing Division's Captive Power Plant, energy saving has been achieved by usage of HP fuel gas make-up substituting C4 at the rate of 1.2 Ton Per Hour (TPH).
2) At Jamnagar Manufacturing Division's Sulphur Complex, energy saving has been achieved by adding Plate & Frame exchanger in place of existing rich / lean amine shell & tube exchanger in ATU.
3) At Hazira Manufacturing Division, energy saving has been achieved by reduction of C3 at the rate of 1.6 TPH dumping in fuel gas header and export Cracker gas as per Naphtha quality.
4) At Hazira Manufacturing Division's Mono Ethylene Glycol - 2 Plant, reduction in ethylene burning has been achieved by substituting steam due to high selectivity catalyst.
5) Improvement in biogas recovery was done at Hazira Manufacturing Division. Further, as a part of Clean Development Mechanism (CDM), a project on energy efficiency through steam optimization (Cracker and Aromatics Plant steam optimization measures) has been completed.
6) Methyl Acetate recovery; optimization of quench air conditions in all products; stopping of pack preheaters in spinning by improving pack life & optimizing pack inventory; and process changes in exchanger EA-402 were carried out at Patalganga Manufacturing Division which resulted in significant energy savings and revenues.
7) At Patalganga Manufacturing Division, reduction in specific heating oil consumption in CP7 by trap design modification & process optimization was achieved. Also, parallel reboiler to R/R column E- 1035N, activation of economizer mode in inverters for spinning & CP equipments and stopping of brine chillers resulted in savings of energy.
8) Under Energy Saving Scheme-II, installation of E-1221 and D-1221 were carried out at Kurkumbh Manufacturing Division.
9) Air Conditioning system optimization was completed at Silvassa Manufacturing Division.
10) Energy saving by replacing HP steam with MP steam in stripper reboiler in VGO Hydrotreater contributed to energy saving was achieved at Jamnagar Manufacturing Division.
12) Reduction in power of compressed air system was achieved at Allahabad Manufacturing Division.
13) Air washer system in AHU was completed at Silvassa Manufacturing Division.
14) Hydrocarbon recovery from CG Sour oil trap vent from atmosphere to first stage suction drum was achieved at Dahej Manufacturing Division.
15) HRSG Burner modification No. 5 was carried out at Hazira Manufacturing Division.
16) Optimized Loading of Spinneret in Pack Pre Heaters was done at Allahabad Manufacturing Division.
17) Stopping of 6 nos. aerators in monsoon period was completed at Nagothane Manufacturing Division.
18) At Dahej Manufacturing Division, saving in demineralized water was achieved as a result of ethylene oxide recatalyzation, cleaning of Ethylene Oxide Reactor by gas cooler and replacement of ion exchange resulted in increase of cycle time.
(b) Additional investments / proposals being implemented for reduction of consumption of energy
1) Increase in Pre-heat temperature from 241 Degrees Celsius to 266 Degrees Celsius by Heat recovery from Vacuum gas oil (VGO) product stream in Crude distillation unit (CDU) 1 and 2 was achieved at Jamnagar Manufacturing Division.
2) Mono Ethylene Glycol plant (MEG) 3 plant parallel reactor operation and usage of S-882 catalyst at Hazira Manufacturing Division.
3) As part of CDM, at Hazira Manufacturing Division following initiatives have been planned (a) Makeup Water Heaters in Heat recovery steam generator (HRSG) (58496 Certified emission reductions (CER) per annum); (b) PTA-3 energy efficiency through waste heat recovery (48626 CERs per annum); (c) Biogas recovery from effluents and thus fossil fuel replacement (7400 CERs per annum) and (d) HRSG Burner modification (14057 CERs per annum).
4) Recovery of pentane in Paraxylene Plant was done at Patalganga Manufacturing Division.
5) Scheme for reducing supplementary firing in HRSGs- 1, 2, 8 & 9 by Superheater modification of CPP at Hazira Manufacturing Division.
6) Fuel gas heating from 25 Degrees Celsius to 180 Degrees Celsius at 9 Gas turbines (GT) using stack heat via makeup water heater resulted in 25 kg/hr/ GT fuel saving at Hazira Manufacturing Division.
7) Coal based heating oil system in POY Plant was used at Nagpur Manufacturing Division.
8) CPP On-line Optimiser was initiated for fuel saving in CPP at Hazira Manufacturing Division.
9) Glycol jet ejectors (CP 1/2/3) were installed in Polyester Yarn Plant at Hazira Manufacturing Division.
10) Dehydrator regeneration gas exchanger provision was made in Ethane Propane Recovery Unit (EPRU) Plant at Dahej Manufacturing Division.
11) Replaced old small size oil type compressors with large size oil free compressors at Silvassa Manufacturing Division.
12) Reduction by 60 Degrees Celsius in recycle furnace stack was achieved by cleaning Cracker unit at Hazira Manufacturing Division's.
13) New compressor for balance hydrogen recovery was installed in chlor alkali (CA) plant of Dahej Manufacturing Division.
14) Installed new injection heater for maximization of condensate recycle in Purified Terephthalic Acid (PTA) plant at Hazira manufacturing Division.
15) Increasing CP 4, 5, 6 return dowtherm condensate temperature from 265 Degrees Celsius to 288 Degrees Celsius in PSF plant at Hazira Manufacturing Division.
16) Installed new burner in the Steam super heater to extract energy from waste gases at Kurkumbh Manufacturing Division.
17) Coating of cooling water pumps was done at Nagothane Manufacturing Division.
18) Replaced insulation of Xylene fractionation column at Patalganga Manufacturing Division.
19) Nagpur Manufacturing Division, reduced contract maximum demand for plant to reduce costs.
20) Reduced steam consumption by 0.1 MT/MT by process optimization in Polyester Staple Fibre (PSF) plant at Barabanki Manufacturing Division.
(c) Impact of measures at (a) & (b) above for reduction of energy consumption and consequent impact on the cost of production of goods
1) At Jamnagar Manufacturing Division, an estimated energy savings of Rs. 35 crore per annum is expected in the next financial year. This is being achieved by increasing pre-heat temperature from 241 Degrees Celsius to 266 Degrees Celsius by Heat recovery from VGO product stream in CDU1 & CDU2.
2) Hazira Manufacturing Division achieved a saving of Rs.15 crore per annum by usage of high pressure (HP) fuel gas in Cracker as fuel gas make up to substitute C4. Other 28 major schemes implemented throughout the year resulted in saving of Rs. 8 crore per annum.
3) At Jamnagar Manufacturing Division, by adding Plate & Frame exchanger in place of existing rich / lean amine Shell & Tube exchanger in ATU, revenue saving of Rs. 14 crore per annum was achieved.
4) Hazira Manufacturing Division achieved a saving of Rs. 7 crore per annum by reducing C3 @ 1.6 TPH dumping in fuel gas header and export cracker gas as per naphtha quality.
5) In MEG - 2 Plant, reduction in ethylene burning by substituting steam resulted in saving of Rs. 6 crore per annum and also a biogas recovery improvement resulted in savings to the tune of Rs. 5 crore per annum at Hazira Manufacturing Division.
6) Various energy conservation measures undertaken by the polyester manufacturing divisions at Allahabad, Barabanki, Dhenkanal, Hoshiarpur, Nagpur and Silvassa has resulted in savings of revenue to the tune of Rs. 3 crore per annum. Further, an estimated saving of Rs. 12 crore per annum is expected in the next financial year.
7) At Patalganga Manufacturing Division, the cost reduction achieved by energy savings schemes work out to Rs. 6 crore per annum.
(d) Total energy consumption and energy consumption per unit of production as per Form A' attached hereto
B. TECHNOLOGY ABSORPTION
(e) Efforts made in technology absorption - as per Form B given below:
Form - B
Research and Development (R&D)
1. Specific areas in which the research and development (R&D) is being carried out by the Company
* State-of-art chromatographic, spectroscopic, microscopic facilities (like SEM, XRD, NMR etc) establishment in Hazira. New generation polymer technology development, new product development and improved product were carried out.
* Technology for polypropylene product - from concept to pilot scale development and moving towards commercial trial in Hazira.
* Manufacturing process improvement using advance microscopy and spectroscopy technique for value addition in PP, PE, PVC, RELPIPE, PTA and PSF product.
* Hazira was invited and participated in research paper presentation in national & international conference; Development partnership with UICT, DSIR and others for developmental program & manufacturing excellence; 1 US Patent granted to RIL on Polyolefin.
* Launching of improved version of catalyst & process for PDEB production in Vadodara.
* New generation catalyst for paraffin dehydro genation.
* Lab. scale catalysts for hydrocarbon oxidation & acetylene (in HCl) hydrogenation.
* Catalysts & process for production of C6 & C8 co-monomers
* Mathematical modeling of oxy reactor & EDC cracker.
* Processes for removal of toxic pollutants (cyanide & benzene) from waste water streams
* Adsorptive purification of polyethylene. High impact PP and Clarified PP grades for niche market. This is achieved through new additives. The additives have the capability to improve the impact properties of PP. A new approach for low cost clarifier of PP is also being developed at lab scale.
* Development of PE-100 plus (HMHDPE) pipe grade.
* UHMWPE: Slurry polymerization in hexane.
* Alternate chain transfer agent in polymerization of 1, 3-butadiene.
* Pacol reactor optimization in Patalganga.
* Development of pulsar fancy yarn products.
* Development for taffetta fabrics, Yarns for single end sizing application.
* Additive cost reduction in Hoshiarpur.
* Bi-shrinkage yarn produced in Nagpur.
2. Benefits derived as a result of the above R&D
* Unique process with super selective catalyst for production of export quality PDEB with above 99.0% purity.
* Catalyst with higher selectivity & lesser raw material consumption. A potential cost reduction of Rs. 23 crore was achieved due to this.
* Noble metal based catalysts for oxidation & hydrogenation. A potential cost reduction of Rs. 3 crore is estimated.
* Potential value generation for Rs. 4 crore was achieved due to catalysts & process for production of C6 & C8 co-monomers in Vadodara.
* Potential for Rs. 5 crore through reduction in alumina consumption is estimated by adsorptive purification of polyethylene in Vadodara.
* Potential benefit Rs. 1 crore is estimated due to alternate chain transfer agent in Polymerization of 1, 3-butadiene in Vadodara.
3. Future plan of action
* Basic Studies of new material development in Hazira.
* Nano structured catalysts for hydrogenation & dehydrogenation processes in Vadodara.
* Applications of nano zeolites in aromatics conversion processes (6) Energy efficient separation & purification processes.
* Nano structured adsorbents for purification & recovery of monomers.
* Treatment of plant waste water streams for re-use.
* Development of nano metal / metal oxides composites of polyolefin.
* New process for polymerization of 1, 3-butadiene in Vadodara.
* Installation of SSM air texurising pilot machine in Silvassa.
* High shrinkage fiber development in Dhenkanal.
* PFF silicon finish oil consumption to be reduced by 0.5 Kg / MT in Hoshiarpur.
4. Expenditure on R & D
a) Capital 203.50
b) Recurring 104.74
c) Total 308.34
d) Total R & D expenditure as a percentage of 0.22%total turnover
Technology absorption, adoption and innovation
1. Efforts, in brief, made towards technology absorption, adoption and innovation:
* Methyl Acetate hydrolysis in Patalganga.
* Improved & eco-friendly process for purification & recovery of Acetonitrile in Vadodara.
* The high selectivity catalyst one batch operation completed and the technology fully absorbed in ACN plant of Vadodara.
* The technology of continuous catalyst injection in ACN reactor fully absorbed in Vadodara.
* New PP random copolymer grade SRM 250 NC produced.
* Improved dehydrogenation catalyst RPDC 10 produced.
* ATY YARN technology, installation of AIKI ATY pilot machine in Silvassa.
* Bishrinkage yarn technology in Silvassa.
* DM no. 1 baler modified for increasing the bale weight of conjugate fiber in Hoshiarpur.
2. Benefits derived as a result of the above efforts
* Recovery of Acetonitrile in Vadodara unit increased from 66% to 95% resulting in an additional earning of Rs. 1.6 crore
* In ACN plant Vadodara savings on raw material, catalyst consumption to the extent of Rs. 9.0 crore was achieved.
* In ACN plant Vadodara savings on raw material propylene consumption to the extent of Rs. 1.4 crore was achieved.
3. Information regarding Imported Technology
Product Technology Year of Status import import implementa from -tion/absorption
High performance Successfullydehydrogenation UOP 2007-08 implementedcatalyst for LAB at and absorbed.VadodaraHigh selectivity Successfullycatalsyt for MEG Scientific 2007-08 absorbedProduction at Design and underVadodara implementation
Continuous catalystmakeup system for Inter Cat Inc. 2007-08 SuccessfullyA C N, Propylene U.S.A. implementedamoxidation reactor andat Vadodara absorbed.
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
(f) Activities relating to export, initiatives to increase exports, Developments of New export markets for Products and Services and Export Plan.
The Company has continued to maintain focus on and avail of export opportunities based on economic considerations. During the year the Company has exports (FOB value) worth Rs.75,974.22 crore (US$ 18,936.74 million).
(g) Total Foreign exchange earned and used
a. Total Foreign Exchange earned 76,010.76
b. Total savings in foreign exchangethrough products manufactured bythe Company and deemed exports(US$ 15,671.45 million) 62,873.85
Sub total (a+b) 1,38,884.61
c. Total Foreign Exchange used 1,05,357.86
Form of disclosure of particulars with respect to conservation of energy
Power & Fuel Consumption April,07 to April,06 to March, 08 March,07
a) Purchased Units (Lacs) 4,732.39 4,582.19
Total Cost (Rs. In crores) # 167.38 150.62Rate / Unit (Rs.) # 3.54 3.29
b) Generation through captivepower facilities
1) Through Steam Turbine/Generator
Units (Lacs) 23,738.67 24,310.08KWH per unit of fuel 4.63 4.68Total Cost (Rs. In crores) 1,181.36 1,213.14Cost / Unit (Rs.) 4.98 4.99
c) Own Generation
1) Through Diesel Generator
Units (Lacs) 1,298.81 1,246.39KWH per unit of fuel 3.99 4.08Fuel Cost / Unit (Rs.) 5.39 4.75
2) Through Steam Turbine/Generator
Units (Lacs) 55,396.09 51,930.66KWH per unit of fuel 4.29 4.49Fuel Cost / Unit (Rs.) 2.37 2.83
3) Through Wind Mill Turbine
Units (Lacs) 24.37 79.58Purchased Fuels consumed
2. Furnace Oil
Quantity (K.Ltrs) 257,000.51 208,912.67Total Cost (Rs. In crores) 504.08 355.36Average rate per Ltr. (Rs.) 19.61 17.01
3. Diesel Oil
Quantity (K.Ltrs) 25,496.61 155,990.40Total Cost (Rs. In crores) 60.11 318.29Average rate per Ltr. (Rs.) 23.58 20.40
Quantity (1000 M3) 1,358,268.20 1,091,968.64Total Cost (Rs. In crores) 792.96 774.35Average rate per 1000M3 (Rs) 5,838.06 7,091.34
Quantity (MT) 20,429.00 23,032.04Total Cost (Rs. In crores) 3.28 4.11Average rate per MT (Rs.) 1,607.15 1,786.30Internal Fuels consumed
Quantity (1000 M3) 2,473,129.32 2,428,707.83
6. GT fuels
Quantity (K.Ltrs) 1,213,235.02 1,210,081.53# Excluding Demand Charges
B. Consumption per unit of Production:
Product Electricity Furnace (KWH) Oil/HSD/HFHSD (Ltrs) Current Previous Current Previous Year Year Year Year
Fabrics (per 1000 mtrs) 4,085 3,918 - 1 PFY (per MT) 861 898 25 21 PSF (per MT) 381 346 33 13 PTA (per MT) 309 334 6 6 LAB (per MT) 575 585 52 41 MEG (per MT) 527 486 - - PVC (per MT) 454 449 - - HDPE (per MT) 541 570 - - PP (per MT) 323 332 - - FF (per MT) 594 532 45 20 PET (per MT) 336 352 - - PX (per MT) 198 220 10 11 Petro-products (per MT) 66 65 - - PBR (per MT) 707 723 - - Caustic Soda (per MT) 2,562 2,516 - - Acrylonitrile (per MT) 593 547 - - Acrylic Fibre (per MT) - 3,224 - -
Product LSHS Gas (kgs) (SM3) Current Previous Current Previous Year Year Year Year
Fabrics (per 1000 mtrs) - - 453 443PFY (per MT) 16 66 39 23PSF (per MT) 2 27 56 26PTA (per MT) - - - -LAB (per MT) 220 108 119 133MEG (per MT) 2 7 36 32PVC (per MT) 1 5 36 19HDPE (per MT) 2 2 25 14PP (per MT) 0 1 25 25FF (per MT) - - 53 66PET (per MT) - - 72 90PX (per MT) - - 228 257Petro-products (per MT) - - 41 41PBR (per MT) 11 114 479 341Caustic Soda (per MT) 3 22 88 94Acrylonitrile (per MT) 4 - (59) -Acrylic Fibre (per MT) - 448 - 933
For and on behalf of the Board of Directors,
Mukesh D. AmbaniChairman & Managing Director
MumbaiApril 21, 2008.
MANAGEMENT DISCUSSION AND ANALYSIS
This report contains forward-looking statements, which may be identified by their use of words like plans', expects', will', anticipates', believes', intends', projects', estimates' or other words of similar meaning. All statements that address expectations or projections about the future, including, but not limited to statements about the company's strategy for growth, product development, market position, expenditures, and financial results, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The company cannot guarantee that these assumptions and expectations are accurate or will be realised. The company's actual results, performance or achievements could thus differ materially from those projected in any such forward-looking statements. The company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.
Overview FY 2007-08
A year of significant achievements
This was yet another successful period for Reliance Industries Limited's Oil and Gas Exploration & Production business which resulted in several key achievements.
* Reliance announced several discoveries which are as follows:
* Wells KG-III-05-P1 and KG-III-05-J1 in block KG-OSN- 2001/1 (KG-III-5)
* Well MD1 in block KG-DWN-98/1 (KG-D4)
* Well CY-III-D5-A1 in block CY-DWN-2001/2 (CY-IIID5)
* Well KG-D6-R1 in block KG-DWN-98/3 (KG-D6)
* Well GS-01-B1 in block GS-OSN-2001/1 (GS-01)
* Well KG-V-D3-A1 and B1 in block KG-DWN-2003/1 (KG-V-D3)
* Well NEC-25-J1 in block NEC-OSN 97/2 (8th gas discovery in NEC-25 block)
* Development plan for MA oil fields (KG-D6) approved by the Management Committee.
* Development plan for Sohagpur Coal Bed Methane (CBM) Blocks (East and West) approved by the Directorate General of Hydrocarbons (DGH).
During the year, Reliance signed an agreement to acquire certain polyester (capacity) assets of Hualon, Malaysia. It is a leading polyester producer in Malaysia with a capacity of half a million tonnes per annum along with downstream textile manufacturing capabilities spread over two locations in Malaysia, namely Nilai and Malacca. This acquisition was the second international acquisition in the polyester sector after Reliance acquired Trevira. This will help Reliance consolidate its position as the world's largest polyester manufacturer with an annual capacity of 2.5 million tonnes, which represents an increase of 25% over its existing capacity. With this acquisition, Reliance's global market share in polyester fibre and yarn will exceed 7%.
In the Refining & Marketing business, Reliance took over majority control of Gulf Africa Petroleum Corporation (GAPCO) and started shipping products to the East African markets. GAPCO owns and operates large storage terminal facilities and a retail distribution network in countries like Tanzania, Uganda and Kenya. It owns and operates large coastal storage terminals in Dar es Salaam (Tanzania), Mombassa (Kenya), and Kampala (Uganda). It has other well-spread depots in East and Central Africa. It also markets through 250 outlets covering retail and industrial segments.
Reliance also signed MoU with GAIL (India) Limited to explore opportunities of setting up petrochemical plants in feedstock rich countries outside India. Earlier, Reliance and GAIL had signed a MoU for co-operation in identified areas in natural gas - pipeline transmission and marketing, coal bed methane gas opportunities, city and local gas distribution, operations and maintenance services, exploration & production and technology and knowledge sharing.
Reliance Petroleum Limited (RPL) continued the second year of implementation of its refinery project with an overall project progress of 90%. Based on the progress made so far, RPL expects to complete the refinery project ahead of schedule.
During the year, Reliance Retail Limited (RRL) continued its rollout of stores across various verticals and formats. Reliance Retail today operates over 590 stores in 57 cities, spanning 13 states, with over 3.5 million square feet of trading space.
During FY 2007-08, two international investment rating agencies, Moody's and S&P, reaffirmed investment grade rating for the international debt of Reliance.
Reliance's Hazira manufacturing division was awarded the 'Deming Quality Control Award' for the Operations Business Unit (2007), making it the world's first petrochemical company to win this award.
Reliance's Jamnagar refinery was adjudged the winner of 'Golden Peacock National Training Award 2007'.
Reliance's Hazira manufacturing division was adjudged the winner of 'Golden Peacock Innovation Award 2007'.
Reliance is amongst the 'World's 25 Most Innovative Companies'. The Company was ranked 19th in the list compiled by Business Week in collaboration with Boston Consulting Group.
Record financial performance
Turnover Rs. 139,269 crore + 18% $ 34,713 million + 27%PBDIT Rs. 24,201 crore + 18% $ 6,032 million + 28%Cash Profit Rs. 25,205 crore + 43% $ 6,282 million + 54%Net Profit Rs. 19,458 crore + 63% $ 4,850 million + 77%Net Profit (excl. Rs. 15,261 crore + 28%exceptional income) $ 3,804 million + 38%
During the year, Reliance set several benchmarks in terms of sales, profits, net worth and assets. Reliance achieved the unique status of becoming India's first Company in the private sector to achieve a net profit exceeding Rs. 15,000 crore (excluding exceptional income). The net profit for the year was at Rs. 15,261 crore ($ 3,804 million) with a Compounded Annual Growth Rate (CAGR) of 30% over the past five years excluding exceptional income.
Reliance announced a dividend of 130% - amounting to Rs. 1,631 crore ($ 407 million). This is the highest ever payout by any private sector company in India.
Return on Equity was at 24.8% and Return on Capital Employed was at 20.3%. Reliance's net gearing was at 22.3% and the net debt/equity ratio was 0.35 as on March 31, 2008.
Reliance has always played a pivotal role in the growth of India's economy and endeavours to contribute to the country's progress and development. Reliance's revenues are equivalent to about 3% of India's GDP. Reliance accounts for:
* 13.4% of India's total exports
* 4.9% of the Government of India's indirect tax revenues
* 6.7% of the total market capitalisation in India
* Weightage of 16.5% in the BSE Sensex
* Weightage of 12.5% in the Nifty Index
Reliance delivered superior financial performance during the year with improvement across all major parameters.
Turnover achieved for the year ended 31st March 2008 was Rs. 139,269 crore ($ 34.7 billion), reflecting a growth of 18% over the previous year. Increase in revenue was due to 12% increase in prices and a 6% growth in volumes. During the year, exports were higher by 25% at Rs. 83,492 crore ($ 20.8 billion). Consumption of raw materials increased by 17% from Rs. 76,872 crore to Rs. 90,304 crore ($ 22.5 billion). This was mainly on account of higher crude and naphtha prices. Traded goods purchase increased from Rs. 1,821 crore to Rs. 6,008 crore ($ 1.5 billion) primarily comprising petroleum products for retail sales.
Employee cost was Rs. 2,119 crore ($ 528 million) for the year as against Rs. 2,094 crore. The previous year's figure includes Rs. 376 crore towards expenditure incurred on Voluntary Retirement Scheme / Special Separation Scheme announced for the employees of erstwhile IPCL Vadodara unit.
Operating Profit before other income increased by 16% from Rs. 20,046 crore to Rs. 23,306 crore ($ 5.8 billion). Net operating margin for the period was 17.5% as compared to 17.9% in the previous year.
Other income was higher at Rs. 895 crore ($ 223 million) against Rs.478 crore primarily on account of increase in interest income.
Interest costs were lower by 9% at Rs. 1,077 crore ($ 269 million) primarily on account of appreciation of the rupee vis-a-vis the US dollar. During the year, the rupee appreciated by 7.7% against the US dollar. Moreover, 85% of Reliance's debt is foreign currency denominated. During the year, Rs. 885 crore of interest was capitalized, as against Rs 535 crore in the previous year. Gross interest cover was 12.3 compared to 11.9 for the previous year.
Depreciation was marginally higher at Rs. 4,847 crore ($ 1.2 billion) against Rs. 4,815 crore in the previous year. Exceptional item of Rs. 4,733 crore ($ 1.2 billion) represents gains primarily arising out of transactions concerning RPL shares. The transactions were conducted through stock exchanges and have helped to further broad base the shareholding pattern of RPL. The sale of shares monetises only a fraction of Reliance's holding in RPL at the same time increasing free float in the market. This has unlocked value for Reliance shareholders. Reliance now holds 70.38% of RPL's equity.
Profit after tax, including exceptional item, was Rs. 19,458 crore ($ 4.9 billion) as against Rs. 11,943 crore for the previous year, an increase of 63%. Profit after tax, excluding exceptional item was Rs. 15,261 crore ($ 3.8 billion), representing an increase of 28%.
Basic earning per share (EPS), including exceptional item, for the year was Rs. 133.9 ($ 3.3). Basic earning per share (EPS) excluding exceptional item, for the year was Rs. 105.0 ($ 2.6) against Rs. 82.2 for the previous year.
The outstanding debt as on 31st March 2008 was Rs 36,480 crore ($ 9.1 billion) compared to Rs 27,826 crore as on 31st March 2007. Net gearing as on 31st March 2008 was 22.3% as compared to 25.2% on 31st March 2007.
Reliance has domestic credit ratings of AAA from CRISIL and FITCH. Moody's and S&P have reaffirmed investment grade ratings for international debt of Reliance, as Baa2 and BBB respectively.
Capital expenditure during the year was Rs. 19,503 crore ($ 4.9 billion) primarily on account of exploration and production, implementation of value maximisation projects and expansion of petrochemical capacities. Details of the capital expenditure undertaken during the year are as follows:
(In Rs. crore) FY 2007-08 FY 2006-07
Oil & Gas (E&P) 13,443 5,725Refining & Marketing 2,661 1,430Petrochemicals 506 462Common 2,893 1,363TOTAL 19,503 8,980
Contribution to the National Exchequer:
Reliance is one of India's largest contributors to the national exchequer primarily by way of payment of taxes and duties to various government agencies. During the year, a total of Rs. 13,696 crore ($ 3.4 billion) was paid in the form of various taxes and duties.
Leadership in exports
Reliance maintained its leadership status as India's largest exporter. Exports, including deemed exports, were at Rs. 83,492 crore ($ 20.8 billion) as against Rs. 66,627 crore in the previous year.
Reliance exports products to 108 countries. Some of them are the most stringent quality-driven and value-driven developed nations. This demonstrates Reliance's global competitiveness, the world-class quality of its products and superior logistical capabilities. The Company has achieved this significant growth in exports while maintaining its share in the domestic market.
Revenues from exports now represent 60% of the Company's turnover. Petroleum products constitute 77% and petrochemicals contribute 23% of the total exports.
Resources and Liquidity:
Reliance's financial framework allows it to maintain a conservative financial profile even while pursuing aggressive business growth strategies. This is reflected in Reliance's domestic as well as international ratings. The Company's long-term debt is rated AAA' from CRISIL and Ind AAA' by Fitch - the highest ratings awarded by these agencies. The short-term debt programme is rated P1+ and working capital debt programme is rated AAA (Assigned) by CRISIL, the highest credit rating that can be assigned in this category. The Company's international debt has been rated BBB (Stable Outlook) by S&P, Baa2 (Stable Outlook) by Moody's and BBB- (Stable Outlook) by Fitch. S&P has rated Reliance above India's sovereign rating.
Reliance's gross debt equity ratio, including long-term and short term debt as on March 31, 2008, is at 0.45. The Company's long term debt as on March 31, 2008 was at Rs. 27,957 crore ($ 6,968 million). Of this, foreign currency denominated debt represents 85% with an average maturity of 5.2 years. The average maturity of the Company's long-term debt is 5 years.
Reliance continued to demonstrate dynamism and flexibility in debt issuance during the year. In May 2007, the Company set a new benchmark in Asia by raising a $ 2 billion syndicated term loan for a 10-year period at competitive rates with participation from 23 banks from across the globe. This is a landmark deal as it makes
Reliance the first corporate borrower from India to have accessed the External Commercial Borrowings (ECB) market for this size. In September 2007 the Company also raised $ 500 million by way of a syndicated term loan at competitive rates amidst the subprime turmoil in the global markets.
Reliance meets its working capital requirements through commercial credit lines provided by a consortium of Indian and foreign banks. Reliance undertakes liability management transactions to reduce overall cost of debt and diversify liability mix.
As on March 31, 2008, Reliance has cash and cash equivalent of Rs. 7,566 crore ($ 1,886 million). The Company actively manages its short-term liquidity to generate reasonable returns by investing surplus funds while preserving the safety of capital.
Oil and Gas Exploration & Production (E&P)
High commodity prices and robust demand for oil and gas resulted in the E&P industry experiencing a record year. IPE Brent prices averaged at $ 82.8 /bbl during FY 2007-08 as against an average of $ 64.2 /bbl in FY 2006-07. Henry Hub natural gas price averaged at $ 7.4 /MMBTU for FY 2007- 08. One of the major events in the industry was crude oil prices crossing an all time high of $ 100 /bbl. The energy demand was driven by secular global growth. Supply chain pressures also led to price escalations. In another significant development, spot Liquefied Natural Gas (LNG) prices breached its oil price parity in the Asian LNG markets.
The International Energy Agency forecasts the global demand for oil to grow by 1.5% to 87.2 million BPD in 2008. The previous year 2007 saw an increase in global oil demand to 86.0 million BPD, resulting in an increase of 1.3% over 2006.
High commodity prices and robust growth have ensured strong profitability and cash flows for E&P companies. They have encouraged significant investments across the global energy value chain, resulting in severe pressure in the supply chain. The cost of exploration and development has increased sharply with the cost of drilling rigs, seismic services, engineering, fabrication and installation costs contributing to the increase. This trend is likely to continue in the medium term.
Rising challenges in the E&P sector
The capital expenditure in the E&P industry is estimated to be upwards of $ 300 billion per annum. Operators are increasingly looking at opportunities in the deep waters of the Gulf of Mexico, West Africa, Latin America and in the Asia Pacific Region.
Deep water exploration is a fast emerging frontier for oil and gas as the era of easy' oil seems to have come to an end. The overall cost inflation in upstream projects in deepwater areas has increased by more than 100% since 2002. Cost of steel has increased by 100% since 2002 while in sub-sea and EPC contracts price inflation is also around 100%. PIRA estimates that since 2002, finding & development costs have increased from $ 8/ bbl to $ 15/ bbl in 2006, an increase of 90%. CERA estimates that capex inflation has risen from a base of 100 to touch 198 in the third quarter of 2007.
Shortage of rigs is hampering exploration efforts worldwide. The high day rates of operating the rigs are driven by demand/supply fundamentals and rise in the cost of manpower, services and raw materials. Demand for 6th generation drill-ships capable of drilling in harsher environments far exceeds the availability. Consequently, contracting rigs is a big challenge for operators and due to this shortage, rig utilisation rates are expected to remain high. Shipyards constructing deepwater rigs are fully booked and the lead time for a new build is between 3-4 years.
Recent oil and gas discoveries are in deep waters, oil sands, shales, arctic and unconventional geographies. These discoveries are in much harsher terrains and in new frontiers. In addition, availability of manpower, services and equipment is limited. Evacuation and transportation logistics of resources are also becoming more challenging. All these factors are resulting in project cost escalation and delays.
About 88% of world's proven oil reserves of 1,148 billion barrels are under the control of national oil companies (NOCs) with no equity participation by international oil companies (IOCs) in them. IOCs in the western part of the world now control less than 10% of the world's oil and gas resource base.
In spite of these challenges, profitability of E&P companies has been strong in recent times, driven largely by record oil prices. During the past five years, oil prices have increased from an average of $ 25 /bbl in 2002 to $ 72 / bbl in 2007, an increase of 188%. More recently, oil prices have moved to as high as $ 120 /bbl.
Henry Hub gas prices have also increased from $ 3.34 /MMBTU in 2002 to the average price of $ 7.4 /MMBTU in 2007.
Development of a global natural gas market continues:
Gas accounts for 34% of the energy basket in the Former Soviet Union region and in Europe, 24% in USA, 15% in Japan and 14% in Korea. The world average is 24%. In India, gas accounts for just 8% of the energy basket constrained by limited availability of gas and nascent transmission and distribution infrastructure.
The share of gas in the global energy mix is set to increase primarily driven by the power sector, industrial sector, city gas distribution and gas-to-liquid opportunities. Gas is preferred because of its cost competitiveness and environmental advantages over other fossil fuels. Gas is also more convenient to use vis-a-vis other fossil fuels.
Accelerating global demand, increasing import dependency, and the build-out of LNG infrastructure are supporting price discovery. Industry expectations suggest continued strength in global GDP over the long-term driven by developing economies of Asia and the Middle East and a 40% increase in LNG liquefaction capacity over the coming 3 years addressing 11% of global demand by 2010.
Powerful trends are supporting demand growth and prices in both the developed and developing nations. In 2007-08, Henry Hub Prices averaged $ 7.4 / MMBTU. In Europe, the NBP prices averaged 40 pence per therm which is the equivalent of around $ 8 /MMBTU. The Asian LNG prices were $ 9.5 /MMBTU based on average for prices in Japan and Korea. Long term contracts signed by China for LNG are at around $ 10 /MMBTU (FOB). These contracts are for 2-3 MMTPA and the first sale is expected to commence in the year 2013-14.
In the developed world, natural gas is the only near-term generation option to bridge the energy gap. A similar trend is clear in Asia and Australia. In the developing world, rapid economic growth is fueling energy demand in all its forms. Natural gas has been a niche fuel, not easily available due to infrastructure constraints and domestic productive capacity. However, the price of alternative fuels (particularly crude products) is supporting a re-evaluation of energy source, which in many cases favors natural gas. While nuclear and renewable remain the long term 'green' solutions of choice, natural gas will remain the primary near-term alternative to meet the demand for growth in generation in developed and developing economies.
Natural Gas in India:
The landscape of the Indian natural gas market is set to witness significant change. Natural gas currently accounts for around 8% of the total energy mix in India as against the global average of 24%. However, with increased availability and spurt in transmission and distribution infrastructure, the share of natural gas in the energy mix is set to rise. For 2007-08, gas production is expected to be 88 MMSCMD and LNG consumption is estimated at 33 MMSCMD.
The major demand centers, excepting the north-eastern market which is not connected to the transmission network of the rest of India, have been considered for making demand projections. The un-met demand for natural gas is estimated to increase from about 113 MMSCMD (FY 2007-08) to 396 MMSCMD by the year 2022. The following factors are expected to drive the increased consumption of natural gas in India:
* Macro-economic factors
* Growth of end-user segments
* Cost of gas vis-a-vis alternate liquid fuels
* Regulation and policy making
* Environmental concerns
* New uses of natural gas (for example, co-generation)
Reliance's E&P portfolio:
Reliance with its subsidiaries is India's largest exploration acreage holder in the private sector with a portfolio comprising the following:
* 30% interest in Panna-Mukta and Tapti (PMT) fields
* 33 exploration blocks awarded under the NELP and Pre-NELP licensing rounds
* 5 coal bed methane (CBM) blocks
* Exploration interests in Yemen, Oman, East Timor, Kurdistan (Iraq), Colombia and Australia
Reliance's ambition is to be a global energy major with a significantly diversified upstream portfolio. The Company's focus on training people, processes and technology is expected to help in strengthening its commitment towards exploration, development and production activities.
Performance of PMT:
The Tapti expansion project called 'New Revised Plan of Development' was carried with the objective of development of Mid Tapti field and expansion of Central Processing/Compression/ Export capacity. This included a new Compression and Processing Platform (TCPP), a Second Tapti Flare Platforms (STFP), a new 9 slot well head platform (MTA), intra-field flow lines and an export pipeline. On completion of this project, additional production from Tapti has stabilized at 6 MMSCMD of gas and 4,500 BOPD of condensate.
The development plans of South West Panna (SWP) and Panna K (PK) fields have been approved and the Engineering, Procurement, Installation and Commissioning Contracts (EPIC) are in progress. Production from SWP and PK fields is expected in 2009.
The Panna-Mukta fields produced 1,910,000 tonnes of crude oil and 2,030 MMSCM of natural gas, reflecting a growth of 9% and 22% respectively. The Tapti field produced 3,365 MMSCM of gas and 232,000 tonnes of condensate, reflecting a growth of 51% and 82% respectively.
It was another very successful year of exploration for Reliance. The Company surpassed its previous record and had 9 offshore discoveries of which seven were gas discoveries, one an oil discovery and another one contained both oil and gas. The discoveries were across four offshore basins viz. Mahanadi, Krishna, Cauvery and Gujarat-Saurashtra. With these, the inventory of discovered blocks stands at 37 reflecting a success ratio of 63 %.
Three gas discoveries were made in the Krishna basin in deep water (KG-D6-R1, KG-V-D3-A1 & B1). Two more gas discoveries were made in the Krishna basin in shallow water (KG-III-05-P1 & J1). A deep water discovery was made in the Cauvery basin (CY-D5-A1) yielding both oil and gas. An oil discovery was made in the deep waters of the prolific Krishna basin (KG-D4-MD1). One gas discovery each was made in the shallow waters of the Gujarat- Saurashtra basin (GS-01-B1) and Mahanadi basin (NEC-25-J1). In order to assess their commerciality, appraisal process is underway. Development plan for Sohagpur coal bed methane blocks (East and West) was approved by the DGH.
Reliance's strategic perspective on E&P
Deepwater projects typically face many technical challenges. It is essential that these challenges are assessed, mitigated, and managed throughout project execution by selecting appropriate field development plans, risk management, and modifying project implementation methods.
Some of the most critical activities involved in developing deepwater block are selection and design of concept, mitigation of reservoir uncertainties, well completions, flow-lines and risers, mitigation of flow control and assurance risk, processing and support transportation and storage facilities.
Reliance's development strategy is focused on use of best practices and application of proven technology.
Developments in KG-D6 (D1 and D3):
The development of discoveries Dhirubhai-1 and Dhirubhai-3 in the KG-D6 block are on schedule for production of first gas during second half of FY 2008-09. Milestones achieved are:
Drilling and Well Completions
17 wells were drilled during the year. Hardware required for the purpose of wells completion has been delivered and well completion is under progress.
Off Shore: Sub-sea
Sub-sea hardware has been received. Installation barges and support vessels have been mobilized and are operational. Installation work is in advanced stages of completion.
Off Shore Installation:
Off shore equipment has been delivered. Installation of the jacket, deck and living quarters for the Control-cum-Riser Platform (CRP) has been completed. Hookup and pre-commissioning activities have commenced. Installation of the sub-sea is progressing in full swing and vessels have been mobilized for off-shore installation purposes.
On Shore Terminal (OT)
Major equipment and packages have been delivered at the site. Civil works are almost completed with around 80% of structural work also complete. Installation of major equipment and packages has also been completed. Consequently, the infrastructure facilities at the OT are in operation. Construction of buildings in the infrastructure area is in advanced stage of completion.
During the year, Reliance submitted the development plan for Dhirubhai - 26 cretaceous oil discovery (MA) in KG-D6 and it has since been approved.
MA field is a fast track development project. This will be the first Floating Production Storage & Off-take (FPSO) project in India located at depth ranging from 1,100 meters to 1,400 meters. Facilities on board the FPSO include process plant, gas compression facilities, power generation facilities and offloading. Major sub-sea hardware fabrication has already been completed and shipped to the site. Installation of sub-sea hardware has commenced as per schedule. Mooring lines, buoy and gas injection umbilical have been installed. Installation of production risers has commenced.
The development plan for the NEC-25 block has been submitted to the DGH for its approval.
The international business comprises 11 blocks with acreage of about 80,000 square kilometers - 3 in Yemen (1 producing and 2 exploratory), 2 each in Oman, Kurdistan and Colombia, 1 each in East Timor and Australia.
The average production at the Yemen Block 9 was 4,500 BOPD. There was a discovery of oil in the exploratory well Malik - 1. The size of the discovery is yet to be ascertained.
Processing and interpretation of recently acquired 2D and 3D has been completed in the Oman Block 18. Processing and interpretation of data is in progress. An inventory of drillable locations is being finalized. Preparatory activities like setting up a shore base are currently underway with an objective to drill an exploratory well subject to the availability of a suitable exploratory rig.
Reliance has further expanded its international footprint in exploration business:
* Executed two Production Sharing Contracts (PSC), with the Kurdistan Regional Government (KRG). These PSC's cover petroleum exploration activities in the Rovi' and Sarta' blocks in the Kurdistan region of Iraq.
* Signed Production Sharing Agreement (PSA) for an offshore block no. 41 in Oman deep water. The block measures over 20,000 square kilometers. The new block is adjacent to Reliance's earlier block which was acquired in 2005.
* Signed Production Sharing Agreements (PSA) for two on land blocks in Yemen. The exploration blocks 34 and 37 are located in Jeza basin of eastern Yemen. Reliance holds 70% participating interest in both these blocks.
* Signed contracts for two offshore blocks, Borojo North and Borojo South, in Colombia. The contracts envisage Touching lives. Transforming India. 20 exploration of two blocks located in the Pacific Ocean, west of Colombia in water depths reaching up to 1,500 meters. The size of each block is approximately 4,000 square kilometers.
* Acquired an exploration permit for an offshore block WA 405 P in Australia.
Refining and Marketing:
Industry overview and prospects:
Demand was robust throughout the year even as crude prices climbed over $ 100 /bbl; despite the looming threat of global slowdown. OPEC's reluctance to increase global oil supply and tightening of product specifications added pressure to an already stretched refining system. Rising costs and project delays continued to hamper growth in new refinery capacity additions. Complex refiners continued to gain due to wide light-heavy differentials and higher light product margins. High oil prices however put simple refining margins under pressure.
Prospects for the sector remain positive given the robust demand outlook and continuing delays as well as cancellation of several planned projects. Outlook for margins remains positive for complex refiners.
Resilient demand despite high oil prices:
According to the International Monetary Fund (IMF) global economy grew by an estimated 4.9% in 2007 despite concerns of tighter financial market conditions, high oil prices and inflation. A key contributor to the positive growth trend remained the Asian region, with China and India registering an impressive 11.4% and 8.7% economic growth respectively. In addition, Middle East and CIS countries grew by 6% and 8.2% respectively.
In 2007, global demand for petroleum products grew to 86.0 million BPD from 84.9 million BPD in 2006. The demand came in stronger from the Non-OECD countries, driven primarily by China, Middle East and Latin America, as compared to the OECD nations where the demand was lower due to weaker economic activity, higher oil prices and mild weather conditions particularly in OECD Pacific. The economic expansion started showing signs of slowdown after a strong growth in the third quarter of the calendar year 2007.
IMF estimates the global growth to decelerate to 4.1% in 2008 due to financial strains originating in the US sub-prime sector and a continued slow growth in Europe and Japan.
Even with a potential of a slower economic expansion, the International Energy Agency (IEA) expects stronger growth in global demand for petroleum products and forecasts it to grow by 1.5% to 87.2 million BPD in 2008, driven mainly by demand growth centers of China, India, the Middle East and Africa, where the economic growth projections continue to remain robust. In the medium term, petroleum product demand is expected to clock a compounded annual growth rate of 2.2% during 2008 - 2012, as per projections of IEA Mid Term Outlook. IEA expects the petroleum product consumption to increase to 95.82 million BPD in 2012. Concerns of a tight crude oil market and supply disruptions will continue through the next year.
Transportation fuels driving the growth:
Several populated economies are at threshold levels of per capita income, beyond which mobility and transportation fuel requirements tend to grow exponentially. Given this intrinsic linkage between the economy and mobility, the world is expected to undergo considerable shift in favor of lighter transportation fuels. Asia (led by India and China), Middle East and Africa have emerged as new economic centres and are expected to drive demand growth for petroleum products in the foreseeable future. This should call for matching growth in refining capacities in the region that are suitable for meeting growing transportation fuel demand.
In 2007, aggregate demand for transportation fuels comprising gasoline, diesel and jet kerosene grew by an average 1.2% against a decline of 0.1% for fuel oil. The trend of faster growth in transportation fuels is likely to continue. According to the World Refining and Fuel Service (HART Publishing), gasoline, diesel and jet kerosene are expected to grow at a compounded annual rate of 1.7%, 2.5% and 2.2% respectively till 2010. Growth in residual fuel oil is expected to be the least due to ongoing substitution with natural gas in power generation and heavy industrial applications.
Policy responses to high oil prices:
Faced with the low prospect of oil prices easing in the absence of higher production, governments have reached a tipping point that forces them to address demand-side energy policy. The USA introduced its energy bill 'Energy Independence and Security Act' which mandates the CAFE (Corporate Average Fuel Economy) to increase to 35 miles per gallon by 2020 from existing 22 miles per gallon for light trucks and 27.5 miles per gallon for cars. The Renewable Fuel Standard (RFS) sets annual requirements for the amount of renewable fuels produced and used in motor vehicles.
In addition to the USA, several large consuming countries have already come up or are in the process of formulating their own policies that revolve around efficiency improvements and mandating alternative fuels. The mandated bio-fuels would be blended with the petroleum products in varying quantities.
Greening of fuels:
During the past two decades, global planners and related stakeholders have painstakingly worked towards making petroleum products cleaner and greener. The refining industry has also taken proactive steps in co-operating towards this global cause. A large portion of investments made in the refining industry are aimed at producing fuels with low sulphur content and cleaner burning in order to reduce emission levels.
In most of the major oil consuming countries like EU, Japan and some Asian countries, sulphur will be virtually eliminated from gasoline and diesel by the year 2009 with a mandated maximum content of 10 parts per million (ppm). The current standard is 15 ppm in the case of diesel and 30 ppm for gasoline in the United States, whereas the standard is 15 ppm for both in Canada. Gasoil is also being targeted, with Europe reducing the maximum limit on sulphur from 2000 ppm to 1000 ppm from January 2008. This ongoing trend will present new trade opportunities for global complex refiners like Reliance. The society at large stands to be the leading beneficiary of this trend.
Refinery capacity and utilization trends:
During 2007, global refining capacity grew marginally, from 85.1 million barrels per day (BPD) to 85.3 million BPD. According to Oil & Gas Journal's Worldwide Refinery Report, the rise in capacity was only through creep by few players. No refineries closed down in 2007, mainly due to high refining margins that made even the smallest plants profitable. This meager capacity rise resulted in additional pressure on the global refining system that was already stretched to operating rates of about 85.3%, which are amongst the highest levels witnessed in the last two decades. The average capacity utilization rates in 2007-08 for refineries in North America, Europe and Asia were at 86.2%, 83.9% and 85.7% respectively. This set the stage for continued strength in refining margins, well above historical averages, for two consecutive years of 2006 and 2007.
IEA estimates an additional global crude distillation capacity requirement of about 9.7 million BPD towards meeting the estimated global demand by 2012. Though several large capacity announcements have taken place in recent years, their progress has been slow on account of rising costs and manpower shortage. In an already stretched refining industry, it has raised concern over the ability to meet incremental demand growth and improved prospects for refining margins, especially for complex refiners.
Gross Refining Margins
Refining margins witnessed significant volatility during the year. Margins peaked in the second quarter of the year due to high light product cracks and tightened product markets but dropped in the third quarter mainly due to increased crude prices and reduced cracks. In the fourth quarter, US Gulf Coast margins continued to decline due to weak gasoline cracks whereas Singapore complex margins increased on the strength of high jet fuel / kerosene and gas oil cracks.
Refinery Gross margins ($ / bbl)
FY 2006-07 FY 2007-08
Reliance 11.7 15.0Regional BenchmarksSingapore (Dubai) 6.1 7.6US Gulf Coast (Brent) 7.8 6.9US Gulf Coast (WTI) 8.3 8.9Rotterdam (Brent) 4.6 4.9Mediterranean (Urals) 5.8 4.8
(Source : Reuters)
Margins for complex refineries continue to remain strong, supported by tightened product markets, strong margins for light products and unplanned outages by large refiners. However, margins for simple refiners dropped on the back of improved utilization, lower turnaround rate and fuel switching in China and US.
Reliance's Jamnagar refinery achieved superior gross refining margins due to scale, complexity, higher yields, superior product mix and a wide crude slate.
Product margins remained healthy with crack spread for gasoline in Singapore averaging at $ 13.5 /bbl in 2007 as against $ 10.9 /bbl in 2006, while that of gas oil at $ 16.7 and $ 15.3 /bbl respectively. Fuel oil crack margins averaged at $ (-) 10.3 /bbl in the year 2007 against $ (-) 12.7 /bbl in 2006, leading to improved margins for simple refiners.
The medium term outlook for refining margins looks positive, due to robust growth in demand, stretched utilization levels and lagging new capacity buildup. Refining capacity bottlenecks are also unlikely to reduce prior to 2012 on account of project delays. In addition to supply-demand dynamics, refining margins are influenced by the cost efficiency in crude oil sourcing, manufacturing reliability, material evacuation infrastructure and the ability to produce transportation fuels.
Changes in product specifications are also leading to lower yields of clean products as the refiners reconfigure themselves in order to meet specifications. Complex refiners stand to gain from (i) higher premiums for ultra-clean fuels in the western markets and (ii) changing crude oil dynamics.
The complex configuration of Reliance's refinery gives it the ability to process both heavy and sour crude. Incremental oil supplies through new discoveries are in the 'challenged-category' and require unique capabilities for processing. These factors continue to support a high level of light-heavy differential and provide an advantage to complex refineries.
Crude price movements and outlook
Crude prices continued to rise and touched a new high, with the WTI peaking at $ 120 / bbl in April 2008. Spurt in crude prices were due to a combination of geopolitical events and unplanned outages of some of the oil production fields. The prices continued to hover at historically high levels with Brent, WTI and Dubai crude prices still averaging at $ 82.8, $ 81.6 and $ 76.5 /bbl for FY 2007-08. This reflected an increase of 29%, 26% and 25% respectively over the corresponding levels of FY 2006-07.
Demand for petroleum products in India
During the year, domestic demand for petroleum products increased from 111.7 million tonnes to 118.8 million tonnes - a growth of 6.3%. Transportation fuels grew faster at over 10%. The consumption of HSD (High Speed Diesel), which accounts for more than a third of the total consumption, grew at 11.1%. Growth in MS (Motor Spirit) was at 11.2% and that of ATF (Aviation Turbine Fuel) was at 14.1%. Demand for LPG (Liqueified Petroleum Gas) was up by 7.5% while sales of Naphtha and Kerosene declined by 14.8% and 0.6% respectively. Aggregate Indian refining capacity remained unchanged at 149 million tonnes.
Reliance's refinery, located in Jamnagar in Northwest India, has a capacity of 33 million tonnes per annum. It is the first refinery established by the private sector in India and is the third largest single location refinery in the world.
During FY 2007-08, the refinery processed 31.8 million tonnes of crude and had a high utilisation rate of 96.4%. The utilisation rate could have been higher but for the planned maintenance shutdown of one unit of crude distillation of the refinery in October 2007.
Production details of Reliance's petroleum products are as follows:
Production (KT) FY 2006-07 FY 2007-08
Gases & Distillates 28,001 28,522Fuel oils and solids 4,726 4,617Total Production 32,727 33,139
For the year under review, average gross refining margin stood at $ 15 /bbl, reflecting a premium of $ 7.4 /bbl over the Singapore Crack Margins. Reliance's consistent performance over the benchmark reflects the benefits of higher complexity, capability to process heavier / sour crude and produce superior product quality. Reliance's refinery has particularly benefited from tightening of product specifications around the world and has been able to capture the Clean and Green' premium of supplying products to the most quality conscious markets across continents.
Petroleum products marketing:
The Company has 1,432 retail outlets in India. Expansion plans of the network are affected primarily due to under-recoveries and an uneven level playing field for private players.
Aggregate export volumes of refined products grew by over 25% to 22.1 million tonnes from 17.7 million tonnes in the previous year. Exports account for 67% of aggregate refinery product volumes and export revenues were at $ 16.1 billion, reflecting a growth of 43% as compared to the previous year. For the very first time, Reliance's refinery at Jamnagar exported high quality 50 ppm Ultra Low Sulphur Diesel to European markets. Asia accounted for 55% of overall exports; Europe accounted for 20% followed by Africa which accounted for 18% of the overall petroleum products exports.
During the year, Reliance took over majority control of Gulf Africa Petroleum Corporation (GAPCO). GAPCO owns and operates large storage terminal facilities and a retail distribution network in several East African countries. This acquisition is a strategic step for Reliance towards achieving its global vision in the petroleum downstream sector by integrating the entire value chain consisting of refining, shipping, trading, terminal and marketing through retail and wholesale segments.
After acquisition of GAPCO in August 2007 supply, infrastructure and retail network have been strengthened to achieve distribution efficiency, superior productivity and higher throughputs. Sales and cash profits have grown significantly under Reliance's management.
The East African countries have seen rapid economic growth and demand for petroleum products. Import of petroleum products in these countries is also expected to rise in the near future and Reliance is now strategically positioned to capitalise these opportunities.
Reliance entered the high-growth aviation fuel segment this year and has presence at 14 airports in India.
Reliance plans to sharpen its focus on global markets for a significant part of petroleum products produced at the refinery. Towards this end, Reliance converted its Jamnagar complex as an Export Oriented Unit (EOU) in April 2007.
The petrochemical industry is an integral part of energy value chain that offers a wide range of products to meet material needs of virtually every sector like agriculture, water conservation, construction, automobiles, consumer durables, textile, healthcare, packaging etc. During the past few years substantial investments have been made in new capacities in emerging economies like China, India and the Middle East. While growth in China and India are driven by local demand, the Middle East region is expected to emerge as a production hub due to availability of cheap feedstock like ethane, propane and condensate.
The Ethylene scenario:
Ethylene is the principal petrochemical building block and is a major feedstock for polymers. Global ethylene demand grew by 4.6% in 2007 reaching 114 million tonnes, primarily due to strong demand from its derivatives like Polyethylene and Ethylene Oxide / Glycols. The growth in supply was largely from Middle East which grew at 23.5%.
Global capacity of Ethylene during this period grew by 4.5% to 132 million tonnes keeping industry operating rates relatively high. In Asia, Formosa Plastic started its 1200 KT Ethylene cracker at Mai Liao in Taiwan. Qapco, Qatar expanded its 525 KT Ethane based cracker taking it to 720 KT. Iran added two new crackers with Arya Sasol started its 1,000 KT Ethane feed cracker and Jam Petrochemicals started its 1,320 KT mixed feed cracker in 2007.
Ethylene operating rates
Cracker operating rates are a prime indicator of Ethylene chain profitability. Historically, Ethylene chain profitability was seen to increase exponentially at operating rates above 90%. Global Ethylene capacity utilization has remained above 90% since 2004 and is expected to stay high in 2008.
Large capacity additions in the Middle East and Asia during 2009- 2011 may impact operating rate thus marking the potential for a down cycle. The industry is also witnessing a high feedstock cost environment due to strong crude oil and resultant naphtha prices.
Shift in global ethylene capacity base
Large capacity addition currently underway in the Middle East and China are poised to change the geographical demand supply dynamics. Share of developed regions (North America and Europe), currently at 46%, is likely to come down significantly by 2012. On a global capacity base of 132 million tonnes, over 28 million tonnes of new capacities are planned or being added in Middle East and China during next few years. The bulk of these facilities are coming up in Saudi Arabia, Iran and China.
Changing feedstock mix in future
Annual Ethylene demand growth is expected to average at 4.8% over the next few years. Polyethylene and Ethylene Oxide / Glycol are likely to remain the dominant derivatives. Based on new capacities announced and plants that are under construction, global Ethylene capacity is expected to be at 162 million tonnes by 2012, slightly ahead of the demand growth.
Globally, ethylene is produced from a variety of hydrocarbon feedstock. Over 60% of current cracker capacity is based on liquid feed. The balance is based on gas of which around 12% is based on the advantageously priced gas in the Middle East. The share of gas based crackers in global capacity is expected to increase in future. Ethane, which is used as a primary feedstock for most of the Middle East crackers, is available at fixed natural gas prices of $ 0.75 to $ 2.00 /MMBTU, making the region one of the lowest cost ethylene producers in the world.
Changing age profile of crackers and its impact
Globally 10% of cracker capacities are less than 5 years of age, whereas 23% cracker capacities are more than 30 years old. These aging facilities are likely to be under pressure from new world scale plants. The older crackers which are mainly based on liquid feeds and are smaller in size (below 300 KT) are likely to be the most vulnerable during a down cycle due to higher variable costs and feedstock costs.
Ethylene capacity additions planned in India:
Ethylene capacity in India marginally increased with 70 KT of expansions by GAIL. In next five years the capacity is expected to increase from current 3.1 million tonnes to 5.8 million tonnes, with a CAGR of nearly 14 %. While 65% of new capacity and expansion would be based on refinery off-gas at Reliance, nearly 35% would be based on liquid/mixed feed being pursued by other producers.
Reliance's off-gas cracker at Jamnagar (2.0 million tonnes of total Olefins) will be configured to benefit from integration between the refineries and petrochemical complex wherein production economics would be comparable to many of the Middle East facilities.
The Polymers scenario (PP, PE, PVC):
Consumption of major thermoplastics was at 183 million tonnes globally. Polyethylene, comprising of High-density Polyethylene (HDPE), Linear Low-density Polyethylene (LLDPE) and Lowdensity Polyethylene (LDPE) constitute about 38% of major thermoplastics usage followed by Polypropylene (PP) 24% and Polyvinyl Chloride (PVC) 19%. Reliance is present in nearly 90% of global thermoplastics categories.
Combined global demand for PE, PP and PVC was estimated at 148 million tonnes during 2007, growing at 5.5%. This growth was mainly driven by LLDPE (6.0%), PP (5.8%) and HDPE (5.6%). Developing countries such as China and India have contributed significantly to global demand growth.
PP, HDPE and LLDPE would continue to lead demand growth for polymers in the future. Overall demand growth is expected to be around 5.3 %, marginally behind the capacity growth of 5.4 % during the same period.
Aggregate consumption of PE, PP and PVC in India crossed 5 million tonnes in 2007-08, registering an impressive growth of 15%. This was achieved despite a high price environment with product pricing in some cases on a 15-year high. The demand growth is attributed mainly to demand in packaging, injection molded components (used in the automotive and appliances sectors), pipes used in agriculture and infrastructure development, flexible packaging as well as bulk packaging. Demand is expected to remain firm in the near term.
With the rapid growth in the domestic market, Reliance is aggressively enhancing its reach by expanding the marketing and distribution network.
In order to improve service levels and make the process of doing business with Reliance an efficient process, state-of-the-art IT systems have beenput in place which allow customers access to the company on a 24X7 basis.
Reliance has over 10,000 customers ranging from very large units to very small plastic converting companies that sources only a few bags of materials at a time. All these different customer segments are serviced through a large network of agents and dealers spread across the country.
Rishta - A 3600 Partnership with Customers
During the year, Polymer Business substantially enhanced customer engagement through a series of CRM initiatives. A total of 176 of such events, under the brand 'Rishta', were conducted in over 75 cities and all metros. These events focus on new areas of usage of polymers in agriculture, in building and construction, automotive, appliance etc.
Innovation in materials
Reliance has developed four new grades of PP in its pilot plant. A total of 5 new grades were commercialised and taken to market place during the year. Special grades of PP were developed that were highly acclaimed and leading global machinery manufacturers of BOPP lines approved these for their customers worldwide.
Reliance maintained its leadership in domestic market with a share of 55%. Aggregate production increased by 160 KT, registering a growth of 5% over previous year. The increase in production is attributed to the full impact of the new PP plant at Jamnagar and also to the scheduled maintenance shutdown of the cracker and downstream plants at Hazira during the previous year.
Polymer Production in KT:
Product FY 2006-07 FY 2007-08
PP 1,641 1,712PE 1,011 1,083PVC 562 579Total 3,214 3,374
Polypropylene business (PP):
In 2007, the global capacity of PP was 49 million tonnes and demand was at 44 million tonnes. Demand grew at a healthy rate of 5.8%. Operating rate was relatively high at 90%.
North-East Asia (NEA), West Europe and North America account for 70% share of the global demand. Markets of the Indian subcontinent, CIS and Baltic States and NEA have grown faster at 13%, 11% and 9% respectively.
Prices remained firm throughout the year. With cost push from crude and naphtha, prices are expected to remain firm in the near future but could soften thereafter, depending on quantum and timings of new capacities.
Over 4.4 million tonnes of new PP capacity could be added during 2008-09, of which 0.9 million tonnes is being commissioned by RPL. Almost 2.85 million tonnes of new capacity is coming up in Middle East alone.
However, with high degree of integration of PP manufacturing with its refinery, Reliance is well placed on the feedstock front as compared to other PP producers. The Company's focus on specialty grades fetching higher realization and capturing value through chain operations would help its PP business maintain global leadership position.
Domestic demand for PP witnessed strong growth of 16% during the year. The demand for 2008-09 is expected to be healthy. PP consumption growth is driven by growth in packaging, automotive, durables and industrial applications.
Key end use segments in packaging are bulk packaging for cement, food grains, chemicals packaging. Flexible packaging growth is driven mainly byBOPP for packaging of snack food and garments, while rigid packaging sector growth depends on FMCG products like bottles for shampoo, talcum powder etc.
Automotive sector, both four and two-wheeler segments, consumes PP for bumper, dashboard, front panel, mudguard, mirror housing, battery casing applications. Major applications of PP in durable sector are in washing machines, refrigerators, mixer grinders etc. With the thrust on infrastructure development, booming consumerism and increase in organized retail, growth in polypropylene is expected to continue.
Use of PP in non-woven is emerging as an exciting of area of growth in India. A large number of non-woven lines were commissioned this year.
With the new 900 KT PP capacity expected to come on stream through RPL, the Company's aggregate capacity will increase to 2.7 million tonnes. This expansion will take Reliance from currently being the 7th largest producer of PP to 3rd largest producer globally.
As a part of its continuing growth strategy, Reliance has moved rapidly to make the most of existing global opportunity. This has been done by identifying and developing new applications, import substitution through introduction of new grades and a constant replacement of conventional materials to increase consumption in the domestic market. The Company has also successfully exported products in newer niche markets, realizing better margins.
Polyethylene business (PE):
Polyethylene continues to be the largest consumed commodity plastic. Global capacity was 78 million tonnes and consumption crossed 68 million tonnes in 2007, registering a growth of 5.1%. The operating rates were high at 87%. North East Asia and Middle East leads the demand growth, higher than the aggregate demand.
Middle East is adding bulk of the new capacities followed by capacity additions in North East & South East Asia. These capacity additions are driven by cost competitiveness in the Middle East and high demand in North East Asia.
Nearly 47% of new PE capacities over next five years are coming up in the Middle East region primarily driven by the availability of cheap feedstock.
Globally, LLDPE continues to have the highest consumption growth of around 6% on account of growth in the flexible packaging sector. Injection/ roto molding and wires & cables are expected to grow more than sector average. Usage pattern is dominated by films which was 75% of LLDPE in 2007 and expected to remain the same in 2012 as well.
PE prices were strong and reached their peak levels in 2007. In the markets of South East Asia, which set the benchmark prices for the Indian domestic market, HDPE prices were firm and registered a 10% increase; LLDPE registered a 12% growth; whereas LDPE registered a 20% growth.
In India, the PE demand grew by 17% during FY 2007-08. Demand was driven by a robust growth in HDPE as well as LLDPE. HDPE growth was led by high growth in HD/HM pipe and injection molding sectors. LLDPE growth has been driven primarily by flexible packaging.
In India, demand for PE is expected to remain robust on the basis of growth in agriculture sector, water conservation and organized retailing. Prices may, however, be affected due to large capacity additions/expansion expected in the region.
Reliance is focusing on high growth sectors like Metallocenes and HM Film. Reviving the specialty polymer manufacturing capability of Ethyl Vinyl Acetate (EVA)/ Ultra High Molecular Weight Polyethylene (UHMW-PE) is expected to provide an added advantage in capturing demand for EVA in India and in developing high performance application areas of UHMW-PE.
Reliance received PE 100 certification for its PE pipe grade Relene 46GP003, manufactured at Dahej, from M/s Bodycote, Sweden. With this certification Reliance has joined a select group of only 11 manufacturers out of 440 present globally, whose PE pipe grades are certified for use in high pressure applications which can withstand 10 MPA of stress for 50 years, @ 20o C (without KNEE). This is a rare achievement with RIL being the only Indian and seventh Asian producer to get this most coveted certification for this very critical application. Reliance would leverage this certification coupled with its in-house capability to produce PE Pipes to create a differentiated platform for our PE pipe brands.
Pipes made out of PE 100 grades have outstanding pressure and abrasion resistance, superior stress crack resistance and provide a higher margin of safety. These pipes find extensive use in applications for gas distribution, water distribution and effluent disposal.
Poly Vinyl Chloride business (PVC):
Global PVC demand grew in excess of 5% in 2007 to around 35.3 million tonnes. China, with a 10 million tonnes demand in 2007 is the single largest market for PVC both in terms of volume and growth rate.
North America accounts for around 23% of global GDP demand. A slowdown in US GDP could have some impact on demand. However, housing slowdown in the US could have limited impact on global PVC demand since growth in building, construction and infrastructural development in the developing world would compensate for this slowdown.
Global PVC capacity is expected to reach 50 million tonnes from the current 42 million tonnes over the next 5 years. In 2007, 2.3 million tonnes of capacity was added. Of this China alone added 2.1 million tonnes of new capacity based on Carbide process. PVC capacity in China in 2007 was 12.5 million tonnes and is expected to reach 17.5 million tonnes in 2012. More than 85% of this incremental 5 million tonnes would be carbide based.
PVC consumption in India was 1.4 million tonnes in 2007-08, a growth of 12% over the previous year. Pipes and fittings continued to be the major sector accounting for 70% of domestic PVC demand.
PVC is a major product for infrastructure sector. Pipes for transportation of water for irrigation, drinking water, various sewerage applications, profiles for building industry, wire and cable require PVC as raw material. This has resulted in PVC demand mimicking growth of infrastructure sector in a significant way. With increasing emphasis and higher budgetary outlays on infrastructure and housing, health and hygiene, PVC consumption is expected to grow in the coming years. Due to stagnant domestic capacity and increasing domestic demand, Reliance imported and augmented its supply.
Cracker Products, Aromatics and Chemicals
During the year, Reliance produced 1,891 KT of ethylene and 748 KT of propylene, an increase of 7% for both over the previous year.
Butadiene production during the year was at 175 KT representing an 11% increase over the previous year. Butadiene demand grew by 3% globally. Supply and demand were balanced and the operating rates reached 85% and prices witnessed high fluctuations due to short term production disturbances.
Capacity additions in North East Asia during the first quarter resulted in over-supply which put pressure on prices. Margins were under pressure also due to high feedstock prices. However, supplies became tight from the second quarter and prices stayed firm. The increasing price trend continued till the end of the year with strong demand from major downstream sectors.
During the year, the Company produced 75 KT of Poly Butadiene Rubber (PBR), an increase of 4% over the previous year. Global demand for PBR has increased strongly and with limited new capacity additions, the supply situation remains tight and is expected to remain so during 2008-09.
Additionally, under technical know-how from Indian Space Research Organisation (ISRO), Reliance produces Hydroxy Terminated Poly Butadiene (HTPB) - a high speciality chemical that is used as a binder for the solid propellants in satellite launch vehicles. During the year, Reliance produced 15 tonnes of HTPB. With a capacity of 50 tonnes, Reliance is one of the leading HTPB suppliers to ISRO.
Reliance's benzene production at 650 KT during the year makes it a leading producer in Asia. It has maintained market leadership in India and has emerged as the supplier of choice for all consumers. The Company exported around 385 KT of Benzene this year across different geographies. It focused on the deficit areas like the USA, Europe and the Middle East.
Reliance produced 111 KT of toluene during the year, representing a 15 % increase over the previous year. Reliance maintained leadership position in the domestic market with a market share of 45%.
Reliance continues to be a leading producer of Linear Alkyl Benzene (LAB) and Normal Paraffin in the country. LAB production for the year was at 173 KT. Consumption of LAB in India has been growing at CAGR of 5.3% since 2000. With a capacity of 180 KT, Reliance is the world's sixth largest producer of LAB and has a 25% market share in India.
Polyester (PFY, PSF, PET)
Market leadership and innovation:
Reliance has achieved market leadership through innovation in products, processes and cost competitiveness. This was achieved with the help of the combined efforts in the field of product innovation, cost competitiveness and efficient utilisation of its assets.
Innovation at Reliance goes beyond product and process innovation and encompasses the entire organization. Among the employees, 60 'Innovation Stars' have been selected and trained to enhance and channelise innovation mindset. The aim is to encourage disruptive thinking and produce innovative solutions.
Innovation is helping Reliance take Polyester beyond traditional textiles. The recently developed 'tear-resistant' paper is expected to revolutionize the paper industry in the near future.
In an effort to help conserve water resources, Reliance has introduced 'Swarang', which is an inherently dyed polyester thus avoiding polluting effluent.
The Company has also taken major steps to recycle used polyester bottles thus reducing land fill concerns. More than 25% of used polyester bottles in the country are collected and used for producing 'Green Polyesters'.
Reliance also launched 'Recron Rainbow', multi-coloured filament polyester with novel dyeing effects. This will help the downstream textile industry in introducing fashion garments.
Reliance is also working on food preservation polyester solution to enhance life of fruits and vegetables. This is expected to be launched in the current financial year.
Health care solutions
Reliance is emphasizing on health care polyester solutions for providing cost-effective products. These are anti-microbial polyester products which are widely used in bed sheets, gloves and active wear. It is also developing clean care solutions which will be widely used in clinics and hospitals.
Market environment - rising share of Polyester
Historically, cotton was the dominant fibre for mass consumption for centuries but in the late 1980s, man-made fibres including polyester started becoming the preferred fibre in the textile industry. As against a 3% growth of all fibres, polyester filament yarn is growing at double the rate of all fibres while polyester staple fibre is growing at more than 4%. Such high growth rates are expected to help polyester staple fibre to overtake cotton consumption by 2020 and polyester filament yarn will become the largest segment by 2015.
Reliance is the world's largest polyester manufacturer and is well placed to capture the global demand growth.
The demand for textile polyester increased to 30.4 million tonnes at the end of 2007, an increase of 7.5% over the previous year. Of the total polyester demand, Polyester Filament Yarn (PFY) accounted for 18.4 million tonnes, registering an increase of 8% over the previous year. Polyester Staple Fibre (PSF) demand stood at 12 million tonnes, an increase of 6% over the previous year. Global polyester capacity addition during 2007 was 3.3 million tonnes, of which 2.2 million tonnes was commissioned in China.
In the current global scenario, polyester consumption growth is being driven by Asia in general and China and India in particular.
Emergence of new applications, changing lifestyle and rising affluence remain supportive of growth in polyester consumption. Key applications that are growing are non-apparels, technical textiles, and non-woven as well as polyester resin usage in packaged food and beverages. Technical textiles are growing at around twice the rate of textiles for clothing applications and now account for more than half of the total textile production globally.
Global PET resin capacity in 2007 was around 17 million tonnes, an increase of 10% over the previous year. However, global demand is around 13 million tonnes, an increase of 8% over the previous year. Asian PET capacity in 2007 was 7.6 million tonnes, increase of 4% over previous year. Asian demand during the same time stood at 3.7 million tonnes, an increase of 9% over the previous year.
Polyester margin environment:
Cotton, the second largest fibre in demand, is witnessing a firm trend in prices. Falling stocks accompanied by declining acreage has increased prices of cotton by more than 26% in the previous year. Global quest for bio-fuels is impacting the agriculture economies world-wide. In February 2008, cotton futures for May 2009 went up to as high as 97 cents per pound ($ 2,138/ tonne) showing signs of firm undertone. This is one of the highest levels in the last decade.
The United States, the world's third largest cotton producer, has seen a 28% fall in acreage under cotton production for current season (2007-08) and is likely to see a further drop in the years to come. Most of the farmers have shifted to planting of corn and soyabean, due to robust demand from the bio-fuel industry.
Due to rapid additions in polyester capacity in China, there has been over-supply since 2000. Low margins in the last few years have reduced incremental growth in polyester capacities in countries like China. From an incremental capacity of 2 million tonnes over incremental demand in 2004, currently incremental demand is more than the annual new capacity creation.
Polyester consumption is growing faster than that of any other fibre. There are large pockets of population that have low consumption like the Indian sub-continent and Africa. While the global per capita demand for all fibres stands at 11 Kgs, with China at 16 Kgs and the US at 38 Kgs, India is still at less than 5 Kgs and Africa is at less than 4 Kgs. These regions contribute to nearly half of the world's population and are witnessing increase in disposable income with overall economic prosperity. Historically it is seen that rising per capita income and industrialisation increase textile consumption for both apparel and non-apparel applications. Due to inherent constraints in growth of cotton, polyester is likely to capture the maximum share of future growth.
Steadily rising prices of crude and naphtha through the year impacted polyester margins worldwide. Delays in commissioning of PTA and MEG plants in the year 2007-08 have increased cost of polyester production globally. The year 2007 witnessed some unexpected shutdowns in MEG capacities in the Middle East, resulting in a sharp rise in feedstock prices to as high as $ 1,700 per tonne. Easing of supply constraints of feedstock in 2008-09 is expected to bring down pressure on polyester margins.
Reliance, with annual capacity of two million tonnes, is uniquely positioned as compared to stand-alone producers due to fully integrated operations.
During 2007, Reliance consolidated its position in the global polyester industry with acquisition of certain polyester (capacity) assets of Hualon Corporation in Malaysia, through its subsidiary Recron Malaysia. This is the second overseas acquisition for Reliance after Trevira in Europe. It is a leading polyester producer in Malaysia with a capacity of half a million tonnes per annum, along with downstream textile manufacturing capabilities spread over two locations in Malaysia, namely Nilai and Malacca.
This acquisition will help Reliance to consolidate its position further as the world's largest polyester manufacturer with a 2.5 million tonnes capacity. With this acquisition, Reliance's global market share in polyester fibre and yarn will exceed 7%.
The domestic scenario
Currency appreciation has been of major concern for textile exporters in India. Last year, the Indian Rupee has appreciated against US dollar by 7.7%. Textile exports being a highly competitive business, is adversely affected by an appreciating rupee.
The Indian Government reduced the import duty on polyester from 10% to 7.5% and again to 5% mid year in November 2007. The Government, in an effort to give a fillip to investments in downstream textile industry has extended Textile Up-gradation Fund in the 11th Five Year Plan. Benefits of this fund have been extended to technical textiles, which is an under-penetrated segment for industrial and household polyester applications.
With a growing presence in domestic textile growth segments like non-woven, industrial and automotive yarns, Reliance is well positioned to increase its polyester market share over other Indian manufacturers.
Polyester witnessed exciting demand growth in the domestic market at 17% over the previous year. POY demand grew by 18% whereas PSF demand grew by 12%. The increased demand for polyester was driven by robust investments in textile sector and PET consuming industries during the previous year.
Indian PET bottle resin market grew by 26% and is expected to sustain the growth rate due to a wider scope of increased penetration in carbonated soft drink, mineral water, fruit juice, healthcare and agro-chemicals segments. Reliance, with a share of 55% in PET market, is the largest player in the country.
Production volumes of the Polyester (PFY, PSF and PET) including Trevira and Recron Malaysia, increased by 16.6% to 1,910 KT. Production from the new domestic polyester facility has been placed successfully in the market. The Company has maintained its focus on specialty products which account for 54% and 38% of PSF and PFY production respectively. Reliance's domestic market share is now in excess of 49%.
Polyester Production in KT
Product FY 2006-07 FY 2007-08
PFY 663 840PSF 718 765PET 257 305Total 1,638 1,910
Fibre Intermediates (PX, PTA, MEG)
In the last few years, petrochemical industry has been affected by high crude prices. Due to rapid growth of investments in PTA capacity in China, there has also been a mismatch in PX-PTA demand supply. Consequently, China is expected to remain a net importer of PX over the next few years. Current global PX capacity is 29.7 million tonnes, an increase of 4% over the previous year.
Over the next few years, about 5 million tonnes of PX capacity is expected to be added globally. Reliance, the world's 4th largest producer of PX, has announced a capacity expansion of 2.6 million tonnes at Jamnagar. This expansion is in line with Reliance's strategy of retaining integration across the petrochemical chain. It will also provide Reliance the added flexibility of integrating the PX business with its refinery business in situations of fluctuating gasoline demand and/or margins.
Global PTA capacity during 2007 was 43.4 million tonnes, an increase of 13% over the previous year. PTA demand during 2007 was 37.7 million tonnes which was an increase of 10.5% over previous year. PTA supplies during the year were constrained by low availability of PX. To meet the growth in polyester production, 3 million tonnes of incremental PTA is required annually. Most of the new PTA plants are being commissioned in China. However, China is expected to continue to import 5-6 million tonnes of PTA annually over the next two years.
Following on from the new 700 KT capacity plant at Hazira, Reliance is the world's 4th largest producer of PTA. This new generation plant is amongst the most cost effective facilities in the world. It has incorporated new processes and equipment like High Pressure Catalytic Converting Unit (HPCCU), a water recovery system that makes the plant environment friendly.
Global capacity of MEG during 2007 was 21.4 million tonnes, an increase of 6% over the previous year. MEG demand during 2007 was 18.4 million tonnes, an increase of 8%. The availability of MEG was impacted by supply constraints. MEG supplies during the year were affected due to delays in commissioning of new projects and unexpected shutdowns of some capacities in the Middle East. This resulted in an unprecedented rise in the prices of MEG in the global market. The prices touched a peak of $ 1,700 per tonne during the year. Margin for MEG is expected to continue to remain firm in the near term.
Reliance's polyester intermediates (PX, PTA and MEG) production grew by 9% to 4,714 KT during the year. The production increase is attributed to the new 730 KT PTA plant at Hazira which was commissioned in FY 2006-07, partially offset by planned shutdown of its Paraxylene unit at Jamnagar in 3Q FY 2007-08. The Company's domestic market share in polyester intermediates stood at 76%.
Fibre Intermediates Production in KT
Product FY 2006-07 FY 2007-08
PX 1,779 1,878PTA 1,777 2,035MEG 781 801Total 4,337 4,714
Integration with the refinery coupled with high-quality manufacturing assets and a customer-centric organisation has helped the Company position its intermediates business as the most preferred supplier of PTA and MEG in the key markets.
Reliance's Manufacturing Division at Naroda, Ahmedabad is one of the largest and most modern textile complexes in the world. The Company's flagship brand VIMAL is one of the most trusted brands of premium textiles in the country. Main growth drivers for VIMAL are retail presence across India, innovation and focus on premium products and men's formal wear.
The Company also plans to sharpen its focus on global automotive furnishing business. Aligned to this objective, the company has taken various steps to position its business globally:
* Increasing the domestic retail presence, by opening 23 additional Company outlets, and increasing the number of retail counters to 500 and promoting the products and services through Reliance Retail.
* Apart from being a major supplier of fabrics with all the leading US and European brands, Reliance proposes to enter into garment supplies, ensuring a one point solution for their needs.
* The textile division has achieved a major breakthrough in the domestic and American automotive markets aimed at obtaining a foothold in the world's auto-textile segment, currently worth
* 5 billion.
* The manufacturing facility at Naroda, Ahmedabad has completed its modernization and upgradation.
New product initiatives
* Copol & Copol blended fabrics.
* Polyester / Wool / Bamboo blended fabrics with inherent antimicrobial, anti-odor and UV protection properties.
* Wool / Soya blended fabrics with having similar moisture absorption capabilities as cotton.
* Durable moisture management in 100% polyester sports wear fabrics.
* Fire-retardant and water proof tent fabric, providing additional safety from fire hazards.
* Water and oil repellant fabrics made from eco friendly recycled polyester.
Reliance is in the energy business with interests in the entire value chain of exploration, production, refining, marketing, petrochemicals, textiles and infrastructure development. The Company's financial strength, superior project execution capabilities and strong leadership skills is uniquely poised to effectively avail of all opportunities and create new ones going forward.
With the ever increasing demand for oil and petroleum products the Company's foray into the exploration and production arena will contribute significantly to value creation. The Company is committed to allocate resources towards the E&P business segment. In addition to the development of KG-D6, the company will continue its ongoing efforts of exploration and development of various blocks. The production of gas from this block will catapult Reliance to becoming the single largest gas producer in the country with more than 50% market share. The Company expects this business segment to deliver sustainable long term returns.
With growing demand for transportation fuels, changing environment norms and slow pace of new capacity additions worldwide, the refining segment of the Company continues to throw exciting opportunities. Reliance's existing refinery at Jamnagar is one of the few complex refineries in the world, with Nelson Complexity Index of 11.3. With high oil price environment and stretched refining system, the Company is expected to benefit. The significant progress has been made in the construction of new RPL refinery and is expected to be completed before December 2008. This new refinery once commissioned will nearly double refining capacity. The Company would also be focusing on tapping the trade opportunities that would arise with the ongoing scenario of slow growth in capacities worldwide due to an ongoing thrust on the modernization and up-gradation of existing refineries.
In the petrochemicals space, the Company would continue to maintain its leadership positions through capacity additions and investing in value added products. In line with its growth strategy, Reliance has announced the setting up of an integrated cracker and petrochemical complex of global scale, with a capacity of 2 MMTPA in the Special Economic Zone in Jamnagar.
Challenges, Risks and Concerns
Reliance's efforts are focused more on two projects, viz. the development of the KG-D6 block and the implementation of the new refinery at Jamnagar, through its subsidiary, RPL.
The upcoming new refinery poses the challenge of completion of the same on schedule by December 2008. The Company is confident of achieving this target. This project is assisted by the project implementation partners, Bechtel, with their significant experience in implementing world scale projects.
The development of KG-D6 block is more complex than many other deep water projects due to the met-oceanic conditions, an uneven terrain for sub-sea activities, strong sub-sea currents and a very tight supply chain market.
The performance of this block is subject to a number of risks common to the E&P industry, which include geological conditions being more complex than originally predicted, stratigraphic compartmentalization, water encroachment or water breakthrough, permeability issues, inadequate pressure support, poor or inadequate well spacing and operating efficiencies of various facilities.
Currently, the project is progressing well towards meeting the target installation and commissioning dates.
Reliance's exports, which constitute about 60% of its turnover, are earned in foreign currency, primarily the US dollar. In addition, earnings in local currency are also based upon import parity prices. As part of the fund raising efforts, the Company is likely to continue to tap the global financial markets. Thus, the Company's business is exposed to foreign exchange fluctuations and interest rate risk.
The Company maintains a system of internal controls designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls, and compliance with applicable laws and regulations.
The organization is well structured and the policy guidelines are well documented with pre-defined authority. The Company has also implemented suitable controls to ensure that all resources are utilized optimally, financial transactions are reported with the accuracy and there is strict compliance with all applicable laws and regulations.
The Company has put in place sufficient systems to ensure that assets are safeguarded against loss from unauthorized use of disposition and that transactions are authorized, recorded and reported. The Company also has an exhaustive budgetary control system to monitor all expenditures against approved budgets on an ongoing basis.
Recognizing the important role of internal scrutiny, the Company has an internal audit function which is empowered to examine the adequacy and the compliance with policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of risk management, control and governance process. Continuous audit and verification of the systems enables the various business groups to plug any shortcomings sooner rather than later. It also evaluates the Company's strategic risk management system and suggests risk mitigation measures for all key operations. In addition, the top management and the Audit committee of the Board review the findings and recommendations.
Reliance Petroleum Limited
Reliance Petroleum Limited (RPL) has marched ahead at a blistering pace during the year in implementation of its global sized complex refinery, being built at Jamnagar in Gujarat State on the west coast of India.
RPL was set up with the objective of creating value for shareholders by harnessing the emerging opportunities in the global energy sector, arising out of several years of under investment in refining capacity. RPL is setting up a greenfield petroleum refinery capable of processing 580,000 barrels of crude oil per stream day (BPSD). It will also produce 0.9 million tonnes polypropylene per annum and will be located in the Special Economic Zone at Jamnagar. On completion, the RPL refinery will be the sixth largest in the world with a Nelson Complexity Index of 14, which is amongst the highest in the sector globally.
RPL is a 70.38% owned subsidiary of RIL. RPL also benefits from its strategic alliance with Chevron Corporation USA, a global super major in the energy sector, through its subsidiary Chevron India Holding Pte Limited, Singapore.
Overview of the implementation progress
There has been significant traction at the RPL project with 90% progress in implementation of its complex refinery. RPL has mobilised sufficient site infrastructure to sustain construction on fast track in the coming quarters. RPL expects to complete the refinery ahead of schedule.
During the year, RPL surpassed several significant milestones, including completion of engineering works, procurement and contracting activities, near completion of equipment deliveries and rapid progress on equipment installations at site. The significant milestones achieved during the past few months include the following:
* Overall procurement progress at 99%; activity in the closeout mode already.
* Deliveries and installation of over dimensional cargos (ODC) and super ODCs completed.
* Overall construction progress nearing 80% mark for the complex.
* Start-up planning and operations preparedness activities gained significant momentum.
The year witnessed successful completion of project engineering activities with only residual engineering activities continuing to support ongoing construction at site. RPL has achieved rapid progress on the procurement front as well. Procurement and contracting activities for all required equipments and bulk materials have been completed. Deliveries of key equipments and their installations gained significant momentum. RPL has received 5,350 equipments, including several over dimensional cargos (ODCs) and super heavy equipments from vendors across the world. With this, 93% of equipments are already at site. Deliveries of bulk materials, including pipes, fittings as well as electrical and instrumentation bulks matched the pace of equipment deliveries and their installation at site. With near completion of deliveries of equipments and bulk materials, focus has shifted towards achieving a close-out and vendor follow-up for residual deliveries.
The civil construction is nearly complete with nearly 2.0 million cubic meters of concreting works done at site. Over 4,000 equipments, including several super heavy equipments, have already been installed and are at various stages of completion and testing at site. Over 95% of structural steel fabrication work, 74% of structural erection and 94% of underground piping works are complete now. Substantial progress is achieved in the areas of above-ground pipe fabrication and erection as well. The construction activities are at peak and RPL is fully geared to sustain construction on fast track in the coming quarters. Simultaneously, RPL has made considerable progress on the start-up planning and operations preparedness activities to support an early commissioning of the refinery.
Reliance Retail Limited (RRL)
With a vision to generate inclusive growth and prosperity for farmers, vendor partners, small shopkeepers and consumers, Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead Reliance Group's foray into organized retail.
With a 27% share of world GDP, retail is a significant contributor to overall economic activity across the world. Of this, organized retailing contributes between 20% to 55% in various developing markets. The Indian retail industry is pegged at $ 300 billion and growing at over 13% per year. Of this, presently, organized retailing is about 5%. This is expected to grow to 10% by 2011. RRL has embarked upon an implementation plan to build state-of-the-art retail infrastructure in India, which includes a multi-format store strategy of opening neighbourhood convenience stores, hypermarkets, specialty and wholesale stores across India.
RRL launched its first store in November 2006 through its convenience store format Reliance Fresh'. Since then RRL has rapidly grown to operate 590 stores across 13 states at the end of FY 2007-08. RRL launched its first Reliance Digital' store in April 2007 and its first and India's largest hypermarket Reliance Mart' in Ahmedabad in August 2007. This year, RRL has also launched its first few specialty stores for apparel (Reliance Trends), footwear (Reliance Footprints), jewellery (Reliance Jewels), books, music and other lifestyle products (Reliance Timeout), auto accessories and service format (Reliance Autozone) and also an initiative in the health and wellness business through Reliance Wellness'. In each of these store formats, RRL is offering a unique set of products and services at a value price point that has not been available so far to the Indian consumer. Overall, RRL is well positioned to rapidly expand its existing network of 590 stores which operate in 57 cities.
During the year, RRL also focused on building strong relationships in the agri-business value chain and has commenced marketing fruits, vegetables and staples that the company sources directly to wholesalers and institutional customers. RRL provides its customers with high quality produce that has better shelf life and more consistent quality than was available earlier. RRL has made significant progress in establishing state-of-the-art staples processing centres and expects to make them operational by May 2008.
Through the year, RRL also expanded its supply chain infrastructure. The Company is fully geared to meet the requirements of its rapidly growing store network in an efficient manner.
Recognizing that strategic alliances are going to be a key driver to its retail business, in FY 2007-08, RRL established key joint ventures with international partners in apparel, optical and office products businesses. Further, RRL will continue to seek synergistic opportunities with other international players as well. This year, RRL will continue its focus on rapid expansion of the existing and other new formats across India.
Special Economic Zones
The Government of India announced the Special Economic Zones policy in the year 2000 and notified the Central SEZ Act 2005 and SEZ Rules 2006 in February 2006 with a view to promote exports and generate employment through economic development. Reliance Industries Limited is developing SEZs, at Gurgaon and Jhajjar in Haryana and at Jamnagar in Gujarat. Both the States have a pragmatic approach towards business and were amongst the first few States to legislate their respective SEZ Acts in line with the national policy.
Reliance Ventures Ltd. (RVL), a subsidiary of RIL, in a joint venture (JV) with Haryana State Industrial Investment Development Corporation (HSIIDC) is promoting Reliance Haryana SEZ Limited (RHSEZ) to develop two SEZs in the State. RVL will hold 90% and HSIIDC 10% in the JV.
The company has received formal approval from the Government of India (GoI) in this regard and 1088 acres of land has been notified as Multi Services SEZ at Gurgaon. This phase of development is meant for the services sector such as IT/ITeS, education, health care, media services and financial services.
The SEZ at Jhajjar will be developed as a Multi Product SEZ with emphasis on the manufacturing industry. The SEZs are well connected to all the national highways emanating from Delhi. The rail link from Delhi to West India via Rewari / Jaipur also passes through the site. The proposed SEZs will function as an integrated package with all the required infrastructure facilities to ensure sustainable development of medium and large scale industries and service activities with sufficient provision for future growth and expansion.
The project has been planned to enable inclusive growth of villages. To achieve the above objectives, the company has already started capacity building programs including health, education and technical training. As part of its corporate commitment, Reliance has started an Industrial Training Centre at Gurgaon. Reliance has also adopted three ITIs under the public-private partnership scheme of the Government of India.
The approval for setting up an SEZ at Jamnagar (JSEZ) was received in March 2006. The JSEZ is spread over approximately 11,000 acres. A total of over 4,000 acres of land has already been notified.
The first SEZ Unit, Reliance Petroleum Limited (RPL) got approval in May 2006 to set up a crude petroleum refinery and polypropylene plant.
A number of global chemical companies have evinced keen interest in setting up units in JSEZ.
Infrastructure development at the site is in full swing. The railway sidings for solid products are nearing completion. The captive power plant and water desalination plant have started precommissioning activities. The water treatment plant is already commissioned.
JSEZ has a dedicated craft training centre where every month approximately 200 unskilled workers are trained to be skilled, semi-skilled, riggers, welders, pipe fitters, scaffolders, mill wright mechanics and carpenters. Nearly 2,600 unskilled workers have deftly engaged themselves in economic pursuits after this intensive training.
Research and Development
With the implementation of various multi-pronged initiatives at various R&D centers involving product, process and catalyst development projects, the research activities at Reliance received a major boost during the year. This effort was supplemented by sponsored and outsourced collaborative research programs with national and international institutes and labs to leverage expertise across boundaries. This has resulted in creating new business opportunities and intellectual capital rights, value enhancement, cost reduction through various technology and knowledge platforms.
Some achievements of Reliance's R&D are as under:
* Synergistic PP clarifiers
* Energy efficient process for a portfolio of Ultra High Molecular Weight (UHMWPE) grades
* Development of New Generation Paraffin Dehydrogenation Catalyst (RPDC-10)
* Commercialisation of New Generation Para Diethyl Benzene (PDEB) Catalyst
* Development of Catalysts for Hydrogenation of Acetylene in HCl Stream
* Development of Noble metal based Catalyst for PET plant
* High Impact Polystyrene (HIPS) grade Polybutadiene Rubber (PBR)
* Process for Recovery of Benzene from PBR-I Waste Water Stream
* Scale-up Studies on Cyanide removal from Ammonium Sulfate Stream of ACN plant by steam stripping
* Adsorptive Process for the Recovery of Monomers
* Optimization of Oxychlorination Reactor and Modeling of Ethylene Dichloride (EDC) Cracker
* Commercialisation of Bi-component Pilot Plant and four specialty PFY
* Recron Stretch
* Recron Polylon (Incorporate properties of Nylon)
* Recron Micrelle (Ultra microdenier)
* Development of Low Abrasive Full Dull yarns for high speed texturising
* Development of Recron Rainbow, a mixed filament with novel dyeing effects
* Development of RELCOT for moisture management fabrics.
* Development of proprietary finish with special surface coatings for polyester short-cut fibres for better dry dispersion in concrete
* Development of self coloured polyester (Swarang)
* Demonstration of Concept feasibility and product by process for making eco-friendly and self coloured polyester ('Swarang') yarns for three colours
Nanotechnology has been a key enabler for breakthroughs in new materials. PP-Nanoclay based composites have been validated for automotive applications at several customer trials. Significant improvement in properties has been demonstrated.
Another significant milestone is the development of PE100, a high pressure Polyethylene (PE) pipe grade for transportation of gas and water. Reliance will be the first company in India to get the PE100 certification, which is expected to help in the growth of the PE pipe industry. International accreditation is expected in mid 2008.
Major Advancements have been achieved in RELDONORr and RELCATtr technology for high performance grades of PP in extrusion, thermoforming, injection moulding for durables and automobile sectors and packaging at Hazira. In 2007-08, ten patents have been filed and seven patents have been granted including one US patent. Reliance has also filed 14 patents this year relating to the polyester business.
Reliance has undertaken collaborative research programs with reputed research institutes achieving good progress in various initiatives.
Refining and Marketing
* Development of improved FCC catalyst and additive: Both the new catalyst and additives were tested in the riser pilot plant and were found to provide about 0.5 % increase in propylene yield
* Development of Anode/Needle coke from FCC CSO
* Increase in propylene yield of FCC-1 plant
* Quality check up of fresh FCC catalyst
* Cracking of Naphtha and lighter feedstock in FCC riser bottom
There are a number of agreements with industries / institutes for co-development of various catalysts and processes.
Reliance Innovation Leadership Centre (RIL-C) and RRTC
Reliance has announced an ambitious Innovation agenda with the sole quest of propelling the company to the forefront of global innovation leadership. The charter for this Agenda has been defined as
* Growth is Life
* Innovation as a Way of Life
* Innovation-led Growth
It is intended that innovation will become the language, the behaviour definer, the culture and the soul of Reliance.
The goal of the innovation movement is to make Reliance one of the most innovative companies in the world with a corporate culture that fosters innovation.
The innovation agenda entails setting up of the Reliance Innovation Council, comprising global thought leaders under chairmanship of Dr. R. A. Mashelkar, one of India's foremost scientist and a member of the Company's Board. Besides Shri. Mukesh D. Ambani, CMD, RIL, the council membership comprises Prof C.K. Prahlad, Global Strategy Guru, Prof. George Whitesides, Harvard University, Prof. Jean-Marie Lehn, Nobel Laureate, Prof Robert Grubbs, Nobel Laureate and Dr. Larry Summers, Ex President, Harvard University. The council will be supported by Reliance Innovation Leadership Center (RIL-C), Pune.
The RIL-C has been created with an important mandate of driving the Reliance Innovation Agenda. It will act as a catalyst in providing leadership and support to the business of Reliance by harnessing cutting-edge, futuristic but practical, science, technology and innovation initiatives from both within and outside the organization.
The Reliance Research and Technology Centre (RRTC) is set to be created with a floor space of more than half a million square feet in the central district of Navi Mumbai. The RRTC will act as a hub for the research centers already operating at various manufacturing locations. Reliance intends to create world class physical and intellectual infrastructure in RRTC, with some of the best globally available scientists bolstering its innovation agenda.
During the year, Reliance completed 27 Six Sigma projects, leading to financial benefits worth Rs.25 crore per annum.
Presently, 446 Six Sigma improvement projects are being executed across 14 manufacturing divisions, including 40 Lean Six Sigma projects. The Company has 582 Black and Green Belts in Six Sigma projects at its manufacturing locations and offices. Nearly 2,200 team members and supervisory personnel are providing active support for the success of the projects.
Human Resource Development
One of the 'Key' reasons for the exponential growth of Reliance is undoubtedly its 'People'. Given the right environment and nurturing that is provided, time and time again seemingly 'Ordinary' people surprise the company as they deliver 'Extraordinary' results. This has indeed been the cornerstone of Reliance's resounding success. While continuing to harness the limitless potential and capability of the Human Mind, Spirit and Energy, the Company constantly endeavours to provide a platform for individual opportunities and growth of its people across diverse businesses, manufacturing sites and services in multiple locations.
Reliance with its subsidiaries continues to build its workforce which today is in excess of 48,000 strong with a diverse background of individuals - essential for the kind of organisation that Reliance is. The employees today, include amongst others - more than 200 Doctorates, 10,000 plus Engineers, 3,000 plus Management Graduates, 1,000 plus Accountants and over 1,000 other professionals. There is an appropriate blend of Youth and Experience with approx 50% of the workforce below 40 years of age. The average age of around 34 years continues to move downwards in alignment with the company ethos of providing and entrusting responsibilities at a young age. This strategy has stood Reliance in good stead and provided the company with that cutting edge competitive advantage which is extremely difficult for anyone to replicate.
The year 2007-08 has been another landmark year of significant success with Reliance's ongoing initiatives, and as has been the story over the years, the launch of several new initiatives. Some of these are shared below:
Learning and Development
* The accelerated learning programme 'Dronacharya', launched in the previous year at Jamnagar manufacturing division. Under the programme, a senior person called 'Dronacharya' takes under his tutelage 2-3 youngsters - 'Arjunas' - and trains them ready to manage independent positions in 3-6 months. This programme has had resounding success with over 1500 'Arjunas' being trained. With the resounding success of this programme, this is now being rolled out to other manufacturing divisions.
* Training, which has now become a way of life, saw a total of 160,253 man days - a significant increase over the previous year. The focus has been on 'In-House Home grown programmes' [Developing Accountants, Engineers etc], Competency Development Programmes and Soft Skills Learning. Further 360 programmes specifically for infrastructure projects were conducted.
* The Company endeavours to work with leading engineering and management institutes. In addition to the MPRE [Management Programme for Reliance Engineers] with IIMBangalore and a Reliance Certified Engineering Course with IIT-Mumbai for its Science graduates, Reliance has now put together a Reliance Instrumentation Engineering Programme for Science Graduates with Sardar Vallabhbhai National Institute of Technology (SVNIT), Surat - a three year programme where the first batch is of 50 students. This would take care of the Company's large requirement of Instrumentation Engineers on an ongoing basis.
* On the management education front, two new programmes were launched - MDP's [Management Development Programme] - Level 1 and Level 2 with IIM-Bangalore. These are again customized programmes targeted at Reliance's high growth managers. During the year, more than 180 such managers went through such 2-3 weeks campus programmes.
Building the Talent Pipeline
* The Company has hired over 1,500 engineering talents to take care of its growth and other initiatives.
* Reliance sourced, got on board and trained over 1,700 employees at Jamnagar.
* To take care of Company's business requirements, a new BMT [Business Management Trainee] Scheme was introduced. This will be an on-going annual initiative.
* Reliance has also had a successful foray into the IIMs with over 30 employees being hired over the last 2 years. This has now become an annual programme for attracting talent for its various businesses.
Towards a 'Best in Class Employer'
* In line with the company's growth trajectory, Reliance is extensively focused on building start-of-the art processes and systems which will make it comparable with the 'Best in Class Employers' globally. Towards this end, the Company engaged M/s. Hewitt Associates, a globally reputed consulting organization with significant experience in dealing with 'Best Employers Programmes' to work with the management in rolling out a major Company-wide initiative. This would be focused around areas of Performance Management, Reward and Recognition, Career Opportunities, Learning and Development, Policies amongst others. The main objective being to take a relook at the existing processes and benchmark with the best in each area and work towards going beyond.
* ESOS [Employee Stock Option Scheme] - One of the widest programs of its kind in the Indian Corporate Sector, was introduced in the previous year, covering under its ambit as many as more than 14,000 employees. Keeping in view the Organisation's value and belief of creating 'Owner Managers', this program has helped achieve that vision in no uncertain terms with not just giving the people higher order responsibilities but returns as well to go with it. Such a wide spectrum, broad-based coverage of creating 'entrepreneurs' has rarely been seen in Corporate India.
* Job Evaluation - Reliance engaged Hay group, a leading global consulting firm in the area of Job Evaluation and completed the 'End-to-End' Job Evaluation exercise for its petrochemicals business. The Company now plans to roll this out to the rest of the organisation. This would help the Company in building a platform for various initiatives - organisation structuring, career planning, compensation and benefits planning - to name a few.
Awards and Recognitions
Reliance has merited a series of awards and recognitions for excellence for businesses and operations.
* Shri Mukesh Ambani was awarded the Defence India Excellence Award 2007. The Award is a salute to those who have made the country proud.
* Shri Mukesh Ambani was conferred the Indian of the Year Award by NDTV. This is India's most prestigious award for outstanding contribution towards the betterment of the nation. Shri Mukesh Ambani received the coveted award in the Business Category.
* Shri Mukesh Ambani was conferred the Outstanding Business Leader of the Year Award by CNBC TV18.
* Shri Mukesh Ambani was awarded the Business Leadership Award 2007 by NDTV Profit.
* Shri Mukesh Ambani was conferred the Leadership Award for Global Vision by the United States India Business Council.
* Shri Mukesh Ambani was elected to be a member of the Honorary Fellows of The Institution of Chemical Engineers, UK.
* On invitation to Shri Mukesh Ambani, Reliance Industries Limited became a Council Member of World Business Council for Sustainable Development (WBCSD) in July 2007. Presently, Shri Mukesh Ambani is the only Indian CEO who is Council Member of WBCSD.
* Dr. Ravi Bastia was conferred the 'Padma Shri' in 2008 by the Government of India for his contribution to earth sciences.
Corporate Ranking and Ratings:
Reliance featured in the Fortune Global 500 list of World's Largest Corporations' for the fourth consecutive year.
* Ranked 269th in 2007 having moved up 73 places from the previous year.
* Featured as one of the world's Top 200 companies in terms of Profits.
* Among the top 25 climbers for two years in a row.
* Featured among top 50 companies with the biggest increase in Revenues.
* Ranked 26th within the refining industry.
Reliance is ranked 182nd in the FT Global 500 (up from previous year's 284th rank).
* PetroFed, an apex hydrocarbon industry association, conferred the PetroFed 2007 awards in the categories of 'Refinery of the Year' and 'Exploration & Production - Company of the Year'.
* Brand Reliance was conferred the 'Bronze Award' at The Buzziest Brands Awards 2008, organized by agencyfaqs.
* Institute of Economic Studies conferred the 'Udyog Ratna' award in October 2007 for contributions to the industry.
* Chemtech Foundation conferred the 'Hall of Fame' in February 2008 for sterling contributions to the industry.
* Chemtech Foundation conferred the 'Outstanding Achievement - Oil Refining' for work at the Jamnagar Manufacturing Division.
* Petroleum Federation of India conferred the 'Refinery of theYear Award - 2007' to Jamnagar Manufacturing Division.
* 'The Plastics Export Promotion Council - PLEXCOUNCIL Export Award' in the category of Plastic Polymers for the year 2006-2007 was awarded to Reliance being the largest exporter in this category.
Health, Safety and Environment
* Jamnagar Manufacturing Division was conferred the 'Golden Peacock Award for Occupational Health & Safety - 2007' by Institute of Directors.
* Jamnagar Manufacturing Division was conferred the 'ICC Award for Water Resource Management in Chemical Industry'.
* Jamnagar Manufacturing Division was conferred the 'Good House Keeping Award' from Baroda Productivity Council.
* Jamnagar Manufacturing Division was conferred the 'BEL-IND' Award for the best scientific paper at the 58th National Conference of Occupational Health.
* Naroda Manufacturing Division was conferred the 'Safety Award and Certificate of Appreciation' presented by Gujarat Safety Council & Directorate of Industrial Safety & Health, Gujarat State for the recognition of safety performance at the 29th State Level Annual Safety Conference.
* Dahej Manufacturing Division received 'BSC 5-Star' rating from British Safety Council, UK.
* Dhenkanal Manufacturing Division received the '2nd Prize for Longest Accident Free Period' from the Hon'ble Minister of Labour, State of Orissa.
* Hoshiarpur Manufacturing Division bagged the First Prize in 'Safety in Punjab', organized by Punjab Safety Council.
* Patalganga Manufacturing Division won the 'Gold Medal at CASHe (Change Agents for Safety, Health and Environment) Conference'. It also won the III Prize in Process Management category for Presentation on Safety through Design in chemical process industry in Petrosafe 2007 Conference.
* Kurkumbh Manufacturing Division won the 'Greentech Safety Award silver trophy' for outstanding achievement in safety management in chemical sector.
* Hazira Manufacturing Division received the 'TERI Corporate Environmental Award (Certificate of Appreciation)' for PET recycling project.
* Nagothane Manufacturing Division received the 'Shrishti G-Cube Award for Good Green Governance' from Minister for Commerce and Industry, on World Earth Day.
Training and Development
* Jamnagar Refinery was adjudged the winner of the 'Golden Peacock National Training Award -2007'.
* Patalganga Manufacturing Division won the 'ASTD (American Society for Training & Development) Excellence in Practice Award' for innovative practice titled Learning Function's role as Business partner: Empowering people with Knowledge to achieve Business Goals.
* Reliance won the CNBC TV-18 instituted 'Jobstreet.com Jobseekers' Employer of Choice Award'.
* Exploration & Production (E&P) Division won 'The Infraline Energy Excellence Awards 2007: Hydrocarbon Columbus Award for Excellence in Petroleum Exploration'.
* Patalganga Manufacturing Division won the First Prize in 'Energy Conservation in State of Maharashtra' organized by Maharashtra Energy Development Agency (MEDA).
* Jamnagar Manufacturing Division won the 'Oil & Gas Conservation Award -2007' from the Centre for High Technology, Ministry of Power & Natural Gas for the excellent performance in reduction/elimination of steam leaks in the plant.
* Jamnagar Manufacturing Division was the recipient of the 'Infraline Energy Award-2007' by Ministry of Power.
* Hazira Manufacturing Division won the Government of India Energy Conservation Award (2007) conferred by the Bureau of energy efficiency and Ministry of Power.
* Hazira Manufacturing Division was adjudged 'Excellent Energy Efficient Unit' at Energy Summit - 2007 by CII.
* Vadodara Manufacturing Division received the CII award for 'Excellence in Energy Management - 2007' as energy efficient unit. This division also received the 2nd prize in 'National Energy Conservation Award - 2007' from Bureau of Energy efficiency, Ministry of Power, Government of India.
* The Company's manufacturing divisions at Vadodara and Hazira were honoured with CII-National award for excellence in water management - 2007 as water efficient unit in 'Within the fence' category. Additionally, Hazira Manufacturing Division was honoured as water efficient unit 'Beyond the Fence' category.
* For the first time ever, globally, a petrochemical company bagged the 'Deming Prize for Management Quality'. 'The Quality Control Award for Operations Business Unit 2007' was awarded to the Hazira Manufacturing Division for Outstanding Performance by Practicing Total Quality Management.
* 'QUALTECH PRIZE 2007', which recognizes extraordinary results in improvement and innovation, was won by Hazira Manufacturing Division for its Small Group Activity Project.
* Vadodara Manufacturing Division's Polypropylene-IV (PP-IV) plant was conferred the 'Spheripol Process Operability Award-2006' for the highest operability rate with an on stream factor 98.97% by M/s. BASELL, Italy.
* Allahabad Manufacturing Division won the 'Excellent Category Award' at National Convention of Quality Circle (NCQC) - 07.
* Lean Six sigma project on 'Reducing retention time of caustic soda lye tankers at Jamnagar' won the 1st prize in the national level competition held by Indian Statistical Institute (ISI).
* Patalganga Manufacturing Division's Six Sigma Project on Improve Transfer Efficiency for Automatic winders in PFY won the 2nd Prize for 'Best design for Six Sigma Project in International Six Sigma Competition' organized by IQPC (International Quality and Productivity center).
* Barabanki Manufacturing Division won the 3rd prize in 'All India Six Sigma case study contest 2008' for the Case study on 'Reduction of waste of Plant 2 from 16% to 8%'.
* Hoshiarpur Manufacturing Division won the 2nd prize in 'Six Sigma competition at National Level' organized by ISI and Quality Council of India (in manufacturing category), while Dhenkanal and Barabanki Manufacturing Divisions won the 3rd prize.
* Vadodara Manufacturing Division's Six Sigma project won the 1st prize as the 'Best Six Sigma project' at National level by CII.
Technology, R&D and Innovation
* Vadodra Manufacturing Division's R&D bagged an award from Indian Institute of Chemical Engineers for Excellence in Process / Product Development for the work on 'Eco friendly Process for Acetonitrile Recovery'.
* 'DSIR National Award for R&D Efforts in Industry (2007)' was conferred on Hazira Manufacturing Division for the Cyclehexane Recovery Project.
* Patalganga Manufacturing Division's Project titled Augmentation of ETP and use of biogas in Fired heaters won the 'Best Innovative Project' from CII.
* Reliance bagged the 'Innovation Award at Tech Converge 2007' for innovative developments in short-cut fibres.
* Hazira Manufacturing Division won the 'Golden Peacock Innovation Award - 2007' for its Cyclohexane Recovery Process.
* 'CIO of the Year Award' for the best IT-enabled organization in India for the Year 2007.
* 'Ones to Watch - CIO - USA Award', for figuring among the top 20 organizations fostering excellence in IT team.
* 'The Skoch Challenger Award' conferred for the best IT Head (managing the most IT enabled organization) of the Year 2007.
* 'Best IT Implementation Award', by PC Quest for Knowledge Management Systems portal (KMS).
* 'CIO Excellence Award' for Chemical Industry Information Technology Forum for exemplary Information Technology implementation amongst global chemical companies.
* 'CTO Forum Hall of Fame Award' for the best CIOs in India for not only providing service to their organisations, but also serving as idols.
* Hazira Manufacturing Division won the 'Golden Peacock Global Award for Corporate Social Responsibility' - 2008.
Report on Corporate Social Responsibility:
Health, Safety and Environment
Health, Safety and Environment (HSE) is a high priority issue at Reliance. The aim is to provide comprehensive health services covering preventive, promotive, curative and community health care services.
Further, the management's vision to put safety of personnel above all, is evident from the policy statement, 'Safety of persons overrides all production targets'. This vision drives the company to continuously look for ways to break new barriers in safety management for the benefit of all.
To establish a direction towards attaining world-class environmental management, the Company has identified key performance indicators such as material consumption, energy efficiency, GHG emission, air quality, ozone depleting substances, water consumption, waste water discharge, hazardous and non-hazardous waste generation and disposal.
Reliance's state-of-the-art Occupational Health Centres (OHC) at its manufacturing divisions offer health care services to its employees. These centres are equipped with diagnostic and therapeutic equipment and are manned by qualified occupational health specialists. The programmes conducted by medical centres, include preventive health care through pre-employment and also periodic medical examinations of all employees. The results are computerized and analysed so as to provide targeted interventions at the individual and group levels. The medical departments also carry out informative lecture sessions, exhibitions and diagnostic camps. Curative treatments are a part and parcel of the services provided. The employees are also supported for hospitalization by regular liaisoning and provision of financial support, where required.
Reliance's preventive health care, provided through workplace improvements is carried out under the CASHe Programme. Started in 2003, it has grown to encompass the entire enterprise. The programme has been instrumental in creating a culture of implementing health, safety and environment projects on a priority basis. This programme has also helped the Company to improve its performance on the occupational health and safety front, besides being recognized in international forums, like the International Commission on Occupational Health Congress, held in Italy.
Occupational Health Centres (OHC)
The Company's occupational health centers are also in the forefront in organizing preventive educational programmes for noncommunicable diseases, such as: heart problems, hypertension, diabetes and other lifestyle diseases, along with informative sessions for communicable diseases, such as: malaria, tuberculosis and HIV / AIDS. The Company endeavours to move towards the concept of wellness as it recognizes that a healthy worker is a productive worker.
Having reached high levels of safety management within the country, the management has, in the last few years, been steadily taking strategic steps to take the Company to world class levels. This year, under the guidance of the HSE Committee of Directors, Reliance entered into a strategic partnership with DuPont Safety Resources. The engagement is focused on behavioral as well as process safety aspects and aims at bringing in excellence in safety management.
In addition to personnel safety, process safety is also a top priority for the Company. World class documented standards, emphasis on line management responsibility, an improved and standardized process for safety observations are helping the manufacturing sites achieve higher employee participation in the safety management process. In line with the Company's vision to always tie-up with the best in the world, Reliance has tied-up with the Centre for Chemical Process Safety, of the American Institute of Chemicals Engineers (AIChE) of USA.
The focus on construction safety has further increased with standardized safety management practices being established at all construction areas from Jamnagar to Kakinada. Construction of office buildings is also being monitored strongly from a safety point of view. This emphasis has led to the Company achieving a low lost time incident rate even at construction projects.
With business needs increasing, the Company is also focusing on transportation and distribution safety. This focus shall not only help establish international systems for the existing businesses, but also prepare for the upcoming businesses such as Retail.
The Centre for HSE Excellence is accordingly getting further strengthened with the necessary skill sets and competencies. The Centre is helping Reliance to implement and practice world class standards as well as standardize the processes and establish the 'Reliance Way' of Safety Management.
In its pursuit of excellence in sustainable development, Reliance further integrated its safety and environment performance in the overall business plan and strategy. A management system approach, consisting of gap analysis, planning, implementation, and review has percolated to all business plans through ISO 14001:2004 at all manufacturing locations.
Through its annual environment plan and business targets, the Company identifies projects and takes action to achieve these targets with the ultimate goal of becoming water positive, carbon neutral, with maximum possible recycling and reuse of hazardous and other wastes. A management framework with defined structures, roles and responsibilities, group guidelines, audits and training has been instituted to implement the journey towards world-class excellence in environment. The Company initiated reporting environmental efforts to the world through Global Reporting Initiative following G-3: 2006 guidelines. Reliance's second Sustainability Report for FY 2005-06, 'My Reliance. My Life' received the highest possible accreditation: GRI Checked A+. The Company has also undertaken an exercise to establish world class corporate environmental standards with the help of DuPont experts.
Reliance is statutory compliant in the area of environment. As a policy, environment impact assessment and qualitative risk analysis are performed for all new and major expansion projects and incorporate all necessary measures to mitigate environmental impacts due to project implementation. All the hardware - such as effluent treatment plants, air emission abatement units and waste disposal facilities, were maintained and improved further. The above efforts have resulted in a significant improvement in water consumption, water recycle and reuse, CO2 and other air emissions, ozone depleting substances consumption and hazardous waste generation.
This year, Reliance's exploration and production (E&P) division, involved in exploratory drilling in various off-shore blocks off the coast of State of Andhra Pradesh, has moved into development phase for the KG-D6 project. Regulatory environment monitoring programs have been instituted from the beginning of construction phase to ensure a fool-proof compliance tracking and reporting mechanism.
Climate change and Energy conservation: During 2007-08, Reliance registered two Clean Development Mechanism (CDM) projects, one each from Patalganga and Allahabad, with UNFCCC for CO2 reduction. More than 100,000 Certified Emission Reduction (CER) from two of the registered projects have been verified and issued by United Nations Framework Convention on Climate Change (UNFCCC). The Company is exploring all possibilities to take the benefit of CDM credits through various projects. Reliance also became member of Carbon Capture and Sequestration Association, London, for active participation in worldwide activities related to Carbon Capture and Storage (CCS).
To decrease the Company's carbon footprint, activities have been initiated in the area of bio-diesel through non-edible route of Jatropha seeds. Extensive distribution of Jatropha saplings and cultivation in the wasteland has been targeted and a pilot plant of 20 Ton Per day (TPD) bio-diesels is ready for commissioning. Reliance is also exploring the possibility of bio-ethanol using second generation raw material.
Fresh water consumption and effluent discharge: Reliance as a responsible corporate has accorded top priority to water conservation and reuse to preserve fresh water, one of the precious natural resources. Jamnagar Manufacturing Division is not dependent on fresh water resource and continues to generate fresh water from sea. A study was undertaken by internationally renowned consultant M/S ENSR, USA to improve the effluent treatment plant's (ETP) operation at Jamnagar Manufacturing Division. Their recommendations are being implemented. New facilities have been created for township and labour camps at the Jamnagar Manufacturing Division and also at the Nagpur Manufacturing Division for the treatment of domestic sewage and its reuse and recycle.
Compared to the previous year, there has been a reduction in consumption of water at manufacturing locations Jamnagar, Kurkumbh, Hoshiarpur, Silvassa, Dhenkanal and Nagpur manufacturing divisions have achieved 100 % recycling of the treated water and thus attained the status of 'Zero discharge' sites.
Vadodara and Hazira Manufacturing Divisions have initiated the 'Zero Discharge Project'. Waste reduction and utilization: Reliance's Manufacturing Divisions at Vadodara and Hazira have achieved significant reduction in hazardous waste generation through process improvement, recycling and reuse efforts, employing Six Sigma methodology. Efforts on plastic waste recycling, through Indian Center for Plastics in the Environment (ICPE), and PET bottle waste recycling, have been very well documented, and continue to reduce load on municipal waste. These efforts also generate employment for the weaker sections of society. A project on conversion of biological sludge to manure by vermi-compost has been initiated at Vadodara, Hazira and Naroda Manufacturing Divisions. Canteen waste at Manufacturing Divisions located at Jamnagar, Hazira and Nagothane is converted to bio-gas and used as fuel. At Nagothane Manufacturing Division, conversion of horticulture bio-mass to coal briquettes and its use as fuel has been implemented.
The Company has taken a proactive measure for the safe disposal of electronic waste, fluorescent tube lights, empty paint containers, spray cans, etc. Silvassa Manufacturing Division has established EWaste disposal through E-Parisara, MoEF approved recyclingagency, while the Manufacturing Divisions at Jamnagar and Hazira have instituted tube light and empty paint container crusher with recovery and safe disposal of toxics. These practices are being implemented at others sites as well.
Training and Audits: During the year, Reliance has accorded highest priority to the training, awareness and learning mechanism at all levels. During the year, various internal and advanced training programs and inter-site meets were conducted involving experts. Learning on specific environmental issues through participation in national and international conferences, workshop and courses, has been encouraged at Reliance. Effective networking and collaboration with national and international agencies such as universities, research institutes, regulatory bodies, industrial and professional association has helped to assimilate and implement the world class best practices in HSE management.
Environment audit is one of the important tools on which special emphasis is given and the Company currently has more than 75 'Trained Lead Auditors' for ISO 14001:2004. Various audits conducted during the year include third party statutory audits in the state of Gujarat and ISO audits; group environment audit; independent assurance of Reliance's Sustainability Reports by Ernst & Young; Audit by Japanese Union of Scientists & Engineers at Hazira and Nexant team at Jamnagar. Action plans are made to liquidate all audit observations.
Community Environment Initiatives: Various environment programs, such as tree plantation, water conservation & harvesting and energy saving initiatives were conducted by all sites within the complex and in the nearby community. All sites, as part of the World Environment Day' celebrations created awareness on Global Warming and melting of ice. This year, manufacturing Divisions at Vadodara and Dahej gave special emphasis to schools and initiated Green School project using the framework developed by Centre for Science and Environment (CSE), New Delhi.
To enhance bio-diversity in the vicinity of the on-shore facility at Kakinada, Reliance undertook an extensive mangrove plantation exercise and also forestation for restoration of degraded mangrove areas in Coringa mangrove forest in association with MS Swaminathan Foundation. Reliance has also sponsored study of coastal wetlands of Godavari Delta to Environment Centre- a reputed NGO of Andhra Pradesh.
Social Responsibility and Community Development
Social welfare and community development is at the core of Reliance's Corporate Social Responsibility (CSR) philosophy and continues to be a top priority for the Company. It revolves around the Company's deeply-held belief in the principle of symbiotic relationship with the local communities, recognizing that business ultimately has a purpose - to serve human needs. Close and continuous interaction with the people and communities in and around the manufacturing divisions has been the key focus while striving to bring around qualitative changes and supporting the underprivileged.
Reliance's contributions to the community are in the area of health, education, infrastructure development (drinking water, improving village infrastructure, construction of schools etc.), environment (effluent treatment, tree plantation, treatment of hazardous waste), relief and assistance in the event of a natural disaster, and miscellaneous activities such as contribution to other social development organizations etc. The Company's CSR teams at all manufacturing divisions interact with the neighbouring community on regular basis. The Company takes pride in the fact that its CSR representatives are known by their first names in the regions that it operates.
Teach them young' is the very motto of Reliance as the Company believes that the quality of inputs received by an individual at an early age contributes to his or her growth as a capable human being. To ensure high quality of teaching, Reliance has made significant efforts towards value enhancement of teachers through professional and institutionalized training. Dahej Manufacturing Division conducted educational and excursion tours of students and teachers from the primary schools of neighbouring villages, and also organized Balmela' and Science and Mathematics Fair.
To provide training in the field of effective techniques and modern methods of teaching to high school teachers in the Hazira area, the Company organized training of teachers in various subjects. Reliance has launched the 'Sky is the limit' programme at Hazira, to address the problem of school drop-outs in the local community.
The Company also provides opportunities to engineering and management institute students to undergo in-plant training/projects as part of their academic curriculum, thus enabling them to appreciate application of theoretical knowledge and get an exposure to the industrial practices.
Efforts were made to enhance employability/skill development of local youths. This was done by giving opportunities to them to work in the Company's operating plants, which in turn improve their job prospects.
Executive Development Programs for officers of neighbouring industries were organized in coordination with PRIA (Patalganga Rasayani Industries Association).
The Company's major manufacturing locations provide good quality education to the children of all employees and also cater to the needs of surrounding villages. Jamnaben Hirachand Ambani School, Kokilaben Dhirubhai Ambani Vidya Mandir, and Jamnaben Hirachand Ambani Saraswati Vidya Mandir are schools near the Company's manufacturing locations at Patalganga, Hazira and Jamanagar respectively. A modern educational infrastructure coupled with extra-curricular activities and recreational facilities distinguish all these schools.
To encourage school children from neighbouring villages, Nagothane Manufacturing Division based CSR cell - MGCC Area Development Research Foundation (MADER) Trust took following initiatives:
* Felicitated meritorious students from neighbouring villages and tribal hamlets. Each student received a set of note books, stationary items and a school bag.
* There are several Zilla Parishad schools located on the hilltop near Nagothane Manufacturing Division where all the children who are attending school are tribal. With an objective to encourage the tribal students, Reliance also provided school uniforms.
Barabanki Manufacturing Division renovated a primary school in an adjoining village. Hoshiarpur Manufacturing Division provided free uniform (winter and summer), books, bags, shoes and stationery to the school-going children of neighbouring village.
Health Awareness Programs, covering diverse topics such as noise pollution, hazards substance abuse, prevention of HIV/AIDS and First Aid were conducted for students of schools at the neighbouring towns and villages of Patalganga. Barabanki Manufacturing Division provides medical service and awareness programs on health, hygiene, cleanliness and sanitation in neighboring villages.
Hoshiarpur Manufacturing Division too conducts monthly checkup camps at neighbouring villages. Free medicines and spectacles were also provided. Round the clock free ambulance service has been provided to roadside accident victims.
Hazira Rehabilitation Centre for the Physically Challenged has been set up in partnership with Disabled Welfare Trust of India for capacity building of physically challenged children from the weaker sections of society.
Initiatives to Combat HIV / AIDS and TB
The Company provides Community Medical Centres near most of its manufacturing divisions. These centres cater to the Governmental health care programmes like maternal and child health, TB, malaria, HIV / AIDS etc., besides providing curative treatment. These Centres have been well received and go a long way in providing the medical relief for the community. The Company has implemented HIV / AIDS and DOTS programme at Hazira and Jamnagar, and is in the process of replicating the same at the other manufacturing divisions. This initiative is a publicprivate partnership between the Government, NGOs and Reliance. This comprehensive project extends from creating awareness to providing treatment, care and support. Reliance's initiative to combat HIV / AIDS has been recognized by UNAID, World Bank and other national and international institutions.
Adoption of Public Health Centre (PHC)
Reliance has adopted a Primary Health Centre (PHC) from the State Government of Gujarat and converted it into a model primary health centre. The PHC located at Dahej in Bharuch District, Gujarat, has attained the status of the best PHC in the District in a short-span of 6 months and has established itself as a centre of excellence.
Highway Rescue Intervention
To provide emergency and trauma care to victims of highway accidents, Hazira has tied-up with an NGO to run the project on the State Highway in Gujarat starting from Sachin to Bharuch, and the State Highway via Hazira - Olpad - Hansot - Ankleshwar. The project will benefit thousands of commuters who use this highway on a daily basis.
Traffic Police personnel are the first government agency to respond to an emergency involving a chemical tanker or a truck. With the increase in the number of accidents on roads and the unending addition of new chemicals, it is important that these personnel understand the hazards and the basic steps to be taken to safeguard themselves and the general public from the hazards of chemicals.
The Company's initiative of training traffic police personnel by its Kurkumbh Manufacturing Division in handling road transport emergencies involving chemicals will go a long way in serving the objective of community well-being. Dhirubhai Ambani Hospital, Lodhivali Reliance also operates the Dhirubhai Ambani Hospital, Lodhivali and renders quality medical services to the rural population and highway accident victims.
Moti Khavdi Medical Centre
As part of corporate social responsibility services, a community medical centre was established in Moti Khavdi, a village near Jamnagar Manufacturing Division, during the pre-commissioning stage of the refinery in November 1995. This Community Medical Centre provides comprehensive medical services free of cost and round the clock. About 1.2 lakh villagers of nearby areas like Moti Khavdi, Nani Khavdi, Padana, Meghpar, Gagva, Jogvad, Baid, Kanalus, Sikka, Sarmat, Navaniya, Mungani, Jakhar, Bara, Vasai and Amra benefit from the same.
Community Medical Services at SEZ, Jamnagar
A massive workforce from all parts of India are working at the mega construction activities in the SEZ at Jamnagar. The Company has given shelter in several colonies. Each labour colony has a separate medical centre. Each medical centre is manned round the clock by doctors, nurses and ambulances.
Thalassaemia detection camp and Parental counseling
The tribal areas in regions near Surat, Gujarat, are highly endemic to the prevalence of a thalassaemic trait, which is a genetic disorder. The Company launched a thalassaemia detection camp in association with the Indian Red Cross in the local high school. Children from the nearby school were tested for the disorder. The opportunity was also used for detecting aneamia and sickle cell aneamia. A post-test counseling session was organized for the parents of these children.
Project 'Cancer-Aid' for Cancer patients
In partnership with the Lions Cancer Detection centre, the Company provides monetary assistance for purchase of medicines to cancer patients.
Reliance also operates free medical diagnostic and therapeutic services at neighbouring villages of several of its manufacturing locations.
Blood Donation Drives
The Company's employees organize and participate in blood donation campaigns every year across its manufacturing divisions and offices.
Public Health Care
Sir Hurkisondas Nurrotumdas Hospital and Research Centre (HNHRC)
Dhirubhai Ambani Foundation (DAF), with financial and technical services support from the Reliance Group, joined in 1997 the Management of HNHRC, a charitable hospital offering tertiary health care facilities to all strata of society and providing free and subsidized services to the poor and indigent patients availing of various diagnostic and treatment facilities.
Thousands of patients have received treatment indoors in the various wards and specialized care areas and at OPD services at P.T. Clinic, the popular Diagnostic Centre of the Hospital. The Hospital continues its age-old tradition of rendering free service to all in the casualty ward. More than 4,000 surgeries were performed during the year, of which a major portion was special and supramajor surgeries.
The Hospital carried out several Cadaver Transplants in the recent past. Further, the eye Donation drive initiated by the hospital witnessed an increased response. Some of the important outreach programmes conducted during the year included a Senior Citizen Health Screening Program in association with Rotary Club, and a medical back-up for the Special Olympics event organized by the Lions Club - International. Twice a month, the hospital continues to conduct free health check-up for senior citizens and physically challenged in Mumbai. These programmes have gone a long way in educating the community on prevention of diseases, and promoting a healthy lifestyle.
The hospital is in the process of building a multi-storied ultra modern tertiary care hospital with state-of-art facilities and infrastructure embracing the entire spectrum of health care services. Several new facilities would be added, and many of the existing facilities would be significantly upgraded in areas like Neurology and Neurosurgery, Urosurgery, Cardiology and Cardiac Surgery, Cardiovascular Surgery and Cosmetology. A chain of blood banks would be established at various centers under a new initiative by the DAF. Educational and research activities at the hospital shall receive significant boost by way of advanced facilities and better funding. The project, when completed, would be a landmark healthcare facility in this city.
Sir Hurkisondas Nurrotumdas Medical Research Society (HNMRS)
DAF, through the Reliance Group, supports the scientific research activities of HNMRS. The Society has been carrying out scientific research activities since 1974 -75 and has completed more than 130 research projects. The scientists from HNRMS have presented over 180 papers at various national and international conferences. More than 130 papers have been published in peer reviewed scientific journals, about half of them being highly rated as prestigious international journals. Topics of national health priorityconstitute a major share of the research projects undertaken.
The researchers are motivated to expand their research avenues to carry out epidemiological studies and community-based surveys. As part of such studies, children from nearby schools and susceptible population from neighbourhood communities are regularly screened by medical / paramedical professionals. Those in need of medical care are offered special attention and treatment at the institution free of cost.
Project Drishti, a nation-wide corneal grafting drive to bring light into the lives of visually challenged from the underprivileged segment of society, has restored the gift of sight to over 5,500 Indians. A unique joint initiative of Reliance Industries Limited and National Association of Blind (NAB), Project Drishti has undertaken over 5,500 keroptoplasty surgeries in less than 4 years since it was started - all free of cost. It is now the largest corneal grafting surgery project enabled by a single corporate entity in India.
Drishti Painting Competition
As a part of corporate initiative to propagate awareness of Project Drishti, Drishti painting competition is organized for school children at several manufacturing divisions and offices of the Company.
Jamnagar Manufacturing Division continues to extend a helping hand to surrounding villages and the community at large. Activities during the year focussed on improving village infrastructure, supply of drinking water, education support etc.
During the year, in a unique initiative to improve rural housekeeping and sanitation, a totally fresh approach was adopted to beautify Moti Khavdi; Reliance's adopted village. Cleaning and sanitation drive at Moti Khavdi was taken up as an ongoing project.
Three MoUs were finalized with the State Government of Gujarat for development of Dwarka during the year. They are to (i) develop the temple square in front of the famous Dwarkadheesh temple (ii) construct Sudama Setu'-a bridge to connect both the banks of Gomati river behind Dwarkadheesh's temple and (iii) develop Panch-kui' area on the sea-shore where five wells, believed to be dug by Pandavas, still give fresh potable water right on the seashore.
To maintain and support village cows in surrounding villages, two more brand new cow-sheds for Kanalus and Kanachikari were constructed and handed over to the respective villages. These cows and cow-sheds ('Gaushala') receive regular fodder supply from the Company's Jamnagar Manufacturing Division.
Construction of a public lavatory, water tank and avedo (common drinking water facility for villagers) was done at Nani Khavdi during the year under report. Drinking water through water tankers was supplied during a crisis period in Sikka, Nani Khavdi, Meghpar and Padana. At Kanachikari, Drinking water pipelines were laid during the year.
A new primary school building at Navagam was constructed and repairing of some village schools was taken up. Participation and distribution of sweets in village schools during the Independence Day and the Republic Day; support to Government of Gujarat's drive for girls' education; distribution of gifts to girls of villages during Navratri festival; supporting Navratri celebrations in Jamnagar were some of the salient aspects of Jamnagar Manufacturing Division's Community Welfare Cell as part of routine and regular activities.
In a major initiative to celebrate Navratri, the world's longest dance festival on a large scale; Jamnagar manufacturing division took a lead to form Gujarat Industries Navratri Festival. A gala festival was organized and celebrated at state capital Gandhinagar's helipad ground for nine days jointly with leading industries of Gujarat. The event brought to fore the role of industries, handicrafts, art and culture etc in the development of Gujarat as a vibrant state. The event evoked tremendous response and applause from every quarter of the society at large.
Reliance Rural Development Trust (RRDT)
The work to improve the rural infrastructure under the Government of Gujarat's rural development plans was continued with full energy by RRDT. During the year under report, the RRDT created 760 facilities in the rural areas at a cost of Rs. 24.07 crore. The facilities included 247 concrete roads, 465 anganwadis, 38 drinking water facilities, 1 panchayat office, 2 community halls, 5 check-dams and 2 other amenities in the rural areas of the State of Gujarat. RRDT has turned out to be an exemplary corporate NGO steadily and silently implementing government's developmental plans for rural areas of Gujarat. It is a unique synergy between a corporate giant like Reliance Industries Limited and the Government of Gujarat, formed to carry out rural development projects in private public partnership.
Dahej Manufacturing Division has been playing a pivotal role in the development of the society. Social initiatives undertaken by Dahej Manufacturing Division are concentrated towards promotion of education, health awareness and medical facilities, infrastructure development and supply of safe drinking to the villages.
Some of the initiatives undertaken by the Company's E&P Division near KG-D6 include 1) gainful employment for local communities, 2) vocational training for the youth, 3) employment for members of Gadimoga panchayat, 4) financial assistance for community activities, 5) sponsoring of cultural and sports events, 6) financial relief to affected communities, 7) compensation to local fishermen, 8) academic and financial assistance and educational support through distribution of books, 9) improvement of village school infrastructure and 10) medical help to local communities.
After successfully implementing zero garbage concept at Nagothane Manufacturing Division, the Company's CSR cell took the initiative to propagate the concept of solid waste (dry and wet waste) management in the neighbouring villages so as to help villagers in keeping their village environment neat, clean and garbage-free.
Reliance has also solved the long-standing drinking water problem of villages near its Manufacturing Divisions located at Naroda and Nagpur. Further, Reliance has created public bathing facilities and toilets for truckers and residents of villages for improving hygiene near its Allahabad Manufacturing Division.
Empowerment of Women and Youth
Reliance has conducted many training programmes, which would help the rural women and youth to be self sustaining and generate income for themselves and support their families.
The training programmes conducted at Vadodara for the rural women and youth of surrounding villages of Vadodara Manufacturing Division during the current year are: 1) Women Empowerment, 2) Dress making & Designing, 3) Beauty Culture & Healthcare, 4) Hospital attendant (Helpers for Hospital & Nursing Homes), 5) Plumbing & Hand Pump repairing training, 6) Computer Hardware, 7) Motor Vehicle Driving, 8) Mobile Repairing and 9) Doormat making. Several persons participated and benefited from the above training programmes.
Nagothane Manufacturing Division based CSR cell-MADER Trust is supporting several Self-Help groups in income generating activities such: Hatsadi tandul (brown rice cultivation), phenoyl making, agarbati-making, candle-making, papad-making and supplying it to industrial canteens and also hand-carry-bag making. Hoshiarpur Manufacturing Division conducts free stitching courses for the women of nearby villages.
Reliance runs special training programs to equip the young people of neighboring villages with life and work skills necessary for sustaining livelihood. Nagothane Manufacturing Division conducted training in fashion designing courses for the ladies to upgrade the skills of those women who are already trained in basic tailoring. This division also conducted computer education courses and nursing assistant training courses. The trainees also received hands on training at the local hospitals and primary health centres at Nagothane. The Company also trains the youth in vehicle driving courses and also helps them in getting a driver's license so that they can earn a livelihood by starting their own business as motor drivers.
The Company's Polymer business division organised technical training programmes at 50 Industrial Training Institutes (ITIs) all over India to enhance skills of artisans for new and advanced technique of plumbing with PPR pipes. The Company also offers plumbing kits, free of cost, to various plumbers as well as to ITIs to promote this new energy efficient application in the building industry. PPR pipes are faster to install than metal pipes. This results in improving daily productivity of plumbers thereby increasing in their earnings. This initiative covered many plumbers across the country.
In addition to the above initiatives, the Company also focusses on the development of the eco-system and improvement of the green belt across its manufacturing and E&P sites.
Transforming lives at the bottom of the Pyramid
Reliance constantly aims at creating and living up to rising expectations among its valued stakeholders. The Company cares for providing clean and green environment on a sustainable basis. It recycles used bottles to produce value added products. When most of the environmental concerns are subsidised, Reliance has found a solution for being environmental friendly on a sustainable basis. In the case of recycling bottles, Reliance is indirectly providing livelihood to around 200,000 individuals. This business has transformed lives of those at the bottom of the pyramid.
Packaging solution to farmers (Leno bags)
Reliance organised extensive awareness programmes on improved packaging solutions for potato and other vegetables for farmers all over India. This included demonstration on use of Leno bags, which are more durable, functionally more efficient and cheaper than traditional materials. This programme helped the farmers reduce the cost of packaging of potato. These bags also helped farmers to reduce wastage while keeping in cold storage. The Company's efforts helped the farmers to improve their earnings. The programme covered more than 10,000 farmers across India.
Polyethylene (PE) Biogas Domes for Renewable Energy Source
Biogas technology for rural development has been a focus area for Government of India. Ministry of New and Renewable Energy (MNRE) promotes family-type biogas plants under the National Project on Biogas Development (NPBD). The project was launched in 1981-82 with the objective of producing clean and alternate renewable energy for cooking and lighting, enriched organic manure for agricultural usage, improving sanitation and hygiene and reducing drudgery of women. The two cubic metre 'Deenabhandu' model is the most popular family type fixed dome biogas plant developed with conventional brick and cement. Many of these plants get defunct due to dome cracks leading to gas leakages. The Company has developed a 100 per cent leak-proof Rotomolded PE Dome, which gives end-users a unique combination of properties like good strength, stiffness, light weight, seamless construction, ease of installation and very little maintenance. The PE-based dome has been developed by Reliance and has been approved by the Ministry of New and Renewable Energy, Government of India.
Sports for the Physically Challenged
Reliance has joined hands with the organising team of Special Olympics Gujarat (Bharat) for the physically challenged children of Gujarat. Several hundred children participated in the events that were organised at the Reliance Sports Complex, Vadodara.
Real Indian Heroes
On the occasion of Shri Dhirubhai Ambani's 75th birthday, 60 years of Indian Independence and 30 years of Reliance, the Company took up a unique initiative to salute the Real Indian Heroes of Independent India. Partnering with the TV Channel, CNN-IBN, a series of programmes to felicitate the unsung heroes of India was launched. CNN-IBN identified 24 Real Heroes, which included six each from the four zones of India. In recognition for their outstanding contribution to society, Reliance felicitated each of these 24 Real Heroes to further encourage their contributions.
Dhirubhai Ambani Foundation (DAF)
Dhirubhai Ambani Foundation (DAF) was established in 1995 by Shri Dhirubhai Ambani, the Patron Trustee of the Foundation. A public charitable trust registered under the Bombay Public Trusts Act, 1950, DAF has for its objectives a broad spectrum of worthy causes ranging from health and environment, to promotion of social and economic welfare, and rural development. However, its main thrust has been on education and public healthcare.
DAF systematically pursues philanthropic activities to promote national welfare and social good. Reliance lends valuable support to DAF in terms of financial contribution and wherever necessary, infrastructural support. Reliance also draws on the DAF expertise in evolving and coordinating the Corporate Social Responsibility Initiatives and other group companies also help DAF initiatives wherever possible. Thus, DAF initiatives reinforce Reliance's
commitment to social responsibility.
Education: Rewards and Scholarships DAF SSC Merit Reward and Undergraduate Scholarship Schemes: The Foundation's much acclaimed SSC Merit Reward and Undergraduate Scholarship Schemes continued to encourage and assist meritorious students at the district level to pursue higher education in different vocations to enhance the Human Resource potential of the country. Now in their twelvth year, both the schemes are currently applicable in the states of Maharashtra, Gujarat, Goa and the Union Territory of Daman, Diu and Dadra Nagar Haveli.
The first three in overall merit and one physically challenged student securing the highest marks in each of the 64 districts at the annual SSC and HSC examinations of the respective state Boards, as well as the first ten CBSE students from Maharashtra and Gujarat and 2 from Goa, in the merit list of CBSE New Delhi, are eligible for the Rewards and Scholarships.
Reaching out to other states:
To offer equal opportunities to the physically challenged meritorious students from the rest of the country, the Foundation has extended the Rewards and Scholarship Schemes to the first five physically challenged students from all the States and Union Territories of India that provide the list of such meritorious students. Accordingly, in 2007-08, physically challenged meritorious students from Rajasthan received SSC Merit Rewards and Undergraduate Scholarships at a function held in Jaipur, whereas at a function held in Hyderabad, 20 Physically Challenged meritorious students from the state of Andhra Pradesh received the Rewards and Undergraduate Scholarships for the years 2006-07 and 2007-08.
Reliance Kargil scholarships scheme
Children of martyrs / disabled soldiers of the Kargil war received financial support under this Scheme for their education from Std. V to XII. The unique feature of the Scheme is that the corpus was created with contributions from Reliance Group employees, with the Management responding by making equal contribution.
'Dhiruhbai Ambani Scholars' scheme' for Meritorious Children of Reliance Shareholders
The Scheme was announced in 2003 as a one-time measure to commemorate the silver jubilee of the company's listing on the Bombay Stock Exchange. In the first year, 900 meritorious children of the shareholders received the scholarships. Of these, in 2007 - 08 which is the 4th year of the Scheme, a total of 101 scholars continued to receive the scholarship for their education, leading to Degree / Diploma course, the rest having completed their education.
Reliance School of Life Sciences (RSLS)
Reliance School of Life Sciences is a centre of excellence established by the DAF in 2007. It is dedicated to providing graduate, post graduate, doctoral research and continuing education programmes in various domains of life sciences and related technologies. RSLS currently operates from a state of the art campus at Navi Mumbai. The first Diploma Programme in Clinical Research and Biopharmaceutical Manufacturing commenced from July 2007.
Dhirubhai Ambani International School
In just five years, Dhirubhai Ambani International School has emerged as a centre of excellence, with outstanding achievements and all-round development of its students, as outlined in the Annual Report 2006 - 2007. An LKG-12 school, it prepares students for the ICSE, the IGCSE and the IB Diploma Examinations and is a member of the Cambridge International Primary Program (CIPP).
The first three batches of the school's IB Diploma candidates are pursuing their undergraduate studies at leading universities worldwide, and this year some are completing their degrees in the UK and India! The fourth batch, the Class of 2008 (88 candidates), has also earned outstanding university placement offers, as reflected in the accompanying list as per Annexure-A. Several of these universities have also offered scholarships to our students.
A range of achievements in broader areas, in addition to those already reported on before, indicates the increasing balance and depth of learning experiences at the school.
The CAS (Creativity, Action and Service) program, part of the IB Diploma program, serves as a key opportunity for our students to engage with a variety of social causes. Our students work with a number of NGOs - Advitya, Akanksha, CCDT, Magic Bus, Muktangan, Pratham, Pukar, and Amnesty. Indo-French Schools, a joint service project between our school, L'Ermitage School, Paris and The Franco-Indian school of Bombay, teach English to children in a slum in Malad (Mumbai). It also has conducted eye check-ups for children there. The Across the Road' service project recently launched by the school serves children in the slum areas adjacent to the school and supports them in their educational and developmental needs.
In December 2007, the school celebrated its Annual Day as The Great Indian Mela' - a musical event to celebrate India's 60 years of Independence, as well as a fete that raised considerable funds for the NGOs that our students support and work with. The two evening performances were enjoyed by 6,500 people from the school community.
In keeping with its philosophy of constantly endeavoring to provide opportunities for the overall development of children, this year the school is launching The Dhirubhai Ambani International School Study & Activity Center at Matheran. Set in a lush green 18-acre campus, with sports, recreation and study facilities, it serves as a base for outdoor pursuits for our children and faculty, and for engaging with neighboring villages in their development. DAIS students have annual exchange trips with L'Ermitage, and also CAS exchange trips with a school in Mauritius.
In May-June 2007, the school organized its Inaugural International Football Camp, which was led by three prominent coaches from the United Kingdom. Over 70 students from the school participated in this 7-day camp.
In March 2008, the school earned Regional Membership of Round Square'. The criteria for membership include a strong commitment to participate in the six pillars that form the foundation of Round Square' - international understanding, democracy, environment, adventure, leadership, and service.
Annexure - A
College-wise position of admission offers earned by the IB Diploma Class of 2008
NAME OF THE UNIVERSITY COUNTRY A B C
Harvard University USA 1 2 1
Yale University USA 2 3 2
University of Oxford UK 2 NA 1
University of Cambridge UK 2 NA 2
Imperial College London UK 5 NA 8
Princeton University USA 6 1 2
University of Chicago USA 7 9 1
University College London UK 9 NA 16
Columbia University USA 11 9 2
McGill University Canada 12 NA 7
Duke University USA 13 8 1
University of Pennsylvania USA 14 5 8
Stanford University USA 19 4 2
Cornell University USA 20 12 2
Carnegie Mellon University USA 20 22 9
California-Berkeley USA 22 21 6
University of Edinburgh UK 23 NA 1
King's College London UK 24 NA 9
Northwestern University USA 29 14 7
University of Manchester UK 30 NA 4
Brown University USA 32 14 4
University of British
Columbia Canada 33 NA 3
University of Bristol UK 37 NA 6
University of Michigan-Ann Arbor USA 38 25 15
University of Toronto Canada 45 NA 6
Boston University USA 47 57 12
New York University USA 49 34 9
University of Texas-Austin USA 51 44 4
University of Wisconsin-Madison USA 55 38 1
University of Warwick UK 57 NA 24
University of California-San Diego USA 58 38 1
London School of Economics UK 59 NA 5
University of Sheffield UK 68 NA 1
University of Nottingham UK 70 NA 6
University of Illinois-Urbana Champaign USA 73 38 15
University of York UK 74 NA 2
Emory University USA 74 17 3
University of St. Andrews UK 76 NA 2
Purdue University USA 77 64 12
University of Southampton UK 80 NA 2
Queen's University Canada 88 NA 1
Penn State University USA 90 18(in Business) 7
Rice University USA 92 17 1
California-Davis USA 96 42 3
Georgia Institute of Technology USA 97 35 9
Cardiff University UK 99 NA 1
University of Liverpool UK 101 NA 1
Georgetown University USA 102 23 2
Durham University UK 109 NA 1
University of California-Santa Barbara USA 117 44 2
University Southern California USA 119 27 12
Ohio State University USA 120 57 1
University of Sussex UK 121 NA 2
Texas A & M University-College Station USA 122 62 1
University of Western Ontario Canada 126 NA 1
Arizona State University USA 134 124 1
Indiana University-Bloomington USA 137 11(in Business) 7
University of Aberdeen UK 137 NA 1University of
California-Irvine USA 140 44 1
University of Bath UK 145 NA 6
Tufts University USA 159 28 1
Virginia-Tech University USA 166 71 1
Rutgers, The State University of New Jersey USA 177 59 1
University of Surrey UK 190 NA 2
Rensselaer Polytechnic Institute USA 191 44 2
University of California-Los Angeles USA NA 25 5
Syracuse University USA NA 50 2
University of Miami USA NA 52 1
Northeastern University USA NA 96 1
Drexel University USA NA 108 1
New Jersey Institute of Technology USA NA 124 1
Harvey Mudd College USA NA 1 (in Engg) 3
Embry-Riddle Aeronautical University USA NA 9 (in Engg) 1
Swarthmore College USA NA 3(in Liberal Arts) 2
Wellesley College USA NA 4(in Liberal Arts) 2
Middlebury College USA NA 5(in Liberal Arts) 1
Haverford College USA NA 10(in Liberal Arts) 1
Wesleyan University USA NA 11(in Liberal Arts) 1
Vassar College USA NA 11(in Liberal Arts) 2
Bryn Mawr College USA NA 24(in Liberal Arts) 5
Lafayette College USA NA 34(in Liberal Arts) 2
Bard College USA NA 37(in Liberal Arts) 1
Franklin & Marshall College USA NA 40(in Liberal Arts) 1
Denison University USA NA 52(in Liberal Arts) 1
Babson College USA NA 27(in Business) 3
Villanova University USA NA 1(Master's Universities) 1
Bentley College USA NA 6 (Master's Universities) 1
Rochester Institute of USA NA 8 (Master's 1Technology Universities)
Emerson College USA NA 16 (Master's 3 Universities)
New York Institute of USA NA 80 (Master's 1Technology Universities)
School of the Art Institute of Chicago USA NA NA 2
Savannah College of Art and Design USA NA NA 1
Parsons The New School for Design USA NA NA 1
Otis College of Art & Design USA NA NA 1
Florida Institute of Technology USA NA NA 4
Chapman University USA NA NA 1
California College of Arts USA NA NA 2
City University, London UK NA NA 1
School of Oriental and African Studies UK NA NA 4
Royal Halloway, University of London UK NA NA 1
Loughborough University UK NA NA 2
Kingston University UK NA NA 1
Brunel University UK NA NA 2
The University of Bradford UK NA NA 1
Carleton University Canada NA NA 1
University of Guelph Canada NA NA 1
York University Canada NA NA 1
University of Ontario Canada NA NA 1
A = WORLD UNIVERSITY RANKING Times Higher Education Supplement Nov 2007 (World's top 200 Universities)
B = U. S. NEWS & WORLD REPORT America's Best Colleges 2008 Edition
C = NUMBER OF ADMISSION OFFERS TO DAIS STUDENTS