sweta

Summer Internship Project Report

On

STUDY ON E-PROCUREMENT & IMPORT PAYMENT OF ONGC

Submitted in partial fulfilment for the award of the Post Graduate Diploma in Management

Submitted By

Mukund Kumar Mishra

Roll No.: M2013035Under the guidance of

Mr. Runak Singhania

APEEJAY INSTITUTE OF TECHNOLOGYSCHOOL OF MANAGEMENT & COMPUTER SCIENCE GREATER NOIDA2013-2015DECLARATION

The work in this summer internship project report is based on the original work carried out by me towards the partial fulfillment for the award of Post Graduate Diploma in Management. No part of this report has been submitted elsewhere for any other degree or qualification and it is all my own work.(Mukund Kumar Mishra)Roll No.: M2013035

CERTIFICATEThis is to certify that Mukund Kumar Mishra Roll No M2013035 a student of Apeejay Institute of Technology-School of Management & Computer Science, Greater Noida (PGDM 2013-2015) has done the project work on Working Capital Management & Ratio Analysis under my supervision and guidance. I understand this project report is being submitted for award of Post Graduate Diploma in Management. To the best of my knowledge, this report has not been submitted to any other Institute/University for award of any other degree/Diploma/Certificate.

During this period, I have found his work satisfactory.

Mr. Runak Singhania

ACKNOWLEDGMENTIn this highly complex society no work can be accomplished by a single individual but needs inspiration and sincere guidance of intellectuals.

With an overwhelming sense of obligations, I avail this opportunity to express my deep sense of gratitude to Mr. Abhijit Saha who gave me the opportunity to work with finance section attached with corporate material management, Scope Minar Delhi.

I emphatically express my profound thanks and heartfelt gratitude to my guide Mr. Rounak Singhania for his valuable guidance, timely suggestions and constant encouragement during the entire course of my training.

Finally, I thank all those who helped me directly and indirectly during the course of my summer training.

(Mukund Kumar Mishra) Table of ContentAcknowledgement Page No.

Chapter-1:....................................... Executive Summary 6

Chapter-2:......................................Objective 7

Chapter-3:......................................Introduction 8

History of ONGC 10

Achievement 16

Mission & Vission 20

Core Value 21

Chapter-4:.....................................Company profile 22

Chapter-5:.....................................Business of ONGC 28

Primary 28

Secondary 31

Chapter-6:....................................Material Management 35

Introductoin 35

ABC Analysis 43

ONGC Centralized procurement 45

E-Procurement 48

Business processes 56

E-Tendering 57

Open Tender-2 bid system 57

Brief explanation 57

Process Flow Chat 61

General explanation 62

Quick Tour of ONGC E-Procurement 76

Open Tender- single bid system 87

Limited Tender- single bid system 88

Single Tender 88

Payment Process 89

Indigenous Payment 89

Import Payment 90

Letter of Credit Opening 90

Vetting 122

Document Retirement 123

ICICI Tender Fees 124

Logistics Invoice Verification (LIV) 125

Chapter-7:................................................Financial Pricing Policy 130

Chapter-8:..............................................Finding 134

Chapter-9:.............................................Suggestion 135

Annexure 137

Bibiliography 143

CHAPTER - 1

Executive Summary

I, Sweta, a student of Ishan Institute Of Management And Technology, Greater Noida, got an opportunity to carry out my internship project in ONGC, Delhi as a part of the curriculum. This prestigious organization is one of the nine Navratnas recognized by the Indian Govt.

During my internship tenure at ONGC, I strived to investigate and study the e-procurement system & import payment of ONGC thoroughly. The objective of my project is to highlight the benefits of the e-procurement process to the parent organization in terms of reduced material and operating costs, improved compliance, and increased total spend under management and how company make payment nationally and internationally . This is a new and exciting area of study with unprecedented benefits if the opportunities are identified and pursued.

In order to achieve the aforementioned objective, I carried out a thorough preliminary research of the entire procurement process. I had a detailed study of the existing documented records of such procurement process. I also had the opportunity to study the impact of the novice procedure of the novel payment terms on international clients and suppliers by analyzing them individually. I also had several brainstorming sessions with my fellow executive trainees and my senior company executives regarding the indispensable benefits of this system

This report shows how new dimension such as Reverse Auction, have been added to the procurement system which enables the company to get the quality product at the most reasonable prices. This work also reflects the process of making payments to the international suppliers using a financial instrument known as Letter of Credit. It also emphasizes on the various security concerned issues related to the E-Procurement

CHAPTER - 2OBJECTIVE

OBJECTIVES OF ONGC (THE DYNAMICS OF SUCCESS)

The objectives of company play a vital part in the success of every company and it also holds true in the context of ONGC as it has a set of objectives which not only guide the company towards success but also fulfill its corporate social responsibilities efficiently hence ensuring that the vision of the company To be a world class Oil and Gas Company integrated in energy business with dominant Indian leadership and global presence can be fulfilled. The objectives of ONGC are as follows:-

Optimize production of hydrocarbons.

Self-reliance in technology.

Promoting indigenous efforts in oil & gas related equipment, materials and services.

Assist in conservation of hydrocarbons, more efficient use of energy and development of alternative sources of energy.

Environment protection.

Generate adequate resources for reinvestment.

Develop scientifically oriented and technically competent human resource through motivation and training

CHAPTER - 3

INTRODUCTION

Oil and Natural Gas Corporation Limited (ONGC) (incorporated on June 23, 1993) is an Indian public sector petroleum company. It is a Fortune Global 500 company ranked 335th, and contributes 77% of India's crude oil production and 81% of India's natural gas production. It is the highest profit making corporation in India. It was set up as a commission on August 14, 1956. Indian government holds 74.14% equity stake in this company.

ONGC is engaged in exploration and production activities. It is involved in exploring for and exploiting hydrocarbons in 26 sedimentary basins of India. It produces about 30% of India's crude oil requirement. It owns and operates more than 11,000 kilometers of pipelines in India. Until recently (March 2007) it was the largest company in terms of market cap in India.

ONGC is the fullyintegrated petroleum company in India, operating along the entire hydrocarbon value chain:Holds largest share of hydrocarbon acreages in India.

Contributes over 80 per cent of Indians oil and gas production.

About one tenth of Indian refining capacity.

Created a record of sorts by turning Mangalore Refinery and Petrochemicals Limited around from being a stretcher case for referral to BIFR to the BSE Top 30, within a year.

Interests in LNG and product transportation business.ONGC has single-handedly scripted Indias hydrocarbon saga by:

Establishing 6.61 billion tonnes of In-place hydrocarbon reserves with more than 300 discoveries of oil and gas; in fact, 6 out of the 7 producing basins have been discovered by ONGC: out of these In-place hydrocarbons in domestic acreages, Ultimate Reserves are 2.36 Billion Metric tonnes (BMT) of Oil plus Oil Equivalent Gas (O+OEG).

Cumulatively producing 788.273 Million Metric Tonnes (MMT) of crude and 463 Billion Cubic Meters (BCM) of Natural Gas, from 111 fields.

ONGC has bagged 85 of the 162 Blocks (more than 50%) awarded in the 6 rounds of bidding, under the New Exploration Licensing Policy (NELP) of the Indian Government.

ONGCs wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 44 Oil & Gas projects (7 of them producing) in 18 countries, i.e. Vietnam, Sudan, Russia, Iraq, Iran, Myanmar, Libya, Cuba, Colombia, Nigeria, Nigeria Sao Tome JDZ, Egypt, Brazil, Congo, Turkmenistan, Syria, Venezuela and United Kingdom. OVL has a committed overseas investment of over 5 billion US dollars. International rankingONGC ranks as the Numero Uno Oil & Gas Exploration & Production (E&P) Company in the world, as per Platts 250 Global Energy Companies List for the year 2008 based on assets, revenues, profits and return on invested capital (ROIC).

ONGC ranks 20th among the Global publicly-listed Energy companies as per PFC Energy 50 (Jan 2008)

ONGC is the only Company from India in the Fortune Magazines list of the Worlds Most Admired Companies 2007.

Occupies 152nd rank in Forbes Global 2000 2009 list (up 46 notches than last year) of the elite companies across the world; based on sales, profits, assets and market valuation during the last fiscal. In terms of profits, ONGC maintains its top rank from India.

ONGC ranked 335th position as per Fortune Global 500 - 2008 list; up from 369th rank last year, based on revenues, profits, assets and shareholders equity. ONGC maintains top rank in terms of profits among seven companies from India in the list.

History of ONGC

1947-1960

During the period of pre-independence period, the Assam Oil Company in the northeastern and Attock Oil Company in northwestern part of the undivided India were the only oil Companies producing oil in the country, with minimal exploration input.

After independence, the national Government realized the importance oil and gas for rapid industrial development and its strategic role in defense.

Before 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and the Oil India Ltd. (a 50% joint venture between Government of India and Burmah Oil Company) was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam. largely unexplored.

In 1955, Government of India decided to develop the oil and natural gas resources in the various regions of the country as part of the Public Sector development. With this objective, an Oil and Natural Gas Directorate was set up towards the end of 1955.

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

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

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

1961-1990Since its foundation stone was laid, ONGC is transforming Indias view towards Oil and Natural Gas by excelling in the countrys limited upstream capabilities into a large viable playing field. ONGC, since 1959, has made its presence noted in most parts of India and in overseas territories. ONGC found new resources in Assam and also established the new oil province in Cambay basin (Gujarat). In 1970 with the discovery of Bombay High (now known as Mumbai High), ONGC went offshore. The most important contribution of ONGC, however, is its self-reliance and development of core competence in exploration and production activities at a globally competitive level.

AFTER 1990

After the liberalization of then Indian economy in 1991, the Indian Government began to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. As a consequence thereof, ONGC was re-organized as a limited Company under the Company's Act, 1956 in February 1994.

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

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

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

HISTORY OF OIL IN INDIA AND ONGC

1867 Asias first successful mechanically oil well was drilled on 26th May 1867 at Makum.

1889 Well No.s 1 spuded in Digboi by the M/s AR&T Co. in Sep.

1893 A small refinery was erected at Margherita.

1901 Digboi refinery was commissioned which is still running.

1931 Burma Oil Company Ltd. At well No.s 5 in Masimpur found high- pressure gas.

1952 Assam Oil Company supded Well No.s 1 at Nahorkatiya on 26th May.

1955 The Oil & Natural Gas Division was set up by Govt. of India.

1956 Oil & Natural Gas Division converted into a Directorate in May and Commission in August.

1958 Gas struck in Jawalamukhi.Well No.s 1 Cambay spuded in by ONGC and completed as a producer.

1959 Oil India Pvt. Ltd., incorporated on 18.02.59.ONGC converted into statutory body by Act of Parliament.

1960 Oil struck at Ankleshwar and Rudrasagar by ONGC.

1961 Oil Struck in Kalol by ONGC.

1962 First public sector refinery started at Guwahati. Naharkotia- Guwahati pipeline commissioned on 26.4.1962.

1963 Oil struck in Sanand and Nawagam in Gujarat by ONGC. Offshore seismic started in Gulf of Cambay.

1964 Oil discovered in Lakwa by ONGC.

1965 Ankleshwar to Koyali pipe line commissioned for oil dispatched to Gujarat Refinery

1966 Oil discovered in Geleki by ONGC.

1969 ONGC completed drilling of 700 wells.

1970 India first offshore well spuded in the Gulf of Cambay on 14th March.

1973 ONGC completed drilling of 1000th wells.

1974 ONGC entered in offshore drilling on 31.1.74 using the drill ship Sagar Samrat.Oil struck on 19th February.

1976Mumbai high put into commercial production by ONGC, which is still delivering Golden Eggs to ONGC and India.

1978Gas supply from Mumbai Offshore started for commercial use i.e. power generation and fertilizer etc.

1980 Ratanagiri structure found with Oil and Gas with Mumbai High.

1984-85 Drilling commences at Narimanam in the Cauvery Basin and Oil strikes.

1985-86 LPG plant commissioned by ONGC at Uran.

1986-87 Oil strikes in Tapti offshore area and Namti structure in Assam.

1987-88 Mumbai-Off-shore Gas started in HBJ pipeline.

1989-90 ONGC discovered South Heera field in Mumbai Offshore. ONGC

western offshore production reached at a peak of 21.72 MMT.

1993-94 ONGC production from western offshore to low at 15.73 MMT. Neelam

development completed. ONGC entered into Venture Corporation for development of

Ravva, Mid and South Tapti, Mukta and Panna fields.

1994-95 Production from Western Offshore again picks up to 20.23 MMT within one year.

1995-96 ONGC oil production reached to 31.64 MMT and gas production of

BCM.

1996-97 Physical performance of ONGC remains mixed. There in stagnation in

oil production but several policies decision has taken to increase the production and

growth through new initiatives and diversification. Few are as follows: -

- Deep-sea exploration.

- Cool Bed Methane.

- Paraxylene Plant at Hazira.

- Liquefied Natural Gas Plant/Terminal in Joint Venture.

- Strategy to enhance oil recovery in Neelam field.

2002-03 Crude production increased by 0.5 million Mt, nearly 10%.

- Foreign currency loans of Rs 24,753 Million pre-paid, with significant reduction in interest charges and achieving dept-free status with dept equity ratio of 0.02:1.

- Package insurance cover for US$ 14 Billion renewed without any reduction in scope, restricting incremental premium below other Indian Corporate.

2004-05 Earned highest profit registered so far by any Indian company, i.e.12983.05 crores.

-Net sales increased to Rs. 4636294 crores.

2006-07 Highest In-place Oil & Gas reserve accretion of 169.52 MTOE in eleven

years; ninth time crossed the 150 MTOE milestones in 51 years of operation. Ultimate

Reserve accretion stands at 65.56 MTOE.

Achievement of ONGCONGC has achieved the distinction of the countrys Most Valuable Corporate; this is an unmatched performance by a Public Sector Enterprise, perhaps even in the global context. Few of its achievement is mentioned below:

ONGC is the first ever and only Indian company to have featured in the list of FORTUNE MOST ADMIRED COMPANIES (2007). In this list the company has been admired on nine attributes viz. Ability to attract and retain talented people, Quality of management, Social responsibility to the community and environment, Innovativeness, Quality of product or services, Wise use of corporate assets, Financial soundness, Long term investment value and Effectiveness in doing business globally.

ONGC ranks as the Numero Uno Oil & Gas Exploration & Production (E&P) Company in the world, as per Platts 250 Global Energy Companies List for the year 2008 based on Assets, Revenues, Profits and Return on Invested Capital (ROIC).

ONGC ranks 20th among the Global publicly-listed Energy companies as per PFC Energy 50 (Jan 2008)

ONGC is the only Company from India in the Fortune Magazines list of the Worlds Most Admired Companies 2007.

Occupies 152nd rank in Forbes Global 2000 2009 list (up 46 notches than last year) of the elite companies across the world; based on sales, profits, assets and market valuation during the last fiscal. In terms of profits, ONGC maintains its top rank from India.

ONGC ranked 335th position as per Fortune Global 500 - 2008 list; up from 369th rank last year, based on revenues, profits, assets and shareholders equity. ONGC maintains top rank in terms of profits among seven companies from India in the list.

Establishing 6.61 billion tonnes of In-place hydrocarbon reserves with more than 300 discoveries of oil and gas; in fact, 6 out of the 7 producing basins have been discovered by ONGC: out of these In-place hydrocarbons in domestic acreages, Ultimate Reserves are 2.36 Billion Metric tonnes (BMT) of Oil Plus Oil Equivalent Gas (O+OEG).

Cumulatively producing 788.273 Million Metric Tonnes (MMT) of crude and 463 Billion Cubic Meters (BCM) of Natural Gas, from 111 fields.

ONGC has bagged 85 of the 162 Blocks (more than 50%) awarded in the 6 rounds of bidding, under the New Exploration Licensing Policy (NELP) of the Indian Government.

ONGCs wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 44 Oil & Gas projects (7 of them producing) in 18 countries, i.e. Vietnam, Sudan, Russia, Iraq, Iran, Myanmar, Libya, Cuba, Colombia, Nigeria, Nigeria Sao Tome JDZ, Egypt, Brazil, Congo, Turkmenistan, Syria, Venezuela and United Kingdom. OVL has a committed overseas investment of over 5 billion US dollars.

Indias Most Valuable Public Sector Enterprise

Ranked as the most respected Public Enterprise in India in 2007 Business World Survey, with 19th position in the league of the most-respected Indian Corporate(s).

Rated Excellent in MOU Performance Rating for 2006-07 by the Department of Public Enterprises, Ministry of Heavy Industries in Public Enterprises, GOI.

Oil Industry Safety Directorate (OISD) has selected Ahmedabad Asset and MRPL for the year 2006-07 (as number one in Group-4 category (Oil & Gas Assets) and Second in Group-1 Refinery category respectively).

Topped the visibility metrics in Indian Oil and Gas Sector and the only PSU in the top 10 list of Indian Corporate newsmakers.

Golden Peacock Global Award 2007 for Excellence in Corporate Governance 2007, for the 3rd consecutive time, conferred by World Council for Corporate Governance.

Bagged the coveted winners trophy of the maiden Earth Care Award for excellence in climate change mitigation and adoption under the category of GHG mitigation in the small/medium and large enterprises.

Conferred with Infraline Energy Excellence Award for its services to the Nation in Oil & Gas Exploration and Production category.

Ranked 326th in Financial Times Global 500 List by market cap; first among Indian Corporates.

Ranked 133rd in Forbes 400 Top Global Corporates by market cap; first among Indian Corporates.

Ranked 1st in Economic Times 500 Corporate List by net profit and market cap

Ranked 1st in Business Today 500 List by net profit.

Ranked 1st in Business Today-Stern Stewart Study of 500 Indian Corporates for highest-ever Market Value Added (MVA). ONGC is the only PSU which has both MVA and EVA positive.

Bestowed with Amity Award for Excellence in Cost Management.

ONGC is the only fullyintegrated petroleum company in India, operating along the entire hydrocarbon value chain:

Holds largest share of hydrocarbon acreages in India.

Contributes over 80 per cent of Indians oil and gas production.

About one tenth of Indian refining capacity.

Created a record of sorts by turning Mangalore Refinery and Petrochemicals.

Limited around from being a stretcher case for referral to BIFR to the BSE Top 30, within a year.

Interests in LNG and product transportation business.

MISSION & VISSION

Vission

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

Mission

World Class

Dedicated to excellence by leveraging competitive advantages in R&D and technology with involved people.

Imbibe high standards of business ethics and organizational values.

Abiding commitment to safety, health and environment to enrich quality of community life.

Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for our people.

Strive for customer delight through quality products and services.

Integrated in Energy Business

Focus on domestic and international oil and gas exploration and production business opportunities.

Provide value linkages in other sectors of energy business.

Create growth opportunities and maximize shareholder value.

Dominant Indian Leadership

Retain dominant position in Indian petroleum sector and enhance Indias energy availability.

Core value

Patents

Strong brand names

Good reputation among customers.

Favorable excess to distribution networks etc.

CHAPTER - 4

Company Profile

OIL AND NATURAL GAS CORPORATION LTD

Keshava Deva Malaviya realized the importance of an indigenous petroleum industry and laid the foundation of OIL AND NATURAL GAS CORPORATION LTD, (ONGC) in August, 1956.

OIL AND NATURAL GAS CORPORATION LTD, (ONGC) today is the premier Indian industry effectively participating in efficient implementation of both the economic as well as the social mission of a national industry. Its growth has been one of consistent stability and ascending productivity, matching international performance makers, through innovative approach and participative management.

ONGC operates in the upstream sector of the petroleum industry on the unstructured premises of accepting the intellectual softwares, geological thoughts and perceptions of the petroleum geoscientists, as its basic raw materials. Until today, there has been no tool or technique that can directly oil within the earth crust. Consequently, oil exploration has ever been a highly probabilistic and cannot be defined within the confine of the scales and measures of the conventional engineering INPUT and OUTPUT ratios. In oil exploration activity, input is deterministic, but output is probabilistic. It is a high risk and possibly high reward business.

Further, oil exploration and production activities are multi-disciplinary, and the industry constantly operates under a syndrome of high-value high technology (of high rate of obsolescence) that mostly create compulsions for massive investment in exploration exponentially because the New Finds of oil deposits progressively become more and more scarce and recovery from old fields become costlier.

Impressions often are focused in the form that ONGC is an Island of prosperity, and thus is, expected to provide high measures of various subsidies to all in various types of industries in the national as well as the private sector. Willing or otherwise, ONGC has been providing such support services to many Indian Industries, often at the cost of depletion of its logically earned income and profits.

ONGC is a performing national industry, constantly achieving commanding heights of performance. Its attitudinal orientation is TO DO BETTER THE THINGS BEING DONE WELL. In this document, its structural fabrics, management perceptions, practices and performance have been briefly profiled. ONGC assures that its main aim is to accelerate the progress of the Indian petroleum industry that would lead to the consolidation of the Indian Energy Security.

Exploration for hydrocarbons is a complex process starting with prognostication and involving the entire gamut of activities like geo-scientific surveys, drilling drawing up technological schemes, reservoir assessment, field delineation etc. There is no proven method of direct detection of hydrocarbons; the only definite means of locating oil is through drilling. The two key words in the business of oil exploration are perseverance and ability to take risk.

CORPORATIZATION OF ONGC

Oil and Natural Gas Corporation Limited was incorporated under the companies Act, 1956 on June 23, 1993. The same was incorporated to the decision of the govt. to convert Oil and Natural Gas Corporation. Transfer of under taking and Repeal Act, 1993 was passed on 4th September 1993 providing that the undertaking of the commission shall be transferred to and vested in the corporation with effect from an appointed day to be notified by the Govt., through a separate notification. The Govt. notified Feb. 1, 1994 as the appointed day. Accordingly with affect from Feb. 1, 1994 the undertaking of the erstwhile Oil and Natural Gas Corporation including all the assets, liabilities, rights, obligations, employees, etc. stood transferred to and vested in the Oil and Natural Gas Corporation Limited.Accordingly the accounts of the erstwhile Oil and Natural Gas Corporation were closed on 31st January 1994. The accounts for the Oil and Natural Gas Corporation Limited for the first year were prepared for the period 23rd June 1993 (Date of Incorporation) to 31st January 1994 to coincide with the closure of accounts of the commission. Between the date of incorporation of the corporation (23.6.93) and the 31.1.94, the accounts mainly related to company formation transactions. The accounts of Oil and Natural Gas Corporation Limited for the financial year 1994-95 therefore are for a period of 14 months i.e. from 1st February 1994 to 31st March 1995.

Work in ONGC Ltd. has been organized on the basis of functional business group with commercial working relationship among these groups. The business is:

Exploration

Drilling

Operations

Technical services

Directors concerned of the above business groups assume effective charge of all functional aspects of materials management.

FEATURES

Indias largest Exploration & Production Company.

Nearly 90% of Indias oil and gas production.

Indias largest listed company.

Highest profit making company in the country.

Ranked amongst first 25 oil companies in the world in terms of oil and gas production and reserves.

Strong historical performance with significant upsides

Impressive financial and operational results.

Major initiatives to enhance efficiencies underway.

Clear upsides from liberalization.

Globally competitive with attractive valuations:

Lowest cost producer.

Largest pure Exploration & Production Company available to investors.

Attractively valued on an Enterprise Value / Boe basis.

Guided by several environmental laws and regulation:

Water (Prevention on and Control of Pollution) Act, 1974.

The Air (Prevention and Control of Pollution) Act, 1981.

The Environment Protection act, 1986.

The Hazardous Waste (Management and Handling) Rules, 1958.

The Environmental Provision of Merchant shipping Act, 1958.

Three-tiered SEM organization set-up to provide safe and healthy working conditions to the employees, maintain ecological balance and protection of the environment.

Energy conservation measures:

Inter-fuel substitution and proper capacity utilization of equipment.

Use of Lubrication Oil Analysis Kits.

Use of waste heat recovery equipment at;

Offshore Platforms.

Offshore Rigs.

LPG Plant Hazira & Uran.

Use of Energy Efficient Equipment & Devices and Turbo Expanders at Hazira & Uran.

Harnessed Solar Energy for total one-lac liters per day water heating capacity at various places and use of solar Photovoltaic Applications.

Conducting Energy Adults on regular basis.

In-house training program on Energy Conservation conducted through various Regional Training Institutes.

Using top drive system for faster drilling operation at Sagar Jyoti.

Use of vapor absorption chilling unit for Regional Office building and guesthouse at Hazira.

WORK DIVISIONS OF THE CORPORATAION

During 80s a concept of Centralized Policy making and Decentralized Administration was introduced. To ensure better operational performance, greater coordination among the functional group and accountability for overall performance in defined areas, 6 regional business centers were created, each under a control of a regional director with overall responsibility for the operation and achievement of given targets in respective region. The registered office of ONGC Ltd. is at Jeevan Bharti Building, New Delhi. The head quarters of ONGC Ltd. is at Dehradun, apart from Institute of Reserve Oil Studies (IRS), GEO data processing and Interpretation Center (GEOPIC), Institute of Drilling Technology (IDT), Institute of Petroleum Exploration (IPE), Institute of Management Development (IMD), Institute of Petroleum Safety and Environment Management (IPSEM), Institute of Engineering and Ocean technology (IEO), Institute of Biotechnology and Geotectonic which continued to functions at Dehradun and other regions. So the whole of the corporation is divided into different regional business centers in India viz.

Mumbai Regional Business Center (MRBC), base at Mumbai.

Central Regional Business Center (CRBC), base at Calcutta.

Northern Regional Business Center (NRBC), base at Jammu.

Southern Regional Business Center (SRBC), base at Baroda.

Eastern Regional Business Center (ERBC), base at Nazira.

These business centers are further divided into basins, which have their network in the scorching desert of Jaisalmer, in the dense forest of Assam, in the tricky terrains of Kutch, in snow bond Kashmir and in Gulf of Cambay and also the Arabian Sea.

CHAPTER 5Business of Organisation

Primary

Secondry

Primary:

Integrated Trading Desk of Oil and Natural Gas Corporation (ONGC) on behalf of ONGC Group of Companies comprising of ONGC Limited, and its subsidiaries ONGC Videsh Limited (OVL), ONGC Nile Ganga BV (ONG BV) and Mangalore Refinery and Petrochemicals Limited (MRPL) organizes Import/International Sale of Crude Oil, Export of Petroleum Products and Petrochemical Products through Tendering Procedure for all the Group Companies of ONGC. ONGC Group presents a lot of business opportunities to prospective Business Partners in the area of international sale/import of Crude Oil and Export of Petroleum Products and Petrochemical Products

SUBSIDIARIES OF ONGC

ONGC VIDESH LIMITED (OVL): OVL is a wholly owned subsidiary of ONGC engaged in exploration and production of oil and gas outside India. OVL was incorporated as Hydrocarbons India Private Limited on March 5, 1965. Therefore, OVL became a deemed public company under Section 43A of the Companies Act with effect from April 1, 1975. OVL is no longer a deemed company pursuant to amendments to the companies Act. It changed its named from Hydrocarbons India Limited to ONGC Videsh Limited. Accordingly, a fresh certificate of incorporation consequent upon change of name was issued on June 15, 1989.

The primary business of OVL is to prospect for oil and gas acreages abroad. The other activities include acquisition for oil and gas fields in foreign countries, exploring, producing, transporting, exporting and carrying out other related functions of an international petroleum company.

Currently, OVL has participated in oil and gas projects in Vietnam, Sudan, Russia, Iraq, Myanmar, Libya, Angola, and Syria. The Vietnam project is producing natural gas and the Sudan project is producing oil. The project in Russia is in advance stages of development and production. The projects in Iraq, Iran and Syria are in various stages of exploration. In the Myanmar project, where an exploratory well was drilled, natural gas have been discovered in January 2004.

SUBSIDRIES OF OVL

ONGC NILE GANGA B.V (ONGBV): ONGBV is a wholly owned subsidiary of OVL. ONGBV originally was in corporated as Supertest Holding B.V., a Besloten Vennootschap (private company with limited liability) in the Netherlands on September 29, 1995, and wad first registered in the Commercial register on October 10, 1995, with statutory seat at Rotterdam. The name of Supertest Holding B.V was changed to State Petroleum Corporation and then to Talisman (Greater Nile) B.V., which was a part of Talisman Energy Inc. of Canada and owned 25 percent participating interest in the Greater Nile Oil Project in Sudan. OVL acquired the entire share capital of ONGBV effective March 12, 2003 and the company was renamed as ONGC Nile Ganga B.V. effective from March 14, 2003.ONGC NARMADA LIMITED (ONL): ONGC Narmada (ONL), a wholly owned subsidiary of OVL is engaged in E&P activities in Nigeria. ONL holds 13.5% PI in deep water exploration Block-2 in Nigeria-Sao Tome & Principle, Joint Development Zone (JDZ). The other partners in the Block inter-alia include Sinopec (with 28.67% PI)), Adex Petroleum (with 14.33% PI), ERHC Energy Inc. (with 22% PI), Equator Exploration (with 9% PI), Foby (with 5%PI) and A & Hatman (with 2.5%PI), with Singapore as the operator.

ONGC AMAZON AKLAKNANDA LIMITED (OAAL): ONGC Amazon Alaknanda limited (OAAL), a wholly owned subsidiary of OVL incorporated on 8th August, 2006 in Bermuda, is engaged in E&P activities and holds stake in E&P projects in Colombia, through Mansarovar Energy Columbia Limited (MECL), a 50:50 JV Company with Sinopec of China. MECL is currently producing oil @ 20,000 bbls/d. During 2006-2007, OVLs share of production was about 0.297 MMT of oil.

4) ONGC MITTAL ENERGY LIMITED (OMEL): OVL along with Mittal Investments Sarl (MIS) promoted ONGC Mittal Limited (OMEL), a joint venture company incorporated in Cyprus. OVL and MIS holds 50% shares of OMEL currently. However, the ultimate shareholding of OMEL is proposed to be in the ratio of 51(OVL): 49(MIS) of 98% as between the promoters with 2% shares to be held by a financial institution. OMEL holds PI in the AFPC Syrian Assets through ONG B.V. Further OMEL holds stake in two exploration Blocks namely OPL 279 and OPL 285 in Nigeria

Secondry:

MANGALORE REFINERY AND PETROCHEMICALS LTD. (MRPL): MRPL was incorporated on March 7, 1998 and commenced its business on August 2, 1988. MRPLs registered office is located at Mudapadav, Kuthethoor P.O. via Katipalla, Mangalore, Karnataka.

MRPL was incorporated pursuant to a Memorandum of Understanding dated June 26, 1987 entered into between the President of India representing Government of India, Hindustan Petroleum Corporation Ltd. (HPCL) and Indian Rayon and Industries Ltd. and its affiliates (IRIL), for the purpose of setting up Crude petroleum refinery at Mangalore in the state of Karnataka. MRPL has a refinery capacity of 9.69 million metric tons per annum and is involved in refinering crude oil into petroleum products. In view of the losses incurred by MRPL in the last few years, the peak net worth of MRPL was eroded by more than 50 percent as on March 31, 2002 and accordingly as required under Section 23 (1)(a) of the Sick Industrial Companies (Special provisions) Act, 1985, a report was submitted to the Board for Industrial and Financial Reconstruction (BIFR).

HPCL and IRIL each were holding 37.39 percent shares in MRPL. The entire 37.39 percent of equity capital held by IRIL was acquired by ONGC on March 3, 2003. Further it infused a sum of Rs. 6000 million through preferential allotment of equity shares to ONGC on March 30, 2003 thereby increasing its stake in MRPL to 51.27 percent of equity share capital of MRPK, making MRPL its subsidiary and also a Government Company under Section 617 of the Companies Act. ONGC exercised its option incorporated in the option agreement as part of the Debt Restructuring Package for purchase of 358.2 million equity shares allotted to the lenders under the Debt Restructuring Package at a cost of Rs. 3,811 million. As a result, its shareholding in MRPL increased to 71.62 percent of equity share capital of MRPL.

JOINT VENTURES OF MRPL

KAKINADA REFINERY AND PETROCHEMICALS Ltd. (KRPL): The financial appraisal report submitted by SBI Capital Market for the Kakinada Refinery indicated that 7.5 MMTPA Refinery project was not financially viable. However, keeping in view the long-term scenario in which, the petroleum consumption in the country is expected to go up, as brought out in the market study conducted by Nexant. A preliminary in-house assessment was taken up, which indicated that the project could be viable, if the capacity is enhanced to 15 MMTPA. KRPL has therefore engaged EIL for conducting Techno Economic Feasibility Study for setting up 15 MMTPA Refinery at Kakinada. MRPL has 46% equity in the Joint Venture Company and balance equity is held by IL&FS and KRPL (51%) and APIIC (3%).

KAKINADA SEZ Ltd. (KSEZ): Kakinada SEZ Ltd. (KSEZ) was incorporated on 30th june,2006 with an equity participation of 26% by MRPL, 26% by IL&FS 45% by KSPL and 3% by APIIC.

KSEZ has been notified as SEZ by the Government of India on 23rd April, 2007.

B. JOINT VENTURES/ASSOCIATES

PETRONET LNG Ltd.(PLL): ONGC has 12.5% stake in PLL. The Dahej Terminal is operating at its optimum capacity and is currently meeting 25% of Indias total gas supplies. The company has started expansion of Dahej terminal to 10 MMTPA and also setting up LNG Receiving and Re-gasification Terminal of %MMTPA at Kochi. The turnover of PLL during 2006-2007 is Rs. 55,089.5 million, profit before tax is Rs. 4,755.7 million and profit after tax is Rs. 3,132.5 million, respectively. PLL ha paid a dividend of 12.5%.

ONGC TRIPURA POWER COMPANY Pvt. Ltd. ( OTPC): ONGC is setting up a mega 740 MW (2x370 mw) gas based Combined Cycle Power Plant (CCPP) at Palatana in Tripura to monetize its idle gas resource in Tripura state along with a 400 KV Transmission line up linking the Power Plant with PGCIL Grid at Bongaigoan. The estimated cost of the integrated Project is Rs. 38,440 million

PETRONET MHB Ltd. (PMHBL): ONGC holds 23% equity stake in this product pipeline Company linking MRPL to Bangalore. PMHBL in incurring losses due to low capacity utilization and sub-optimal financial structure. Accordingly, ONGC has made an upfront payment of Rs. 2,276 million as per corporate debt restructuring and the Master Restructuring Agreement (MRA) has been signed with the Bankers on 25th January, 2007.

PAWAN HANS HELICOPTERS LIMITED (PHHL): ONGC has 21.5% equity in PHHL, which provides helicopter services primarily to the company. PHHL is the only helicopter operator with ISO 9001:2000 certification in Asia for its entire gamut of business activities. PHHL earned a net profit of Rs. 473.86 million during 2005-2006 and provisional net profit for the financial year 2006-2007 is Rs. 490.00 million.

ONGC PETRO-ADDITIONS Ltd. (OPaL): A grass root integrated petrochemical complex at an estimated investment of Rs. 135,400 million has been approved for implementation jointly by ONGC & GSPC holding 26% & 5% equity respectively, with balance equity to be tied with strategic investors and public offering.

DAHEJ SEZ Ltd. (DLS): Dahej Special Economic Zone Limited (DLS) has been promoted by ONGC (23%) and Gujarat Industrial Development Corporation GIDC (26%) to develop a multi-product SEZ at Dahej in coastal Gujarat. Ministry of Commerce & Industry (MoCI), Government of India, has approved development of this SEZ over 1,717 hectares of land.

MANGALORE SEZ Ltd. (MSL): ONGC has taken up development of a multi-product SEZ in the vicinity of MRPL Refinery in coastal Mangalore through a SPV Mangalore SEZ Limited (MSEZ) in which it holds 26% equity share. The other partners being Karnataka Industrial Area Development Board (KIADB) with 23% equity share. Kanara Chambers of Commerce And Industry (KCCI) and Infrastructure Leasing Services Limited (IL&FS) has balance 51% share. ONGC envisages locating its upcoming Aromatics Complex, and another LNG based projects within this SEZ.

ONGC MITTAL ENERGY SERVICES Ltd. (OMESL): OMSEL, a Joint Venture promoted by ONGC and MITTAL Investment Sarl, is registered in Cyprus and intends to focus on trading and shipping of Oil and Gas (including LNG).

ONGC MANGALORE PETROCHEMICALS LIMITED. (OMPL): ONGC has taken up an implementation of an Aromatic Complex for manufacturing Paraxylene from MRPLs Aromatic Stream through a SPV, ONGC Mangalore Petrochemicals Limited (OMPL) with 46% equity participation, 3% by MRPL and the remaining balance of 51% by Banks and Financial Institutions. OMPL has been incorporated in 19th December, 2006. Total estimated investment in the project is proposed to be Rs. 48,520 million.

ONGC TERI BIOTECH Ltd. (OTBL): ONGC formed a joint venture in association with The Energy Research Institute (TERI) for addressing for requirements of Bioremediation, Microbial Enhanced Oil Recovery and Prevention of Wax Deposition in tubular for its E&P operations. The Joint Venture has been incorporated on 26th March, 2007.

CHAPTER 6

Material management

Introduction

Requirement generation from plants

As we know that ONGC generally work to extract oil and natural gas from various places like

Mehsana, Ankleshwar, Raigadh, Shivsagar, Assam, Agartalla, Nahava, Kakinanda, Silchar.

so for that purpose they require some material like drilling pipes, casing pipes, liner hanger,

drill collars etc for the extraction of raw material say oil and gas. And the requirement are

generated from various places from where the oil and natural gas could extracted.

Indenter are the people who generally make the estimation of the material which can be

purchases for the extraction of oil and gas, they just estimate the price from last years price

and increase the rate of price from 5% to 15% and then ask them to give their requirement

list so that they can consolidate the requirement from various places and forward purchase

requisition, pre qualification criteria, technical BEC(bid- evaluation criteria) to material management. Now from then the work of material management starts

Purchase Requisition (PR) : Purchase Requisition (PR) is a document created by the Indentor when he wants to utilize budget for any expenditure. He has to mention the Fund Centre from where he wishes to draw the funds and commitment item where his fund is lying in the fund centre. It is to be released by the designated Indentor and in the next level by the MRP Controller. Then the PR is forwarded to Finance which concur the PR and also releases the PR . The PR is than submitted for final approval with the Competent Authority. The funds get automatically blocked after the creation of the Purchase Order against that PR. Bid Evaluation Criteria(BEC):

Before invitation of tenders, the technical as well as commercial Bid Evaluation Criteria will be formulated by the tender committee.Bid Evaluation Criteria (BEC) in general should have a Rejection (both technical and commercial) criteria, and financial Evaluation methodology (including Loading criteria) . BECs should be firm / standardized. Standard BEC for goods and services were issued vide circular No.19/2003 and 36/2003 respectively. Updations / Modifications to the same (as approved by EPC) are also notified from time to time.BEC once approved should normally be adopted without any change for the subsequent tenders for the same item/category of items. Only the changes from previous BEC/standard BEC to be submitted for approval, with reasons.Pre Qualification Criteria (PQC):

Qualification shall be based on satisfaction of all the following minimum pass/fail (qualification / disqualification) criteria by the bidders regarding their general and particular experience, financial position, personnel and equipment capabilities and other relevant information as demonstrated by the Bidders responses in the form attached to the Bid. The qualification capacity and resources of proposed subcontractors shall not be taken into account in determining the Bidders compliance with the qualifaction criteria.

MATERIALS MANAGEMENT

The main activity of ONGC is exploration and exploitation of hydrocarbons. This involves various activities like survey, drilling, production, transportation etc. and it requires the technical expertise of experts and various equipments of materials to do the same.Materials management is the branch of logistics that deals with the tangible components of a supply chain. Specifically, this covers the acquisition of spare parts and replacements, quality control of purchasing and ordering such parts, and the standards involved in ordering, shipping, and warehousing the said parts.

Aim of the Materials Management Organisation is to procure, preserve and deliver materials in proper time to ensure smooth progress of the project works and administrative machinery.

Every effort is made by the Materials Management Organization to meet the needs of the Engineers and the Scientists with regards to the Materials. But the success of the aspiration of the Materials Management depends very much on the proper planning and timely intimation by the concerned Engineers/Scientists to the Materials Management. It is therefore, essential that these aspects are kept in view to ensure timely procurement of materials/services.First the targets of the corporate are set based on the MOU (Memorandum of Undertakings) entered with the government.

Once targets are fixed action for implementation thereof is taken by working out the inputs required for achieving these targets and necessary budget provision is made in consultation with attached finance for procurement of capital items, stores and spares etc.

Based on the provision in the approved budget, proposals are initiated for obtaining approvals of the competent authority for individual items of expenditure with the concurrence of attached finance wherever required.

After the competent authority approves expenditure and funds are embarked by finance, the purchase procedure commences.

Material Management at ONGC

High Value Capital items

Services and Turnkey projects

Bulk stores items

Spares - OEM & Non OEM

Other Stores and Consumables

2,80,000 - Material master records

80,000 - Vendor records

Classification of Materials:

For procurement, the materials may be classified into the following categories: -

Proprietary Materials: - Proprietary materials are those which are manufactured by the

makers of the main plants themselves such as spare parts for Willys Jeeps.

Non-Proprietary Materials: - Non-Proprietary Materials are those which are manufactured by many firms such as chemicals and laboratory equipments.

c) Stock Items: - Fast moving items of regular consumption as also spares required for running repairs and periodical overhaul of machinery and equipments are considered Stock Items.

The senior most materials management officer, not below E-1 (M.M.Officer) will have full powers to declare stores and spares as Stock Items.

d) Non-Stock Items: - Non-Stock Items are those which are to be purchased against specific requirements of the indenting departments.

e) Capital Items: -

I) All the items costing Rs. 5,000 or more and with a life of more than one year are categorized as Capital Items

II) Items costing less than Rs. 5000 which have a life of more than one year and can be regarded as complete units in themselves (e.g. small compressors, pumps, electric motors, welding sets, electric testing instruments etc.) are also to be categorized as Capital Items

The senior most materials management officer, not below E-1 (M.M.Officer) will have full powers with the concurrence of finance to declare an item costing less than Rs. 5000 as Capital Items.

f) Stores and Spares: - All the items, which cost less than Rs. 5000 and have a life less than one year are to be treated as Stores and Spares.

The procurement and stocking of materials is decentralized to the respective business groups (Exploration, drilling, technical and operations) at headquarters and regions. Every business group has a structured materials management setup with suitable structure at the regions and headquarters. The headquarters materials management set up with the concerned director is responsible for the following: -

1) Procurement and related work including steering committee cases. Executive purchase committee cases. However policy matters including liaison with the Govt. will be done by the materials set up under director.

2) Providing superintendence to the materials set up at the regions under the concerned business group with regard to the different functions of Materials Management for example, inventory control, disposal, codification, standardization of specifications, computerized MIS and stock verification etc.

3) Bulking of all high value indigenous and critical items to be procured centrally for taking maximum advantage in price discount. Such exercise would be done by the headquarters materials set up for all the regions under the group.

The above functions are to be discharged by personnel of materials management discipline who will be so allocated to each business group both at headquarters and at the bases. However, the procurement of all indigenous materials except as mentioned above is decentralized with their respective business group.

Materials procurement powers are to be exercised only be exception by functional executives other than materials management executives by special nomination by the Competent Authority as a stop gap arrangement till such time materials personnel are in position.

The materials management support groups will function strictly within the policy guidelines and such administrative norms as may be prescribed by director (Technical).

Provisions of materials management are duly approved by Executive Committee/Steering committee and ratified by the ONGC Board. Therefore, any deviation from the prescribed policy guidelines or norms on materials management will require reference to director (technical) through the director incharge of the business group for approval/ratification of Competent Authority wherever considered necessary.

First the targets of the corporate are set based on the MOU (Memorandum of Undertakings) entered with the government.

Once targets are fixed action for implementation thereof is taken by working out the inputs required for achieving these targets and necessary budget provision is made in consultation with attached finance for procurement of capital items, stores and spares etc.

Based on the provision in the approved budget, proposals are initiated for obtaining approvals of the competent authority for individual items of expenditure with the concurrence of attached finance wherever required.

After expenditure is approved by the competent authority and funds are embarked by finance, indents for purchase of equipments, stores and spares are o be sent on STR_6 (Store taking receipt) form to purchase department preferably on the annual requirement basis. The indent should be routed through MPPC and should be accompanied with detailed specifications and financial sanctions.

On receipt of indents, MM department initiates procurement action as per instructions contained in Store Procedures.

Functions of Purchase Department: -

1) The vital functions of purchase department are as follows: -

(i) What quantity to buy

(ii) When to buy

(iii) From whom to buy

(iv) At what price to buy

(v) What quality to buy

2) The purchase department while making any purchases should see that: -

All the purchases are made for the properly authorized requisitions clarifying the purpose for which these are required.

All the materials requisitioned are duly ordered out from the right source after full enquiries.

The right type and quality of the materials are bought from the cheapest source.

Only the right quantities are purchased in right time.

Deliveries of all the materials are received by stipulated time.

Suppliers bills are paid promptly to maintain good relations with the trade.

Adjustments on claims due to shortage or due to any discrepancy are secured, and

Pre-Bid Conference:

Subject to (b) below, Pre-Bid Conference should be held as a practice rather than exception for procurement for all cases of goods/services/turnkey project above Rs. 25 lakhs, Pre-Bid Conference need not be held in tenders valuing up to 25 lakhs.

(b) Proposal to take exception to (a) above, i.e. either to hold pre-bid conference in a tender valuing over Rs 25 lakhs, or to hold pre-bid conference in a tender valuing up to Rs 25 lakhs, should be initiated by the indenter who should record the reasons for such an action and covey approval of the Competent Purchasing Authority (CPA) to MM executive. While deciding whether or not to hold pre-bid conference in a particular case, the following on merit, interalia, are to be kept in view: -

Complexity of that case,

Historical experience in respect of bidders' taking exceptions/deviations in previous tenders for such items/services.Holding pre bid conference can be dispensed with, in cases where pre-bid conference has been held in the past by the concerned work centre for the procurement/hiring services of the same item and where no change has been made in the BEC which was adopted in the previous tender

In NIT, date for closure of sale of bidding documents should be specified, providing sufficient time for response. It should also be indicated in NIT/bidding documents that all bidders who buy bidding documents are invited to attend the pre-bid conference. As soon as the sale of documents is closed, pre-bid conference is to be convened (the date and venue of pre-bid conference should be clearly indicated in the NIT and the bidding document). In the NIT and bidding document as well as during the pre-bid conference, bidders should be advised that ONGC expects the bidders to comply with the tender specifications/conditions which have been frozen after pre-bid conference, and hence non-conforming bids will be rejected straightaway. The indenting officer from the User department (who has framed/signed the specifications) is to chair pre-bid conference(s) with competent representative from concerned technical department (like E&C), MM and Finance.

(e) However, for EPC level cases where limited tenders have been invited due to valid reasons, as per provisions of Materials Management Manual, second pre-bid conference will be held as a standard practice so as to ensure that the bidders understood the requirement, terms and conditions including the amendments (if any) subsequent to first pre-bid conference.

ABC ANALYSISONGC has to maintain several types of inventories. It is not desirable to keep the same degree of control on all the items. ONGC pays maximum attention to those items whose value is the highest. ONGC, therefore, classifies inventories to identify which items should receive the most effort in controlling. The firm is selective in its approach to control investment in various types of inventories. This analytical approach is called the ABC analysis and tends to measure the significance of each item of inventories in terms of its value.

The high-value items are classified as Category A items and would be under the tightest control. A class items which are critically important and require close monitoring and tight control while this may account for large value these will typically comprise a small percentage of the overall inventory count.

Category B items are in between A and C limits, defined by the respective department as required.

Category C represents relatively least value and would be under simple control. The ABC analysis concentrates on important items and is also known as control by importance and exception (CIE).

The following steps are involved in implementing the ABC analysis:

Classify the items of inventories, determining the expected use in units and the price per unit for each item.

Determine the total value of each item by multiplying the expected units by its units price

Rank the items in accordance with the total value, giving first rank to the item with highest total value and so on.

Compute the ratios (percentage) of number of units of each item to total units of all items and the ratio of total value of each item to total value of all items. TYPE A ITEMS (FOR CENTRALISED PROCUREMENT)

Drill pipes of all sizes and grades

Heavy weight drill pipes of all sizes and grades

Casing pipes of all grades and sizes

Liner Hanger

Drill collars of all sizes

Drill bits of all rating and sizes

Drill hoses of all ratings and sizes

Floating equipment

Resignated Lignite

CLS

KCL

Chrome Lignite

Spotting fluid

EP lube

Sulphonated asphalt

Drilling detergent

Production tubings of all sizes

Well head of all pressure rating and sizes

X-Mas tree of all pressure rating and sizes

Perforation material

Geophone strings of all types

Line pipes of all sizes

Kelly all types

All import substitution items

POL (Diesel,lubricants etc.)

CMC

Oil well cement

Bentonite

BarytesThe list is not exhaustive and the items may get added or deleted as per the decision of the management.CENTRALISED / DE-CENTRALISED PURCHASES In Drilling Business Group, purchase functions of the following items would be handled as under:-Sl. No. ItemBase

1.Pipes of all size

Delhi

2.CMC

Dehradun

3.Oil Well Cement and Cement additives

Mumbai

4.BitsIndigenousImported

DehradunDehradun

5.Blow Out Preventors and accessoriesDehradun

6.Rig (purchase and service contracts)OnlandOffshore

DehradunMumbai

7.Spares and assemblies for on-land rigsDehradun

8.Spares and assemblies for offshore rigsMumbai / Chennai

9.Well HeadsOnlandOffshoreDehradunDelhi

10.Imported mud chemicals and mud additivesDehradun

11.Casings 30 and 20 required for offshore operations exclusively

Mumbai, Delhi

12.Others - whether indigenous or imported for on-land and off-shore operations

Dehradun

An Overview of Purchasing ProcedureONGC CENTRALIZED PROCUREMENT

ONGC Corporate MM Department deals in centralized procurement of A Category items. These items are purchased for use in the work centers staggered length and breadth of the country. To procure an item, the corporate MM Department, after receiving the demand with necessary expenditure sanctions, floats tenders to obtain Bids for the required item. The tenders are floated in Legacy System or E-Procurement System. The items are procured from indigenous sources or imported sources.

LEGACY SYSTEMA Tendering Process by which ONGC seeks prices and terms for a particular project to be carried out under a contract. The sealed offers themselves, including company information, a project outline, and a price quote, are known as tenders or bids. These bids are obtained physically as hard copies in the legacy system from the vendors.

E-PROCUREMENTE-Procurement is the term to describe the use of electronic methods in every stage of the purchasing process from identification of requirement through to payment, and potentially to contract management. Electronic enablement of the purchasing process can be more specifically identified as:E-Sourcing: - For contractual processes. Tools include e-tendering, e-RFQs (Request for quotations/evaluations) and e-auctions.E-Procurement: - For transactional processes. Tools include market places using techniques such as e-catalogues and punch-out.E-Payment: - Tools include virtual or embedded GPC (Government Procurement Card), e-invoicing and self-billing.E-Sourcing is a suite of collaborative, web-based tools that enable procurement professionals and suppliers to conduct the strategic activities within the procurement lifecycle over the internet. These strategic activities including requirements/specification definition, tendering and supplier selection, and contract award and management are designed to deliver value for money procurement solutions to the public sector. E-Sourcing helps to encourage consistency with policy and best practice and increase sourcing and contract management efficiency and effectiveness.E-Sourcing delivers the following benefits to public sector procurement professionals: The E-Sourcing service will deliver the following benefits to customers: -Process efficiencies: - e-Sourcing reduces tendering and contract management time and effort for both buyers and suppliers.Improved public sector savings: - e-Sourcing helps public sector procurement professionals to focus on core, value-added procurement activity rather than administration.Policy: - e-Sourcing helps users to ensure compliance with the requirements of the efficiency review and the national procurement strategy for local government.Best practice: - e-Sourcing encourages users to adopt procurement best practice, enabling a more consistent approach to sourcing.Collaboration and aggregation: - e-Sourcing makes it easier for public sector procurement professionals to work collaboratively on common sourcing projects across geographically dispersed units and different departments.Direct costs for buyers and suppliers: - e-Sourcing reduces the direct costs of preparing and issuing the ITT and responding with tenders. Direct costs include paper, printing and distribution costs such as couriers. Collaborative working reduces the need for teams to travel for face to face meetings.

ONGC uses E-Procurement process for purchase of required Category A Items. E-procurement is the business-to-business or business-to-consumer purchase and sale of supplies and services through the Internet as well as other information and networking systems, such as Electronic Data Interchange and Enterprise Resource Planning.

ONGC e-procurement Website allows qualified and registered users to look for requirement of goods and services. Companies participating expect to be able to control parts inventories more effectively, reduce purchasing agent overhead, and improve manufacturing cycles.

This process includes: Selecting the supplier.Submitting formal requests for goods and services to suppliers.Getting approval from the buyer.Processing the purchase orderFulfilling the order.Delivery.Receipt.Payment.Shipping.First the targets of the corporate are set based on the MOU (Memorandum of Undertakings) entered with the government. Once targets are fixed action for implementation thereof is taken by working out the inputs required for achieving these targets and necessary budget provision is made in consultation with attached finance for procurement of capital items, stores and spares etc.Based on the provision in the approved budget, proposals are initiated for obtaining approvals of the competent authority for individual items of expenditure with the concurrence of attached finance wherever required.After expenditure is approved by the competent authority and funds are embarked by finance, indents for purchase of equipments, stores and spares are to be sent on STR_6 (Store taking receipt) form to purchase department preferably on the annual requirement basis. The indent should be routed through MPPC and should be accompanied with detailed specifications and financial sanctions.On receipt of indents, MM department initiates procurement action as per instructions contained in Store Procedures.

Different Steps of e-procurement

New Dimensions Offered by e-Procurement solutions

Reverse Auction

Electronic Markets

Electronic sourcing

Reverse Auction:

Process of reverse auction: -

May use purchasers own servers or a hired auction site

Auction open to those who are authorized to access the site

Prequalification

Electric bidding takes place for specified set time period

Advantages of reverse auction

Process Efficiency Reduction of Negotiation Cycle time

Transparency with increased competitiveness

Each bid is a negotiation in itself, expanded market

Real Time Submission of bids and Competitive Response

Perfect Competition Market is the Price Driver

Supplier negotiates with market, not with buyer

Disadvantages of reverse auction

Suppliers dissatisfaction

Not suitable for items with limited competition

Normal Auction Reverse Auction

Seller conducts auction Purchaser conducts auction

Process continued till Process continues till

highest bid is received lowest bid is received

The seller, buyers The purchaser and sellers

physically present at the are present on web and each

place of auction participant can see the bids

given by others

Electronic Market Place

It is a facility that allows buyer and sellers to exchange value.

Run by independent agencies- Access given by registered buyers and sellers.

Catalogue and specification driven

Purchaser selects the offer for an item and conveys his acceptance. Independent agency handles the transaction and confirms the contract to the supplier.

Needs a contract between independent agency and clients.

Big buyers may set up his own market place.

Advantages of electronic market place

Cost reduction

Convenience to small buyers

Suitable for small and fully defined items like spares, maintenance, services, etc.

Disadvantages of electronic market place

Inadequate facility for qualifying the supplier

Fear of unknown firms offering vastly different rates

Inadequate facility for analyzing the offers

Refusal of supplier to accept the contract

Unsatisfactory contracts

E-Procurement at ONGC

High Value Capital items Services and Turnkey projects Bulk stores items Spares - OEM & Non OEM Other Stores and Consumables 2,80,000 - Material master records 80,000 - Vendor records E-Procurement Component

SHAPE \* MERGEFORMAT

Business Processes

For procurement of material through online process the company will follow following steps:1. Vendor Access Authorization for E-Tendering Application2. SRM: E-TenderingOpen Tender with 2 Bid system Open Tender with Single Bid system Limited Tender - 2 Bid system Limited Tender - Single bid system Single TenderVendor Access Authorization for E-Tendering Application

Brief Explanation :Vendor access authorization for e-tendering application is the process in which the vendor requests access for submitting bids through the e-tendering application. The process results in a vendor code created in R3 and SRM for the vendor or if the vendor code in R3 already exists, the same will be replicated to SRM.E-TENDERINGOpen Tender 2 Bid Systems

Brief Explanation:

Open tenders are restored to when tender value is more than Rs. 25 lakhs except for the cases falling under single tender and limited tender categories. For all large and complex bids, open tender 2-Bid system is followed. In a 2-Bid system, bidder submits the bid documents in 2 sealed covers. One cover consists of technical bid and the another cover consists of price bid. The bid opening date is different for both the bids. The technical bid is opened first and a short listing of bidders based on the technical criteria is done. Price bids of short listed bidders will be opened on the price-bid opening date.In all open tenders, certain payments are involved at tendering stage. Vendors need to pay Tender Fees to purchase/download the Tender Document. During the submission of tenders, vendors need to pay Earnest Money Deposit (Either as payment or bank guarantee). Certain categories of bidders are exempted from payment of Tender fees and/or EMD (NSIC regd., CPSU etc)Open Tender with Two Bid System

PROCESS FLOW CHART

General ExplanationsNote: The complete process is explained step wise. In each step, first paragraph details the process in general rest of the paragraph refers to system mapping of the process.1. Receipt of approved Indent: - Approved consolidated indent to be transferred from SAP-R/3. Detailed requirements documents etc. is created in Collaboration Folders (c-Folders).Requirements are transferred automatically based on the material code, material group and purchasing group combination maintained in the Purchase requisition. The material group and purchasing group combination is maintained in a structure in SAP-MM by SRM Master Data administrator. Material code for SRM is determined by assigning class in material master. Requirements can also be manually transferred to SRM by executing the report provided for this purpose.2. Form Tender Committee: - This is optional and manual process. A tender committee is formed to recommend changes from standard/previous approved BEC (Technical Evaluation Matrix, Commercial Evaluation Matrix and Price Format) and special conditions. If required, PQC (Pre-Qualification Criteria) is also recommended by TC.3. Finalize BEC, PQC & Special Conditions: - The tender committee or Tender Dealing Officer finalizes Bid Evaluation Criteria and Pre-Qualification Criteria. Bid evaluation criteria are set of documents consisting of criteria for both technical and commercial evaluation. BEC also consists of a matrix which need to be filled by bidder with compliance Yes/No and Specific Details. The BEC also consists of price format in which he needs to submit the price-bid. The evaluation of bid is done based on these criteria. Sometimes, Pre-Qualification Criteria are also required. Vendor should confirm compliance to PQC before obtaining tender document.The BEC documents and PQC documents are created in c-Folders. Evaluation matrix is maintained as Data Sheets in c-Folders.The price format is typically the pricing conditions as maintained in R/3 pricing procedure. Pricing conditions are maintained in SRM.Tender Committee minutes are kept in c-Folders.4. TC recommendations and approval: - The documents should be approved by the competent purchasing authority. Competent purchasing authoritys comments are maintained in c-Folders.Approval Procedure in the system: - A status profile will be assigned to the documents folder. The status profile consists of complete approval route with a series of statuses (e.g. Prepared TC Review Endorsement by Chief-MM Approved by EPC) and authorizations for each of the status. Dealing officer sends notifications to the approvers from the folder containing tender documents. The approver can access the folder with the link in the notification and set the status. If the approver needs clarification before approving, then a notification is sent to the dealing officer or any other officer with the comments.5. Prepare Tender Document: - A tender document is prepared with details of requirements/specifications, standard conditions which include checklist and appendices of ONGC tender booklet, special conditions and BEC. Tender fee amount, EMD amount, last date of selling tenders, tender submission dates, pre-bid conference dates etc are mentioned.The approved tender document(s) are digitally signed and uploaded in c-Folders by the dealing officer. The following documents will be in c-Folders:Standard Instructions to BiddersStandard Conditions with Checklist & other AppendicesSpecial ConditionsBECTechnical/Commercial Evaluation MatrixSpecification SheetsQuantity Distribution Chart, if requiredFor the documents that need to be filled by the vendor such as technical specifications, an excel sheet with protected cells to be used. The left side columns of the excel sheets contains the points/specifications filled by the ONGC officer for which vendor need to give inputs. These columns should be protected. Vendor fills his inputs in the right side of the columns and for each point vendor can fill his response. This folder will be shared with vendors. A bid invitation in SRM is created with reference to the indent (PR). C-Folders are linked to the bid invitation. Bid invitation is signed by dealing officer. In SRM, digital signature of dealing officer would be required.Some Main fields in Bid Invitation: -

Bid invitation No: System generated serial number.Description of tender: The tender number generation in R/3 is used and copied in this field so that uniformity is maintained in tender numbering. The entry in SRM is validated with the tender number in R/3.Type of tenderBidding System (Single or 2 Bid system)Tender Value (INR)Tender Fee (INR)Tender Fee (INR)Date and time of closure of tender sellingLast date and time to receive queries for clarificationLast date and time to apply for access to e-Tender ApplicationDate of PBC (optional)Closing date and time for submission of bidsOpening date and time of unpriced techno-commercial bids (only in 2 bid system).Opening date and time for price bids (only in 2 bid system) Opening date and time of Bid (in case of single bid system)Bid Validity DateEMD/Bid Bond/ Bid Security (Given in tender documents in c-Folders)Security deposits/Performance bank guarantee (Given in tender documents in c-Folders)Address for correspondencePort consignee (Header and for each item)Ultimate consignee (Header and for each item)Delivery dates (Given in tender documents in c-Folders)Payment terms (Given in tender documents in c-Folders)Item details (Material description, UOM, Qty, Price, Delivery date, Valuation type, Port consignee, Ultimate consignee etc) Price related documents, if any, will be attached with Bid invitation (Not in c-Folders).6. Publish notice inviting tenders (NIT): - NIT is published in leading newspapers (global or local depending upon the type of bid). NIT along with the Tender document is published in ONGC website (www.ongctenders.net).Dealing officer shall download the bid invitation details required for NIT and upload in ONGCtenders.net for publishing. The NIT consists of a link to SRM application. All prospective bidders can logon to SRM application with Guest user ID and view the documents. If the prospective bidder wants to participate in bidding, access to SRM is required and the process of obtaining access is explained in process Vendor Access Authorization for e-tendering application.7. Send advance intimation to prospective bidders: - Advance intimation is sent to prospective bidders in case of open bidding.Prospective bidders are maintained in Bid invitation. As soon as the bid invitation is published, an email is sent to the vendors.8. Receive Tender fees and PQC Compliance from prospective bidders: - This step is required only in open tenders. Prospective bidders need to submit DD/Pay order for the tender fee amount and buy the tender document from the tender selling counters of the organization. The tender fee is normally waived for selected categories of vendors. In cases where PQC is required, bidders have to certify that they comply with PQC. Tenders documents are sold till the prescribed last date and time of selling tenders. When vendor clicks on Buy Tender for a bid invitation, payment gateway interface is activated to collect tender fee. Access to bid will be provided after the payment of tender fees.For the vendors who want a waiver need to request ONGC for the same with supporting documents. ONGC officers enter the details in the tender fee application in R/3 and generate a transaction number to allow vendors without payment of tender fee. The bidder will then have to be included in the SRM Bid invitation as a prospective bidder.9. Give tender document to bidder: - Covered in the above step.10. Receipt of Queries from bidders: - Optional. This step is common in large and complex requirements. Bidders who bought tender documents might need clarifications and hence submit their queries to tender dealing officers.Bidders can access c-Folders collaboration folder and upload the query documents up to a specified time in c-Folders.11. Forward Queries to all concerned and form suitable reply: - Copies of the queries from bidders are forwarded to tender committee or all concerned departments/people in the organization (Engineering or technical, finance and purchase). The response from different departments is collated and suitable replies are framed for all the queries.All concerned users shall be given authorization to specific folders in c-Folders for the bid invitation. Users can view the documents from various bidders in c-Folders. Final document consisting of suitable replies is uploaded into c-Folders. This document is not shared with vendors.12. Pre-Bid Conference (PBC): - Optional. A Pre-bid conference is organized on the pre-determined date to clarify all the queries of prospective bidders.13. Process PBC minutes: - The minutes of the pre-bid conference are prepared.Minutes of PBC are kept in c-Folders. These minutes will be approved by CPA.Approval Procedure in the system: A status profile is assigned to the documents folder. The status profile consists of complete approval route with a series of statuses (e.g. Prepared TC Review Approved by CPA) and authorizations for each of the status. Dealer officer shall send notifications to the approvers from the folder containing PBC minutes. The approver can access the folder with the link in the notification and set the status. If the approver needs the clarification before approving, then a notification is sent to the dealing officer or any other officer with comments.An abstract of approved PBC minutes is prepared and this abstract is shared with all vendors.14. Modify tender documents and circulate: - The modifications to tender documents, if any, are deliberated by tender committee and approved by Competent Purchasing Authority. The modifications to tender documents circulated to all bidders who bought the tender documents.Amendments to tender documents and approved abstract of PBC minutes and clarifications are kept in c-Folders after digitally signing them. Bid invitation is modified, if required. Last date of submission also may be modified, if required. An email is sent to all bidders informing the modifications.15. Receive Bids, EMD: - Vendors submit techno-commercial bids and price bids in separate sealed covers. When vendors electronically submit bids, nobody should be allowed to open the documents till the pre-determined tender opening date and time. Also, while opening the techno-commercial tenders, price should not be visible to anybody. Prices should be visible only after pre-determined price bid opening date and time. EMD may be received in the form of a Bank Guarantee or DD/Pay Order. EMD will be forwarded to accounting department.Bids: Vendor shall fill the bid invitation with required inputs (Dynamic attributes, price etc details). The complete tender document (technical & commercial documents only) without price details shall be uploaded after digitally signing into c-Folders. The data sheets, if any, are filled in c-Folders.Complete check lists, appendices and any other documents shall be uploaded in c-Folders. Bidders can submit bids till the last date of submission given in the bid invitation. Once a bid is submitted, vendor will not be able to submit the bid again. However, he may request the dealing officer through email to return the bid for resubmission. In such cases, dealing officer shall return the bid (Dealing officer will not be able to view the bid) by giving the bid number. Dealing officer will be able to return the bids only before last date of submission.Price details (all price conditions) should be only i