• Overview
• Corporate Governance in HPCL
• Implementation
• Decision making process
• Advisory Council
• Exercise of Authority
• Limits of Authority Manual (LAM)
• Purchase Manual
• Right to Information Act 2005
• Integrity Pact

The evolution of Corporate Governance in India began in early 90s. The starting point was the recommendations of the Cadbury Committee Report after which followed various committees, leading to a formal Corporate Governance Code. This code was notified by Securities Exchange Board of India (SEBI) by inserting a new Clause 49 in the listing guidelines to the Stock Exchanges making it mandatory for the listing companies to follow the requirements of Clause 49 effective January 01, 2006.ÿ The major areas of compliance in Clause 49 are

• Appointment of required number of independent directors
• Larger role of Audit Committee
• CEO/CFO Certification of Accounts (will become applicable for 2005-06 Accounts)
• Code of Conduct for Board / Senior Management
• Risk Minimization Report to the Board
• Legal Compliance Report to the Board
• Compliance relating to Subsidiary Companies
• Information items to Board

HPCL has taken necessary steps to comply with the requirement and spirit of Corporate Governance

HPCL lays special emphasis on conducting its affairs within the framework policies, internal and external regulations and in a transparent manner.ÿ Being a Government Company, its activities are subject to review by several external agencies like the Comptroller & Auditor General of India (CAG), the Central Vigilance Commission (CVC), Parliamentary Committees, Statutory Auditors etc.

Like any other corporate, at the apex level is the HPCL Board of Directors (The Board). The Board has constituted several sub-committees, such as the Committee of Functional Directors (CFD), the Audit Committee, the Investment Committee, the HR Committee, the Investor Grievance Committee, etc. The composition of these Committees is given in this Report. The meetings of these committees are convened on need basis and minutes of these meetings are placed for information of the Board. Majority of the members of the Committees except the CFD are Independent Non-Executive or Government nominated Directors with the Whole Time Directors playing a facilitating role.

The Corporation has constituted an Executive Council comprising of Chairman & Managing Director, the Functional Directors and the SBU Heads of the Corporation. This council discusses important issues concerning the organization, analyses the same and recommend the ‘way forward’ in respect of matters discussed. Emphasis is laid on team approach, mutual support of functions and joint deliberations on issues by the council which has enhanced further the decision making process. It has thus facilitated an integrated thinking process and an aligned approach across the Corporation for achieving the Corporate Vision and each one of the aspirational aspects contained in the Vision Statement.

In the context of a highly competitive and dynamic environment of the Oil and Gas Sector, the Corporation felt that an external Committee comprising of eminent people could be constituted to seek their views and guidance, not only on the various ongoing activities, but also on its strategic initiatives aimed towards growth and development. With this background, the Committee called as Advisory Council was constituted in July, 2005 with the approval of the Board.

The Committee comprises of the following members:

This Council has met twice so far on October, 01, 2005 and February 20, 2006. Aspects related to performance of the Corporation, HPCL’s endeavour for global standards for various operations, initiatives under the areas of Corporate Governance, Corporate Social Responsibilities etc. were placed before this council. The suggestions/ observations made by the Council is being progressed further by the Corporation. The advice from this highly eminent group would immensely benefit the Corporation in the time to come.

The Corporation has well documented Limits of Authority Manual, Purchase Manual, Chart of Accounts, etc., facilitating the decentralized decision making process throughout the organization spread out throughout the country at various levels of the organization.

The LAM lays down the authorities that can be exercised at various levels i.e. the Board, Committee of Functional Directors, the Executive Committee, the Contracts Committee, the Bids Committee and the senior individual positions etc. for different activities of the Corporation.ÿ The manual is divided into segments representing different functions like Sales, Crude & Shipping, Capital Projects, Operations & Distribution, Finance, HR etc., and provides for a decision making process through various committees as above, represented by inter-functional groups including Finance. This ensures a transparent well considered and streamlined decision making process adhering to the laid down systems and procedures and thereby leaving no room for arbitrariness.

This Manual lays down elaborate procedures to be followed while undertaking purchases and in finalization of contracts. It lays down, inter-alia, the purchasing authorities at various levels, norms and processes for procurement.

The endeavour is always on building trust with shareholders, employees, Customers and other stakeholders based on the basic principles of Corporate Governance i.e. transparency, fairness, disclosure and accountability.

HPCL has implemented The Right to Information Act, 2005 (RTI) that became effective 12th October 2005. HPCL has provided detailed information on this Website www.hindustanpetroleum.com, and updates the same from time to time. Officers across the country, representing different Departments, have been appointed as Public Information Officers and Appellate Authorities to deal with the queries read from the Indian Citizens under RTI Act.

The Corporation has introduced “Integrity Pact” (IP) to enhance ethics / transparency in the process of awarding contracts. A MoU has been signed with “Transparency International” on July 13, 2007. This was made applicable in the Corporation effective September 01, 2007. The Integrity Pact has now become a part of tender documents to be signed by the Company and by the successful vendor / bidder.