In an exclusive interaction with People Matters, B.M. Bansal, Chairman, IOC and V.C. Agarwal, Director – HR and Director-in-charge (IBP Division) IOC discuss the market-oriented and organizational challenges faced and overcome by the PSU since it set forth to becoming an integrated energy player a decade ago

How has been the evolution of the business since 1991?
Mr. Bansal - Until 1991, IndianOil was purely a downstream company. We were not into any other businesses. It was only after liberalisation that IndianOil decided to diversify and the Board took the lead by creating a business development group in 1994 that ventured into different businesses both upstream and downstream. From 1994 onwards, these internal teams have been focusing on diversifying into non core businesses. First we ventured into petrochemicals, then natural gas, LNG, and globalization of marketing operations. Today, IndianOil is poised to become the second major petrochemical company in India.

In the last few years, we have consolidated in our core areas of refining and marketing and have also grown very fast in strategic initiatives across the hydrocarbon value chain. With a consortium approach, we have grown in upstream integration into oil and gas exploration and production, downstream integration into petrochemicals, and diversification into natural gas business, as well as globalization of marketing operations.

IOCL today is India’s largest commercial enterprise with a turnover of Rs. 271,074 crore for the year 2009-10.
We believe that in a growing economy like India, the future is indeed full of excitement. We see ourselves as an ‘Energy Company‘ and are also venturing now into renewable energy sources like solar, hydrogen and bio-fuels and other sources of energy like nuclear as well.

What are the key challenges that IOCL has faced in the last few years? What are the challenges ahead?
Mr. Bansal - The major challenge from the business point of view is the fluctuation of crude oil prices in the global market along with the control of the retail prices by the government in the domestic market. During times of crude oil price fluctuation, like we had in 2008 and 2009, maintaining the cash flow and sustaining projects have been a major challenge. Every year we face similar challenges. 2008-09 was very difficult because oil prices shot up; 2009-10 was also difficult even though we had a bit of inventory to support us. While we were fully compensated for our losses in 2008-09, we had to suffer some losses in 2009-10. Challenges for the future will remain more or less the same until we have an open market in terms of pricing of end products.

What are the major challenges you have faced in the HR function in the past years?
Mr. Agarwal - In the last few years, we have grown extensively in new business areas where we had no presence before and that was a challenge to have the internal talent available to run those businesses. We have grown in upstream and downstream, especially into petrochemicals and diversified into natural gas. Considering our core business is refining and marketing, it has been a huge change in terms of the talent we needed to attract and groom internally to run these diversified businesses. We have trained people from in-house combining with external recruitment at entry and middle management levels from private sector as well. Today, this talent challenge is stabilizing as we have been successfully able to groom various managers from the traditional business for the new businesses. We have been successfully able to equip our people with new skill sets and are contributing this talent to the overall industry as well.

And what are your views on the HR challenges faced by IOC?
Mr. Bansal - We have faced a major challenge in terms of talent shortage, especially in areas of new businesses for us. We have overcome those challenges by equipping our people with new skill sets as well as hiring new talent at various levels. We have been able to build internal capabilities too over a period of time. Today, we have the confidence that we have those required capabilities ourselves.

How is your organization structured? What is the empowerment of the company when it comes to people practices?
Mr. Agarwal - IndianOil is a Board–managed, national listed company, with majority stake owned by the Government of India. The structure is very similar to the other PSUs. With Navratna and now Maharatna Board, it enjoys a lot of independence when it comes to business related decisions. The Board of IndianOil is totally empowered to take business and investment decisions. The guidelines on people policies and practices are provided by the Department of Public Enterprises (DPE).

The freedom to design and implement people policies like compensation, benefits, working regulations, et al, has not been given to the PSUs The Government believes that there should be uniformity among all PSU companies when it comes to people practices. From my point of view, I agree that some uniformity must be there like in group companies for example in the private sector. However, at the same time, each PSU should be given enough freedom to handle the ground realities, which are very different from business to business as the nature of the organization is different and hence the people requirements will also be different.

IOC has been defined as an organization with modern practices and traditional soul. What is your opinion?
Mr. Agarwal - We have many practices where we leverage technology to create communication channels and access to the management team. That way I agree that we have been able to keep ourselves up to date in terms of technology. For instance, we hold regular live webcasts with our executives across the country for updates and communication. In terms of accessibility to the management team, we also create the channels for employees to raise issues directly. For example, I encourage any employee to connect with me directly for any unresolved issues. I have many instances of employees raising an issue in their respective locations and when investigated, we realized that there indeed was a problem and we have been able to solve it thanks to the employee who highlighted the issue. We empower our employees to take ownership of their work and the performance of the organization; they are willing to take the risk. This has benefited the organization and we have acknowledged the same, so employees feel comfortable about raising them.

What is your view on the environmental disaster in the Gulf of Mexico and how has it affected the brand of not only BP but also the Industry?
Mr. Bansal - All companies in the hydrocarbon business have such high risks. Unfortunately, these challenges exist. Of course this disaster affects BP as a brand and to some extent companies in the same sector also. Now the efforts should be toward taking this opportunity to revisit the existing practices and ensuring that the learning from this disaster is imbibed by corporates in this sector.