A Summer Training Project Report On E-PROCUREMENT PROCESS OF ONGC LTD.

(A report submitted towards the partial fulfillment of the requirements of the two years full-time Post Graduate Diploma in Management)

Submitted by: Priyanka Virmani Post Graduate Diploma in Management Roll No.: 2k11b21 2011 -2013

ASIA-PACIFIC INSTITUTE OF MANAGEMENT

3,Institutional Area, Jasola , New Delhi 110025

ACKNOWLEDGEMENT

E-Procurement Process of ONGC LTD.

independence. This project is the result of two months of work whereby I have been

A journey is easier when you travel together. Interdependence is certainly more valuable than

ACKNOWLEDGEMENT
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A journey is easier when you travel together. Interdependence is certainly more valuable than independence. This project is the result of two months of work whereby I have been accompanied and supported by many people. It is a pleasant aspect that I have now the opportunity to express my gratitude for all of them. With an overwhelming sense of obligations, I avail this opportunity to express my deep sense of gratitude towards Shri Goyal, G.G.M. (F&A) ,Corporate MM, ONGC, Delhi who gave me the opportunity to work with the dynamic sections of ONGC such as Finance & Accounts along with Corporate Material Management, Scope Minar, Delhi. I emphatically express my profound thanks and heartfelt gratitude to my mentor Mr.Shibu Mammen for his valuable guidance, timely suggestions and constant encouragement during the entire course of my training. I would definitely like to place on record my thanks to Mr. Rounak Singhania, for his constant support, encouragement & motivation without which this project would not have taken its present shape. I would like to convey thanks to Mr Mohammad Arshad, for their support and guidance in my project. I would like to acknowledge my project guide Dr J Bhandari for guiding me throughout the term for the completion of my project , without his guidance and support I would had not been able to complete my project on time I also thank my College authorities to provide me with the opportunity to work with one of the largest corporations of India. I am also thankful to my peers and co-trainees for their advice and their willingness to share their bright thoughts with me, which was very fruitful for shaping my ideas. Lastly, I would like to acknowledge everybody who, though remain unmentioned, yet have been connected with my project directly or indirectly and entire staff of ONGC for all their understanding and cooperation during the entire period of project that I spent with them.

EXECUTIVE SUMMARY
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I, Priyanka Virmani, a student of pgdm Batch of 2011-2013 of Asia Pacific Institute of management ,Delhi got an opportunity to carry out my internship project in ONGC, Delhi where I was allowed to work on the project titled E-Procurement Process of ONGC Ltd.. This prestigious organization is one of the nine Navratnas recognized by the Indian Govt. The main activity of ONGC Ltd. is exploration and production of hydrocarbons and it requires the technical expertise of experts and various equipments required to do the same.

The Objective of this project was to analyze the procedures involved in the procurement of the A category items centrally at Dehradun using e-procurement was studied thoroughly. I also 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. This report also shows how a 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.

TABLE OF CONTENTS
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Student Declarationiii Certificate from Company..iv Certificate from Guide....v Acknowledgement..................vi Executive Summary....v Chapter-1: Introduction..............3
1.1 Purpose of the Study 1.2 Research Objectives of the study 1.3 Research Methodology of the study 1.3.1 Research Design 1.3.2 Data Collection: Primary & Secondary data 1.3.3 Design 1.3.4 Method of data collection 1.3.5 Limitation

3 4 4 5 5 5 6 6

Chapter-2: Company Profile..7 2.1 About the Indian Oil Industry 2.2 About ONGC 2.3 Vision & Mission 2.4 ONGC Offices & Institutes 2.5 Subsidiaries of ONGC 2.6 ONGC & its Joint Ventures 2.7 Achievements of ONGC 2.8 Organizational Structure 2.9 Performance at a Glance 2.10 Share Capital Composition 7 8 9 10 13 14 16 18 18 19
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2.11 Auditor Comments 2.12 Corporate Social Responsibility 2.13 SWOT Analysis

20 21 21

Chapter-: E-Procurement Process of O.N.G.C. . 22 3.1 Introduction 3.2 Material Management 3.3 ABC Analysis 3.4 Purchasing Process 3.5 Business Processes 3.5.1 Vendor Access Authorization for E-Tendering Application 3.5.2 SRM: E-Tendering 3.5.3 Process Flow Chart 3.5.4 New Dimensions Offered by E-Procurement Solutions CHAPTER-4: Analysis 22 26 26 29 30 31 33 34 47 54

CHAPTER-5: Findings. CHAPTER-6: Suggestions... CHAPTER-7: Conclusion ... Bibliography................................................................................................................. Annexure..

CHAPTER 1 INTRODUCTION
1.1 PURPOSE OF THE STUDY
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The purpose of my study is to analyze the Financial Performance of O.N.G.C. and detailed Study of E-Procurement Process of O.N.G.C. Ltd. The main activity of ONGC Ltd. is exploration and production of hydrocarbons and it requires the technical expertise of experts and various equipments required to do the same. In this project, basically Changes in Accounting Policies in the last 5 years have been analysed and studied. In Addition to that, an attempt has been made to analyze and interpret the Financial Position of ONGC Ltd., which constitute Accounting Ratios like Liquidity, Leverage, Profitability and Activity Ratios and working capital management. Apart from the financial analysis, the purpose of this project is to highlight the E-Procurement Procedure in O.N.G.C. This project was undertaken to study the procedures involved in the procurement of the A category items centrally using e-procurement. 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.

1.2

RESEARCH OBJECTIVE OF THE STUDY

The major research objective of the project is to know how the company manages its financial issues during a particular year, I studied the past five years financial position of the company by studying the annual reports and the official website, I compared the past five years balance sheet, profit & loss account through which I analyzed the financial ratios. I also studied Significant Accounting Policies and relevant changes made in last 5 years starting from year 2004 2008. Also, as a part of project, Detailed Study & analysis was done on the E-Procurement Process of A-Class Items in ONGC. With the help of Questionnaire, E-Procurement is compared with Non E-Procurement & E-Procurement Benefits & Limitations are viewed and accordingly analyzed and studied.

1.3

RESEARCH METHODOLOGY

In order to complete project report on Financial Analysis & E-Procurement Process of O.N.G.C. Ltd, following methodology has been adopted.
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There are two main types of data collection i.e., 1. Primary Data 2. Secondary data PRIMARY DATA: It means collection of information for the first time. In order to collect such type of information questionnaire i.e., to be constructed and information is collected from the respondent. In my project report Financial Analysis & E-Procurement Process of ONGC Ltd., the primary data is collected with the help of questionnaire to question the respondents i.e., Employees of M.M. Department. On the basis of the Analysis of Primary data obtained, the Pros & Cons of EProcurement Process is studied. SECONDARY DATA Secondary data are information, which has already been collected by others. In order to carry out my project successfully, I have relied on the secondary data made available through various resources available at the company premises and other data base. Source of secondary Data,

Library of ONGC Annual reports of ONGC Ltd. Monthly publication of ONGC i.e., corporate finance ONGC LTD website: www.ongcindia.com

1.3.1 RESEARCH DESIGN

The researcher must design a sampling design, which calls for three decisions:
Sampling unit:

The first step is deciding about the sampling unit i.e. who are to be surveyed as the target population. We selected the sampling unit to be, the Employees of ONGC.
Sampling design: 9

The second step is to decide that how many people are to be surveyed. Since the Maximum No. of Employees in M.M.& C.F.S.G. are 50, so we selected 50 people as the target population for the survey.
Sampling procedure:

This aspect deals with the issue, of how respondents to be chosen. Here, Non Random Sampling was done. Each and every respondent does not have the equal probability of getting selected.

1.3.2 DATA COLLECTION

PRIMARY DATA: The Primary Data has been collected from the Questionnaire Method. SECONDARY DATA: Secondary data has been collected from Websites, ONGC Intranet, Books, and Magazines & Annual Reports.

1.3.3 DESIGN
1.3.3.1 POPULATION

No. of Employees in ONGC Ltd. all of over India are 32,900. No. of Contractual Employees is 28,000. The Total No. of Employees in ONGC, Laxmi Nagar, Delhi is 600 (Population).

1.3.3.2

SAMPLE SIZE

The No. of ONGC Employees in ONGC, Laxmi Nagar, Delhi who belong to Corporate M.M. Department, Delhi M.M. Department & Common Finance Service Group are 50.

1.3.3.3

SAMPLING TECHNIQUE

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The Type of Sampling Technique used here is the Judgmental Sampling, a type of Non Probability Sampling Technique. It is because; this questionnaire is meant for the ongc employees of the Corporate & Delhi M.M. Dept and C.F.S.G. only and not any other department of ongc. So, Each Employee of Ongc does not have equal probability of getting selected in Sample. Also, since we are basically required to study only the E-Procurement process and not any other process, so we are actually doing Judgmental Sampling.

1.3.4 METHOD OF DATA COLLECTION

The researcher can choose any research instrument that suits his/her type of topic is selected. However, I have chosen the questionnaire method, as my research instrument in collecting the information as primary data. I have tried to make this questionnaire in both open ended and close ended ways, keeping in mind, my objective of research.

1.3.5 LIMITATIONS
1. The time of survey was limited for the proper and detailed analysis on the various

aspects of E-Procurement & Reverse Auctioning. 2. During the study, some people show keen interest in the topic and give their views while some people do not show any interest.

CHAPTER 2 COMPANY PROFILE

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2.1. ABOUT THE INDIAN OIL INDUSTRY

The origin of oil & gas industry in India can be traced back to 1867 when oil was struck at Makum near Margherita in Assam. At the time of Independence in 1947, the Oil & Gas industry was controlled by international companies. India's domestic oil production was just 250,000 tones per annum and the entire production was from one state - Assam. The foundation of the Oil & Gas Industry in India was laid by the Industrial Policy Resolution, 1954, when the government announced that petroleum would be the core sector industry. In pursuance of the Industrial Policy Resolution, 1954, Government-owned National Oil Companies ONGC (Oil & Natural Gas Commission), IOC (Indian Oil Corporation), and OIL (Oil India Ltd.) were formed. ONGC was formed as a Directorate in 1955, and became a Commission in 1956. In 1958, Indian Refineries Ltd, a government company was set up. In 1959, for marketing of petroleum products, the government set up another company called Indian Refineries Ltd. In 1964, Indian Refineries Ltd was merged with Indian Oil Company Ltd. to form Indian Oil Corporation Ltd. During 1960s, a number of oil and gas-bearing structures were discovered by ONGC in Gujarat and Assam. Discovery of oil in significant quantities in Bombay High in February, 1974 opened up new avenues of oil exploration in offshore areas. In 1984, Gas Authority of India Ltd. (GAIL) was set up to look after transportation, processing and marketing of natural gas and natural gas liquids. By the end of 1980s, the petroleum sector was in the doldrums. Oil production had begun to decline whereas there was a steady increase in consumption and domestic oil production was able to meet only about 35% of the domestic requirement.

Overview of Sector

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FIGURE 2.1 PETROLEUM SECTOR

2.2 OIL AND NATURAL GAS CORPORATION LTD. (ONGC)

OIL AND NATURAL GAS CORPORATION (ONGC): The organization was incorporated on June 23, 1993 as an Indian public sector petroleum company. It is one of the Fortune Global 500 Company, 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. ONGC was set up as a commission on August 14, 1956. Indian government holds 74.14% equity stake in this company. The Organization is mainly 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. In March 2007 it was rated as the largest company in terms of market capitalization in India. 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.

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. Oil exploration and production activities results in massive investment in exploration because the New Finds of oil deposits progressively become more and more scarce and recovery from old fields become costlier.
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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. The Biggest and Most Formidable Competitor that ONGC has faced has been the China National Petroleum Corporation. Some major competitors in the oil and gas industry are Chevron Corp, Total, Exxon Mobil CP, BP PLC and Petro china COADS. ONGC is spearheading the UN Global Impact-World`s Biggest corporate citizenship initiative to bring Industry, UN Bodies, NGOs, Civil Societies and corporate on the same platform. Being a responsible corporate citizen, ONGC has made sizeable contributions towards flood relief in Bihar and Assam. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, give the information required by the companies act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: In the case of Balance sheet, of the state of affairs of the company as at 31st March 08; In the case of Profit & Loss account, of the profit of the company for the year ended on that date; In the case of the Cash Flow statement, of the cash flows of the company for the year ended on that date.

2.3 VISION & MISSION

Vision: To be a world-class oil and gas company integrated in energy business with dominant Indian leadership and global pressure. Mission:
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World class Dedicated to excellent by leveraging competitive advantages in R&D and technology with involved people. Imbibe high standards of business ethics and organizational values. A bidding commitment to safety, health and environment to enrich of community life. Fosters a culture of trust, openness and mutual concern to make working a stimulating and challenging experience of our people. Strive for customers delight through quality products and services. Integrated in every business Focus on domestic and international oil and gas exploration and production business opportunities. Provide value linkages in other sector of energy business. Create growth opportunities and maximization shareholder value.

Dominant Indian leadership Retain dominant position in Indian Petroleum sector and enhance Indias energy availability.

2.4. ONGC OFFICES

The organization has its Headquarter at Dehradun, Uttarakhand and registered office is at Jeevan Bharti Building, Tower-II, 124, Indira Chowk, New Delhi. In addition to that, it has a number of regional offices, branch offices of subsidiaries and its institutions spread across the country.

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FIGURE 2.2 ONGC OFFICES, HTTP://WWW.ONGCINDIA.COM

2.5 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. 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

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project is producing natural gas and the Sudan project is producing oil. In the Myanmar project, an exploratory well was drilled, natural gas have been discovered in Jan 04.

MANGALORE REFINERY AND PETROCHEMICALS LTD. (MRPL): MRPL was incorporated on March 7, 1998 and commenced its business on August 2, 1988. Hindustan Petroleum Corporation Ltd. (HPCL) and Indian Rayon and Industries Ltd. and its affiliates (IRIL), were the purpose of setting up Crude petroleum refinery at Mangalore. MRPL has a refinery capacity of 9.69 million metric tons per annum and is involved in refinering crude oil into petroleum products. 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.

2.6 ONGC & ITS JOINT VENTURES

1. 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 has paid a dividend of 12.5%.

2.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

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the Power Plant with PGCIL Grid at Bongaigoan. The estimated cost of the integrated Project is Rs. 38,440 million 3. 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 Accordingly, ONGC has made an upfront

utilization and sub-optimal financial structure.

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. 4. 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. 5.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. 6. 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. 7. 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
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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. 8. 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). 9. 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. 10. 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.

2.7 ACHIEVEMENTS
GLOBAL RANKING
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1. 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). 2. ONGC ranks 20th among the Global publicly-listed Energy companies as per PFC Energy 50 (Jan 2008) 3. ONGC is the only Company from India in the Fortune Magazines list of the Worlds Most Admired Companies 2007. 4. 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. 5. 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. ONGCs wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 44 Oil & Gas projects 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.

REPRESENTS INDIAS ENERGY SECURITY

1. The Oil and Gas Corporation (ONGC) had the highest net worth and second highest market capitalization of all corporations in India by 2007. 2. The ONGC is the Indias largest exploration and production (E&P) company.

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3. The state- owned ONGC alone hold the exploration (as well as mining) rights for more than half of the hydrocarbon acreage licensed out by the government. 4. It account for a little more than three quarter of Indian crude oil production and more than two thirds of its natural gas production. 5. Rated Excellent in MOU Performance Rating for 2006-07 by the Department of Public Enterprises, Ministry of Heavy Industries in Public Enterprises, GOI. 6. Topped the visibility metrics in Indian Oil and Gas Sector and the only PSU in the top 10 list of Indian Corporate newsmakers. 7. Golden Peacock Global Award 2007 for Excellence in Corporate Governance 2007, for the 3rd consecutive time, conferred by World Council for Corporate Governance.

2.8 ORGANIZATIONAL STRUCTURE

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FIGURE 2.3 ORGANIZATIONAL STRUCTURE, ONGC OFFICIAL WEBSITE

2.9 PERFORMANCE AT A GLANCE

FINANCIALS (2007-08) (AS PER LATEST AUDITED A/C & BALANCE SHEET) ONGC posted a net profit of Rs. 167.016 billion, the Highest by any Indian Company. Net worth Rs. 699 billion. Practically Zero Debt Corporate. Contributed over Rs. 300 billion to the exchequer.

PERFORMANCE OF THE COMPANY (2007-08) :- (IN MILLION RUPEES)

Annual Turnover (gross revenue) : - 648459.50 (INCREASED BY 6.5623 %) Total expenditure Profit before tax (PBT) Profit after tax (PAT) :::396112.49 (INCREASED BY 7.4280 %) 252345.91 167016.47 (INCREASED BY 6.61 %) (INCREASED BY 6.768 %)

Earnings per share (E.P.S) : Dividend(%) :320 327

78.09 (in rupees) (INCREASED BY 6.7678 %)

Book value per share(Rs) :ROCE(%) :- 52 Current Ratio:- 2.47

2.10 SHARE CAPITAL COMPOSITION Shareholding Pattern as on 31st March, 2008

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FIGURE 2.4 SHAREHOLDING PATTERN OF ONGC TABLE 2.2 SHAREHOLDING PATTERN

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CATEGORY A. Promoters Holding 1. Promoters - Indian Promoters - Foreign Promoters - Persons Acting in Concert Sub Total B. Non-Promoters Holding 2. Institutional Investors a. Mutual Funds and UTI b. Banks, Financial Institutions, Insurance Companies (Central / State Govt. Instts. / Non-Govt. Institutions) c. FIIs Sub Total 3. Others a. Private Corporate Bodies b. Indian Public c. NRIs/OCBs/Clearing Members Sub Total Grand Total

NO. OF SHARES

PERCENTAGE OF SHAREHOLDING

1,585,740,673 NIL NIL 1,585,740,673

74.14 --74.14

36,656,577 105,054,973

1.71 4.91 5.43 12.05

116,097,133 257,808,683

256,472,098 37,456,781 1,394,295 295,323,174 2,138,872,530

11.99 1.75 0.07 13.81 100.00

2.13 SWOT ANALYSIS

STRENGTHS: ONGC is the only company in India which is involved in offshore construction activities related to oil and gas project for more than two decades.

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It has rich experience over the last 20 years in its execution and processes abundant data associated with these projects.

Another area of strength of ONGC is its commitment and quality to maintenance management, be in rigs, production installations or processing plants.

The organization possesses quality certification capability particularly in specialized area of OCTG inspection. ONGC has access to high quality acreage in Mumbai High and several other basins, which results in lower costs per barrel.

The organization possesses highly skilled manpower at a low cost. The operational cost of ONGC is among the lowest in the world and its reserve level is equivalent to 23 years of production.

ONGC enjoys virtually a monopoly position controlling more than 80% of the countrys crude oil production.

ONGC can boast of installing 28 process platforms, 132 well platforms and more than 3000 km submarine pipelines.

WEAKNESS: The purchase procedures of ONGC do not lend to feasible and faster purchase decision. The functioning of the organization as a commercial organization is restricted or constrained through its high regulation by the government. Behaviors of certain reservoirs in the Mumbai High have not been in line with expectation and would entail investments in the future.
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OPPORTUNITIES: The number of sedimentary basin in India is about 26, out of which only 9 have been discovered as yet. Moreover production has been commenced in six of them. Hence, there is tremendous opportunity for growth in the future. Furthermore, oil exploration and development has been opened to the private sector, hence, ONGC can overcome its resources crunch be setting up joint ventures with foreign companies. The company is having an opportunity for growth in the overseas market through the subsidiary OVL. ONGC has entered into a strategic alliance with IOC to form a national oil entity for domestic and global operations. THREATS: The unexplored basins are of poor acreage and would increase ONGCs finding and development costs. International crude oil prices are highly volatile and any sharp downturn would affect the profitability of the organization. ONGC has a lot of exposure to the group companies in the form of cross-holdings. This is hampering the financial soundness of the company. ONGC paid Rs 1700 Crore to the government for a 10% stake in IO and 5% stake in GAIL. Same way IOC is paying Rs. 3000 Crore for a 10% stake in ONGC and 5% stake in GAIL. The company was a favored company by the GOI in the decontrolled scenario it could face greater challenges from private players.
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CHAPTER 3 E-PROCUREMENT PROCESS OF ONGC

3.1. E-PROCUREMENT
E-procurement, or electronic procurement, is the purchasing process, conducted over the internet. E-procurement solutions are fully automated, internet-based, self-service systems that streamline purchasing between buyers and suppliers. These solutions also provide crucial information for making better purchasing decisions. 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 order Fulfilling the order. Delivery. Receipt. Payment. Shipping.
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Benefits and Examples Launching an e-Procurement solution can help you reduce both direct costs (those that are part of the end product, such as plastic) and indirect costs (those associated in creating the end product, such as office chairs). You can increase purchasing efficiency; reduce overall production time; and improve purchasing controls. THE KEY BENEFITS OF E-PROCUREMENT ARE: 1. Improved Supplier Management: - e-Procurement solutions enable your company to locate suppliers with the best price and quality, and help streamline the negotiation and contracting processes. For example, a small jewelry retail chain was limited to a handful suppliers and lacked options when price increases occurred. Its customers began shopping around and finding comparable products at lower prices. The retail chain implemented an e-Procurement solution that allowed them to participate in an e-marketplace. This enabled the retail chain to find multiple suppliers and reduce their purchasing costs and pass these savings onto its customers without sacrificing quality. 2. Cost Reductions and Procurement Savings: - e-Procurement helps you increase the productivity and lower the cost of your purchasing staff. You can reduce reliance on paper-based documents, such as request for proposals, responses and purchase orders. You can also leverage your companys buying power by qualifying for volume discounts or special offers. On average, e-Procurement cost reductions and savings range from 15 to 35 percent, depending on your level of integration. For example, a five-location home improvement chain launched an eProcurement system so it could combine office supply purchases by all departments. The system aggregated the chains buying and receives a volume discount from its paper supplier. Costs were reduced and ordering efficiency increased. 3. Improved Documentation: - e-Procurement helps improving reporting and record keeping by electronically tracking and recording your transactions. This helps you increase order fulfillment accuracy and eliminate untracked or sporadic buying habits. For example, the manufacturing facility of a computer component producer wanted to reduce ordering errors in supplies

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procurement. It deployed an e-Procurement system to move all phases of ordering, payment and shipment verification online, reducing delivery errors and the producing delays they caused. 4. Increased Speed: - e-Procurement helps employees automate many routine purchasing tasks, eliminate redundant tasks (such as requisition approval), and increase purchasing efficiency. For example, members of the purchasing department at a medium-sized chemical company where consistently complaining about hassles of gaining approvals for small purchases. Through its eProcurement solution, the company set a threshold for purchases that would no longer require multiple levels of approval. Departments could place orders from selected suppliers, eliminating the need for time-consuming and redundant approvals. Purpose The main activity of ONGC is to focus on domestic and international oil and gas exploration and production business opportunities. This involves various activities like survey, drilling, production, transportation, joint ventures etc, and it requires the technical expertise of experts and various equipments of material to achieve the mission. Most of these materials are of both domestic and foreign origin and their procurement requires definite criteria to be followed. This project was undertaken to study the procedures involved in the procurement of the A category items centrally at Dehradun using e-procurement, embedding all the rules and regulations to be followed as were being followed in legacy system. After the successful implementation at Dehradun, the e-procurement will be extended to other category items in all other locations of ONGC. This study will also focus on the payment procedure adopted by the company. Once the material is procured than how the payment is being made to the supplier and what all are the issues that need to be checked before making a payment. Limitations Limitations are extent above which the process should not exceed. Every work has its own limitation. Similarly in our case also we have certain limitations, these are as follows: Some issues related to procurement are highly confidential such as bidding process, to which we have no access. Thus it hinders us to understand some concepts.
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This procurement process deals with different department of the organization, but we have access to only one department that is finance. This also limits our understanding of certain concepts.

3.2. MATERIAL 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 Organization 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.

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3.3. ABC ANALYSIS

ONGC 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). Steps 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. 1
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2 3 4
5

TYPE A ITEMS (FOR CENTRALISED PROCUREMENT)

1. Drill pipes of all sizes and grades 2. Heavy weight drill pipes of all sizes and grades 3. Casing pipes of all grades and sizes 4. Liner Hanger 5. Drill collars of all sizes 6. Drill bits of all rating and sizes 7. Drill hoses of all ratings and sizes 8. Floating equipment 9. Resignated Lignite 10. CLS 11. KCL 12. Chrome Lignite 13. Spotting fluid 14. EP lube 15. Sulphonated asphalt 16. Drilling detergent 17. Production tubings of all sizes 18. Well head of all pressure rating and sizes 19. X-Mas tree of all pressure rating and sizes 20. Perforation material 21. Geophone strings of all types 22. Line pipes of all sizes 23. Kelly all types 24. All import substitution items
25. POL (Diesel, lubricants etc.)

26. CMC 27. Oil well cement

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28. Bentonite
29. Barytes The 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:-

S. No. 1. 2. 3. 4. Pipes of all size CMC

Item Delhi

Base

Dehradun Mumbai

Oil Well Cement and Cement additives Bits Indigenous Imported

Dehradun Dehradun Dehradun

5. 6.

Blow Out Preventers and accessories Rig (purchase and service contracts) On land Offshore

Dehradun Mumbai Dehradun Mumbai / Chennai Dehradun Delhi Dehradun Mumbai, Delhi Dehradun
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7. 8. 9.

Spares and assemblies for on-land rigs Spares and assemblies for offshore rigs Well Heads On land Offshore Imported mud chemicals and mud additives Casings 30 and 20 required for offshore operations exclusively Others - whether indigenous or imported for on-land and off-shore operations

10. 11. 12.

TABLE 4.1 LIST OF ITEMS PURCHASED

3.4 PURCHASING PROCESS

An Overview of Purchasing Procedure

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FIGURE 3.1 PURCHASING PROCEDURE

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FIGURE 3.2 ONGC CENTRALIZED E-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.

3.5 BUSINESS PROCESSES

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

3.5.1 Vendor 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.

3.5.2 SRM: E-TENDERING

Open 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 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.

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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 Single Bid System 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 some open tender single bid system is followed. In a single bid system, bidder submits the bid documents in one sealed cover, both technical bids as well as price bid. There is only one bid opening date for both technical & commercial bids. In all open tenders, certain payments are involved at tendering stage. Vendors need to pay Tender Fee to purchase/download the Tender Document. During submission of tenders, vendors need to pay Earnest Money Deposit (either as payments or Bank Guarantee). Certain categories of bidders are exempted from payment of Tender fee and/or EMD (NSIC regd., CPSU etc.) Limited Tender 2 Bid System Brief Explanation Limited tenders are restored to when tender value is less than Rs. 25 lakhs except for the cases falling under single tender and limited tender categories. Some high value cases may be taken as Limited tender also. For all large and complex limited tender bids, 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.

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In all limited tenders, certain payments are involved at tendering stage. During submission of tenders, vendors need to pay Earnest Money Deposit (Either as payment or bank guarantee). Limited Tender Single Bid System Brief Explanation Limited tenders are restored to when tender value is less than Rs. 25 lakhs except for the cases falling under single tender and limited tender categories. Some high value cases may be taken as Limited tender also. For some limited tender, single bid system is followed. In a single-bid system, bidder submits all the bid documents in a single sealed cover which consists of both technical bid and price bid. The bid opening date will be common for both the bids. In all limited tenders, certain payments are involved at tendering stage. During submission of tenders, vendors need to pay Earnest Money Deposit (Either as payment or bank guarantee). Single Tender Brief Explanation In case of single tender there is only one bidder. Generally, single tender is floated in the following cases: PAC items (Purchase of proprietary articles). OEM in case there are no authorized dealers/distributors. On nomination basis.

SRM: E-TENDERING
Open 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 another cover consists of price bid. The bid opening date is different for both 39

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)

3.5.3 PROCESS FLOW CHART

PROCESS FLOW CHART

General Explanations:-

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Note: 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 SAPR/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.

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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 Bidders Standard Conditions with Checklist & other Appendices Special Conditions BEC Technical/Commercial Evaluation Matrix Specification Sheets Quantity Distribution Chart, if required For 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
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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 tender Bidding System (Single or 2 Bid system) Tender Value (INR) Tender Fee (INR) Tender Fee (INR) Date and time of closure of tender selling Last date and time to receive queries for clarification Last date and time to apply for access to e-Tender Application Date of PBC (optional) Closing date and time for submission of bids Opening date and time of unpriced techno-commercial bids (only in 2 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 Date EMD/Bid Bond/ Bid Security (Given in tender documents in c-Folders) Security deposits/Performance bank guarantee (Given in tender documents in cFolders) Address for correspondence Port consignee (Header and for each item) Ultimate consignee (Header and for each item) Delivery dates (Given in tender documents in c-Folders)
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bid system).

 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.

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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 predetermined 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
45

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 technocommercial 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.

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Price details (all price conditions) should be only in Bid invitation. Any price related documents shall be attached in bid invitation (not in c-Folders) only. These documents have to be digitally signed. A set of pricing conditions relevant for vendor entry are maintained in the system. Instructions are given to vendor on the price conditions applicable in a bid invitation. Bidder is required to sign on the bid as well as all documents attached with bid. Accordingly, provision for digital signature as per IT Act 2000 required on bid submission as well as documents in c-Folders. These signatures are to be verified upon tender opening. In SRM tenders, all vendors shall be insisted to submit bids along with all appendices involving dynamic attributes, evaluation matrix, check list etc through SRM only. Bidders would be allowed to submit only the following documents physically prior to date/time of unpriced bid closing: Documents essentially required in physical form: Tender fee in foreign currency, if applicable Bid bond in original Solvency Certificate in original Any other certificates/documents required to be furnished in original or as certified true copy as per tender requirement (mandatory) Documents which can be submitted either in e-form or in physical form Annual reports Supporting documents for past experience Technical catalogues Any additional information/document bidder wants to furnish. 16. Open Techno-commercial bids (unpriced): - On the pre-determined date and time of opening technical bids, the technical bids shall be opened in the presence of vendor representatives. The system should allow the bids to be opened with due simultaneous electronic authorization of representatives from purchasing & finance departments. Currently SRM does not support this
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functionality. The technical/commercial folders are available only for viewing after opening of techno-commercial bids. Vendors shall be able to view only their respective documents. Summary of the documents received from each bidder (either through SRM or manually) prepared and kept in c-Folders for viewing by respective bidders. 17. Prepare & Sign Evaluation Matrix: - The evaluation matrix comparison is prepared and signed by the tender committee. In c-Folders Data sheet comparison gives an excel based report of the values filled by all the bidders. This report is saved as an excel file and kept in c-Folders for adding the ONGC comments. Thus this new file gives the complete details of the data given by vendors and also the comments of the ONGC officers. 18. Forward bids to all concerned for technical/commercial evaluation and obtain comments with approval: - The technical bidding documents are printed and sent to technical evaluation committee or indenters, as required. The relevant officers shall receive the copy of bidding document and deliberate. The officer in charge shall approve the comments and return the documents. The approved documents are uploaded into c-Folders. Relevant officers are authorized to view the technical documents in c-Folders. The officers make a document with their comments and on approval upload the approved document in c-Folders. This is an internal document and not shared with bidders. Similarly, the dealing officer verifies the commercial documents and prepares an evaluation document which is vetted by a finance officer. The vetted document is uploaded into c-Folders. This document is not shared with bidders. 19. TC meeting for confirmations and approval: - The comments are received and a TC meeting is convened to prepare TC recommendations for short listing of bidders or to seek further confirmations from the bidders. The recommendations document is signed by TC members and endorsed by chief MM and approved by CPA (if CPA is not Chief MM). The document is uploaded in c-Folders and an appropriate status profile is assigned by the dealing officer/administrator for approval process.
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20. Seek clarifications from bidders: - Optional. Dealing officer shall make a document on clarifications to be obtained from each bidder and send it to respective bidders. The bidders should submit their clarifications before a cut-off date. Final approved document is uploaded into public c-Folders for the vendors to view. A notification is sent to vendors to inform then regarding the document. Bidder can see the documents and provide the confirmations. The bidders confirmation document is uploaded in cFolders in his private area. 20a. Obtain clarifications from bidders and consolidate: - Optional. Clarifications received from all the bidders are compiled and circulated to all concerned in the organization. A notification is sent by dealing officer to all concerned informing the receipt of clarifications from bidders. It is recommended that all required clarifications are obtained once without repeating the process of seeking clarifications many times to cut cycle time. 21. Final technical comments from all concerned: - Optional. If required, the step 18 is repeated. 22. TC meeting for short listing of bidders & approval: - Optional. This step is similar to step 19. The comments are received and a TC meeting is convened to prepare TC recommendations for short listing of bidders. The recommendation letter is signed by TC members and approved by CPA or endorsed by Chief MM and approved by CPA (if CPA is not Chief-MM). Price bids of these short listed bidders only will be opened. The document is uploaded in c-Folders and an appropriate status profile is assigned by the dealing officer/administrator for approval process. The short listing of bidders is indicated in c-Folders by setting status for unshort listed vendors and an interface program between SRM & c-Folders shall update the bids in SRM. The rejection indicator in SRM will be checked in SRM for the unshort listed bids. The rejection indicator is renamed as Under Review.
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23. Intimation of price-bid opening date and time to short listed bidders: - Price Bid opening date & time is intimated to short listed bidders. The price bid opening date is modified, if required and informed to all short-listed bidders. 23a. (Optional) As per ONGCs tender conditions variations of tendered quantity up to 20% is allowed for each item at ONGCs options prior to price bid opening. In case this option is availed, tender quantity is modified and intimated to short listed bidders. Modification to bid invitation after the submission date is not allowed in the system and hence this cannot be done in SRM. However, the same is informed to vendors through c-Folders notification. 23b. Adjustment Price Bids: - Optional. In exceptional cases, bidders need to submit adjustment bids (Delta price only) based on the modifications to the bid. Sometimes, they are allowed to submit only decrease in price. Modification to bid invitations/bids after the submission date is not allowed in the system and hence this cannot be done in SRM. However, obtaining the adjustment bids details can be done through c-Folders and update the details in comparison statement. 24. Opening of price bids: - Price bids of short listed bidders will be opened in the presence of vendors representatives. The system should allow the bids to be opened with due simultaneous electronic authorization of representatives from purchasing & finance departments. Currently, SRM does not support this functionality. Bids as given in SRM and adjustment price bid, if any, received in c-Folders should be opened. Bidders present are informed of the prices quoted by other short listed bidders at this stage. 25. Prepare & sign comparative statement: - A comparative statement is prepared and signed by dealing officer and checked by one higher officer. The price comparison statement is generated by the BW system which is seen from SRM. Domestic price/purchase preference factors etc, if any, are applied while making the comparative
50

statement. Landed cost is determined in the comparative statement for each item (or group of items, as the case may be) in the bid also for overall bid. Ranking for each item or group of items as the case may be, is done. The comparison statement is downloaded from the report; loading factors are applied and uploaded into c-Folders for further processing. Comparisons are also made of L-1 rates (Evaluated rates) with respect to corresponding last purchase rates (LPR) as well as estimates for briefing TC/CPA. Last purchase rate is taken from R/3 and estimates are taken from PR values and comparison sheet is prepared in BW. 25a. Vetting of comparative statement: - The comparative statement is vetted by appropriate finance authority. 25b. Preparation of brief to TC: - Total financial implication for placement of orders at L1prices is to be worked out both vendor wise and work centre wise. Comparison to be made w.r.t required fund and available funds for each work centre. In intimation/alert to indenter and concerned work centers to be made for additional funds. The comparison sheet with LPR and PR values as described in point 25 is provided. 25c. TC meeting & Approval: - A TC meeting is convened and recommendations are prepared and signed by TC members. The recommendations document is signed by TC members and approved by CPA or endorsed by Chief MM and approved by CPA (if CPA is not Chief-MM) 26. Negotiations with L1: - This step is optional. CPA/Director shall authorize price negotiations as per internal guide lines. In case, order for same item is to be distributed between more than one bidders, same is specifically spelt out in tender. In such cases, negotiations with bidders (say L-2, L-3) i.e. other than L-1 bidder will be involved. Price may be changed as a result of negotiations. Price comparison w.r.t. LPR/Estimates (step 25a) and TC brief (step 25b) are to be repeated, if required. Modifications to bid invitations/bids after the submission date are not allowed in the system and hence this cannot be done in SRM.

51

27. Proposal for successful bidder: - Successful bidder is decided based on the ranking in comparative statement or to the L1 bidder based on the negotiation. Sometimes, multiple bidders are declared as L1 bidder. 28. TC meeting for award of contract and approval/endorsement: - A formal TC meeting decides to award the contract to successful bidder(s) and the contract terms are finalized. The proposal is approved by competent authority. If the bid requires approval of EPC, then steps 25a and 25b are also required. Necessary documents are kept in c-Folders and approvals are obtained in c-Folders. 28a. Preparation and submission of EPC brief: - A proposal for EPC approval is prepared with summary bid data. This proposal is forwarded to EPC members. These are specific formats for check list, summary and annexure of brief to EPC. SRM to generate these documents. System shall provide reports from objective data like comparison sheets. These reports can be downloaded and kept in c-Folders along with other necessary documents. These documents are either printed and sent to EPC or can be accessed from the c-Folders. 28b. EPC approval: - EPC members deliberate on the proposal and approve the document. Sometimes, EPC may ask for review of the proposal. Then the entire process (or some steps in the above process) may have to be repeated based on the comments of EPC. Within two days of EPC meeting, EPC cell with approval of director issues a summary of EPC decision. Detailed minutes of EPC meeting is issued later on by EPC cell. These approvals are confidential and to be accessed by select few only. EPC record note can be kept in c-Folders. Based on the EPC record note some of the steps described above may be repeated. 29. Issue of LOI to successful bidder(s): - Letter of Indent or Letter of Authority is issued to successful bidder(s). (In EPC cases, upon the receipt of summary of decision). The bid invitation in SRM is accepted based on the approvals of CPA/EPC. Then a PO is created in the backend R/3 system based on the acceptance. 30. Release of EMDs of unsuccessful bidders: - EMD of unsuccessful bidders is released. This step is done in R/3 and current R/3 process is continued.

52

31. Receive security deposit from successful bidders and release EMD: - Security deposit (Either Bank Guarantee or DD/Pay order) is received from the successful bidders before awarding the contract. This step is done in R/3 and current R/3 process is continued. 32. Prepare PO/Contract: - A PO/Contract is prepared based on the successful bid. This step is done in R/3 and current R/3 process is continued. 33. Sign PO/Contract & Transmit: - The PO/Contract is approved (may be more than one vendor) and transmitted to vendor.

3.5.4 NEW DIMENSIONS OFFERED BY E-PROCUREMENT SOLUTIONS

Reverse Auction Electronic Markets Electronic sourcing 1. 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 1. Process Efficiency Reduction of Negotiation Cycle time 2. Transparency with increased competitiveness 3. Each bid is a negotiation in itself, expanded market 4. Real Time Submission of bids and Competitive Response
53

5. Perfect Competition Market is the Price Driver 6. Supplier negotiates with market, not with buyer Disadvantages of reverse auction 1. Suppliers dissatisfaction 2. Not suitable for items with limited competition

Normal Auction 1. Seller conducts auction 2. Process continued till highest bid is received 3. The seller, buyers physically present at the place of auction

Reverse Auction 1. Purchaser conducts auction 2. Process continues till lowest bid is received 3. The purchaser and sellers are present on web and each participant can see the bids given by others

TABLE 4.2 DIFFERENCES BETWEEN NORMAL & REVERSE AUCTION 2. 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 1. Cost reduction 2. Convenience to small buyers 3. Suitable for small and fully defined items like spares, maintenance, services, etc. Disadvantages of electronic market place 1. Inadequate facility for qualifying the supplier
54

2. Fear of unknown firms offering vastly different rates 3. Inadequate facility for analyzing the offers 4. Refusal of supplier to accept the contract 5. Unsatisfactory contracts 3. E-Sourcing 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. The E-Sourcing service will deliver the following benefits to customers: -

1. 2.

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.

3. 4. 5.

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. E-Sourcing reduces the direct costs of preparing and responding with tenders. D.C. include paper, printing and distribution costs such as couriers. Collaborative working reduces the need
55

for teams to travel for face to face meetings.

Strongly Agree

Agree

Neutral

Disagree

StronglyDisagree

20

75

CHAPTER-4 ANALYSIS
ANALYSIS FROM QUESTIONNAIRE
Q-1 E-Procurement process provides benefits to your organization.

56

S trong Ag ly ree Ag ree Neutra l Dis ree ag S trong Dis g ly a ree

Q-2 Compared to Non E-Tendering, E-Tendering involves a Higher Cost Consideration. Strongly Agree StronglyAgree Agree Agree 10 Neutral Neutral 10 45 Disagree Disagree 80 35 StronglyDisagree StronglyDisagree 10 10

S trong Ag ly ree Ag ree Neutra l Dis g a ree S trong ly Dis g a ree

Q-3 Number of Bidders are more in E-Procurement as compared to Non E-Procurement.

57

S trong ly Ag ree Ag ree Neutra l Dis g a ree S trong ly Dis g a ree

Q-4 Price Quoted by the Supplier in E-Tendering is Authentic.

StronglyAgree Agree Neutral Disagree StronglyDisagree

65

25

10
S trong Ag ly ree Ag ree Neutra l Dis ree Ag S trong D a ree ly is g

Q-5 In E-Tendering, the Internal Audit Procedure is Stringent. StronglyAgree 10 Agree 25 Neutral 50 Disagree 15 StronglyDisagree -

S trong Ag ly ree Ag ree N eutra l D a ree is g S trong ly D a ree is g

Q-8 Are C.V.C. Guidelines compatible with E-Procurement?

58

Yes 98
120 100 80 60 40 20 0 Yes No

No 2

CVC Guidelines com tible pa with E -P

Q-10 Due to E-Procurement, has your time of completion of tendering has been reduced?

Yes 45

No 65

70 60 50 40 30 20 10 0 Yes No T e of im Com pletionof T enderingis R educed

Q-11 Why Centralized Procurement preferred over Decentralized Procurement? Profitable Best Prices are Available 5 65 Consolidation of Reqt. Becomes Easy 25 5 Others

59

Lack of Knowledge of E-P Software

Vendors do not rely on E-Document of tender

Some Vendors prefer traditional method of procurement

B&C Class Item Suppliers cannot use this method

90

10

Profita ble

B t Pricesa es re Av ila a ble Cons olida tionof R eqt. B ecom es Es ay O thers

Q-14 E-Procurement process cannot be universally applied for all kinds of Vendors. Why?
La of k ck nowledg ofE e -P S oftwa re Vendorsdo not relyonE Docum of tender ent S e Vendorsprefer om tra ditional m ethodof procurem ent B Cla sitems &C s uppliers ca nnot us thism e ethod

Q-15 Does Pre-Qualification Criteria in E-Procurement ensures a Perfect Supplier Selection? Yes 90 No 10

60

100 80 60 40 20 0 Yes N o PQCin E .Procurem ent ens uresa perfect

Q-16 Have you undergone a Formal Training for E-Procurement? Yes 25

80 60 40 20 0 Yes No F orm l T ining a ra Providedfor E Procurem ent

No 75

Q-17 Does E-Procurement provides a better opportunity for a creating a good B2B link? Process saves both time & energy Process Leads to Reduction in paper work 24hrs availability of the tender document on the website 10 5
Process save s both time & ene rgy Re duction in pape r work Transparency All of the Above

Transparency during ETendering

All of the Above

10

75

Q-18 Tick the one, which is preferred?

61

E-Procurement 95

Non E-Procurement 5

E -Procurem ent N E on Procurem ent

CHAPTER-5 FINDINGS
FINDINGS RELATED TO E-PROCUREMENT
Enterprises today are using e-procurement to manage more requisitions, spend categories, and suppliers than ever before. Launching an e-Procurement solution can help in reducing both direct costs and indirect costs. Through this company can increase purchasing efficiency; reduce overall production time; and improve purchasing controls. The Key Benefits of E-Procurement are: -

Improved Supplier Management: - E-Procurement solutions enable your company to locate

suppliers with the best price and quality, and help streamline the negotiation and contracting processes.

Cost

Reductions and Procurement Savings: - E-Procurement helps to increase the

productivity and lower the cost of purchasing staff. Company can reduce reliance on paperbased documents, such as request for proposals, responses and purchase orders. It can also leverage companys buying power by qualifying for volume discounts or special offers. On average, E-Procurement cost reductions and savings range from 15 to 35 percent, depending on your level of integration.
62

 Improved Documentation: - E-Procurement helps improving reporting and record keeping

by electronically tracking and recording transactions. This helps to increase order fulfillment accuracy and eliminate untracked or sporadic buying habits.

Increased Speed: - e-Procurement helps employees automate many routine purchasing tasks,
eliminate redundant tasks (such as requisition approval), and increase purchasing efficiency.

FINDINGS FROM THE E-PROCUREMENT QUESTIONNAIRE

After analyzing the questionnaire and personally perceiving the peoples views, we have arrived at the conclusion that the E-Procurement Process has significantly impacted the performance, Efficiency and Effectiveness of ONGC. It is Definitely Better than the conventional Non EProcurement Method. Also, though it has some limitations such as Errors Incurred, complexity, Challenges in its Application for all kinds of Vendors and its effectiveness in case of B2C or C2B links. Now I would like to conclude that: 1. As per Question (1-5), E-Procurement is definitely benefiting the Organization. Though it requires Higher Initial Cost of implementing it, but in the longer run, it helps us to reduce direct or indirect cost involved. Most of the Respondents do not agree that with the help of E-Procurement the No. Of Bidders participating in the bidding process increases, instead some feel that it E-P does not affect the no. Of bidders. Talking about the Price Quoted by the supplier, many agree with the fact that, it is Authentic. On the other hand, some not commented on the same. E-Tendering according to majority of respondents does not have strict Audit Procedure. There is a need to make it more powerful and stringent. 2. In Question-6, 80% of Respondents received Errors during E-Tendering. Some of the Errors according to respondents are:i) Log in Problem. ii) Problem in uploading the bid by the vendors.
63

iii) Problem in getting Digital Signature. iv) On one occasion, there were two L1 Bidders. v) On one occasion, there was disconnectivity of one bidder. vi) Due to wrong amount keyed, as a result EMD was forfeited. vii) Some Bidders omitted taxes, freight , etc for some items whereas as basic rate was quoted. In some cases, technical bid was not found, though loaded by bidder. 3. In Question-7, According to 75% of Respondents E-Procurement is more beneficial than compared to Non E-Tendering because: i) It reduces paper work, easy to prepare comparative statement ii) Due to transparency factor iii) Reduces time taken for tendering Rest 25% felt, that both cannot be compared because: i) When participation of foreign bidders, then E-Procurement would be preferred, otherwise in Indian context we may prefer Non E-Tendering ii) E-Tendering is better method as not all bidders are so equipped and they might miss the opportunity to participate in E-Tenders. iii) Also, E-Tendering is not beneficial for type B & C class items 4. In Question-8, Most of the Respondents agree with the fact that CVC Guidelines are compatible with E-Procurement. 5. In Question-9, 70% of the respondents felt that Auditing procedure is not complex and others are not aware of it. 6. In Question-10, only 35% of respondents felt that E-Procurement has reduced their time
64

of completion of tendering. 7. In Question-11, 65% of respondents felt that centralized procurement is preferred over decentralized because Best Prices are available. 25% felt that consolidation of requirement of material becomes easy. 8. In Question-12, the reason of not procuring B & C Class items through E-Procurement because:i) Due to Higher quantities & and more transportation cost ii) Because of their Low Value & easy to procure it in decentralized way iii) As per practices, first A Category items are targeted iv) It is still under process 9. In Question-13, Most of the Respondents do not agree that in case of E-P, competition among bidders increases. In fact, it remains same and it depends on bid conditions. 10. In Question-14, 90% of Respondents felt that E-Procurement cannot be universally applied for all kinds of vendors due to Lack of Knowledge of E-P Software. 11. In Question-15, Most of the Respondents said that Pre-Qualification Criteria is same in both E-Procurement and Non E-Procurement. Hence, it does not affect much the selection of a better supplier. 12. In Question-16, 75% of respondents have not undergone any formal training. 13. In Question-17, 75% of respondents say that E-Procurement provides a better opportunity for B2B Link as it saves time, lead to reduction in paper work, 24 hrs availability of tender document on website. 14. In Question-18, 95% of the Respondents agree with the fact that they will prefer EProcurement over Non E-Procurement.

65

CHAPTER-7 SUGGESTIONS

Recommendations for E-Procurement Process of ONGC

1. Concern about security and privacy is one of the major factors restricting the

growth of e-Procurement. Hence, an organization must consider securing itself against: Damage to business reputation Failure to comply with internal policies, national requirements and the law Loss, corruption or sharing of commercially sensitive or business critical information Loss of business continuity due to loss of business critical systems or information Loss of commercial position due to inappropriate sharing of commercially sensitive information or the inability for potential suppliers to participate. In general, the type of security breaches that may occur includes:1. Fraud and financial loss, including misappropriation of funds and leaking of sensitive information (e.g. pricing information). 2. Lack of commercial awareness amongst employees. 3. Theft of data on laptops or other hardware items. 2. Process Re-engineering:- The e-Procurement process consists of many sub-processes which are redundant and it is possible to have the same result, even if we remove some of them, thereby reducing the time consumed by the process. This basic process reengineering will make the whole process easier and faster. 3. New avenues offered:- e-Procurement offers many new avenues like reverse auction, which gives the buyer a chance to select the vendor, giving his required specifications. This whole process is easier in comparison to normal auction as it is conducted on the internet.

66

4. E-Marketplaces:- A B2B link can be created with some big vendors and suppliers like IBM, to have a good relationship. This creates a better and bigger marketplace on the internet for the company. 5. Include more items:- At present only A category items are included for the eProcurement process. The other categories should also be included at the earliest, so that the procurement process is easier for all the items. 6. More vendor participation:- The available vendors and suppliers in the market, who do not have the basic knowledge of e-Procurement, should be provided with the basic knowledge of existing amenities of e-Procurement to get them to the level of bidding of the items/services on the net, preferably by ONGC itself. 7. Transparency:- e-Procurement brings transparency in the system. It makes the system more reliable. It has been observed that the e-Procurement process and paper work in legacy go parallel, increasing the workload of the officers. Being a PSU it is not possible to go paperless for the company. But it can try to rely more on e-Procurement almost tending to a paperless office. 8. Training:- All officers including the higher levels of the organization should be provided with the training of the basic software to be used for e-Procurement, in order to achieve the success and benefit of e-Procurement of A category items 9. Complete Paper-Less Processing of Tender:Though E-Procurement has improved the work style, efficiency & performance, it still requires some documents which need to be given as a hard copy. Complete paper work processing, I would like to suggest, which need to be achieved in near future.

CHAPTER-6 CONCLUSION

67

My summer training at ONGC gave me an opportunity to closely watch the working in corporate sector. It taught me how all the departments of an organization must co-ordinate and synchronizes their working in order to ensure the success of the organization. It has been an enriching experience for me to get an insight. I have studied how a company maintains their accounts and also tried to understand the balance sheet and profit and loss account of a company which is necessary for my project. I had also learnt about the Eprocurement and tender processing of ONGC in detail. On the basis of liquidity Ratio, it can be said that liquidity position of company is very strong and company have enough cash with them to fulfill their current liability obligation. Leverage ratio shows good financial position. By analyzing the solvency ratio, I analyzed that company is stable in future. It means there is no risk of bankruptcy. After seeing the trend of last five years of equity ratio, I found company is more funded by equity. The main reason for this is that government has 76% stake in the company. By analyzing the profitability ratio, companys net profit is increasing but at diminishing rate. But the company is giving good investment returns approximately 11% in 2008 which is a good return. On the basis of all the ratios, I can finally summarize that ONGC has a sound capital and asset base and is able to pay all its liabilities in time. In fact, it is a debt free company. The experience of summer training at Oil and Natural Gas Cooperation Limited will act like a stepping stone for me and would support me in my career as a professional. I have learned to take failures in my stride and move ahead. At last, but not the least there are lot many things which I have gone through in those days, I was treated as a part of the organization and was allotted with the work of the company due to which today i am aware of many practical concepts. I was able to understand the working culture of an organization with the help and support of the employees.

BIBLIOGRAPHY
BOOKS
ONGC Annual Report 2003-2004 to 2007-2008
68

Maheshwari, S.N., Financial Management, 9th Edition, 2007, Sultan Chand & Sons, B.25B.130, E.250-E.283 Pandey, I.M., Financial Management, (9th Edition), 2009, Vikas Publishing House Pvt. Ltd., 577 to 658 Kothari, C.R., Research Methodology, 3rd Edition, 2003, Vikas Publishing House Pvt. Ltd, New Delhi Maheshwari, S.N., Accounting for Management, 1st Edition, 2006, Vikas Publishing House Pvt. Ltd., P 2.1 to 2.61

INTERNET

www.ongcindia.com/ , Accessed on 2nd June, 2009 www.ongcreports.net, Accessed on 5th June, 2009 www.tenders.ongc.co.in, Accessed on 9th June, 2009 http://www.geojitbnpparibas.com/CompanyProfile/CompanyProfileInner.aspx? cocode=6068&id=131, Accessed on 17th June, 2009 http://en.wikipedia.org/wiki/Market_share, Accessed on 19th June, 2009 www.sap.com/industries/publicsector/pdf/BWP_SB_EProcurement_PublicSector.pdf, Accessed on 21th June, 2009 http://www.financialexpress.com/news/Focus-on-EampP-ONGC-told/221214/#, Accessed on 27th June, 2009

http://www.gasandoil.com/goc/company/cna60207.html, Accessed on 27th June, 2009 Yahoo Finance: http://biz.yahoo.com/ic/ll/120mkt.html, Accessed on 4th July, 2009 Yahoo India News: http://in.news.yahoo.com/050727/139/5zi9q.html, Accessed on 9th July, 2009

ANNEXURE
A. PAYMENT PROCESS
69

INDIGENOUS PAYMENTS The term Indigenous Payment refers to making payments to the vendors for the supplies made with in India. After placing the purchase order and when the required material is ready after inspection with the supplier, supplier sends intimation to ONGC that the items are ready to be transported and seeks for the decision on transport. ONGC either arranges the transport or requests the vendor to transport on their transportation depending on the cost of transportation. The supplier sends the material to the concerned ONGC Department. After sending the material, the vendor submits the documents as per the Purchase order conditions to ONGC work center for payment along with the invoice and Lorry receipt or rail receipt through the bank. After receipt of the documents the concerned finance section of the work center verifies the documents and the payment is released through the bank if no discrepancies are observed. If there are any discrepancies the matter will be sorted out by Corporate MM section with the supplier and the payments are released accordingly. Thus, the material reaches work centre from the vendor by rail or road as the case may be. IMPORTED PAYMENTS Imported Payments refer to the payments made to the vendors who are in foreign countries. For making imported payments, some financial tools are used which are describes below: LETTER OF CREDIT A letter of credit (also called LC or Documentary Credit) is a secure payment method undertaken by the buyers bank on behalf of the buyer, to pay a seller a given amount of money. On presentation of specified documents representing the supply of goods within specific time limit. The documents involved conform to terms and conditions set out in the letter of credit and are to be presented at a specific place. Documentary letter of credit are usually regarded as low risk, as the bank only pays the beneficiary upon presentation of the documents evidencing that the shipment of the goods has been made of the services provided. The whole process of opening of L.C. and making payment via L.C. is shown through a flow chart:-

70

FIGURE A-1.1

The following Parties are involved in this procedure: Beneficiary The beneficiary is the supplier who is entitled to payment as long as he can provide the documentary evidence required by the letter of credit. Issuing Bank The issuing banks role is to provide a guarantee to the seller that if compliant documents are
71

presented, the bank will pay the seller the amount due and to examine the documents, and only pay if these documents comply with the terms and conditions set out in the letter of credit. The issuing banks liability to pay and to be reimbursed from its customer becomes absolute upon the completion of the terms and condition of the letter of credit. Under the provisions of the Uniform Customs and Practice for Documentary Credits, the bank is given a reasonable amount of time after receipt of the documents to honor the draft Advising Bank An advising bank, usually a foreign correspondent bank of the issuing bank will advise the beneficiary. Generally, the beneficiary would want to use a local bank to insure that the letter of credit is valid. In addition, the advising bank would be responsible for sending the documents to the issuing bank. The advising bank has no other obligation under the letter of credit. If the issuing bank does not pay the beneficiary, the advising bank is not obligated to pay. Buyer A buyer is one who requires material and in order to fulfill its requirement he purchases the same from the supplier. Flow of events that takes place in making payment via L.C. are as follows: 1. Buyer and seller agree to conduct business. 2. The seller wants a letter of credit to guarantee payment. 3. Buyer applies to his bank for a letter of credit in favor of the seller. 4. Buyers bank approves the credit risk of the buyer, issues and forwards the credit to its correspondent bank (advising or confirming). The correspondent bank is usually located in the same geographical location as the seller (beneficiary). 5. Advising bank will authenticate the credit and forward the original credit to the seller (beneficiary). 6. Seller (beneficiary) ships the goods, then verifies and develops the documentary requirements to support the letter of credit. Documentary requirements may vary greatly depending on the perceived risk involved in dealing with a particular company. 7. Seller presents the required documents to the advising or confirming bank to be processed for
72

payment. 8. Advising or confirming bank examines the documents for compliance with the terms and conditions of the letter of credit. 9. If the documents are correct, the advising or confirming bank will claim the funds by debiting the account of the issuing bank. 10. Advising or confirming bank will forward the documents to the Issuing Bank. 11. Issuing Bank will examine the documents for compliance. If they are in order, the Issuing Bank will debit the buyers account. 12. Issuing Bank then forwards the documents to the buyer. 13. Buyer than send the documents to the respective ports and thus the material is received.

The Documents required for opening of LC with the bank are:Purchase order with all its amendments (if any) Bill of Lading Undertaking Judicial stamp paper of Rs 100 L/C cover note which includes all the clauses of PO : PO no. and Date. Delivery date and negotiation date. Transshipment allowed or not allowed Certificate of test & inspection and recent manufacturer Beneficiary address & its banker name PO. Value in figure & words. Port of export Port of unloading
73

Certificate of warranty to quality. Forwarding letter showing the PO no., date, value & party name, and chapter no & item no. is mentioned as per import & export policy.

BILL OF LADING A Bill of Lading is a type of document that is used to acknowledge the receipt of a shipment of goods and is an essential document in transporting goods overland to the exporters international carrier. A through Bill of Lading involves the use of at least two different modes of transport from road, rail, air and sea. The term derives from the noun bill, a schedule of costs for services supplied or to be supplied, and from the verb to lade which means to load a cargo onto a ship or other form of transport. In addition to acknowledging the receipt of goods, a Bill of Lading indicates the particular vessel on which the goods have been placed, their intended destination, and the terms for transporting the shipment to its final destination. Inland, ocean, through, and airway bill are the names given to bills of lading. In the hands of the shipper a bill of lading serves as evidence of the contract of carriage though it contains the terms of carriage. The contract with the shipper is likely to have been concluded orally long before the issue of the bill of lading. The document may vary some of the agreed terms or contains terms that have not been agreed to by the parties.

B. BID EVALUATION MATRIX

Tender no: for supply of Date of opening: Estimated Tender Value: No. of tender documents No. of tender sets received in time: No. of late tenders received: Tender opening officers: 1. 2.

74

SL. NO.

BEC / TENDER REQUIREMENTS Bidders to confirm that they have not taken any exception/deviations to the bid document even after Pre-bid conference. Confirm that the product offered strictly conform to the technical specifications as appended in the tender documents ?. TECHNICAL CRITERIA Is the bid complete in all aspects covering entire scope of supply for each item quoted and conform to the technical specifications indicated in the bid document duly supported with catalogue/technical literature wherever applicable ? Whether manufacturer has submitted documentary evidence for offered item(s) along with the techno-commercial bid for the following: (a) Minimum3 years of experience of manufacturing drill collars. For this purpose the period reckoned shall be the period prior to the date of opening of the techno-commercial bid. (b) Should have manufactured and supplied drill collars at least 10% of tendered quantity to various oil and gas specific companies in the last 7 (Seven) years.

Company A

Company B

Company C

2 B.1 B.1.1

B.1.2

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TABLE B-1.1

C. THE ACTIVITY-WISE RESPONSIBILITIES IN THE EPROCUREMENT SYSTEM.

(i)
Activity Manual (M)/ Electronic (E) E M M E E Responsible officer(s)

1 2 3 4 5

6 7 8

9 10 11

Consolidation of PRs generated in SAP R3/MM. BEC formulation BEC approval Creation of Bid Invitation in SRM Uploading of scanned copies of all related noting/documents of T.C after approvals in C-folders (internal folders) Release of tender document in system for publishing tender. Affixing digital signature on documents and Publishing of tender in SRM Issue of authorization on internal documents and e-bids to other ONGC officials as necessary in process of etenders. Access Authorization to new vendors. Allowing tender fee exempted vendors to participate in particular tender against request. Return of E-Bid before the due date for bid submission against specific

In Charge P&E Section of Corporate MM for Type-A items. T.C. CPA Dealing Purchase Officer(s). Dealing Purchase Officer(s).

E E E

I/C MM Dealing Purchase Officer(s) Dealing Purchase Officer(s)

E E E

I/C MM Dealing Purchase Officer(s) Tender Administrator. 76

Activity

Manual (M)/ Electronic (E) M E

Responsible officer(s)

12 13

14 15 16

17

18 19 20 21 22 23 24 25

request from the vendor mentioning Bid number. Pre-Bid Conference Uploading of minutes of pre-bid conference after due approvals with restricted access to those bidders who have paid tender fee or who have been allowed to participate in particular tender without tender fee. Issue all amendments to tender documents in system with necessary approvals. E-Bid opening on specified due date and time. Opening of original documents permitted to be submitted in physical form on due date and time. (Manual process). Uploading of bid opening report with restricted access to bidders who have submitted the bids for unpriced bids and short listed bidders in case of price bids Compilation of Bid Evaluation Matrix. Uploading the evaluation matrix in internal Folders. Technical Evaluation of E-Bids. Price Comparative statement generation. Checking of C.S Vetting of C.S All correspondences to bidders through system (C-folders) Seeking Adjustment prices from bidders, if any prior to price bid opening with approval of competent authority Price Negotiations with L-1 wherever applicable Purchase related Recommendations

T.C. Dealing Purchase Officer(s)

E E M

Dealing Purchase Officer(s) Automatic Nominated tender opening officers

Dealing Purchase Officer(s)

M E M E E E E E

TC Dealing Purchase Officer(s) P&E section / Technical evaluation committee Dealing Purchase Official/Officer. Purchase Officer at the required level, based on the monetary limits as specified in MM Manual. Finance Officer at the required level, based on the monetary limits as specified in MM Manual. Dealing Purchase Officer(s) Dealing Purchase Officer(s)

26 27

M M

T.C T.C 77

Activity

Manual (M)/ Electronic (E) M E E

Responsible officer(s)

28 29 30

after viewing E-bids. Approval of T.C recommendations. In case of EPC cases, uploading EPC agenda in specific folder in the system after endorsement of Director Uploading Scanned copies of technical comments approved T.C minutes and EPC decisions immediately on receipt of same in appropriate internal folders in system. Acceptance of bids in SRM for placement of order as per approval of CPA.

Competent Authority Dealing Purchase Officer(s) Dealing Purchase Officer(s)

31

P.O Signing authority

TABLE C-1.1

78

D. BALANCE SHEET & PROFIT & LOSS ACCOUNT OF ONGC LTD. (LATEST)

FIGURE D-1.1
79

FIGURE D-1.2

80

E. QUESTIONNAIRE

QUESTIONNAIRE On E-PROCUREMENT PROCESS OF ONGC LTD.

1. The questionnaire has 3 pages and has 18 questions which are required to be filled in by every respondent. 2. Please follow the instructions given in questions.

Personal Information: Name:______________________(optional) Gender: Male Age: 20-30 Designation: Phone No.___________________(optional) Email:______________________ Female 30-40 40-50 50-Above

Please tick the option, which you think is most suitable.

Q-1 E-Procurement process provides benefits to your organization. strongly agree Agree Neutral Disagree strongly disagree

Q-2 Compared to Non E-Tendering, E-Tendering involves a Higher Cost Consideration. strongly agree Agree Neutral Disagree strongly disagree

Q-3 Number of Bidders are more in E-Procurement as compared to Non E-Procurement. strongly agree Agree Neutral Disagree strongly disagree

Q-4 Price Quoted by the Supplier in E-Tendering is Authentic. strongly agree Agree Neutral Disagree strongly disagree

Q-5 In E-Tendering, the Internal Audit Procedure is Stringent.

81

strongly agree

Agree

Neutral

Disagree

strongly disagree

Q-6 Mention any error(s) faced by you during E-Procurement Process? 1. _________________________________________ 2. _________________________________________ 3. _________________________________________ 4. _________________________________________ Q-7 Which is more beneficial? E-Procurement or Non E-Tendering. Give Reason for your Answer. _____________________________________________________________________________ _ _____________________________________________________________________________ _ Q-8 Are C.V.C. Guidelines compatible with E-Procurement? Yes No

Q-9 Auditing Procedure in E-Procurement is Complex. If yes, why? _____________________________________________________________________________ _ _____________________________________________________________________________ _ Q-10 Due to E-Procurement, has your time of completion of tendering has been reduced? Yes No

Q-11 Why Centralized Procurement preferred over Decentralized Procurement? a. Profitable

b. Best Prices are available

c. Consolidation of requirement of materials becomes easy

d. Others _________________________________________________
82

Q-12 Why is the B & C Class Items not procured by ONGC through E-Procurement Process? _____________________________________________________________________________ _ Q-13 Competition among Suppliers in case of E-Tendering is more. If yes, why? _____________________________________________________________________________ _ Q-14 E-Procurement process cannot be universally applied for all kinds of Vendors. Why? a. Lack of Knowledge of E-Procurement Software b. Vendors do not rely on Electronic Document of Tender c. Some Vendors prefer traditional method of procurement d. B & C Class Item Suppliers cannot use this method Any Other Comment ____________________________________________________________ Q-15 Does Pre-Qualification Criteria (PQC) in E-Procurement ensures a Perfect Supplier Selection? Yes No

Any other Comment _____________________________________________________________ Q-16 Have you undergone a Formal Training for E-Procurement? Yes No

Q-17 Does E-Procurement provides a better opportunity for a creating a good B2B (Business to Business) Link? Why? a. This process saves both time and energy b. Leads to Reduction in Paper Work c. 24 hrs availability of the tender document on the website d. Transparency during E-Tendering e. All of the Above Any other Comment _____________________________________________________________ Q-18 Tick the one, which is preferred? E-Procurement
83

Non E-Procurement _____________________________________________________________________________ _ Any Suggestions/ Changes you would like to suggest that can be incorporated in the current E-Procurement process.

LIST OF ABBREVIATIONS

84