IOC Limited's Cash Management Practices

Abstract

The Indian economy is through a dynamic period of substantial transformation and therefore important changes occur within the oil industry. A strategic consequence of the oil reform is the dismantling in 2002 of ADMINISTERED PRICING MECHANISM (APM) (under which the petroleum companies were assured of a reasonable return through controlled pricing).
Since the dismantling of APM, PSU companies are empowered to negotiate prices at which each other supplies goods and services. They work with OIL MARKETING COMPANIES (OMC). And three main petroleum PSUs under the s essentially a consortium of the above companies that supply the other company with goods and services if the assisted company does not have refineries or other facilities. This is done to avoid the transit costs that may occur when a company takes the product away from its refinery and hence to support the entire economy. This is because the PSUs also function for social welfare purposes. In this project, an in-depth research is being carried out on the accounting processes used for OMC transactions. The effect of OMC transactions on IOCL in the final quarter of 2008-2009 is also included. An in-depth study of the profitability of different goods is also carried out. It is examined which product is more lucrative when sold through OMC than via the retail channel.