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1 Address of Chairman & Managing Director at 59 th Annual General Meeting held on 222 nd Sept 2011 at Mumbai Good morning, Ladies Gentlemen n. It gives me great pleasure to welcome all shareholders on behalf of Board of Directors to 59 tht Annual General Meeting of HPCL. Before I speak about performancee in year that has just gone by businesss plans, permit me to outline major developments that have taken place in Indian economy during last year. Developments in Indian economy & Oil Sector The Indian economy has ecovered swiftly from slowdown resulting from financial crisis of The GDP growth rate was 8.5% in compared to 8% in The growth, however, was accompanie ed by persistently highh inflation which has remained above 8% throughout year, iss a cause of worry. Global oil prices, which had remained stable withinn $75-85 per barrel range during initial part of 2010, started to rise in latter part of 2010 reached $115 per barrel by March Behind rise was strong growth in global oil dem. 1 Page

2 Dem for Oil increased by 3.1%in 2010, whichh was more than twice ten-year four years average. The developed world also saw an increase in dem after of continuous decline; however bulk of increase still occurred in developing countries. Oil production, on or h, was affected by turmoil in Middle- East. The consumption of petroleum products in India increased by about 3% in , about 142 MMT of petroleum products were consumed during year. Petrol diesel consumption n recorded a growth rate of 11% 7% respectively, boosted by rising vehicle ownership. Gas made furr inroadss in industrial segment replacing oil dem. Dem for industrial fuels such as FO/LSHS declined. Turnaround in aviation sector was apparent in double digit increase in ATF dem. Bitumen demd declined with completion of major planned projects under NHAI / NHDP program. HPCL Performanc ce The turnover of your company increased by 22% to r1,32,670 crores during year. Profit after tax increased to R1539 crores during from R1301 crores in previous year even after absorbing under recovery of r1509 crores on sales of sensitive petroleum products. Althoughh borrowings have increased, interest cost has been brought down through prudent treasury manageme nt. Your company refineries processed 14.75MMT of crude oil achieving nearly 100% capacity utilization 2 Page despite shutdown of key units for revamp turnaround activities

3 undertaken for hling additional throughput improve flexibility in hling different varieties of crude oil. Gross Refinery Margins doubled to $5-6 per barrel as compared to previous year. We have continued to build on our product pipeline capabilities. Your company has achieved mechanical completion of 250 km long Bathinda Ramanmi Bahadurgarh pipeline. This will give a major boost to our marketing activities in North India after commissioning of HMEL Refinery. Our product pipelines have achieved a throughput of about 13 MMT against a target of 10 MMT. The sales in reached 27 MMT, including exports. In domestic market we have grown by 5.5% recording a growth of about 3% above Industry achieved sales of 25.5 MMT. We have institutionalized numberr of process innovation resulting in double digit growth rates in Petrol Diesel sales, well above industry growth rates. We have also increased sales of LPG, FO/ /LSHS LDO. However, Naphtha sales were impacted by availability & usage of Natural Gas. Your company is second largest lube marketer in country. We are first company in country to introduce Nano particle based lubricating oils, viz., HP Numaro Uno in Engine Oil category HP Rhino in Gear Oil category. Recognizing potential in City Gas Distribution, we have made inroads in this businesss with participation in Ahmedabad through JVs in Andhra Pradesh Madhya Pradesh. We see great opportunity in cityy gas distribution have submitted 3 Page

4 bids for city gas distribution for 4 cities during year. Your company is also in discussions with state government of West Bengal to implement CGD project in city of Kolkata through a Joint Venture company. To build establish a significant presence in e Natural Gas infrastructure segment, your company has formed a consortium with GSPC & ors, for bidding in gas trunk pipelines notified by PNGRB. The consortium hass been successful in winning all three bids for Pipelines i.e. (1) Mallavaram-Bhilwara, (2) Mehsana-Bathinda (3) Bathinda-Srinagar. A formal authorizatio n from PNGRB is awaited. In upstream business, your company has been awarded 2 blocks in ninth round of NELP of Government of India in March As of 31 st March 2011, your company has participating interests in a total 25 blocks including 4 overseas blocks. As a step to establish presence in growing field of alternate energy, your company has commissioned additional 25 MW capacity in Wind Farm project taking total capacity to 50 MW of power generation. Your company is setting up a state of art Green R&D Centre at Bengaluru at an investment of r210 crores for absorption of new technologies, product & process development to strengn refineries marketingg function. 4 Page

5 Your company has leveraged ICT tools platform providedd by ERP extensively to bring in process efficiency, better control transparency during year. The Joint Venture companies subsidiaries of HPCL have also performed very well during year Projects completed during year Your company has identified infrastructu re development as key element to give thrust to growth. In line with same, several projects were successfully completed during year. We have commissioned a new Fluidized Catalytic Cracking Unit (FCCU-II) of capacity 1.45 MMTPA at Mumbai Refinery revamped second FCCU at Visakh Refinery increasing capacity from 0.6 to 1.0 MMTPA. These projects will help in maximizing production of MS LPG, thus reducing our dependence on imports. I am happy to convey thatt your company achieved a major milestone with commissioning of Lube Oil Base Stock (LOBS) project during year enhancing LOBS production capacity to 400 TMTPA. Your company will now be able to produce base oil conforming to API Group I, II / III grades as per requirement. Anor lmark achievement by your company on East coast is commissioning of Single Point Mooring (SPM) facilities at Visakh which has enabled 5 Page

6 Visakh refinery to receive Very Large Crude Carriers (VLCCs)) which will result in freight savings. Your company has commissioned during year country s largest, fully automated Oil terminal at Visakhapatnam exclusively hling Black oil. Anor l mark Industry s first achievement by your company is commissioning of World s largest Flex Speed Carousal att Cherlapally LPG plant. It is a 66 Head Carousel with a filling capacity of 3,600 cylinders/hour it can be operated at variable speed. The LPG bottling capacity has been augmented by 135 TMT storage capacity increased by 3.6 TMT. The Sugar Mills at Sugauli & Lauriya have been commissioned in March 2011by our subsidiary HPCL Biofuels Ltd. The construction off Cogen Ethanol plants is in advance stage commissioning is expected during Guru Gobind Singh Refinery project at Bathindaa of M/s HMEL, our joint venture company, is nearing completion commissioning is expected in current financial year. The project is our first refining project in e north of country will ease product availability issues in region. Business Plans 6 Page

7 A large number of infrastructure projects are underr various stages of implementation in line with our focus area of strengningg infrastructure for achieving growth profits. While se have been detailed in Management, Discussion Analysis (MDA) section of Annual report, I will like to dwell briefly on business plans whichh are aimed at building on our strengths. In Retail, focus is on providing differentiated customer experience, selective expansion of network growth. Your company is firstt to implement NANO (No Automation No Operation) for ensuring that fuels of right quality are delivered in right quantity through our retail outlets. We will continuee to leverage technology for ensuring delivery of Quality products services throughh Automation of outlets, web based grievance redressal mechanism, NP Tool for expansion of network, implementing or initiatives Stard Operating practices (SOP) at retail outlets. In I&C, we are focusing to improve saless volumes profitability by delivering superior customer experience throughh key account management capturing small medium enterprises (SME) opportunity. In lubricants, focus is on product development product innovation to meet customer needs. We plan to leverage our strong infrastructure marketing tie-ups to grow in this profitable segment of business. In Aviation, we are aiming at balancing domestic international portfolio exploring strategic tie-ups for participation in Greenfield / airport modernisation projects. 7 Page

8 In LPG, we are focused on strengning infrastructure increasing rural penetration in line with Vision 2015 of MOP&NG. We are committed to safety of LPG customers have plans for various initiatives for ensuring safety in kitchen. On refinery front, we will be exping existing Visakh Refinery to 15 MMT. During my addresss in previous AGM, I had shared plans for new Maharashtra refinery. We are actively engaged currently focused on identifying suitable l getting environmen ntal clearance. In upstream business, we plan to convert e existing joint venturee company M/s Prize Petroleum Ltd into a 100% subsidiary off your company leveragee subsidiary for participating in E&P business. In Natural gas, apart from participation in CGD pipeline transportation as already detailed, your company is looking to develop sourcing capabilities develop infrastructure through partnerships. This will help us in meeting internal dem for our refineries also participate in this growing segment of energy business. Human Resourcess The mainstay of your company performance is itss employees. All employees are fully aware of challenges fully aligned to organizational objectives. A number of initiatives have been introduced to provide a productive working environment ensure that our people continue to deliver best performancee in current challenging environment. We believe in thought leadership team culture for 8 Page

9 achieving excellence continuous performance improvement. Competency Mapping Development Centers are being utilized to identify enhance employee potential. Your company has embarked upon a comprehensive structured process for development of leadership competencies acrosss levels of organizational hierarchy to translate our aspiration into a reality. Health, Safety Environment Your company is committed to conducting businesss by preserving environment. The focus is on sustainable development, providing safe work place enrichment of quality of life of employees, customers community. To ensure safe reliable operations, HPCL along with or PSU Oil companies has taken up implementation of M B Lal Committee recommendations. We are committed to do all we can to prevent fire accidents at our operating locations. At HPCL, we had adopted a Climate Change Policy to reduce carbon foot print incorporate a green perspective in all key organizational initiatives processes. A benchmark assessment of Carbon foot print at both Visakh Mumbai refineries has been carried out. Corporate Social Responsibility As part of our CSR initiatives, we have taken upp various initiatives towards building social capital, skill development, community development care of girl child. We 9 Page

10 st committed to furr contribute to Agenda of Government for inclusive growth. Risk Management Risk is an inherent part of Oil & Gas business. Hence, your company has institutionalized Risk evaluation management as an on-going process. During year, all possible risks have been evaluatedd fresh Risk register has been finalized. Action plan to mitigate identified risks has also been institutionalized. Corporate Governance Your Company has complied with all matory provisions of Clause 49 of Listing Agreement of SEBI relating to Corporate Governance requirements as well as guidelines of Corporate Governance for Centrall Public Sector Enterprises (CPSEs), issued by DPE, except requirement of requisitee number off Independent Directors on Board of Company. Your Company is pursuing with Administrative Ministry for appointment of additional number of Independen nt Directors on Board. Future outlook In current year, Indiann economicc growth iss expected monetary policy is being followed to control inflation. to be moderate as a tight The dem for petroleum products in country is expected to grow at a Compounded Annual Growth Rate (CAGR) of 4.5% %. 10 Pag e

11 As far as oil prices are concerned, it is likely that current high oil prices will continue. IMF has increased baseline projections for crude oil to be in range of US $ 105 to 110. The consequent under recoveries will adversely affect liquidity leading to increased borrowings higher interest cost. The government is discussing various options to reform subsidy regime including direct transfer. I am confident that efforts will lead to a suitable solution to compensate your company for under recoveries. Our Appreciation Ladies Gentlemen, before I conclude, I would like to express my sincere appreciation, on behalf of Board of Directors, too Ministry of Petroleum & Natural Gas or Ministries/Departments of Government of India various State Governments for continued support. ir constant guidance counsel, look forward to ir My fellow directors I are thankful to our shareholders individuals institutions for support confidence reposed in us. I thank you for being here today. We look forward to your continued association with us. I also extend my sincere thanks to my colleagues on Board for ir involvement mature counsel. I sincerely thank all our customers business associates for ir continued support. I would also like to thank all our employees forr ir commitment, hard work contribution to Company s performance. 11 Pag e

12 I assure you that your corporation will continue to scale greater heights uphold faith trust placed by all stakeholders. We have set very high objectives during coming years for creating sustainable value d reby reward your loyalty. I thank you all for giving us an opportunity to build HPCL as a strong organization in future. Place: Mumbai Subir Roy Choudhury Dated: September 22, 2011 Chairman & Managing Director Management Team Management Team From Left: Shri K Murali, Director- Refineries, Dr. V Viziasaradhi, Director-Human Resources, Shri. S Roy Choudhury, Chairman & Managing Director, Shri. B. Mukherjee, Director- Finance Ms. Nishi Vasudeva, Director- Marketing 12 Pag e