Early History Of Eil

FINAL EIL: CREATION OF A NATIONAL ASSET

It was soon after Indian Independence. The country was consumed with the excitement of economic development fueled by the vision, drive and contagious idealism of Pandit Nehru. India had started to build its industrial base, reflective of Nehru's passion for Science and Technology. The call for Self Reliance was born to buttress an independent foreign policy, amongst other things. Against this background I was completing my engineering at MIT. In between semesters I came home and had the privilege of meeting Pandit Nehru, Shastriji, Kidwai Saheb, Dr. Homi Bhabha and Dr. S.S. Bhatnagar. Above all I was inspired by my father’s ideals. In 1955, I joined Caltex in New York, as one of four Indian engineers, to get involved in the implementation of their Vizag refinery project. It was only natural that during my first week in Caltex's design office in New York, the question arose, "Why can't we do this in India?". This thought became an obsession as I went through the design, construction and commissioning phases of the Vizag refinery. In 1957 I quit Caltex to join Exxon in Mumbai. While in Delhi I met with the Minister for Petroleum, Mr. Keshav Dev Malaviya and mentioned to him I was one of four Indian engineers who had been exposed to refinery design for the first time. Would he support the establishment of an Indian capability for refinery design? With his vision for a public sector oil industry, he reacted enthusiastically. He mentioned that Gauhati and Barauni refinery projects did not provide for participation of Indian engineers in their design work. However, this should be possible in respect of the Gujarat refinery, a few years down the road.

In 1962, while with Exxon, I got a call from the MD of Indian Refineries Ltd., Mr. P.R. Nayak, a highly regarded member of the ICS. He inquired of my interest to join Indian Refineries and lead a team of eight engineers to the USSR to participate in the Detailed Project Report of the 2 MTA Koyali refineries, with the objective of maximizing the use of Indian equipment/ materials. Soon thereafter I was facing -40% C weather in Moscow with a team that included Chandhok, Dixit, Palit, Raghavan and Govinda. Later in the year Malaviyaji visited Moscow for discussions regarding the expansion of the Koyali Refinery and asked me, "Are you ready to design the next refinery?" I replied that our team should first do the detailed engineering in Baroda for the off-sites of the Koyali refinery project. To enable this it would be necessary for a small group of Russian design specialists to move to Baroda to provide supervision. Malaviyaji was to meet Prime Minister Kosygin the next day and asked me to provide him a written request for this purpose. Mr. Kosygin agreed. In the process I incurred the displeasure of Mr. Nayak. He felt that I should have first checked with him. He also saw considerable risk to the refinery project schedule since refinery design would be done in India for the first time. On completion of our team’s work in the Moscow and Leningrad design institutes, we returned to India in 1963. The Central Design Organization (CDO) got started in Baroda, as part of the Gujarat Refinery Project, under the overall management of Gen. Sardanand Singh. CDO was the forerunner to EIL. CDO proved to be a great success and Mr. Nayak was now persuaded that a separate design/construction company should be established to implement refinery projects. He asked me to evaluate three candidates for a joint venture company with GOI, viz. Bechtel, Snam Progetti and Brown & Root. I recommended Bechtel because of the depth of its capabilities across several industrial sectors.

EIL was incorporated in New Delhi with a paid up capital of Rs 25 lakhs, on March 15, 1965. This was 10 years after the start of a dream in New York that got triggered with the question, “Why not in India?”. EIL was a joint venture between GOI and Bechtel, with GOI owning 51% and a Bechtel MD in charge. On completion of my responsibilities for the overall management of CDO’s work and also the mechanical/ electrical/instrumentation installation for the 2MTA refinery, I joined EIL at its inception. Others on board were a Bechtel Manager of Engineering, MD Raff Dorman and Avtar Singh Sandhu. EIL’s Chairman was Mr. Nayak, then Secretary of the Petroleum Ministry. Our first office was located in a small Golf Links house. Following the signing of a contract for the EPC of Madras Refinery’s off-sites (job 1007) EIL’s office moved to the Allahabad Bank Building on Parliament Street. Our initial lease for 20,000 square feet had to be halved soon thereafter since other work expected did not materialize. Cash flow was a problem and I went without salary for nine months. About this time EIL had assembled its core management team; Dixit, Raghavan, Chandhok, Palit, Bery, Sharangpani, Dawda, Grover, B.R Chowdhary, Malhotra, Mukhopadhya, Agarwalla and Kocher, with Pargal and Mitra joining later. These were the stalwarts who built the foundation of EIL. They, in turn, brought on board outstanding supervisory talent in the various disciplines. At the junior levels EIL was able to attract from the best available in the country, including several President’s Gold Medalists. Most of the staff belonged to Engineering and Construction. While Raghavan, Sandhu and Grover, in turn organized a highly capable Engineering organization, Dowda did likewise for Construction. All told, this was a world-class management team.

A few months after the Madras off-sites contract we signed a sub-contract (job 1015) with Snam Progetti for the off-sites engineering of Lube India Ltd.’s lubricant plant in Mumbai. To keep overheads low, the new MD, Buck Forney rented a ramshackle office near a dhobi ghat in Worli, Mumbai! When Franco Salembini, President of Snam Progetti visited the office he immediately directed that we move out to a better place ! The office then moved to its present location in Nirmal building, Churchgate. The EIL joint venture ran a rocky course, because of differences between the two parties. Bechtel had failed in its efforts to sell a package of five fertilizer plants to the Government and furthermore wanted EIL to sub-contract much of its work to San Francisco. In contrast, GOI’s emphasis was on the rapid development of indigenous capabilities. Additional work was not forthcoming. The then petroleum ministry, Mr. O.V Alagesan asked my advise as to whether Bechtel should continue. I explained why this was not in EIL’s interest. As it turned out, the joint venture ended in 1967. It must however be said to Bechtel’s credit that they got EIL started on a sound commercial basis, in sharp contrast to the other public sector design organizations. This proved enormously beneficial to EIL’s future development. As Bechtel pulled out, the Petroleum Secretary suggested that perhaps we needed a new overseas partner. I strongly felt that this, as before, would inhibit our development. Instead, we should be free to select the best possible overseas collaborators, on a job-to-job basis, on competitive terms. Of course this meant running the risk of shutting down, in case we could not maintain financial viability. The next two years saw Mr. M.A Rao, retired Railway Board Chairman, as EIL’s CMD. By then we had moved to

the PTI building on Parliament Street. With Bechtel gone, it was a huge challenge for a band of sixty odd engineers to command credibility. The only immediate job prospect was IOC’s coke calcination plant at Barauni on a LSTK basis. We had to win this job in order to survive. Our competition was McNeilly-Bird, an equipment supplier. IOC determined that theirs was the lower bid. I saw the Petroleum Minister, Mr. Ashok Mehta and convinced him that EIL, as a design company would be a better choice from the standpoint of developing indigenous know-how. At a meeting called by the Minister and attended by the IOC MD, a surprised Petroleum Secretary and me, the Minister asked whether EIL could do the job at a lower price than McNeilly Bird. Their price was Rs 2 lakhs lower than ours. I dropped our price by Rs. 3 lakhs and the contract was EIL’s. Since we were obliged to extend IOC unlimited performance guarantees, we had to press our equipment supplier AVB to oversize the equipment by a considerable margin. We lived to see another day and the project turned out to be an outstanding success. We were now successful in getting other work. Our Government ownership, combined with the fact that the jobs we sought were Government owned, helped us get the support of the best overseas specialist companies. Thus, we were awarded the Cochin refinery expansion job, supported by Badger. We outbid Parsons, Mumbai, and they were obliged to shut down their Indian operations. Earlier, Lummus, Mumbai, had done likewise. We targeted the study for the dry dock in Cochin. I saw the Chairman of Cochin Port Trust, who laughing asked, ‘what experience do you have in this field?’ I mentioned that we would obtain the support of an experienced overseas company. We bid with Entrepose, France, in competition against RPT of UK. It was only after the intervention of Mr. V.K.R.V. Rao, Minister of Transport, that we were awarded the study on the

grounds that we would develop indigenous expertise. The intervention came only after the minister had sent his Joint Secretary to visit EIL to make sure that the company really existed! The study was performed successfully under the management of T.K.D. Munshi. Still hungry for work, we bid for the brewery facility of Punjab State Industrial Corporation under Mr.Tejinder Khanna, presently Delhi’s Lieutenant Governor. We worked with Danish collaboration, including the services of a brewmaster. The beer that flowed out proved very popular. Not to be left behind, the Haryana Government contracted with us to implement a similar brewery and this was equally successful. The project manager for these jobs was Prakash. Meantime, Mr. Lovraj Kumar had been appointed Advisor, Petrochemicals in the Ministry. He was very forward thinking and I had known him since our days in Allahabad University. He was negotiating an agreement with Krupp of Germany for the establishment of an Aromatics plant at Koyali. He asked whether EIL would be interested in engineering the plant to Krupps process design. This was a Godsend and stabilized EIL operations for the first time. The job was completed very successfully under Bery’s leadership. We had now not only broken through the process plants market and survived but had also stabilized our operations. Soon thereafter Loveraj Kumar’s negotiations with several international petrochemical companies for the establishment of an ethylene complex at Koyali ended in failure. They could not agree to GOI’s terms. He was then able to get GOI to allocate enough foreign exchange to buy the basic design of the various process units from different licensors. EIL contracted with the newly formed IPCL to engineer the entire ethylene complex under the leadership of Dixit. This was

eminently successful, despite its enormous technical complexity. EIL’s future was now secure. By this time the Haldia Refinery Project started to develop on the basis of French financing and under the technical leadership of Technip. We signed a contract with IOC for the EPC of the fuels portion of the refinery, under Technip’s technical supervision. This included the process design of Atmospheric/Vacuum units. IIP/IFP was to provide licensor information for the cat reforming and HDS units. We had to compete against IIP for the process packages of the licensed units. We quoted zero cost to IOC. We won the job, to Dr. Ahluwalia’s, (IIP’s Director) considerable consternation. This marked our entry into the field of process design. Later, I tried to pacify Dr. Navarre, President of IFP in Paris, carrying with me presents from EIL. He was not amused and accused me of getting the job on the basis of salesmanship only. The entire EPC project was completed successfully under the management of Sharangpani. On Mr. Rao’s retirement in 1969, I was appointed CMD. Before this I had to overcome the reservations of the bureaucracy that I was too young for this job. This included furnishing the Prime Minister’s office, at their request, with examples of young CEOs in other countries. I was interviewed for the job by a Committee of GOI Secretaries. It was a brief interview. We made further inroads into the petrochemical field by successfully implementing a caprolactum project for GSFC. Before award of the contract I recall making a presentation to the GSFC Board that consisted of both State officials and well known businessmen. EIL soon signed licensing agreements with Foster Wheeler for the design of process heaters, Lummus for heat exchangers and Hydronyl for distillation trays.

This lead to the formation of the HMT department under Chandhok and was very successful. This was part of EIL’s deliberate effort to develop and maximize the supply of Indian equipment in order to reduce the country’s dependence on foreign credit. Such dependence also limited the scope of EIL’s engineering due to the inevitable involvement of an overseas engineering company. At the same time we used every possible opportunity to send our engineers to these companies to participate in their share of the work. EIL’s collaboration agreements were criticized by some leftleaning members of the Congress Party. I invited Mrs. Gandhi’s attention to this and was assured that she would handle any political fallout. As part of our diversification strategy, we now targeted non-ferrous plants. I invited Mr. Mohan Kumarmangalam, the concerned Minister to visit EIL’s PTI office. He was very impressed with both my presentation and the functionality of EIL’s office. That evening, in his speech to the Delhi Rotary Club, he spoke of EIL in glowing terms. This was followed by engineering contracts for Hindustan Copper and Hindustan Zinc and marked our entry to the non-ferrous field. In 1972 I was offered the Chairmanship of ONGC and also Membership of the Planning Commission. I elected to go with the Planning Commission, with Mrs. Gandhi agreeing to my also remaining CMD, EIL which now got upgraded to an A category PSE from a B category. I had two other colleagues on the Commission, both eminent economists. My portfolio comprised Industry and Minerals, Power, Transport, Communications and Science and Technology. Soon thereafter crude oil prices experienced their first hike. This upset the projections being made for the fifth Five Year Plan. Mrs. Gandhi consulted the Commission Members. I proposed that every effort be

made to increase production from investments already made in the public sector. The Simla session of the AICC passed a resolution to the effect that an Action Committee be formed to improve the performance of the Public Sector Enterprises. I was appointed its Chairman and invited the following to join me: V. Rajadhakshaya, Chairman, Hindustan Lever; K.M. George, Chairman, AVB; C.P. Shrivastava, Chairman, Shipping Corporation; P.C. Lal, retired Air Force Chief; Nitish Dey, IIM, Calcutta and P. Fernandes, Secretary, BPE. We conducted a management cum operations audit of major PSEs, excluding ONGC. For each PSE a two page report was submitted to Prime Minister and a more detailed one to the Cabinet Committee for PSEs. We had the full support of the government. Our recommendations were approved and rapidly implemented. The Action Committee was able to help in turning the aggregate performance of the PSEs from loss to profit within two years. An important recommendation of the Action Committee that was approved by the Prime Minister was the constitution of the PSEB to select CEOs for the PSEs. To start with then PSEB consisted of S. Moolgaokar of Tata’s, Rajadhakshaya, George, P.C. Lal and Fernandes of BPE. Concurrently with the Action Committee, the Malaviya ONGC Review Committee was conducting its examination of ONGC. As this Committee’s member, I had the opportunity to review ONGC’s performance. Among the decisions taken was the restructuring of ONGC and this provided for its Offshore Operations as a separate division. Soon thereafter the Planning Commission Members presented the Fifth Five Year Plan to the Cabinet. As part of my presentation, I put forth the case for the development of Bombay High, then under exploratory investigation with the support of the French. It became apparent that earlier Mrs. Gandhi had been advised that

there was no oil to be found offshore. The Fifth Plan was approved by the Cabinet and later by the National Development Council. I now met with N.B. Prasad, Chairman, ONGC. While discussing his plans for Bombay High development, he mentioned that he would like EIL to perform the design/ engineering for ONGC’s offshore facilities. He did not seem satisfied with the performance of ONGC’s in-house design capability. This provided the opportunity for which EIL had been waiting since A.K. Malhotra had joined in 1970. EIL’s Ocean Engineering Department was now formed under Malhotra’s capable leadership. He rapidly developed the company’s offshore capabilities and workload, with the support of Crest, Inc.,USA This involved highly sophisticated design for the offshore facilities of Bombay High and later supervision of an offshore terminal at Salaya. Because of his proclivity for strategic thinking, Malhotra was also assigned Corporate Planning. The newly formed Systems Engineering capability was also put under his charge. Special mention needs to be made of Dr. Mitra’s and Dr. Pargal’s induction into EIL. At the suggestion of Loveraj Kumar, I met Mitra in The Hague, where he was employed with Shell as their expert in the maintenance Shell refineries worldwide. I persuaded him to return to India and join EIL, with the objective of establishing a strong capability for providing specialized maintenance services to IOC. He agreed, but Dasgupta, MD of IOC’s Refining Division proved to be very negative. This was a big opportunity lost to the country. I entrusted Mitra with the overall management of Process Design and front-end functions, including our newly established R&D capability under Mukhopadhya who made an outstanding contribution. Dr. Pargal, who had earlier been my colleague at Caltex and later joined ICI, was assigned overall charge of services

relating to project execution. Both Mitra and Pargal provided invaluable support as I divided my time between EIL and the Planning Commission. By this time EIL was strongly established as an engineering and construction company known outside India as well. EIL figured prominently In Hydrocarbon Processing’s list of worldwide job awards. Overseas, we had provided limited support to Snam Progetti in their engineering of the Shiraz and Tabriz refineries in Iran. In Iraq we had signed an agreement with SOIDC, a state owned organization providing engineering services to the country’s refining industry. Several EIL engineers were assigned for on-site support to SOIDC. India had close relations with Iraq and was the first country to purchase their nationalized crude oil. As Member of the Planning Commission, I represented India on the Indo-Iraq Joint Commission for Economic Cooperation. On one occasion when I was in discussion with Iraq’s Oil Minister, Mr Hamadi, in his office in Bagdad, he got a call from President Saddam Hussain who wished to meet with me. This was a good meeting and was given wide publicity in the local papers. All this helped EIL in Iraq and also IOC in the purchase of crude oil. About this time I got a letter from Bechtel’s Raff Dorman that they would be interested in getting back with EIL. But this was not possible. Also, Hans Uhde met me, at the suggestion of the then Petroleum Minister, Mr. P.C. Sethi, to ask whether I would be agreeable to Uhde starting an engineering operation in India. I responded that EIL still needed some protection from international competition. Following the successful completion of the Haldia refinery, EIL signed up with IOC for the EPC of the Mathura Refinery in’73/’74. This was a Russian financed project. In a meeting in the Planning Commission with Deputy Chairman, D.P. Dhar and Petroleum Minister D.K.

Barooah, I had to fight hard to maximize EIL’s share of the total project. While on the Planning Commission it was also brought to my attention by the Cabinet Secretary and Economic Affairs Secretary that they were having difficulty meeting the foreign exchange requirements for importing adequate supplies of fertilizer. Our public sector plants were operating at inadequate capacities, many of them because of design/equipment deficiencies. The Action Committee for Public Sector Enterprises sought to address this problem. In addition, it was decided that two new fertilizer plants, based on fuel oil would be set up at Bhatinda and Panipat with the shortest possible project schedules. These projects would be entrusted to EIL in collaboration with Toyo Engineering, who had a successful track record in India. This decision attracted the criticism of vested interests inspired by both political considerations and a threatened Fertilizer Corporation of India (FCI). I accompanied our Foreign Minister, Sardar Swaran Singh, for discussions in Tokyo with the concerned ministers and Prime Minister Tanaka, to negotiate Japanese credit required for the two projects. This was done. EIL signed a contract with Toyo, assuming EPC responsibilities with Toyo support. Under the leadership of Bery, the projects were an outstanding success. They were completed within 36 months and incorporated a greater indigenous content than any other fertilizer project upto now. The all-important ammonia synthesis compressors were supplied from India for the first time. I was able to get BHEL, Hyderabad, to license manufacture of the compressors from Snam Saipem. Because of the difficult feed stock, we tied up with Veba Chemie of Germany. They owned and operated fuel oil based fertilizer facilities, using Texaco technology for partial oxidation, as in our case. They

were to review Toyo’s process design from the standpoint of an operator. To get Toyo’s buy-in to this review, I met with Chairman of Mitsui, the owners of Toyo. He agreed to share the cost of Veba’s review with EIL. Even though this was a small amount it was strongly opposed by FCI, on the grounds that this was unnecessary foreign exchange expenditure. We were able to overcome the objection and the foreign exchange was approved. Veba’s operational review proved invaluable and ensured smooth plant startup. Later, FCI approached EIL for assistance in such a review of their fuel oil based project. Bhatinda and Panipat marked EIL’s full fledged entry into the fertilizer field. Earlier, EIL had supported Kellogg in their design of IFFCO’s ammonia plant at Kalol. Ironically, after I left EIL, the company was debarred from implementing public sector fertilizer projects as a result of a decision taken by a committee chaired by Homi Setna, then Chairman of FCI. The committee was charged to decide whether EIL should share public sector fertilizer projects with FCI and FACT. In 1973, at the request of the Atomic Energy Commission’s Chairman, Dr. Vikram Sarabai, we contracted to support AEC in the design of their heavy water plant in Gujarat. This took EIL into a whole new field. With a sufficiently strong Balance Sheet now, it was time to move into our own building. I saw Mr. Om Mehta, Minister for Works and Housing and he allotted office space at EIL’s present location. By this time EIL had emerged as the most capable engineering company in Asia, outside Japan. Its staff totaled 2700. It had accomplished the following:

1. Diversification embracing petroleum refining,

2. 3.

4. 5.

petrochemicals, fertilizers, non-ferrous metals, ocean engineering, systems engineering and heavy water. Entered the international market. Helped develop Indian equipment, greatly reducing the amount of foreign exchange required for process plants. Started a process R & D capability in Gurgaon, that included the use of pilot plants. Fostered a management culture that emphasized the induction, retention and development of the best available talent from within and outside the country. This would not have been possible without the invaluable contribution made by R.D.Gupta who managed the Employee Relations Department and a succession of highly motivated Finance Directors, Messrs. Aiyar, Poulouse and Ramaswamy.

The key to our success was the care given to our staff. Any employee wishing to resign had to first see me and in almost all cases I was able tos resolve their grievances. In 1974, in an effort to get the Bureau of Public Enterprises relax their salary policy as applicable to EIL, I invited Finance Minister, Mr. Y.B Chavan and Petroleum Minister, Dr. Triguna Sen to visit EIL. We made our case by presenting EIL’s Five Year Plan. They agreed and we were able to make a significant improvement in our salary structure. In December 1974, it was discovered that I had an unusual case of glaucoma. I resigned from the Planning Commission and returned to EIL fulltime. Early in 1975 I visited Tripoli, Libya, and had discussions with their Oil Minister, Mr. Mabrouk, and sold him the idea of a joint venture company with EIL in Tripoli. This would help EIL penetrate the overseas market further. My execution of an MOU to this effect with the Oil

Minister in consultation with the Indian Ambassdor Mr. Talyerkhan, attracted the attention of several of the other embassies in Libya. However, on my return to Delhi, the Ministry of Petroleum objected to my execution of the MOU, without their prior approval. The External Affairs Ministry supported my position, but this did not change the Ministry’s stance. Thereupon, I offered to resign from EIL, but Malaviyaji pursuaded me to change my mind. By this time my eye condition had deteriorated further and on my doctor’s advise I was obliged to seek medical treatment in the US. Since this required regular medical surveillance, I decided to stay back in the US and with a heavy heart sent in my letter of resignation to the Prime Minister. From the US, I tried to keep in touch with EIL. I recall the time when EIL was under the threat of being divested by the previous Government. I spoke to the decision makers at the political level and also wrote an impassioned article in the Business Standard on how EIL’s divestment would prove fatal. Fortunately, the threat was averted. Over the years, EIL has made remarkable progress. It has weathered competition from overseas companies, but not without a significant loss of its experienced engineers. Presently EIL has an impressive workload and has much to be proud of under the leadership of Mukesh Rohatgi. An eye-catching project is the cleanup of the Jamuna river and hopefully this will extend to the Ganga as well. As a national company, there is much to be done in the field of water management, clean coal, non-conventional fuels, energy conservation, environmental engineering and project management in fields hitherto not addressed. Finally, I am deeply touched that you have decided to give me this lifetime award. There is yet another award

I would greatly cherish: make EIL No. 1 in the world during my lifetime. So will you please hurry up!! God Bless EIL. M.S. Pathak

11th March 2009