'As a finance head, my role has become very critical, especially in getting approval for projects' - SV Narasimhan, Director (finance), IndianOil
New Delhi   01-Sep-2008
<b>On being a CFO in a public sector unit</b> Unlike in private companies, whatever decisions are made in a public sector unit are passed through the finance department and that is why the finance executive has a lot of knowledge about all functions. Having said that, a finance chief had a limited role till the mid-1990s. It was an era where the pricing mechanism was controlled. All decisions on prices were made by the oil coordination committee under the ministry of petroleum and natural gas. Unlike now, we were ignorant of crude oil price (movements) because financial decisions then were based on cost plus return on investment. Crude oil prices were not relevant to us because prices were anyway controlled. <b>On functions in the pre-liberalization era</b> Most of our time then was spent on audit, financial concurrence and accounting. Also, accounting standards were not in place and therefore the accounting process was not as complex as it is now. Treasury management was also a lot simpler because we were in a comfortable position. Fund requirement in relation to projects was also not as high as it is today. <b>On changes post listing</b> We got listed on the Bombay Stock Exchange in 1995 and issues of disclosures and accountability to public shareholders came to the fore. Shareholders came for the annual general meeting, unlike earlier when only government nominees attended it. With listing came new responsibilities and then deregulation happened. All our prices were now based on international crude and product prices. Optimal production of oil was based on the relative prices of different oil products because of which the finance head had a bigger role to play. <b>On how 'Navratna' status brought new responsibilities</b> The Navratna status gave enhanced financial and operational autonomy to select public sector undertakings. After IndianOil was bestowed navratna status in 1999, its core independent directors, who came from private companies or institutes such as the Indian Institute of Management, brought in a professional outlook. Earlier, all investment decisions amounting to more than Rs 100 crore had to be approved by the government, while now the projects were reviewed by the project evaluation committee of the board comprising independent directors and then approved by the board. As a finance head, my role has become very critical, especially in getting approval for projects. While corporate governance has always existed at IndianOil, it has become far more structured now. <b>On the increased Importance of treasury management</b> Treasury management has become more important. Now we are taking bilateral loans from domestic and foreign banks at the best interest rates (compared to rates offered to others) for working capital. For project loans, we take syndicated loans from a consortium of banks. <b>On new challenges</b> A big change that has come about in a finance chief's role at IndianOil is that he has to reorient the business to sell in a losing market. In the last six months, we have been optimizing existing resources and cutting down on non-essential operational expenses. We need to ensure both short-term and long-term growth plans.