FINAL

EIL: CREATION OF A NATIONAL ASSET

It was soon after Indian Independence. The country wasconsumed with the excitement of economic developmentfueled by the vision, drive and contagious idealism ofPandit Nehru. India had started to build its industrialbase, reflective of Nehru's passion for Science andTechnology. The call for Self Reliance was born tobuttress an independent foreign policy, amongst otherthings. Against this background I was completing myengineering at MIT. In between semesters I came homeand 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’sideals. In 1955, I joined Caltex in New York, as one offour Indian engineers, to get involved in theimplementation of their Vizag refinery project. It wasonly natural that during my first week in Caltex'sdesign office in New York, the question arose, "Whycan't we do this in India?".

This thought became an obsession as I went through thedesign, construction and commissioning phases of theVizag refinery. In 1957 I quit Caltex to join Exxon inMumbai. While in Delhi I met with the Minister forPetroleum, Mr. Keshav Dev Malaviya and mentioned to himI was one of four Indian engineers who had been exposedto refinery design for the first time. Would he supportthe establishment of an Indian capability for refinerydesign? With his vision for a public sector oilindustry, he reacted enthusiastically. He mentionedthat Gauhati and Barauni refinery projects did notprovide for participation of Indian engineers in theirdesign work. However, this should be possible inrespect of the Gujarat refinery, a few years down theroad.

In 1962, while with Exxon, I got a call from the MD ofIndian Refineries Ltd., Mr. P.R. Nayak, a highlyregarded member of the ICS. He inquired of my interestto join Indian Refineries and lead a team of eightengineers to the USSR to participate in the DetailedProject Report of the 2 MTA Koyali refineries, with theobjective of maximizing the use of Indian equipment/materials. Soon thereafter I was facing -40% C weatherin Moscow with a team that included Chandhok, Dixit,Palit, Raghavan and Govinda. Later in the yearMalaviyaji visited Moscow for discussions regarding theexpansion of the Koyali Refinery and asked me, "Are youready to design the next refinery?" I replied that ourteam should first do the detailed engineering in Barodafor the off-sites of the Koyali refinery project. Toenable this it would be necessary for a small group ofRussian design specialists to move to Baroda to providesupervision. Malaviyaji was to meet Prime MinisterKosygin the next day and asked me to provide him awritten 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. Healso saw considerable risk to the refinery projectschedule since refinery design would be done in Indiafor the first time. On completion of our team’s work inthe Moscow and Leningrad design institutes, we returnedto India in 1963. The Central Design Organization (CDO)got started in Baroda, as part of the Gujarat RefineryProject, under the overall management of Gen. SardanandSingh. CDO was the forerunner to EIL. CDO proved to bea great success and Mr. Nayak was now persuaded that aseparate design/construction company should beestablished to implement refinery projects. He asked meto evaluate three candidates for a joint venturecompany with GOI, viz. Bechtel, Snam Progetti and Brown& Root. I recommended Bechtel because of the depth ofits capabilities across several industrial sectors.

EIL was incorporated in New Delhi with a paid upcapital of Rs 25 lakhs, on March 15, 1965. This was 10years after the start of a dream in New York that gottriggered with the question, “Why not in India?”. EILwas a joint venture between GOI and Bechtel, with GOIowning 51% and a Bechtel MD in charge.

On completion of my responsibilities for the overallmanagement of CDO’s work and also the mechanical/electrical/instrumentation installation for the 2MTArefinery, I joined EIL at its inception. Others onboard were a Bechtel Manager of Engineering, MD RaffDorman and Avtar Singh Sandhu. EIL’s Chairman was Mr.Nayak, then Secretary of the Petroleum Ministry. Ourfirst office was located in a small Golf Links house.Following the signing of a contract for the EPC ofMadras Refinery’s off-sites (job 1007) EIL’s officemoved to the Allahabad Bank Building on ParliamentStreet. Our initial lease for 20,000 square feet had tobe halved soon thereafter since other work expected didnot materialize. Cash flow was a problem and I wentwithout salary for nine months. About this time EIL hadassembled its core management team; Dixit, Raghavan,Chandhok, Palit, Bery, Sharangpani, Dawda, Grover, B.RChowdhary, Malhotra, Mukhopadhya, Agarwalla and Kocher,with Pargal and Mitra joining later. These were thestalwarts who built the foundation of EIL. They, inturn, brought on board outstanding supervisory talentin the various disciplines. At the junior levels EILwas able to attract from the best available in thecountry, including several President’s Gold Medalists.Most of the staff belonged to Engineering andConstruction. While Raghavan, Sandhu and Grover, inturn organized a highly capable Engineeringorganization, Dowda did likewise for Construction. Alltold, this was a world-class management team.

A few months after the Madras off-sites contract wesigned a sub-contract (job 1015) with Snam Progetti forthe off-sites engineering of Lube India Ltd.’slubricant plant in Mumbai. To keep overheads low, thenew MD, Buck Forney rented a ramshackle office near adhobi ghat in Worli, Mumbai! When Franco Salembini,President of Snam Progetti visited the office heimmediately directed that we move out to a better place! The office then moved to its present location inNirmal building, Churchgate.

The EIL joint venture ran a rocky course, because ofdifferences between the two parties. Bechtel had failedin its efforts to sell a package of five fertilizerplants to the Government and furthermore wanted EIL tosub-contract much of its work to San Francisco. Incontrast, GOI’s emphasis was on the rapid developmentof indigenous capabilities. Additional work was notforthcoming. The then petroleum ministry, Mr. O.VAlagesan asked my advise as to whether Bechtel shouldcontinue. I explained why this was not in EIL’sinterest. As it turned out, the joint venture ended in1967. It must however be said to Bechtel’s credit thatthey got EIL started on a sound commercial basis, insharp contrast to the other public sector designorganizations. This proved enormously beneficial toEIL’s future development. As Bechtel pulled out, thePetroleum Secretary suggested that perhaps we needed anew overseas partner. I strongly felt that this, asbefore, would inhibit our development. Instead, weshould be free to select the best possible overseascollaborators, on a job-to-job basis, on competitiveterms. Of course this meant running the risk ofshutting down, in case we could not maintain financialviability.

The next two years saw Mr. M.A Rao, retired RailwayBoard Chairman, as EIL’s CMD. By then we had moved to

the PTI building on Parliament Street. With Bechtelgone, it was a huge challenge for a band of sixty oddengineers to command credibility. The only immediatejob prospect was IOC’s coke calcination plant atBarauni on a LSTK basis. We had to win this job inorder to survive. Our competition was McNeilly-Bird, anequipment supplier. IOC determined that theirs was thelower bid. I saw the Petroleum Minister, Mr. AshokMehta and convinced him that EIL, as a design companywould be a better choice from the standpoint ofdeveloping indigenous know-how. At a meeting called bythe Minister and attended by the IOC MD, a surprisedPetroleum Secretary and me, the Minister asked whetherEIL could do the job at a lower price than McNeillyBird. Their price was Rs 2 lakhs lower than ours. Idropped our price by Rs. 3 lakhs and the contract wasEIL’s. Since we were obliged to extend IOC unlimitedperformance guarantees, we had to press our equipmentsupplier AVB to oversize the equipment by aconsiderable margin. We lived to see another day andthe project turned out to be an outstanding success.

We were now successful in getting other work. OurGovernment ownership, combined with the fact that thejobs we sought were Government owned, helped us get thesupport of the best overseas specialist companies.Thus, we were awarded the Cochin refinery expansionjob, supported by Badger. We outbid Parsons, Mumbai,and they were obliged to shut down their Indianoperations. Earlier, Lummus, Mumbai, had done likewise.We targeted the study for the dry dock in Cochin. I sawthe Chairman of Cochin Port Trust, who laughing asked,‘what experience do you have in this field?’ Imentioned that we would obtain the support of anexperienced overseas company. We bid with Entrepose,France, in competition against RPT of UK. It was onlyafter the intervention of Mr. V.K.R.V. Rao, Minister ofTransport, that we were awarded the study on the

grounds that we would develop indigenous expertise. Theintervention came only after the minister had sent hisJoint Secretary to visit EIL to make sure that thecompany really existed! The study was performedsuccessfully under the management of T.K.D. Munshi.

Still hungry for work, we bid for the brewery facilityof Punjab State Industrial Corporation underMr.Tejinder Khanna, presently Delhi’s LieutenantGovernor. We worked with Danish collaboration,including the services of a brewmaster. The beer thatflowed out proved very popular. Not to be left behind,the Haryana Government contracted with us to implementa similar brewery and this was equally successful. Theproject manager for these jobs was Prakash.

Meantime, Mr. Lovraj Kumar had been appointed Advisor,Petrochemicals in the Ministry. He was very forwardthinking and I had known him since our days inAllahabad University. He was negotiating an agreementwith Krupp of Germany for the establishment of anAromatics plant at Koyali. He asked whether EIL wouldbe interested in engineering the plant to Kruppsprocess design. This was a Godsend and stabilized EILoperations for the first time. The job was completedvery successfully under Bery’s leadership. We had nownot only broken through the process plants market andsurvived but had also stabilized our operations. Soonthereafter Loveraj Kumar’s negotiations with severalinternational petrochemical companies for theestablishment of an ethylene complex at Koyali ended infailure. They could not agree to GOI’s terms. He wasthen able to get GOI to allocate enough foreignexchange to buy the basic design of the various processunits from different licensors. EIL contracted with thenewly formed IPCL to engineer the entire ethylenecomplex under the leadership of Dixit. This was

eminently successful, despite its enormous technicalcomplexity. EIL’s future was now secure.

By this time the Haldia Refinery Project started todevelop on the basis of French financing and under thetechnical leadership of Technip. We signed a contractwith IOC for the EPC of the fuels portion of therefinery, under Technip’s technical supervision. Thisincluded the process design of Atmospheric/Vacuumunits. IIP/IFP was to provide licensor information forthe cat reforming and HDS units. We had to competeagainst IIP for the process packages of the licensedunits. We quoted zero cost to IOC. We won the job, toDr. Ahluwalia’s, (IIP’s Director) considerableconsternation. This marked our entry into the field ofprocess design. Later, I tried to pacify Dr. Navarre,President of IFP in Paris, carrying with me presentsfrom EIL. He was not amused and accused me of gettingthe job on the basis of salesmanship only. The entireEPC project was completed successfully under themanagement of Sharangpani.

On Mr. Rao’s retirement in 1969, I was appointed CMD.Before this I had to overcome the reservations of thebureaucracy that I was too young for this job. Thisincluded furnishing the Prime Minister’s office, attheir request, with examples of young CEOs in othercountries. I was interviewed for the job by a Committeeof GOI Secretaries. It was a brief interview.

We made further inroads into the petrochemical field bysuccessfully implementing a caprolactum project forGSFC. Before award of the contract I recall making apresentation to the GSFC Board that consisted of bothState officials and well known businessmen.

EIL soon signed licensing agreements with FosterWheeler for the design of process heaters, Lummus forheat exchangers and Hydronyl for distillation trays.

This lead to the formation of the HMT department underChandhok and was very successful. This was part ofEIL’s deliberate effort to develop and maximize thesupply of Indian equipment in order to reduce thecountry’s dependence on foreign credit. Such dependencealso limited the scope of EIL’s engineering due to theinevitable involvement of an overseas engineeringcompany. At the same time we used every possibleopportunity to send our engineers to these companies toparticipate in their share of the work. EIL’scollaboration agreements were criticized by some left-leaning members of the Congress Party. I invited Mrs.Gandhi’s attention to this and was assured that shewould handle any political fallout.

As part of our diversification strategy, we nowtargeted non-ferrous plants. I invited Mr. MohanKumarmangalam, the concerned Minister to visit EIL’sPTI office. He was very impressed with both mypresentation 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 byengineering contracts for Hindustan Copper andHindustan Zinc and marked our entry to the non-ferrousfield.

In 1972 I was offered the Chairmanship of ONGC and alsoMembership of the Planning Commission. I elected to gowith the Planning Commission, with Mrs. Gandhi agreeingto my also remaining CMD, EIL which now got upgraded toan A category PSE from a B category. I had two othercolleagues 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 theirfirst hike. This upset the projections being made forthe fifth Five Year Plan. Mrs. Gandhi consulted theCommission Members. I proposed that every effort be

made to increase production from investments alreadymade in the public sector. The Simla session of theAICC passed a resolution to the effect that an ActionCommittee be formed to improve the performance of thePublic Sector Enterprises. I was appointed its Chairmanand 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 ForceChief; Nitish Dey, IIM, Calcutta and P. Fernandes,Secretary, BPE. We conducted a management cumoperations audit of major PSEs, excluding ONGC. Foreach PSE a two page report was submitted to PrimeMinister and a more detailed one to the CabinetCommittee for PSEs. We had the full support of thegovernment. Our recommendations were approved andrapidly implemented. The Action Committee was able tohelp in turning the aggregate performance of the PSEsfrom loss to profit within two years. An importantrecommendation of the Action Committee that wasapproved by the Prime Minister was the constitution ofthe PSEB to select CEOs for the PSEs. To start withthen PSEB consisted of S. Moolgaokar of Tata’s,Rajadhakshaya, George, P.C. Lal and Fernandes of BPE.

Concurrently with the Action Committee, the MalaviyaONGC Review Committee was conducting its examination ofONGC. As this Committee’s member, I had the opportunityto review ONGC’s performance. Among the decisions takenwas the restructuring of ONGC and this provided for itsOffshore Operations as a separate division.

Soon thereafter the Planning Commission Memberspresented the Fifth Five Year Plan to the Cabinet. Aspart of my presentation, I put forth the case for thedevelopment of Bombay High, then under exploratoryinvestigation with the support of the French. It becameapparent that earlier Mrs. Gandhi had been advised that

there was no oil to be found offshore. The Fifth Planwas approved by the Cabinet and later by the NationalDevelopment Council.

I now met with N.B. Prasad, Chairman, ONGC. Whilediscussing his plans for Bombay High development, hementioned that he would like EIL to perform the design/engineering for ONGC’s offshore facilities. He did notseem satisfied with the performance of ONGC’s in-housedesign capability. This provided the opportunity forwhich EIL had been waiting since A.K. Malhotra hadjoined in 1970. EIL’s Ocean Engineering Department wasnow formed under Malhotra’s capable leadership. Herapidly developed the company’s offshore capabilitiesand workload, with the support of Crest, Inc.,USA Thisinvolved highly sophisticated design for the offshorefacilities of Bombay High and later supervision of anoffshore terminal at Salaya. Because of his proclivityfor strategic thinking, Malhotra was also assignedCorporate Planning. The newly formed SystemsEngineering 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 ofLoveraj Kumar, I met Mitra in The Hague, where he wasemployed with Shell as their expert in the maintenanceShell refineries worldwide. I persuaded him to returnto India and join EIL, with the objective ofestablishing a strong capability for providingspecialized maintenance services to IOC. He agreed, butDasgupta, MD of IOC’s Refining Division proved to bevery negative. This was a big opportunity lost to thecountry. I entrusted Mitra with the overall managementof Process Design and front-end functions, includingour newly established R&D capability under Mukhopadhyawho made an outstanding contribution. Dr. Pargal, whohad earlier been my colleague at Caltex and laterjoined ICI, was assigned overall charge of services

relating to project execution. Both Mitra and Pargalprovided invaluable support as I divided my timebetween EIL and the Planning Commission.

By this time EIL was strongly established as anengineering and construction company known outsideIndia as well. EIL figured prominently In HydrocarbonProcessing’s list of worldwide job awards. Overseas, wehad provided limited support to Snam Progetti in theirengineering of the Shiraz and Tabriz refineries inIran. In Iraq we had signed an agreement with SOIDC, astate owned organization providing engineering servicesto the country’s refining industry. Several EILengineers were assigned for on-site support to SOIDC.India had close relations with Iraq and was the firstcountry to purchase their nationalized crude oil. AsMember of the Planning Commission, I represented Indiaon the Indo-Iraq Joint Commission for Economic Co-operation. On one occasion when I was in discussionwith Iraq’s Oil Minister, Mr Hamadi, in his office inBagdad, he got a call from President Saddam Hussain whowished to meet with me. This was a good meeting and wasgiven wide publicity in the local papers. All thishelped EIL in Iraq and also IOC in the purchase ofcrude oil. About this time I got a letter fromBechtel’s Raff Dorman that they would be interested ingetting back with EIL. But this was not possible. Also,Hans Uhde met me, at the suggestion of the thenPetroleum Minister, Mr. P.C. Sethi, to ask whether Iwould be agreeable to Uhde starting an engineeringoperation in India. I responded that EIL still neededsome protection from international competition.

Following the successful completion of the Haldiarefinery, EIL signed up with IOC for the EPC of theMathura Refinery in’73/’74. This was a Russian financedproject. In a meeting in the Planning Commission withDeputy Chairman, D.P. Dhar and Petroleum Minister D.K.

Barooah, I had to fight hard to maximize EIL’s share ofthe total project.

While on the Planning Commission it was also brought tomy attention by the Cabinet Secretary and EconomicAffairs Secretary that they were having difficultymeeting the foreign exchange requirements for importingadequate supplies of fertilizer. Our public sectorplants were operating at inadequate capacities, many ofthem because of design/equipment deficiencies. TheAction Committee for Public Sector Enterprises soughtto address this problem. In addition, it was decidedthat two new fertilizer plants, based on fuel oil wouldbe set up at Bhatinda and Panipat with the shortestpossible project schedules. These projects would beentrusted to EIL in collaboration with ToyoEngineering, who had a successful track record inIndia. This decision attracted the criticism of vestedinterests inspired by both political considerations anda threatened Fertilizer Corporation of India (FCI). Iaccompanied our Foreign Minister, Sardar Swaran Singh,for discussions in Tokyo with the concerned ministersand Prime Minister Tanaka, to negotiate Japanese creditrequired for the two projects. This was done.

EIL signed a contract with Toyo, assuming EPCresponsibilities with Toyo support. Under theleadership of Bery, the projects were an outstandingsuccess. They were completed within 36 months andincorporated a greater indigenous content than anyother fertilizer project upto now. The all-importantammonia synthesis compressors were supplied from Indiafor the first time. I was able to get BHEL, Hyderabad,to license manufacture of the compressors from SnamSaipem. Because of the difficult feed stock, we tied upwith Veba Chemie of Germany. They owned and operatedfuel oil based fertilizer facilities, using Texacotechnology for partial oxidation, as in our case. They

were to review Toyo’s process design from thestandpoint of an operator. To get Toyo’s buy-in to thisreview, I met with Chairman of Mitsui, the owners ofToyo. He agreed to share the cost of Veba’s review withEIL. Even though this was a small amount it wasstrongly opposed by FCI, on the grounds that this wasunnecessary foreign exchange expenditure. We were ableto overcome the objection and the foreign exchange wasapproved. Veba’s operational review proved invaluableand ensured smooth plant startup. Later, FCI approachedEIL for assistance in such a review of their fuel oilbased project.

Bhatinda and Panipat marked EIL’s full fledged entryinto the fertilizer field. Earlier, EIL had supportedKellogg in their design of IFFCO’s ammonia plant atKalol.

Ironically, after I left EIL, the company was debarredfrom implementing public sector fertilizer projects asa result of a decision taken by a committee chaired byHomi Setna, then Chairman of FCI. The committee wascharged to decide whether EIL should share publicsector fertilizer projects with FCI and FACT.

In 1973, at the request of the Atomic EnergyCommission’s Chairman, Dr. Vikram Sarabai, wecontracted to support AEC in the design of their heavywater plant in Gujarat. This took EIL into a whole newfield.

With a sufficiently strong Balance Sheet now, it wastime to move into our own building. I saw Mr. Om Mehta,Minister for Works and Housing and he allotted officespace at EIL’s present location.

By this time EIL had emerged as the most capableengineering company in Asia, outside Japan. Its stafftotaled 2700. It had accomplished the following:

1. Diversification embracing petroleum refining,petrochemicals, fertilizers, non-ferrous metals,ocean engineering, systems engineering and heavywater.

2. Entered the international market.3. Helped develop Indian equipment, greatly reducing

the amount of foreign exchange required forprocess plants.

4. Started a process R & D capability in Gurgaon,that included the use of pilot plants.

5. Fostered a management culture that emphasized theinduction, retention and development of the bestavailable talent from within and outside thecountry. This would not have been possible withoutthe invaluable contribution made by R.D.Gupta whomanaged the Employee Relations Department and asuccession 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 andin almost all cases I was able tos resolve theirgrievances. In 1974, in an effort to get the Bureau ofPublic Enterprises relax their salary policy asapplicable to EIL, I invited Finance Minister, Mr. Y.BChavan and Petroleum Minister, Dr. Triguna Sen to visitEIL. We made our case by presenting EIL’s Five YearPlan. They agreed and we were able to make asignificant improvement in our salary structure.

In December 1974, it was discovered that I had anunusual case of glaucoma. I resigned from the PlanningCommission and returned to EIL fulltime. Early in 1975I visited Tripoli, Libya, and had discussions withtheir Oil Minister, Mr. Mabrouk, and sold him the ideaof a joint venture company with EIL in Tripoli. Thiswould 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 theother embassies in Libya. However, on my return toDelhi, the Ministry of Petroleum objected to myexecution of the MOU, without their prior approval. TheExternal Affairs Ministry supported my position, butthis did not change the Ministry’s stance. Thereupon, Ioffered to resign from EIL, but Malaviyaji pursuaded meto change my mind. By this time my eye condition haddeteriorated further and on my doctor’s advise I wasobliged to seek medical treatment in the US. Since thisrequired regular medical surveillance, I decided tostay back in the US and with a heavy heart sent in myletter of resignation to the Prime Minister.

From the US, I tried to keep in touch with EIL. Irecall the time when EIL was under the threat of beingdivested by the previous Government. I spoke to thedecision makers at the political level and also wrotean impassioned article in the Business Standard on howEIL’s divestment would prove fatal. Fortunately, thethreat was averted.

Over the years, EIL has made remarkable progress. Ithas weathered competition from overseas companies, butnot without a significant loss of its experiencedengineers. Presently EIL has an impressive workload andhas much to be proud of under the leadership of MukeshRohatgi. An eye-catching project is the cleanup of theJamuna river and hopefully this will extend to theGanga as well. As a national company, there is much tobe done in the field of water management, clean coal,non-conventional fuels, energy conservation,environmental engineering and project management infields hitherto not addressed.

Finally, I am deeply touched that you have decided togive me this lifetime award. There is yet another award

I would greatly cherish: make EIL No. 1 in the worldduring my lifetime.So will you please hurry up!!

God Bless EIL.

M.S. Pathak11th March 2009