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Notes to Accounts of Hindustan Petroleum Corporation Ltd.

Mar 31, 2016

(a) Right and Restrictions on Equity Shares

The Company has only one class of Equity Shares having a face value of Rs, 10/- per share which are issued and subscribed. Each Shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of the winding up of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company in proportion to the number of equity shares held by the shareholders and the amount paid up thereon

The Company also has 75,000 6% cumulative Redeemable Non-convertible Preference Shares of Rs, 100 /- each as a part of the Authorised Capital, which were issued earlier by the erstwhile ESRC. Presently the said Preference Shares stand redeemed

1. Debentures

The Company has issued the following Secured Redeemable Non-convertible Debentures:

8.77% Non-Convertible Debentures were issued on 13th March, 2013 with the maturity date of 13th of March, 2018. These are secured by first legal mortgage by way of a Registered Debenture Trust Deed over immovable property of the company being undivided share of land with the entire First Floor in the building High Street 1, situated at Ahmadabad and the first charge of fixed assets mainly certain Plant and Machinery at Visakh Refinery.

i. 8.75% Non-Convertible Debentures were issued on 9th November, 2012 with the maturity date of 9th of November, 2015 These are secured by mortgage, on first pari passu charge basis, by way of a Registered Debenture Trust Deed over immovable property of the company being undivided share of land with the entire First Floor in the building High Street 1, situated at Ahmadabad and the first charge of fixed assets mainly certain Plant and Machinery at Mumbai Refinery.

During the year ended March, 2016 an amount of Nil (31.03.2015 : Rs, 545.00 crores) of 8.75% Non-Convertible Debentures is repayable within one year and shown in note # 10 A. These Debentures Matured on 9th November, 2015

* : Rs, 125 Crores (31.03.15 : Rs, 200.00 Crores) is repayable within 1 year and the same has been shown as "Current Maturity of Long Term Debts" under Note #10 A.

2. Syndicated Loans from Foreign Banks (repayable in foreign currency)

The Company has availed Long Term Foreign Currency Syndicated Loans from banks at 3 months floating LIBOR plus spread (spread range : 65 to 170 basis point p.a.). These loans are taken for the period of 3 - 5 years. Rs, 6,625.25 Crores (31.03.15 Rs, 2,500.20 Crores) is repayble within 1 year and the same has been shown as "Current Maturity of Long Term Debts" under Note #10 A.

* : Security has been created with first charge on the facilities of Awa Salawas Pipeline, Mangalore Hasan Mysore LPG Pipeline, Uran - Chakan / Shikarpur LPG Pipeline & Rewari Project Pipeline. Rs, 64.50 Crores (31.03.2015 : Rs, 34.50 Crores) is repayble within 1 year and the same has been shown as "Current Maturity of Long Term Debts" under Note # 10 A.

10A.1 : This includes loans repayable within one year: Syndicated Loans from Foreign Banks (repayable in foreign currency) Rs, 6,625.25 Crores (31.03.15: Rs, 2,500.20 Crores), 8.75% Non - Convertible Debenture Nil (31.03.15: Rs, 545.00 Crores), and Loan from Oil Industry and Development Board Rs, 189.50 Crores (31.03.15: Rs, 234.50 Crores)

10A.2 : To the extent Micro and Small Enterprises have been identified, the outstanding balance, including interest thereon, if any, as at Balance Sheet date is disclosed on which Auditors have relied upon. (Refer note # 39)

10A.3 : No amount is due as at the end of the year for credit to Investors'' Education and Protection Fund

10A.4 : Includes Statutory Liabilities of Rs, 2,979.39 Crores (31.03.15: Rs, 2,635.81 Crores), Liabilities relating to retention money payable to Suppliers within one year, Supplies / Project related payables, etc. Rs, 4,299.59 Crores (31.03.15: Rs, 3,748.77 Crores)

Notes:

1. Includes assets costing Rs, 0.007 crores (2014-2015 : Rs, 0.007 crores) of erstwhile Kosan Gas Company not handed over to the Corporation. In case of these assets, Kosan Gas Company was to give up their claim. However, in view of the tenancy right sought by third party, the matter is under litigation

2. Includes Rs, 477.90 Crores (2014-2015: Rs, 153.60 Crores) towards Building, Other Machinery, Pipelines, Railway Sidings, Right of Way etc. being the Corporation''s Share of Cost of Land & Other Assets jointly owned with other Companies

3. Includes Rs, 35.28 Crores (2014-2015 : Rs, 35.99 Crores) towards Roads & Culverts, Transformers & Transmission lines, Railway Sidings & Rolling Stock, ownership of which does not vest with the Corporation . The Corporation is having operational control over such assets. These assets are amortised at the rate of depreciation specified in Schedule II of the Companies Act, 2013

4. (a) Includes following assets which are used for distribution of PDS Kerosene under Jana Kalyan Pariyojana against which financial assistance is being provided by OIDB

5. Includes Assets retired from active use and held for disposal - Gross Block: Rs, 177.22 Crores / Net Block: Rs, 37.08 Crores (2014- 2015: Gross Block: Rs, 34.69 Crores/ Net Block: Rs,2.98 Crores). These Assets are valued at their Net Book Value or Net Realisable Value whichever is lower: Rs, 12.01 Crores (2014-2015: Rs, 2.56 Crores)

6. Leasehold Land includes Rs, 26.87 Crores (2014-15: Rs, 25.25 Crores) for land acquired on lease-cum-sale basis from Karnataka Industrial Area Development Board (KIADB) which is capitalized without being amortised over the period of lease. Lease shal be converted into Sale on fulfilment of certain terms and conditions as per allotment letter.

3. During the current financial year 2015-16, ONGC offered discount on prices of crude purchased from them. Accordingly, the Corporation has accounted the discount as under:

(a) Rs, Nil (2014-15: Rs, 1,035.37 crores) discount received on purchase of PDS SKO and Domestic LPG from ONGC and GAIL has been adjusted against Purchases of Stock-in-Trade

(b) Rs, 190.33 crores (2014-15: Rs, 9,826.84 crores) discount received on Crude Oil purchased from ONGC has been adjusted against purchase cost of Crude Oil

4. During the current financial year 2015-16, Subsidy on PDS Kerosene and Domestic Subsidized LPG from Central and State Governments amounting to Rs, 11.77 crores (2014-15:Rs, 684.79 crores) has been accounted

5. Approval of Government of India for Budgetary Support amounting to Rs, 1,761.26 crores (2014-15: Rs, 5,057.94 crores) has been received and the same has been accounted under ''Recovery under Subsidy Schemes''

6. (a) Inter-Oil company transactions are reconciled on a continuous basis. However, year end balances are subject to confirmation/ reconciliation which is not likely to have a material impact.

(b) Customers'' accounts are reconciled on an ongoing basis and such reconciliation is not likely to have a material impact on the outstanding or classification of the accounts

7. The Corporation has on the Balance sheet date, outstanding forward contract amounting to USD 50.27 Million, of which NIL (2014-15 : USD NIL) is to hedge the foreign currency exposure towards loans and USD 50.27 Million i.e. an equivalent of Rs, 333.05 crores (2014-15 : USD NIL) to hedge its foreign currency exposure towards import payable. As at Balance Sheet date, Corporation has interest rate swap contracts for a value of USD 260 Million i.e. an equivalent ofRs, 1,722.57 crores (2014-15: USD 200 Million i.e. an equivalent of Rs, 1,250.10 crores) to cover its floating interest rate exposure to fixed interest rate

Following are the unheeded foreign currency on account of exposures

8. In accordance with the option as per AS - 11 (notified under the Company''s Accounting Standards Rules, 2006) exercised in the year 2008 - 09, the Corporation has adjusted the exchange differences arising on long term foreign currency monetary items to the cost of assets and depreciated over the balance life of the assets. The Corporation has continued to exercise the option during the year 2015-16 as per Ministry of Corporate Affairs'' Notification

9. In accordance with the option exercised by the Company as referred in note # 34, an exchange loss of Rs, 197.14 crores (2014 - 15: Loss of Rs, 63.16 Crores) related to non-depreciable assets is remaining to be amortized over the balance period of loan in "Foreign Currency Monetary Item Translation Difference Account" as at March 31, 2016

10. During the F. Y. 2015-16, corporation do not have any RBI Swap transaction. During the F.Y. 2014-15, the net gain of Rs, 360.71 crore have been recognized and accounted for in the books on RBI swap transactions, out of which Rs, 192.38 crore was realized on account of RBI swap transactions settled during the financial year 2014-15 and Rs, 168.33 Crore on account of reversal of mark to market losses provision provided as on 31.03.2014 on forward contracts taken to hedge the un-matured RBI swap transactions outstanding as on 31.03.2014.

11. Ancillary costs incurred towards raising of Syndicated Loans from Foreign Banks (repayable in foreign currency) is being amortized over the tenure of the loan. Total amount of such ancillary costs remaining unamortized as on the balance sheet date is Rs, 162.35 Crores (2014-15: Rs, 205.94 crores).

12. (a) Current Tax includes MAT Credit utilisation of Rs, 133.61 Crore (2014-15: Rs, 243.15 Crore).

(b) The recognition of MAT Credit Entitlements of Rs, 429.57 Crore as at March 31, 2016 (^ 344.33 Crore as at March 31, 2015) is on the basis of convincing evidence that the Corporation will be able to avail the credit during the period specified in section 115JAAof the Act.

(c) Provision for tax for earlier years written back(net) of Rs, 120.38 Crore (2014-15: Rs, 27.47 Crore) represents reversal of excess provision towards current tax of Rs, 249.75 Crore (2014-15: Rs, 24.71 Crore), additional provision towards deferred Tax of Rs,141.08 Crore (2014-15: Rs, 26.76 Crore) and recognition of MAT credit Entitlements of Rs, 11.71 Crore (2014-15: Rs, 29.53 Crore)

13. Related Party Disclosure:

A. Names of and Relationship with Related Parties

1. Jointly controlled entities

i. HPCL-Mittal Energy Ltd.

i. Hindustan Colas Pvt. Ltd

iii. South Asia LPG Company Pvt. Ltd

iv. Petronet India Ltd

v. HPCL Shapoorji Energy Pvt. Ltd

2. The Company has not included disclosure in respect of following related parties which are State-Controlled Enterprises as per AS - 18.

i. Subsidiaries

1. CREDA-HPCLBiofuelsLtd.

2. HPCL Biofuels Ltd.

3. Prize Petroleum Company Ltd

4. HPCL Rajasthan Refinery Ltd. ii. Jointly controlled entities

1. Mangalore Refinery and Petrochemicals Ltd

2. Aavantika Gas Ltd

3. Bhagyanagar Gas Ltd

4. Petronet MHB Ltd.

5. GSPL India Gasnet Ltd.

6. GSPL India Transco Ltd

7. Mumbai Aviation Fuel Farm facility Pvt. Ltd

3. Key Management Personnel

Smt. Nishi Vasudeva, Chairman and Managing Director (Till 31.03.2016)

Shri Mukesh Kumar Surana, Chairman and Managing Director (w.e.f. 01.04.2016)

ii. Shri K. V. Rao, Director- Finance (Till 30.09.2015)

iii. Shri J. Ramaswamy, Director - Finance (w.e.f. 01.10.2015)

iv. Shri B. K. Namdeo, Director-Refineries

v. Shri Y.K. Gawali, Director - Marketing

vi. Shri Pushp Kumar Joshi, Director - Human Resources

vii. Shri Shrikant Madhukar Bhosekar, Company Secretary

a) The Blocks KK-DWN-2002/2, CY-DWN-2004/1,2,3,4, CY-PR-DWN-2004/1&2, KG-DWN-2004/1,2,3,5,6, MB-OSN-2004/1, MB-OSN-2004/2 & RJ-ONN-2004/1 & 3 are in the process of relinquishment. The audited financial statements for these UJVs have been received up to March 31, 2015. The Company has incorporated the share of the assets, liabilities, income and expenditure based on the unaudited financial statements / data received from operator as on 31st March, 2016

b) The Blocks AAONN-2003/3 and KK-DWN-2002/3 are in the process of relinquishment. The audited financial statements for these UJVs have been received up to March 31, 2011 and March 31, 2012 respectively. The Company has incorporated the share of the assets, liabilities, income and expenditure based on the unaudited financial statements / data received from operator as on 31st March, 2016

c) The block CB-ONN-2002/3 was awarded under NELP IV bidding round and the production sharing contract was signed on 06.02.2004. The exploration Minimum Work Program has been completed. The block is divided into two areas i.e. Mirol and Sanand. Approval of Mining Lease to commence production from Sanand field has been received from Govt, of Gujarat Preparation of addendum to Sanand FDP (Field development plan) for additional discovery in Kalol reservoir is in progress

d) The exploration block MB-OSN-2010/2 has been awarded under NELP IX Bidding Round, Production Sharing Contract (PSC) of the same has been signed on 30/08/2012. 3D seismic data acquisition, Processing & interpretation have been completed Discussion on well location and further course of action is in progress

e) In respect of Cluster - 7, the matter is under arbitration. Please refer Note #55.1

* As of 31st March 2014, paid up equity capital of BGL wasRs, 5 lacs, in which H PC Land GAIL were holding 25% each. Balance 50% of shares were held by Kakinada Seaports Ltd (KSPL) on warehousing basis. In addition, each one of HPCL and GAIL had paid Rs, 22.49 crores as Advance against Equity/ Share application money (totalling to Rs, 44.98 crores) in earlier years. On 20th August 2014, BGL allotted 2,24,87,500 shares on preferential basis to each of HPCL and GAIL towards the money paid earlier. Meanwhile there are certain issues pending adjudication with another shareholder. Accordingly, keeping in view financial prudence, HPCL''s share has been considered at 24.99% (considered as 24.99% in F.Y. 2014-15).

b) In respect of jointly controlled entities, the Corporation''s share of assets, liabilities, income, expenses, contingent liabilities and capital commitments as furnished below on the basis of audited / unaudited financial statements received from these joint venture companies

14. The net worth of HPCL Biofuel Limited, a 100% subsidiary, is partially eroded. The management has considered Rs, 161 Crores as a diminution other than temporary in the value of Investment as per AS - 13 and accordingly, made a provision during F.Y. 2015-16.

15. During the year Corporation has made 100% provision amounting to Rs, 16.10 crores for diminution in value of investment in CREDA HPCL Biofuels Ltd. as all the business activities of the company have been suspended and Financial Statement of the company has not been prepared on a going concern basis

16. During the year, M/s PPIPL, a subsidiary of M/s Prize Petroleum Company Limited (PPCL), has decided to provide for an impairment charge of Rs, 117.27 Crores taking cognizance of low crude and other product prices estimates in near future Accordingly, a provision for diminution other than temporary in value of PPCL''s investment in PPIPL amounting to Rs, 51.47 Crores has been made in the books of M/s PPCL, a 100% subsidiary of the Corporation. In line with above, a provision for diminution, other than temporary in value of HPCL''s investment in M/s PPCL amounting to Rs, 105 Crores has been made in the books of HPCL taking into account accumulated losses and diminution in PPCL''s Investment in PPIPL as per AS-13.

17. As per the guidelines issued by Department of Public Enterprises (DPE) in August, 2005, the Board of Directors of Navratna Public Sector Enterprises (PSEs) can invest in joint ventures and wholly owned subsidiaries subject to an overall ceiling of 30% of the net worth of the PSE. As per company''s understanding, since the subject matter covered in DPE OM dated 5th August 2005 was on the same lines as covered in DPE OM dated 22nd July 1997 except increase in financial limits, the said clarification would apply mutatis mutandis to both the OMs of DPE. Thus, the ceiling of 30% of Net worth of PSE on Investments in all Joint Ventures/Subsidiaries as prescribed in DPE OM dated 5th August 2005 is calculated exclusive of the Investments made through the Directives of the Government.

18. Operating Leases - Assets taken on lease primarily consist of leased land taken for the purpose of setting up retail outlets, depot operations and properties for use by the Corporation. These lease arrangements are normally renewed on expiry of the term Amount of lease rental expenses recognized in the Statement of Profit & Loss is given under Note 27 - ''Other expenses''

19. Considering the Government policies and modalities of compensating the oil marketing companies towards under-recoveries, future cash flows have been worked out based on the desired margins for deciding on impairment of related Cash Generating Units. Since there is no indication of impairment of assets as at Balance Sheet date as per the assessment carried out, no impairment has been considered. In view of assumptions being technical, peculiar to the industry and Government policy, the auditors have relied on the same

20. During the year 2015-16, an amount of Rs, 73.40 Crores (2014-15: Rs, 29.45 Crores) has been charged to revenue towards Enabling Assets on which the Corporation does not have a control

21. Disclosure as required by Regulation 34(3) and 53(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

22. The Corporation has complied with the requirement of para 4 (a) of Notes to Schedule II to the Companies Act, 2013 relating to componentization from 2015-16. Due to the above compliance, the depreciation expense for the period ended March 31, 2016 is increased byRs, 260.88 crores. As provided in para 7 (b) of Schedule II to the Companies Act, 2013, the Corporation has charged Rs, 219.49 crores to Profit & Loss.

23. The Company has considered the ISBL (Inside boundary Limited) pipeline directly associated as an integral part of Plant and Machinery / Tanks and has depreciated such pipelines based on the useful life of respective plants, which is considered as 25 years in line with the Schedule II of the Companies Act, 2013

24. During theyear2015-16, Corporation has spentRs, 71.76 Crores (2014-15 :Rs,34.07 Crores) towards Corporate Social Responsibility (CSR) as against the budget of Rs, 71.67 Crores (2014-15 :Rs,34.03 Crores).

25. : Company has entered into a long term product off take agreement with M/s HPCL- Mittal Energy Limited (HMEL), its joint venture company, for purchase of petroleum products produced by the refinery. This agreement has a take or pay clause and the Company is committed to purchase the said petroleum products over the tenure of the agreement

26. : The Company and Mittal Energy Investment Pte. Ltd. (its joint venture partner in HPCL-Mittal Energy Limited) have committed that they would jointly hold at least 51 % of share capital of HPCL-Mittal Energy Limited till the repayment of certain bank loans / bonds

27. : A claim of Rs, 241.92 crores (36.51 Million USD @ Exchange rate of 1 US$ = Rs, 66.2525), claim by M3nergy on termination of service contract of Cluster - 7 field, which was awarded by ONGC to the consortium of M3nergy (Malaysia) BHD (30%), Prize Petroleum Company Limited (10%) and HPCL (60%). HPCL and Prize Petroleum has also initiated arbitration proceedings against M3nergy. The share of the claim of the company is Rs, 889.71 crores with loss of profit and other expenses etc. Arbitration was bifurcated into two aspects one is liability and the other is quantification. Liability aspects have been held in favour of Corporation and by an interim award by Hon''ble Arbitral Tribunal, which has been challenged by M3nergy in Bombay High Court. Quantification aspect is being looked into by Arbitral Tribunal. This amount is not included above

28. Employee Benefits

(A) Provident Fund

The Company has Provident Fund maintained by PF Trust. During the year, Company has conducted Actuarial Valuation of PF Trust. As per Actuarial Valuation, PF Trust does not have any deficit as on 31st March 2016. Accordingly, other related disclosures in respect of Provident Fund have not been made During the year, the company has recognised Rs, 120.46 crore (2014-15 : Rs, 114.68 crore) as Employer''s contribution to Provident Fund in the Statement of Profit and Loss

(B) Superannuation Fund

The company has Superannuating Scheme - Defined Contribution Scheme maintained by SBFS trust wherein Company contributes a certain percentage every month out of 30% of Basic plus DA ( in accordance with DPE guidelines ) to the credit of individual employee accounts maintained with LIC.

During the year, the company has recognised Rs, 178.34 crore ( 2014-15 : Rs, 144.84 crore) as Employer''s contribution to Superannuation Fund in the statement of Profit and Loss

Foot Notes :

1 Leave Encashment: All employees are entitled to avail earned leave and sick leave during the service period and the same can be encashed on superannuation, resignation, termination or by nominee on death. Further, the accumulated earned leave can also be encased during the service period. The contribution for increase in actuarial liability as of March 31, 2016 over March 31, 2015 towards leave encashment is funded to LIC. As per the practice followed, the payment made to employees during the year to the extent of Rs, 174.39 crores is not claimed from LIC, hence, benefit paid during the year is shown as "NIL" in the above table. Total expenses recognised in Profit & Loss Account of this benefit is Rs, (77.26) crores (i.e. provision of Rs, 15.29 crores towards decrease in liability and interest earned from LIC is Rs, 61.97 crores)

2 Gratuity : All employees are entitled to receive gratuity as per the provisions of Payment of Gratuity Act, 1972

3 Pension : The employees covered by the Pension Plan of the Corporation are entitled to receive monthly pension for life

4 Post Retirement Medical Benefit : The serving and superannuated employees are covered under medical insurance policy taken by Corporation. It provides reimbursement of medical expenses for self and dependents as per the terms of the policy.

5 Long Service Awards : The Board in its 587th meeting held on Feb 12,2016 has approved the modified scheme for Long Service Awards to its employees in the form of memento/emblem/cash on completion of specified length of service and superannuation

6 Ex-qratia : The ex-employees of Corporation covered under the Scheme are entitled to get ex-gratia based on the grade at the time of their retirement. The benefit will be paid to eligible employees till their survival, and after that, till the survival of their spouse

7 Death Benefits : The families of deceased employees are paid at a specified percentage of last drawn salary till the notiona date of retirement age under the provisions of Superannuation Benefit Fund Scheme

8 Resettlement Allowance : At the time of retirement, the employees are allowed to permanently settle down at a place other than the location of the last posting

9 The fair value of the assets of Provident Fund Trust as of balance sheet date is greater than the obligation, including interest, and also the returns on these plan assets including the amount already provided are sufficient to take care of PF interest obligations, over and above the fixed contribution recognized

29. Figures in italics represent last year figures

58 During the year, due to completion of tenure of one of the Independent Directors, the number of Independent Directors in the Board is reduced to one, which is less than the minimum number of Independent Directors required in terms of the provisions of the Listing Agreement and the Companies Act, 2013. The Company has approached the administrative ministry for appointment of requisite number of Directors for compliance of the provisions of the Listing Agreement and the Companies Act, 2013 and the same is awaited. Pending such appointment, the financial results have been reviewed and recommended to the Board by the reconstituted Audit Committee consisting of one Independent Director.

30. Previous year''s figures are reclassified / regrouped wherever necessary.


Mar 31, 2015

1.1 Debentures

The Company has issued the following Secured Redeemable Non-convertible Debentures:

i. 8.77% Non-Convertible Debentures were issued on 13th March, 2013 with the maturity date of 13th of March, 2018. These are secured by mortgage, on first pari passu charge basis, by way of a Registered Debenture Trust Deed over immovable property of the company being undivided share of land with the entire First Floor in the building High Street 1, situated at Ahmedabad and the first charge of fixed assets mainly certain Plant and Machinery at Visakh Refinery.

ii. 8.75% Non-Convertible Debentures were issued on 9th November, 2012 with the maturity date of 9th of November, 2015. These are secured by mortgage, on first pari passu charge basis, by way of a Registered Debenture Trust Deed over immovable property of the company being undivided share of land with the entire First Floor in the building High Street 1, situated at Ahmedabad and the first charge of fixed assets mainly certain Plant and Machinery at Mumbai Refinery.

During the year ended March, 2015 an amount of Rs. 545.00 crores (March, 2014 Rs. Nil) of 8.75% Non-Convertible Debentures is repayable within one year and shown in note # 10 A.

1.2 Term Loan from Oil Industry Development Board

During the year 2014 - 15 security has been created with first charge on the facilities of Awa Salawas Pipeline, Manglore Hasan Mysore LPG Pipeline, Uran - Chakan / Shikarpur LPG Pipeline & Rewari Project Pipeline. Rs. 34.50 Crores (2013 - 14 : Nil) is repayble within 1 year and the same has been shown as "Current Maturity of Long Term Debts" under Note # 10 A.

1.3 Syndicated Loans from Foreign Banks (repayable in foreign currency)

The Company has availed Long Term Foreign Currency Syndicated Loans from banks on floating LIBOR. These loans are taken for the period of 3 - 5 years. Rs. 2,500.20 Crores (2013 - 14 : Rs. Nil) is repayble within 1 year and the same has been shown as "Current Maturity of Long Term Debts" under Note # 10 A.

2A.1 : This includes loans repayable withing one year: Syndicated Loans from Foreign Banks (repayable in foreign currency) Rs. 2,500.20 Crores (2013 - 14: Rs. Nil), 8.75% Non - Convertible Debenture Rs. 545.00 Crores (2013 - 14: Rs. Nil), and Loan from Oil Industry and Development Board Rs. 234.50 Crores (2013 - 14: Rs. 234.50 Crores). In line with Section 71 of Companies Act 2013 read with rules, the Company has earmarked 8.20% Oil Marketing Companies GOI Special Bonds 2024 of Market value of Rs. 81.75 crores being 15% of the total value of Rs. 545 crores maturing in the next financial year.

2A.2 : To the extent Micro and Small Enterprises have been identified, the outstanding balance, including interest thereon, if any, as at Balance Sheet date is disclosed on which Auditors have relied upon. (Refer note # 39).

2A.3 : No amount is due as at the end of the year for credit to Investors'' Education and Protection Fund.

2A.4 : Includes Statutory Liabilities of Rs. 2,635.81 Crores (2013 - 14: Rs. 2,518.81 Crores), Liabilities towards Forward Exchange Contracts of Rs. Nil (2013 - 14: Rs. 386.40 Crores), Liabilities relating to retention money payable to Suppliers within one year, Supplies / Project related payables, etc. Rs. 3,743.03 Crores (2013 - 14: Rs. 2,821.93 Crores).

3.1: Rs. 2,750 Crores bonds pledged with Clearing Corporation of India Limited against CBLO Loan.

3.2: In line with Section 71 of Companies Act 2013 read with rules, the Company has earmarked 8.20% Oil Marketing Companies GOI Special Bonds 2024 of Carrying value of Rs. 81.75 crores being 15% of the total value of Rs. 545 crores maturing in the next financial year.

4. During the current financial year 2014-15, ONGC and GAIL offered discount on prices of crude, PDS SKO and Domestic LPG purchased from them. Accordingly, the Corporation has accounted the discount as under:

(a) Rs. 1,035.37 Crores (2013-14: Rs. 1,815.55 crores) discount received on purchase of PDS SKO and Domestic LPG from ONGC and GAIL has been adjusted against Purchases of Stock-in-Trade.

(b) Rs. 9,826.84 crores (2013-14: Rs. 14,955.22 crores) discount received on Crude Oil purchased from ONGC has been adjusted against purchase cost of Crude Oil.

5. During the current financial year 2014-15, Subsidy on PDS Kerosene and Domestic Subsidized LPG from central and state governments amounting to Rs. 684.79 crores (2013 - 14: Rs. 744.08 crores) has been accounted.

6. Approval of Government of India for Budgetary Support amounting to Rs. 5,057.94 crores (2013-14: Rs. 15,215.45 crores), has been received and the same have been accounted under ''Recovery under Subsidy Schemes''.

7. (a) Inter-Oil company transactions are reconciled on a continuous basis. However, year end balances are subject to confirmation/reconciliation which is not likely to have a material impact.

(b) Customers'' accounts are reconciled on an ongoing basis and such reconciliation is not likely to have a material impact on the outstanding or classification of the accounts.

8. The Corporation has NIL (2013-14 : USD 1,388.50 Million i.e. an equivalent of Rs. 8,320 crores) foreign exchange hedging contracts, as at the Balance Sheet date, to hedge its foreign currency exposure towards loans/export earnings. The Corporation normally does not hedge the foreign currency exposure in respect of crude/product payments and export earning which is due for payment generally within 30 to 90 days. Exposures not hedged as of Balance Sheet date amounted to USD 460.16 Million i.e. an equivalent of Rs. 2,876.22 crores (2013-14: USD 1,062.68 Million i.e. an equivalent of Rs. 6,367.59 crores) towards purchase of Crude & Products, USD 23.32 Million i.e. an equivalent of Rs. 145.77 crores (2013-14: USD 35.16 Million i.e. an equivalent of Rs. 210.69 crores ) towards export earnings and USD 2,565 Million i.e. an equivalent of Rs. 16,032.53 crores (2013-14: USD 3,051.50 Million i.e. an equivalent of Rs. 18,284.59 crores) in respect of loans taken. As at Balance Sheet date, Corporation has interest rate swap contracts for a value of USD 200 Million i.e. an equivalent of Rs. 1,250 crores (2013-14: USD 200 Million i.e. an equivalent of Rs. 1,198 crores) to cover its floating interest rate exposure to fixed interest rate.

9. In accordance with the option as per AS – 11 (notified under the Company''s Accounting Standards Rules, 2006) exercised in the year 2008 – 09, the Corporation has adjusted the exchange differences arising on long term foreign currency monetary items to the cost of assets and depreciated over the balance life of the assets. The Corporation has continued to exercise the option during the year 2014-15 as per Ministry of Corporate Affairs'' Notification.

10. In accordance with the option exercised by the Company as referred in note # 34, an amount loss of Rs. 63.16 crores (2013 - 14: Gain of Rs. 161.58 Crores) related to non-depreciable assets is remaining to be amortized over the balance period of loan in "Foreign Currency Monetary Item Translation Difference Account" as at March 31, 2015.

11. During the financial year 2013-14, Reserve Bank of India had introduced forex swap window for meeting the daily US dollar requirement of public sector oil marketing companies. Under the special window, total RBI swap window transactions entered during financial year 2013-14 were USD 1,444 Million (i.e. an equivalent of Rs. 9,443.54 crores), out of which USD 491 Million (i.e. an equivalent of Rs. 3,287.41 crores) were settled during financial year 2013-14 and balance USD 953 Million (i.e. an equivalent of Rs. 6,156.13 crores) got settled during financial year 2014-15. Corporation had fully hedged entire swap transactions in the Financial Year 2013-14 itself.

The net gain of Rs. 360.71 crore have been recognized and accounted for in the books on RBI swap transactions during the financial year 2014-15, out of which Rs. 192.38 crore was realized on account of RBI swap transactions settled during the financial year 2014-15 and Rs. 168.33 Crore on account of reversal of mark to market losses provision provided as on 31.03.2014 on forward contracts taken to hedge the un-matured RBI swap transactions outstanding as on 31.03.2014.

12. Ancillary costs incurred towards raising of Syndicated Loans from Foreign Banks (repayable in foreign currency) is being amortized over the tenure of the loan. Total amount of such ancillary costs remaining unamortized as on the balance sheet date is Rs. 205.94 Crores (2013-14: Rs. 224.43 crores).

13. (a) Current Tax includes MAT Credit utilisation of Rs. 243.15 Crore (2013-14: Rs. 10.68 Crore).

(b) The recognition of MAT Credit Entitlements of Rs. 344.33 Crore as at March 31, 2015 ( Rs. 568.44 Crore as at March 31, 2014) is on the basis of convincing evidence that the Corporation will be able to avail the credit during the period specified in section 115JAA of the Act.

(c) Provision for tax for earlier years written back (net) of Rs. 27.47 Crore (2013-14: Provided Rs. 19.82 Crore) represents reversal of excess provision towards current tax of Rs. 24.71 Crore (2013-14: Rs. 2.53 Crore), additional provision towards deferred Tax of Rs. 26.76 Crore (2013-14: Rs. 192.33 Crore) and recognition of MAT credit Entitlements of Rs. 29.53 Crore (2013-14: Rs. 169.99 Crore)

14. RELATED PARTY DISCLOSURE:

A. Names of and Relationship with Related Parties

1. Jointly controlled entities

i. HPCL-Mittal Energy Ltd.

ii. Hindustan Colas Ltd.

iii. South Asia LPG Company Pvt. Ltd.

iv. Petronet India Ltd.

v. HPCL Shapoorji Energy Ltd.

2. Key Management Personnel

i. Smt. Nishi Vasudeva, Chairman and Managing Director.

ii. Shri K. V. Rao, Director - Finance.

iii. Shri B. K. Namdeo, Director – Refineries

iv. Shri Y. K. Gawali, Director - Marketing (w.e.f. 10-10-2014).

v. Shri Pushp Kumar Joshi, Director - Human Resources

vi. Shri Shrikant Madhukar Bhosekar, Company Secretary

3. The Company has not included disclosure in respect of following State-Controlled Enterprises as per AS – 18.

i. Subsidiaries

1. CREDA-HPCL Biofuels Ltd.

2. HPCL Biofuels Ltd.

3. Prize Petroleum Company Ltd.

4. HPCL Rajasthan Refinery Ltd.

ii. Jointly controlled entities

1. Mangalore Refinery and Petrochemicals Ltd.

2. Aavantika Gas Ltd.

3. Bhagyanagar Gas Ltd.

4. Petronet MHB Ltd.

5. GSPL India Gasnet Ltd.

6. GSPL India Transco Ltd.

7. Mumbai Aviation Fuel Farm facility Ltd. (w.e.f. 20-10-2014)

15. Operating Leases - Assets taken on lease primarily consist of leased land taken for the purpose of setting up retail outlets, depot operations and properties for use by the Corporation. These lease arrangements are normally renewed on expiry of the term. Amount of lease rental expenses recognized in the Statement of Profit & Loss is given under Note 27 - ''Other expenses''.

16. Considering the Government policies and modalities of compensating the oil marketing companies towards under- recoveries, future cash flows have been worked out based on the desired margins for deciding on impairment of related Cash Generating Units. Since there is no indication of impairment of assets as at Balance Sheet date as per the assessment carried out, no impairment has been considered. In view of assumptions being technical, peculiar to the industry and Government policy, the auditors have relied on the same.

17. During the year 2014-15, an amount of Rs. 29.45 Crores (2013-14: Rs. 12.82 Crores) has been charged to revenue towards Enabling Assets on which the Corporation does not have a control.

18. Disclosure as required by Clause 32 of Listing Agreement

19. The net worth of HPCL Biofuel Limited, a 100% subsidiary, which is in nascent stage of operation, is partially eroded. Government of India has recently announced measures to improve the price sentiments relating to sugar. These include increase in the import duty on sugar and removal of excise duty on Ethanol produced from molasses generated during the next sugar session and supplied for ethanol blending. Based on these announcements and also considering the fact that these mills, have now stabilized, the Corporation expects improvement in the operation of this subsidiary. Having regard to the said facts, being the long term and strategic nature of the investment and continuous support of the Corporation, the diminution in value is considered temporary. Hence no provision has been made.

20. The net worth of M/s Prize Petroleum Company Limited (PPCL), a 100% subsidiary, is partially eroded. Though, PPCL on a standalone basis has reported a net profit of Rs. 2.08 crores during the financial year 2014-15, its wholly owned subsidiary M/s Prize Petroleum International Pte. Limited Singapore (PPIPL), has reported a loss. M/s PPIPL was incorporated in January 2014 and has acquired minority stake in two E&P assets in Australia (Yolla producing field and Trefoil discovered field), the deal for which was completed in November. 2014. The profitability of M/s PPIPL was adversely affected due to fall in crude prices in the international market. Further, as per the planned development program, two additional development wells are being drilled necessitating shut down of the current facility for some time, which has also affected the profitability of M/s PPIPL. Having regard to the above facts, the diminution in value is considered temporary in nature and hence not provided.

21. M/s HPCL Mittal Energy Limited (HMEL), a Joint Venture entity, started its refining operation in the year 2012 and had incurred losses in the initial years of operation resulting in partial erosion of net worth. The investment is long term and strategic in nature and has long gestation period. During June, 2014 there was a fire incident at one of the unit in the refinery and the refinery was shut down for about three months. Post re-commencement of the refinery, the operations have stabilized and the yield of high value products has improved. Having regard to the above facts, the diminution in value is considered temporary in nature and hence not provided.

22. As per the guidelines issued by Department of Public Enterprises (DPE) in August, 2005, the Board of Directors of Navratna Public Sector Enterprises (PSEs) can invest in joint ventures and wholly owned subsidiaries subject to an overall ceiling of 30% of the net worth of the PSE. The company has requested Ministry of Petroleum & Natural Gas (MOP&NG) to confirm its understanding that for calculating this ceiling limit, the amount of investments specifically approved by Government of India (i.e. investment in HMEL and HPCL Rajasthan Refinery Limited) are to be excluded. The reply from MOP&NG is awaited. Pending such clarification, the Company has calculated the limit of 30% by excluding the investments specifically approved by Govt. of India. During the year investments / commitments in Joint Ventures and Subsidiaries as per note 14 have increased by Rs. 131.69 crores, during the current year (2013 – 14: Rs. 969.76 Crores).

23. Due to the revised useful lives, the depreciation expense for the year ended March 31, 2015 is reduced by Rs. 499.16 crores As per the transitional provisions of Schedule II of the Companies Act, 2013, the Company has transferred Rs. 499.52 crores (net of Tax of Rs. 264.36 crores) to retained earnings as at April 1, 2014.

24. In line with the Notification dated August 29, 2014 issued by Ministry of Corporate Affairs (MCA), the Company will comply with the requirements of paragraph 4(a) of Notes to Schedule II of Companies Act, 2013, relating to componentization, from financial year 2015-16.

25. The Company has considered the ISBL (Inside boundary Limited) pipeline directly associated as an integral part of Plant and Machinery / Tanks and has depreciated such pipelines based on the useful life of respective plants, which is considered as 25 years in line with The Schedule II of the Companies Act, 2013.

26. During the year 2014 – 15, Corporation has spent Rs. 34.07 Crores in towards Corporate Social Responsibility (CSR) as against the budget of Rs. 34.03 crores.

Rs. /Crores

2014-15 2013-14

27 Contingent Liabilities and Commitments

I. Contingent Liabilities

A. No provision has been made in the accounts in respect of the following disputed demands/claims since they are subject to appeals/representations filed by the Corporation

i. Income Tax 75.74 75.80

ii. Sales Tax/Octroi 2,483.43 4,419.81

iii. Excise/Customs 324.84 424.57

iv. Land Rentals & Licence Fees 181.83 224.45

v. Others 111.28 134.16

3,177.11 5,278.80

B Contingent Liabilities not provided for in respect of appeals filed against the Corporation

i. Sales Tax/Octroi - 7.33

ii. Excise/Customs - 34.11

iii. Employee Benefits/Demands (to the extent quantifiable) 362.71 367.34

iv. Claims against the Corporation not acknowledged as Debts 400.62 375.49 (refer note 55.1)

v. Others 300.38 286.84

1,063.71 1,071.09

C Guarantees given 158.28 79.27

158.28 79.27

27.1: A claim of Rs. 228.23 crores, claim by M3nergy on termination of service contract of Cluster - 7 field, which was awarded by ONGC to the consortium of M3nergy (Malaysia) BHD (30%), Prize Petroleum Company Limited (10%) and HPCL (60%). HPCL and Prize Petroleum has also initiated arbitration proceedings against M3nergy. The share of the claim of the company is Rs. 441 crores with interest towards loss of profit and other expenses etc. Arbitration was bifurcated into two aspects one is liability and the other is quantification. Liability aspects have been held in favour of Corporation and by an interim award by Hon''ble Arbitral Tribunal, which has been challenged by M3nergy in Bombay High Court. Quantification aspect is being looked into by Arbitral Tribunal. The above amount is not included above.

27.2: Company has entered into a long term product off take agreement with M/s HPCL- Mittal Energy Limited (HMEL), its joint venture company, for purchase of petroleum products produced by the refinery. This agreement has a take or pay clause and the Company is committed to purchase the said petroleum products over the tenure of the agreement.

27.3: The Company and Mittal Energy Investment Pte. Ltd. (its joint venture partner in HPCL-Mittal Energy Limited) have committed that they would jointly hold at least 51 % of share capital of HPCL-Mittal Energy Limited till the repayment of certain bank loans / bonds.

28. EMPLOYEE BENEFITS

(A) Provident Fund

The Company has Provident Fund maintained by PF Trust. During the year, Company has conducted Actuarial Valuation of PF Trust. As per Actuarial Valuation, PF Trust does not have any deficit as on 31st March, 2015. Accordingly, other related disclosures in respect of Provident Fund have not been made.

During the year, the company has recognised Rs. 114.68 crore (2013-14 : Rs. 107.66 crore) as Employer''s contribution to Provident Fund in the Statement of Profit and Loss.

29. Subsequent to the date of the Balance Sheet, due to completion of tenure of some of the Independent Directors, the number of Independent Directors in the Board is reduced to one, which is less than the minimum number of Independent Directors required in terms of the provisions of the Listing Agreement and the Companies Act, 2013. The Company has approached the administrative ministry for appointment of requisite number of Directors for compliance of the provisions of the Listing Agreement and the Companies Act, 2013 and the same is awaited. Pending such appointment, the financial results have been reviewed and recommended to the Board by the reconstituted Audit Committee consisting of one Independent Director.

30. Previous year''s figures are reclassified / regrouped wherever necessary.


Mar 31, 2014

1. During the current financial year 2013-14, ONGC and GAIL offered discount on prices of crude, PDS SKO and Domestic LPG purchased from them. Accordingly, the Corporation has accounted the discount as under:

(a) Rs. 1,815.55 Crores (2012-13: Rs. 1,587.82 Crores) discount received on purchase of PDS SKO and Domestic LPG from ONGC and GAIL has been adjusted against Purchases of Stock-in-Trade.

(b) Rs. 14,955.22 Crores (2012-13: Rs. 9,600.71 Crores) discount received on Crude Oil purchased from ONGC has been adjusted against purchase cost of Crude Oil.

2. In principle approval of Government of India for Budgetary Support amounting to Rs. 15,215.45 Crores (2012-13: Rs. 24,825.28 Crores), has been received and the same have been accounted under ''Recovery under Subsidy Schemes''.

3. (a) Inter-Oil company transactions are reconciled on a continuous basis. However, year end balances are subject to confirmation/reconciliation.

(b) Customers'' accounts are reconciled on an ongoing basis and such reconciliation is not likely to have a material impact on the outstanding or classification of the accounts.

4. The Corporation has, as at the Balance Sheet date, entered into foreign exchange hedging contracts amounting to USD 138.85 Crores (2012-13 : USD 246.90 Crores) to hedge its foreign currency exposure towards loans/ export earnings. The Corporation normally does not hedge the foreign currency exposure in respect of payment for crude/product which is due for payment generally within 30 to 90 days. Exposures not hedged as of Balance Sheet date amounted to USD 106.27 Crores (2012-13: USD 103.70 Crores) towards purchase of Crude & Products and USD 305.15 Crores (2012-13: USD 242.60 Crores) in respect of loans taken. As at Balance Sheet date, Corporation has interest rate swap contracts for a value of USD 20 Crores (2012-13: USD 16 Crores) to cover its floating interest rate exposure to fixed interest rate. Forward contract of USD 95.30 Crores are outstanding as at the year end to hedge the RBI swap transactions referred in note # 35 later.

5. In accordance with the option as per AS – 11 (notified under the Company''s Accounting Standards Rules, 2006) exercised in the year 2008 – 09, the Corporation has adjusted the exchange differences arising on long term foreign currency monetary items to the cost of assets and depreciated over the balance life of the assets. The Corporation has continued to exercise the option during the year 2013-14 as per Ministry of Corporate Affairs'' Notification.

6. In accordance with the option exercised by the Company as referred in note # 33, an amount (gain) of Rs. 161.58 Crores (2012 - 13: loss of Rs. 4.66 Crores) related to non-depreciable assets is remaining to be amortized over the balance period of loan in "Foreign Currency Monetary Item Translation Difference Account" as at March 31, 2014.

7. During the financial year 2013-14, Reserve Bank of India had introduced forex swap window for meeting the daily US dollar requirement of public sector oil marketing companies. The net realized gain (including premium paid/ received) of Rs. 147.74 Crores on the RBI Swap transactions and the forward contracts taken to hedge the same, which have matured during the financial year 2013-14 have been recognized and accounted for in the books.

The un-matured RBI Swap Transactions (which are in the nature of firm commitments) are mark to market at the year end and resultant unrealized gain of Rs. 192.73 Crores is not recognized on ground of prudence. The forward contracts taken to hedge the un-matured RBI swap transactions and open at year end are also mark to market and the resultant loss of Rs. 168.33 Crores is recognized. This treatment is in line with the March 29, 2008 announcement of Institute of Chartered Accountants of India.

8. During the previous financial year, the premium on forward exchange contracts entered into to hedge the liability towards Syndicated Loans from Foreign Banks (repayable in foreign currency) had been considered as borrowing costs as per AS 16. Accordingly, an amount of Rs. 64.82 crores had been capitalized and an amount of Rs. 55.90 Crores (net of depreciation) had been disclosed as "Prior Period Expenses/(Income)".

During the current financial year, based on the opinion of Expert Advisory Committee of ICAI, the Corporation has decapitalized the said premium of Rs. 64.82 Crores and an amount of Rs. 52.43 Crores (net of depreciation) has been disclosed as "Prior Period Expenses/(Income)".

9. Ancillary costs incurred towards raising of Syndicated Loans from Foreign Banks (repayable in foreign currency) is being amortized over the tenure of the loan. Total amount of such ancillary costs remaining unamortized as on the balance sheet date is Rs. 224.28 Crores (2012-13 : Rs. 118.87 Crores).

10. During the current year, investments in "6.90% Oil Marketing Companies'' GOI Special Bonds 2026" amounting to Rs. 3,500.00 crores have been reclassified from ''Long Term Investments'' to ''Current Investments'' to improve flexibility in liquidity. Consequently, an amount of Rs. 583.18 Crores has been provided in the books of accounts towards diminution in the value for this investment.

11. (a) Current Tax includes MAT Credit availment of Rs. 10.68 Crores (2012-13: Nil).

(b) The recognition of MAT Credit Entitlements of Rs. 568.44 Crore as at March 31, 2014 (Rs. 406.85 Crores as at March 31, 2013) is on the basis of convincing evidence that the Corporation will be able to avail the credit during the period specified in section 115JAA of the Act.

(c) Provision for tax for earlier years (written back) / provided of Rs. 19.82 Crores (2012 – 13: written back Rs. 60.62 Crores) represents additional provision of Rs. 192.33 Crores (2012 – 13: Rs. 72.12 Crores) towards deferred tax, recognition of MAT Credit Entitlements of Rs. (169.99 crores) (2012 – 13: Rs. (24.89 Crores) and reversal of excess provision of Rs. (2.53 Crores) (2012 – 13: Rs. (107.85 Crores).

12. Related Party disclosure:

(A) Names of and Relationship with Related Parties

1. Joint Venture Companies

a. HPCL-Mittal Energy Ltd.

b. Hindustan Colas Ltd.

c. South Asia LPG Company Pvt. Ltd.

d. Petronet India Ltd.

e. Aavantika Gas Ltd.

f. HPCL Shapoorji Energy Limited (w.e.f 27-03-2014)

2. Key Management Personnel

a. Smt. Nishi Vasudeva, Chairman and Managing Director (w.e.f 1-3-2014).

b. Shri S. Roy Choudhury, Chairman and Managing Director (up to 28-2-2014).

c. Shri B. Mukherjee, Director - Finance (up to 31-5-2013).

d. Shri K. V. Rao, Director - Finance (w.e.f. 1-6-2013).

e. Shri K. Murali, Director - Refineries (up to 30-6- 2013).

f. Shri B K Namdeo, Director - Refineries (w.e.f. 1-7- 2013).

g. Smt. Nishi Vasudeva, Director - Marketing (up to 28-2-2014).

h. Shri Pushp Kumar Joshi, Director - Human Resources

The above disclosure does not include following Related Parties for which no disclosure is required as they are State-Controlled Enterprises as per AS - 18.

1. Subsidiaries

a. CREDA-HPCL Biofuels Ltd.

b. HPCL Biofuels Ltd.

c. Prize Petroleum Company Ltd.

d. HPCL Rajasthan Refinery Ltd. (w.e.f 25-03-2014)

2. Joint Venture Companies

a. Mangalore Refinery and Petrochemicals Ltd.

b. Petronet MHB Ltd.

c. Bhagyanagar Gas Ltd.

d. GSPL India Gasnet Ltd. (w.e.f 4-7-2012)

e. GSPL India Transco Ltd. (w.e.f 4-7-2012)

13. Operating Leases - Assets taken on lease primarily consist of leased land taken for the purpose of setting up retail outlets, depot operations and properties for use by the Corporation. These lease arrangements are normally renewed on expiry of the term. Amount of lease rental expenses recognized in the Statement of Profit & Loss is given under Note 23 - ''Other expenses''.

14. Considering the Government policies and modalities of compensating the oil marketing companies towards under- recoveries, future cash flows have been worked out based on the desired margins for deciding on impairment of related Cash Generating Units. Since there is no indication of impairment of assets as at Balance Sheet date as per the assessment carried out, no impairment has been considered. In view of assumptions being technical, peculiar to the industry and Government policy, the auditors have relied on the same.

15. During the year 2013-14, an amount of Rs. 12.82 Crores (2012-13: Rs. 8.11 Crores) has been charged to revenue towards Enabling Assets on which the Corporation does not have a control.

16. Disclosure as required by Clause 32 of Listing Agreement

17. During the financial year 2013 - 14, bridge loan (along with accrued interest) totaling to Rs. 419.65 crores given to HPCL Biofuels Ltd., a subsidiary company, has been converted into 41,96,51,511 ''Non-cumulative 14 years Redeemable Preference Shares'' of Rs. 10 each bearing 5% dividend.

The net worth of said subsidiary company, which is in nascent stage of operation, is partially eroded. Based on the current price trends of Ethanol and withdrawal of levy sugar mechanism the Corporation expect improvements in the operation of the subsidiary. Having regard to the said facts, the long terms and strategy nature of investment, conversion of loan into Non-Cumulative Preference Share and continuing support of the Corporation, the diminution in value is considered temporary in nature and hence not provided.

18. The company has investment in Joint Venture entity, viz. Hindustan Mittal Energy Limited, which has set up a Petroleum Refinery at Bathinda and supplies major part of its production to Corporation. The refinery has started operation in the year 2012 and had incurred losses in the initial years of operation resulting in partial erosion of net worth. The investment is long term and strategic in nature and has long gestation period. The operation of refinery is expected to stabilize in near future. Having regard to the above facts, the diminution in value is considered temporary in nature and hence not provided.

19. The Employee cost for the previous year 2012-13 includedRs. 813 Crores towards implementation of Long Term Settlement of Non-management employees and Superannuation Benefits for all the employees finalized during the said year, including for the past periods.

20. During the year, there was an instance of fire in Cooling Water Tower Area in Visakh Refinery. The Company has incurred an expenses of Rs. 31.38 Crores towards reconstruction / compensation. Insurance claims are under process and will be recognized on acceptance.

Rs. / Crores

2013-14 2012-13

21. Contingent Liabilities and Commitments

I. Contingent Liabilities

A. No provision has been made in the accounts in respect of the following disputed demands /claims since they are subject to appeals/ representations filed by the Corporation

i. Income Tax 75.80 87.60

ii. Sales Tax/Octroi 4,419.81 4,260.21

iii. Excise/Customs 424.57 377.24

iv. Land Rentals & Licence Fees 224.45 98.90

v. Others 134.16 125.99

5,278.80 4,949.94

B. Contingent Liabilities not provided for in respect of appeals filed against the Corporation

i. Sales Tax/Octroi 7.33 7.33

ii. Excise/Customs 34.11 25.96

iii. Employee Benefits/Demands (to the extent quantifiable) 367.34 183.44

iv. Claims against the Corporation not acknowledged as Debts 375.49 316.89

v. Others 286.84 267.78

1,071.09 801.39

C. Guarantees given 79.27 54.91

79.27 54.91


Mar 31, 2013

1. BASIS OF PREPARATION

The financial statements are prepared under historical cost convention in accordance with Generally Accepted Accounting Principles (GAAP), Accounting Standards referred to in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government and the relevant provisions of the Companies Act, 1956. All income and expenditure having material bearing are recognised on accrual basis, except where otherwise stated. Necessary estimates and assumptions of income and expenditure are made during the reporting period and difference between the actual and the estimates are recognised in the period in which the results materialise.

2. During the current financial year 2012-13, ONGC and GAIL offered discount on prices of crude, PDS SKO and Domestic LPG purchased from them. Accordingly, the Corporation has accounted the discount as under:

(a) Rs. 1,587.82 Crores (2011-12: Rs. 1,868.12 Crores) discount received on purchase of PDS SKO and Domestic LPG from ONGC and GAIL has been adjusted against Purchases of Stock-in-Trade.

(b) Rs. 9,600.71 Crores (2011-12: Rs. 10,211.63 Crores) discount received on Crude Oil purchased from ONGC has been adjusted against purchase cost of Crude Oil.

3. In principle approval of Government of India for Budgetary Support amounting to Rs. 24,825.28 Crores (2011-12: Rs. 18,342.77 Crores), has been received and the same have been accounted under ''Recovery under Subsidy Schemes''.

4. (a) Inter-Oil company transactions are reconciled on a continuous basis. However, year end balances are subject to confirmation/reconciliation.

(b) Customers'' accounts are reconciled on an ongoing basis and such reconciliation is not likely to have a material impact on the outstanding or classification of the accounts.

5. The Corporation has, as at the Balance Sheet date, entered into foreign exchange hedging contracts amounting to USD 246.90 Crores (2011-12 : USD 194.58 Crores) to hedge its foreign currency exposure towards loans/ export earnings. The Corporation normally does not hedge the foreign currency exposure in respect of payment for crude/product which is due for payment generally within 30 to 90 days. Exposures not hedged as of Balance Sheet date amounted to USD 103.70 Crores (2011-12: USD 138.38 Crores) towards purchase of Crude & Products and USD 242.60 Crores (2011-12: USD 219.97 Crores) in respect of loans taken. As at Balance Sheet date, Corporation has interest rate swap contracts for a value of USD 16 Crores (2011-12: JPY 1,050 Crores) to cover its floating interest rate exposure to fixed interest rate.

6. In accordance with the option as per AS - 11 (notified under the Company''s Accounting Standards Rules, 2006) exercised in the year 2008 - 09, the Corporation has adjusted the exchange differences arising on long term foreign currency monetary items to the cost of assets and depreciated over the balance life of the assets. The Corporation has continued to exercise the option during the year 2012-13 as per Ministry of Corporate Affairs'' Notification.

7. In accordance with the option exercised by the company as referred in note # 33, an amount of Rs. 4.66 Crores related to non-depreciable assets is remaining to be amortized over the balance period of loan in "Foreign Currency Monetary Item Translation Difference Account" as at March 31st, 2013.

8. Exchange differences arising from Syndicated Loans from Foreign Banks (repayable in foreign currency) taken for acquisition of fixed assets, to the extent that they were regarded as an adjustment to interest cost, were being treated as finance costs in line with the guidance issued by MCA during May 2009. During the year and pursuant to clarification dated 9th August 2012 by MCA, such exchange differences pertaining to all the Syndicated Loans from Foreign Banks (repayable in foreign currency) taken by the Corporation have now been treated as foreign exchange fluctuation and accordingly retrospectively adjusted to the carrying costs of the related assets.

Consequently, exchange difference of Rs. 95.56 Crores pertaining to previous years and charged to the Statement of Profit and Loss Account has been written back and correspondingly credited in Finance Cost during the year. This change has resulted in increase in Profits for the year before tax (net of depreciation) for the year by Rs. 62.52 Crores.

9. Hitherto, premium on forward exchange contracts entered into to hedge the liability from Syndicated Loans from Foreign Banks (repayable in foreign currency) were amortized over the period of the Syndicated Loans from Foreign Banks (repayable in foreign currency). As per AS 16, Borrowing Costs include costs incurred by an enterprise in connection with borrowing of funds. Accordingly, during the current financial year, the premium on forward exchange contracts entered into to hedge the liability towards from Syndicated Loans from Foreign Banks (repayable in foreign currency) have been considered as borrowing costs as per AS 16. Consequently, an amount of Rs. 64.82 Crore has been capitalized in the current financial year and disclosed as a part of Note # 28, "Prior Period Expenses / (Incomes)". As a result, Profit for the year before Tax of the Corporation (net of depreciation) is higher by Rs. 52.43 Crores during the current financial year.

10. Ancillary costs incurred towards raising of Syndicated Loans from Foreign Banks (repayable in foreign currency) is being amortized over the tenure of the loan. Total amount of such ancillary costs remaining unamortized as on the Balance Sheet date is Rs. 118.89 Crores (2011-12 : Rs. 81.71 Crores).

11. (a) Considering the uncertainties attached to certain benefits under the Income Tax Act, the Corporation has been continuing to account for such tax benefits in the year they are allowed in the Appeals/Assessments. Further, where issues are strong on merits/covered by legal precedents, tax has not been provided for.

Accordingly, upon receipt of Appellate Orders covering the assessment periods 1991-92 to 1995-96, 1997-98, 2000-01 to 2002-03 & 2009-10, and Assessment Order for the assessment year 2010-11 during the year, the Corporation has reversed provision for tax/deferred tax/MAT Credit Entitlement amounting to Rs. 20.58 Crores (2011-12: Rs. 58.11 Crores) after duly considering MAT Credit, available for set off U/s 115JAA of the Income Tax Act, 1961.

For other assessment years, a reversal of provision for tax/deferred tax /MAT credit Entitlement amounting to Rs. 40.04 Crores (2011-12: Rs. 37.67 Crore) is made after duly considering MAT Credit, available for set off U/s 115JAA of the Income Tax Act, 1961.

The above reversal of provision of Rs. 60.62 Crore (2011-12: Rs. 95.78 Crore) for earlier years is disclosed as "Provision for Tax for earlier years written back (net)" in the Statement of Profit and Loss.

(b) The recognition of MAT Credit Entitlements of Rs. 406.85 Crore as at March 31, 2013 (Rs. 268.77 Crore as at March 31, 2012) is on the basis of cogent evidence that the Corporation will be able to avail the credit during the period specified in Section 115JAA of the Act.

12. To the extent Micro and Small Enterprises have been identified, the outstanding balance, including interest thereon, if any, as at Balance Sheet date is disclosed on which Auditors have relied upon :

13. RELATED PARTY DISCLOSURE:

(A) Names of and Relationship with Related Parties

1. Joint Venture Companies

a. Prize Petroleum Company Ltd. (upto 18-12-2011)

b. HPCL-Mittal Energy Ltd.

c. Hindustan Colas Ltd.

d. South Asia LPG Company Pvt. Ltd.

e. Petronet India Ltd.

f. Aavantika Gas Ltd.

2. Key Management Personnel

a. Shri S. Roy Choudhury - Chairman and Managing Director.

b. Dr. V Vizia Saradhi - Director - Human Resources (upto 31-7-2012)

c. Shri B. Mukherjee - Director - Finance.

d. Shri K. Murali - Director - Refineries.

e. Smt. Nishi Vasudeva - Director - Marketing.

f. Shri Pushp Kumar Joshi - Director - Human Resources (w.e.f 1-8-2012).

The above disclosure does not include following Related Parties for which no disclosure is required as they are State-Controlled Enterprises.

1. Subsidiaries

a. CREDA-HPCL Biofuels Ltd.

b. HPCL Biofuels Ltd.

c. Prize Petroleum Company Ltd. (w.e.f. 19-12-2011)

2. Joint Venture Companies

a. Mangalore Refinery and Petrochemicals Ltd.

b. Petronet MHB Ltd.

c. Bhagyanagar Gas Ltd.

d. GSPL India Gasnet Ltd. (w.e.f 04-07-2012)

e. GSPL India Transco Ltd. (w.e.f 04-07-2012)

14. Operating Leases - Assets taken on lease primarily consist of leased land taken for the purpose of setting up retail outlets, depot operations and properties for use by the Corporation. These lease arrangements are normally renewed on expiry of the term. Amount of lease rental expenses recognized in the Statement of Profit & Loss is given under Note # 23 - ''Other expenses''.

15. Considering the Government policies and modalities of compensating the oil marketing companies towards under- recoveries, future cash flows have been worked out based on the desired margins for deciding on impairment of related Cash Generating Units. Since there is no indication of impairment of assets as at Balance Sheet date as per the assessment carried out, no impairment has been considered. In view of assumptions being technical, peculiar to the industry and Government policy, the auditors have relied on the same.

16. During the year 2012-13, an amount of Rs. 8.11 Crores (2011-12: Rs. 3.83 Crores) has been charged to revenue towards Enabling Assets on which the Corporation does not have a control.

17. Disclosure as required by Clause 32 of Listing Agreement

18. The net worth of one of the subsidiary companies, HPCL Biofuels Ltd., which has started regular operations only during the year, is largely eroded. Based on the current price trends of Ethanol and in view of withdrawal of levy sugar mechanism and keeping in view the long term strategic nature of this investment, this diminution is not considered permanent in nature. Hence, no provision has been considered necessary for the value of the said investment and loans given (refer note # 14 and 46).

19. The Employee cost for the year 2012-13 includes Rs. 813 Crores towards implementation of Long Term Settlement of Non-management employees and Superannuation Benefits for all the employees finalized during the year, including for the past periods.

20. Previous year''s figures are reclassified / regrouped wherever necessary.


Mar 31, 2012

1. BASIS OF PREPARATION

The financial statements are prepared under historical cost convention in accordance with Generally Accepted Accounting Principles (GAAP), Accounting Standards referred to in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government and the relevant provisions of the Companies Act, 1956. All income and expenditure having material bearing are recognised on accrual basis, except where otherwise stated. Necessary estimates and assumptions of income and expenditure are made during the reporting period and difference between the actual and the estimates are recognised in the period in which the results materialise.

2. During the current financial year 2011-12, ONGC and GAIL offered discount on prices of crude, PDS SKO and Domestic LPG purchased from them. Accordingly, the Corporation has accounted the discount as under:

(a) Rs. 1,868.12 crores (2010-11: Rs. 1,378.15 crores) discount received on purchase of PDS SKO and Domestic LPG from ONGC and GAIL has been adjusted against Purchase of Product for Resale.

(b) Rs. 10,211.63 crores (2010-11: Rs. 5,259.40 crores) discount received on Crude Oil purchased from ONGC has been adjusted against Raw Material Cost.

3. In principle approval of Government of India for Budgetary Support amounting to Rs. 18,342.77 crores (2010-11: Rs. 8,976.28 crores), has been received and the same have been accounted under 'Recovery under Subsidy Schemes'.

4. (a) Inter-Oil Company transactions are reconciled on a continuous basis. However, year end balances are subject to confirmation/reconciliation.

(b) Customers' Accounts are reconciled on an ongoing basis and such reconciliation is not likely to have a material impact on the outstanding or classification of the accounts.

5. The Corporation has, as at the balance sheet date, entered into foreign exchange hedging contracts amounting to USD 194.58 crores (2010-11 : USD 156.34 crores) to hedge its foreign currency exposure towards loans/ export earnings. The Corporation normally does not hedge the foreign currency exposure in respect of payment for crude/product which is due for payment generally within 30 to 90 days. Exposures not hedged as of balance sheet date amounted to USD 138.38 crores (2010-11: USD 117.79 crores) towards purchase of crude & Products and USD 219.97 crores (2010-11: USD 185.46 crores) in respect of loans taken.

6. Total amount outstanding from M/s Kingfisher Airlines Ltd is Rs. 505.53 crores, out of which Rs. 434 crores is covered by Bank Guarantee. Management is confident that the entire dues will be realized.

7. Ancillary costs incurred towards raising of Long Term Syndicated Loans (External Commercial Borrowings) from Foreign Banks (repayable in foreign currency) is being amortized over the tenure of the loan. Total amount of such ancillary costs remaining unamortized as on the balance sheet date is Rs. 81.68 Crores.

8. (a) Considering the uncertainties attached to certain benefits under the Income Tax Act, the Corporation has been continuing to account for such tax benefits in the year they are allowed in the Appeals/Assessments. Further, where issues are strong on merits/covered by legal precedents, tax has not been provided for.

Accordingly, upon receipt of Appellate Order for the assessment year 2008-09 and Assessment Order for the assessment year 2009-10 during the year, the Corporation has reversed provision for tax/deferred tax/MAT Credit Entitlement amounting to Rs. 58.11 Crores (2010-11: Reversal of provision of Rs. 271.39 Crores) after duly considering MAT Credit, available for set off U/s 115JAA of the Income Tax Act, 1961.

For the earlier assessment years, a reversal of provision for tax/deferred tax /MAT credit Entitlement amounting to Rs. 37.67 Crores (2010-11: Provision of Rs. (46.26) Crore) is made after duly considering MAT Credit, available for set off U/s 115JAAofthe Income Tax Act, 1961.

The said reversal includes adjustment done pursuant to treatment of loss on sale of oil bond as a business loss instead of capital loss considering that the issue is strong on merits/covered by legal precedents.

(b) MAT Credit Entitlement consists of Rs. 268.77 Crore (2010-11: Rs. 500.87 Crore) towards earlier years, arising primarily on account of higher depreciation considered in Return of Income, is shown under Long Term Loans & Advances. The recognition of MAT Credit is on the basis of cogent evidence that the Corporation will be able to set off the credit during the period specified in Section 115JAA of the Act.

9. In accordance with the option as per AS - 11 (notified under the Company's Accounting Standards Rules, 2006) exercised in the year 2008-09, the Corporation has adjusted the exchange differences arising on long term foreign currency monetary items to the cost of assets. The corporation has continued to exercise the option during the year 2011-12 as per Ministry of Corporate Affairs' Notification dated 29-12-2011.

10. RELATED PARTY DISCLOSURE

(A) Names of and Relationship with Related Parties

1. Joint Venture Companies

a. Prize Petroleum Company Ltd. (upto 18-12-2011)

b. HPCL-Mittal Energy Ltd.

c. Hindustan Colas Ltd.

d. South Asia LPG Company Pvt. Ltd.

e. Petronet India Ltd.

f. Aavantika Gas Ltd.

2. Key Management Personnel

a. Shri S. Roy Choudhury - Chairman and Managing Director.

b. Dr. V. Vizia Saradhi - Director - Human Resources.

c. Shri B. Mukherjee- Director -Finance.

d. Shri K. Murali- Director -Refineries.

e. Smt. Nishi Vasudeva - Director - Marketing (w.e.f 4-7-2011).

The above disclosure does not include following Related Parties for which no disclosure is required as they are State-Controlled Enterprises.

a. CREDA-HPCL Biofuels Ltd.

b. HPCL Biofuels Ltd.

c. Prize Petroleum Company Ltd. (w.e.f. 19-12-2011)

d. Mangalore Refinery and Petrochemicals Ltd.

e. Petronet MHB Ltd.

f. Bhagyanagar Gas Ltd.

a) Block KK-DWN-2002/3 was relinquished during the year on completion of Minimum Work Program (MWP) under exploration phase. Drilling of 1 well was completed as per committed work program, which was declared as dry.

b) Blocks MB-OSN-2004/1 & MB-OSN-2004/2 were relinquished during the year on completion of Minimum Work Program (MWP) under exploration phase as no presence of hydrocarbons was observed in the drilled wells. Drilling of 3 wells in each block was completed as per committed work program.

c) In block RJ-ONN-2004/3, 2 exploratory wells were drilled against committed work program of 8 wells, which were declared as dry. Hence, due to the poor prospectively of the block it was decided not to drill any further wells and relinquish the block along-with other consortium partners.

d) Two exploration blocks at Egypt were awarded during the 2008-09 with GSPC (Operator) and Oil India. HPCL has 25% participating interest in both of these blocks. Production sharing contract of these blocks is yet to be signed.

* During the year 2011-12, HPCL acquired 50% shareholding in Prize Petroleum Company Limited (PPCL), thereby converting PPCL from a Joint Venture company into a 100% subsidiary of HPCL.

** Corporation's share in Petronet India Ltd. is not reported hereunder as the Management had fully provided for diminution in the value of investment during the financial year 2006-07.

*** Including Tax

11. Operating Leases - Assets taken on lease primarily consist of leased land taken for the purpose of setting up retail outlets, depot operations and properties for use by the Corporation. These lease arrangements are normally renewed on expiry of the term. Amount of lease rental expenses recognized in the Statement of Profit & Loss is given under Note 23 - 'Other expenses'.

12. Considering the Government policies and modalities of compensating the oil marketing companies towards under- recoveries, future cash flows have been worked out based on the desired margins for deciding on impairment of related Cash Generating Units. Since there is no indication of impairment of assets as at Balance Sheet date as per the assessment carried out, no impairment has been considered. In view of assumptions being technical, peculiar to the industry and Government policy, the auditors have relied on the same.

13. During the year 2011-12, an amount of Rs. 3.83 Crores (2010-11: Rs. 14.31 Crores) has been charged to revenue towards Enabling Assets on which the Corporation does not have a control.

14. During the year ended 31st March 2012, the Revised Schedule VI notified under the Companies Act 1956 has become applicable to the Corporation. The Corporation has also reclassified / regrouped previous year's figures in accordance with the requirements applicable in the current year.

b) Exploration and Production of Hydrocarbons

Segments have been identified taking into account the nature of activities and the nature of risks and returns.

2. Segment Revenue comprises the following:

a) Turnover (Net of Excise Duties)

b) Subsidy from Government of India

c) Other income (excluding interest income, dividend income and investment income)

3. There are no geographical segments.

 
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