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Directors Report of Mangalore Refinery And Petrochemicals Ltd.

Mar 31, 2015

Dear Members,

On behalf of the Board of Directors, I take pleasure in presenting the Board''s Report on the performance of your Company, together with the Audited Financial Statements and Auditors'' Report and the Report of the C&AG of India for the financial year ended 31/03/2015.

1.0 THE STATEMENT OF COMPANY''S AFFAIRS:

1.1 PERFORMANCE AT A GLANCE

- Crude processed at 14.65 MMT during the year 2014-15 against 14.55 MMT during the previous year 2013-14.

- Turnover at Rs 62,412 Crores during the year 2014-15 against Rs 75,226 Crores for the previous year 2013-14.

- Export Turnover at Rs 22,790 Crores during the year 2014-15 against Rs 35,392 Crores for the previous year 2013-14.

- After Tax Loss Rs 1,712 Crores during the year 2014- 15 against Profit of Rs 601 Crores for the previous year 2013-14

1.2 FINANCIAL PERFORMANCE

The Audited Standalone / consolidated financial performance for the year ended 31/03/2015 is summarized below:

(Rs In Crores)

Standalone Year ended Year ended 31st March 2015 31st March,2014

Turnover 62412 75226

Profit before (1250) 1437

Depreciation Interest and Tax Interest

Interest and Finance Charges 407 321

Gross Profit after interest but before (1657) 1116 Depreciation and Tax

Depreciation and Amortizations 499 706

Profit/(Loss) Before Tax (2156) 410

Provision for Taxation (444) (191) (deferred tax liability)

Profit/(Loss) after Tax (1712) 601

Balance of Profit/(Loss) 4839 4238 brought forward from previous year

Surplus available for appropriation 3075 4839

Consolidated Year ended Year ended 31st March 2015 31st March,2014

Turnover 62051 74952

Profit before Depreciation Interest and Tax (1325) 1448

Interest and Finance Charges 448 323

Gross Profit after interest but before (1773) 1125 Depreciation and Tax

Depreciation and Amortizations 522 707

Profit/(Loss) Before Tax (2295) 418

Provision for Taxation (deferred tax liability) (442) (188)

Profit/(Loss) after Tax (1853) 606

Balance of Profit/(Loss) brought forward 4858 4252 from previous year

Surplus available for appropriation 3003 4858

1.3 OPERATIONAL PERFORMANCE:

- Your Company had processed highest ever crude of 14.65 MMT during the financial year 2014-15 compared to 14.55 MMT during the previous year.

- The operating margin was 3.44 $/bbl during 2014-15 as against 1.69 $/bbl during 2013-14.

- Your Company has achieved export turnover of Rs 22,790 Crores during the financial year 2014-15 by exporting products viz., Motor Spirit, Naphtha, Mixed Xylene, High Speed Diesel, Jet fuel and Fuel Oil.

1.4 DIVIDEND AND TRANSFER TO RESERVES:

During 2014-15, your Company has incurred loss of Rs 1,712 Crores. Hence, your Directors have not recommended any dividend for FY 2014-15 and no amount has been transferred to General Reserve during the FY 2014-15.

1 .5 DEPOSIT:

Your Company has not accepted any fixed deposit during the year from the public. As on 01/04/2014, certain customer advances remained unpaid which were classified as deemed deposits under the provisions of the Companies Act, 2013 and were refunded to customers during the year.

1.6 PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS:

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to Financial Statements. Full particulars of Loans given, Investments made and Guarantees given, and Securities provided are furnished in the notes to Financial Statements forms part of the Annual Report.

1.7 SHARE CAPITAL:

The Authorised Share Capital of the company has been increased from Rs 2,000 Crores to Rs 3,000 Crores. The Issued, Subscribed and Paid up Equity Share Capital of your Company as on 31/03/2015 stood at Rs 1,753 Crores. During the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or sweat equity as any kind of securities.

1.8 MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF FINANCIAL YEAR AND DATE OF REPORT.

There is no occurrence of material change and commitment made between the end of financial year and date of this report which has affected financial position of the company.

1.9 CREDIT PROFILE

- After Annual surveillance, the highest Corporate Credit Rating has been reaffirmed by both ICRA and CRISIL in March 2015.

- ICRA has reaffirmed "Ir AAA" to MRPL.

- "[ICRA] AAA" for Rs 3,000 Cr. Fund- Based limits of MRPL.

- "[ICRA] A1 " to Rs 4,000 Cr. Non-Fund based limits of MRPL.

- "[ICRA] A1 " to Rs 900 Cr. Commercial Paper Programme to MRPL.

- CRISIL has reaffirmed the highest Corporate Credit Rating "[CCR AAA]" to MRPL.

2.0 MARKETING & BUSINESS DEVELOPMENT:

Your Company has retained its strong market presence in its Refinery zone for various petroleum products and also been able to get a good market reach for Petcoke. Company could evacuate Petcoke and Sulphur on a consistent basis in domestic as well as export market.

With entry of natural gas pipeline in North Karnataka & Goa, customers earlier using Fuel Oils are shifting to Gas, leading to shrinkage of liquid fuels market. However, due to commissioning of the Petcoke unit in MRPL, Company has carried good market development and has already attained market leadership for Petcoke sales in South India.

Your Company continues to expand its market spread in the direct sales segment of petroleum products in the state of Karnataka and its adjoining states. Your Company has significant market share and direct customer relations for products such as Bitumen, Fuel Oil, Sulphur, Diesel, Petcoke and Mixed Xylene in its refinery zone. The total sales volume of direct marketing products during the FY 2014-15 was 0.81 MMT with a sales value of Rs 1,926 Crores compared to volume of 0.46 MMT and sales value of '' 2,291 Crores in the previous FY 2013-14.

The deregulation of HSD pricing has opened up opportunities for recommencing the retail business. Your company has significantly increased HSD sales in its refinery zone. Domestic sale of Sulphur has also increased considerably against previous year. Your Company has commissioned its first dealer operated Retail Outlet at Mangalore in December, 2014 and is in the process of setting up large number of retail outlets in its refinery zone.

Your Company has set up a Polypropylene plant of 440 KTPA capacity and company has already appointed required channel partners in initial primary target markets for marketing of Polypropylene. Detailed Market study has been completed and Sales are expected to commence soon. In addition, Your Company is also developing its own storage infrastructure for Polypropylene in Karnataka.

3.0 HEALTH, SAFETY AND ENVIRONMENT PERFORMANCE

Your Company have achieved 1212 accident free days as on 18/05/2015 with 12.10 million man hours worked. The various units of Phase - III Refinery Upgradation and Expansion Project and storage tanks were commissioned safely during the year.

Your Company is committed towards imparting continuous training in fire and safety practices. Regular Mock exercises were conducted considering the various emergency scenarios in plant and non plant areas.

Your Company believes in "Perform beyond Compliance" - that is to perform better than minimum required by statutes. The Refinery of your Company is a certified ISO

14001: 2004 for Environment Management Systems by TUV Rheinland. The major achievements on the Environment Management and performance are summarized as under:

In Environment Management, the company''s Philosophy is to perform beyond Compliance - that is to perform better than minimum required by statutes. The major Achievements on the Environment Management front include:

- Water Audit Study conducted in the Refinery by M/s. National Productivity Council, Hyderabad.

- Marine Quality Monitoring at Single Point Mooring (SPM) conducted by M/s. College of Fisheries, Mangalore.

- Utilization of Sewage Treatment Plant (STP) water as make-up to cooling towers carried out. This measure is directly resulted in reduction of fresh water consumption.

- A Sulphur Pastillation Unit is commissioned as a part of Phase - III Project to reduce the dust emissions.

- Inspection of Tier - I facility of SPM was carried out by OISD & Indian Coast Guard in the month of March, 2015.

- CTBD (Cooling Tower Blow Down) system of WWTP - III commissioned in the month of March, 2015.

- VOC Recovery system is commissioned in WWTP - III.

- SOx & NOx Stack Online Analyzer data of Phase - I & II units connected to CPCB server in the month of March, 2015.

- Hydrocarbon detectors at strategic locations in the refinery are provided.

- VOC Emission monitoring carried out in the refinery through reputed agency at 74000 points and corrective measures are taken to effectively minimize the same, wherever needed.

- Periodic Manual Stack Monitoring is being carried out by MoEF/KSPCB approved external agency.

- Ambient Air Quality Monitoring is carried out by MoEF/ KSPCB approved external agency in and around the refinery at 9 location including 4 locations in Phase - III area as per revised National Ambient Air Quality Monitoring Standards published by Ministry of Environment & Forests.

- An advanced technology has been employed for cleaning Crude Tanks in the refinery which results in lower oil content in the Tank sludge.

- Environment Awareness Programmes was organized periodically in the neighboring villages in association with Karnataka State Pollution Control Board.

- 70-75% of the total treated Effluent is recycled back to the cooling towers.

- Continuous online monitoring of Analyzers installed to monitor Treated Effluents for parameters like pH, Sulphide, Dissolved Oxygen, Phenols, before discharged to sea.

- Treated effluents are monitored on a daily basis at both Refinery end & at APMC yard.

- A Fortnightly Marine Environment Impact Assessment study is being carried out through College of Fisheries, Mangalore from 7 monitoring stations set-up in the vicinity of Treated effluent Disposal point (at sea) & 3 Stations in the Seashore. The results indicate no adverse effect on the marine environment.

- The Company is meeting the stipulations of KSPCB with regard to the quality of treated effluent, which is well below the standards in every aspect, on a continuous basis.

- Ten Nos. of Ground Water monitoring stations in and around the Refinery have been set up and regular monitoring of ground water quality is being carried out along with Karnataka State Pollution Control Board (KSPCB).

- Low sulphur Fuel oil was being used in all the Refinery furnaces and boilers, simultaneously maximizing the usage of ultra low Sulphur fuel gas generated in the refinery process units.

- Sulphur Recovery Units (SRUs) are operated at efficiency greater than 99%.

- Annual Submarine pipeline inspection carried out by National Institute of Oceanography (NIO).

4.0 PROJECTS

4.1 Phase - III Refinery Upgradation and Expansion Project:

The commissioning of all the Secondary Process Units of Phase -III Refinery Upgradation and Expansion project were completed in September 2014, these units will increase the distillate yield and produce high value products viz Propylene, Gasoline from low value black oils. Crude Distillation Unit (CDU), Hydrogen Generation Unit (HGU) and Diesel Hydrotreater Unit (DHDT) were commissioned in the previous financial years. The delay in commissioning of the process units was mainly on account of non-availability of reliable steam and Power from CPP. The total expenditure incurred by your Company on Phase -III Refinery Upgradation and Expansion project is around Rs 12,485 Crores as on 31/03/2015.

Your refinery is now capable of processing most difficult crudes from 18 API (blended) to 46 API gravity and light to heavy / sour to sweet crudes and also capable to handle High TAN Crudes also.

4.2 Single Point Mooring (SPM):

Your Company has setup SPM along with coastal booster pumping station within the port limits at a location of 16 Km from the shore having the draft availability of 32 M for handling Very Large Crude Carrier (VLCC), at a cost of Rs 1,044 Crores (Actual cost as on 31/03/2015 is Rs 807 Crores). The SPM is constantly unloading Suez Max (about 135,000 of cargo) ships since commissioning in August, 2013. As on 31/03/2015, 108 ships has been unloaded at SPM, handling total crude cargo of approximately 14.5 Million Tonnes. This facility has also decongested existing berth at New Mangalore Port, during non-monsoon periods.

4.3 Polypropylene Unit:

The Polypropylene (PP) unit has been set up with the licensor M/s Novolen Technology, Germany in integration with the Phase - III Project at an estimated Capex of Rs 1,804 Crores. The total expenditure incurred on this project is Rs 1,227 Crores as on 31/03/2015. The feed-in has been achieved during March, 2015. The unit was inaugurated on 05/04/2015 by the Hon''ble Minister of Petroleum and Natural Gas (Independent Charge) and commercial production has been started since 18/06/2015.

5.0 AWARDS AND RECOGNITION:

- Won the "Export Excellence Award, 2014" in Best Exporter Award (Medium/large category) from the Federation of Karnataka Chamber of Commerce and Industry (FKCCI) for FY 2013-14 in recognition of its Rs 35,392 Crores worth of export.

- Won the Silver at "Niryat Shree Award -2014" in the residual sector of the MSME at FIEO (Federation of Indian Export Organisation).

- MRPL has conferred the prestigious "Skoch Foundation Order -of-Merit Award" for the best project in the country.

- Shri Vishnu Agrawal, Director Finance of MRPL was adjudged winner of the ''BT-STAR Excellence Award in the category PSU- small,- DIRECTOR-FINANCE OF THE YEAR'' post a rigorous evaluation process by the Jury of the BT- Star Excellence Awards, 2015.

- MRPL won the first prize for outstanding performance in the area of Hindi Implementation for the year 2014-15 for fourth consecutive year by TOLIC, Mangalore.

6.0 PERFORMANCE OF SUBSIDIARY/ JOINT VENTURES:

Pursuant to Section 129 (3) of the Companies Act, 2013 read with Rule (5) of the Companies (Accounts) Rules, 2014, the salient features of Financial statement of Subsidiary and Joint Ventures in Form AOC-1 is attached as Annexure ''A'' which forms part of this report.

6.1 SUBSIDIARY COMPANY:

Your Company has adopted a Policy on determining Material Subsidiary, which is available at www.mrpl.co.in.

6.1.1 ONGC Mangalore Petrochemicals Limited (OMPL)

ONGC Mangalore Petrochemicals Limited (OMPL) is the only subsidiary company. Your company holds 51% of equity shares in OMPL since 28/02/2015 and the balance 49% held by parent company ONGC. OMPL has set up an Aromatic Complex with an annual capacity 914 KTPA of Para-xylene and 283 KPTA of Benzene in Mangalore Special Economic Zone as value chain integration project of ONGC & MRPL. The total project cost is about Rs 6,875 Crore and it has commenced commercial operation from 1st October, 2014. 0.26 MMT of Para-xylene and 0.06MMT of Benzene, have since been exported in the financial year, as the production is being ramped up.

The revenue for FY 2014-15 is Rs 1,728.25 Crores (Previous Year Rs 0.026 Crores) with Pre-tax loss of Rs 914.30 Crores (Previous Year loss of Rs 1.18 Crores) and post-tax loss of Rs 914.30 Crores (Previous Year loss of Rs 0.47 Crores).

6.2 JOINT VENTURE(S)

6.2.1 Shell MRPL Aviation Fuel Services Limited (SMAFSL)

MRPL Joint Venture (JV) with Shell B.V. Netherland known as Shell MRPL Aviation Fuel Services Limited (SMAFSL) supplies Aviation Turbine Fuel (ATF) to both domestic and international airlines at several Indian airports. The revenue for FY 2014-15 is Rs 636 Crores (Previous Year Rs 662 Crores) with Pre-tax profit of Rs 10.69 Crores (Previous Year Rs 18.40 Crores) and post-tax profit of Rs 7.74 Crores (Previous Year Rs 12.30 Crores).

6.2.2 Mangalam Retail Services Limited (MRSL)

Mangalam Retail Services Limited (MRSL) the Joint Venture (JV) Company with Ashok Leyland Project Services Limited (ALPSL) was incorporated on 03/05/2006 to set up commercial complexes for promoting retail plan of MRPL. In absence of any viable business plan, the continuance of the JV is being examined. The JV has not commenced any business activities. Hence there is no business transaction during the FY 2014-15. The Account of the JV was audited for the purpose of consolidation.

7.0 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO :

Information required to be disclosed pursuant to Section 134(3)(m) of The Companies Act, 2013 read with Rule 8(3) of The Companies (Accounts) Rules, 2014 with respect to conservation of energy, technology absorption and foreign exchange earnings & outgo are furnished in Annexure ''B'' which forms part of this Report.

8.0 EXTRACT OF ANNUAL RETURN :

Information required to be disclosed pursuant to Section 134(3)(a) of The Companies Act, 2013 with respect to the details forming part of the extract of the Annual Return in form MGT-9 are furnished in Annexure ''C'' which forms part of this Report.

9.0 MANAGERIAL REMUNERATION AND PARTICULARS OF EMPLOYEES:

Your Company being a Govt. company is exempted to furnish information under Section 197 of the Companies Act, 2013 vide Ministry of Corporate Affairs (MCA) Notification dated 05/06/2015.

10.0 CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY DEVELOPMENT :

10.1 Corporate Social Responsibility (CSR):

Your Company''s social welfare and community development initiatives focus on the key areas of education, health care and overall development of basic infrastructure in and around its operational areas. These projects are largely in accordance with Schedule VII of the Companies Act, 2013.

The CSR objective of your Company in line with DPE guidelines is promoted under the name of "SAMRAKSHAN". This captures the spirit and commitment to protect, preserve and promote the social, cultural and environmental heritage and wealth in and around the area of our business and to usher in sustainable development. Facilitating Midday Meal to support continuing Education, setting up of computer room, Anganwadi building, skill development training for youths, infrastructural development etc. is a part of the Samrakshan activities. In addition, your Company is committed to mission of "Swachh Vidhyalaya Abhiyan" and has undertaken construction of 50 toilets in Govt. schools.

Your Company has taken up the construction of One wing of Government Lady Goschen Hospital, Mangalore under its "CSR - SAMRAKSHAN" Programme, at a cost of Rs 21.70 Crores.

Lady Goschen Hospital is a 162 year old hospital for Women, established in the year 1849 and is located at the heart of Mangalore City. It has 260 beds, mainly catering to the health care needs of patients from poorer section of society. About 75% of the patients who come for treatment to this hospital belong to Below Poverty Line (BPL) category.

Your company has spent Rs 4.81 Crores (Previous Year Rs 3.47 Crores) for various CSR activities during the year 2014-15. Pursuant to Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 the Annual Report on CSR activities is annexed herewith as Annexure ''D''.

10.2 Sustainability Development Performance:

- Sustainability efforts of your Company is centering on drawing action plans towards minimizing our carbon footprint through managing complex projects and operations, addressing risk and opportunity, and engaging externally. We also continue our focus on defining supplier expectations for business conduct, and on addressing related risks in our supply chain.

- We continue to work to reduce greenhouse gas emissions in our operations and to integrate climate change-related activities and goals into our business planning.

- The Plan further provides guidance regarding integrating sustainable development with our business operations. Your Company has laid down priority areas as well as short and long term actions to be undertaken for meeting the objectives of the plan. Key identified areas include:

- Hydrocarbon value chain optimization

- Energy consumption optimization

- Water and Waste Management

- Customer development and growth partnership

Specific enablers have also been identified to facilitate the

implementation of action plans developed for above four

areas.

Your Company is consolidating its position in potential hydrocarbon value chain optimization avenues for sustainable development. The pivotal emphasis is on recovering value from low value hydrocarbons such as petcoke, refinery offgas and internal fuel oil.

After successful commissioning of the Phase-III major units such as Delayed Coker Unit, Petrochemical grade Fluidised Catalytic Cracking Unit (PFCCU), Diesel Hydrotreating Unit and the latest Polypropylene Unit, MRPL''s product base has expanded to include Pet coke, Ultra Low sulfur Diesel and Polypropylene. Your Company is establishing value partners to expand market base and partner sustainable growth.

Your Company is also considering other sustainable options to utilize the pet coke for firing in utility boilers to produce steam for power generation along with capture of the associated pollutant - sulfur molecule. This is expected to not only help in production of cheaper power, but also ensure timely evacuation of this product from the refinery complex. Another advantage envisaged is the reduction in internal fuel oil consumption which is currently being fired in the boilers, for upgradation into various lighter molecules like Polypropylene, diesel etc. via the delayed coking route. In-house feasibility study of the project with support from potential technology suppliers is being taken-up.

Water and waste management is given top priority by Your Company to reduce refinery''s impact on the environment. The refinery recycles more than 70% of its treated effluents and has also been maximizing intake of treated municipal sewage to reduce fresh water intake. The refinery has also commissioned its sludge processing facility to effectively address disposal concerns.

Your Company is also looking into the option of recovering valuable ethylene from low value PFCC off gas and supplying into downstream petrochemical complexes. Also, the recovered ethylene can be used as a co-monomer along with propylene to produce hetero-polymers of polypropylene for enhancing market value. The in-house viability study along with the potential increase in profitability estimations are being carried out with inputs from downstream petrochemical complexes and ethylene recovery technology suppliers.

The Phase-III Refinery Complex Captive power plant facilities and some of the process heaters are designed to burn Natural Gas as fuel. The Phase-III Hydrogen generation unit is also designed to consume Natural Gas as an alternate feedstock. The infrastructure to bring natural gas to Mangalore is being assessed by various gas suppliers. Subject to economics, utilization of natural gas will not only reduce SO emissions but also open up the avenue of converting the low value internal fuel oil into high value hydrocarbons.

11.0 RELATED PARTY TRANSACTIONS :

All transactions entered with Related Parties for the year were on arm''s length basis and in ordinary course of business. Further, there are no material related party transactions during the year with the Promoters, Directors or Key Managerial Personnel. The Company has adopted a Related Party policy and procedure, which is available at www.mrpl.co.in.

All Related Party Transactions are placed before the Audit Committee as also to the Board for approval. Omnibus approval was obtained on a quarterly basis for transactions which are of repetitive nature.

11.1 Particulars of contracts or arrangements with related parties:

The particulars of every contract or arrangements entered into by the Company with Related Parties referred in Section 188(1) of the Companies Act, 2013 disclosed in Form No. AOC - 2 attached as Annexure ''E''. MCA vide Notification dated 05/06/2015, has exempted the applicability of Section 188 (1) of the Companies Act, 2013 for a transaction entered into between two Government Companies.. In view of the same shareholders approval has not been solicited for the transactions with Govt. Companies.

12.0 HUMAN RESOURCES:

- Your Company continued to enjoy cordial and harmonious relations with the collectives and as evidence to the same not a single man-hour was lost on account of any industrial disturbance during the year 2014-15.

- During the year, your Company has recruited 33 employees comprising of 2 women employees and 15 Scheduled Caste (SC) / Scheduled Tribe (ST) employees

- Total employee strength as on 31/03/2015 was 1720 including 125 women employees, 202 SC/ST employees and 7 Physically Challenged employees. 742 employees belong to Management cadre whereas, 978 employees belong to Non-Management cadre.

- During the year 2014-15, Your Company devoted 4078 Mandays for Training, Development and Learning which amounted to an average of 2.39 Mandays per employee. This includes functional, developmental and special training programs covering the entire spectrum of employees.

13.0 OFFICIAL LANGUAGE:

Your Company is implementing Official Language Policy in

letter and spirit as per the Annual Programme prescribed by the Department of Official Language, Ministry of Home Affairs, Government of India. In order to propagate Hindi among the employees, Hindi Workshops are organised on a regular basis at Mangalore, Mumbai, Delhi & Bangalore Offices. Regular Hindi classes such as Prabodh, Praveen & Pragya in addition to Hindi Stenography are being conducted for employees. In order to increase the correspondence in Hindi, by the employees, special efforts are made to activate Unicode facilities on all the computers used in your Company. To motivate employees for Hindi usage, various incentive schemes are introduced such as Cash award & Personal Pay.

14.0 RIGHT TO INFORMATION ACT, 2005:

Your Company''s RTI manual is available on its website www.mrpl.co.in which discloses all required information. During the year, 112 applications were received, out of which 96 were disposed off before 31/03/2015 and balance 16 applications were disposed off after 01/04/2015.

15.0 SECURITY MEASURES:

The Refinery security is designed and operated in compliance with guidelines given by Oil Sector Infrastructure Protection Plan (OSIPP) and the Security Audit recommendations given by the IB (MHA) from time to time.

The Refinery is completely secured and protected inside including newly expanded refinery operations area under Phase-III and the Refinery surrounding premises all the times through deployment of Central Industrial Security Force (CISF) personnel.

Refinery Security is on priority due to increased threats and it is ensured through emergency preparedness, conducting periodic mock drills by security personnel. In order to promote awareness on security issues among all stake holders, Security Awareness programmes along with government authorities are organized periodically.

16.0 VIGILANCE FUNCTION :

Your Company has developed a structured mechanism of vigilance functions and its practices are focused towards creation of value for all the stakeholders. The practices involve multi-layer checks and balances to improve transparency. Vigilance Awareness and Preventive vigilance activities were continuously carried out during the year. Guidelines of Central Vigilance Commission (CVC) are being followed. Officers in sensitive posts are rotated regularly.

Whistle Blower Policy for employees is in place which ensures that a genuine whistle blower is granted due protection from any victimization. In compliance with CVC instruction, your Company has implemented a complaint handling policy in which all complaints received from various sources can get recorded and can be examined by Vigilance. Further, in line with CVC instructions, your

Company has achieved high compliance level with regard to e-payment and e-tender.

Leveraging of technology to enhance transparency has been a thrust area of action in which vigilance has played a catalytic role. The website of the Company displays downloadable tender document, publication of information of works awarded on nomination basis, publication of post award information of contracts.

Full time Chief Vigilance Officer (CVO) is posted and he can be contacted at cvo@mrpl.co.in for any complaint having vigilance angle.

16.1 Whistle Blower Policy for Directors & Employees:

The Whistle Blower Policy is formulated to provide a vigil mechanism for Directors and Employees to raise genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Company''s code of conduct or ethics policy. It also provides for adequate safeguard against victimisation of persons who use such mechanism.

The Policy provides necessary safeguards for protection of Directors and Employees who avail the vigil mechanism from reprisals or victimization, for whistle blowing in good faith and to provide opportunity to Directors and Employees for direct access to the Chairperson of the Audit Committee in exceptional cases. The policy is available on the Company''s website www.mrpl.co.in.

17.0 DIRECTORS & DIRECTORS'' RESPONSIBILITY STATEMENT

17.1 Following changes took place in Board of Directors and Key Managerial Personnel of your Company.

- Shri H. Kumar assumed the office of Managing Director w.e.f 14/08/2014 and elected as a Director in the 26th Annual General Meeting held on 13/09/2014.

- Shri M. Venkatesh has assumed the office of Director (Refinery) with effect from 1st April, 2015. He was appointed as Additional Director who vacates his office as Additional Director and being eligible offers himself for appointment as Director (Refinery) in the 27th Annual General Meeting.

- Shri Nalin Kumar Srivastava, Deputy Secretary, MoP&NG was appointed as Additional Director with effect from 5th March, 2015, who vacates his office as Additional Director and being eligible offers himself for appointment as Director in the 27th Annual General Meeting.

- Smt. Perin Devi, Director of MoP&NG was appointed as Additional Director with effect from 14th May, 2015, who vacates her office as Additional Director and being eligible offers herself for appointment as Director in the 27th Annual General Meeting..

- Shri Vishnu Agrawal who retires by rotation and being eligible offers himself for re-appointment as a Director.

- Shri V G Joshi, ceased to be a Director consequent upon his superannuation from the services of MRPL on 31st March, 2015.

- Shri P. Kalyanasundaram, ceased to be a Director w.e.f 4th March, 2015 consequent upon his superannuation from the services of Government of India.

- Shri C. L. Shah, Smt. Neela Gangadharan, Prof. Jayant M. Modak, Prof. Usha Kiran Rai and Capt. John Prasad Menezes ceased to be Additional Director w.e.f. 14/09/2014.

The Board places on record appreciation for the valuable contributions made by them during their tenure as Directors of the Company.

17.2 Directors'' Responsibility Statement:

To the best of knowledge and belief and according to the information and explanations received, Directors make the following statement in terms of Section 134(3)(c) of the Companies Act, 2013.

The Board of Directors confirm as under for the Financial Year 2014-15:

a) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

b) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d) The Directors have prepared the Annual Accounts on a going concern basis;

e) The Directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

17.3 Formal Annual Evaluation & Board Diversity:

Your company is Schedule "A" category -1 Miniratna Central Public Sector Enterprise (CPSE) governed by Department of Public Enterprise (DPE), Government of India and its Administrative Ministry i.e. Ministry of Petroleum & Natural

Gas (MoP&NG) Government of India. The Board Diversity is maintained as the Administrative Ministry i.e., MoP&NG appoints various categories of Directors on the Board. The evaluation of the Company is made by MoU signed with ONGC, the holding Company pursuant to DPE guidelines. The formal evaluation process is based on evaluation of MoU parameters for various operational and physical Parameters. MCA vide notification dated 05/06/2015, has exempted the Govt. Company from the formal annual evaluation by the Board on its own performance pursuant to Section 134(3) (p) of the Companies Act, 2013, as the Directors are evaluated by the Administrative Ministry i.e., MoP&NG, Govt. of India.

The Directors are appointed by the Govt. of India and terms and conditions of their service is also determined by Govt. of India. The detailed terms and conditions are furnished in the Corporate Governance Report.

18.0 NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS:

The Board of Directors of your Company had Nine (9) Meetings during the FY 2014-15. Details of the Board Meetings held for the year 2014-15 have been furnished in the Corporate Governance Report and forms part of this Report.

19.0 AUDIT COMMITTEE:

The Audit Committee was constituted on the terms of reference as prescribed under Section 177 of the Companies Act, 2013 read with Rule 6 of the Companies (Meetings of the Board and its Powers) Rules, 2014, Clause 49 of the Listing Agreement with the Stock Exchanges and Guidelines on Corporate Governance for Central Public Sector Enterprise issued by Department of Public Enterprise, Government of India. The detail of Audit Committee is disclosed in the Corporate Governance Report which forms part of this Report.

20.0 NOMINATION AND REMUNERATION POLICY:

MRPL is a ''Schedule A'' category-1 Miniratna Central Public Sector Enterprise (CPSE). The appointment, terms, conditions and remuneration of Managing Director and Functional Directors (Whole-time Directors) are fixed by the Department of Public Enterprises (DPE), Govt. of India.

Pursuant to Clause 49 of the Listing Agreement and DPE guidelines on Corporate Governance for CPSE, your Company has constituted a Nomination and Remuneration Committee. The details on the Nomination and Remuneration committee is disclosed in Corporate Governance Report which forms part of this report.

21.0 RISK MANAGEMENT POLICY:

Your Company has a well-defined policy framework for Enterprise Risk Management formulated by M/s. Deloitte, Risk Managers are continuously monitoring the Risks pertaining to their area. Risk Management Committee was reconstituted consisting of majority of Directors pursuant to Clause 49 (VI) of Listing Agreement which monitors and evaluates the risk overview document once in quarter and recommends the same to the Audit Committee for evaluation. The Risk Management Committee''s overview document is duly reviewed by the Audit Committee and placed before the Board on quarterly basis.

22.0 SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS:

There are no significant and material orders passed by the Regulators/Courts that would impact the going concern status of the Company and its future operations.

23.0 CORPORATE GOVERNANCE:

- Your company has complied with all the mandatory provisions of Clause 49 of the Listing Agreement relating to the Corporate Governance requirements and mandatory guidelines on Corporate Governance for CPSEs issued by DPE, Government of India, except the Composition of Board of Directors, in relation to requisite number of Independent Directors.

- The Annual Report contains a separate section on Corporate Governance, which forms part of this Report.

- Pursuant to Clause 55 of Listing Agreement, Annual Business Responsibility Report (ABRR) has been prepared for the financial year and the same has been uploaded on the website of the company www.mrpl.co.in

- Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges, your Company has obtained the Certificate from the Joint Statutory Auditors of the Company, towards Compliance of Corporate Governance which forms part of this report.

24.0 MANAGEMENT DISCUSSION AND ANALYSIS:

In terms of Clause 49 (VIII) (D) of the Listing Agreement with the Stock Exchanges, the Management Discussion and Analysis Report for the FY 2014-15 duly reviewed by Audit Committee and approved by Board and forms part of this Report.

25.0 INTERNAL FINANCIAL CONTROL:

Your Company has a well established Internal Control system to ensure an effective internal control environment that provides assurance on the efficiency of conducting business, including adherence to the Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. The Internal Auditor certifies on the assurance of adequacy of Internal Control System on quarterly basis which are regularly reviewed by the Audit Committee. Details on the Internal Control System is disclosed in the MDA which forms part of this report.

26.0 AUDITORS:

26.1 Joint Statutory Auditors:

M/s Gopalaiyer and Subramanian, Coimbatore and M/s A Raghavendra Rao and Associates, Mangalore have been appointed as Joint Statutory Auditors of the Company for the FY 2014-15 by Comptroller & Auditor General of India (C&AG). They have audited the Financial Statements and along with Balance Sheet for the Financial Year ended 31/03/2015 and submitted their report which forms part of this report.

26.2 Comptroller and Auditor General (C&AG) Report:

The Comptroller and Auditor General (C&AG) have submitted their report which forms part of this report.

26.3 Secretarial Auditors:

Your Company has engaged M/s Ullas Kumar Melinamogaru & Associates, Practicing Company Secretaries, Mangalore for conducting Annual Secretarial Audit for the year 2014-15 pursuant to Section 204 of the Companies Act, 2013. M/s Ullas Kumar Melinamogaru & Associates, Practicing Company Secretaries, Mangalore have issued Annual Secretarial Audit Report (Form MR-3) for the year 2014-15 which forms part of this report and is furnished as Annexure ''F''.

26.4 Cost Auditors:

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost accounts maintained by the company for the FY 2014 -15 are being audited by Cost Auditors M/s. Bandyopadhyaya Bhaumik & Co., Kolkata with approval of Ministry of Corporate Affairs, Government of India.

27.0 ACKNOWLEDGEMENT:

27.1 Your Directors sincerely thank the Government of India (GoI), Ministry of Petroleum and Natural Gas (MoP&NG), Ministry of Finance (MoF), Ministry of Corporate Affairs (MCA), Department of Public Enterprise (DPE), Ministry of Environment and Forest (MoEF), Ministry of External Affairs (MEA), Ministry of Shipping (MoS), Ministry of Home Affairs (MHA), other Ministries and Departments of the Central Government and the Government of Karnataka, for their valuable support, guidance and continued co- operation.

27.2 Your Directors gratefully acknowledge support and direction provided by the parent company, Oil and Natural Gas Corporation Limited (ONGC) and the support of Hindustan Petroleum Corporation Limited (HPCL), the Promoters of the company.

27.3 Your Directors wish to thank the shareholders for the continued confidence reposed on their Company.

27.4 Your Directors acknowledge the continuing co-operation and support received from New Mangalore Port Trust, Financial Institutions, Banks and all other stakeholder such as suppliers of crude oil, vendors, contractors, transporters.

27.5 Your Directors recognize the patronage extended by the valued customers for the products of the Company and promise to provide them the best satisfaction.

27.6 Your Directors wish to place on record their sincere appreciation of the sustained and dedicated efforts put in by all the employees collectively and concertedly as a Team known as "Team MRPL".

For and on behalf of the Board

(Dinesh Kumar Sarraf) Chairman

Place: New Delhi Date: 09/07/2015


Mar 31, 2014

Dear Members,

On behalf of the Board of Directors of MRPL and on my behalf, it is my privilege to present the 26th Annual Report and the Audited Accounts for the financial year ended March 31, 2014.

It is a matter of pride that your Company is now Schedule ''A'' Central Public Sector Enterprise (CPSE) upgraded from Schedule ''B'' status. Your Company is marching ahead with a renewed vision and commitments for greater growth. We focused at fortitude in advertises, embracing opportunities and over coming setbacks to gain in strength with continued support of all shareholders.

1.0 PERFORMANCE AT A GLANCE

- Highest ever crude processed at 14.59 MMT during the year 2013-14 against 14.41 MMT during the previous year 2012-13.

- Highest ever Turnover at Rs. 75,226 Crore during year 2013-14 against Rs. 68,834 Crore for the previous year 2012-13.

- Highest ever Export Turnover at Rs. 35,392 Crore during the year 2013-14 against Rs. 33,340 Crore for the previous year 2012-13.

- profit After Tax (PAT) at Rs. 601 Crore during the year 2013-14 against the loss of Rs. 757 Crore incurred for the previous year 2012-13

1.1 SUMMARY OF FINANCIAL PERFORMANCE

The summarized financial performance of your company for the year ended 31st March, 2014 is furnished below:

(Rs. In Crore)

Year ended Year ended 31st March, 31st March, 2014 2013

Turnover 75226 68834

Profit before Depreciation Interest and Tax 1437 456

Interest and Finance Charges 321 329

Gross Profit after interest but before Depreciation 1116 127 and Tax

Depreciation and Amortizations 706 604

Profit/(Loss) Before Tax 410 (477)

Provision for Taxation (deferred tax liability) (191) 280

Profit/(Loss) after Tax 601 (757)

Balance of profit/(Loss) brought forward from 4238 4999 previous year

Surplus available for appropriation 4839 4242

Transfer to Capital Redemption Reseve - 4

Balance carried to Balance Sheet 4839 4238

1.2 DIVIDEND

In view of the carry forward losses of previous financial year and funds requirement for meeting huge capital expansion plans of the Company, your Board of Directors has not recommended any dividend for the financial year 2013-14. However, we are quite confdent to deliver growth and enhance shareholder value once all the units of Phase-III Refnery Project are made fully operational which will contribute significant improvement in operating profit margins of the Company.

1.3 OPERATIONAL PERFORMANCE

Your Company had processed the highest ever crude of 14.59 MMT during the financial year 2013-14 compared to 14.41 MMT during the previous financial year 2012-13. The Fuel and Loss net of commissioning usage was 7.15%, higher by 1% as the fuel consumption during stabilisation of units.

The Refnery achieved the Highest Crude processed with Energy index (MBTU/BBL/NRGF) of 60.88 during the year 2013-14 against 61.01 during the year 2012-13.

1.4 EXPORTS

Your Company has achieved highest ever export turnover of Rs.35,392 Crore during the financial year 2013-14 by exporting products viz., Motor Spirit (MS), Naphtha, Mixed Xylene (MX), High Speed Diesel (HSD), Air Turbine Fuel (ATF) and Fuel Oil (FO).

Your Company continues to supply petroleum products viz. Mogas, ATF, Gas Oil and Fuel Oil to State Trading Corporation (STC), Mauritius.

In the global competitive market, Your Company has secured its place by exporting petroleum products to 21 countries viz. Bahamas , China , Egypt, Hongkong, Japan, Jordan, Kenya ,Korea, Malaysia ,Mauritius, Netherlands, Oman ,Saudi Arabia ,Singapore, Slovenia, South Africa, Taiwan, Turkey ,UAE, UK and Yemen and continues to explore more opportunities for its growth.

1.5 SAFETY PERFORMANCE

Your Company have achieved 912 accident free days as on 22/07/2014 with 8.59 million man hours worked. The various units of Phase -III Refnery Upgradation and Expansion Project and storage tanks were commissioned safely during the year.

Your Company is committed towards imparting continuous training in fre and safety practices. During the year, 1085 employees and 5788 contract workmen were trained in fre and industrial safety. Regular Mock exercises were conducted considering the various emergency scenarios in plant and non plant areas.

1.6 ENVIRONMENT MANAGEMENT & PERFORMANCE

Your Company believes in "Perform beyond Compliance" - that is to perform better than minimum required by statutes. The Refnery of your Company is a certified ISO 14001: 2004 for Environment Management Systems. The major achievements on the Environment Management and performance are summarized as under:

- The Phase -III has an advanced Waste Water Treatment Plant (WWTP) which includes oil effuent Treatment unit, Sequential Batch Reactor (SBR) unit and Membrane Bio Reactor (MBR). This unit was commissioned during the year.

- Sulphur Pastillation Unit was commissioned in the Refnery to reduce dust emissions in the Sulphur Recovery Unit (SRU).

- An advanced Reverse Osmosis (RO) Plant was commissioned on 30/10/2013 for maximizing the quantity of treated water recycle back to the Refnery.

- Wet Air Oxidation (WAO) Unit is set-up in the Refnery to treat Spent Caustic to improve the WWTP performance.

- Volatile Organic Compound (VOC) Recovery system in WWTP- III was commissioned during the year. VOC Emission is being monitored at 74,000 points in the Refnery through reputed agency and corrective measures are taken to effectively minimize the same.

- A Condensate Recovery Unit was commissioned in process unit resulting reduction in fresh water consumption.

- A Closed Bioremediation Unit was commissioned in the Refnery as a part of WWTP.

- Environment Awareness programs are organized periodically in the neighbouring villages & schools in association with Karnataka State Pollution Control Board (KSPCB).

- Karnataka Forest Department, Government of Karnataka has been requested to develop greenbelt in 120 acres area of the Refnery. They have developed saplings and Plantation has been commenced in the Refnery area of your Company.

- Advanced technology has been deployed for cleaning Crude oil Tanks in the Refnery.

- Regular Seawater quality monitoring is being carried out by M/s. College of Fisheries on fortnight basis indicating no adverse effect on the marine environment.

- Ten Ground Water monitoring stations in and around Refnery have been setup and regular monitoring of ground water quality is being carried out along with KSPCB. Average treated effuent recycled to cooling towers during the year was 70-75%.

- Ambient air quality monitoring is being done inside and outside the Refnery at 9 locations (including 2 locations at Phase-III Project site) as per revised National Ambient Air Quality Monitoring Standard.

Your Company has also undertaken the following projects which are in various stages of installation:

Your Company has also undertaken the following projects which are in various stages of commissioning.

- Vapour Recovering System for light hydrocarbon storage tanks in Phase – III Refnery Project,

- Automatic Rim seal protection Installation in storage tanks.

- Connection of LPG spheres and Mounded Bullets PSV discharge to fare header.

1.7 MARKETING

1.7.1 Marketing and Business Development

Your Company continued its direct marketing activities in the State of Karnataka and in the adjoining states. The total direct marketing turnover during the financial year 2013-14 was Rs. 2589 Crore.

With the availability of natural gas pipeline in North Karnataka and Goa, some major customers have shifted from liquid fuels to gas, leading to shrinkage of liquid fuels market. However, your Company could establish a good market reach for sale of Petcoke produced from the Delayed Coker Unit (DCU) commissioned in Phase-III project during April, 2014.

Your Company continues to develop its direct marketing network for various value added products like Petcoke, Polypropylene (PP) etc by various units commissioned in Phase-III Refnery project.

1.7.2 Retail Operations

Your Company embarked into bulk sales of HSD after the introduction of dual pricing for HSD which has improved sales considerably in the bulk consumer segment. Domestic sale of Mixed Xylene has increased considerably against previous year. Keeping in view the gradual decontrol of HSD in retail segment; Your company is evaluating the opportunity to set up few retail outlets in select markets.

1.7.3 New Products Marketing Plan

Your Company is setting up a Polypropylene (PP) plant of 440 KTPA capacity for bulk supplies to downstream processing industry. The channel partners have been identified for sale of Polypropylene (PP) in key areas in the domestic market. In addition to this your Company is also developing storage infrastructure for Polypropylene (PP) in Karnataka for managing its supply chain for marketing networks.

1.7.4 Joint Ventures

Your Company''s Joint Venture (JV) with Shell B.V. Netherland known as Shell MRPL Aviation Fuel Services Limited (SMAFSL) supplies Aviation Turbine Fuel (ATF) to both domestic and international airlines at Indian airports has performed well.

The Turnover of the SMAFSL was Rs. 651 Crore during the financial year 2013-14 against Rs. 486 Crore during the previous financial year 2012-13 and the Pre-tax profit of Rs. 18.40 Crore during the financial year 2013-14 against Rs.13.14 Crore during the previous financial year 2012-13. The company has declared dividend of 10% for the financial year 2013-14 as compared to 8% in the previous financial year 2012-13.

2. AWARDS AND RECOGNITION:.

- Upgraded to Schedule ''A'' CPSEs from Schedule "B" with effect from 04/07/2013 by the Department of Public Enterprises, thereby making it eligible for achieving the "NAVARATNA" status.

- Won the coveted Petrofed Award "Refnery of the Year-2012" for its commendable performance in production and operational efficiencies while adhering to the norms of health, safety and environment protection.

- Won the "Refnery of the Year" from Petrofed for the year 2011-12 for leading performance in production and operational efficiencies while meeting the norms of Health, Safety and Environment protection.

- Won the "Export Excellence Award, 2013" in Best Manufacturer / Exporter (large category) – Gold from the Federation of Karnataka Chamber of Commerce and Industry (FKCCI) on 22/06/2013.

- Secured the frst prize for outstanding performance in the area of Hindi Implementation for the year 2012-13 by Town Offcial Language Committee(TOLIC), Mangalore on 28/05/2013.

- Secured the frst prize in the Jawaharlal Nehru Centenary Awards for energy performance for the year 2011-12 & 2012-13 under the Refneries category having complexity of 6.0.

- Secured the frst prize in the OGCF-2012 awards for Furnace/Boiler effciency having heat duty more than 1000MM Kcal/hr.

- Won the "State Export Excellence Award" for 2012-13 & 2011-12 Medium/ Large category – Gold & Platinum respectively by Government of Karnataka.

- Won the award for "Best Fuel efficient Boiler operation" by the Department of Factories and Boilers on the occasion of 43rd National Safety Day celebration.

3. CREDIT PROFILE

3.1 ICRA has reaffirmed Issuer Rating "Ir AAA" (pronounced IR Triple A) to your company. This rating indicates the highest credit quality rating assigned by ICRA and the rated entity carries the lowest credit risk.

3.2 ICRA has reaffirmed "[ICRA] AAA" (pronounced as ICRA Triple A) to Rs. 3,000 Crore Fund- Based limits of your company. The outlook on the rating is "Stable".

1.3 ICRA has reaffirmed "[ICRA] A1 " (pronounced as ICRA A one plus) to Rs. 4,000 Crore Non- Fund based limits of Your company.

1.4 ICRA has reaffirmed "[ICRA] A1 " (pronounced as ICRA A one plus) to Rs. 1,500 Crore Commercial Paper issued by your company. This rating indicates the very strong degree of safety regarding timely payment of financial obligations i.e., which carries the lowest credit risk.

1.5 CRISIL has reaffirmed "[CCR AAA]" (pronounced as CCR Triple A). This rating indicates highest degree of strength with regard to honouring debt obligations by Your company.

4. FINANCIAL ACCOUNTING:

The financial Statements have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP), all accounting standards guidance note on accounting for activities of your company issued by The Institute of Chartered Accountants of India (ICAI) and Schedule VI format and other relevant provisions of the Companies Act, 1956. The MCA General Circular No. 1/19/2013-CL-V dated 04/04/2014 clarifes that the Annual Accounts/Financial Statements along with documents required to be attached thereto, Auditors'' Report and Boards'' Report in respect of financial years that commenced earlier than 1st April, 2014 shall be governed by the relevant provisions/ Schedules/rules of the Companies Act, 1956.

5. INTERNAL CONTROL SYSTEM

Your Company has a well-established internal control system, which is commensurate with its size and nature of operations. The internal control systems are designed to provide a reasonable assurance over reliability in financial reporting, ensure appropriate authorisation of transactions, safe guarding the assets of the Company and prevent misuse/losses and legal compliances.

The internal control system includes a well-Defined delegation of authority and a comprehensive Management Information System coupled with monthly reviews of operational and financial performance, a well-structured budgeting process with regular monitoring of expenses, a state of art ERP systems and Internal audit.

The internal audit team is led by a professional audit manager and supported by financial and technical personnel drawn from across the organisation. The internal audit is conducted as per a plan drawn at the beginning of the year in consultation with the management and statutory auditors of the Company which is finally approved by the Audit Committee. The audit plan attempts to cover all significant risk areas, review and evaluation of the effectiveness of existing processes, controls and compliances and ensure adherence to policies and procedures. All the significant audit observations made by the internal auditors of the Company are regularly reviewed by the management. However, all significant audit observations along with the management responses/ replies and follow up actions are periodically placed for review before the Audit Committee.

6. PROJECTS

A) Ongoing projects:

i. Phase -III Refnery Upgradation and Expansion Project.

The commissioning of Secondary Process Units of Phase -III Refnery Upgradation and Expansion project are under near completion, which will increase the distillate yield and produce high value products viz Propylene, Gasoline from low value black oils.

Crude Distillation Unit (CDU), Hydrogen Generation Unit (HGU) and Diesel Hydrotreater Unit (DHDT) were commissioned in the last financial year. The Refnery achieved major milestones with the commissioning of the Delayed Coker Unit (DCU), one train of Sulphur Recovery Unit (SRU) and Coker Gasoil Hydro Treating Unit (CHTU) in the months of April and May 2014. The last process unit in Phase -III, Petro (PFCCU) unit is under advance stage of commissioning and expected to go on stream shortly.

The delay in commissioning was mainly on account of the delay in the completion of the Captive Power Plant (CPP) being executed by M/S BHEL. Most of the major equipments are commissioned and it is expected that the CPP can supply the required quantity of steam and power for running all the Phase -III units.

The total expenditure incurred by your Company on Phase –III Refnery Upgradation and Expansion project is around Rs. 11500 Crore as on 15/07/2014.

ii. Polypropylene Project (PP):

The Polypropylene (PP) unit being set up with the licensor M/s Novolen Technology, Germany in integration with the Phase -III Project at an estimated Capex of Rs. 1804 Crore by your Company has achieved an overall progress of 95.6% as on 15/07/2014.

The non-vacating of the site by PDF had resulted in shifting the location of the unit causing delay in the site work and environmental clearance. The project is expected to get mechanically completed and will go on stream shortly. The total expenditure incurred on this project was Rs. 960 Crore as on 15/07/2014.

iii. Single Point Mooring (SPM) Project:

Your Company has setup SPM project along with coastal booster pumping station within the port limits at a location of 16 Km from the shore having the draft availability of 30 M for handling Very Large Crude Carrier (VLCC) at an estimated cost of Rs. 1044 Crore . The SPM was successfully commissioned on 29/08/2013 by unloading the frst crude vessel Ratna Puja with the cargo of 87 TMT(''000MT).

This facility will enable the company to receive crude in Suez max / VLCC vessels, which in turn will give freight economics and also allow access to West African and Latin American countries for sourcing crudes. This facility will also de-congest existing berth facility at New Mangalore Port Trust (NMPT) port and reduce the incidence of demurrage.

iv. Refnery Performance Improvement Programme

Your Company has taken up Refnery Performance Improvement Programme (RPIP) through M/s Shell Global Solutions International B.V. under the auspices of Centre for High Technology, Ministry of Petroleum and Natural Gas (MoP&NG), Government of India.

The RPIP is aimed at identifying opportunities for improvement by adopting best operating practices in the areas having a bearing on profit margin including optimizing operation , energy and utilities consumption , minimizing hydrocarbon loss and improving maintenance and inspection practices.

The PFI''s (Proposals for Implementation) developed after the evaluations are under various stages of implementation.

B) Future Projects:

Your Company has signed an Memorandum of Understanding (MOU) with Government of Karnataka for setting up a Linear Alkyl Benzene (LAB) Plant (for producing raw materials to manufacture detergent) and to expand its Refning capacity to 18/21 MMTPA in a time horizon of 3 to 6 years subject to techno economic viability and availability of required infrastructure at Mangalore with an approximate investment of Rs. 8500 Crore.

7. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO :

The additional information required to be disclosed pursuant to section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988 with respect to conservation of energy, technology absorption and foreign exchange earnings & outgo are furnished in ''Annexure- I'' which forms part of this Report.

8. PARTICULARS OF EMPLOYEES

Your Company being a Government Company is exempted from disclosure of particulars of employees under section 217(2A) of the Companies Act, 1956, and the Particulars of Employees (Amendment) Rules, 2011.

9. RIGHT TO INFORMATION ACT, 2005

Your Company''s RTI manual is available on its website www.mrpl.co.in, which discloses all required information.

During the year, 114 applications were received, out of which 111 were disposed off before 31/03/2014 and balance 3 applications were disposed off subsequently.

10. HUMAN RESOURCES

- Your Company continued to enjoy cordial and harmonious relations with the collectives and as evidence to the same not a single man-hour was lost on account of any industrial disturbance during the year 2013-14.

- During the year, your Company has recruited 114 employees comprising of 8 women employees and 44 Schedules Caste (SC) / Schedule Tribe (ST) employees.

- Total employee strength as on 31/03/2014 was 1715 including 127 women employees,191 SC/ST employees and 7 Physically Challenged employees. 704 employes belong to Management cadre whereas 1011 employees belong to Non-Management cadre.

- During the year 2013-14, Your Company devoted 4809 Mandays for Training, Development and Learning which amounted to an average of 3 Mandays per employee. This includes functional, developmental and special training programs covering the entire spectrum of employees.

11. OFFICIAL LANGUAGE:

Your Company is implementing Offcial Language Policy in letter and spirit as per the Annual Programme prescribed by the Department of Offcial Language, Ministry of Home Affairs, Government of India. In order to propagate Hindi among the employees, Hindi Workshops are organised on a regular basis at Mangalore, Mumbai, Delhi & Bangalore offices. Regular Hindi classes such as Prabodh, Praveen & Pragya in addition to Hindi Stenography are being conducted for employees. In order to increase the correspondence in Hindi, by the employees, special efforts are made to activate Unicode facilities on all the computers used in your Company. To motivate employees for Hindi usage, various incentive schemes are introduced such as Cash award & Personal Pay.

12. VIGILANCE FUNCTION:

Your Company has developed a structured mechanism of vigilance functions and its practices are focused towards creation of value for all the stakeholders. The practices involve multi-layer checks and balances to improve transparency. Vigilance Awareness and Preventive vigilance activities were continuously carried out during the year. Guidelines of Central Vigilance Commission (CVC) are being followed. officers in sensitive posts are rotated regularly.

Whistle Blower Policy for employees is in place which ensures that a genuine whistle blower is granted due protection from any victimization. In compliance with CVC instruction, your Company has implemented a complaint handling policy in which all complaints received from various sources can get recorded and can be examined by vigilance. Further, in line with CVC instruction, your Company has achieved high compliance level with regard to e-payment and e-tender.

Leveraging of technology to enhance transparency has been a thrust area of action in which vigilance has played a catalytic role. The website of the company displays downloadable tender document, publication of information of works awarded on nomination basis, publication of post award information of contracts.

Full time Chief Vigilance officer (CVO) is posted and he can be contacted at cvo@mrplindia.com for any complaint having vigilance angle.

13. SECURITY MEASURES

Security of Refnery of your Company is designed to comply with Oil Sector Infrastructure Protection Plan (OSIPP) and the Security Audit recommendations given by the Intelligence Bureau (IB), Ministry of Home Affairs, Government of India from time to time are duly implemented.

The Security of the Refnery of your Company is handled by Central Industrial Security Force (CISF) and survey to extend CISF coverage to newly commissioned Phase -III Project is underway. A project to install an integrated Security Surveillance System for the entire Refnery is on the anvil.

Security is on top of the agenda of your Company and to ensure preparedness, periodic mock drills on work-place security preparedness are conducted. To promote awareness on security issues amongst all stake holders, Security Awareness Weeks are organized.

14. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

Your Company''s social welfare and community development initiatives focus on the key areas of education, health care and overall development of basic infrastructure in and around its operational areas. The CSR objective of your Company in line with DPE guidelines is promoted under the name of "SAMRAKSHAN". This captures the spirit and commitment to" protect, preserve and promote the social, cultural and environmental heritage and wealth in and around the area of our business and to usher in sustainable development". Facilitating Midday Meal to support continuing Education, setting up of computer room, Anganwadi building, skill development training for youths, infrastructural development etc. is a part of the Samrakshan activities.

Your company has spent Rs. 3.47 Crore for various CSR activities during the year 2013-14.

15. DIRECTORS

During the year following changes took place in Board of Directors of Your Company:

15.1 Shri D.K. Sarraf has assumed the position of CMD, ONGC and Chairman/ Director of your Company w.e.f. 01/03/2014 consequent to superannuation of Shri Sudhir Vasudeva from the services of ONGC.

15.2 Consequent upon attaining the age of superannuation Shri P P Upadhya, Managing Director, retired from the services of MRPL on July 31, 2014. Shri Vishnu Agrawal, Director (Finance) has assumed the additional charge of the post of Managing Director w.e.f. 01/08/2014.

15.3 Shri V G Joshi was appointed Director (Refnery) w.e.f. 04/04/2013.

15.4 Shri P Kalyanasundaram, Joint Secretary, MoP&NG was appointed Government Director w.e.f. 15/04/2013 in place of Shri P. K. Singh. Shri P. Kalyanasundaram who retires by rotation and being eligible offers himself for re-appointment as a Director.

15.5 Shri B. K. Namdeo, Director Refnery (HPCL) was appointed as Director w.e.f. 01/07/2013 in place of Shri K. Murali consequent upon superannuation from the services of HPCL. Shri B. K. Namdeo who retires by rotation and being eligible offers himself for re-appointment as a Director.

15.6 Shri B Ravindranath ceased to be an Independent Director / Nominee Director of IDBI Bank Limited., w.e.f. 06/01/2014.

15.7 Dr. D. Chandrasekharam ceased to be an Independent Director w.e.f. 10/03/2014 consequent upon the expiry of his 3 years term as an Independent Director on the Board of ONGC.

15.8 Shri K. S. Jamestin, Special Invitee on the Board, was superannuated from the services of ONGC as Director (HR) on 31/07/2014 and ceased to be a Special Invitee on the Board. Shri A. K. Banerjee, Director (Finance), ONGC, has been nominated as Special Invitee on the Board of MRPL w.e.f. 05/08/2014.

15.9 The Board wishes to place on record its deep appreciation for the services rendered and contribution made by Shri Sudhir Vasudeva, Shri P P Upadhya, Shri P. K. Singh, Shri K. Murali, Shri B Ravindranath, Dr. D. Chandrasekharam and Shri K. S. Jamestin as directors / special Invitee during their tenure on the Board of the company.

16. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respect to Directors'' responsibility statement, it is hereby confirmed that:

a. In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

b. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2013-14 and of the profit and loss of the company for that period;

c. The Directors have taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d. The Directors have prepared the Annual Accounts for the financial year 2013- 14 on going concern basis.

17. FIXED DEPOSIT

Your company has not accepted any fixed deposit during the year from the public.

18. CORPORATE GOVERNANCE

18.1 Your company has complied with all the mandatory provisions of Clause 49 of the Listing Agreement relating to the Corporate Governance requirements and mandatory guidelines on Corporate Governance for CPSEs issued by DPE, Government of India, except the composition of Board of Directors.

18.2 The Annual Report contains a separate section on Corporate Governance, which forms part of this Report.

18.3 Pursuant to Clause 55 of Listing Agreement, Annual Business Responsibility Report (ABRR) has been prepared for the financial year and the same has been uploaded on the website of the company www.mrpl.co.in

18.4 Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges, Your company has obtained the Certifcate from the Joint Statutory Auditors of the Company, towards Compliance of Corporate Governance which is annexed to and forms part of this report.

18.5 As a measure of good corporate governance, Your company has engaged M/s Ullas Kumar Melinamogaru & Associates, Practicing Company Secretaries, Mangalore for conducting Annual Secretarial Compliance Audit for the year 2013-2014. M/s Ullas Kumar Melinamogaru & Associates Practicing Company Secretaries, Mangalore have issued Annual Secretarial Compliance Audit Report for the year 2013-14 which forms part of this report.

19. MANAGEMENT DISCUSSION AND ANALYSIS

In terms of Clause 49 (IV)(F) of the Listing Agreement with the Stock Exchanges, the Management Discussion and Analysis Report for the year have been attached and forms part of this report.

20. AUDITORS:

20.1 M/s Gopalaiyer and Subramanian, Coimbatore and M/s A Raghavendra Rao and Associates, Mangalore have been appointed as Joint Statutory Auditors of the Company for the Financial Year 2013-14 by Comptroller & Auditor General of India (C&AG).

20.2 The report of the C&AG at Annexure III forms part of this Report.

20.3 Pursuant to the provisions of the Companies Act, 1956, the cost accounts maintained by the company for the financial year 2013 -14 are being audited by Cost Auditors M/s. Musib and Associates with approval of Ministry of Corporate Affairs, Government of India.

21. ACKNOWLEDGEMENT

- Your Company always conducts business with a strong commitment for environment preservation, sustainable development, safe workplaces and enrichment of the quality of life of its stakeholders and the community at large.

- Your Directors are highly grateful for all the help, guidance and support received from the Ministry of Petroleum and Natural Gas (MoP&NG), Ministry of Finance (MoF), Ministry of Corporate Affairs (MCA), Department of Public Enterprises (DPE), Ministry of Environment and Forest (MoEF), Ministry of External Affairs (MEA), Ministry of Shipping (MoS), Ministry of Home Affairs (MHA) Ministry of Heavy Industries and Public Enterprises (MoHI&PE) and other inistries and Departments of Central and State Governments especially the Government of Karnataka.

- Your Directors gratefully acknowledge the continued support and guidance extended by Oil and Natural Gas Corporation (ONGC) Limited, the parent company.

- Your Directors thank all shareholders and members of the Company for their faith, trust and confdence reposed on the Management of the Company.

- Your Directors wish to place on record their sincere appreciation for the sustained efforts and dedicated contributions put in by all the employees collectively and concertedly as a Team, to ensure that the Company continues to grow and excel.

For and on behalf of the Board

(D.K. Sarraf) Chairman

Place: New Delhi

Date : 05/08/2014


Mar 31, 2013

Dear Members,

The behalf of the Board of Directors of Mangalore Refi nery and Petrochemicals Limited (MRPL) and on my own behalf, it is my privilege to present the 25th Annual Report of the performance of your Company, the Audited Accounts and Auditors’ Report thereon for the year ended 31/03/2013.

2012-13 : Silver Jubilee Year of your Company

Your Company which was set up in 1988 with a processing capacity of 3.69 MMTPA was later expanded to 9.69 MMTPA before reaching the present capacity of 15 MMTPA.

25 years later, your Company MRPL, is an ONGC group company, a trail blazer with cutting edge technology and a jewel in the crown of our great Nation.

With ONGC powering MRPL : A Decade of Exponential Growth and Prosperity

The Board of Directors acknowledge the wonderful success story scripted by your Company under ONGC Group. In just 10 years, your company turned around from a ''BIFR’ case to a ''Mini Ratna, Category 1’ in July 2007 and a Schedule "A” Public Sector Enterprise in July, 2013. Your Company moved the needle of capacity utilization from a sluggish 70%, a decade back to a remarkable above 100% capacity utilization, year on year, for the last decade. The capacity itself has been increased from 9.69 MMTPA to 15 MMTPA. Your Company’s ability to deliver results is recognized by the Indian hydrocarbon industry and your Company have been awarded "Refi nery of the Year” for 2009 and for 2012 by Petrofed.

2012-13 : New milestones; Tough challenges.

2012-13 was a year of new milestones. Your Company have processed highest ever crude of 14.4 MMT during the year and posted the highest ever gross turnover of Rs. 68,834 Cr despite the shutdown of the refi nery due to water shortage during 19/04/2012 to 27/04/2012. Inspite of the good physical performance during the year, the Company has incurred a net loss after tax of Rs. 757 Cr against after tax profi t of Rs. 909 Cr in the previous year. The loss was mainly contributed by shutdown of the refi nery due to water shortage at a time when the price of Crude and Product was falling resulting in inventory losses, lower operating margin, higher depreciation and interest cost arising out of Phase III capitalization. It must be admitted that your Company has put in a very creditable performance during the year 2012-13 in the background of the industry scenario and as compared with the performance results of the peers. On completion of Phase-III project in its entirety, the company anticipates the benefi ts of the project will start accruing and is expected to be in the path of profi tability again.

Major highlights of CompanyÊs performance during the year 2012-13

1. Processed the highest ever crude of 14.4 MMT during the year 2012-13, against 12.82 MMT in 2011-12 and recorded the highest ever gross turnover of Rs. 68,834 Cr for the year 2012-13 against Rs. 57,207 Cr for the year 2011-12.

2. Higher distillate yield in 2012-13 at 76.55% as against 73.27% in 2011-12.

3. Set a new record in export during the year at 7.10 MMT vis-a-vis last year’s 5.59 MMT

4. Procured the highest Crude of 14.15 MMT during the year 2012-13 as against 13.02 MMT in 2011-12 at a time of sanction against Iran.

5. The product despatch for the year 2012-13 at 13.17 MMT was highest against 11.95 MMT in 2011-12.

1.1 SUMMARY OF FINANCIAL PERFORMANCE

(Rs.In Cr.)

Year ended Year ended 31st March, 2013 31st March, 2012

Turnover 68,834 57,207

Profi t before Depreciation Interest and 456 1,961 Tax

Interest and Finance Charges 329 207

Gross Profi t after interest but before 127 1,754

Depreciation and Tax

Depreciation and Amortizations 604 434

Profit/(Loss) Before Tax (477) 1,320

Provision for Taxation (deferred tax 280 411 liability)

Profit/(Loss) after Tax (757) 909

Balance of Profi t/(Loss) brought forward 4,999 4,298 from previous year

Surplus available for appropriation 4,242 5,207

Appropriations:

Dividend on Equity Shares 175

Tax on Dividend 28

Transfer to Capital Redemption 5 5

Reserve

Balance carried to Balance Sheet 4,237 4,999

1.2 DIVIDEND

In view of the losses during the year 2012-2013, declaration of dividend could not be considered by the Board of Directors for the year.

1.3 OPERATIONAL PERFORMANCE

Your Company with increased capacity addition had processed the highest ever crude of 14.4 MMT during 2012-13 against 12.82 MMT in 2011-12 despite shutdown of the refi nery from 19th April to 27th April, 2012 due to water shortage. Fuel & Loss for the year 2012-13 was 7% against 6.75% in 2011-12. Higher fuel & loss was mainly on account of commissioning activities of Phase-III units and force majeure shutdown of the refi nery during the fi rst quarter of the year due to water crisis. The energy index for the year 2012-13 was 61.01 (MBTU / BBL / NRGF) against 57.92 in 2011-12 and MBN was higher during the year due to higher fuel & loss and lower complexity operations. The Company processed some new crudes namely Zafi ro, Rabi, Aseng and Hungo for the fi rst time during the year 2012-13.

1.4 EXPORTS

Your Company have achieved highest ever export turnover of Rs. 33,340 Cr during the year 2012-13 by exporting petroleum products viz., Motor Spirit, Naphtha, Mixed Xylene, High Speed Diesel, Jet fuel and Fuel Oil.

The three year term export contract for the supply of petroleum products to State Trading Corporation, Mauritius to meet the demands of Republic of Mauritius continued during the year. Your Company has successfully fi nalised a new 3 year contract with STC, Mauritius for supply of petroleum products which will be valid till 31/07/2016.

In the global competitive market, your Company have secured its place by exporting the petroleum products and is continuing to explore opportunities for its growth.

1.5 SAFETY PERFORMANCE

Your Company have recorded accident free period of 435 days during the year. No major outbreak of fi re during the year resulting in property loss or environmental damage. Hydrogen and DHDT Plants of Phase-III were commissioned safely during the year in addition to a few new tanks. Your Company is committed towards imparting continuous training in fi re & safety practices. During the year, 873 employees and 4,722 contract workmen were trained in fi re and industrial safety. OISD external safety audit was conducted in December-2012.

A total of 7 Mock exercises were conducted during the year considering the various emergency scenarios like toxic gas leak, fi res, in Plant and Non-Plant area like Materials Department. This includes one full scale "off site” Mock exercise carried out in the presence of District Crisis Group Members on 04/12/2012 which was followed by Review Meeting and timely implementation of all the recommendations.

1.6 ENVIRONMENT MANAGEMENT & PERFORMANCE

In Environment Management, the Company’s Philosophy is to perform beyond Compliance - that is to perform better than minimum required by statutes. The refi nery is certifi ed with ISO 14001: 2004 for Environment Management Systems.

The major achievements on the Environment Management and performance front include:

- Phase III advanced Waste Water Treatment Plant which includes oil effl uent treatment unit & Sequential Batch Reactor (SBR) unit was commissioned in the month of March, 2013. Membrane Bio Reactor (MBR) unit pre- commissioning jobs are in progress.

- Sulphur Pastillation Unit is being commissioned in the Refi nery as a part of Phase - III to reduce dust emissions in the Sulphur Recovery Unit (SRU).

- An advanced Reverse Osmosis (RO)Plant is set up for maximizing the quantity of treated effl uent back to the Refi nery. RO will be commissioned shortly.

- Wet Air Oxidation (WAO) Unit is set-up in the refi nery to treat Spent Caustic and to improve the WWTP performance.

- A Condensate Recovery Unit has been commissioned in process unit resulting reduction in fresh water consumption.

- A Closed Bioremediation Unit is being commissioned in the refi nery as a part of WWTP-III

- VOC Emission is being monitored at 74,000 points in the refi nery through reputed agency and corrective measures are taken to effectively minimize the same.

- Environment Awareness programs are organized periodically in the neighbouring villages & schools in association with Karnataka State Pollution Control Board (KSPCB).

- Order was placed on State Forest Department for developing greenbelt in 120 acres area. Plants are being developed in their nursery. Tree Plantation is already commenced in the Refi nery.

- An advanced technology has been employed for cleaning Crude Tanks in the refi nery.

- Seawater quality monitoring was carried out by M/s. College of Fisheries on fortnight basis indicating no adverse effect on the marine environment.

- Ten Ground Water monitoring stations in and around Refi nery have been set up and regular monitoring of ground water quality is being carried out along with KSPCB.

- Average treated effl uent recycled to cooling towers during the year was 70-75%.

- Ambient air quality monitoring is being done inside and outside the Refi nery at 9 locations (including two locations at Phase-III Project site) as per revised National Ambient Air Quality Monitoring Standard.

The following ongoing projects are in various stages of installation:

- Vapour Recovering System for light hydrocarbon storage tanks in Phase - III Refi nery Project,

- VOC Recovery system in WWTP- III,

- Installation of additional Hydrocarbon detector at strategic locations in the Refi nery,

- Installation of automatic rim seal protection for storage tanks at procurement stage and

- Connection of LPG spheres and Moulded Bullets PSV discharge to fl are header.

1.7 MARKETING

1.7.1 Domestic Marketing of Products

Your Company continued its direct marketing activity in the segment of petroleum products in the State of Karnataka and the adjoining States. The direct sales turnover during the year 2012-13 was ? 3,750 Cr compared to ? 2,755 Cr in the previous year.

1.7.2 Retail Operations

Government of India has announced complete decontrol of HSD prices for direct bulk consumers. Your Company has already made inroads in the bulk HSD market. Pending fi nalization of the Govt. policy towards eventual complete decontrol of HSD prices for retail segment, your Company have taken cautious steps to set up only few retail outlets in select markets.

However, your company is in preparedness to enter the retail market in short notice. MS prices remain decontrolled and sales from existing retail outlets continue.

1.7.3 New Products Marketing Plan

Your Company is setting up a polypropylene (PP) plant of 440 KTPA capacity for bulk supplies to downstream processing industry. Detailed Business Plan for sale of PP has been fi nalized and selection of channel partners for sale in domestic market is in progress. In addition, your Company is also developing storage infrastructure for PP in Karnataka.

Your Company is also putting up a Delayed Coker Unit, which will produce pet coke, a new product in the product basket of MRPL. Your Company shall undertake sale of pet coke to major industrial consumers in South India.

1.7.4 Joint Ventures

Your Company’s Joint Venture (JV) with Shell B.V. Netherland in the name and style of Shell MRPL Aviation Fuel Services Private Limited (SMAFSPL) supplies Aviation Turbine Fuel to both domestic and international airlines at Indian airports. During the year, this JV Company has been converted into a public company (SMAFSL).

SMAFSL is aggressively acquiring market share in both domestic and international airlines at Indian airports. The company commenced its operations at Goa and New Delhi. Aviation fuelling station facility has been set-up at Mangalore. The turnover for the year 2012-13 is Rs. 486.10 Cr (2011-12 Rs. 517.35 Cr) and recorded a Pre-tax profi t of Rs. 13.14 Cr for the year (Previous Year Rs. 18.16 Cr). The company has proposed to pay a dividend of 8% for the year 2012-13 (10% in 2011-12).

2. AWARDS AND RECOGNITION:

- MRPL has been upgraded from Schedule ''B’ to Schedule ''A’ company with effect from 4/7/2013.

- MRPL has bagged the coveted Petrofed Award, 2012 "Refi nery of the Year” for the commendable performance in production and operational effi ciencies while meeting the norms of health, safety and environment protection.

- MRPL has won "Export Excellence Award, 2013” in Best Manufacturer – Exporter - large category- Gold by Federation of Karnataka Chamber of Commerce and Industry.

- MRPL was conferred "State Export Excellence Award” for 2010-11 & 2009- 10 Medium/Large category – Gold by Government of Karnataka.

- MRPL has been rated "Excellent” in performance as per the MoU signed with ONGC for the year 2011-12 and 2012-13 (provisional).

- Managing Director, MRPL has won the "CEO with HR Orientation Award” in the Global HR Excellence Awards presented by Institute of Public Enterprise, Hyderabad.

- MRPL was conferred with "BT-Star PSU Excellence Award, 2013” in Human Resource Management category (Mini ratna /others).

- MRPL was awarded First Prize for outstanding performance in the area on Hindi Implementation for two consecutive years 2011-12 and 2012-13 by the Town Offi cial Language Implementation Committee, Mangalore.

3. CREDIT PROFILE

3.1 ICRA has reaffi rmed Issuer Rating "Ir AAA” (pronounced IR Triple A) to MRPL. This rating indicates the highest credit quality rating assigned by ICRA and the rated entity carries the lowest credit risk.

3.2 ICRA has assigned "[ICRA] AAA” (pronounced as ICRA Triple A) to Rs. 3,000 Cr Fund- Based limits of MRPL. The outlook on the rating is "Stable”.

3.3 ICRA has assigned "[ICRA] A1 ” (pronounced as ICRA A one plus) to Rs. 4,000 Cr Non-Fund based limits of MRPL.

3.4 ICRA has reaffi rmed "[ICRA] A1 ” (pronounced as ICRA A one plus) to Rs. 900 Cr Commercial Paper Programme of MRPL. This rating indicates the very strong degree of safety regarding timely payment of fi nancial obligations i.e., which carries the lowest credit risk.

3.5 CRISIL has reaffi rmed the highest Corporate Credit Rating "[CCR AAA]’’ (pronounced as CCR Triple A) to MRPL. This rating indicates highest degree of strength with regard to honouring debt obligations by MRPL.

External Commercial Borrowings

Towards partial Debt Funding for Phase III Refi nery Project, Polypropylene Project and SPM Project, your Company had tied up External Commercial Borrowings (ECB) of US $ 250 Million in 2011-12, out of which US $ 50 Million was availed in the year 2011-12 and remaining US $ 200 Million was drawn in the year 2012- 13. In order to keep the interest cost lower, your Company tied up further ECB of US $ 400 Million in the year 2012-13 and have drawn out of it US $ 50 Million during the year.

4. INTERNAL CONTROL SYSTEM

Your Company remains committed to ensure an effective internal control environment that provides assurance on the effi ciency of operations and security of assets. Internal Audit department functions under the supervision of the Audit Committee chaired by an Independent Director. Your Company have a well established internal control review mechanism which assures an effective internal control environment to the Audit Committee and Board of Directors.

5. PROJECTS

A) Ongoing Projects

i. Phase III Refinery Upgradation and Expansion Project.

The implementation of ongoing Company’s Phase III Refi nery Project to increase complexity and profi tability by increasing the refi ning capacity to 15 MMTPA, to process high TAN and heavy crude, increasing the distillate yield by upgrading low value naphtha and black oils and to produce value added products like Propylene and upgrade its total diesel pool to superior (Euro III/IV) grade HSD is nearing completion. The estimated cost of the project continues to be Rs. 12,160 Crore despite some delay in completion.

The implementation of the project though delayed is now progressing satisfactorily. As of 15/07/2013, the overall physical progress is 99 % against scheduled target of 100%. Due to the delay in completion of the CPP, your Company had taken up alternate measures to commission some of the units in Phase III with the utilities (power and steam) sourced from existing Refi nery CPP. All the process units and the downstream units have achieved Mechanical Completion which includes major units like Petro Fluidized Catalytic Cracking Unit (PFCCU), Delayed Coker Unit (DCU), Sulphur Recovery Unit (SRU). The Units are awaiting the availability of uninterrupted Steam and Power for carrying out the pre-commissioning and commissioning activities from CPP which is being executed by M/s BHEL. CPP is anticipated to be completed progressively by September / October, 2013. However, GTG 1 / HRSG 1 / GTG 2 have been commissioned.

HGU and DHDT units have been successfully commissioned. The other associated Utilities and offsite facilities like Cooling Water System, DM Water System, Air & Nitrogen System, Waste Water Treatment System & Fire Water System have also been commissioned.

The cost commitment for Phase III project was Rs. 10,935 Cr while the cumulative expenditure incurred was Rs. 10,458 Cr as on 31/07/2013. The project having reached the completion stage of 99% and cost commitment nearing completion, it is anticipated that there will not be any cost overrun despite the delay in project completion.

ii. Polypropylene Project

The setting up a Polypropylene unit integrated with the Phase III Project at an estimated capex of Rs. 1,804 Cr by your company with M/s. Novolen Technology, Germany is moderately delayed due to PDF problems. The non vacating of site by PDF has resulted in shifting the location of the unit and delayed commencement of site work and delayed receipt of environmental clearance. Site grading work has now been carried out in the new location and civil and structural works and equipment erection are in progress.

This Project has achieved a progress of 90 % as against target of 93 % as of 15/07/2013. The Cost Commitment made for Polypropylene Project was Rs. 1,298 Cr while the cumulative expenditure incurred was Rs. 725 Cr as of 31/07/2013.

iii. Single Point Mooring (SPM) Project

Your Company have set up SPM project along with coastal booster pumping station within the port limits at a location of 16 kilometers from the shore (High-Seas) having draft availability of 30 meters for handling upto Very Large Crude Carrier (VLCC) at an estimated cost of Rs. 1044 Cr. This facility will enable the company to receive crude in suez max / VLCC vessels, which in turn will give freight economics and also allow access to West African and Latin American countries crudes. This facility will also de-congest existing berth facility at NMPT port and reduce the incidence of demurrage. The facility can also be deployed for crude receipt by the Indian Strategic Petroleum Reserve Limited (ISPRL) underground cavern for storage of Crude oil at Mangalore.

The project activity has achieved an overall progress of 98.64% against the revised scheduled target of 99.12 % as of 15/07/2013. The testing of the facility was started on 03/01/2013. However, due to technical issues, it was taken up for repairs. This repair activity has since been completed. Cost Commitment made for SPM project was Rs. 688 Cr while the cumulative expenditure incurred was Rs. 651 Cr as of 31/07/2013.

iv. Refinery Performance Improvement Programme

Your Company have taken up Refi nery Performance Improvement Programme (RPIP) through M/s Shell Global Solutions International B.V. (SGSI) under the auspices of Center for High Technology, Ministry of Petroleum & Natural Gas.

The RPIP is aimed at identifying opportunities for improvement by adopting best operating practices in the areas having a bearing on profi t margin including optimizing operation, energy and utilities consumption, minimizing hydrocarbon loss and improving maintenance and inspection practices.

The fi rst part of Assessment phase has been completed and is presently under development for implementation.

B) Future Projects

Your Company have signed an MoU with Government of Karnataka for setting up a Linear Alkyl Benzene (LAB) Plant (for producing raw materials to manufacture detergent) and to expand its refi ning capacity to 21 MMTPA subject to techno- economic viability and availability of required infrastructure at Mangalore with an approximate investment of Rs. 8500 Cr. Besides these, Company has been planning to put up a Pet Coke gasifi cation plant and an Olefi n Complex (Naphtha Dual Feed Cracker) at an estimated cost of Rs. 2300 Cr. The preliminary feasibility report is under fi nalization for this project.

6. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO :

The additional information required to be disclosed pursuant to Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 with respect to conservation of energy, technology absorption and foreign exchange earnings & outgo are furnished in ÂAnnexure - IÊ which forms part of this Report.

7. PARTICULARS OF EMPLOYEES

Your Company being a Government Company is exempted from disclosure of particulars of employees under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011.

8. RIGHT TO INFORMATION ACT, 2005

Your Company have a RTI manual posted in the website www.mrpl.co.in.

During the year, 96 applications were received, out of which 80 were disposed off before 31/03/2013 and balance 16 applications disposed off after 1/04/2013.

9. HUMAN RESOURCES

- During the year 2012-13, your Company continued to enjoy cordial and harmonious relations with the collectives and as evidence to the same, not a single man-hour was lost on account of industrial disturbance.

- Your Company have recruited 160 employees including 24 women employees, 21 Schedule Caste (SC) & Schedule Tribe (ST) during the year 2012-13.

- Total employee strength as on 31/03/2013 was 1625 including 119 women employees. The strength of Management cadre employees were 629 and 996 were from Non-Management cadre. The total number of employees belonging to SC/ST categories was 150 and Physically Challenged 5.

- During the year 2012-13, your Company devoted 7191 man-days for Training, Development and Learning which amounts to an average 4.50 man-days per employee. This includes functional, developmental and special training programs covering the entire spectrum of employees.

10. OFFICIAL LANGUAGE:

Your Company implements Offi cial Language Policy in letter and spirit, as per the Annual Programme prescribed by the Department of Offi cial Language, Ministry of Home Affairs, Govt. of India. In order to propagate Hindi among the employees, Hindi Workshops were organised on a regular basis. In order to increase the correspondence in Hindi, by the employees, special efforts were made to activate Unicode facilities on all the computers of the Refi nery. Your Company promotes use of Hindi by conducting various programmes and competitions for the employees, their children and family members. Special awards were given to the eight topper students of MRPL DPS School, Mangalore who earned the highest marks in the public examination of class Xth in Hindi Language. In order to propagate Hindi in the Refi nery a House Journal (Half yearly) namely "MRPL PRATIBIMB” is being published from January, 2013. Your Company have been awarded fi rst prize for outstanding performance in Hindi implementation for the year 2011-12 and 2012-13 by the Town Offi cial Language Implementation Committee, Mangalore and also won nine prizes in the competition.

11. VIGILANCE FUNCTION:

Your Company have developed a structured mechanism of vigilance functions and its practices are focused towards creation of value for all the stakeholders. The practices involve multi-layer checks and balances to improve transparency. Vigilance Awareness and Preventive vigilance activities were continuously carried out during the year. Guidelines of Central Vigilance Commission (CVC) are being followed. Offi cers in sensitive posts are rotated regularly. Whistle Blower Policy for employees is in place which ensures that a genuine whistle blower is granted due protection from any victimization. In compliance with CVC instruction, your Company has implemented a complaint handling policy in which all complaints received from various sources can get recorded and can be examined by vigilance. Further, in line with CVC instruction, your Company have achieved very high compliance level with regard to e-payment and e-tender. Leveraging of technology to enhance transparency has been a thrust area of action in which vigilance has played a catalytic role. The website of the company displays downloadable tender document, publication of information of works awarded on nomination basis, publication of post award information of contracts. Full time Chief Vigilance Offi cer is in place and he can be contacted at cvo@ mrplindia.com for any complaints having vigilance angle.

12. SECURITY MEASURES

Security of MRPL Refi nery is designed to comply with Oil Sector Infrastructure Protection Plan (OSIPP) formulated by Ministry of Petroleum and Natural Gas (MoP&NG). Security of MRPL Refi nery is constantly being upgraded to meet with the requirements of OSIPP. Various security measures taken up at MRPL are as follows:

12.1 CISF Induction:

The Ministry of Home Affairs (MHA), Govt of India had sanctioned a total of 200 Central Industrial Security Force (CISF) personnel for the protection of MRPL Refi nery. The CISF had initially deployed a Quick Reaction Team for protection of the Refi nery. The CISF has recently taken over security of MRPL Refi nery with the induction of 110 CISF personnel. The remaining sanctioned strength of 90 personnel will be inducted by December, 2013. The CISF Township being constructed at a total cost of Rs. 32 crore is expected to be ready by December, 2013.

12.2 CCTV Surveillance & Access Control:

The Refi nery is covered by state-of–the art CCTV Network designed to cover all the access control gates and other strategic locations. Plan to extend CCTV coverage along with an integrated CCTV cum Communication control room is on the anvil. The security to Refi nery facility is strictly controlled by appropriate access control.

12.3 Mock Drills:

Your Company regularly conducts mock drills to assess the preparedness of the security forces to safeguard the Refi nery and its operation in the event of strike, law and order problems and other security related events independently and also along with the District Authorities besides State Police and Coast Guard. MRPL and industries in the neighbourhood are actively involved in the Coastal Security Exercises conducted along the coastal area under the auspices of Coast Guard.

12.4 The security system in place is routinely inspected and reviewed by the Industrial Security Branch of Intelligence Bureau (IB) to identify grey area and recommend / suggest improvements. Your Company deligently implements the majority of IB’s recommendations. The IB team had appreciated the Physical Security, IT Security and Fire Fighting systems at MRPL. Your Company is also guided by security expertise of the parent company.

13. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

The CSR objective of your Company promoted under the name of ''SAMRAKSHAN’ is to promote in a holistic and sustainable manner, development of under-privileged communities, affl icted by poverty, illiteracy, illness and physical disabilities. Besides these, your Company has taken CSR initiative to protect, preserve and promote the social, cultural and environmental, heritage and wealth in and around the area of company’s business and to usher in sustainable development. Your Company with these objectives has implemented a number of CSR programmes. The major programmes are sponsoring Midday Meal to support continuing education, setting up of computer lab, add on facility to Government schools, promotion of livelihood for economically weaker section of people by organising computerised stitch craft, JCB and crane operating training programme, construction of Community hall for local Panchayat, participation in development of appropriate access road to and from remote villages to main arterial roads, providing scholarship and fi nancial assistance to girl and SC/ST students for the Academic year 2012-13 , construction of class rooms, anganwadi, toilets and bath rooms for students’ hostel and running a free primary health centre. The Company along with ONGC has extended its commitment by putting up a separate block to the 162 year old Lady Goschen Hospital at an estimated cost of Rs. 21 Crores. The foundation stone for this facility was laid on March 18, 2013 by the Honourable Union Minister for Petroleum & Natural Gas Dr. M Veerappa Moily and Chief Minister of Karnataka Shri Jagadish Shettar. This activity will make a lasting impact in health services provided to women and infants in the city of Mangalore and surrounding areas.

Your Company has spent Rs. 4.65 Cr. for various CSR activities during the year 2012-13.

14. DIRECTORS

During the year, following changes took place in Board of Directors of your Company:

14.1 Shri P. K. Singh, Joint Secretary, MoP&NG was appointed on 17/08/2012 in place of Shri Vivek Kumar, Joint Secretary, MoP&NG.

14.2 Dr. A. K. Rath, Independent Director completed his three year tenure on 15/02/2013.

14.3 Shri V. G. Joshi has been appointed as Director (Refi nery), MRPL and he had assumed charge on 04/04/2013.

14.4 Shri P. Kalyanasundaram, Joint Secretary, MoP&NG has been appointed w.e.f. 15/04/2013 in place of Shri P. K. Singh, Joint Secretary, MoP&NG.

14.5 Shri B. K Namdeo, Director (Refi nery), HPCL has been appointed w.e.f. 01/07/2013 in place of Shri K. Murali, who superannuated from HPCL.

14.6 The Board wishes to place on records its appreciation for the services rendered by Shri Vivek Kumar, Dr. A. K. Rath, Shri P. K. Singh and Shri K. Murali as Directors during their tenure on the Board of the Company.

14.7 In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Shri P. Kalyanasundaram and Shri Sudhir Vasudeva will retire by rotation at the 25th Annual General Meeting of the Company. Shri P. Kalyanasundaram and Shri Sudhir Vasudeva being eligible, offer themselves for re-appointment as Directors of the Company.

14.8 Brief resume of the Directors seeking appointment / re-appointment, together with the nature of their expertise in specifi c functional areas, the names of the companies in which they hold the directorship and the membership / chairmanship of committees of the Board, and their shareholding in the Company are furnished in the Annexure to the AGM notice.

15. DIRECTORSÊ RESPONSIBILITY STATEMENT

Pursuant to the requirement under section 217 (2AA) of the Companies Act, 1956, with respect to Directors’ responsibility statement, it is hereby confi rmed that: i) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that there are no departures from the same.

ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and the Profi t & Loss of the Company for the year ended on that date.

iii) The Directors have taken proper and suffi cient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities, and

iv) The Directors have prepared the Annual Accounts of the Company on a "going concern” basis.

16. FIXED DEPOSIT

Your Company have not accepted any fi xed deposit during the year from the public.

17. CORPORATE GOVERNANCE

17.1 Your Company have complied with all the mandatory provisions of Clause 49 of the Listing Agreement relating to the Corporate Governance requirements and mandatory guidelines on Corporate Governance for CPSEs issued by DPE, Government of India except having requisite number of Independent Directors on the Board of the Company. There are two Independent Directors on the Board of your Company. The Company is pursuing with Ministry of Petroleum and Natural Gas (MoP&NG), Government of India for appointment of requisite number of Independent Directors.

17.2 The Annual Report contains a separate section on Corporate Governance, which forms part of this report.

17.3 Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges, your Company have obtained the Certifi cate from the Joint Statutory Auditors of the Company towards compliance of Corporate Governance which is annexed and forms part of this report.

17.4 In terms of Clause 49 (IV) (F) of the Listing Agreement with the Stock Exchanges, the Management Discussion and Analysis Report (Annexure - II) have been attached and forms part of this report.

17.5 As a measure of good corporate governance, your Company has engaged Practicing Company Secretaries for conducting Annual Secretarial Compliance Audit for the year 2012-13. The Practicing Company Secretaries have issued Annual Secretarial Compliance Audit Report for the year 2012-13 which forms part of this report.

18. AUDITORS

18.1 M/s. Maharaj N. R. Suresh & Co., Chennai and M/s. Gopalaiyer and Subramanian, Coimbatore have been appointed as Joint Statutory Auditors of the Company for the Financial Year 2012-13 by Comptroller & Auditor General of India (C&AG).

18.2 The report of the C&AG at Annexure - III forms part of this Report. You will be pleased to note that your Company has got ''NIL’ comments certifi cate from C&AG for the 11th year in a row.

18.3 Pursuant to the provisions of Section 233B of the Companies Act, 1956, the cost accounts maintained by the Company are being audited by Cost Auditors M/s. Musib and Associates who are appointed with approval of Ministry of Corporate Affairs, Government of India.

19. ACKNOWLEDGEMENT

19.1 Your Directors sincerely thank the Government of India, Ministry of Petroleum and Natural Gas, Ministry of Finance, Ministry of Corporate Affairs, Department of Public Enterprises, Ministry of Environment and Forest, Ministry of External Affairs, Ministry of Shipping, Ministry of Heavy Industries, Ministry of Home Affairs other Ministries, Public Enterprise Selection Board and Departments of the Central Government and the Government of Karnataka for their valuable support and continued co-operation.

19.2 Your Directors gratefully acknowledge support and cooperation extended by Hindustan Petroleum Corporation Limited, as co-promoter of the company.

19.3 Your Directors wish to thank the shareholders for their continued confi dence reposed on the management and the Company.

19.4 Your Directors acknowledge the continuing co-operation and support received from New Mangalore Port Trust, Financial Institutions, Banks and all other stakeholders such as suppliers of crude oil and other inputs, contractors, transporters and others.

19.5 Your Directors recognize the patronage extended by the valued customers for the products of the company and promise to provide them the best satisfaction.

19.6 Your Directors wish to place on record their sincere appreciation of the sustained and dedicated efforts put in by all the employees collectively and concertedly as a Team.

19.7 Your Company salutes ONGC with deep gratitude for the courage and conviction displayed by ONGC in acquiring and transforming your Company. Today, with all round achievements and spectacular growth and having been crowned with Schedule ''A’ status, your Company shines as an incredible example in the industry under the aegis of ONGC.

For and on behalf of the Board

(Sudhir Vasudeva)

Chairman

Place: New Delhi

Date: 8th August, 2013


Mar 31, 2012

The behalf of the Board of Directors, I take pleasure in presenting the 24th Annual report on the performance of your company, together with the Audit report and Audited account for the year ended 31/03/2012.

It is a matter of immense satisfaction that the performance of your company both on the Physical as well as Fiscal parameters created certain new benchmarks of excellence during the year 2011-12.

Major highlights of your Company's performance during the year are enumerated below:

1. Highest ever Refinery crude thruput at 12.82 MMTPA.

2. Highest ever Turnover at Rs. 572,068 Million.

3. Highest ever Export Turnover at Rs. 234,183 Million.

4. Lowest ever Energy consumption index of 57.92 MBN.

5. Nameplate capacity of the refinery has been enhanced to 15 MMTPA with successful commissioning of 3 MMTPA Crude and Vaccum Distillation Unit III (CDU&VDU III) of Phase-III project on 29/03/2012.

6. With Commissioning of CDU and VDU-III before 31/03/2012 your Company is eligible for benefits under Section 80(IB) of the Income Tax Act, 1962 for Phase- III project.

7. Government of Karnataka has sanctioned an attractive Tax Incentive package for the Phase-III project.

8. Diesel Hydro Treater/ Hydrogen Generation/ Coker Gas Oil Hydro Treater Units were mechanically completed before 31/03/2012.

9. DPE Adjudged performance of your company as "Excellent" for the year 2010- 11 against the MoU target.

1.1 FINANCIAL PERFORMANCE

(Rs. In Million)

Year ended Year ended

31st March, 2012 31st March, 2011 Turnover 572,068 437,236

Profit be fore Depreciation 19 08 22,332

Interest and Tax

Interest and Finance Charges 2,067 1,047

Gross Profit after interest but before 17,541 21,285

Depreciation and Tax

Depreciation and Amortizations 4,339 3,914

Profit Before Tax 13,202 17,371

Provision for Taxation 4,116 5,605

Profit after Tax 9,086 11,766

Balance of Profit/(Loss) brought forward 42 998 33 959 from previous year

Surplus available for appropriation 52,074 45,727 Appropriations:

Proposed dividend on Preference 0,000 0,00 Shares (Rs. 9,186)

Proposed Dividend on Equity Shares 1,753 2,103

Tax on Dividend 284 341

Transfer to Capital Redemption Reserve 46 -

Transfer to General reserve - 295

Balance carried to Balance Sheet 49,991 42,988

1.2 DIVIDEND

The Board of Directors of your company is pleased to recommend dividend payout of 10% (Rs. 1/- per equity share) ofRs. 10/- each fully paid-up in view of the ongoing project investment and the reduced profitability. This will absorb Rs. 2,036 Million including Rs. 284 Million as dividend distribution tax.

1.3 OPERATIONAL PERFORMANCE

The Highest ever Refinery thruput was 12.82 MMTPA for the year 2011-12 compared to 12.64 MMTPA during the previous year. During the last fiscal, your Company has completed the revamp of its CDU/ VDU -I unit as well as Hydro Cracker Unit-II. Your company, keeping in view the process requirement and to maintain high utilization of its assets, has planned these revamps along with the turnaround shutdowns during the year 2011-12. During the year 2011-12, your company has processed three new crudes i.e., Agbami, COCO, Mellitah and continues to expand its crude basket.

1.4 EXPORTS

Your company has achieved highest ever export turnover ofRs. 234,183 Million during the year 2011-12 by exporting products like Motor Spirit (MS), Naphtha, Mixed Xylene, High Speed Diesel (HSD), Jet fuel and Fuel Oil (FO).

Your Company continues to have the Term export contract for the supply of petroleum products to Mauritius with the State Trading Corporation (STC), Mauritius.

In the global competitive market, your company has secured its place by exporting the petroleum products and continues to explore opportunities for its growth.

1.5 SAFETY PERFORMANCE

The year 2011-12 witnessed successful and safe commissioning of CDU/VDU- III of Phase-III. Your company has also recorded longest accident free period of 1662 days during the year by surpassing previous best record of 1301 days during the year.

Your company is committed towards imparting continuous training in fire & safety practices. During the year under review, 885 Nos. of Plant employees and 7,184 Nos. of contract employees were trained in Fire and Industrial Safety. Employees of your company were also trained on safety aspects and practices during the year.

Your company has conducted Multidisciplinary Internal Safety Audit and OISD external surprise audit was also conducted during the year and its recommendations are being complied with.

1.6 ENVIRONMENT MANAGEMENT

Your company believes in "Perform beyond Compliance" for Protection of the Environment. Your Company is ISO 14001:2004 certified company, authenticated by TUV Rheinl and.

Your Company has undertaken following major initiatives for Greener Environment during the last fiscal:

- Wet Air Oxidation Unit is under trial to treat Spent Caustic and to improve the WWTP performance.

- An advanced Reverse Osmosis Plant is being commissioned for maximizing the quantity of treated effluent recycle.

- Condensate Recovery Unit commissioned in CDU-1 resulting reduction in fresh water consumption. Similar units are planned for other process units as well.

- Second continuous ambient air quality monitoring system was installed in the refinery to monitor the ambient air quality.

- An external agency monitors Ambient Air Quality at 7 locations in and around the refinery.

- A Closed Bioremediation Unit is being commissioned in the refinery to treat oily sludge generated in the refinery.

- VOC Emission monitoring is being done at 74,000 points in the refinery through reputed agency and corrective measures taken to effectively minimize the same.

- Community awareness programme was organized in the neighboring villages in association with Karnataka State Pollution Control Board.

- In a unique partnership with Karnataka Forest Department, your company is developing green belt in 120 acres of land. As a first stage, 40,000 saplings are being grown in an offsite nursery by the Forest Department, which will be later transplanted in the green belt.

1.6.1 Environmental Performance:

Your company continues to comply with the Environmental Regulations and also making its best efforts for protection of environment by taking various steps.

Following major actions were taken to prevent water and air pollution.

Water:

- Effluent treatment plant operation was normal throughout the year.

- Treated effluent quality was well within the prescribed limits.

- Seawater quality monitoring carried out by M/s. College of Fisheries indicates no adverse effect on the marine environment due to treated effluent discharge.

- Average treated effluent recycle to cooling towers during the year was about 74%

- Treated effluent after maximum recycle and within the stipulated standards are discharged into sea at a distance of 700 m and at a depth of 6.5m through diffusers for maximum dispersion & dilutions. Independent government agency monitors the marine ecology at the outfall point in the sea on a fortnight basis. Till date there has been no adverse effect on the marine eco-system.

- Cooling towers are operated at greater than 6 Cycles of concentration, this measure has brought down the cooling tower blow down. Refinery practices the cascade blow down system in the cooling towers to conserve water and chemicals.

Air:

- Various energy conservation schemes are implemented for reducing air emission.

- Utilization of low sulphur (less than 1% S) fuel oil in furnaces, with average sulphur content, less than 1% maintained into fuel oil.

- Maximum utilization of Ultra Low Sulphur Fuel Gas (less than 10 ppmS) in furnaces.

- SRU units are running with more than 99% efficiency.

- Ambient air quality monitoring being done inside and outside the Refinery by reputed external agency as per revised National Ambient Air Quality Monitoring Standard set by Ministry of Environment & Forests (MoEF).

- Regular monitoring has minimized flaring.

- Daily average Sulphur dioxide emissions from the refinery kept beneath the prescribed limits of 40.0 T/day.

1.6.2 Solid Waste Management and implementation of Supreme Court Monitoring Committee (SCMC) Recommendations:

- 125MT of spent activated carbon was disposed off.

- Bioremediation of 2000 Tonnes of oily sludge has been completed successfully.

1.6.3 Noise Pollution Control:

Acoustic enclosures are provided for DG sets at Sarapady and APMC pumping station.

1.6.4 Future Plans:

- Utilization of Liquified Natural Gas (LNG) as alternative fuel in the Refinery.

- Vapour recovery System for light hydrocarbon storage tanks in Phase - III Refinery Project.

- VOC Recovery system in Waste Water Treatment Plant (WWTP) of Phase- III.

1.7 MARKETING

Domestic Marketing of Products

Your Company continues to increase its market share in the direct sales segment of petroleum products in the state of Karnataka and its adjoining states. The direct sales turn over during the year was Rs. 27,552 Million compared to Rs. 22,912 Million in the previousfiscal.

During the year Bitumen sales was increased to 293 TMT from 248 TMT sold during the previous year, registering a growth of 18%, Furnace Oil sales was increased to 146 TMT during the year from 99 TMT sold during the previous year, registering a growth of 47% and Mixed Xylene sales was also increased by threefold during the year.

1.7.1 Retail Operations

Keeping in view the under recoveries in retail marketing of auto-fuels, your company continues to adopt a non aggressive approach with its miniscule presence in the retail marketing.

1.7.2 New Products Marketing Plan

Your company is setting up a Polypropylene (PP) plant with the capacity of 440 KTPA, integrated with Phase- III expansion of refinery complex with an investment of Rs. 18,037.8 Million for supplying to downstream processing industry. Detailed business plan for sale of Polypropylene in domestic market is being finalized. Storage infrastructure for Polypropylene is being developed at Hassan in the State of Karnataka.

Your company is also setting up a Delayed Coker Unit (DCU) in its Phase- III expansion project, which will produce Petcoke, a new product in the product basket. Detailed business plan is being finalized for sale of Petcoke to major Industrial consumers in Southern India.

1.7.3 Joint Ventures

Your Company is in Joint Venture (JV) with Shell B.V Netherland known as Shell MRPLA viation Fuel Services Private Limited (SMAFSPL) which supplies Aviation Turbine Fuel (ATF) to both domestic and international airlines at Indian airports.

SMAFSPL is aggressively acquiring market share in both domestic and international airlines at Indian airports. It has commenced its refuelling operations at Mangalore airport.

Your company continues to hold 50% equity in the Joint Ventures by holding 15 Million equity shares worth ofRs. 150 Million.

Turnover of this JV Company was Rs. 5,173.48 Million during the year against Rs. 2,867.03 Million during the previous year and the Pre-tax profit ofRs. 181.59 Million during the year againstRs. 136.28 Million during the previous year.

The JV Company declared its maiden dividend ofRs. 1 per equity share ofRs. 10 each fully paid during the year.

2. AWARDS AND RECOGNITION:

Your company has been recognized for its excellence in all of its operational areas and received following awards during the year:

- Won the "Unnatha Suraksha Puraskara" award - 2011 conferred by National Safety Council -Karnataka Chapter for Outstanding Performance in Safety Management Systems.

- "Excellent" MoU rating received from Department of Public Enterprise, Government of India for the year 2010-11.

- Secured second prize for outstanding performance in the area of Hindi implementation for the year 2010-2011 by the Town Official Language Committee (TOLIC), Mangalore.

- Won BT- STAR PSU Excellence award 2012 for Excellence in Market Capitalization.

- Won OISD "Most Consistant Performer (Refineries)" Award for 2009-10

3. CREDIT PROFILE

3.1 ICRA Limited has reaffirmed Issuer Rating "IrAAA" (pronounced IR Triple A) to your company. This rating indicates the highest credit quality rating assigned by ICRA and the rated entity i.e., which carries the lowest credit risk.

3.2 ICRA has reaffirmed the rating assigned to the Rs. 15,000 Million Fund- Based limits of your company at "[ICRA] AAA" (pronounced ICRA Triple A).The outlook on the rating is "Stable".

3.3 ICRA has also reaffirmed the rating reassigned to the Rs. 55,000 Million Non- Fund based limits of your company at "[ICRA] A1 " (pronounced as ICRA A one plus).

3.4 ICRA has reaffirmed "[ICRA] A1 " (pronounced as ICRA A one plus).This rating indicates the very strong degree of safety regarding timely payment of financial obligations i.e., which carries the lowest credit risk.

3.5 CRISIL has reaffirmed "[CCR AAA] (pronounced as CCR Triple A). This rating indicates highest degree of strength with regard to honoring debt obligations by your company.

4. FINANCIAL ACCOUNTING

The financial statements have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP) and in compliance with all applicable accounting standards and as per the guidance note on accounting for activities of the company issued by The Institute of Chartered Accountants of India (ICAI) and provisions of the Companies Act, 1956. The financial statements have been prepared under the Revised Schedule VI format of the Companies Act, 1956 pursuant to notification of Ministry of Corporate Affairs (MCA), Government of India.

5. INTERNAL CONTROL SYSTEM

Your company remains committed to ensure an effective internal control environment that provides assurance on the efficiency of operations and security of assets.

Internal audit department functions under the supervision of the Audit Committee chaired by an Independent Director. Your company has a well established internal control review mechanism which assures effective internal control environment to the Audit Committee and Board of Directors.

6. PROJECTS

6.1 Phase-III Refinery Expansion and Up gradation Project

As you are aware that your company is implementing Phase-III refinery expansion and up gradation project at an estimated cost of Rs. 121,600 Million, which will drive the future growth of the company.

Major highlights of Phase-III refinery expansion and up gradation project are as under:

- With the increased capacity of 15 MMTPA your company is well placed in the market vis-e-vis its peers in the Industry.

- Your company is the second refinery in the country, capable of processing high TAN crudes.

- The "Nelson Complexity Index" of the refinery of your company enhanced to approximately 9.0 from 6.0.

- The Distillate yield of the refinery will be increased by approximately 80%.

- Your company will produce value added products like Propylene from the low value black oil.

- The Diesel Hydro Treater (DHDT) of the refinery of your company will convert the High Speed Diesel (HSD) into Euro -III, IV and V grade for domestic and global market.

The Phase-III project is being executed in hybrid mode consisting of various modes of execution viz., Engineering, Procurement and Construction Management (EPCM), Open Book Execution (OBE) and Lump Sum Turn Key (LSTK). M/S Engineers India Limited (EIL) is the Project Management Consultant. M/S Jacob is the EPCM Contractor for the cDu/VDU and M/S EIL is the contractor for Petro Fluidized Catalytic Cracking Unit (PFCCU) and Sulphur Recovery Unit (SRU) which are executed under OBE and LSTK.

Your company has achieved an overall progress of 95.7% against scheduled target of 100% as of 15/07/2012 in Phase-III project and is in the process of progressive commissioning of the following major units:-

(i) Hydrogen Generation Unit (HGU)

(ii) Diesel Hydro Treater Unit (DHDT)

(iii) Sulphur Recovery Unit (SRU)

(iv) Captive Power Plant (CPP)

(v) Petro Fluidized Catalytic Cracking Unit (PFCCU)

(vi) Delayed Coker Unit (DCU)

(vii) Coker Gas Oil Hydro Treater Unit (CHTU)

The crude was cut into CDU and VDU of Phase-III on 25/03/2012 after mechanical completion of necessary fire water network, flare network, utilities control systems and various finished products were routed to respective storage tanks on 29/03/2012.

Hydrogen Generation Unit (HGU) was succusfully commissioned on 18/07/2012

Two crude storage tanks each having 60,000 m3 capacity were commissioned on 30/3/2012 to enhance the crude storage capacity of the refinery of your company.

Wet Air Oxidation unit, a part of the auxiliary units/facilities was commissioned on 13/12/2011.

The Phase-III project has Hydrocarbon streams interconnections with the existing Phase-1 & II of the refinery of your company. Revamp of the existing Hydro Cracker Units (HCU-1 and hCu-2) has been successfully completed and commissioned during May, 2012.

Your company is pleased to inform that the Government of Karnataka has given an attractive incentive package consisting of following fiscal benefits for Phase- III project:

- Exemption from payment of Entry Tax on plant and machinery and capital goods during the initial period of 4 years from the date of commencement of project implementation.

- Exemption from payment of Entry Tax on the crude oil thruput in Phase-III for15yearsfrom the start of commercial production of the Phase-III.

- Exemption from Central Sale Tax for 15 years from the date of commencement of commercial production for all the interstate sales.

- Interest free soft loan at the rate of 100% of eligible gross VAT for first

3 years and 60% of eligible gross VAT on the sale of Polypropylene, Petroleum Coke, LSHS, Naphtha, LPG (incremental production), Mixed Xylenes and reformate to non SEZ units for next 12 years to be repaid after 15 years by 15 equal annual installments limited to Rs. 5000 Million per annum.

The Phase-III project of your company is now eligible for Income Tax benefit under Section 80(IB) of the Income Tax Act, 1962 as it has successfully commissioned CDU and VDU of Phase-III project on 29/03/2012 before the sunset deadline of 31/03/2012 .This benefit will place your company in a better position for competing with its peers in the market.

Hydrogen Generation (HG), Diesel Hydro Treater (DHDT), and Coker Gas Oil Hydro Treater (CHT) units along with related utilities were also mechanically completed before March 2012. The pre-commissioning activities of these units are nearing completion by extending steam and power from the existing facilities of Phase-I and Phase-II due to delay in commissioning of Captive Power Plant (CPP) of Phase -III by its LSTK contractor ( M/s BHEL). It is expected that M/s BHEL will be able to commission CPP of Phase-III by the end of September 2012 as assured by it.

6.2 Polypropylene Project

As you are aware that your company is setting up a Polypropylene (PP) unit integrated with the Phase-III project at an estimated Capex of Rs. 18,037.8 Million. M/s. Engineers India Limited (EIL) has been engaged to implement this project under OBE convertable to LSTK methodology and M/s. Novolen Technology, Germany has been selected as the licensor for the same.

Project Displaced Families (PDF) problems had delayed the site work which resulted in shifting the location of this project. Fresh environmental clearance has been obtained from the Ministry of Environment and Forest (MoEF) due to shifting of the location.

Polypropylene Project has achieved an overall progress of 82.2% against scheduled target of 97.7% as of 15/07/2012. Cost commitment made for this project was Rs. 12,976.6 Million and the cumulative expenditure incurred was Rs. 5,492.1 Million as of 31/03/2012.

6.3 Single Point Mooring (SPM) Project

Your company is setting up Single Point Mooring (SPM) project along with coastal booster pumping station within the port limits at a location of 16 kilometers inside the sea (High-Seas) having draft availability of 30 meters for handling Very Large Crude Carrier (VLCC) at an estimated cost of Rs. 10,440 Million.

SPM facility will have following advantages:

a. Use of VLCC will reduce the average freight cost of crude.

b. Flexibility to receive opportunity crudes from West African and Latin American countries.

c. De-congestion of existing jetties at New Mangalore Port Trust (NMPT) will result in handling more petroleum products.

d. Crude will be pumped to the Indian Strategic Petroleum Reserve Limited (ISPRL) underground cavern for storage of Crude oil at Mangalore and Padur.

Single Point Mooring (SPM) project has achieved an overall progress of 95.6% against the scheduled target of 100% as of 15/07/2012 and is expected to commence trial operation by the end of September, 2012.

6.4 Future Projects for Growth

During Global Investors Meet on 7th & 8th June, 2012 at Bengaluru, your company has signed a Memorandum of Understanding with the Government of Karnataka for setting up a Linear Alkyl Benzene Plant (a raw material to manufacture Detergents) and to expand its refining capacity to 21 MMTPA subject to techno- economic viability and availability of required infrastructure at Mangalore with an approximate investment ofRs. 85,000 Million.

7. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO

The additional information required to be disclosed pursuant to Section 217(1) (e) of the Companies Act,1956 read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988 with respect to conservation of energy, technology absorption and foreign exchange earnings & outgo are furnished in 'Annexure-1' which forms part of this Report.

8. PARTICULARS OF EMPLOYEES

Your company being a government company is exempted from disclosure of particulars of employees under Section 217(2A) of the Companies Act, 1956, and the Particulars of Employees Amendment Rules, 2011.

9. RIGHT TOINFORMATIONACT, 2005

Your company has a RTI manual posted in the website www.mrpl.co.in.

During the year 87 applications were received, out of which 82 were disposed off before 31/03/2012 and balance 5 applications disposed off after 01/04/2012.

10. HUMAN RESOURCES

- During the year 2011-12, your company continued to enjoy cordial and harmonious relations with the collectives and as evidence to the same not a single man-hour was lost on account of any industrial disturbance.

- Your company has recruited 168 employees including 13 women employees during the year 2011-12, out of these 20 employees are Schedule Caste (SC), 12 Schedule Tribe (ST) and 1 Physically Challenged (PC).

- Total employee strength as on 31/03/2012 was 1500 including 104 women employees, out of these employees, 597 are from Management cadre whereas 903 are from Non-Management cadre. The number of employees belonging to SC/ST categories are 129 and Physically Challenged are 5.

- During the year 2011-12, your company devoted 5095 man-days for Training, Development and Learning which amounts to an average 3.45 man-days per employee. This includes functional, developmental and special training programs covering the entire spectrum of employees.

11. OFFICIAL LANGUAGE (OL)

Your company continues to implement Official Language (OL) Policy as per the Annual Programme prescribed by the Department of Official Language, Ministry of Home Affairs, Government of India, in this regard following steps were undertaken during the year.

- Periodical reports are sent to all the Government agencies including Administrative Ministry, Ministry of Petroleum and Natural Gas (MoP & NG) highlighting the progress made in promotion of Hindi.

- Hindi workshops and Hindi classes namely Prabodh, Praveen and Pragya are organized on a regular basis.

- Special efforts were made to activate Unicode facilities on all the computers used in the office for increasing the correspondence in OL.

- To motivate employees, incentive schemes such as cash award and personal pay is introduced.

- An OL inspection of various departments and offices was carried out.

Hindi Fortnight was celebrated and many Hindi competitions such as Hindi dictation, Handwriting, Admin-Glossary, speech etc. were conducted for the employees and their family members during the year.

Competitions are also held in Hindi language for employees and their family members during National Safety Day, Environment Day, Security awareness week and Vigilance awareness week.

Hindi Hasya Kavi Sammelan was held on 30/03/2012, 5 National level eminent Hindi poets from different parts of the country participated in this programme organized by your company.

Official Language Implementation Committee (OLIC) meetings, were held on quarterly basis under the chairmanship of Managing Director. All out efforts are being made to promote OL in your company.

Your company has been awarded first prize for outstanding performance in Hindi implementation for the year 2011-12 by the Town Official Language Implementation Committee (TOLIC), Mangalore. Your company also won eight prizes and stood Second at the TOLiC level competitions.

12. VIGILANCE FUNCTION

Your company has developed a structured mechanism of vigilance functions and its practices are focused towards creation of value for all the stakeholders. The practices involve multi-layer checks and balances to improve transparency. Vigilance awareness and preventive vigilance activities were continuously carried out during the year. Guidelines of Central Vigilance Commission are being followed. Officers in sensitive posts are rotated regularly.

Whistle Blower Policy for employees is in place which ensures that a genuine whistle blower is granted due protection from any victimization. In compliance with CVC instruction, your company has implemented a complaint handling policy in which all complaints received from various sources can get recorded and can be examined by vigilance. Further, in line with CVC instruction, your company has achieved very high compliance level with regard to e-payment and e-tender.

Leveraging of technology to enhance transparency has been a thrust area of action in which vigilance has played a catalytic role. The website of the company displays downloadable tender document, publication of information of works awarded on nomination basis, publication of post award information of contracts.

13. SECURITY MEASURES

Your company continues to improve the security measures at the refinery. The following steps were taken to improve the security during the year:

13.1 CISF Induction

Ministry of Home Affairs (MHA) has approved induction of 200 CISF personnel for security of the refinery. A Quick Reaction Team (QRT) team consisting of 22 CISF personnel was inducted to guard the refinery. Construction of an exclusive Township for CISF personnel is underway at a cost of Rs. 320 Million and is scheduled for completion in April, 2013. The second phase of CISF induction with an additional 80 personnel is expected to take place by September, 2012. The remaining CISF manpower will be inducted after completion of CISF Township.

13.2 CCTV Surveillance

The refinery is under surveillance of state-of-the art CCTV Network designed to cover all the access control gates and other strategic locations.

13.3 Access Control

Access to refinery area is controlled by computerised Smart Card & Manual Pass system for contract labourers and RFID smart card for employees. Access control to the refinery area is being improved by completion of the proposed new refinery gate and security building. The security building will be equipped with multi-zone metal detectors and X-ray baggage scanners. This gate will also have turnstiles controlled through bio-metric card readers for strict access control to refinery area. Anti-vehicle intrusion systems like Tyre Rippers are also being planned to be installed at refinery gates. Marketing operation and security infrastructure is being built in the lower plateau of the Refinery.

13.4 IB Recommendations

A team from Industrial Security Branch of Intelligence Bureau (IB) visits the refinery of your company once in every two years to inspect security arrangements, identify grey area and recommend / suggest improvements. All the recommendations given by the IB in the year 2008 have been complied. The last IB inspection was carried out during December, 2010 and out of 30 Recommendations, majority have been complied. The remaining recommendations are under varying stages of compliance.

13.5 Security Audit by ONGC

Chief of Security, Oil and Natural Gas Corporation (ONGC), carries out periodical review of security of the refinery besides periodical security audits, and recommends for improvement which are implemented.

13.6 Mock Drills

A "Protection Scheme" to safeguard the refinery of your company from the events of strike, law & order situation have been finalized with the district Commissioner and Police Commissioner, Mangalore. Regular security mock drills and district level security exercises are conducted jointly with State Police and Coast Guards. Your company is actively involved in the coastal security exercises conducted at the coastal area jointly with Coast Guard.

14. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

Your company's CSR initiative continues to be influenced by the needs and concerns of the community residing in the close proximity of the refinery.

The CSR initiative of your company known as "Samrakshan" have 5 areas with a vision to protect, preserve and promote people, peace and progress in and around of the refinery as under.

- Shikshana Samrakshan,

- Arogya Samrakshan

- Bahujan Samrakshan

- Prakrithi Samrakshan

- Sanskrithi Samrakshan

With these objectives, your company has implemented number of CSR schemes during the year. The major schemes covered under the CSR activities during the year includes construction of community hall, Road asphalting, mid- day meal to school students, construction of school building, toilet blocks for schools, scholarship for meritorious students including SC/ST students, add on facilities to SC/ST community, self employment training for women, free distribution of sewing machines to women , construction of Anganwadi, artificial limb camp, mega medical camp and running a free primary health centre.

The main thrust areas where your company has taken various initiatives are in line with DPE guidelines and has spentRs. 240 Million in various CSR schemes during last 4 years.

15. DIRECTORS

During the year following changes took place in Board of Directors of your company:

15.1 I, Shri Sudhir Vasudeva took over as Chairman of your Company from 03/10/2011.

15.2 Shri Vishnu Agrawal has assumed the office of Director (Finance) with effect from 01/04/2011 pursuant to his appointment as Director (Finance) of MRPL by the Ministry of Petroleum & Natural Gas (MoP&NG), Government of India.

15.3 Shri D.K.Sarraf has resigned on 16/09/2011 from the Board consequent upon his appointment as Managing Director of ONGC Videsh Limited (OVL).

15.4 The nomination of Shri A.K.Hazarika, and Shri K.S.Jamestin, was withdrawn by ONGC the parent company with effect from 31/10/2011 for optimizing the strength of the Board in compliance with Clause 3.1.3 of the mandatory guidelines of corporate governance for Central Public Sector Enterprises (CPSE) issued by Department of Public Enterprises (DPE), Government of India. Shri A.K.Hazarika and Shri K.S.Jamestin are continuing as special invitees on the Board of the company.

15.5 Shri U.K. Basu, Former Managing Director superannuated from the services of MRPL on 30/06/2012 and resigned from the Board of the company with effect from 01/07/2012.

15.6 Shri P.P. Upadhya, has assumed the office of Managing Director with additional change of Director (Technical) MRPL w.e.f. 01/07/2012, pursuant to his appointment as Managing Director and addittional charge of Director (Technical) of MRPL by the Ministry of Petroleum & Natural Gas (MoP&NG), Government of India.

15.7 The Board wishes to place on records its appreciation for the services rendered by Shri U.K. Basu as Managing Director and Shri D.K.Sarraf as Director during their tenure on the Board of the Company.

15.8 In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Dr. A.K. Rath will retire by rotation at the 24th Annual General Meeting of the Company. Dr. A.K. Rath, being eligible, offers himself for re-appointment as Director of the company.

15.9 Dr. D.Chandrasekharam was nominated by ONGC pursuant to clause 6.1 of the guidelines on corporate governance for CPSEs and was appointed as an additional Director with effect from 10/01/2012 by the Board of Directors who vacates his office as Additional Director and being eligible offers himself for re- appointment as a Director in the 24th Annual General Meeting.

15.10 Brief resume of the Directors seeking appointment / re-appointment, together with the nature of their expertise in specific functional areas, the names of the companies in which they hold the directorship and the membership / chairmanship of committees of the Board, and their shareholding in the Company are furnished in the Annexure to the AGM notice.

15.11 Your Company has complied with all the mandatory provisions of clause 49 of the Listing Agreement relating to the corporate governance requirements and mandatory guidelines on corporate governance for CPSEs issued by Department of Public Enterprise (DPE), Government of India except having requisite number of Independent Directors on the Board of the Company. There are three Independent Directors on the Board of your company constituting 1/3rd of its strength. The company is pursuing with Ministry of Petroleum and Natural Gas (MoP&NG), Government of India for appointment of requisite number of Independent Directors. The Annual Report contains a separate section on corporate governance, which forms part of this report.

16. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under section 217 (2AA) of the Companies Act, 1956, with respect to Directors' responsibility statement, it is hereby confirmed that:

i) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that there are no material departures from the same.

ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the company as at 31st March,2012 and the Profit & Loss of the company for the year ended on that date.

iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities, and

iv) The Directors have prepared the Annual Accounts of the Company on a "going concern" basis.

17. FIXED DEPOSIT

Your Company has not accepted any fixed deposit during the year from the public.

18. CORPORATE GOVERNANCE

18.1 Your Company has complied with all the mandatory provisions of Clause 49 of the Listing Agreement relating to the corporate governance requirements and mandatory guidelines on corporate governance for CPSEs issued by DPE, Government of India except having requisite number of Independent Directors on the Board of the Company. There are three Independent Directors on the Board of your company constituting 1/3rd of its strength. The company is pursuing with Ministry of Petroleum and Natural Gas (MoP&NG), Government of India for appointment of requisite number of Independent Directors.

18.2 The Annual Report contains a separate section on Corporate Governance, which forms part of this report.

18.3 Your Company is listed with the Bombay Stock Exchange Limited and National Stock Exchange Limited.

18.4 Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges, your Company has obtained the Certificate from the Joint Statutory Auditors of the Company, for Compliance of Corporate Governance which is annexed to and forms part of this report.

18.5 As a measure of good corporate governance, your Company has engaged M/s Ullas Kumar Melinamogaru & Associates Practicing Company Secretaries for conducting Annual Secretarial Compliance Audit for the year 2011-2012. M/s. Ullas Kumar Melinamogaru & Associates, Practicing Company Secretaries have issued Annual Secretarial Compliance Audit Report for the year 2011-12 which forms part of this report.

18.6 Chairman speech at the 24th Annual General Meeting (AGM) will be distributed to shareholders during the meeting and will be published in the leading news papers.

18.7 Your Company has despatched a copy of Annual Report consisting of Directors Report, Auditors Report, Balance Sheet and Profit & Loss Statement and other documents as required to be sent under the provisions of Companies Act 1956 to all, its members as on the records date i.e. 13.07.2012 pursuant to Section 219 and the Companies Act, 1956.

19. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 (IV) (F) of the Listing Agreement with the Stock Exchanges, the Management Discussion and Analysis Report have been attached and forms part of this report.

20. AUDITORS

20.1 M/s. Maharaj N. R. Suresh & Co., Chennai and M/s. Gopalaiyer and Subramanian, Coimbatore have been appointed as joint Statutory Auditors of the Company for the Financial Year 2011-12 by Comptroller & Auditor General of India (C&AG).

20.2 The report of the C&AG at Annexure III forms part of this Report.

20.3 Particulars of the Cost Auditor for the financial year 2011-12

(a) M/s. Musib and Associates, Cost Accountants has been appointed as Cost Auditor for the year 2011-12.

(b) Cost Audit report for the year 2011-12 will be filed before the due date i.e. 27/09/2011.

21. ACKNOWLEDGEMENT

21.1 Your Directors sincerely thank the Government of India (GoI), Ministry of Petroleum and Natural Gas (MoP&NG), Ministry of Finance (MoF), Ministry of Corporate Affairs (MCA), Department of Public Enterprise (DPE), Ministry of Environment and Forest (MoEF), Ministry of External Affairs (MEA), Ministry of Shipping (MoS), Ministry of Home Affairs (MHA) other Ministries and Departments of the Central Government and the Government of Karnataka, for their valuable support, guidance and continued co-operation.

21.2 Your Directors gratefully acknowledge support and direction provided by the parent company, Oil and Natural Gas Corporation Limited (ONGC) and the support of Hindustan Petroleum Corporation Limited (HPCL), as Promoters of the company.

21.3 Your Directors wish to thank the shareholders for the continued confidence reposed on their Company.

21.4 Your Directors acknowledge the continuing co-operation and support received from New Mangalore Port Trust, Financial Institutions, Banks and all other stakeholders such as suppliers of crude oil, vendors, contractors, transporters.

21.5 Your Directors recognize the patronage extended by the valued customers for the products of the company and promise to provide them the best satisfaction.

21.6 Your Directors wish to place on record their sincere appreciation of the sustained and dedicated efforts put in by all the employees collectively and concertedly as a Team known as "Team MRP".

For and on behalf of the Board

Place: New Delhi (Sudhir Vasudeva)

Date: 3rd August,2012 Chairman


Mar 31, 2010

The Directors are pleased to present the 22nd Annual Report of the Company, together with the audited accounts for the financial year ended 31st March, 2010.

It is gratifying to note that your company has put in a very creditable performance in the background of the industry scenario, and the performance results of other peers. The Company has also created certain new benchmarks of excellence during the year under review. Some of the performance highlights are enumerated below:

1) Overall refinery performance was found to be qualified for "excellent" rating of MoU with Government of India.

2) Highest ever distillate yield of 72.8% at 12.5 MMTPA operating level. Z) Lowest ever own fuel consumption with energy index of 58.27 MBN.

4) Highest ever product sales of 7.40 MMT in the domestic market.

5) Highest ever direct marketing sales of 800 TMT.

6) Highest ever products dispatched through Mangalore-Hassan- Bangalore pipeline of 2.485 MMT.

7) Achieved Gross Refining Margin of 5.46 $/bbl despite low crack margins from the products in the International market.

8) Accident free operation of the refinery during the year achieving the safety record of 1002 days without any Reportable Accident and moving towards previous record of 1301 days.

9) Based on previous years consistent track record, name plate capacity of the refinery increased from 9.69 MMTPA to 11.82 MMTPA.

10) Commenced supply of BS-IV Grade petrol and diesel w.e.f. January 2010 in line with industry implementation programme.

11) The Company successfully completed the revamp of Gas Oil Hydro Desulphurization unit ahead of schedule and within budgeted cost. The same was commissioned and dedicated it to the Nation on 30.04.2010.

12) MRPL signed an MOU with Government of Karnataka for an investment proposal of 15,798 Crore comprising the Phase III Refinery Project and associated projects on 3rd June, 2010 at the Global Investors Meet held at Bangalore.

13) Your Company is the first refinery to begin processing the newly discovered highly viscous Rajasthan Crude Mangala in October 2009.

1.1 FINANCIAL PERFORMANCE ( in Crore)

Year ended Year ended 31st March, 31st March,

2010 2009

Turnover 36,081 42,719

Profit before Depreciation Interest and Tax 2,196 2,337

Interest and Finance Charges 115 143

Gross Profit after interest but before Depreciation and Tax 2,081 2,194

Depreciation and Amortisations 389 382

Profit Before Tax 1,692 1,812

Provision for Taxation 580 619

Profit after Tax 1,112 1,193

Balance of Profit/(Loss) brought forward from previous year 2557 1640

Surplus available for

appropriation 3,669 2,833

Appropriations:

Proposed dividend on Preference Shares ( 9,186) 0.00 0.00

Proposed Dividend on

Equity Shares 210 210

Tax on Dividend 35 36

Transfer to General reserve 28 30

Balance carried to 3,396 2,557

Balance Sheet 3.669 2,833

1.2 DIVIDEND

Despite marginally lower Profit After Tax during the year (as compared to the previous year), the Board of the Company has decided to recommend a dividend payout of 12%. This will absorb ? 245 Crore including ? 35 Crore as tax on dividend.

1.3 OPERATIONAL PERFORMANCE

The Refinery throughput was 12.50 MMT crude oil (12.59 MMT) achieving 106 % capacity utilisation (107%). It may be noted here that Company has increased the nameplate capacity of the refinery from 9.69 MMTPA to 11.82 MMTPA based on a review of successful utilization of design margins available in the units over a period of 4 years, duly approved by the Board in their meeting held on 16.02.2010. The refinery produced 11.68 MMT (11.78 MMT) of finished products during the year.

Your Company has always focused on improving the domestic offtake and achieved highest domestic sales of 7.40 MMT (7.30 MMT). The focus has been to ensure uninterrupted product supply to the domestic segment which also gives better margin.

1.4 EXPORTS

The exports of Petroleum products (Motor Spirit, Naphtha, Mixed Xylene, ATF, HSD, VGO and FO) during the year amounted to ? 11041 Crore ( 11636 Crore) which represents about 37% (38%) of the total dispatches of 11.72 MMT (11.76 MMT ). As you are aware, your company had a long term contract upto July 2010 with State Trading Corporation (STC), Mauritius for supply of approx. one MMTPA of petroleum products (MS, HSD, ATF & FO) which is the total requirement of Mauritius. The terms for renewal of the contract for a further period of 3 years has been finalized and the new Supply Agreement has been signed on 1.07.2010 which is effective 01.08.2010 till 31.07.2013. The contract envisages supply of 1.10 MMT per annum of Petroleum products during 2010-13 with +/- 10% at STCs, Mauritius option and the total value of this deal at current prices is about 2 billion USD. The Company continues to be accredited with Premier Trading House Status (till March 2012) by Director General of Foreign Trade (DGFT), Government of India based on its export performance.

Figures given in the bracket at para 1.3 & 1.4 relate to the previous year.

1.5 SAFETY PERFORMANCE

- Safety at MRPL has the constant support and commitment of the Top Management and incorporates the highest standards of safety amongst its employees and contract workmen. Periodic Audits (both External and Internal), Mock exercises (both Onsite & Offsite), regular training updates and a positive attitude towards safe work practices have ensured a safe and healthy work environment. All process plant modifications are verified through a Hazard and Operability Study (HAZOP) before implementation.

- The Refinery completed 1002 days without Reportable Lost Time Injury (RLTI) as on 31-03-2010 i.e., 6.93 Million Man hours without RLTI.

- In the year 2009, MRPL was adjudged as the Best Safe Refinery for the three years (2006-07, 2007-08 and 2008- 09) among the Indian Refineries and also adjudged as the second best safe refinery for the year 2008-09 by Oil Industry Safety Directorate (OISD).

1.6 ENVIRONMENT MANAGEMENT

In Environment Management, the companys Philosophy is to perform beyond Compliance - that is to perform better than minimum required by statutes. The refinery is certified with ISO 14001: 2004 for Environment Management Systems.

The following are some of the major new initiatives taken up by the company in addition to various other environment management measures done on a continuous basis including checking of Volatile Organic Compounds Emission at 38,000 points in the refinery and taking corrective measures therefor:

- Environment Impact Assessment including Risk Assessment for Quality Improvement Project (GOHDS revamp) and at operating level of 13.6 MMTPA of the refinery (considering current ongoing CDU - I revamp) conducted by M/s. National Environmental Engineering Research Institute (NEERI), Nagpur.

- Environment Clearance obtained from Ministry of Environment & Forests for Quality Improvement Project and operation of refinery at expanded capacity of 13.6 MMTPA during pre Phase III expansion project.

- An "Awareness Cum Interaction Programme" on Hazardous Waste (Management, Handling & Transboundary Movement) Rules 2008 jointly organized with Karnataka State Pollution Control Board for neighbouring industries.

- A Sulphur Pelletisation Unit is being installed to avoid Dust emissions in the Sulphur Recovery Unit.

- Microbiological study commenced for treated effluent by College of Fisheries.

- Work Environment Study is being carried out by Regional Labour Institute, Chennai to monitor the entry of harmful materials into the human systems at work place.

- Continuous Ambient air quality management system installed in the refinery to monitor the various pollutants S02, NO, N02, NOx, H2S, CO, SPM, RSPM, HC Methane, HC non - methane and Total HC. All pollutants are always well within the stipulated limit.

- Manual Stack Monitoring is carried out in all process units by M/s. Environment Management System, Mangalore.

- Bioremediation of 1000 MT oily sludge has been completed by The Energy and Resources Institute, New Delhi.

1.7 MARKETING

1.7.1 Direct Marketing:

The Direct marketing sales of the Company continued its growth during the year 2009-10. The Direct Marketing Sales including ATF and LSHS were up at 808.04 TMT as compared to last year sales of 775.37 TMT.

Bitumen group sales for 2009-10 were 345.24 TMT as compared to 328.48 TMT in 2008-09, with a growth of 5%. MRPL was successful in penetrating adjoining States of Tamilnadu, Kerala, Andhra Pradesh and Maharashtra.

1.7.2 Retail Operations:

MRPL continued to follow a non aggressive and cautious approach in marketing of HSD and petrol in view of the Government regulation in pricing. As of 1st April, 2010, MRPL is operating HiQ retail outlets one each at Maddur and Hubli in Karnataka. However, plans are in place to enter into Retail Operation with deregulation in prices and clearance from MoP&NG.

1.7.3 Joint Ventures in Marketing:

1.7.3.1 The joint venture of your Company with Shell B.V. Netherland viz., Shell MRPL Aviation Fuels and Services Private Limited" for marketing of ATF to both Domestic and International airlines at Indian airports, achieved a operating profit of ? 145.45 Million (previous year operating loss ? 26.20 Million) and post-tax profit of ? 45.34 Million (previous year post tax loss of ? 44.75 Million) in its first full year of operation after wiping out the losses incurred in the previous year.

During the year, the sales under the Delivery Company (DELCO) model were 68,927 KL (previous year 35,517 KL). The company has fuelled 11,106 flights (previous year 4,598 flights). The market share during the year was 15.2% at Bangalore airport and 2.8% at Hyderabad airport.

Sales under the Contracting Company (CONCO) model were 3,43,133 KL (previous year 18,312 KL). The Airport Authority of India has accorded approval for Mobile Refueling operation at Mangalore, Goa, Calicut, Ahmedabad, Coimbatore and Trivandrum. The company is ready to commence its operation at Mangalore as soon as new terminal becomes operational.

1.7.3.2 As you are aware, your Company and Ashok Leyland Group had incorporated a joint venture company viz., "Mangalam Retail Services Limited" for creating one stop-shop commercial complexes in the highway segment, which were also to have Retail Outlets (RO) of your Company. As the entire business model is planned

based on RO set up, this JV has not been able to make any progress as your Company had put on hold setting up of ROs to avoid adverse impact on margins.

2. AWAROS AND RECOGNITIONS

Your Company has received the following awards/ recognitions during the year:

- MRPL has been adjudged as the Most Safe Refinery for the Three years (2006-07, 2007-08 and 2008-09) by Oil Industry Safety Directorate (OISD), MoP&NG after evaluation of all the 17 PSU refineries in India.

- MRPL has also been conferred with 2nd Prize by OISD in the safe refinery category for the year 2008-09.

- MRPL is the Joint Winner in the Jawaharlal Nehru Centenary Award for Energy Performance of Refineries for 2008-09 in Group-1 category by Centre for High Technology (CHT), MoP&NG.

- MRPL has been rated Excellent in MOU performance by ONGC for 2008-09.

- MRPL has been rated number one company in terms of turnover per employee on All India basis by Business Today magazine (BT 500 2009 edition).

- MRPL received "Certificate of Merit" on 18.02.2010 in the Best HR practices 2009 competition organised by National Institute of Personnel Management, Kolkata.

- MRPL has been conferred Export Excellence Award 2010 (Best Manufacturer Exporter Award) - Large Category - Gold by Federation of Karnataka Chambers of Commerce and Industry on 5.06.2010.

- MRPL secured the best export award in overall category "Silver" in the State Level Export Excellence Award for the year 2007-08 and 2008-09 from Government of Karnataka.

3. IMPROVED CREDIT PROFILE

3.1 Your Directors are pleased to inform you that ICRA Limited has reaffirmed Issuer Rating "IR AAA" (pronounced IR Triple A) to your company. This rating indicates the highest credit quality rating assigned by ICRA and the rated entity i.e., MRPL carries the lowest credit risk.

3.2 ICRA has reaffirmed "LAAA" (pronounced L Triple A) the highest credit quality rating under ICRAs long term rating scale for ? 900 crore Fund Based Working Capital Limit of MRPL.

3.3 ICRA has also reaffirmed the "A1+" (pronounced A one plus), the highest and relatively stronger credit quality rating under ICRAs short Term rating scale for Rs.5,500 crore Non-fund Based Limit of MRPL.

3.4 CRISIL has reaffirmed the "CCR AAA" (pronounced "CCR Triple A") rating indicating highest degree of strength with regard to honouring debt obligations.

4. PROJECTS

4.1 Phase III Refinery Project :

As you are aware, your company is currently implementing Phase III Refinery Project with an objective of increasing profitability by

increasing the refining capacity to 15MMTPA, to process more of low price high Sulphur/high acid heavy crude oils,, increasing the distillate yield by upgrading low value black oils, producing value added products like Polypropylene and upgradation of its total diesel pool to superior (Euro lll/IV) grade. The estimated cost of the project is X 12160.26 Crore.

Orders have been placed for all the units like PFCC, SRU & PPU, Captive Power Plant (CPP), Hydrogen & DHDT Units, CHT, DCU etc. as well as all utility packages like Nitrogen, Compressed Air, Raw Water, Cooling water DM water and Waste Water Treatment Plant. The total value of orders placed as on 15.07.2010 is ? 9703 Crore.

The implementation is progressing satisfactorily. The Project has achieved a progress of 51.2% as on 15.07.2010. The project is expected to achieve the mechanical completion by October 2011 as planned and commissioning in phases by end of financial year 2011-12.

4.2 Polypropylene Project

As you are aware that company has been setting up Polypropylene unit integrated with the Phase III project at an estimated capex of ? 1803.78 Crore. M/s. Engineers India Limited (EIL) has been engaged to implement the project under Open Book Execution (OBE) methodology. M/s. Novelene Technology, Germany have been selected as licensor for the project. The project is expected to achieve mechanical completion by April 2012 as planned.

4.3 SPM project

As reported last year, the Company is proposing to set up a Single Point Mooring (SPM) facility in the sea of Mangalore Port area with an objective to receive crude in (very large crude carrier) VLCC tankers. The same facility can also be used for receipt of crude for Indian Strategic Petroleum Reserves (ISPRL) being set up by Government of India at Mangalore very near to our refinery. The draft DFR has been received from M/s. Consulting Engineering Services (I) Pvt. Ltd. and M/s. SBI Capital Markets Ltd. have done an independent financial appraisal of the Project. The estimated project cost is ? 1170.59 Crore.

M/s. Indian Strategic Petroleum Reserves Ltd., (ISPRL) is setting up Crude Oil Storage Cavern of 1.5 MMT at Mangalore. The SPM project envisaged utilizing a part of the ISPRL Mangalore Cavern for receipt and intermediate storage of Crude oil on proportionate cost sharing basis. The environment clearance from Ministry of Environment and Forest (MoEF), Government of India and clearance from Ministry of Shipping is expected shortly. The SPM project proposal has been approved by MRPL Board and is being taken up for approval by the Board of ONGC. The project is targeted to be completed by May 2012.

4.4 Internal Projects :

GOHDS Revamp :

GOHDS Revamp was taken up to increase the capacity of GOHDS by 30% and for up-gradation of quality with respect to Sulphur content meeting Euro IV Standards.

This project was originally scheduled to be completed by August 2010. Subsequently, it was decided to complete it by end March 2010 advancing the completion by nearly 5 Months. This

advancement was planned to meet the requirement of Euro IV norms for fuels in the major cities from 01/04/2010 onwards as per the directives of the Supreme Court.

The revamped GOHDS unit was successfully completed on 10.04.2010 and was dedicated to Nation by the Secretary, Petroleum and Natural Gas, Gol on 30.04.2010.

CDU / VDU1 REVAMP :

This Project is for enhancing the CDU / VDU Phase 1 unit capacity by 30% on substantial basis with improvement in yield with better energy efficiency. The Basic Engineering was done by M/s.EIL who are the suppliers of Basic Engineering & Detailed Engineering for the original unit. Project Management Consultant (PMC) for the project is M/s. Uhde India Pvt. Ltd. (UIPL). The LSTK Contractor is M/s. Toyo Engineering India Ltd. The contractual completion schedule is March 2011. The implementation is ahead of schedule and the progress achieved as on 20/07/2010 is 57% as against the scheduled 49%.

TANKAGES :

With a view to improving the flexibility in operations, the construction of the following tanks have been completed during the year:

1) 2 Diesel Tanks - 12300 m3 Capacity

2) 1 Kerosene Tank - 1790 m3 Capacity

3) ATF tank - 3500 m3 Capacity

4) Mixed Xylene tank - 5000 m3 Capacity

SULPHUR PASTILLATION UNIT (SPU) :

SPU Project is mechanically completed. Instrumentation jobs with respect to panels have also been completed. Conveyor erection job by M/s. Cobit is at the completion stage. Plant is under commissioning which is expected to be completed by last week of July 2010.

4.5 Aromatics Complex

As you are aware that the ONGC Mangalore Petrochemicals Ltd (OMPL) has been jointly promoted by ONGC and MRPL with 46% and 3% equity holding for implementing the Aromatics Project to produce Paraxylene and Benezene, value added products, using Naptha feedstock from MRPL at Mangalore Special Economic Zone (MSEZL). MSEZL has already allotted requisite land and site grading activity are in advanced stages. M/s. UOP, USA are the Technology Licensors for the project and M/s. Toyo Engineering (India) Ltd are the Project Management Consultants. The project cost is estimated at ? 5,750 crore. The company has already achieved financial closure and tied up debts for ? 3,758 crore. The company has awarded major contracts for its Process units with M/s. L & T Ltd for ? 2,035 crore and for Power Plant (CPP) with M/s. Thermax Ltd for ? 588 crore on Lumpsum Turnkey (LSTK) basis. Further the company has awarded contracts on LSTK basis for DM Plant, Cooling water system, Storage tanks, Plant Communication System etc. Company is in the advanced stage of finalizing LSTK contracts for Raw Water System, Effluent water system etc. The mechanical completion of the project is expected in end November 2012 and commercial production is expected in February 2013. The company is also in the process of selection of offtakers for its product with reputed companies.

5. BARMER CRUDE

Your company was the first refinery to begin processing the newly discovered and highly viscous Barmer Crude in October 2009. During the financial year 2009-10, the company received 0.2 MMT of Rajasthan crude as per Government allocation.

6. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO AND PARTICULARS OF EMPLOYEES

The additional information required to be disclosed pursuant to Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988 with respect to conservation of energy, technology absorption and foreign exchange earnings & outgo is given in Annexure -1 which forms part of this Report.

7. PARTICULARS OF EMPLOYEES

The particulars required to be shown in terms of the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended with respect to particulars of employees are furnished in Annexure. However in terms of proviso (b) (iv) of Section 219 (1) of the Companies Act, 1956, the above annexure which is not sent with the accounts will be available for inspection by the members at the Registered office of the Company during working hours for a period of 21 days before the date of AGM. Any member who is interested to obtain such particulars may write to Investor Relations Cell of the company at Delhi.

8. HUMAN RESOURCES

- During the year 2009-10, the Company continued to enjoy cordial and harmonious relations with the collectives and as an evidence of the same, not a single man-hour was lost on account of any industrial disturbance during the entire year.

- The Long Term Settlement (LTS) with the Employees Union came to an end on 31s1 March, 2007. Negotiations for the fresh LTS are in progress.

- As regards the pay revision for Board level and below Board level executives which was due from January 01, 2007, based on the approval of the Board for implementation of pay revision as per the Department of Public Enterprises, Government of India, (DPE) Guidelines and taking into consideration the Presidential Directives issued by the Ministry of Petroleum and Natural Gas for implementation of the pay revision, your Company has implemented the same.

- The Company recruited 75 employees during the year 2009-10. Out of these, 11 belonged to Scheduled Caste (SC), 2 belonged to Scheduled Tribes (ST), 15 from Other Backward Classes (OBC) and 15 women employees were recruited.

- The number of employees as on March 31, 2010 was 1312, including 72 women employees. The number of employees belonging to SC, ST & OBC categories were 75, 24 and 321 respectively.

- During the year 2009 - 2010, Company devoted 2887 man-

days for Training, Development and Learning which amounts to an average of 2.2 man-days per employee. This included functional, developmental and special training programs covering the entire spectrum of employees.

9. OFFICIAL LANGUAGE:

MRPL is implementing Official Language Policy in letter and spirit as per the Annual Programme prescribed by the Department of Official Language, Ministry of Home Affairs, Govt, of India. In order to propagate Hindi among the employees, Hindi Workshops are organised on a regular basis at Mangalore, Mumbai and Bangalore Offices. Regular Hindi classes for Prabodh, Praveen & Pragya are being conducted for employees. In order to increase the correspondence in Hindi, by the employees, special efforts were made to install Hindi software on the computers and nearly 88% computers are installed with Hindi software APS 2000++. To motivate employees who pass final Hindi examinations, Incentive schemes are introduced such as Cash award and Personal Pay.

For promoting the use of Hindi, Hindi Fortnight was celebrated and many Hindi competitions such as Hindi Essay, Dictation, Translation, Songs, Extempore speech etc. were conducted for the employees, their children and family members in the month of September 2009. Competitions are also held in Hindi for employees and their family members during National Safety Day, Environment Day and Vigilance awareness week. Official Language inspections of internal departments and subordinate offices were carried out. Special awards were given to the three toppers of MRPL School children who stood first three in the public exam of class X in Hindi language.

MRPL participated at Town Official Language Implementation Committee (TOLIC) level Hindi competitions and won thirteen prizes and stood First at TOLIC level competition. Quarterly, Half yearly and Yearly reports are sent to all the controlling Agencies/ Departments / MoP&NG on time by highlighting the progress made in promotion of Hindi in the company. Hindi Hasya Kavi Sammelan was organised on 10.2.2010. Six National level Hindi humour poets participated in the programme. As per Official Language Rule, Official Language Implementation Committee (OLIC) meeting was conducted in all the four quarters under the Chairmanship of Managing Director. All out efforts are being made to promote Hindi in the company.

10. VIGILANCE FUNCTION:

Vigilance awareness and preventive vigilance activities were continuously carried out during the year by surprise inspections, Intensive type detailed examination, study of major work orders / purchase orders. Deemed single tenders, tenders on nomination basis were selectively taken for scrutiny.

Transparency initiatives leveraging technology in MRPL had been one of the major achievements of Vigilance department. During the year Vigilance has played a major catalytic role in introducing technology leverages in the company on core areas.

Vigilance Awareness Week was observed to educate employees and to have preventive vigilance through awareness programme conducted from 03.11.2009 to 07.11.2009 in Mangalore and MRPL offices at Bangalore, New Delhi and Mumbai with a theme

"Preventive Vigilance". Evolution and role of vigilance was duly explained to the participants with special emphasis on Whistle Blower Policy. Programmes including quiz, elocution etc. for employees were also conducted. The Managing Director administered oath to all officers on 03.11.2009.

Various competitions viz., Essay competition, Quiz competition, Poster competition, Slogan competition on the Theme "Preventive Vigilance" were held for employees.

Various educative lecture programme conducted for newly appointed graduate engineer trainees on "Facets and role of Vigilance". With thrust on technology as an effective preventive role Vigilance department impressed upon various functions to automate towards transparent and smooth transaction which reduced human interface as per CVC guidelines. With constant follow up with management team the initiatives were taken in the areas of E-payment, E- procurement, Bio metric identification and technology based solution for personal facilities like canteen have been top objective towards improving Vigilance administration by leveraging technology. E- procurement through Reverse Auction was commenced and continued during the year.

Keeping in view the requirement of Clause 49, company has formulated and put in place a Whistle Blower Policy.

11. SECURITY MEASURES

11.1 CISF Induction:

As reported last year, the management has decided to induct Central Industrial Security Force (CISF) to guard the Refinery. Sanction has been obtained from Ministry of Home Affairs for 200 CISF personnel and the first batch of 122 is expected to join anytime from now. All gates and access control to the Refinery will be handed over to CISF. Security of township, NMPT oil jetties, Sarapady Pump House will be looked after by the in-house Security department with contract security personnel.

11.2 CCTV Surveillance:

Complete area of the Refinery is covered by state of the art CCTV Network. Few cameras are netted with OFC cables and rest of them are working on wireless technology. CCTV network is designed to cover all the access control gates and other strategic locations. The CCTV surveillance is going to be further more strengthened by installing 10 more cameras shortly.

11.3 Access Control:

Access to Plant area will be better controlled by New Plant Gate which is segregating Plant and Nonplant area. This gate will have additionally X-Ray baggage screening machines and Multizone door frame metal detectors for frisking and searching. This gate will also have turnstiles integrated with biometric punch card system for strict access control as well as to prevent un-authorised entry.

11.4 IB Recommendations:

Intelligence Bureau (IB) visits once in every two years to inspect Security arrangements, identify grey area, and to recommend/suggest improvements. IB last visited MRPL during Sep 2008 and is expected

to visit this year. Out of the 27 recommendations, 21 have already been complied and actions with regard to compliance of remaining 6 recommendations are in progress.

11.5 Internal Security Audit - ONGC:

Besides IB, ONGC carries out Security Audit of MRPL internally. Their recommendations are being implemented.

11.6 Mock Drills:

Regular mock drills are conducted exclusively on Security. District level security exercises are conducted alongwith State police and Coast guard. Recently, Coast guard and State police conducted a mock exercise SAGAR KAVACH, by involving various industries including MRPL in the coastal belt.

12. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As a socially responsive organisation, the Company is committed to the well being of the communities around the refinery area and with this objective, it has taken up a number of schemes/ developmental activities during 2009-10. The expenditure incurred on CSR activities during the year was ? 12.54 Crore (? 4.21 Crore in previous year) in the core areas viz., Education, Health & Sanitation, Infrastructure, SC / ST Development Scheme, MRPL Rehabilitation Colony, Women Empowerment Programme. The company had contributed ? 4.95 Crore to Chief Ministers Calamity Relief Fund towards construction of houses in flood affected Devadurga Taluka of Raichur Dist. This is in addition to ? 50 lakhs contributed to the Chief Ministers Calamity Relief Fund earlier.

13. DIRECTORS

13.1 HPCL has nominated its Director (Refineries), Shri K. Murali on the Board of MRPL on 19.01.2010 in place of Shri S. Roy Choudhury. Shri K. Murali is a Chemical Engineer by profession having 30 years of rich experience in HPCL in the various areas of refinery.

13.2 Shri V. K. Dewangan, Director MoP&NG on completion of his tenure with Gol had resigned on 31.03.2010.

13.3 Shri L. K. Gupta, Director (Finance), MRPL resigned from the Company and Shri U. K. Basu, Managing Director has assumed additional charge of Director (Finance) w.e.f. 31.05.2010.

13.4 Dr. A. K. Balyan, Director resigned on 15.07.2010 from the Board of MRPL /ONGC consequent to his selection and appointment as MD & CEO, Petronet LNG Ltd.

13.5 The Board wishes to place on record its appreciation for the services rendered by Shri S. Roy Choudhury, Shri V. K. Dewangan, Shri L. K. Gupta and Dr. A. K. Balyan during their tenure as Directors on the Board of the Company.

13.6 Government of India has appointed Dr. A. K. Rath, Independent Director on the Board of your company effective 16.02.2010. Dr. Rath, a doctorate in Business Administration and IAS Officer (1973 cadre), carries with him over 37 years of experience in various Ministries of Central /State Government. Dr. Rath is currently

Professor and Chair of the Public Policy and Management Programme at MDI, Gurgaon.

13.7 In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the company, Dr. A. K. Rath shall hold office upto the date of the Annual General Meeting. The company has received notice from a shareholder proposing his name to the office of the Director at the ensuing AGM.

13.8 ONGC has nominated its Director (Finance), Shri D. K. Sarraf on the Board of MRPL on 27.07.2010 in place of Dr. A, K. Balyan. Shri D. K. Sarraf is an Associate Member of Institute c? Cost & Works Accountants of India and the Institute of Company Secretaries of India having 30 years of experience in Oil Industry.

13.9 In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Shri D. K. Sarraf and Shri Vivek Kumar will retire by rotation at the 22nd Annual General Meeting of the Company. Shri D. K. Sarraf and Shri Vivek Kumar, being eligible, offer themselves for re-appointment.

13.10 Brief resume of the Directors seeking appointment / re-appointment, together with the nature of their expertise in specific functional areas, the names of the companies in which they hold the directorship and the membership /chairmanship of committees of the Board, and their shareholding in the Company as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges are given in the Annexure to the AGM notice.

13.11 You might be pleased to note that a Director (Technical) position

has been approved by the Government of India. Accordingly, Director (Technical) has been shortlisted by the PESB after selection process and his letter of appointment is awaited. As regards filling up of the position of Director (Finance), Company has taken up with MoP&NG for initiating the action on a fast track basis.

13.12 The Company continues to pursue with the Government of India (Ministry of Petroleum & Natural Gas) for appointment of requisite number of Independent Directors on the Board of the Company pursuant to the provisions of the Listing Agreement.

14. DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956 your Directors state that:

i) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that there are no material departures from the same;

ii) They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to, give a true and fair view of the state of affairs of the Company at the end of the financial year viz., 31st March, 2010 and of the Profit & Loss of the Company for the year ended on that date;

iii) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) They have prepared the Annual Accounts ot the Company on a going concern basis.

15. FORFEITURE OF SHARES

In the public issue of PCDs / NCDs made by your company in May 1992, some of the shareholders had not paid allotment / call money on the shares allotted to them inspite of several reminders from the company.

After following the due procedure, your Board of Directors at their meeting held on 19.01.2010 forfeited 3,03,550 Equity shares pertaining to 1638 shareholders for non-payment of allotment / call money arrears. The Stock Exchanges and the defaulted shareholders were advised on the forfeiture of the shares. The forfeited shares have been cancelled and accordingly the paid-up equity capital of the company as on 31.03.2010 stands revised at ? 1752,59,87,770.

16. FIXED DEPOSIT

The Company has not accepted any fixed deposit during the year from the public.

17. CORPORATE GOVERNANCE

17.1 The Company has complied with all the mandatory provisions of Clause 49 of the Listing Agreement relating to the Corporate Governance requirements, except with the requirement of number of Independent Directors on the Board of the Company. Your Company is pursuing with the Administrative Ministry, MoP&NG for appointment of additional Independent Directors on the Board. The Annual Report contains a separate section on Corporate Governance.

17.2 Your Company is listed with the Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

17.3 As required under Clause 49 of the Listing Agreement with Stock Exchanges, your Company has obtained the Certificate from the Auditors of the Company, for Compliance of Corporate Governance which is annexed to and forms part of the Annual Report.

17.4 As a measure of good corporate governance, your Company has voluntarily taken up Secretarial Audit for the year 2009-10 and a Report obtained from M/s. Rathi & Associates, Practising Company Secretaries is annexed to this Annual Report.

17.5 The Company has also complied with the voluntary guidelines of DPE except with regard to appointment of required number of Independent Directors and pre-approval of related party contracts by the Audit Committee. DPE has since modified the guidelines and made it mandatory for the year 2010-11 onwards. The review of related party contracts is retained after deleting the requirement of pre-approval.

17.6 As you are aware that MRPL Secretarial Department has been accredited with ISO 9001 : 2008 certificate on 12.05.2009 by M/s. Bureau Veritas Certification India (P) Ltd (BV). The certificate is valid till May, 2012 and BV will conduct yearly surveillance audit for two years. Accordingly, the first surveillance audit was conducted by M/s. BV on 07.05.2010 and confirmed the continuation of ISO 9001 : 2008 accreditation to the Secretarial Department.

17.7 The Management Discussion and Analysis Report forms part of the Directors Report annexed as Annexure-ll.

18. AUDITORS

18.1 M/s. S.R.R.K. Sharma Associates, Bangalore and M/s. Maharaj N. R. Suresh & Co., Chennai have been appointed as joint Statutory Auditors of the Company for the Financial Year 2009 -10 by Comptroller & Auditor General of India (C&AG).

18.2 The report of the C&AG at Annexure III forms part of this Report. You will be pleased to note that your Company has got a "NIL" comments Certificate from C&AG for the 8* year in a row.

18.3 As per the requirement of Central Government and pursuant to Section 233B of the Companies Act, 1956, the cost accounts maintained by the Company are being audited by Cost Auditors. M/s. JV Associates have been appointed as Cost Auditors for the year 2009-10 with approval of Ministry of Corporate Affairs, Government of India.

19. ACKNOWLEDGEMENT

19.1 Your Directors sincerely thank the Government of India (Gol), Ministry of Petroleum and Natural Gas (MoP&NG), Ministry of Finance (MoF) and other Ministries and Departments of the Central Government and the State Government of Karnataka, Andhra Pradesh, Tamilnadu and Kerala and District Authorities at Mangalore for their valuable support and continued co-operation.

19.2 Your Directors gratefully acknowledge the support and direction provided by the parent company, ONGC.

19.3 Your Directors wish to thank the shareholders for the continued confidence reposed on the Management and the Company.

19.4 Your Directors acknowledge the continuing co-operation and support received from New Mangalore Port Trust, Financial Institutions, Banks and all other stakeholders such as suppliers of crude oil and other inputs, vendors, contractors, transporters and others.

19.5 Your Directors recognize the patronage extended by the valued customers for the products of the company and promise to provide them the best satisfaction.

19.6 Your Directors wish to place on record their sincere appreciation of the sustained and dedicated efforts put in by all the employees collectively and conceitedly as a Team.

19.7 The company salutes its visionary Shri Subir Raha, former Chairman and Managing Director of ONGC Group Company who passed away on 1st February, 2010. He was the person who visualized as early as in 2003 that MRPL will one day touch the sky with glory. True to his dream, MRPL has grown and created many records of excellence in all the spheres of its operations and the graphs of the performance has been only going upwards. It is he who made the miracle of a PSU company turning around a private sector company. MRPL was turned around in just one year by ONGC. After takeover by ONGC in the year 2003, MRPL has not looked back and continues to aim and achieve new heights.

For and on behalf of the Board

(R. S. SHARMA) Chairman

Place: New Delhi Date : 31st July, 2010

 
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