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Notes to Accounts of Mangalore Refinery And Petrochemicals Ltd.

Mar 31, 2015

NOTE 1 OTHER DISCLOSURES

1.01 Valuation of Inventories (Finished Products) (AS-2)

The overall gross margin percentage for all joint products is subtracted from the final net realisable value of each product to arrive at the total cost of each product which is taken as the basis for valuation of closing stock of finished products {Refer Policy No. 9.2 in Note 1 - "Statement of significant accounting policies").

1.02 Cash Flow Statements (AS-3)

Cash Flow Statement has been prepared under the ''Indirect Method" as set out in the Accounting Standard (AS-3) issued by "The Instituite of Chartered Accountants of India".

1.03 Exceptional Items (AS-5)

The exceptional items consists of Rs 867.23 million income arising from Commercial Tax refund relating to Phase III project w.e.f 01.04.2012 pursuant to notification of Govt. of Karnataka, expenses of Rs 383.68 million arising out of discount on sales and obligation on dispute settlement and Rs 149.08 million expenses arising out of differential wharfage payable as per notification of TAMP.

1.04 Depreciation Accounting (AS-6)

Pursuant to applicability of Companies Act 2013 ("The Act") with effect from April 1, 2014, the Company has computed depreciation based on the useful life of the assets as specified in part "C" of the Schedule II of the Act {Refer Policy No. 6 in Note 1 - "Statement of significant accounting policies"). Accordingly, the carrying amount of the assets as on April 1,2014 has been depreciated over the remaining useful life of the fixed assets. Consequently, the depreciation charge for the year is lower and profit before tax is higher to the extent of Rs 3,779.12 Million for the year ended 31st March, 2015.

Further an amount of Rs 782.90 million (net of tax - Rs 516.79 Million) representing the carrying amount of fixed assets whose useful life is Nil as at April 1, 2014 has been charged to the opening balance of surplus as on April 1, 2014 as required in Schedule II to the Act.

1.05 The Effects of changes in Foreign Exchange Rates (AS-11)

Pursuant to Notification no GSR (914)E dated 29th December, 2011 issued by MCA , the Company has opted, from the financial year ending 31st March 2012, to adjust exchange difference arising on reporting of long term foreign currency monetary items, in so far as , they relate to the acquisition of depreciable assets, against the cost of such assets and depreciate the said adjustment, over the balance life of the assets.

Pursuant to Notification No. 17/133/2008-CL-V dated 9th August, 2012 issued by MCA, the Company capitalised the exchange differences including for the period subsequent to the capitalisation of assets. Had this not been followed, the exchange differences amounting to Rs 1,116.87 Million (Previous Year Rs 397.36 million) relating to capitalized assets would have been debited to Statement of Profit and Loss Account and Fixed Assets would have been lower to that extent for the year ended 31st March, 2015."

1.06 Employee Benefits (AS-15)

1.06.01 Brief Description: A general description on the type of Defined Benefit Plans are as follows:

a Earned Leave Benefit (EL):

Accrual - 32 days per year Accumulation up to 300 days allowed

EL accumulated in excess of 15 days is allowed for encashment while in service provided the EL encashed is not less than 5 days.

b Half Pay Leave (HPL)

Accrual - 20 days per year Encashment while in service is not allowed

Encashment on retirement is permitted ; restricted upto 300 days along with Earned leave.

c Gratuity:

15 days salary for every completed year of service. Vesting period is 5 years and the payment is restricted to Rs 1 miilion.

d Post Retirement Medical Benefits:

After retirement, on payment of one time lump sum contribution,the superannuated employee and his/ her dependent spouse and dependent parents will be covered for medical benefit as per the rules of the Company.

e Retirement Benefits:

At the time of superannuation, employees are entitled for reimbursement of expenses towards travel, transportation of personal effects from their place of retirement to the new location upto certain limits depending on the designation of the employee at the time of retirement and one month''s salary as settling allowance.

Note: Figures in parenthesis ( ) represent figure of 2013-14 and [ ] represent figures of 2012-13

1.07 Borrowing Costs (AS-16)

Amount of borrowing costs capitalised during the year ended 31st March, 2015 is Rs 1,686.27 million ( Previous year Rs 3,778.55 million)

1.08 Related Party Disclosure (AS-18)

31.09.01 The Company is a state controlled enterprise and the transactions with other state controlled enterprises are not required to be disclosed as per AS-18.

31.09.02 Key Management Personnel:

(i) Shri H.Kumar, Managing Director - Remuneration from 14th August, 2014 to March, 2015Rs1.98 Million

(ii) Shri Vishnu Agrawal, Director (Finance) - Remuneration from April 2014 to March 2015- Rs 4.17 Million

(iii) Shri V.GJoshi, Director (Refinery) - Remuneration from April 2014 to March 2015- Rs 2.93 Million

(iv) Shri P.P.Upadhya, Managing Director - Remuneration from April 2014 to July 2014 - Rs 3.46 Million

(v) Shri Dinesh Mishra, Company Secretary - Remuneration from April 2014 to March 2015- Rs 2.53 Million

Note : Figures in brackets represent previous year figure

1.09 Leases (AS-19)

1.9.01 The Company has taken various premises under cancellable operating lease.

1.9.02 These lease agreements are normally renewed on expiry of the term.

1.9.03 Lease rental expenses for the year ended 31st March, 2015 in respect of operating leases are Rs 37.73 Million (previous year Rs 37.70 Million)

1.10 Deferred Tax (AS-22)

The Company has recognised deferred tax asset (disclosed as Tax Expense under "Statement of Profit and Loss Account") in respect of carry forward business losses and unabsorbed depreciation to the extent of deferred tax liability of Rs 4,436.58 million.

1.11 Intangible Assets - Research & Development (AS-26)

The Company during the year ended 31st March, 2015 has carried out activities relating to product development in the area of Bitumen Emulsion formulations, detailed characterization of High TAN Crude using True Boiling point Apparatus, Inductively coupled Plasma Mass Spectrometer (ICP-MS), Atomic Absorption Spectrometer, Methodology to control the ammoniacal nitrogen and phenol in treated effluent as a part of its R & D activities and has incurred expenditure as mentioned below. These expenditure are booked in respective natural heads of expenditure.

1.12 Provisions, Contingent Liabilities and Contingent Assets ( AS -29)

1.12.01 Contingent Liabilities not provided for in respect of :

a) Corporate Guarantee given by the Company towards loan of Rs 3,372.30 Million ( Previous Year Rs 3,372.30 Million) sanctioned by certain bankers / financial institutions to New Mangalore Port Trust (NMPT) for construction of Jetties. Amount outstanding as at the close of the year ended 31st March, 2015, after adjusting the repayment made by NMPT is Rs. Nil (Previous Year Rs. Nil).

b) Claims against the Company not acknowledged as debt :

Particulars As on 31st As on 31st March, March, 2015 2014

Claims of Contractors / vendors in Arbitration / Court

Some of the contractors for supply 378.86 371.96 and installation of equipment have lodged claims on the Company seeking revision of time of completion without liquidated damages, extended stay compensation and extra claims etc., which are contested by the Company as not admissible in terms of the provisions of the respective contracts. In case of unfavourable awards the amount payable that would be capitalised is Rs 340.73 million / charged to revenue account would be Rs 38.13 million [Previous year Rs 334.33 million and Rs 37.63 million respectively]

One of the overseas customers has - 365.72 lodged damage claim for supply of off-spec cargo during 2008-09. The Company has disputed the claim and the issue is before the arbitrator.

Claims / counter claims of Customers One of the customer has lodged a 85.20 85.20 claim for damages for pre-closure of the contract. The Company has disputed the claim based on Force Majure condition. In case of non acceptance of the stand taken by the Company the amount will be debited to Statement of Profit & Loss account.

Others

The New Mangalore Port Trust 2,105.44 1,897.82 (NMPT) has claimed from the Company notified wharfage charges for handling cargo at oil berths for the period beyond MOU term (berth No 10 from 16th October.2009 to 31st March,2015 & for berth no 11 from 1st April.2011 to 31st March,2015). The company has claimed that the Memorandum of Understanding, provides for arriving at a mutually agreeable rate subject to Government /TAMP (Tariff Authority for Major Ports) approval for the post MOU period.

The issue is now before Ministry of Shipping. The differential wharfage amount, if any arising out of such decision will be debited / credited to the Statement of Profit & Loss Account in the year of such settlement.

This represents the potential 133.67 133.67 liability which the company has undertaken for reimbursement to lessors, in case of any liability in their respective tax assessments. In case of any claim of such liability by lessors the same will be debited to Statement of Profit & Loss Account.

The claim of Mangalore SEZ Ltd. 109.25 37.43 over and above the advance paid for land and rehabilitation & resettlement work.

Total 2,812.42 2,891.80

In respect of all these claims, it is being contested by the Company as not admissible. It is not practicable to make a realistic estimate of the outflow of resource, if any, for settlement of such claim, pending resolution / award from Arbitrators / Court.

1.12.02 Disputed tax / Duty demands pending in appeal as on 31st March,2015

a) Income Tax: Rs. 5,942.35 Million (Previous Year Rs 6,479.60 Million). Against this Rs 2,579.25 Million (Previous year Rs 2,661.58 Million) is adjusted / paid under protest and is included under other non current assets Note 15.

b) Commercial Tax: Rs 32.36 Million (Previous Year

Rs 32.36 Million).Agains this Rs 15.58 Million (Previous year Rs 15.58 Million) is paid under protest and is included under loans & advances Note 19)

c) Excise Duty: Rs. 315.27 Million (Previous Year Rs. 318.56 Million) against this Rs. 72.87 Million ( Previous Year Rs.

1.13 Million) was paid under protest and is included under loans & advances Note -19)

d) Customs Duty: Rs. 747.56 Million (previous year Rs 711.73 Million).

1.13.02 Capital and other commitments

a) Capital commitments

The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) as on 31st March, 2015Rs1,602.96 Million (Previous Year Rs 12,895.10 Million).

b) Other commitments

Pending commitment on account of Refinery performance improvement programme by Ms.Shell Global International Solution (Ms.Shell GIS) USD 2.44 Million. (Previous year USD 2.44 Million).

The Company has an export obligation to the extent of Rs 1,346.93 Million (Previous year Rs 1,262.78 Million) on account of concessional rate of customs duty availed under EPCG licence scheme on import of capital goods.

1.14 Insurance Coverage

The Company has covered it''s Fixed Assets under a mega risk insurance policy which is subject to sanctions limitation and exclusion by UK, EU and UN.

1.15 Trade Payables

The trade payables referred in Note no 9 includes Rs. 147,854.73 million (Previous year Rs 79,141.99 million) being overdue amount payable to National Iranian Oil Company (NIOC) pending settlement due to non finalisation of remittance channel arising out of UN/US/EU backed sanctions .

1.16 Land Usage of HPCL Land

MRPL is in possession of certain land provisionally measuring 39.76 acres ceeded by HPCL for use by MRPL Phase III expansion and upgration work .The consideration for such land is mutually agreed to be by way of swapping of land in possession of MRPL/HPCL. The final documentation in this regard is pending to be executed.

1.17 Foreign Exchange exposures

1.17.01 Exposures not hedged by Derivative instruments or otherwise:

The Company has receivables and payables in foreign currency as at the Balance Sheet date. These foreign currency exposures are not hedged by any derivative instruments or otherwise.

1.18 Loans and Advances :

Loans and advances (Note 14) includes refund claims of Custom Duty on project imports Rs 378.71 Million (Previous year Rs 378.71 Million) and Commercial Taxes Rs Nil (previous year Rs 97.29 Million). A refund due towards Commercial Taxes Rs 2884.43 Million (Previous year Rs 2884.43 Million) (Refer Note no 19) for which there is a matching liability to pay to customers on receipt of the refund which is included under other current liabilities - Payable to Oil Companies on refund of Commercial taxes ( Note 10).

1.19 Commercial Tax incentives:

The Company, as per the Government of Karnataka notification, is entitled to Sales Tax deferment /exemption as follows:

The company, as per the Government of Karnataka Order and Notification is entitled to the following benefits

i) Entry Tax exemption on crude processed in excess of 12.65 MMTPA for a period of 15 years from 01.04.2012

ii) Full Central Sales Tax exemption on sale of Poly Propylene and Petroleum Coke for a period of 15 years from 01.04.2012. CST exemption on sale of LPG, Mixed Xylene, Naphtha, LSHS and Reformate made out of crude throughput in excess of 12.65 MMTPA for a period of 15 years from 01.04.2012.

iii) Interest free soft loan to the extent of 60% (100% for initial three years) of eligible gross VAT on sale of Poly Propylene, Petroleum Coke, Mixed Xylene, Naphtha, LPG, LSHS and Reformate for a period of 15 years from 01.04.2012 subject to a limit of Rs. 5,000 million per annum, the disbursement of loan is yet to take place.

1.20 Dues to Micro, Small & Medium enterprises:

The classification of the suppliers under Micro, Small and Medium Enterprises Development Act, 2006 is made on the basis of information made available to the company. The Company has neither paid any interest in terms of Section 16 of the above said Act nor any interest is remaining unpaid. No payments were made beyond the ''appointed date'' to such enterprises during the year ended 31st March,2015 subject to Rs 0.23 Million (Previous year Rs 0.70 Million) remaining unpaid on account of non-compliance of order terms.

1.21 Price Reduction Clause

Note No.10 - Other current liabilities includes Rs 1,557.42 million (Previous Year Rs 1,071.60 Million) which is payable against capital goods as on 31st March, 2015 , being amount withheld from vendors pursuant to, price reduction clause for delay in delivery and pending finalisation of proceedings, cost of fixed assets , depreciation. The WDV of the asset may undergo revision in the year in which the proceedings to appropriate the withheld amounts are ultimately finalised and appropriated.

1.22 The Company is yet to receive response for its confirmation letters from some of the trade receivables , Loans and Advances and trade payables. Reconciliation for those received as well as those for which confirmation is yet to be received is to be made , the effect for which, in management''s opinion is not significant.

1.23 Following expenses are included under other expenses

Insurance charges amounting to Rs 14.17 Million (Previous year Rs 13.41 Million) relating to crude purchase and staff welfare has been charged under respective heads for the year ended 31st March, 2015.

1.24 Disclosure as required by Clause 32 of the Listing agreement

There are no loans and advances in the nature of loan to Subsidiary, Associates and Joint Ventures.

1.25 Previous year''s figures have been re-grouped/ re classified wherever necessary to confirm to the curent year''s classification.


Mar 31, 2014

Note :1 Other Disclosures

1.01 Intangible Assets - Research & Development (AS-26)

The Company during the year ended 31st March, 2014 has carried out activities relating to product development in the area of Bitumen Emulsion formulations, Establishing analytical methods using Ion- Chromatography & Atomic Absorption Spectrometer with Hydride Generator, Detailed Crude assay analysis using True Boiling Point Apparatus , Crude Compatibility Study, Physical and Chemical evaluation of Catalyst as a part of its R & D activities and has incurred expenditure as mentioned below. These expenditure are booked in respective natural heads of expenditure.

1.02 Effects of changes in Foreign Exchange Rates (AS 11)

Pursuant to Notifcation no GSR (914)E dated 29th December 2011 issued by MCA , the Company has opted, from the financial year ending 31st March 2012, to adjust exchange difference arising on reporting of long term foreign currency monetary items, in so far as , they relate to the acquisition of depreciable assets, against the cost of such assets and depreciate the said adjustment, over the balance life of the assets.

Pursuant to Notifcation No. 17/133/2008-CL-V dated 9th August 2012 issued by MCA, the Company capitalised the exchange differences including for the period subsequent to the capitalisation of assets. Had this not been followed, the exchange differences amounting to Rs. 397.36 Million (Previous Year Rs. (3.13) million) relating to capitalized assets would have been debited to profit and Loss Account and Fixed Assets would have been lower to that extent for the year ended 31st March, 2014 .

1.03 Employee benefits (AS-15) 31.03.01 Brief Description: A general description on the type of Defined

benefit Plans are as follows: a Earned Leave benefit (EL):

Accrual – 32 days per year

Accumulation up to 300 days allowed

EL accumulated in excess of 15 days is allowed for encashment

while in service provided the EL encashed is not less than 5 days.

b Sick Leave (SL) now converted to Half Pay Leave (HPL)

Accrual – 10 days per year ( now converted to 20 days per year) Encashment while in service is not allowed Encashment on retirement is permitted ; restricted upto 300 days along with Earned leave.

c Gratuity:

15 days salary for every completed year of service. Vesting period is 5 years and the payment is restricted to Rs. 1 miilion.

d Long Service Emblem:

On completion of each milestone of service from the date of joining and also at the time of retirement, employees will be gifted with Gold Coin, weight depends on the milestone of service completed.

e Post Retirement Medical benefits:

After retirement, on payment of one time lump sum contribution,the superannuated employee and his/her dependent spouse and dependent parents will be covered for medical benefit as per the rules of the Company.

f Retirement benefits:

At the time of superannuation, employees are entitled for reimbursement of expenses towards travel, transportation of personal effects from their place of retirement to the new location upto certain limits depending on the designation of the employee at the time of retirement and one month''s salary as settling allowance.

1.04 Borrowing Costs (AS-16)

Amount of borrowing costs capitalised during the year ended 31st March 2014 is Rs. 3,778.55 million ( Previous year Rs. 3,589.01 million)

1.06 Related Party Disclosure (AS-18)

1.06.01 The Company is a state controlled enterprise and the transactions with other state controlled enterprises are not required to be disclosed as per AS-18.

1.06.02 Key Management Personnel:

(i) Shri P.P.Upadhya, Managing Director Remuneration from April 2013 to March 2014 - Rs. 36,22,630/- (ii) Shri Vishnu Agrawal, Director (Finance) Remuneration from April 2013 to March 2014- Rs. 33,72,310/-

1.07 Leases (AS-19)

1.07.01 The Company has taken various premises under cancellable operating lease.

1.07.02 These lease agreements are normally renewed on expiry of the term.

1.07.03 Lease rental expenses for the year ended 31st March, 2014 in respect of operating leases are Rs. 37.70 Million (previous year Rs. 35.06 Million)

1.08 Exceptional Items

The Company has recognised Rs. 1,118.85 million as income under exceptional items, arising out of changed pricing terms for curde oil supply, pursuant to signing of Crude Oil Sale Agreement (COSA) with ONGC on 31st July 2013 effective from 1st April 2010.

1.09 Deferred Tax

The Company during the year has recognised deferred tax assets of Rs. 2,640.59 Million net of deferred tax liability (previous year Nil).

1.10 Provisions, Contingent Liabilities and Contingent Assets (AS -29) Movement in Provisions (Rs. in Million)

Year 2013-14 2012-13

Particulars Debtors Others Debtors Others

Opening Balance 714.43 103.12 629.95 96.55

Add : Provision made 164.52 - 84.48 7.52 during the year

Less: Provision written - - - 0.95 back/reclassified/ reduction during year

Closing Balance 878.95 103.12 714.43 103.12

1.11 Provisions, Contingent Liabilities and Contingent Assets ( AS -29)

1.11.02 Contingent Liabilities not provided for in respect of :

a Corporate Guarantee given by the Company towards loan of Rs. 3,372.30 Million ( Previous Year Rs. 3,372.30 Million) sanctioned by certain bankers / financial institutions to New Mangalore Port Trust (NMPT) for construction of Jetties. Amount outstanding as at the close of the year ended 31st March, 2014, after adjusting the repayment made by NMPT is Rs. Nil (Previous Year Rs. Nil).

1.11.03 Disputed tax / Duty demands pending in appeal as on 31st March,2014

a) Income Tax: Rs. 2,840.81 Million (Previous Year Rs. 1,881.24 Million). Against this Rs. 2,661.58 Million (Previous year Rs. 948.74 Million) is adjusted / paid under protest and is included under loans & advances Note 14.

b) Commercial Tax: Rs. 32.36 Million (Previous Year Rs. 24.09 Million)

c) Excise Duty: Rs. 296.08 Million (Previous Year Rs. 324.08 Million) against this Rs. 70.33 Million ( Previous Year Rs. 74.95 Million) was paid under protest and is included under loans & advances Note -19)

d) Customs Duty: Rs. 711.68 Million (previous year Rs. 762.86 Million).

1.11.04 Capital and other commitments

a) The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) as on 31st March, 2014 Rs. 12,895.10 Million (Previous Year Rs. 19,896.30 Million).

b) Other commitments as on 31st March, 2014

Pending commitment on account of Refnery performance improvement programme by Ms.Shell Global International Solution (Ms.Shell GIS) USD 2.44 Million.(Previous year USD 3.25 Million)

1.13 Insurance Coverage

The Company has covered it''s Fixed Assets under a mega risk insurance policy which is subject to sanctions limitation and exclusion by UK, EU and UN.

1.14 Trade Payables ( NIOC )

The trade payables referred in Note no 9 includes Rs. 79141.99 million being overdue amount payable to National Iranian Oil Company (NIOC) pending settlement due to non finalisation of remittance channel arising out of UN/US/EU backed sanctions .

1.15 Land Usage of HPCL Land

MRPL is in possession of certain land provisionally measuring 39.76 acres ceeded by HPCL for use by MRPL Phase IIII expansion and upgration work .The consideration for such land is mutually agreed to be by way of swapping land in possession of MRPL. The final documentation in this regard is pending to be executed.

1.16 Valuation of Finished Products:

The overall gross margin percentage for all joint products is subtracted from the final net realisable value of each product to arrive at the total cost of each product which is taken as the basis for valuation of closing stock of fnished products{Refer Policy No. 9.2 in Note 1 - "Statement of significant accounting policies").

1.17 Foreign Exchange exposures

1.18 Loans and Advances :

Loans and advances (Note 14) includes refund claims of Custom Duty on project imports Rs. 378.71.Million (Previous year Rs. 378.71 Million) and Commercial Taxes Rs. 97.29 Million (previous year Rs. 158.30 Million). A refund due towards Commercial Taxes Rs. 2,884.43 Million (Refer Note no 19) for which there is a matching liability to pay to customers on receipt of the refund which is included under other current liabilities - liability for statutory payments( Note 10).

1.19 The Company is yet to receive response for its confirmation letters from some of the trade receivables , Loans and Advances and trade payables. Reconciliation and adjustment will be effected on receipt of confirmations, which in the opinion of the management will not be significant.

1.20 Dues to Micro, Small & Medium enterprises:

The classifcation of the suppliers under Micro, Small and Medium Enterprises Development Act, 2006 is made on the basis of information made available to the company. The Company has neither paid any interest in terms of Section 16 of the above said Act nor any interest is remaining unpaid. No payments were made beyond the ''appointed date'' to such enterprises during the year ended 31st March,2014. Amount outstanding to these enterprises payable within the "appointed date'' for the year ended 31st March, 2014 is Rs. 0.70 Million (Previous year Nil)

1.21 Price Reduction Clause

Note No.10 - Other current liabilities includes Rs. 1,071.60 million (Previous Year Rs. 838.81 Million) which is payable against capital goods as on 31st March 2014 , being amount withheld from vendors pursuant to, price reduction clause for delay in delivery and pending finalisation of proceedings, cost of fixed assets , depreciation. The WDV of the asset may undergo revision in the year in which the proceedings to appropriate the withheld amounts are ultimately finalised and appropriated.

1.21 Following expenses are included under other expenses

Insurance charges amounting to Rs. 13.41 Million (Previous year Rs. 29.88 Million) relating to crude purchase and staff welfare has been charged under respective heads for the year ended 31st March 2014.

1.22 Disclosure as required by Clause 32 of the Listing agreement

There are no loans and advances in the nature of loan to associates and joint ventures.

1.23 Current / MAT tax

During the year Company has provided current tax as per section 115JB (MAT) of the Income Tax Act, 1961 (Previous year Nil).

1.24 Previous year''s figures have been re-grouped/ re classified wherever necessary to confirm to the curent year''s classification.


Mar 31, 2013

1.01 Intangible Assets - Research & Development (AS-26)

The company during the year has carried out activities relating to Gas Chromatographic methods development, Bitumen Emulsion formulations, Reduction of Phenolic and Sulphidic odour in the spent caustic, Ammoniacal and nitrate Nitrogen reduction in the treated effl uent, Detailed Crude assay analysis, Crude Compatibility Study, Synthesis of value added product for HSD lubricity improving application, as a part of its R & D activities and has incurred expenditure as mentioned below. These expenditure are booked in respective natural heads of expenditure

1.02 Effects of changes in Foreign Exchange Rates (AS 11)

Pursuant to Notifi cation no GSR (914)E dated 29th December 2011 issued by MCA , the Company has opted to adjust exchange difference arising on reporting of long term foreign currency monetary items, in so far as , they relate to the acquisition of depreciable assets, against the cost of such assets and depreciate the said adjustment over the balance life of the assets from the fi nancial year ending 31st March 2012.

Pursuant to Notifi cation No. 17/133/2008-CL-V dated 9th August 2012 issued by MCA, the Company capitalised the exchange differences including for the period subsequent to the completion of construction of assets. Had this not been followed, the exchange differences amounting to Rs. 3.13 million relating to capitalized assets would have been credited to Profi t and Loss Account and Fixed Assets would have been higher to that extent for the year ended 31st March 2013.

1.03 Employee Benefits (AS-15)

1.03.01 Brief Description: A general description on the type of Defined Benefit Plans are as follows:

a Earned Leave Benefit (EL):

Accrual – 32 days per year

Accumulation up to 300 days allowed

EL accumulated in excess of 15 days is allowed for encashment while in service provided the EL encashed is not less than 5 days

b Sick Leave (SL):

Accrual – 10 days per year

Encashment while in service is not allowed

Encashment on retirement is permitted and entire accumulation is allowed for encashment

c Gratuity:

15 days salary for every completed year of service. Vesting period is 5 years and the payment is restricted to Rs. 1 miilion.

d Long Service Emblem:

On completion of each milestone of service from the date of joining and also at the time of retirement, employees will be gifted with Gold Coin, weight depends on the milestone of service completed.

e Post Retirement Medical Benefits:

After retirement, on payment of one time lump sum contribution,the superanuated employee and his/her dependent spouse and dependent parents will be covered for medical benefi t as per the rules of the Company.

f Retirement Benefits:

At the time of superannuation, employees are entitled for reimbursement of expenses towards travel, transportation of personal effects from their place of retirement to the new location upto certain limits depending on the designation of the employee at the time of retirement and one month’s salary as settling allowance.

1.04 Borrowing Costs (AS-16)

Amount of borrowing costs capitalised during the year Rs. 3,589.01 million (Previous year Rs. 889.56)

1.05 Related Party Disclosure (AS-18)

1.05.01 The Company is a state controlled enterprise and the transactions with other state controlled enterprises are not required to be disclosed as per AS-18.

1.05.02 Key Management Personnel:

(i) Shri. U.K.Basu, Managing Director (upto 30/06/2012) Remuneration

- Rs. 34,52,847/- (ii) Shri P.P.Upadhya, Managing Director (from 01/07/2012 with additional

charge as Director (Technical)) Remuneration - Rs. 41,81,373/- (iii) Shri Vishnu Agrawal, Director (Finance) Remuneration - Rs. 31,28,003/-

1.06 Leases (AS-19)

1.06.01 The company has taken various premises under cancellable operating lease.

1.06.02 These lease agreements are normally renewed on expiry of the term.

1.06.03 Lease rental expenses for the year ended 31st March, 2013 in respect of above operating leases are Rs. 35.06 Million (pre. year Rs. 34.75 Million)

1.07 Exceptional Items

1.07.01 Pursuant to the order of Tariff Authority for Major Ports (TAMP ) no TAMP/22/2012-NMPT dated 1st April 2013 notifi ed in Gazette of India datad 12th April 2013 fi xing the wharfage rates for the years 2002-03 to 2008-09, the Company has recognised Rs. 444.54 Million as receivable from NMPT and the same is considered as income under Exceptional items. (Refer Note No. 29 )

1.08 Deferred Tax

1.08.01 The company has not recognized deferred tax assets amounting to Rs. 5,792.10 Million in the absence of virtual certainty (Refer Note No. 5)

1.08.02 Contingent Liabilities not provided for in respect of :

a Corporate Guarantee given by the Company towards loan of Rs. 3,372.30 Million sanctioned by certain bankers / fi nancial institutions to New Mangalore Port Trust (NMPT) for construction of Jetties. Amount outstanding as at the close of the year ended 31st March, 2013, after adjusting the repayment made by NMPT is Rs. Nil (Previous Year Rs. Nil).

1.08.03 Disputed tax / Duty demands pending in appeal:

a) Income Tax: Rs. 1,881.24 Million (Previous Year Rs. 1,123.40 Million). Against this Rs. 948.74 Million (Previous year Rs. 1000.92 Million) is adjusted / paid under protest and is included under loans & advances Note 15.

b) Commercial Tax: Rs. 24.09 Million (Previous Year Rs. 321.49 Million) – includes Rs. Nil (Previous Year Rs. 321.49 Million) relating to projects.

c) Excise Duty: Rs. 341.85 Million (Previous Year Rs. 500.19 Million). (against this Rs. 79.36 Million ( Previous Year Rs. 39.10 Million was paid under protest and is included under loans & advances Note -20)

d) Customs Duty: Rs. 762.86 Million (previous year Rs. 647.54 Million).

1.08.04 a) The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 19,896.30 Million (Previous Year Rs. 31,185.31 Million).

b) Other commitments

i) ECB Loan to be availed USD 350 million

ii) ONGC Loan to be availed Rs. 17,000 million

iii) Pending commitment on account of Refi nery performance improvement programme by Ms.Shell Global International Solution (Ms.Shell GIS) USD 3.25 Million.

1.9 Loans and Advances :

Loans and advances (Note 14) include refund claims for Custom Duty on project imports Rs. 378.71.Million (Previous year Rs. 378.71 Million) and Commercial Taxes Rs. 158.30 Million (previous year Rs. 548.48 Million). A further refund due towards Commercial Taxes Rs. 2,884.43 Million is also included therein for which there is a matching liability to pay to customers on receipt of the refund which is included under other current liabilities - liability for statutory payments( Note 10).

1.10 Commercial Tax incentives:

1.10.01 The Sales tax deferment loan shown under Unsecured Loans (Note-4) includes a sum of Rs. Nil (Previous Year Rs. 290.17 Million) relating to CST on excise duty included under refund from Commercial Tax Department ( Note 20) for the years 2000-01and 2001-02, which were earlier paid under protest and are now being claimed as sales tax deferment loan by the Company.

1.11 The Company is yet to receive response for its confi rmation letters from some of the trade receivables , Loans and Advances and trade payables. Reconciliation and adjustment will be effected on receipt of confi rmations, which in the opinion of the management will not be signifi cant.

1.12 Dues to Micro, Small & Medium enterprises:

The classifi cation of the suppliers under Micro, Small and Medium Enterprises Development Act, 2006 is made on the basis of information made available to the company. The Company has neither paid any interest in the terms Section 16 of the above said Act nor any interest remain unpaid and no payments were made beyond the ''appointed date’ to such enterprises during the year ended 31.03.2013. Amount outstanding to these enterprises for the year ended 31st March, 2013 is Rs. Nil (Previous year: Rs. Nil)

1.13 Price Reduction Clause

Note No.10 - Other current liabilities includes Rs. 838.81 million (Previous Year Rs. 386.92 Million)under payable against capital goods , being amount withheld from vendors pursuent to price reduction clause for delay in delivery and pending fi nalisation of proceedings, cost of fi xed assets, depreciation and WDV may undergo revision in the year in which the proceedings to appropriate the withheld amounts are ultimately fi nalised and appropriated.

1.14 Following expenses are included under other heads of expenses

Insurance charges amounting to Rs. 29.88 Million (Previous year Rs. 20.22 Million) relating to crude purchase and staff welfare has been charged under respective heads.

1.15 Previous year’s fi gures have been re-grouped/ re arranged wherever necessary to conform to the curent period presentation .


Mar 31, 2010

1. Contingent Liabilities not provided for in respect of:

1.1. Corporate Guarantee given by the Company towards loan of ? 3,372.30 Million sanctioned by certain bankers / financial institutions to New Mangalore Port Trust (NMPT) for construction of Jetties. Amount outstanding as at the close of the year after adjusting the repayment made by NMPT is ? Nil (Previous Year ? 69.47 Million).

1.2. Claims against the Company not acknowledged as debt:

(in Million)

Sl.Particulars As on As on No 31.03.2010 31.03.2009

1 Claims of Contractors / vendors in 338.65 357.37 Arbitration / Court

(a) Some of the contractors for supply and installation of equipment have lodged claims on the company seeking revision of time of completion without liquidated damages, extended stay compensation and extra claims etc., which are contested by the company as not admissiblein terms of the provisions of the respective contracts. In case of unfavourable awards the amount payable would be capitalised (? 300.92 Million) / Reimbursable (? 37.73 Million) [Previous year ? 321.51 Million and X 35.86 million respectively]

(b)A shipping company had gone for - 57.60 arbitration, disputing the mutual settlement reached with the company. The claim has been withdrawn during the year.

2 Claims / counter claims of Customers

(a) The company had gone into an 14.31 1437 international arbitration at London against one of its export customers. The Arbitration Tribunal has dismissed the companys claims relating to throughput loss and non-fulfillment of contractual obligations and has ordered the company to bear the customers advocate cost along with refund of part of adhoc amount paid by the customer alongwith interest. The company has preferred an appeal in the Mumbai High Court against this arbitral award. In case of unfavourable award the amount payable would be debited to Profit & Loss Account.

(b)One of the customers has lodged a 85.20 85.20 claim for damages for pre-closure of the contract. The company has disputed the claim basis force meagre condition. In case of non acceptance of the stand taken by the company the amount will be debited to the Profit & Loss Account.

3 Others

(a) The New Mangalore Port Trust 177.38 (NMPT) has claimed from the company notified wharfage charges for one of the Jetty. The company has approached the Tariff Authority of Major Ports (TAMP) for fixation of the wharfage rates based on Tariff Policy. The differential amount between the wharfage rate to be fixed by the TAMP and the wharfage rate being paid by the company, if any, will be debited / credited to the Profit & Loss Account.

(b)This represents the potential 133.67 133.67 liability which the company has undertaken towards reimbursement to lessors in case of any liability in their respective tax assessments. In case on any claim by lessors the same will be debited to Profit & Loss Account.

4 Total 749.21 648.21

In respect of all these claims, which are being contested by the company as not admissible, it is not practicable to make a realistic estimate of the outflow of resource, if any, for settlement of such claim pending resolution / award from Arbitrators / Court.

5. Disputed tax / Duty demands pending in appeal:

a) Income Tax: 244.51 Million (Previous Year 345.13 Million).

b) Commercial Tax: 1,188.76 Million (Previous Year 1,684.92 Million) - includes 500.46 Million (Previous Year 500.46 Million) relating to projects. (Against this 1377.20 Million is paid under protest and included under loans & advances.)

c) Excise Duty: 146.45 Million (Previous Year 188.96 Million). (Against this ? 41.08 Million is paid under protest and is included under loans & advances.)

d) Custom Duty: 128.82 Million (Previous year 124.21 Million).

6. The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 93,391.12 Million (Previous Year 54,814.59 Million).

7. Loans and Advances :

7.1. Loans and advances include refund claims for Custom Duty on project imports 378.71.Million (Previous year 378.71 Million) and Commercial Taxes 500.63 (Previous year 315.68 Million). A further refund due towards Commercial Taxes 2884.43 Million is also included therein for which there is a matching liability to pay to customers on receipt of the refund which is included under Sundry Creditors (Others).

7.2, Sales tax deferment loan shown under Unsecured Loans includes a sum of f 290.17 Million (Previous Year ? 290.17 Million) relating to CST on excise duty included under refund from Commercial Tax Department (refer note no.2.1 above) for the years 2000-01 and 2001-02, which were earlier paid under protest and are now being claimed as sales tax deferment loan by the Company.

8. The Company is yet to receive response for its confirmation letters from some of the Sundry Debtors, Loans and Advances and Sundry Creditors. Reconciliation and adjustment will be effected on receipt of confirmations, which in the opinion of the management will not be significant.

9. Provision for Wage Revision

The Ministry of Petroleum and Natural Gas has approved revision of pay & allowances of management employees of the company in line with DPE approved scales of pay effective from 1st January, 2007 & 28* November, 2008 respectively. Accordingly wage revision in respect of Management employees has been given effect. The Non Management employees wage revision is due for revision effective from 1st April, 2007 and the negotiation with the employees union is in progress. Pending final negotiation, the company has made provision for wage revision on estimated basis for the year ended 31st March, 2010 amounting to 7 Nil (Previous Year ? 39 Million) and is shown under "Payment to and Provision for Employees" in Schedule P.

10. Following expenses are included under other heads of expenses Insurance 20.46 Million (Previous year 11.47 Million)

11. Dues to Micro, Small & Medium Enterprises:

The classification of the suppliers under Micro, Small and Medium Enterprises Development Act, 2006 is made on the basis of information made available to the company. No interest amount remain unpaid to such Micro and Small Enterprises as on 31.03.2010 and no payments were made to such enterprises beyond the "appointed day" during the year. Also the company has not paid any interest in terms of Section 16 of the above-mentioned act or otherwise. Amount outstanding to these enterprises for the year ended 31s1 March, 2010 is 0.74 Million (Previous Year. Nil)

12. Fofwarc Cm tracts to cover Forex Risk

12.1. Forward contracts Nil is outstanding as on 31s1 March, 2010 (US$ 56.17 Million as on 31s1 March, 2009), which were entered into, to hedge the risk of changes in foreign currency exchange rates on future export sales against existing long term export contract.

12.2. As the company is not following Accounting Standard 30 - Financial Instruments Recognition and Measurement, keeping in view of the principle of prudence, the Company, has recognised an amount of ? Nil (Previous Year: ? 226.38 Million) towards the mark to market (MTM) loss (net) as on 31s1 March. 2010 (included under the head exchange fluctuation (net) in Schedule P) on outstanding forward contracts mentioned at para 8.1.

13. Disclosures as requited under Accounting Standard 15 (Revised) is given below:

13.1. Brief Description: A general description on the type of Defined Benefit Plans are as follows:

a) Earned Leave Benefit (EL): Accrual - 32 days per year. Accumulation up to 300 days allowed. EL accumulated in excess of 60 days is allowed for encashment while in service.

b) Sick Leave (SL): Accrual - 10 days per year. Encashment while in service is not allowed. Encashment on retirement is permitted and entire accumulation is allowed for encashment.

c) Gratuity:15 days salary for every completed year of service. Vesting period is 5 years and the payment is restricted to 10,00,000.

d) Long Service Emblem: On completion of each milestone of service from the date of joining and also at the time of retirement, employees will be gifted with Gold Coin, weight depends on the milestone of service completed.

e) Post Retirement Medical Benefits: After retirement, on payment of one time employees share of premium, the employee and his/her spouse will be covered under Group Medical Insurance. The cover amount depends on designation of employee at the time of retirement.

f) Retirement Benefits: At the time of superannuation, employees are entitled for reimbursement of expenses towards travel, transportation of personal effects from their place of retirement to the new location upto certain limits depending on the designation of the employee at the time of retirement and one months salary as settling allowance.

14, Segment Reporting

The Company is engaged in the business of refining crude oil, all activities of the Company revolve around this business and the operations are in India. As such there is no other reportable segment as defined by the Accounting Standard 17 - Segment Reporting issued under the Company (Accounting Standard) Rules, 2006.

15. Information as per Accounting Standard (AS-18) on Related Party Disclosures is given below.

15.1. The Company is a state controlled enterprise and the transactions with other state controlled enterprises are not required to be disclosed as per AS-18.

15.2. Key Management Personnel: Functional Directors:

(i) Shri. U.K.Basu, Managing Director

(ii) Shri L.K.Gupta, Director (Finance).

Remuneration paid to the above-mentioned Directors during the year is 5.63 Millions (Previous year ? 4.30 Million) - Refer Note No. 12 given below.

The above figures do not include Provision for Leave, Gratuity and Post Retirement Benefits as per Revised AS-15 since the same were not ascertained for individual employees.

The performance related pay is considered on paid basis.

Loan & Advances outstanding from Directors -- Nil (Previous year - Nil), Maximum amount of Loans & Advances outstanding during the year 0.42 Million (Previous year Nil)

16. Operating Leases:

16.1. The company has taken various premises under cancellable operating lease.

16.2. These lease agreements are normally renewed on expiry of the term.

16.3. Lease rental expenses for 2009-10 in respect of above operating leases are 40.87 Million (previous year 38.80 Million)

17. Basic and Diluted Earnings Per Share:

18. Current Tax:

Provision for Current Tax is made in accordance with the provisions of the Income Tax Act, 1961.

19. Disclosure on Research & Development Expenditure

The company during the year has carried out activities relating to study of Crude Assay, Spent Caustic Treatment, additive degradation, Fluorescence Characteristics of Petroleum fractions, Biological Oxygen Demand and Chemical Oxygen Demand depletion, salt content of various crude and evaluation of Crude Assay as a part of its R & D activities. The total expenditure incurred by the company during the year on the above mentioned Research & Development activities is Rs. Qr>- Million (Previous Year - 7.99 Million).

Note : Figures in parenthesis represents previous year figure.

20.Foreign Exchange Exposures

21. Additional Information pursuant to the provisions of 3, 4B, 4C and 4D of Part II of Schedule - VI to the Companies Act, 1956:

 
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