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Notes to Accounts of Mangalore Refinery And Petrochemicals Ltd.

Mar 31, 2017

1. Corporate information

Mangalore Refinery and Petrochemicals Limited (‘MRPL’ or ‘the Company’) is a Central public sector enterprise domiciled and incorporated in India having its registered office at Mudapadav, Kuthethoor P.O. via Katipalla, Mangaluru, Karnataka -575030. The Company’s equity shares are listed and traded on BSE Limited and National Stock Exchange Limited, stock exchanges. The Company is engaged in the business of refining of crude oil. The Company is a subsidiary of Oil and Natural Gas Corporation Limited which holds 71.63% equity shares.

2. Application of new and revised Indian Accounting Standards

All the Indian Accounting Standards issued and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) till the financial statements are authorized have been considered in preparing these financial statements.

2.1. Standards / Amendments issued but not yet effective

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of cash flows’ and Ind AS 102, ‘Share-based payment.’ These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of cash flows’ and IFRS 2, ‘Share-based payment,’ respectively. The amendments are applicable to the Company from April 1, 2017.

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.

The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated.

Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.

As the Company has not issued any stock options plans, hence this amendment will have no effect on the Company’s financial statements.

3. Critical Accounting Judgments, Assumptions and Key Sources of Estimation Uncertainty

Inherent in the application of many of the accounting policies used in preparing the financial statements is the need for management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual outcomes could differ from the estimates and assumptions used.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.

Key source of judgments, assumptions and estimation uncertainty in the preparation of the financial statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of useful lives of property, plant and equipment, employee benefit obligations, provision for income tax and measurement of deferred tax assets.

3.1. Critical judgments in applying accounting policies

The following are the critical judgements, apart from those involving estimations (Refer note 4.2), that the Management have made in the process of applying the Company’s accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.

(a) Determination of functional currency

Currency of the primary economic environment in which the Company operates (“the functional currency”) is Indian Rupee (‘ in which the company primarily generates and expends cash. Accordingly, the management has assessed its functional currency to be Indian Rupee (‘).

3.2. Assumptions and key sources of estimation uncertainty

Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.

a) Useful lives of property, plant and equipment and intangible assets

Management reviews its estimate of the useful lives of PPE and intangible assets at each reporting date, based on the future economic benefits expected to be consumed from the assets.

b) Defined benefit obligation (DBO)

Management’s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, medical cost trends, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.

c) Provision for income tax

Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid/ recovered for uncertain tax positions.

d) Recognition of deferred tax assets

The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company’s future taxable income against which the deferred tax assets can be utilized. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties.

a These leasehold lands are considered as finance lease in nature as the ownership will be transferred to the Company at the end of the lease period . These leasehold lands are not depreciated.

b Leasehold lands includes land amounting to Rs.28.82 million (As at March 31, 2016 Rs.28.82 million; As at April 1, 2015 Rs.28.82 million), which is in possession of the Company towards which formal lease deeds are yet to be executed.

c Plant and equipment include Rs.39.15 million (As at March 31, 2016 Rs.39.15 million; As at April 1, 2015 Rs.39.15 million) being Company’s share of an asset jointly owned with another company.

4.1 The Company has elected to continue with the carrying value of its property, plant and equipment recognised as of April 1, 2015 measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date as per para D7AA of Ind AS 101 ‘First-time adoption of Indian Accounting Standards’ [Refer note 3.24.7]. The deemed cost is further reduced for the unamortised transaction costs on borrowings as at April 1, 2015, which were earlier capitalised with Property, Plant and Equipment.

4.2 Property plant and equipment pledged as security:

External commercial borrowing and loan availed from Oil Industry Development Board (OIDB) are secured by first pari passu charge over immovable property, plant and equipment and first ranking pari passu charge over movable property, plant and equipment both present and future. Working capital borrowings from consortium banks are secured by way of hypothecation of Company’s stocks of raw material , finished goods, stock-in-process, stores, spares, components, trade receivables, outstanding money receivables, claims, bills, contract, engagements, securities both present and future and further secured by second ranking pari passu charge over Companies movable and immovable property, plant and equipment both present and future [Refer note 21].

4.3 Foreign exchange differences and borrowing costs capitalised

Additions to property, plant and equipment includes ‘ (766.49) million (For the year ended March 31, 2016 Rs.2,406.17 million) in relation to foreign exchange differences and Nil (For the year ended March 31, 2016 Rs.124.17 million) borrowing costs capitalised. Asset class wise addition details are disclosed below:

4.4 The rate used to determine the amount of borrowing costs eligible for capitalisation was NIL (For the year ended March 31, 2016 was 6.94 %) which is the effective interest rate on borrowings.

4.5 Under the Previous GAAP, the Company reported an amount of Rs.138,226.10 million as carrying amount of plant and equipment as at March 31, 2015. During the year ended March 31, 2016 the Company made an adjustment of Rs.499.67 million to comply with requirements of Schedule II of the Companies Act, 2013. The same amount is taken in the opening balance of plant and equipment with corresponding adjustment to retained earnings as at April 1, 2015. Accordingly, an amount of Rs.137,726.43 million (Rs.138,226.10 million minus Rs.499.67 million) has been considered as deemed cost on transition date. Deferred tax impact was Rs.172.93 million on account of this adjustment.

4.6 The Company is eligible for certain economic benefits such as exemptions from entry tax, custom duty, etc. on import/ local purchase of capital goods in earlier years amounting to Rs.3,622.28 million. The Company has not made retrospective adjustment to the value of the respective property, plant and equipment as they are in the nature of Government assistance rather than Goverment grant as defined in Ind AS 20.

5. Capital work-in-progress (CWIP)

5.1 Additions to CWIP includes exchange differences amounting to Nil (For the year ended March 31, 2016 Rs.5.26 million) and includes borrowing costs amounting to Rs.Nil (For the year ended March 31, 2016 Rs.2.61 million) and allocated to different class of assets. The rate used to determine the amount of borrowing costs eligible for capitalisation was nil (For the year ended March 31, 2016 was 6.94%) which is the effective interest rate on borrowings.

5.2 CWIP includes nil (For the year ended March 31, 2016: Rs.0.42 million) in relation to depreciation capitalised during construction period.

5.3 The Company has elected to continue with the carrying value of its CWIP recognised as of April 1, 2015 measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date as per para D7AA of Ind AS 101 ‘First-time Adoption of Indian Accounting Standards’ [Refer note 3.24.7].

6.1 Goodwill represents excess of consideration paid over net assets acquired for acquisition of nitrogen plant.

6.2 The Company has elected not to apply Ind AS 103 ‘Business Combinations’ retrospectively in relation to acquisition of nitrogen plant that occurred before the transition date April 1, 2015 [Refer note 3.24.3].

7.1 The Company has elected to continue with the carrying value of its other intangible assets, recognised as of April 1, 2015 measured as per the previous GAAP and used that carrying value as its deemed cost as on the transition date as per para D7AA of Ind AS 101 ‘First-time Adoption of Indian Accounting Standards’ [Refer note 3.24.7].

8.1.1 The Company has elected to continue with the carrying value of its investment in subsidiary and joint ventures measured as per the Previous GAAP and used that carrying value on the transition date April 1, 2015 as per Para D15(b)(ii) of Ind AS 101.

8.1.2 Restrictions on disinvestment of share in ONGC Mangalore Petrochemicals Limited are subject to the approval of the Board of Oil and Natural Gas Corporation Limited.

8.1.3 Restrictions on disinvestment of shares in Shell MRPL Aviation Fuels and Services Limited and Mangalam Retail Services Limited are subject to the approval of the Oil and Natural Gas Corporation Limited.

9.1 The cost of inventories (cost of sales) recognised as an expense during the year in respect of continuing operations was Rs.385,732.81 million (For the year ended March 31, 2016 Rs.368,305.20 million).

9.2 The method of valuation of inventories has been stated in Note 3.18.

10.1 Generally, the Company enters into long-term sales arrangement with Oil Marketing Companies for domestic sales besides export of products through term contracts and spot international tenders and supplies to SEZ customers. The average credit period on sales ranges from 7 to 45 days. Interest is not charged on trade receivables for the applicable credit period from the date of invoice. For delayed period of payments, interest is charged as per respective arrangements, which is upto 3% per annum over the applicable bank rate on the outstanding balance.

10.2 Of the trade receivables, balance as at March 31, 2017 of Rs.24,308.83 million (As at March 31, 2016 Rs.21,531.97 million and as at April 1, 2015 Rs.23,180.40 million are due from the customers mentioned below. There are no other customers who represent more than 5% of the total balance of trade receivables other than mentioned below.

10.3 Usually, the Company collects all receivables from its customers within the applicable credit period. The Company assesses impairment on trade receivables from all the customers on facts and circumstances relevant to each transaction.

10.4 Secured by bank guarantees received from customers.

10.5 The Company has concentration of credit risk due to the fact that the Company has significant receivables from customers mentioned in note 15.2, however these customers are reputed and credit worthy.

11.1 Bank deposits maintained by the Company with banks comprise time deposits, which can be withdrawn at any point of time without prior notice or penalty on the principal.

11.2 Amount deposited in the unclaimed interest on debentures account is earmarked for payment of interest and cannot be used for any other purpose.

11.3 Amount deposited in the unclaimed dividend account is earmarked for payment of dividend and cannot be used for any other purpose.

11.4 Restricted bank balance represents unutilized capital expenditure fund drawn by way of external commercial borrowing which has been kept in a non-interest bearing account as per the Reserve Bank of India guidelines and can be utilised only for the stated purposes.

12.1 Based on the Board’s approval in the year 2007, the Company has been reclassifying unutilised freehold land to be disposed of as “Assets held for sale” under “ Current assets”. The Company intends to dispose off the freehold land in the next twelve months rather than utilising it for business purposes. The Company is actively searching prospective buyer. No impairment loss was recognised on reclassification of the freehold land as at March 31, 2017 as the Company expects that the fair value (estimated based on the recent market prices of similar properties in similar locations) less costs to sell is higher than the carrying amount.

12.2 Assets held for sale includes certain Property, plant and equipments which have been fully depreciated.

13.1 Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

13.2 Details of equity shares held by the holding company or its subsidiaries or its associates are as under:-

13.3 Details of shareholders holding more than 5% equity shares in the Company are as under:-

13.4 Equity shares reserved for issue under options and contracts or commitments for the sale of shares or disinvestment: Nil (As at March 31, 2016: Nil ; As at April 1, 2015: Nil).

13.5 Equity shares of Rs.10 each (equivalent to 303,550 equity shares of Rs.10 each) were forfeited in the year 2009-10 against which amount originally paid up was Rs.654,000.

14.1 The Company created capital redemption reserve on redemption of preference share capital during the financial years 2011-12 and 2012-13.

14.2 The Company created securities premium reserve on issue of equity share capital and the same can be utilized as per the requirement of the Companies Act, 2013.

14.3 The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to profit or loss.

14.4 The amount that can be distributed by the Company as dividends to its equity shareholders is determined considering the requirements of the Companies Act, 2013 and the dividend distribution policy of the Company. Thus, the amount reported in general reserves are not entirely distributable.

In respect of the year ended March 31, 2017, the Board of Directors has proposed a final dividend of Rs.6/- per share to be paid on fully paid equity shares. This equity dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed equity dividend is payable to all holders of fully paid equity shares. The total estimated equity dividend to be paid is Rs.10,515.59 million and the dividend distribution tax thereon amounts to Rs.2,140.73 million.

15.1 External commercial borrowing (ECB)

15.1.1 ECB taken by the Company are USD denominated loans and carries variable rate of interest which is LIBOR (6 months) plus spread. These are secured by first pari passu charge over immovable property, plant and equipment and first ranking pari passu charge over movable property, plant and equipment both present and future.

15.1.2 Rs.9,945.16 million (As at March 31, 2016 of Rs.2,600.25 million, As at April 1, 2015 of Rs.1,266.93 million) is repayable within one year and the same has been shown as “Current maturities of long term debts (secured)” under Note 22.

15.2 Loan from Oil Industry Development Board (OIDB)

15.2.1 Loan from OIDB taken by the Company carries fixed rate of interest. These are secured by first pari passu Charge over immovable property, plant and equipment and first ranking pari passu Charge over movable property, plant and equipment both present and future. Prior to December 10, 2015 the loan from OIDB was unsecured.

15.2.2 Rs.1,750.00 million (As at March 31, 2016 of Rs.2,750.00 million, As at April 1, 2015 of Rs.2,750.00 million) is repayable within one year and the same has been shown as “Current maturities of long term debts” (secured)” as at march 31, 2017 and as at march 31,2016 and “Current maturities of long term debts (unsecured)” as at April 1,2017 under Note 22.

15.3 Working capital loan from Banks

15.3.1 Working capital borrowings from consortium banks are secured by way of hypothecation of Company’s stocks of Raw material , Finished goods, stock-in-process, stores, spares, components, trade receivables, outstanding money receivables, claims, bills, contract, engagements, securities both present and future and further secured by second ranking pari passu charge over companies movable and immovable property, plant and equipment both present and future.

15.4 Term loan from related party

15.4.1 Term loan from related Party (ONGC) taken by the Company carries variable rate of interest which is G-sec yield for 5 years tenor plus spread w.e.f April 1, 2016 (earlier SBAR minus spread).

15.4.2 Rs.6,857.20 million (As at March 31, 2016 of Rs.6,857.20 million, As at April 1, 2015 of Rs.6,857.20) is repayable within one year and the same has been shown as “Current maturities of long-term debts (unsecured)” under Note 22.

15.5 Deferred payment liabilities

15.5.1 Deferred payment liability represents amount payable on account of sales tax liability to be paid after a specified period to the sales tax authority. Such deferral of sales tax liability is not liable for any interest. The Company has applied the mandatory exception provided under Ind AS 101 and accordingly has not fair valued the deferred payment liabilities that existed as at April 1, 2015.

15.5.2 Rs.526.54 million (As at March 31, 2016 of Rs.458.17 million, As at April 1, 2015 of Rs.555.83) is repayable within one year and the same has been shown as “Current maturities of long term debts (unsecured)” under Note 22.

15.6 Foreign currency non repatriable loan (FCNR)

15.6.1 Foreign Currency Non Repatriable Loan from bank are USD denominated loans carries variable rate of interest which is LIBOR (6 months) plus spread and is repayable at the end of one year from the date of each disbursement.

15.7 The repayment schedules disclosed above are based on contractual cash outflows and hence will not reconcile to carrying amounts of such borrowings which are accounted at amortised cost.

16.1 No amount is due for payment to the Investor Education Protection Fund.

16.2 Unclaimed interest on matured debentures represents interest payable towards disputed claims.

16.3 Price reduction clause

Payable against capital goods includes Rs.985.46 million (As at March 31, 2016 Rs.2,024.28 million, As at April 1, 2015 Rs.1,557.42 million) relating to amounts withheld from vendors pursuant to price reduction clause which will be settled on finalisation of proceedings with such vendors. When the withheld amounts are ultimately finalised, the related adjustment is made to the property, plant and equipment prospectively.

17.1 Trade payables include Rs.9,102.11 million (As at March 31, 2016 of Rs.4,638.87 million; As at April 1, 2015 of Rs.3,282.95 million) for which ONGC has given guarantees on behalf of the Company.

17.2 The average credit period on purchases of crude, stores and spares, other raw material, services, etc. ranges from 7 to 90 days. Thereafter, interest is charged upto 6.75% p.a. over the relevant bank rate as per respective arrangements on the outstanding balances. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

18.1 Net of amount receivable/ payable from/to gratuity trust.

19.1 Provision for revision in salary w.e.f January 01, 2017 is considered as per recommendation of “Third Pay Revision Committee Report”.

19.1 Excise duty on sale of product has been included in ‘Revenue from operations’ and excise duty shown above represents the difference between excise duty on opening and closing stock of finished goods.

19.2 The CSR expenditure comprises the following:

(a) Gross amount required to be spent by the Company during the year: Rs.50.00 million (Year ended March 31, 2016 Rs.23.40 million).

(b) Amount spent during the year on:

20.1 Exceptional items for the current year is on account of exchange rate variation gain arising out of settlement of overdue trade payables which got accumulated on account of non finalisation of remittance channel.

20.2 The exceptional items for the previous year consists of Rs.1,541.87 million expenses arising out of differential wharfage for the period October 16, 2009 to March 31, 2015 paid as per order issued by Ministry of Shipping, Government of India, Rs.211.15 million towards adhoc contribution to Super Annuation Benefit Fund for the non-management staff as per Long Term settlement signed effective April 01, 2007 (contribution pertains to the period April 2007 to March 2015) and Rs.76.92 million on account of re-worked out Custom Duty on the basis of judgment of Hon’ble Supreme Court in MRPL’s Civil Appeals.

21 Leases

21.1 Obligations under finance leases

21.1.1 The Company has entered into lease agreements for lands which have been classified as finance leases. The ownership of the lands will be transferred to the Company at the end of the lease term with nominal payment of administrative charges. The lease term ranges from 5 - 44 years. The Company has pledged these leasehold lands for obtaining borrowings [Refer Note 5.2].

Financial lease obligation as at March 31, 2017 is immaterial ( As at March 31, 2016 : immaterial; As at April 1, 2015: immaterial).

21.2 Operating lease arrangements

21.2.1 Leasing arrangements

The Company has entered into arrangements for right of way for pipelines and lease of land which have been classified as operating leases. The lease period for right of way ranges from 11 months to 30 years and for leases of land ranges from 5 to 44 years. In case of leasehold land, the Company does not have option to purchase the land at the end of the lease period. Generally, the lease arrangements for land requires Company to make upfront payments at the time of the execution of the lease arrangement with annual recurring charges with escalations in annual lease rentals.

21.2.2 Payments recognized as an expense

21.2.3 Non-cancellable operating lease commitments

The Company does not have any non-cancellable lease arrangements.

22 Employee benefit plans

22.1 Defined Contribution plans

The amounts recognized in the financial statements for defined contribution plans are as under:

22.2 Other long term employee benefits

22.2.1 Brief Description: A general description of the type of Other long-term employee benefits is 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 up to 300 days along with Earned leave.

22.2.2 The liability for leaves is recognized on the basis of actuarial valuation.

22.3 Defined benefit plans

22.3.1 Brief Description: A general description of the type of Defined benefit plans is as follows:

a) Gratuity:

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

The MRPL- Gratuity Trust was formed on 20th April,2007 and invesments of the funds received from the company after actuarial valuation and the investment of the funds upto June 28, 2013 was made in the manner prescribed by Income tax Rule 67(1) of the Income Tax Rules ,1962 as amended from time to time .

The Funds of MRPL- Gratuity Trust after June 28, 2013 is being invested in Group Gratuity Cash Accumulation Scheme (Traditional Fund) in LIC, Bajaj Allianz, HDFC Standard Life Insurance Co., Birla Sunlife Insurance co and Inda First Life Insurance Co.

b) 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.

c) Resettlement Allowance:

At the time of superannuation, employees are entitled to settle at a place of their choice and they are eligible for Settlement Allowance.

22.3.2 The liability for Defined benefit plans is recognized on the basis of actuarial valuation.

22.3.3 These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

No other post-retirement benefits are provided to these employees.

In respect of the plans, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at March 31, 2017 by a member firm of the Institute of Actuaries of India. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

22.3.4 The principal assumptions used for the purposes of the actuarial valuations were as follows.

The rate of discounting based upon the market yield available on Government bonds at the accounting date with a term that matches. The salary growth takes account inflation, seniority, promotion and other relevant factor on long term basis. Expected rate of return on plan assets is based on market expectation, at the beginning of the year, for return over the entire life of the related obligation.

22.3.5 Amounts recognised in statement of profit and loss in respect of these defined benefit plans are as follows:

The current service cost and the net interest expense for the year are included in the ‘Employee benefits expense’ line item in the statement of profit and loss.

The remeasurement of the net defined benefit liability is included in other comprehensive income. The components of remeasurement of net defined benefit liability recognised in other comprehensive income is ‘ (75.55) million (previous year Rs.5.28 million)

22.3.6 Movements in the present value of the defined benefit obligation are as follows:

22.3.7 The amount included in the Balance sheet arising from the entity’s obligation in respect of its defined benefit plan is as follows :

The amounts included in the fair value of plan assets of gratuity fund in respect of Company’s own financial instruments and any property occupied by, or other assets used by the reporting enterprise are Nil (As at March 31, 2016 Nil ; As at April 1, 2015 Nil)

Post-Retirement Medical Benefits and terminal benefits and Resettlement allowances are unfunded plans, and no plan assets are involved.

22.3.8 Movements in the fair value of the plan assets are as follows :

Expected Contribution in respect of Gratuity for next year will be Rs.94.65 million (For the year ended March 31, 2016 Rs.27.08 million)

The Company has recognized a gratuity liability of Rs.98.99 as at March 31, 2017 (As at March 31, 2016 Rs.28.95 million; As at April 1, 2015 Rs.31.68 million).

22.3.9.1 The actual return on plan assets of gratuity was Rs.43.18 million (As at March 31, 2016 Rs.40.56 million).

22.3.10 Significant actuarial assumptions for the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

22.3.11 Sensitivity Analysis as at March 31, 2017

23 Segment Reporting

The Company has “petroleum products” as single reportable segment.

23.1 Information about major customers

Company’s significant revenues are derived from sales to oil marketing companies which is 68% and 70% of the Company’s total revenue for the year ending 31st March 2017 & 31st March 2016 respectively. The total sales to such companies amounted to Rs.405,803.37 million for the year ended March 31, 2017 and Rs.354,414.95 million for the year ended March 31, 2016.

Nil customer (excluding oil marketing companies mentioned above) for the year ended March 31, 2017 and [nil] customers (excluding oil marketing companies mentioned above) for the year ended March 31, 2016 contributed 10% or more to the Company’s revenue. The total sales to such customer amounted to nil million for the year ended March 31, 2017 and nil million for the year ended March 31, 2016.

23.2 Information about geographical areas:

a) The Company is domiciled in India. The amount of its revenue from customers broken down by location of customers is tabulated below:

b) Non-current assets (excluding financial assets and deferred tax assets) broken down by location of customers is tabulated below:

23.3 Revenue from major products

The following is an analysis of the Company’s revenue from continuing operations from its major products:

24 Related Party Disclosures

24.1 Name of related parties and description of relationship:

A Entity having control over the Company

Oil and Natural Gas Corporation (ONGC)

B Entity having significant influence over the Company

Hindustan Petroleum Corporation Limited (HPCL)

C Subsidiary

ONGC Mangalore Petrochemicals Limited (OMPL)

D Joint Ventures

1 Shell MRPL Aviation Fuels and Services Limited (SMAFSL)

2 Mangalam Retail Services Limited(MRSL) (upto January 16, 2017)

E Trusts (including post retirement employee benefit trust) wherein MRPL having control

1 MRPL Gratuity Fund Trust

2 MRPL Provident Fund Trust F Key Management Personnel F.1 Non-Executive directors

Shri D. K. Saraff (Chairman)

F.2 Executive Directors

1 Shri H. Kumar, Managing Director.

2 Shri M. Venkatesh Director (Refinery).

3 Shri Vishnu Agrawal, Director (Finance) up to January 31, 2016.

4 Shri A. K. Sahoo, Director (Finance) from February 1, 2016.

F.3 Other Non-Executive Directors

1 Shri B.K.Namdeo, Nominee Director (HPCL) upto November 8, 2016.

2 Shri Nalin Kumar Srivastava, Government Nominee Director, upto March 3, 2016.

3 Shri Diwakar Nath Misra, Government Nominee Director, from March 9, 2016.

4 Shri Vinod S. Shenoy, Nominee Director (HPCL), from November 8, 2016.

5 Smt.Perin Devi, Government Nominee Director.

6 Ms.Manjula C, Independent Director, from January 31, 2017.

F.4 Company Secretary

Shri Dinesh Mishra, Company Secretary

The above transactions with the government related entities cover transactions that are significant individually and collectively. The Company has also entered into other transactions such as telephone expenses, air travel, fuel purchase and deposits etc. with above mentioned and other various government related entities. These transactions are insignificant individually and collectively and hence not disclosed.

24.2.1 Transactions and outstanding balances with ONGC, HPCL, OMPL, PMHBL and ONGBV have been disclosed in Note 41.2.1 to 41.2.10 above.

25 Financial instruments

25.1 Capital Management

The Company’s objective when managing capital is to safeguard its ability to continue as going concern so that the Company is able to provide maximum return to stakeholders and benefits for other stakeholders; and maintain an optimal capital structure to reduce the cost of capital.

The Company maintains its financial framework to support the pursuit of value growth for shareholders, while ensuring a secure financial base. In order to maintain or adjust the capital structure, the Company may vary the distribution of dividends to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The capital structure of the Company consists of net debt (borrowings as detailed in notes 21 and 22 offset by cash and bank balances) and total equity of the Company.

The Company’s management reviews the capital structure of the Company on quarterly basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital requirements and maintenance of adequate liquidity.

25.1.1 Gearing Ratio

The gearing ratio at the end of the reporting period is computed as follows: The gearing ratio is worked out as follows

25.2.1 Investments in subsidiary and joint ventures have not been disclosed above as these are measured at cost less impairment, if any

25.3 Financial risk management objectives

The Company’s risk management committee monitors and manages key financial risks relating to the operations of the Company by analyzing exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

25.4 Market Risk

Market risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of a business. The major components of market risk are foreign currency exchange risk and interest rate risk.

25.5 Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies, primarily for purchases of crude oil and exports sales and has borrowings denominated in foreign currency; consequently, exposures to exchange rate fluctuations arise. Significant carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows

25.5.1 Foreign currency sensitivity analysis

The Company is mainly exposed to the currency of United States of America (USD). Sensitivity of profit or loss arises mainly from USD denominated receivables and payables.

As per management’s assessment of reasonable possible changes in the exchange rate of /- 5% between USD-INR currency pair, sensitivity of profit or loss only on outstanding foreign currency denominated monetary items at the period end is presented below:

25.5.2 Forward foreign exchange contracts

The Company has not entered into any forward foreign exchange contracts during the reporting period.

25.6 Interest rate risk management

The Company has availed borrowings at fixed and floating interest rates, hence is exposed to interest rate risk. The Company has not entered into any of the interest rate swaps and hence the Company is exposed to interest rate risk.

Interest rate sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates at the end of the reporting period. For floating rate borrowings, the analysis is prepared assuming the amount of the borrowings outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used for disclosing the sensitivity analysis.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s profit for the year ended March 31, 2017 would decrease/increase by Rs.318.68 million (for the year ended March 31, 2016 : decrease/increase by Rs.370.75 million). This is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings.

25.7 Credit risk management

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises from cash and cash equivalents, deposits with banks as well as customers including receivables. Credit risk management considers available reasonable and supportive forward-looking information including indicators like external credit rating (as far as available), macro-economic information (such as regulatory changes, government directives, market interest rate).

Major customers, being public sector undertakings oil marketing companies having highest credit ratings, carry negligible credit risk. Concentration of credit risk to any other counterparty did not exceed 11% of total monetary assets at any time during the year.

Only high rated banks are considered for placement of deposits. Bank balances are held with reputed and creditworthy banking institutions.

25.8 Liquidity risk management

The Company manages liquidity risk by maintaining sufficient cash and cash equivalents including bank deposits and availability of funding through an adequate amount of committed credit facilities to meet the obligations when due. Management monitors rolling forecasts of liquidity position and cash and cash equivalents on the basis of expected cash flows. In addition, liquidity management also involves projecting cash flows considering level of liquid assets necessary to meet obligations by matching the maturity profiles of financial assets & liabilities and monitoring balance sheet liquidity ratios. The Company manages liquidity risk by maintaining adequate reserves and continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Company may be required to pay.

The following table details the Company’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

25.9 Fair value measurement

The management considers that the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair values unless otherwise stated.

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.

26.1 Disputed tax / Duty demands pending in appeal as at 31st March,2017

26.2.1 Income Tax: Rs.4,231.68 million as at March 31,2017 (As at March 31, 2016 Rs.6649.42 million; As at April 1, 2015 Rs.5942.35 million). Against this Rs.3,994.28 million as at March 31,2017 (As at March 31, 2016 Rs.3373.70 million; As at April 1, 2015 Rs.2579.25 million). is adjusted / paid under protest and is included under tax assets/ liability [Note 12].

26.2.2 Commercial Tax: Rs.0.43 million as at March 31,2017 (As at March 31, 2016 Rs.32.36 million; As at April 1, 2015 Rs.32.36 million). Against this Rs.0.21 million as at March 31,2017 (As at March 31, 2016 Rs.15.58 million; As at April 1, 2015 Rs.15.58 million) is paid under protest and is included under other assets (non current) [note 13].

26.2.3 Excise Duty: Rs.5,962.90 million as at March 31,2017 (As at March 31, 2016 Rs.304.80 million ; As at April 1, 2015 Rs.315.27 million). Against this Rs.130.06 million as at March 31,2017(As at March 31, 2016 Rs.59.78 million; As at April 1, 2015 Rs.72.87 million) was paid under protest and is included under other assets (non current) [note 13].

26.2.4 Customs Duty: Rs.777.54 million as at March 31,2017 (As at March 31, 2016 Rs.737.82 million; As at April 1, 2015 Rs.747.56 million).

27 Commitments

27.1 Capital Commitments:

The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) as at March 31, 2017 Rs.3,012.07 Million (As at March 31, 2016 Rs.1,153.52 million; As at April 1, 2015 Rs.1,602.96 million). The Company has requested KIADB for an allotment of 1050 acres of land for Phase IV expansion. The total capital commitment in this regard is around Rs.1,042.02 million (As at March 31,2016 Rs.6,946.81 million) as per the letter No.KIADB/Central Ofc/LA-MNG/2480/16195/2015-16 dated 22/02/2016.

27.2 Other Commitments

a Pending commitment on account of Refinery-MRPL is in possession of certain land provisionally measuring 39.76 acres ceded by HPCL for use by MRPL Phase III expansion and upgradation 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.

b Pending commitment on account of Refinery performance improvement programme by M\s.Shell Global International Solution (M\s.Shell GIS) as at March 31, 2017 USD 1.46 Million (As at March 31, 2016 USD 2.06 Million; As at April 1, 2015 USD 2.44 Million)

c The Company has an export obligation as at March 31,2017 Rs.1,313.68 million (As at March 31, 2016 Rs.1,556.36 million; As at April 1, 2015 Rs.1,346.93 Million) on account of concessional rate of customs duty availed under EPCG licence scheme on import of capital goods.

28 The Company has a periodic system of physical verification of inventory, property, plant and equipment and capital stores in a phased manner to cover all items over a period. Adjustment differences, if any, is carried out on completion of reconciliation.

29 The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

30 Some balances of trade and other receivables, trade and other payables and loans are subject to confirmation/reconciliation.

Adjustments, if any, will be accounted for on confirmation/reconciliation of the same, which will not have a material impact.

31 Figures in parenthesis as given in these notes to financial statements relate to previous years.

32 Approval of financial statements

The financial statements were approved for issue by the board of directors on May 17, 2017

32 First-time Ind AS adoption reconciliations

32.1 Effect of Ind AS adoption on the balance sheet as at March 31, 2016 and April 1, 2015

Explanatory Notes to Balance sheet Reconciliation

1 Reclassification of leasehold land : Under Previous GAAP, upfront premium paid for leasehold land was recognised as property, plant and equipment. Under Ind AS, leasehold lands where the ownership of the land will not be transferred to Company at the end of lease period are classified as operating leases. Consequently, as on the transition date, an amount of Rs.6.96 million has been reclassified from property, plant and equipment and shown as prepayments under Ind AS. Similarly, an amount of Rs.6.88 million has been shown as prepayments as at March 31, 2016. This reclassification has no impact on equity as on transition date.

2 Adjustment relating to property, plant and equipment: Under the Previous GAAP, the Company reported an amount of Rs.138,226.10 million as carrying amount of plant and equipment as at March 31, 2015. During the year ended March 31, 2016 the Company made an adjustment of Rs.499.67 million to comply with requirements of Schedule II of the Companies Act, 2013. The same amount is taken in the opening balance of plant and equipment with corresponding adjustment to retained earnings as at April 1, 2015. Accordingly, an amount of Rs.137,726.43 million (Rs.138,226.10 million minus Rs.499.67 million) has been considered as deemed cost on transition date. Deferred tax impact was Rs.172.93 million on account of this adjustment.

3 Transaction Cost: Under Previous GAAP, transaction costs related to ECB loan were capitalised with the cost of property, plant and equipment (being costs eligible for capitalisation). Under Ind AS, borrowings are recognised net of transactions costs on initial recognition and subsequently measured at amortised cost. As at transition date, transaction costs amounting to Rs.416.20 million has been reduced from the property, plant and equipment and corresponding reduction in ECB Loan. Subsequent to the transition date, the transaction cost is amortised over the loan period using effective interest rate method and depreciation on property, plant and equipment is calculated on the reduced amount over the remaining useful life. Amortisation of transaction costs for the year ended March 31, 2016 has been recognized as finance costs in the Statement of Profit and Loss resulting in increase in finance cost by Rs.139.43 million. Depreciation reduction on account of above adjustment relating to property, plant and equipment amount to Rs.17.64 million for the year ended March 31, 2016

4 Reclassification of long term loans and advances : Under Previous GAAP, an advance paid towards capital expenditure which was presented as part of long-term loans and advances which has been re-classified as capital work-in-progress under Ind AS. Consequently, an amount of Rs.51.50 million has been reclassified from long-term loans and advances and classified as capital work-in-progress as at transition date and as at March 31, 2016. This reclassification has no impact on equity as on transition date.

5 Amortisation on Goodwill : Under Previous GAAP, Goodwill was amortised over the useful life of the assets, whereas under Ind AS Goodwill is tested for impairment at each reporting period and is not amortised. Consequently, goodwill amount as the transition date has been tested for impairment under Ind AS. Amortisation amounting to Rs.2.01 million for the year ended March 31, 2016 has been reversed. This reclassification has no impact on equity as on transition date.

6 Re-measurement of financial assets and financial liabilities : Under Ind AS, certain security deposits taken and other deposits given have been fair valued and subsequently accounted at amortised cost. The fair valuation impact of other deposit given and security deposit taken at transition date amounts to Rs.5.61 million and Rs.1.84 million respectively. This adjustment at transition date has resulted in decrease in the carrying balance of Other Deposit (financial asset) and Security Deposit (financial liability) by Rs.5.61 million and Rs.1.84 million respectively and recognition of Prepaid Rent and Advance Rental respectively. Subsequent to transition date, Other Deposit (financial asset) and Security Deposit (financial liability) have been accounted at amortised cost resulting in recognition of finance income and finance expense respectively. Prepaid Rent and Advance Rental are amortised on straight line basis over the period of deposit. This remeasurement has no impact on equity as on transition date. Subsequent to the transition date, such valuation difference on financial assets and liabilities has been recognized in statement of profit & loss resulting in increase in other expenditure by Rs.1.33 million, interest income by Rs.1.19 million, increase in finance cost by Rs.0.08 million and increase in other income by Rs.0.13 million for the year ended March 31, 2016. The net effect of above is decrease in financial assets by Rs.0.14 million, decrease in financial liabilities by Rs.0.05 million and decrease in total equity by Rs.0.09 million as at March 31, 2016.

7 Recognition of amount paid for certain facility having future economic benefits : An amount of Rs.265.17 million paid for ETP facility has been recognised as “Prepayments” on transition date which was charged to Statement of Profit and Loss account under Previous GAAP. This has resulted in increase the retained earning on transition date. Subsequent to transition date, the amount is amortised over the remaining useful life of the ETP facility. The amount recognised in the Statement of Profit and Loss account for the year ended March 31, 2016 in relation to amortisation is Rs.8.95 million.

8 Reclassification of rebate accrued : Under Previous GAAP, accrual for rebate to customers (current) was shown as deduction from trade receivables. Under Ind AS, it has been reclassified and shown as “Other Financial Liabilities” under current liabilities. Therefore an amount of Rs.93.47 million as at April 1, 2015 and Rs.262.16 million as at March 31, 2016 towards accrual of rebate is reclassified to “Other Financial Liabilities”.

9 Reclassification Cash and Cash Equivalents and Other Bank Balances : Under Previous GAAP, the classification of bank deposits was based on the remaining maturity period of bank deposits as on the balance sheet date. Under Ind AS , the classification for the bank deposit is based on the original maturity period of the bank deposit. Accordingly, an amount of Rs.27468.71 million and Rs.81560.00 million has been re-classified from cash and cash equivalents to “other bank balances” as at transition date and March 31, 2016 respectively.

Under Previous GAAP, gold coins were shown cash and cash equivalents. Under Ind AS, gold coin are classified “other assets”. Accordingly, an amount of Rs.0.94 million and Rs.0.91 million have been reclassified from cash and cash equivalent to “other current assets” as at transition date and March 31, 2016 respectively.

Under Previous GAAP, unutilized CAPEX fund drawn by way of External Commercial Borrowing lying in the Current Account was shown as Cash and Cash Equivalent. Under Ind AS, the same is reclassified to “other bank balances” as restricted cash as withdrawal from this account is only for the purpose for meeting capital expenditure. Accordingly an amount of Rs.Nil and Rs.8,078.42 million has been reclassified from cash and cash equivalents to “other bank balances” as at transition date and March 31, 2016 respectively.

10 Reclassification of assets held for sale: As at transition date, an amount of Rs.77.96 million have been reclassified from Other Current Assets to Asset held for sale. These reclassifications have no impact on equity.

11 Financial Guarantees: Under Ind AS, financial guarantee given by holding company on behalf of subsidiary without charging any guarantee fees are fair valued. Accordingly, an amount of Rs.26.05 million has been recognized as Additional Paid in Capital as at April 1, 2015 with corresponding debit to prepayment for Guarantee Charges. Prepayment for guarantee charges is amortised over the guarantee period. For the year ended March 31, 2016, an amount of Rs.18.37 million has been amortised as Guarantee fees which has been charged to Statement of Profit and loss.

12 Deferred Tax: Deferred tax has been recognized on the account of adjustments made due to application of Ind AS. These adjustments have resulted in an increase in deferred tax liability by Rs.34.73 million as at March 31, 2016

Notes to Profit Reconciliation for the year 2015-16:

1 Revenue from Operations: Excise duty: Under Previous GAAP, revenue from sale of products was presented excluding excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty and the excise duty paid is presented separately as an expense. This has resulted in an increase in total revenue and total expenses by Rs.112321.37 million for the year ended March 31, 2016.

2 Employee benefit expenses : Under Previous GAAP, actuarial gains and losses on post-retirement defined benefit plans were recognised in Statement of Profit and Loss. Under Ind AS, the same is recognised in the “Other comprehensive income”.

3 Transaction Cost : Under Previous GAAP, transaction costs related to ECB loan were capitalised with the cost of property, plant and equipment (being costs eligible for capitalisation). Under Ind AS, borrowings are recognised net of transactions costs on initial recognition and subsequently measured at amortised cost. As at transition date, transaction costs amounting to Rs.416.20 million has been reduced from the property, plant and equipment and corresponding reduction in ECB Loan. Subsequent to the transition date, the transaction cost is amortised over the loan period using effective interest rate method and depreciation on property, plant and equipment is calculated on the reduced amount over the remaining useful life. Amortisation of transaction costs for the year ended March 31, 2016 has been recognized as finance costs in the Statement of Profit and Loss resulting in increase in finance cost by Rs.139.43 million. Depreciation reduction on account of above adjustment relating to property, plant and equipment amount to Rs.17.64 million for the year ended March 31, 2016

4 Amortization of financial guarantees charges : As stated at note 3.20.2(a), financial guarantees charges have been recognized as Prepaid Guarantee Charges as at the transition date. Such guarantees have been amortized to Statement of Profit and Loss over the guarantee period, resulting in increase in finance cost by Rs.18.37 million during year ended March 31, 2016.

5 Reclassification of leasehold land : Under Previous GAAP, leasehold land was shown as part of property, plant and equipment and depreciated over the lease period. Under Ind AS, leasehold lands where the ownership of the land will not be transferred to Company at the end of lease period are classified as operating leases and therefore are shown as prepayments and amortized over the lease period. This reclassification resulted in decrease in depreciation expense by Rs.0.08 million with corresponding increase in other expenditure.

6 Reversal of Amortisation on Goodwill : Under Previous GAAP, Goodwill was amortised over the useful life of the assets, whereas under Ind AS Goodwill is tested for impairment at each reporting period and is not amortised. Consequently, goodwill amount as the transition date has been tested for impairment under Ind AS. Amortisation amounting to Rs.2.01 million for the year ended March 31, 2016 has been reversed.

7 Re-measurement of financial assets and financial liabilities : Under Ind AS, certain security deposits taken and other deposits given have been fair valued and subsequently accounted at amortised cost. The fair valuation impact of other deposit given and security deposit taken at transition date amounts to Rs.5.61 million and Rs.1.84 million respectively. This adjustment at transition date has resulted in decrease in the carrying balance of Other Deposit (financial asset) and Security Deposit (financial liability) by Rs.5.61 million and Rs.1.84 million respectively and recognition of Prepaid Rent and Advance Rental respectively. Subsequent to transition date, Other Deposit (financial asset) and Security Deposit (financial liability) have been accounted at amortised cost resulting in recognition of finance income and finance expense respectively. Prepaid Rent and Advance Rental are amortised on straight line basis over the period of deposit. This remeasurement has no impact on equity as on transition date. Subsequent to the transition date, such valuation difference on financial assets and liabilities has been recognized in statement of profit & loss resulting in increase in other expenditure by Rs.1.33 million, interest income by Rs.1.19 million, increase in finance cost by Rs.0.08 million and increase in other income by Rs.0.13 million for the year ended March 31, 2016. The net effect of above is decrease in financial assets by Rs.0.14 million, decrease in financial liabilities by Rs.0.05 million and decrease in total equity by Rs.0.09 million as at March 31, 2016.

8 Recognition of amount paid for certain facility having future economic benefits : An amount of Rs.265.17 million paid for ETP facility has been recognised as “Prepayments” on transition date which was charged to Statement of Profit and Loss account under Previous GAAP. This has resulted in increase the retained earnings on transition date. Subsequent to transition date, the amount is amortised over the remaining useful life of the ETP facility. The amount recognised in the Statement of Profit and Loss account for the year ended March 31, 2016 in relation to amortisation is Rs.8.95 million.

9 Deferred Tax: Deferred tax has been recognized on the account of adjustments made due to application of Ind AS. These adjustments have resulted in an net increase in deferred tax by Rs.140.03 million during year ended March 31, 2016.


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, 2012

1.1 Shares held by holding or ultimate holding company or its subsidiaries or associates 1,255,354,097 Equity Shares (1,255,354,097 Equity Shares) are held by ONGC Limited, the holding company.

1.2 No shares are reserved for issue under options and contracts/commitments for the sale of shares/disinvestment

Notes

a. Includes Rs. 261.50 Million (Previous YearRs. 260.87 Million) which has not been amortised in view of the fact that eventually the ownership will get transferred to the Company on expiry of the lease period, of which Rs.11.52 Million (Previous YearRs. 11.52 Million) is in the process Being surrendered to Competent Authority. Net Block Rs.11.52 Million (Previous YearRs. 11.52 Million).

b. Includes land value Rs. 29.99 Million (Previous YearRs. 29.99 Million), which is in possession of the company towards which formal lease deeds are yet to be executed . Net BlockRs.29.92 Million (Previous Year Rs.29.92 Million)

c. Includes Rs. 782.98 Million (Previous Year Rs. 782.98 Million) being Company's share of an asset jointly owned with another Company. Net Block Rs. 120.73 Million (Previous YearRs. 162.07 Million).

d. Includes Office Equipments

e. Assets not in use and held for sale is shown at lower of cost or estimated realisable value.

f. Represents consideration for purchase of business (Nitrogen Plant) in excess of book value of net assets acquired.

2.01 Effects of changes in Foreign Exchange Rates (AS11)

Pursuant to Notification no. G.S.R.(914)E dated 29th December 2011, issued by MCA, from the current financial year, the Company has opted to adjust exchange differences 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 asset. Had the option not been exercised, the difference amounting to Rs. 26.14 million on long term foreign currency monetary items relating to depreciable assets would have been charged to Profit and Loss Account and Capital Work in Progress would have been lesser to that extent.

2.02 Employee Benefits(AS-15)

2.02.01 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 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.

2.03 Borrowing Costs(AS-16)

Amount of borrowing costs capitalised during the yearRs. 889.56 million (Previous year Nil)

2.04 Segment Reporting(AS17)

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 Companies (Accounting Standards ) Rules, 2006. The clarification sought for by the Company on the EAC opinion is under consideration by ICAI and hence segment reporting is not made.

2.05 Related Party Disclosure (AS-18)

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

2.05.02 Key Management Personnel:

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

(ii) Shri P.P.Upadhya, Director (Technical)

(iii) Shri Vishnu Agrawal, Director (Finance)

2.06 Leases(AS-19)

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

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

2.06.03 Lease rental expenses for the year ended 31st March, 2012 in respect of above operating leases are Rs. 34.75 Million (pre. year Rs. 44.22 Million)

2.07 Accounting for taxes on income(AS-22)

2.07.01 The company has commenced commercial refining of crude oil from its Phase III refinery during the year and accordingly is entitled to the deduction u/s80 IB of the Income TaxAct,1961.

2.07.02 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 / financial institutions to New Mangalore Port Trust (NMPT) for construction of Jetties. Amount outstanding as at the close of the year ended 31st March, 2012, after adjusting the repayment made by NMPT is Rs. Nil (Previous Year Rs.Nil).

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.

2.07.03 Disputed tax / Duty demands pending in appeal:

a) Income Tax: Rs. 1123.40 Million (Previous YearRs. 373.90 Million). (against this Rs. 1000.92 Million is adjusted / paid under protest and is included under loans & advances. Note 21)

b) Commercial Tax: Rs. 321.49 Million (Previous Year Rs. 1217.84 Million) Rs. includes Rs. 321.49 Million (Previous Year Rs. 524.87 Million) relating to projects.

c) Excise Duty: Rs. 488.10 Million (Previous Year Rs. 360.26 Million). (against this Rs. 27.01 Million is paid under protest and is included under loans & advances Note -20)

d) Customs Duty:Rs.647.54 Million (previous yearRs. 130.19 Million).

2.07.04 a) The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.31,185.31 Million (Previous YearRs. 57,527.76 Million).

b) Other commitments

i) ECB Loan to be availed USD 200 million

ii)ONGC Loan to be availed Rs. 24000 million

iii)Pending commitment on account of Refinery performance improvement programme by Ms.Shell Global International Solution

(Ms.Shell GIS) USD 0.50 Million USD

2.8 Foreign Exchange exposures

2.9 Loans and Advances :

Loans and advances (Note 20) include refund claims for Custom Duty on project imports Rs. 378.71.Million (Previous yearRs. 378.71Million) and Commercial Taxes Rs. 548.48 Million (previous year Rs. 476.34 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).

2.10.01 The Sales tax deferment loan shown under Unsecured Loans (Note-4 ) includes a sum of Rs. 290.17 Million (Previous YearRs. 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.

2.11 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.

2.12 Following expenses are included under other heads of expenses Insurance charges amounting to Rs. 20.22 Million (Previous year Rs.17.13 Million) relating to crude purchase and staff welfare has been charged under respective heads.

2.13 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 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 31.03.2012. Amount outstanding to these enterprises for the year ended 31st March, 2012 is Rs.Nil (Previous year: Rs.Nil)

2.14 The financial statements for the year ended March, 31,2011 had been prepared as per the then applicable , pre Revised Schedule VI to the Companies Act,1956 . Consequent to the notification of Revised Schedule VI under the Companies Act,1956, the financial statements for the year ended March,31,2012 are prepared as per Revised Schedule VI. Accordingly, the previous year's figures have also been reclassified to conform to this year's classification. The adoption of Revised Schedule VI for previous year's figures does not impact recognition and measurement principles followed for preparation of financial statements.

Corporate Governance is based on principles of conducting business with all integrity and fairness, being transparent with regard to all transactions making all disclosures, complying with laws of land, accountability and responsibility towards the shareholders and commitment to conduct the business in an ethical manner.

We at MRPL are committed to good governance practices that create long-term sustainable value for its stakeholders. Our Corporate Governance framework is based on the following principles:

- Ensuring maximum disclosure of information to the Board/Committees of the Board for meaningful and focused discussions in meetings;

- Committed to a transparent system and values;

- Operating in a sound system of internal control with a thrust on integrity and accountability;

- Ensuring timely and adequate disclosure of all material information to all Stakeholders;

- Ensuring compliance of applicable laws, guidelines, rules and regulations;

- Committed for equitable and fair treatment to all its stakeholders and society at large.


Mar 31, 2011

1. Loans and Advances :

1.1 Loans and advances include refund claims for Custom Duty on project importsRs. 378.71.Million (Previous year Rs.378.71Million) and Commercial Taxes Rs. 476.34 Million (previous year Rs. 500.63 Million). A further refund due towards Commercial Taxes Rs. 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).

2.2. Sales tax deferment loan shown under Unsecured Loans includes a sum of Rs. 290.17 Million (Previous Year Rs. 290.17 Million) relating to CST on excise duty included under refund from Commercial Tax Department (refer note no.1.1 above) 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.

3. The Company is yet to receive response for its confrmation letters from some of the Sundry Debtors, Loans and Advances and Sundry Credito Rs. Reconciliation and adjustment will be effected on receipt of confrmations, which in the opinion of the management will not be significant.

4. Following expenses are included under other heads of expenses Insurance charges amounting to Rs. 17.13 Million (Previous year Rs. 20.46 Million) relating to crude purchase and staff welfare has been charged under respective heads.

5. Wage revision

The Company during the financial year has finalised the wage revision of unionised employees effective from 01.04.2007. The quantum of wage arrears relating to period from 01.04.2007 to 31.03.2010 net of provision amounting to Rs. 405.00 Million is shown under "Payment to and Provision for Employees" in Schedule P.

6. 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 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 31.03.2011. Amount outstanding to these enterprises for the year ended 31st March, 2011 is Rs. Nil (Previous year: Rs. 0.74 Million)

7. Disclosures as required under Accounting Standard 15 (Revised) is given below:

7.1. Brief Description: A general description on the type of defined Beneft Plans are as follows:

a) Earned Leave Beneft (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. 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 employee's 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 month's salary as settling allowance.

8. 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.

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

9.1. 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.

9.2. Key Management Personnel: Functional Directors:

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

(ii) Shri L.K.Gupta, Director (Finance).- Part of the period upto 31.05.2010

(iii) Shri P.P.Upadhya, Director (Technical) - Part of the period from 30.09.2010. Remuneration paid to the above-mentioned Directors during the year is Rs. 6.92 Million (Previous year Rs. 5.63 Million) - Refer Note No. 10 given below

The above fgures 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 – Rs. Nil (Previous year - Rs. Nil),

Maximum amount of Loans & Advances outstanding during the year ended 31st March, 2011, Rs.Nil (previous year Rs. 0.42 Million)

10. Operating Leases:

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

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

10.3. Lease rental expenses for the year ended 31st March, 2011 in respect of above operating leases are Rs. 44.22 Million (previous year Rs. 40.87 Million)

11. Current Tax:

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

12. Disclosure on Research & Development Expenditure

The Company during the year has carried out activities relating to study of Crude Assay, Modified Bitumen, Liquid effluents, VG Bitumen & Additive Evaluation. as a part of its R & D activities. The company has obtained approval of competent authority to establish R&D facilities for carrying out development work w.r.t Polypropylene unit, PFCCU Unit, Corrosion Monitoring, Development of Modified bitumen and Bitumen Emulsions and effluent & Spent Caustic Treatment. The total expenditure incurred by the company during the year on the above mentioned Research & Development activities is Rs. 1.11 Million (Previous Year - Rs. 1.83 Million).

12.2 Contingent Liabilities not provided for in respect of:

1. Corporate Guarantee given by the Company towards loan of 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, 2011, after adjusting the repayment made by NMPT is Rs. Nil (Previous Year Rs. Nil).

2. Claims against the Company not acknowledged as debt :

(` in Million)

Sl. Particulars As on As on

No 31.03.2011 31.03.2010

1 Claims of Contractors / vendors in Arbitration / Court 352.47 338.65

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 admissible in terms of the provisions of the respective contracts. In case of unfavourable awards the amount payable would be capitalised Rs. 314.74 million / Reimbursable Rs. 37.73 million [Previous year Rs. 300.92 million and Rs. 37.73 million respectively]

2 Claims / counter claims of Customers

(a) The Company had gone into an international 16.17 14.31 arbitration at London against one of its export customers. The arbitration Tribunal has dismissed the Company's claims relating to throughput loss and non-full fllment of contractual obligations and has ordered the Company to bear the customer's advocate cost along with refund of part of adhoc amount paid by the customer along with 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 claim for 85.20 85.20 damages for pre-closure of the contract. The Company has disputed the claim basis Force Majure 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 (NMPT) has 606.42 177.38 claimed from the Company notifed wharfage charges for one of the Jetty. The company has approached the Tariff Authority of Major Ports (TAMP) for fxation 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 liability which 133.67 133.67 the Company has undertaken towards reimbursement to lessors in case of any liability in their respective tax assessments. In case of any claim by lessors the same will be debited to Profit & Loss Account.

4 Total 1193.93 749.21

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 outfow of resource, if any, for settlement of such claim pending resolution / award from Arbitrators / Court.

3. Disputed tax / Duty demands pending in appeal:

a) Income Tax: Rs. 373.90 Million (Previous Year Rs. 244.51 Million). (against this Rs. 251.41 Million is adjusted / paid under protest and is included under loans & advances.)

b) Commercial Tax: Rs. 1217.84 Million (Previous Year Rs. 1,188.76 Million) - includes Rs. 524.87 Million (Previous Year Rs. 500.46 Million) relating to projects. (Against this Rs. 377.20 Million is paid under protest and included under loans & advances.)

c) Excise Duty: Rs. 360.26 Million (Previous Year Rs. 146.45 Million). (against this Rs. 41.08 Million is paid under protest and is included under loans & advances.)

d) Customs Duty: Rs. 130.19 Million (previous year Rs. 128.82 Million).

4. The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 57,527.76 Million (Previous year Rs. 93,391.12 Million).

13. Previous year's fgures have been re-grouped / re-arranged wherever necessary to conform to the current 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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