Mar 31, 2023
Petronet LNG Limited referred to as "PLL" or "the Company" is registered in India. The Company''s registered office is at World Trade Centre, 1st Floor, Babar Road, Barakhamba Lane, New Delhi - 110001.
The Company was formed by Bharat Petroleum Corporation Limited (''BPCL''), GAIL (India) Limited (''GAIL''), Indian Oil Corporation Limited (''IOCL'') and Oil and Natural Gas Corporation Limited (''ONGC'') primarily to develop, design, construct, own and operate Liquefied Natural Gas (''LNG'') import and regasification terminals in India. PLL was incorporated on 2 April 1998 under the Companies Act, 1956 and received certificate of commencement of business on 1 June 1998. The Company is involved in the business of import and regasification of LNG and supply to BPCL, GAIL, IOCL and others. Presently, the Company owns and operates LNG Regasification Terminals with name plate capacity of 17.5 MMTPA at Dahej, in the State of Gujarat and 5 MMTPA at Kochi, in the State of Kerala.
The Standalone financial statements have been prepared in accordance with the recognition and measurement principles laid down in the Indian Accounting Standard (''Ind AS''), as notified under the Companies (Indian Accounting Standards) Rules, 2015 read with section 133 of the Companies Act, 2013 (as amended from time to time). The Company has consistently applied the following accounting policies to all periods presented in the financial statements.
These financial statements were authorised for issue by the Board of Directors on 03 May''2023.
The standalone financial statements have been prepared on a historical cost basis except the following items, which are measured on alternative basis on each reporting date:
- Certain financial assets (including derivative instruments) that are measured at fair value
- Defined benefit liabilities/(assets): fair value of plan assets less present value of defined benefit obligation
These financial statements are presented in the Indian Rupee (''INR''), which is the Company''s functional currency. All amounts have been rounded to the nearest crore, unless otherwise indicated.
The Company presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as current when it is:
- expected to be realised or intended to be sold or consumed in normal operating cycle,
- held primarily for the purpose of trading,
- expected to be realised within twelve months after the reporting period, or
- cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- it is expected to be settled in normal operating cycle,
- it is held primarily for the purpose of trading,
- it is due to be settled within twelve months after the reporting period, or
- there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Company''s accounting policies and the reported amounts of assets, liabilities, income and expenses. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
Information about the judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements have been given below:
- Leases: Whether an arrangement qualifies as a lease under Ind AS 116 and assessment of the lease term and discount rate. Judgement in exercised for assessing the lease term in arrangements where the option to extend or to terminate the lease exist. While doing so, the facts and circumstances are considered to decide economic merits and certainty of exercising an option.
- Classification of financial assets: Assessment of business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.
- Identification of distinct performance obligation based on assessment of the products and services in the contract and based on certain factors, determining points of satisfaction of the obligation whether it is at a specific point or over a period.
- Transaction Price determination: Transaction price could be fixed or variable with indexed based escalations. Transaction price is not adjusted for the time value of money in such cases where advances are received from customers to secure long term contracts.
Information about assumptions and estimation uncertainties that pose a significant risk resulting in material adjustment in the financial statements for the year ended 31st March 2023 is included below:
- Impairment test: Estimates used for impairment of property, plant and equipment of separate cash generating unit, key assumptions underlying recoverable amounts:
- Useful life of property, plant & equipment
- Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources
- Estimation of defined benefit obligation
- Estimation of current tax and deferred tax expense
- Estimation of Expected credit loss on trade receivable
Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss, if any. The cost of assets comprises of purchase price and directly attributable cost of bringing the assets to working condition for its intended use including borrowing cost and incidental expenditure during construction incurred up to the date when the assets are ready to use. Capital work in progress includes cost of assets at sites, construction expenditure and interest on the funds deployed.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as a separate item (major components) of property, plant and equipment.
Any gain on disposal of property, plant and equipment is recognised in Profit and loss account.
Subsequent expenditure is capitalised only if it is probable that future economic benefits associated with the expenditure will flow to the Company.
Depreciation on fixed assets is calculated on Straight Line Method (SLM) using the rates arrived at based on the estimated useful lives given in Schedule II of the Companies Act, 2013 and as per technical assessment by the company. The useful life of the assets required to be transferred under Concession Agreement has been restricted up to the end of Concession Agreement.
Cost of leasehold land is amortized over the lease period.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and changes, if any, are accounted for prospectively.
Intangible Assets are stated at cost less accumulated amortization and impairment loss, if any. Intangible assets are amortized on straight line method basis over the estimated useful life. Estimated useful life of the Software/Licenses is considered as 3 years.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign exchange forward contracts, cross currency interest rate swaps, interest rate swaps, currency options and embedded derivatives in the host contract.
All financial assets are recognized initially at fair value (plus transaction costs attributable to the acquisition of the financial assets, in the case of financial assets are not recorded at fair value through profit or loss) except trade receivables. Trade receivables are measured at the transaction price.
The Company classifies its financial assets as subsequently measured at either amortized cost or fair value depending on the Company''s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
The Company assesses the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management.
For the purposes of this assessment, ''Principal'' is defined as the fair value of the financial asset on initial recognition. ''Interest'' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a period, for other basic lending risks, costs (e.g. liquidity risk and administrative costs), and profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.
A financial asset is measured at amortised cost only if both of the following conditions are met:
- It is held within a business model whose objective is to hold assets to collect contractual cash flows.
- the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance income in the profit or loss. The losses arising from impairment are recognized in the profit or loss.
A financial asset is measured at amortized cost only if both of the following conditions are met:
- it is held within a business model whose objective is to hold assets in order to collect contractual cash flows.
- the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Reserve for equity instruments through other comprehensive income''. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Investments in equity instruments are classified as at FVTPL, unless on initial recognition the Company irrevocably elects to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in statement of the profit and loss.
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per the Ind AS 27 -Separate Financial Statements.
The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the
Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in the OCI is recognised in profit or loss.
The Company assesses the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments on a forward-looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
With regard to trade receivable, the Company applies the simplified approach as permitted by the Ind AS 109, Financial Instruments, which requires expected lifetime losses to be recognised from the initial recognition of the trade receivables.
For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial assets has increased significantly since initial recognition.
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss or amortised cost, as appropriate.
All financial liabilities are recognised initially at fair value and in the case of amortised cost, net of directly attributable transaction costs.
The measurement of financial liabilities depends on their classification, as described below:
After the initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in the Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in the OCI. These gains / losses are not subsequently transferred to the statement of profit or loss. However, the Company may transfer the cumulative gain or loss within equity. All the other changes in fair value of such liability are recognised in the statement of profit or loss.
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expired.
If the terms of a financial asset are modified, the Company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised, and a new financial asset is recognised at fair value.
If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the Company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income.
The Company derecognises a financial liability when its terms are modified, and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
Raw material, stores and spares are valued at lower of cost or net realizable value. Cost of raw material is determined on the first-in, first-out principle for respective agreements of LNG.
Cost of stores and spares is determined on weighted average cost.
The Company earns revenue primarily from providing regasification services and sale of RLNG.
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue is recognised on output basis measured by units of gas dispatched, units of gas processed etc.
Revenue from the sale of RLNG is recognised at the point of time when control is transferred to the customer at the point of dispatch.
Revenue from the sale of regasification services is recognised at the point of time when the control of RLNG is transferred to the customers at the point of dispatch.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, credits, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Contract assets are recognised when there is an excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is an unconditional right to receive cash, and only passage of time is required, as per contractual terms.
The billing schedules agreed with customers include periodic performance-based payments and / or milestone-based progress payments. Invoices are payable within contractually agreed credit period.
The Company disaggregates revenue from contracts with customers by the nature of goods and services.
Interest income is recognized using the Effective Interest Rate (''EIR'') method. The EIR is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period, where appropriate to the net carrying amount of the financial asset. The EIR is computed basis the expected cash flows by considering all the contractual terms of the financial instrument. The calculation includes all fees, transaction costs, and all other premiums or discounts paid or received between parties to the contract that are an integral part of the effective interest rate.
Dividend income is recognised, when the right to receive the dividend is established.
i) Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction.
ii) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc.) outstanding at the year end, are translated at exchange rates applicable on year end date.
iii) Non-monetary items denominated in foreign currency (such as fixed assets) are valued at the exchange rate prevailing on the date of transaction and carried at cost.
iv) Any gains or losses arising due to exchange differences arising on translation or settlement are accounted for in the Statement of Profit and Loss.
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Obligations for contributions to defined contribution plans are expensed as the related service is provided. The Company has following defined contribution plans:
a) Provident Fund
b) Superannuation Fund
The Company has five defined benefit plans i.e., gratuity, post-retirement medical benefit, benevolent fund, long service award and resettlement allowance on retirement. The Company net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, a consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liabilities, which comprises of actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in Other Comprehensive Income. Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after considering any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
The Company''s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.
The Company has following long term employment benefit plans:
Leave encashment is payable to eligible employees at the time of retirement. The liability for leave encashment is provided based on actuarial valuation as at the Balance Sheet date, based on Projected Unit Credit Method, carried out by an independent actuary.
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period that is required to complete and prepare the asset for its intended use. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to the items recognised directly in equity or in Other Comprehensive Income
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
⢠Has a legally enforceable right to set off the recognised amounts; and
⢠Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improve.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
a) The entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
b) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication on impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGU).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
An impairment loss in respect of assets other than goodwill is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of Petronet LNG Limited has been identified as being the chief operating decision maker by the Management of the Company. Refer note no 42 for segment information presented.
Cash and cash equivalents comprise of cash at bank and in hand and short-term money market deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
The Company measures the lease liability at present value of remaining lease payments discounted using the
weighted average incremental borrowing rate as at the date of initial application and Right of Use asset is measured at an amount equal to lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before the date of initial application.
The Company considers whether a contract is, or contains a lease. A lease is defined as ''a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period in exchange for consideration''. To apply this definition, the Company assesses whether the contract meets three key points of evaluation which are whether:
⢠the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company
⢠the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract
⢠the Company has the right to direct the use of the identified asset throughout the period of use. The Company assess whether it has the right to direct ''how and for what purpose'' the asset is used throughout the period of use.
At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Company''s incremental borrowing rate.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is re-measured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is re-measured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
At the inception of the lease the Company classifies each of its leases as either an operating lease or a finance lease. The Company recognises lease payments received under operating leases as income on a straight-line basis over the lease term. In case of a finance lease, finance income is recognised over the lease term based on a pattern reflecting a constant periodic rate of return on the lessor''s net investment in the lease. When the Company is an intermediate lessor it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Company applies the exemption described above, then it classifies the sub-lease as an operating lease.
Mar 31, 2022
1. Reporting Entity
Petronet LNG Limited referred to as "PLL" or "the Company" is registered in India. The Company''s registered office is at World Trade Centre, 1st Floor, Babar Road, Barakhamba Lane, New Delhi - 110001.
The Company was formed by Bharat Petroleum Corporation Limited (''BPCL''), GAIL (India) Limited (''GAIL''), Indian Oil Corporation Limited (''IOCL'') and Oil and Natural Gas Corporation Limited (''ONGC'') primarily to develop, design, construct, own and operate Liquefied Natural Gas (''LNG'') import and regasification terminals in India. PLL was incorporated on 2 April 1998 under the Companies Act, 1956 and received certificate of commencement of business on 1 June 1998. The Company is involved in the business of import and regasification of LNG and supply to BPCL, GAIL, IOCL and others. Presently, the Company owns and operates LNG Regasification Terminals with name plate capacity of 17.5 MMTPA at Dahej, in the State of Gujarat and 5 MMTPA at Kochi, in the State of Kerala.
2. Significant Accounting Policies
The Company has consistently applied the following accounting policies to all periods presented in the financial statements.
These financial statements have been prepared in accordance with the recognition and measurement principles laid down in the Indian Accounting Standard (''Ind AS''), prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder; and by the Institute of Chartered Accountants of India, as applicable and other accounting principles generally accepted in India.
These financial statements were authorised for issue by the Board of Directors on 11 May''2022.
The financial statements have been prepared on a historical cost basis except the following items, which are measured on alternative basis on each reporting date:
- Certain financial assets (including derivative instruments) that are measured at fair value
- Defined benefit liabilities/(assets): fair value of plan assets less present value of defined benefit obligation
iii. Functional and presentation currency
These financial statements are presented in the Indian Rupee (''INR''), which is the Company''s functional currency. All amounts have been rounded to the nearest lac, unless otherwise indicated.
iv. Use of judgements and estimates
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Company''s accounting policies and the reported amounts of assets, liabilities, income and expenses. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
a. Judgements
Information about the judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements have been given below:
- Leases: Whether an arrangement qualifies as a lease under Ind AS 116 and assessment of the lease term and discount rate. Judgement in exercised for assessing the lease term in arrangements where the option to extend or to terminate the lease exist. While doing so, the facts and circumstances are considered to decide economic merits and certainty of exercising an option.
- Classification of financial assets: Assessment of business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.
- Identification of distinct performance obligation based on assessment of the products and services in the contract and based on certain factors, determining points of satisfaction of the obligation whether it is at a specific point or over a period.
- Transaction Price determination: Transaction price could be fixed or variable with indexed based escalations. Transaction price is not adjusted for the time value of money in such cases where advances are received from customers to secure long term contracts.
b. Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that pose a significant risk resulting in material adjustment in the financial statements for the year ended 31 March 2022 is included below:
- Impairment test: Estimates used for impairment of property, plant and equipment of separate cash generating unit, key assumptions underlying recoverable amounts:
- Useful life of property, plant & equipment
- Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources
- Estimation of defined benefit obligation
- Estimation of current tax and deferred tax expense
- Estimation of Expected credit loss on trade receivables
v. Property, plant and equipment:
Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss, if any. The cost of assets comprises of purchase price and directly attributable cost of bringing the assets to working condition for its intended use including borrowing cost and incidental expenditure during construction incurred up to the date when the assets are ready to use. Capital work in progress includes cost of assets at sites, construction expenditure and interest on the funds deployed.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as a separate item (major components) of property, plant and equipment.
Any gain on disposal of property, plant and equipment is recognised in Profit and loss account.
On transition to the Ind AS, the Company has opted to continue with the carrying value of all its property, plant and equipment recognised as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Subsequent Measurement
Subsequent expenditure is capitalised only if it is probable that future economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation on fixed assets is calculated on Straight Line Method (SLM) using the rates arrived at based on the estimated useful lives given in Schedule II of the Companies Act, 2013 and as per technical assessment by the company. Useful life of the assets required to be transferred under Concession Agreement have been restricted up to the end of Concession Agreement.
Cost of leasehold land is amortized over the lease period.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and changes, if any, are accounted for prospectively.
vi. Intangible assets
Intangible Assets are stated at cost less accumulated amortization and impairment loss, if any. Intangible assets are amortized on straight line method basis over the estimated useful life. Estimated useful life of the Software/Licenses is considered as 3 years.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign exchange forward contracts, cross currency interest rate swaps, interest rate swaps, currency options and embedded derivatives in the host contract.
(A) Financial Assets(a) Initial recognition and measurement
All financial assets are recognized initially at fair value (plus transaction costs attributable to the acquisition of the financial assets, in the case of financial assets are not recorded at fair value through profit or loss).
(b) Subsequent measurement and Classifications
The Company classifies its financial assets as subsequently measured at either amortized cost or fair value depending on the Company''s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Business model assessment
The Company assesses the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ''Principal'' is defined as the fair value of the financial asset on initial recognition. ''Interest'' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a period, for other basic lending risks, costs (e.g. liquidity risk and administrative costs), and profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.
(i) Financial Assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met:
- It is held within a business model whose objective is to hold assets to collect contractual cash flows.
- the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal
and interest.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance income in the profit or loss. The losses arising from impairment are recognized in the profit or loss.
(ii) Financial Assets at Fair Value through Other Comprehensive Income (FVOCI)
A financial asset is measured at amortized cost only if both of the following conditions are met:
- it is held within a business model whose objective is to hold assets in order to collect contractual cash flows.
- the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal
and interest.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Reserve for equity instruments through other comprehensive income'' The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
(iii) Financial Assets at Fair Value through Profit and Loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless on initial recognition the Company irrevocably elects to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in statement of the profit and loss.
(iv) Investment in Subsidiaries, Jointly Controlled Entities and Associates
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per the Ind AS 27 -Separate Financial Statements.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
(c) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either
(a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in the OCI is recognised in profit or loss.
(d) Impairment of financial assets
The Company assesses the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments on a forward-looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
With regard to trade receivable, the Company applies the simplified approach as permitted by the Ind AS 109, Financial Instruments, which requires expected lifetime losses to be recognised from the initial recognition of the trade receivables.
For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial assets has increased significantly since initial recognition.
(a) Initial recognition and measurement
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss or amortised cost, as appropriate.
All financial liabilities are recognised initially at fair value and in the case of amortised cost, net of directly attributable transaction costs.
The measurement of financial liabilities depends on their classification, as described below:
(i) Financial Liabilities measured at amortised cost
After the initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
(ii) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in the Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to the P&L. However, the Company may transfer the cumulative gain or loss within equity. All the other changes in fair value of such liability are recognised in the statement of profit or loss.
(c) Derecognition of financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
(C) Modifications of financial assets and financial liabilities Financial assets
If the terms of a financial asset are modified, the Company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised, and a new financial asset is recognised at fair value.
If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the Company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income.
The Company derecognises a financial liability when its terms are modified, and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
viii. Inventories
Raw material, stores and spares are valued at lower of cost or net realizable value. Cost of raw material is determined on the first-in, first-out principle for respective agreements of LNG.
Cost of stores and spares is determined on weighted average cost.ix. Revenue Recognition
The Company earns revenue primarily from providing regasification services and sale of RLNG.
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue is recognised on output basis measured by units of gas dispatched, units of gas processed etc.
- Revenue from the sale of RLNG is recognised at the time when control is transferred to the customer at the point of dispatch.
- Revenue from the sale of regassification services is recognised at the time when the control of RLNG is transferred to the customers at the point of dispatch.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, credits, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
The billing schedules agreed with customers include periodic performance-based payments and / or milestone-based progress payments. Invoices are payable within contractually agreed credit period.
The Company disaggregates revenue from contracts with customers by the nature of goods and services.
(b) Interest Income
Interest income is recognized using the Effective Interest Rate (''EIR'') method. The EIR is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period, where appropriate to the net carrying amount of the financial asset. The EIR is computed basis the expected cash flows by considering all the contractual terms of the financial instrument. The calculation includes all fees, transaction costs, and all other premiums or discounts paid or received between parties to the contract that are an integral part of the effective interest rate.
Dividend income is recognised, when the right to receive the dividend is established.
x. Foreign currency transactions
(a) Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc.) outstanding at the year end, are translated at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency (such as fixed assets) are valued at the exchange rate prevailing on the date of transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on translation or settlement are accounted for in the Statement of Profit and Loss.
a. Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Obligations for contributions to defined contribution plans are expensed as the related service is provided. The Company has following defined contribution plans:
b) Superannuation Fund
c. Defined benefit plans
The Company has five defined benefit plans i.e., gratuity, post-retirement medical benefit, benevolent fund, long service award and resettlement allowance on retirement. The Company net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, a consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liabilities, which comprises of actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in Other Comprehensive Income. Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after considering any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
d. Other long-term employee benefits
The Company''s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.
The Company has following long term employment benefit plans:
Leave encashment
Leave encashment is payable to eligible employees at the time of retirement. The liability for leave encashment is provided based on actuarial valuation as at the Balance Sheet date, based on Projected Unit Credit Method, carried out by an independent actuary.
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period that is required to complete and prepare the asset for its intended use. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to the items recognised directly in equity or in Other Comprehensive Income
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
a) Has a legally enforceable right to set off the recognised amounts; and
b) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improve.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
a) The entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
b) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
xiv. Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication on impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGU).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment loss in respect of assets other than goodwill is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
xv. Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
xvi. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of Petronet LNG Limited has been identified as being the chief operating decision maker by the Management of the Company. Refer note no 42 for segment information presented.
xvii. Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank and in hand and short-term money market deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
The Company measures the lease liability at present value of remaining lease payments discounted using the weighted average incremental borrowing rate as at the date of initial application and Right of Use asset is measured at an amount equal to lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before the date of initial application.
The Company as a lessee
The Company considers whether a contract is, or contains a lease. A lease is defined as ''a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period in exchange for consideration'' To apply this definition, the Company assesses whether the contract meets three key points of evaluation which are whether:
⢠the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company
⢠the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract
⢠the Company has the right to direct the use of the identified asset throughout the period of use. The Company assess whether it has the right to direct ''how and for what purpose'' the asset is used throughout the period of use.
Measurement and recognition
At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Company''s incremental borrowing rate.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is re-measured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is re-measured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
The Company as a lessor
At the inception of the lease the Group classifies each of its leases as either an operating lease or a finance lease. The Company recognises lease payments received under operating leases as income on a straight-line basis over the lease term. In case of a finance lease, finance income is recognised over the lease term based on a pattern reflecting a constant periodic rate of return on the lessor''s net investment in the lease. When the Company is an intermediate lessor it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.
Mar 31, 2021
1. Reporting Entity
Petronet LNG Limited referred to as âPLLâ or âthe Companyâ is domiciled in India. The Companyâs registered office is at World Trade Centre, 1st Floor, Babar Road, Barakhamba Lane, New Delhi - 110001.
The Company was formed by Bharat Petroleum Corporation Limited (âBPCLâ), GAIL (India) Limited (âGAILâ), Indian Oil Corporation Limited (âIOCLâ) and Oil and Natural Gas Corporation Limited (âONGCâ) primarily to develop, design, construct, own and operate a Liquefied Natural Gas (âLNGâ) import and regasification terminals in India. PLL was incorporated on 2 April 1998 under the Companies Act, 1956 and received certificate of commencement of business on 1 June 1998. The Company is involved in the business of import and regasification of LNG and supply to BPCL, GAIL, IOCL and others. Presently, the Company owns and operates LNG Regasification Terminal with name plate capacity of 17.5 MMTPA at Dahej, in the State of Gujarat and 5 MMTPA at Kochi, in the State of Kerala.
2. Significant Accounting Policies
The Company has consistently applied the following accounting policies to all periods presented in the financial statements.
i. Basis of preparation
These financial statements have been prepared in accordance with the recognition and measurement principles laid down in the Indian Accounting Standard (âInd ASâ), prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder; and by the Institute of Chartered Accountants of India, as applicable and other accounting principles generally accepted in India.
These financial statements were authorised for issue by the Board of Directors on 8 June'' 2021.
The financial statements have been prepared on a historical cost basis except the following items, which are measured on alternative basis on each reporting date:
- Certain financial assets (including derivative instruments) that are measured at fair value
- Defined benefit liabilities/(assets): fair value of plan assets less present value of defined benefit obligation
iii. Functional and presentation currency
These financial statements are presented in the Indian Rupee (âINRâ), which is the Companyâs functional currency. All amounts have been rounded to the nearest lac, unless otherwise indicated.
iv. Use of judgements and estimates
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Companyâs accounting policies and the reported amounts of assets, liabilities, income and expenses. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
a. Judgements
Information about the judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements have been given below:
- Leases: Whether an arrangement qualifies as a lease under Ind AS 116 and in assessment of the lease term and discount rate. Judgement in exercised for assessing the lease term in arrangements where the option to extend or to terminate the lease exist. While doing so, the facts and circumstances are considered to decide economic merits and certainty of exercising an option.
- Classification of financial assets: assessment of business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.
- Identification of distinct performance obligation based on assessment of the products and services in the contract and based on certain factors, determining point of satisfaction of the obligation whether it is at a specific point or over a period.
- Transaction Price determination: Transaction price could be fixed or variable with indexed based escalations. Transaction price is not adjusted for the time value of money in the case where advances are received from customers to secure long term contracts.
b. Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the financial statements for the year ended 31 March 2021 is included below:
- Impairment test: Estimates used for impairment of property, plant and equipment of separate cash generating unit, key assumptions underlying recoverable amounts:
- Useful life of property, plant & equipment
- Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources
- Estimation of defined benefit obligation
- Estimation of current tax and deferred tax expense
- Estimation of Expected credit loss on trade receivables
v. Property, plant and equipment:
Recognition and measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss, if any. The cost of assets comprises of purchase price and directly attributable cost of bringing the assets to working condition for its intended use including borrowing cost and incidental expenditure during construction incurred up to the date when the assets are ready to use. Capital work in progress includes cost of assets at sites, construction expenditure and interest on the funds deployed.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as a separate item (major components) of property, plant and equipment.
Any gain on disposal of property, plant and equipment is recognised in Profit and loss account.
On transition to the Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Subsequent Measurement
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation on fixed assets is calculated on Straight Line Method (SLM) using the rates arrived at based on the estimated useful lives given in Schedule II of the Companies Act, 2013. Useful life of the assets required to be transferred under Concession Agreement have been restricted up to the end of Concession Agreement.
Cost of leasehold land is amortized over the lease period.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and changes, if any, are accounted for prospectively.
vi. Intangible assets
Intangible Assets are stated at cost less accumulated amortization and impairment loss, if any. Intangible assets are amortized on straight line method basis over the estimated useful life. Estimated useful life of the Software/Licenses is considered as 3 years.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign exchange forward contracts, cross currency interest rate swaps, interest rate swaps, currency options and embedded derivatives in the host contract.
(a) Initial recognition and measurement
All financial assets are recognized initially at fair value (plus transaction costs attributable to the acquisition of the financial assets, in the case of financial assets are not recorded at fair value through profit or loss).
(b) Subsequent measurement and Classifications
The Company classifies its financial assets as subsequently measured at either amortized cost or fair value depending on the Companyâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
The Company assesses the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, âprincipalâ is defined as the fair value of the financial asset on initial recognition. âInterestâ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a period, for other basic lending risks, costs (e.g. liquidity risk and administrative costs), and profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition
(i) Financial Assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met:
- It is held within a business model whose objective is to hold assets to collect contractual cash flows.
- the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance income in the profit or loss. The losses arising from impairment are recognized in the profit or loss.
(ii) Financial Assets at Fair Value through Other Comprehensive Income (FVOCI)
A financial asset is measured at amortized cost only if both of the following conditions are met:
- it is held within a business model whose objective is to hold assets in order to collect contractual cash flows.
- the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Reserve for equity instruments through other comprehensive income''. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
(iii) Financial Assets at Fair Value through Profit and Loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in statement of the profit and loss.
(iv) Investment in Subsidiaries, Jointly Controlled Entities and Associates
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per the Ind AS 27 -Separate Financial Statements.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
(c) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in the OCI is recognised in profit or loss.
(d) Impairment of financial assets
The Company assesses the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments on a forward-looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
With regard to trade receivable, the Company applies the simplified approach as permitted by the Ind AS 109, Financial Instruments, which requires expected lifetime losses to be recognised from the initial recognition of the trade receivables.
For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial assets has increased significantly since initial recognition.
(B) Financial liabilities
(a) Initial recognition and measurement
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss or amortised cost, as appropriate.
All financial liabilities are recognised initially at fair value and in the case of amortised cost, net of directly attributable transaction costs.
(b) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
(i) Financial Liabilities measured at amortised cost
After the initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
(ii) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in the Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to the P&L. However, the Company may transfer the cumulative gain or loss within equity. All the other changes in fair value of such liability are recognised in the statement of profit or loss.
(c) Derecognition of financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
(C) Modifications of financial assets and financial liabilities Financial assets
If the terms of a financial asset are modified, the Company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised, and a new financial asset is recognised at fair value.
If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the Company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the
borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income.
The Company derecognises a financial liability when its terms are modified, and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
Raw material, stores and spares are valued at lower of cost or net realizable value. Cost of raw material is determined on the first-in, first-out principle for respective agreements of LNG.
Cost of stores and spares is determined on weighted average cost.
ix. Revenue Recognition
The Company earns revenue primarily from providing regasification services and sale of RLNG.
(a) Sale of goods & service
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue is recognised on output basis measured by units of gas dispatched, units of gas processed etc.
- Revenue from the sale of RLNG is recognised at the point in time when control is transferred to the customer at the point of dispatch.
- Revenue from the sale of regassification services is recognised at a point in time when the control of RLNG is transferred to the customers at the point of dispatch.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, credits, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
The billing schedules agreed with customers include periodic performance-based payments and / or milestone-based progress payments. Invoices are payable within contractually agreed credit period.
The Company disaggregates revenue from contracts with customers by the nature of goods and services.
(b) Interest Income
Interest income is recognized using the Effective Interest Rate (âEIRâ) method. The EIR is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period, where appropriate to the net carrying amount of the financial asset. The EIR is computed basis the expected cash flows by considering all the contractual terms of the financial instrument. The calculation includes all fees, transaction costs, and all other premiums or discounts paid or received between parties to the contract that are an integral part of the effective interest rate.
(c) Dividend Income
Dividend income is recognised, when the right to receive the dividend is established.
x. Foreign currency transactions
(a) Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc.) outstanding at the year end, are translated at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency (such as fixed assets) are valued at the exchange rate prevailing on the date of transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on translation or settlement are accounted for in the Statement of Profit and Loss.
xi. Employee benefits
a. Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
b. Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided. The Company has following defined contribution plans:
a) Provident Fund
b) Superannuation Fund
c. Defined benefit plans
The Company has only two defined benefit plan i.e. gratuity and post-retirement medical benefit. The Company net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, a consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liabilities, which comprises of actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in Other Comprehensive Income. Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after considering any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
d. Other long-term employee benefits
The Companyâs net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.
The Company has following long term employment benefit plans:
Leave encashment is payable to eligible employees at the time of retirement. The liability for leave encashment is provided based on actuarial valuation as at the Balance Sheet date, based on Projected Unit Credit Method, carried out by an independent actuary.
xii. Borrowing Cost
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalised during the period that is required to complete and prepare the asset for its intended use. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to the items recognised directly in equity or in Other Comprehensive Income
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
a) Has a legally enforceable right to set off the recognised amounts; and
b) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improve.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
a) The entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
b) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
xiv. Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication on impairment. If any such indication exists, then the assetâs recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGU).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An
impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment loss in respect of assets other than goodwill is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
xvi. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of Petronet LNG Limited has been identified as being the chief operating decision maker by the Management of the Company. Refer note no 39 for segment information presented.
xvii. Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank and in hand and short-term money market deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
xviii. Lease Accounting
The Company measures the lease liability at present value of remaining lease payments discounted using the weighted average incremental borrowing rate as at the date of initial application and Right of Use asset is measured at an amount equal to lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before the date of initial application.
The Company as a lessee
The Company considers whether a contract is, or contains a lease. A lease is defined as âa contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period in exchange for considerationâ. To apply this definition, the Company assesses whether the contract meets three key evaluations which are whether:
⢠the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company
⢠the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract
⢠the Company has the right to direct the use of the identified asset throughout the period of use. The Company assess whether it has the right to direct âhow and for what purposeâ the asset is used throughout the period of use.
Measurement and recognition
At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Companyâs incremental borrowing rate.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is re-measured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
The Company as a lessor
At the inception of the lease the Group classifies each of its leases as either an operating lease or a finance lease. The Company recognises lease payments received under operating leases as income on a straight-line basis over the lease term. In case of a finance lease, finance income is recognised over the lease term based on a pattern reflecting a constant periodic rate of return on the lessorâs net investment in the lease. When the Company is an intermediate lessor it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.
Mar 31, 2019
Notes to the standalone financial statements for the year ended 31 March 2019
1. Reporting Entity
Petronet LNG Limited referred to as "PLL" or "the Company" is domiciled in India. The Company''s registered office is at World Trade Centre, 1st Floor, Babar Road, Barakhamba Lane, New Delhi - 110001.
The Company was formed by Bharat Petroleum Corporation Limited (''BPCL''), GAIL (India) Limited (''GAIL''), Indian Oil Corporation Limited (''IOCL'') and Oil and Natural Gas Corporation Limited (''ONGC'') primarily to develop, design, construct, own and operate a Liquefied Natural Gas (''LNG'') import and regasification terminals in India. PLL was incorporated on 2 April 1998 under the Companies Act, 1956 and received certificate of commencement of business on 1 June 1998. The Company is involved in the business of import and regasification of LNG and supply to BPCL, GAIL, IOCL and others. Presently, the Company owns and operates LNG Regasification Terminal with name plate capacity of 15 MMTPA at Dahej, in the State of Gujarat. The Company has also commissioned another LNG terminal with name plate capacity of 5 MMTPA at Kochi, in the State of Kerala.
2. Significant Accounting Policies
The Company has consistently applied the following accounting policies to all periods presented in the financial statements. i. Basis of preparation
These financial statements have been prepared in accordance with the recognition and measurement principles laid down in the Indian Accounting Standard (''Ind AS''), prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder; and by the Institute of Chartered Accountants of India, as applicable and other accounting principles generally accepted in India.
These financial statements were authorised for issue by the Board of Directors on 15 May''2019.
ii. Basis of measurement
The financial statements have been prepared on a historical cost basis except the following items, which are measured on alternative basis on each reporting date:
Certain financial assets (including derivative instruments) that are measured at fair value Defined benefit liabilities/(assets): fair value of plan assets less present value of defined benefit obligation iii. Functional and presentation currency
These financial statements are presented in the Indian Rupee (''INR''), which is the Company''s functional currency. All amounts have been rounded to the nearest lac, unless otherwise indicated.
iv. Use of judgements and estimates
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the company''s accounting policies and the reported amounts of assets, liabilities, income and expenses. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
a. Judgements
Information about the judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements have been given below:
Leases:Whether an arrangement contains a lease and classification of leases into finance and operating lease
Classification of financial assets: assessment of business model within which the assetsare held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.
Identification of distinct performance obligation based on assessment of the products and services in the contract and based on certain factors, determining point of satisfaction of the obligation whether it is at a specific point or over a period.
Transaction Price determination: Transaction price could be fixed or variable with indexed based escalations. Transaction price is not adjusted for the time value of money in the case where advances are received from customers to secure long term contracts.
b. Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the financial statements for the year ended 31 March 2019 is included below:
Impairment test: Estimates used for impairment of property, plant and equipment of separate cash generating unit, key assumptions underlying recoverable amounts:
Useful life of property, plant & equipment
Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources
Estimation of defined benefit obligation Estimation of current tax and deferred tax expense v. Property, plant and equipment: Recognition and measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss, if any. The cost of assets comprises of purchase price and directly attributable cost of bringing the assets to working condition for its intended use including borrowing cost and incidental expenditure during construction incurred up to the date when the assets are ready to use. Capital work in progress includes cost of assets at sites, construction expenditure and interest on the funds deployed.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as a separate item (major components) of property, plant and equipment.
Any gain on disposal of property, plant and equipment is recognised in Profit and loss account.
On transition to the Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Subsequent Measurement
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the company.
Depreciation
Depreciation on fixed assets is calculated on Straight Line Method (SLM) using the rates arrived at based on the estimated useful lives given in Schedule II of the Companies Act, 2013. Useful life of the assets required to be transferred under Concession Agreement have been restricted up to the end of Concession Agreement.
Cost of leasehold land is amortized over the lease period.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and changes, if any, are accounted for prospectively.
vi. Intangible assets
Intangible Assets are stated at cost less accumulated amortization and impairment loss, if any. Intangible assets are amortized on straight line method basis over the estimated useful life. Estimated useful life of the Software/Licenses is considered as 3 yea Rs.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the company.
vii. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign exchange forward contracts, cross currency interest rate swaps, interest rate swaps, currency options and embedded derivatives in the host contract.
(A) Financial Assets
Initial recognition and measurement
All financial assets are recognized initially at fair value (plus transaction costs attributable to the acquisition of the financial assets, in the case of financial assets are not recorded at fair value through profit or loss).
(a) Classifications
The company classifies its financial assets as subsequently measured at either amortized cost or fair value depending on the company''s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
(b) Business model assessment
The company assesses the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ''principal'' is defined as the fair value of the financial asset on initial recognition. ''Interest'' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a period, for other basic lending risks, costs (e.g. liquidity risk and administrative costs), and profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.
Financial Assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met:
It is held within a business model whose objective is to hold assets to collect contractual cash flows.
the contractual terms of the financial asset represents contractual cash flows that are solely payments of principal and interest.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR.The EIR amortisation is included as finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.
Financial Assets at Fair Value through Other Comprehensive Income (FVOCI)
A financial asset is measured at amortized cost only if both of the following conditions are met:
it is held within a business model whose objective is to hold assets in order to collect contractual cash flows.
the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Reserve for equity instruments through other comprehensive income''. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Financial Assets at Fair Value through Profit and Loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in statement of the profit and loss.
Investment in Subsidiaries, Jointly Controlled Entities and Associates
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per the Ind AS 27 -Separate Financial Statements.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
(c) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the company has transferred substantially all the risks and rewards of the asset, or (b) the company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the company continues to recognize the transferred asset to the extent of the company''s continuing involvement. In that case, the company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in the OCI is recognised in profit or loss.
Impairment of financial assets
The Company assesses the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments on a forward-looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
With regard to trade receivable, the Company applies the simplified approach as permitted by the Ind AS 109, Financial Instruments, which requires expected lifetime losses to be recognised from the initial recognition of the trade receivables.
For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial assets has increased significantly since initial recognition.
(B) Financial liabilities
(a) Initial recognition and measurement
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss or amortised cost, as appropriate.
All financial liabilities are recognised initially at fair value and in the case of amortised cost, net of directly attributable transaction costs.
(b) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below: Financial Liabilities measured at amortised cost
After the initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the ElR. The EIR amortisation is included as finance costs in the statement of profit and loss.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in the Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to the P&L. However, the Company may transfer the cumulative gain or loss within equity. All the other changes in fair value of such liability are recognised in the statement of profit or loss.
(c) Derecognition of financial liabilities
The company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. (C) Modifications of financial assets and financial liabilities Financial assets
If the terms of a financial asset are modified, the company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value.
If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income.
Financial liabilities
The company derecognises a financial liability when its terms are modified, and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
viii. Inventories
Raw material, stores and spares are valued at lower of cost or net realizable value. Cost of raw material is determined on the first-in, first-out principle for respective agreements of LNG.
Cost of stores and spares is determined on weighted average cost. ix. Revenue Recognition
The Company earns revenue primarily from providing regasification services and sale of RING. With effective from 1st April 2018, the Company has applied the Ind AS 115 which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognised. The Ind AS 115 replaces Ind AS 18 Revenue and Ind AS 11 Construction Contracts. The Company has adopted the Ind AS 115 using the cumulative effect method. The effect of initially applying this standard is recognised at the date of initial application (i.e. April 1, 2018). The standard is applied retrospectively only to the contracts that are not completed as at the date of initial application. The comparative information in the statement of profit and loss is not restated-i.e. the comparative information continues to be reported under the Ind AS 18 and Ind AS 11. Refer note 2 (ix) - Significant accounting policies - Revenue recognition in the Annual report of the Company for the year ended March 31, 2018, for the revenue recognition policy as per the Ind AS 18 and Ind AS 11. The impact of the adoption of the standard on the financial statements of the Company is insignificant.
(a) Sale of goods & services
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue is recognised on output basis measured by units of gas dispatched, units of gas processed etc.
Revenue from the sale of RING is recognised at the point in time when control is transferred to the customer at the point of dispatch.
Revenue from the sale of regassification services is recognised at a point in time when the control of RING is transferred to the customers at the point of dispatch.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, credits, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
The billing schedules agreed with customers include periodic performance-based payments and / or milestone-based progress payments. Invoices are payable within contractually agreed credit period.
The Company disaggregates revenue from contracts with customers by the nature of goods and services.
(b) Interest Income
Interest income is recognized using the Effective Interest Rate (''EIR'') method. The EIR is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period, where appropriate to the net carrying amount of the financial asset. The EIR is computed basis the expected cash flows by considering all the contractual terms of the financial instrument. The calculation includes all fees, transaction costs, and all other premiums or discounts paid or received between parties to the contract that are an integral part of the effective interest rate.
(c) Dividend Income
Dividend income is recognised, when the right to receive the dividend is established. x. Foreign currency transactions
(a) Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc.) outstanding at the year end, are translated at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency (such as fixed assets) are valued at the exchange rate prevailing on the date of transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on translation or settlement are accounted for in the Statement of Profit and Loss.
xi. Employee benefits
a. Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
b. Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided. The company has following defined contribution plans:
a) Provident Fund
b) Superannuation Fund
c. Defined benefit plans
The company has only one defined benefit plan i.e. gratuity. The company net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, a consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liabilities, which comprises of actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in Other Comprehensive Income. Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after considering any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
d. Other long-term employee benefits
The Company''s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.
The company has following long term employment benefit plans: Leave encashment
Leave encashment is payable to eligible employees at the time of retirement. The liability for leave encashmentis provided based on actuarial valuation as at the Balance Sheet date, based on Projected Unit Credit Method, carried out by an independent actuary.
xii. Borrowing Cost
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period that is required to complete and prepare the asset for its intended use. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred. xiii. Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to the items recognised directly in equity or in Other Comprehensive Income
a. Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
a) Has a legally enforceable right to set off the recognised amounts; and
b) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
b. Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improve.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
a) The entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
b) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
xiv. Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication on impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGU).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment loss in respect of assets other than goodwill is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
xv. Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
xvi. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of Petronet LNG Limited has been identified as being the chief operating decision maker by the Management of the company. Refer note no 37 for segment information presented.
xvii. Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank and in hand and short-term money market deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
xviii. Recent accounting pronouncements Standards issued but not yet effective
Ministry of Corporate Affairs ("MCA'') through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new Ind AS which the Company has not applied as it is effective for annual period beginning on or after April 1, 2019:
Ind AS 116: Leases
The Ind AS 116 will replace the existing leases standard, Ind AS 17 Leases. The Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. It introduces a uniform, on-balance sheet accounting model for lessees and lessoRs. A lessee recognises right-of-use of asset pertaining to its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The standard also contains enhanced disclosure requirements for lessees. The Ind AS 116 substantially carries forward the lessor accounting requirements in the Ind AS 17.
The Company will adopt the Ind AS 116, effective annual reporting period beginning April 1, 2019. The Company will apply the standard to its leases using Modified retrospective approach, with the cumulative effect of initially applying the standard, recognised on the date of initial application. Accordingly, the Company will not restate comparative information, instead, the cumulative effect of initially applying this Standard will be recognised as an adjustment to the opening balance of retained earnings as on April 1, 2019. In accordance with the standard, the Company will elect not to apply the requirements of the Ind AS 116 to short-term leases and the leases for which the underlying asset is of low value.
With effect from April 01, 2019, the Company will recognise new assets and liabilities for its operating leases of chartered vessels and other assets. The nature of expenses related to those leases will change from lease rent in previous periods to:
a) amortization for the right-to-use respective asset, and
b) interest expense on lease liability.
Previously, the Company recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and liabilities only to the extent, there was a timing difference between actual lease payments and the expense recognised.
The Company is in the process of evaluating the impact of the new standard.
Mar 31, 2018
1. Significant Accounting Policies
The Company has consistently applied the following accounting policies to all periods presented in the financial statements.
i. Basis of preparation
These financial statements have been prepared in accordance with the recognition and measurement principles laid down in Indian Accounting Standard (âInd ASâ), prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder; and by the Institute of Chartered Accountants of India, as applicable and other accounting principles generally accepted in India.
These financial statements were authorised for issue by the Board of Directors on 21 Mayâ2018.
ii. Basis of measurement
The financial statements have been prepared on a historical cost basis except the following items, which are measured on alternative basis on each reporting date:
- Certain financial assets (including derivative instruments) that is measured at fair value
- Defined benefit liability/(assets): fair value of plan assets less present value of defined benefit obligation
iii. Functional and presentation currency
These financial statements are presented in Indian Rupee (âINRâ), which is the Companyâs functional currency. All amounts have been rounded to the nearest lac, unless otherwise indicated.
iv. Use of judgements and estimates
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the companyâs accounting policies and the reported amounts of assets, liabilities, income and expenses. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
a. Judgements
Information about the judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements have been given below:
- Leases: Whether an arrangement contains a lease
- Classification of leases into finance and operating lease
- Classification of financial assets: assessment of business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.
b. Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the financial statements for the year ended 31 March 2018 is included below:
- Impairment test: key assumptions underlying recoverable amounts, including the recoverability of development costs;
- Useful life of property, plant & equipment
- Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources
v. Property, plant and equipment:
Recognition and measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss if any. The cost of assets comprises of purchase price and directly attributable cost of bringing the assets to working condition for its intended use including borrowing cost and incidental expenditure during construction incurred up to the date when the assets are ready to use. Capital work in progress includes cost of assets at sites, construction expenditure and interest on the funds deployed.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as a separate item (major components) of property, plant and equipment.
Any gain on disposal of property, plant and equipment is recognised in Profit and loss account.
On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Subsequent Measurement
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the company.
Depreciation
Depreciation on fixed assets is calculated on Straight Line Method (SLM) using the rates arrived at based on the estimated useful lives given in Schedule II of the Companies Act, 2013. Useful life of the assets, required to be transferred under Concession Agreement have been restricted up to the end of Concession Agreement.
Cost of leasehold land is amortized over the lease period.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and changes, if any, are accounted for prospectively.
vi. Intangible assets
Intangible Assets are stated at cost less accumulated amortization and impairment loss, if any. Intangible assets are amortized on straight line method basis over the estimated useful life. Estimated useful life of the Software/Licenses is considered as 3 years.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the company.
vii. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign exchange forward contracts, cross currency interest rate swaps, interest rate swaps and currency options; and embedded derivatives in the host contract.
(A) Financial Assets
(a) Initial recognition and measurement
All financial assets are recognised initially at fair value (plus transaction costs attributable to the acquisition of the financial asset, in the case of financial assets not recorded at fair value through profit or loss.
(b) Classifications
The company classifies its financial assets as subsequently measured at either amortized cost or fair value depending on the companyâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Business model assessment
The company assesses the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, âprincipalâ is defined as the fair value of the financial asset on initial recognition. âInterestâ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a period, for other basic lending risks, costs (e.g. liquidity risk and administrative costs), and profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.
Debt instruments at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met:
- it is held within a business model whose objective is to hold assets to collect contractual cash flows.
- the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.
Debt instrument at Fair Value through Other Comprehensive Income (FVOCI)
Debt instruments with contractual cash flow characteristics that are solely payments of principal and interest and held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets are classified to be measured at FVOCI.
Debt instrument at Fair Value through Profit and Loss (FVTPL)
Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVOCI, is classified as at FVTPL.
In addition, the company may elect to classify a debt instrument, which otherwise meets amortized cost or FVOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ).
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.
On initial recognition an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis.
All other Financial Instruments are classified as measured at FVTPL.
(c) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the company has transferred substantially all the risks and rewards of the asset, or (b) the company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the company continues to recognize the transferred asset to the extent of the companyâs continuing involvement. In that case, the company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.
Impairment of financial assets
The Company assesses the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments on a forward-looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
With regard to trade receivable, the Company applies the simplified approach as permitted by Ind AS 109, Financial Instruments, which requires expected lifetime losses to be recognised from the initial recognition of the trade receivables.
(B) Financial liabilities
(a) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, amortised cost, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of amortised cost, net of directly attributable transaction costs.
(b) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial Liabilities measured at amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss.
(c) Derecognition of financial liabilities
The company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
(C) Modifications of Financial Assets and Financial Liabilities Financial assets
If the terms of a financial asset are modified, the company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value.
If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income.
Financial liabilities
The company derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
viii. Inventories
Raw material, stores and spares are valued at lower of cost or net realizable value. Cost of raw material is determined on the first-in, first-out principle for respective agreements of LNG.
Cost of stores and spares is determined on weighted average cost.
ix. Revenue Recognition
(a) Sale of goods
Revenue is recognised when the significant risk and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates.
Revenue is primarily derived from Sale of RLNG and is net of sales tax. Transfer of risk and rewards for sale of RLNG is at the point of dispatch.
(b) Rendering of services
Revenue from regasification services is recognised when services are rendered and related costs are incurred in accordance with agreements.
(c) Interest Income
Interest income is recognized using the Effective Interest Rate (âEIRâ) method. The EIR is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period, where appropriate to the net carrying amount of the financial asset. The EIR is computed basis the expected cash flows by considering all the contractual terms of the financial instrument. The calculation includes all fees, transaction costs, and all other premiums or discounts paid or received between parties to the contract that are an integral part of the effective interest rate.
(d) Dividend Income
Dividend income is recognised, when the right to receive the dividend is established.
x. Foreign currency transactions
(a) Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc.) outstanding at the year end, are translated at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency, (such as fixed assets) are valued at the exchange rate prevailing on the date of transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on translation or settlement are accounted for in the Statement of Profit and Loss.
xi. Employee benefits
a. Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
b. Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided. The company has following defined contribution plans:
i) Provident Fund
ii) Superannuation Fund
c. Defined benefit plans
The company has only one defined benefit plan i.e. gratuity. The company net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in Other Comprehensive Income. Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after considering any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
d. Other long-term employee benefits
The Companyâs net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise.
The company has following long term employment benefit plans:
Leave encashment
Leave encashment is payable to eligible employees at the time of retirement. The liability for leave encashment is provided based on actuarial valuation as at the Balance Sheet date, based on Projected Unit Credit Method, carried out by an independent actuary.
xii. Borrowing Cost
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period that is required to complete and prepare the asset for its intended use. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
xiii. Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in Other Comprehensive Income
a. Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
i) Has a legally enforceable right to set off the recognised amounts; and
ii) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
b. Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
a) The entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
b) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
xiv. Interest in Joint Ventures
Interests in joint ventures accounted for using the equity method are recognised at cost.
xv. Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication on impairment. If any such indication exists, then the assetâs recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGU).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment loss in respect of assets other than goodwill is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
xvi. Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
xvii. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of Petronet LNG Limited has been identified as being the chief operating decision maker by the Management of the company. Refer note no 38 for segment information presented.
xviii. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand and short-term money market deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
xix. Recent accounting pronouncements Standards issued but not yet effective
Ministry of Corporate Affairs (âMCAâ) through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new and amendments to Ind ASs which the Company has not applied as they are effective for annual periods beginning on or after April 1, 2018:
Ind AS 115 Revenue from Contracts with Customers
Ind AS 21 The Effect of Changes in Foreign Exchange Rates
Ind AS 115 - Revenue from Contracts with Customers
Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 - Revenue, Ind AS 11 Construction Contracts when it becomes effective.
The standard introduces a 5-step approach to revenue recognition:
Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligation in contract Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when âcontrolâ of the goods or services underlying the performance obligation is transferred to the customer. The standard is applied retrospectively only to contracts that are not completed contracts at the date of initial application.
Ind AS 21 - The Effect of Changes in Foreign Exchange Rates
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that for determining the exchange rate, the date of the transaction is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its financial statements.
Mar 31, 2017
1. Significant Accounting Policies
The Company has consistently applied the following accounting policies to all periods presented in the financial statements.
i. Basis of preparation
These financial statements have been prepared in accordance with the recognition and measurement principles laid down in Indian Accounting Standard (âInd ASâ), prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder; or by the Institute of Chartered Accountants of India, as applicable and other accounting principles generally accepted in India.
The financial statement up to year ended 31 March 2016 were prepared in accordance with Generally Accepted Accounting Principles (GAAP) in India and complied with the applicable accounting standards prescribed in the Companies (Accounting Standards) Rules, 2014 issued by the Central Government and as per relevant provisions of the Companies Act, 2013 read together with Paragraph 7 of The Companies (Accounts) Rules, 2014.
The financial statements for the year ended 31 March 2017 are the first financial statements of the Company prepared under Ind AS. An explanation of how the transition to Ind AS has affected the reported financial position, financial performance and cash flows of the Company is provided in note 47.
These financial statements were authorised for issue by the Board of Directors on 9 May 2017.
ii. Basis of measurement
The financial statements have been prepared on a historical cost basis except the following items, which are measured on alternative basis on each reporting date:
- Certain financial assets (including derivative instruments) that is measured at fair value
- Defined benefit liability/(assets): fair value of plan assets less present value of defined benefit obligation
iii. Functional and presentation currency
These financial statements are presented in Indian National Rupee (âINRâ), which is the Companyâs functional currency. All amounts have been rounded to the nearest lac, unless otherwise indicated.
iv. Use of judgements and estimates
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the companyâs accounting policies and the reported amounts of assets, liabilities, income and expenses. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
a. Judgements
Information about the judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements have been given below:
- Leases : Whether an arrangement contains a lease
- Classification of leases into finance and operating lease
- Classification of financial assets: assessment of business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.
b. Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the financial statements for the year ended 31 March 2017 is included below:
- Impairment test: key assumptions underlying recoverable amounts, including the recoverability of development costs;
- Useful life of property, plant & equipment
- Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources
v. Property, plant and equipment: Recognition and measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss if any. The cost of assets comprises of purchase price and directly attributable cost of bringing the assets to working condition for its intended use including borrowing cost and incidental expenditure during construction incurred up to the date when the assets are ready to use. Capital work in progress includes cost of assets at sites, construction expenditure and interest on the funds deployed.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as a separate item (major components) of property, plant and equipment.
Any gain on disposal of property, plant and equipment is recognised in Profit and loss account.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Subsequent Measurement
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the company.
Depreciation
Depreciation on fixed assets is calculated on Straight Line Method (SLM) using the rates arrived at based on the estimated useful lives given in Schedule II of the Companies Act, 2013. Useful life of the assets, required to be transferred under Concession Agreement have been restricted up to the end of Concession Agreement.
Cost of leasehold land is amortized over the lease period.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and changes, if any, are accounted for prospectively.
vi. Intangible assets
Intangible Assets are stated at cost less accumulated amortization and impairment loss, if any. Intangible assets are amortized on straight line method basis over the estimated useful life. Estimated useful life of the Software/Licenses is considered as 3 years.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the company.
vii. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign exchange forward contracts, cross currency interest rate swaps, interest rate swaps and currency options; and embedded derivatives in the host contract.
Financial Assets Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Classifications
The company classifies its financial assets as subsequently measured at either amortized cost or fair value depending on the companyâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Business model assessment
The company makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, âprincipalâ is defined as the fair value of the financial asset on initial recognition. âInterestâ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.
Debt instruments at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met:
- it is held within a business model whose objective is to hold assets in order to collect contractual cash flows.
- the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.
Debt instrument at fair value through Other Comprehensive Income (FVOCI)
Debt instruments with contractual cash flow characteristics that are solely payments of principal and interest and held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets are classified to be measured at FVOCI.
Debt instrument at fair value through profit and loss (FVTPL)
Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVOCI, is classified as at FVTPL.
In addition, the company may elect to classify a debt instrument, which otherwise meets amortized cost or FVOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ).
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.
On initial recognition an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis.
All other Financial Instruments are classified as measured at FVTPL.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the company has transferred substantially all the risks and rewards of the asset, or (b) the company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
When the company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the company continues to recognize the transferred asset to the extent of the companyâs continuing involvement. In that case, the company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
With regard to trade receivable, the Company applies the simplified approach as permitted by Ind AS 109, Financial Instruments, which requires expected lifetime losses to be recognised from the initial recognition of the trade receivables.
Financial liabilities Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, amortised cost, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of amortised cost, net of directly attributable transaction costs.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial Liabilities measured at amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to P&L. However, the group may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss.
Derecognition of financial liabilities
The company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
Modifications of financial assets and financial liabilities Financial assets
If the terms of a financial asset are modified, the company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value.
If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income.
Financial liabilities
The company derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
viii. Inventories
Raw material, stores and spares are valued at lower of cost or net realizable value. Cost of raw material is determined on the first-in, first-out principle for respective agreements of LNG.
Cost of stores and spares is determined on weighted average cost.
ix. Revenue Recognition
a. Sale of goods
Revenue is recognised when the significant risk and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates.
Revenue is primarily derived from Sale of RLNG and is net of sales tax. Transfer of risk and rewards for sale of RLNG is at the point of dispatch.
b. Rendering of services
Revenue from regasification services is recognised when services are rendered and related costs are incurredin accordance with agreements.
c. Interest Income
Interest income is recognized using the Effective Interest Rate (âEIRâ) method. The EIR is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period, where appropriate to the net carrying amount of the financial asset. The EIR is computed basis the expected cash flows by considering all the contractual terms of the financial instrument. The calculation includes all fees, transaction costs, and all other premiums or discounts paid or received between parties to the contract that are an integral part of the effective interest rate.
d. Dividend Income
Dividend income is recognised, when the right to receive the dividend is established.
x. Foreign currency transactions
a. Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction.
b. Monetary items denominated in foreign currencies (such as cash, receivables, payables etc.) outstanding at the year end, are translated at exchange rates applicable on year end date.
c. Non-monetary items denominated in foreign currency, (such as fixed assets) are valued at the exchange rate prevailing on the date of transaction and carried at cost.
d. Any gains or losses arising due to exchange differences arising on translation or settlement are accounted for in the Statement of Profit and Loss.
xi. Employee benefits
a. Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
b. Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided. The company has following defined contribution plans:
a) Provident Fund
b) Superannuation Fund
c. Defined benefit plans
The company has only one defined benefit plan i.e. gratuity. The company net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in Other Comprehensive Income. Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after taking into account any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
d. Other long-term employee benefits
The Companyâs net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.
The company has following long term employment benefit plans:
Leave encashment
Leave encashment is payable to eligible employees at the time of retirement. The liability for leave encashmentis provided based on actuarial valuation as at the Balance Sheet date, based on Projected Unit Credit Method, carried out by an independent actuary.
xii. Borrowing Cost
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
xiii. Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in Other Comprehensive Income
a. Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
a) Has a legally enforceable right to set off the recognised amounts; and
b) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
b. Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
a) The entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
b) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
xiv. Interest in Joint Ventures
Interests in joint ventures accounted for using the equity method are recognised at cost.
xv. Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication on impairment. If any such indication exists, then the assetâs recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGU).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment loss in respect of assets other than goodwill is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
xvi. Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
xvii. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of Petronet LNG Limited has been identified as being the chief operating decision maker by the Management of the company. Refer note no 38 for segment information presented.
xviii. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand and short-term money market deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
xix. Recent accounting pronouncements Standards 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, âStatement of cash flowsâ. These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, âStatement of cash flowsâ. The amendments are applicable to the Company from 1 April 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.
Mar 31, 2016
Company Overview
Petronet LNG Limited referred to as "PLL" or "the Company" was formed
by Bharat Petroleum Corporation Limited (BPCL), GAIL (India) Limited
(GAIL), Indian Oil Corporation Limited (IOCL) and Oil and Natural Gas
Corporation Limited (ONGC) primarily to develop, design, construct, own
and operate a Liquefied Natural Gas (LNG) import and regasification
terminals in India. PLL was incorporated on April 2, 1998 under the
Companies Act, 1956 and received certificate of commencement of
business on June 1, 1998. The Company is involved in the business of
import and regasification of LNG and supply to BPCL, GAIL, IOCL and
others. Presently, the Company owns and operates LNG Regasification
Terminal with name plate capacity of 10 MMTPA at Dahej, in the State of
Gujarat. The Company has also commissioned another LNG terminal with
name plate capacity of 5 MMTPA at Kochi, in the State of Kerala.
1.01 Basis of preparation of financial statements
The financial statements are prepared under historical cost convention,
on a going concern basis and in accordance with the applicable
accounting standards prescribed in the Companies (Accounting Standards)
Rules, 2014 issued by the Central Government and as per relevant
provisions of the Companies Act, 2013 read together with Paragraph 7 of
The Companies (Accounts) Rules, 2014. Accounting policies have been
consistently applied except where a newly issued accounting standard is
initially adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.
1.02 Use of Estimates
The preparation of financial statements requires management to make
certain estimates and assumptions that affect the amounts reported in
the financial statements and notes thereto. Differences between actual
results and estimates are recognized in the period in which they
materialise.
1.03 Fixed Assets, Intangible Assets and Capital Work-in-progress
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost of assets comprises of purchase price
and directly attributable cost of bringing the assets to working
condition for its intended use including borrowing cost and incidental
expenditure during construction incurred upto the date when the assets
are ready to use and share issue expenses related to funds raised for
financing the project. Capital work in progress includes cost of assets
at sites, construction expenditure and interest on the funds deployed.
Intangible Assets are stated at cost less accumulated amortization and
impairment loss, if any.
1.04 Depreciation / Amortisation
Tangible Assets -
a) Depreciation on fixed assets is calculated on Straight Line Method
(SLM) using the rates arrived at based on the estimated useful lives
given in Schedule II of the Companies Act, 2013. Useful life of the
assets, required to be transferred under Concession Agreement have been
restricted up to the end of Concession Agreement.
b) Cost of leasehold land is amortized over the lease period.
Intangible Assets:
Intangible assets are amortized on straight line method basis over the
estimated useful life. Estimated useful life of the Software/Licenses
is considered as 3 years.
1.05 Investments
Trade investments are the investments made to enhance the Company''s
business interests. Investments are either classified as current or
long term based on Management''s intention at the time of purchase.
Current investments are carried at the lower of cost and fair value of
each investment individually. Overseas investments are recorded at the
exchange rate prevailing on the date of investment. Long term
investments are carried at cost after deducting provision, where the
decline in value is considered as other than temporary in nature.
1.06 Inventories
Raw material, stores and spares are valued at lower of cost or net
realizable value. Cost of stores and spares is determined on weighted
average cost. Cost of raw material is determined on FIFO basis for
respective categories of supplies.
1.07 Sale / Revenue Recognition
Revenue is primarily derived from Sale of RLNG and is net of sales tax.
Revenue from sales is recognised at the point of dispatch, when risk
and reward of ownership stand transferred to the customers.
Services are net of service tax. Revenue from services is recognised
when services are rendered and related costs are incurred.
Interest income is recognised on time proportion basis.
Dividend income is recognised, when the right to receive the dividend
is established.
1.08 Foreign Currency Transactions
(a) Foreign currency transactions are recorded at the exchange rate
prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash,
receivables, payables etc.) outstanding at the year end, are translated
at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency, (such as fixed
assets) are valued at the exchange rate prevailing on the date of
transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on
translation or settlement are accounted for in the Statement of Profit
and Loss.
(e) In case of forward exchange contracts, the premium or discount
arising at the inception of such contracts, is amortised as income or
expense over the life of the contract.
1.09 Employee Benefits
Provision for leave encashment is made on the basis of actuarial
valuation at the end of the year. Actuarial gains or losses are
recognized in the Statement of Profit and Loss. Contribution to
Provident Fund and Superannuation is accounted for on accrual basis.
Liabilities with respect to gratuity are determined by actuarial
valuation as of the balance sheet date, based upon which the Company
contributes the ascertained liabilities to the insurer (LIC).
1.10 Borrowing Costs
Borrowing cost (net of any income on the temporary investments of those
borrowings) attributable to acquisition, construction or production of
qualifying assets are capitalised as part of the cost till the assets
are ready for use. Other borrowing costs are recognized as expense in
the period in which these are incurred.
1.11 Taxes on Income
Provision is made for deferred tax for all timing differences arising
between taxable income and accounting income at currently enacted or
substantially enacted tax rates.
Deferred tax assets are recognized, only if there is reasonable /
virtual certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
1.12 Provisions, Contingent Liabilities and Contingent Assets
Provisions, involving substantial degree of estimation in measurement,
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Accounts. Contingent assets are neither recognized nor
disclosed in the financial statements.
1.13 Impairment of Assets
An asset is treated as impaired, when the carrying cost of asset
exceeds its recoverable value. An impairment loss, if any, is charged
to Statement of Profit and Loss, in the year in which an asset is
identified as impaired.
27. Contingent Liability and commitment
A. Commitments
a) Estimated amount of contracts remaining to be executed on capital
account (net of advances) and not provided for Rs. 40,497.02 lac (as on
31st March 2015 Rs. 1,08,476 lac).
b) The Company has entered into following long term LNG purchase
agreements:
a. 8.5 MMTPA with RasGas Company Limited, Qatar for a period upto
April 2028.
b. 1.44 MMTPA with Mobil Australia Resources Company PTY Ltd, likely
to commence supply by the end of 2016 for a period upto 2035.
Since the Company has entered into materially back to back sale
agreements for the same, there is no foreseeable loss on these
agreements as on the balance sheet date. The Company has issued Standby
Letter of Credit of Rs. 5,91,981 lac (Rs. 5,12,667 lac as on 31st March
2015) to RasGas Company Limited against Long Term Purchase Agreement.
B. Contingent Liability
a) The Collector of Electricity Duty, Gandhinagar (Gujarat) had issued
notices classifying the business activities of the Company as
"Storage(HTP-NA)" instead of "Industrial Undertaking (HTP I)" and hence
levied Electricity Duty @ 45% instead of 20% of the consumption charges
and charging 70 paise per unit on the power generated by the Company
for its own consumption. The Company has challenged the legality and
validity of the notices by way of writ petitions before the High Court
of Gujarat. Meanwhile, the Company continues to make payment of
Electricity Duty @15%(Revised rate of HTP-I) on the basis of the stay
order granted by the High Court. The High Court vide order dated
1.7.2014 has set aside the notice and quashed the supplementary
bill/demand notice and remanded the case back to the Collector of
Electricity Duty, Gandhinagar to decide the nature of undertaking of
the Company. The Company has made its oral and written submissions
before the Collector of Electricity Duty, Gandhinagar and the order is
awaited. The total contingent liability till March, 2016 calculated on
the differential payable (25% (Revised rates for "HTP-II A") as
classified by GEB and what is actually paid by the Company on "HTP-I"
rate i.e. 15%) is Rs. 2,668 lac (as on 31st March 2015 Rs. 2,251 lac).
b) The Company has filed a writ petition before the Gujarat High Court
challenging the legality and correctness of the notice dated April 1,
2006 from the Collector of Stamps, Bharuch stating that pursuant to the
amendment to Section 24 of the Bombay Stamp Act, 1958, the Company is
required to pay stamp duty @ Re.1 per Rs. 1000/- or part thereof of the
value mentioned in the Delivery Order of the goods imported through
ports in Gujarat. The Hon''ble High Court of Gujarat vide its order
dated February 24, 2010 has quashed the notice issued by the Stamp
Authorities. Stamp authorities have filed Special Leave Petition (SLP)
in Supreme Court against the same, the last hearing of the same was
done on January 23, 2012 and the case is pending as on 31st March 2016.
The contingent liability from the effective date of amendment i.e.
April 1, 2006 till March 31, 2016 on the CIF value is estimated to be
Rs. 17,421 lac. (as on 31st March 2015 Rs. 15,258 lac).
c) The Company has received refund of Rs. 112 lac, Rs. 284 lac and Rs.
346 lac from Customs department vide CESTAT order dated November 7,
2013, September 9, 2011 and May 31, 2010 respectively, mainly
pertaining to custom duty on short landing of LNG. The Custom
Authorities have filed appeal against the order of the CESTAT with the
Hon''ble High court of Gujarat and the outcome of the case is pending as
on March 31, 2016.
d) Taxes and duties recoverable (Note 13) includes service tax of Rs.
4,005 lac (as on 31st March 2015 Rs. 4,005 lac) on vessel hire charges
(including interest of Rs. 2,97 lac) paid under protest for the period
from May 16, 2008 to September 30, 2009 under Section 65(105)(zzzzj) of
the Finance Act, 1994 (as amended) - "Supply of Tangible Goods for
Use". The Commissioner of the Service Tax, vide Order dated March 6,
2012 has confirmed the demand. Against the Order of the Commissioner,
the Company has filed an appeal before CESTAT and CESTAT has passed an
order in favour of the Company vide order no. ST/A/58706/2013-CU(DB) on
October 24, 2013. The department has filed an appeal against the CESTAT
order before the Supreme Court and stay order has been issued by the
court dated 08th January 2016. The case is pending before Supreme Court
as on 31st March 2016.
e) The Company has cases pending with Service Tax Department at various
levels, pertaining to applicability of service tax on charges paid for
External Commercial Borrowings taken from IFC, ADB & Proparco. Amount
involved in such cases is Rs. 913 lac (as on 31st March 2015 Rs. 479
lac).
f) The service tax department has issued show cause notice dated April
2016 claiming service tax amounting Rs. 1,928 lac for period upto March
2015 (including earlier demand of Rs. 1,416 lac for period upto June
2014 vide notice dated 10th Oct 2014) on the boil off quantity of LNG
during regasification process for the period July 2014 to March 2015.
The Company had replied against the notice and the matter is pending
for adjudication.
g) The Company has filed Service Tax Refund Application for services
availed in the Special Economic Zone for the LNG Terminal at Kochi,
amounting to Rs. 1,924 lac (as on 31st March 2015 Rs. 1,919 lac), out
of which Rs. 774 lac (as on 31st March 2015 Rs. 774 lac) is before the
CESTAT level and Rs. 1,150 lac (as on 31st March 2015 Rs. 1,145 lac) is
at Assistant Commissioner level.
h) The sales tax department has issued show cause notice dated 11th
February 2016 claiming sales tax amounting to Rs. 7,985 lac against the
high seas sales transaction made by the company. The reply against the
show cause notice is submitted by the Company and the matter is pending
for adjudication.
i) There are certain claims of Rs. 18,362 lac (as on 31st March 2015
Rs. 18,362 lac) made by a Contractor against capital works for which
the Company has also made certain counter claims. As per the terms of
the contract, Independent expert''s opinion is being sought and pending
the settlement of liability, claims are not determinable and therefore
no provision has been made in the books.
j) Dahej Second Jetty Topside contract awarded to a consortium of two
parties was terminated by the Company in July, 2012 because of the
failure of the contractor to carry out the work as per schedule.
Contractor invoked arbitration and claimed Rs. 15,409 lac (as on 31st
March 2015 Rs. 15,156 lac). PLL has also filed counter claim of Rs.
11,522 lac (as on 31st March 2015 Rs. 11,671 lac) as per the contract.
Pending the outcome of arbitration proceedings, liability against the
claims, if any, is not determinable and therefore no provision has been
made in the books.
k) The Company had entered into a lease agreement with Cochin port
trust (CPT) for 33.4015 hectare of land for building and operating port
and regasification facility at Kochi. CPT has raised demand for
enhanced lease rent (almost 10 times), by quoting the order of Tariff
Authority for Major Ports (TAMP) dated 10th June 2010. CPT has invoked
arbitration and claimed Rs. 4,258 lac (as on 31st March 2015 Rs. 4,258
lac). Further, an additional demand amounting to Rs. 2,000 lac (as on
31st March 2015 Rs. 2,000 lac) has been raised by CPT for usage of
dredged sand by the Company. PLL has been contesting the increase in
lease rent as well as dredging sand claims. As such, the matter has
been referred to Arbitration. Pending the outcome of arbitration
proceedings, liability against the claims, if any, is not determinable
and therefore no provision has been made in the books.
l) The Company is eligible for deduction under section 80IA of the
Income Tax Act, 1961, with respect to power generation and port
undertakings at Dahej. The assessing officer has disallowed deduction
under Section 80-IA for assessment years 2009-10, 2010-11 and 2011-12.
During the year, the Company has received favourable order from CIT(A)
for the abovementioned years and accordingly the Company has reversed
tax provision amounting to Rs. 7,237 lac in books of accounts. The
Income tax department has preferred an appeal with ITAT against this
order of CIT(A), the outcome of which is pending to be received as on
31st March 2016.
m) The Assessing officer has raised income tax demand of Rs. 1,244 lac
(Rs. 1,244 lac as on 31st March 2015) vide its order dated 20.03.2015
w.r.t. assessment year 2008-09. The Company has filed an appeal against
the same with CIT (A), the final outcome of which is pending to be
received as on 31st March 2016.
Mar 31, 2015
1.01 Basis of preparation of financial statements
The financial statements are prepared under historical cost convention,
on a going concern basis and in accordance with the applicable
accounting standards prescribed in the Companies (Accounting Standards)
Rules, 2014 issued by the Central Government and as per relevant
provisions of the Companies Act, 2013. Accounting policies have been
consistently applied except where a newly issued accounting standard is
initially adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.
1.02 Use of Estimates
The preparation of financial statements requires management to make
certain estimates and assumptions that affect the amounts reported in
the financial statements and notes thereto. Differences between actual
results and estimates are recognized in the period in which they
materialise.
1.03 Fixed Assets, Intangible Assets and Capital Work-in-progress
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost of assets comprises of purchase price
and directly attributable cost of bringing the assets to working
condition for its intended use, including borrowing cost and incidental
expenditure during construction incurred upto the date when the assets
are ready to use and share issue expenses related to funds raised for
financing the project. Capital work in progress includes cost of assets
at sites, construction expenditure and interest on the funds deployed.
Intangible Assets are stated at cost less accumulated amortization and
impairment loss, if any.
1.04 Depreciation / Amortisation Tangible Assets -
(a) Depreciation on fixed asset is calculated on Straight Line Method
(SLM) using the rates arrived at based on the estimated useful lives
given in Schedule II of the Companies Act, 2013. Useful life of the
assets, required to be transferred under Concession Agreement have been
restricted up to the end of Concession Agreement.
(b) Cost of leasehold land is amortized over the lease period.
Intangible Assets-
(c) Intangible assets are amortized on straight line method basis over
the estimated useful life. Estimated useful life of the
Software/Licenses are considered as 3 years.
1.05 Investments
Trade investments are the investments made to enhance the Company's
business interests. Investments are either classified as current or
long term, based on Management's intention at the time of purchase.
Current investments are carried at the lower of cost and fair value of
each investment individually. Overseas investments are recorded at the
exchange rate prevailing on the date of investment. Long term
investments are carried at cost after deducting provision, where the
decline in value is considered as other than temporary in nature.
1.06 Inventories
Raw material, stores and spares are valued at lower of cost or net
realizable value. Cost of stores and spares is determined on weighted
average cost. Cost of raw material is determined on FIFO basis for
respective categories of supplies.
1.07 Sale / Revenue Recognition
Revenue is primarily derived from Sale of RLNG and is net of sales tax.
Revenue from sales is recognised at the point of dispatch, when risk
and reward of ownership stand transferred to the customers.
Services are net of service tax. Revenue from services is recognised
when services are rendered and related costs are incurred.
Interest income is recognised on time proportion basis.
Dividend income is recognised, when the right to receive the dividend
is established.
1.08 Foreign Currency Transactions
(a) Foreign currency transactions are recorded at the exchange rate
prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash,
receivables, payables etc.) outstanding at the year end, are translated
at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency, (such as fixed
assets) are valued at the exchange rate prevailing on the date of
transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on
translation or settlement are accounted for in the Statement of Profit
and Loss.
(e) In case of forward exchange contracts, the premium or discount
arising at the inception of such contracts, is amortised as income or
expense over the life of the contract.
1.09 Employee Benefits
Provision for leave encashment is made on the basis of actuarial
valuation at the end of the year. Actuarial gains or losses are
recognized in the Statement of Profit and Loss. Contribution to
Provident Fund and Superannuation is accounted for on accrual basis.
Liabilities with respects to gratuity are determined by actuarial
valuation as on the balance date, based upon which the Company
contributes the ascertained liabilities to the insurer (LIC).
1.10 Borrowing Costs
Borrowing cost (net of any income on the temporary investments of those
borrowings) attributable to acquisition, construction or production of
qualifying assets are capitalised as part of the cost till the assets
are ready for use. Other borrowing costs are recognized as expense in
the period in which these are incurred.
1.11 Taxes on Income
Provision is made for deferred tax for all timing differences arising
between taxable income and accounting income at currently enacted or
substantially enacted tax rates.
Deferred tax assets are recognized, only if there is reasonable /
virtual certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
1.12 Provisions, Contingent Liabilities and Contingent Assets
Provisions, involving substantial degree of estimation in measurement,
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Accounts. Contingent assets are neither recognized nor
disclosed in the financial statements.
1.13 Impairment of Assets
An asset is treated as impaired, when the carrying cost of asset
exceeds its recoverable value. An impairment loss, if any, is charged
to Statement of Profit and Loss, in the year in which an asset is
identified as impaired.
Mar 31, 2014
1.1 Basis of preparation of financial statements
The financial statements are prepared under historical cost convention,
on a going concern basis and in accordance with the applicable
accounting standards prescribed in the Companies (Accounting Standards)
Rules, 2006 issued by the Central Government, in consultation with the
National Advisory Committee on Accounting Standards and relevant
provisions of the Companies Act, 1956. Accounting policies have been
consistently applied except where a newly issued accounting standard is
initially adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.
1.2 Use of Estimates
The preparation of financial statements requires management to make
certain estimates and assumptions that affect the amounts reported in
the financial statements and notes thereto. Differences between actual
results and estimates are recognized in the period in which they
materialise.
1.3 Fixed Assets, Intangible Assets and Capital Work-in-progress
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost of assets comprises of purchase price
and directly attributable cost of bringing the assets to working
condition for its intended use including borrowing cost and incidental
expenditure during construction incurred upto the date when the assets
are ready to use and share issue expenses related to funds raised for
financing the project. Capital work in progress includes cost of assets
at sites, construction expenditure, advances made for acquisition of
capital assets and interest on the funds deployed. Intangible Assets
are stated at cost less accumulated amortization and impairment loss,
if any.
Estimated amounts of contracts remaining to be executed exceeding Rs. one
lakh in each case are disclosed in the notes to accounts.
1.4 Depreciation / Amortisation
Tangible Assets -
(a) Cost of leasehold land is amortized over the lease period.
(b) Depreciation on fixed assets other than those costing upto Rs. 5,000
is provided on straight line method in accordance with the rates and in
the manner specified in Schedule XIV of the Companies Act, 1956.
(c) Assets costing upto Rs. 5000/- are depreciated fully in the year of
purchase / capitalization.
Intangible Assets -
(d) Software / Licenses are amortised over 3 years on Straight Line
Method.
1.5 Investments
Trade investments are the investments made to enhance the Company''s
business interests. Investments are either classified as current or
long term based on Management''s intention at the time of purchase.
Current investments are carried at the lower of cost and fair value of
each investment individually. Overseas investments are recorded at the
exchange rate prevailing on the date of investment. Long term
investments are carried at cost after deducting provision, where the
decline in value is considered as other than temporary in nature.
1.6 Inventories
Raw material, stores and spares are valued at lower of cost or net
realizable value. Cost of stores and spares is determined on weighted
average cost. Cost of raw material is determined on FIFO basis for
respective categories of supplies.
1.7 Sale / Revenue Recognition
Revenue is primarily derived from Sale of RLNG and is net of sales tax.
Revenue from sales is recognised at the point of dispatch when risk and
reward of ownership stand transferred to the customers.
Services are net of service tax. Revenue from services is recognised
when services are rendered and related costs are incurred.
Interest income is recognised on time proportion basis.
Dividend income is recognised, when the right to receive the dividend
is established.
1.8 Foreign Currency Transactions
(a) Foreign currency transactions are recorded at the exchange rate
prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash,
receivables, payables etc.) outstanding at the year end, are translated
at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency, (such as fixed
assets) are valued at the exchange rate prevailing on the date of
transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on
translation or settlement are accounted for in the Statement of Profit
and Loss.
(e) In case of forward exchange contracts, the premium or discount
arising at the inception of such contracts, is amortised as income or
expense over the life of the contract.
1.09 Employee Benefits
Provision for gratuity and leave encashment is made on the basis of
actuarial valuation at the end of the year. Actuarial gains or losses
are recognized in the Statement of Profit and Loss. Contribution to
Provident Fund and Superannuation is accounted for on accrual basis.
1.10 Borrowing Costs
Borrowing cost (net of any income on the temporary investments of those
borrowings) attributable to acquisition, construction or production of
qualifying assets are capitalised as part of the cost till the assets
are ready for use. Other borrowing costs are recognized as expense in
the period in which these are incurred.
1.11 Taxes on Income
Provision is made for deferred tax for all timing differences arising
between taxable income and accounting income at currently enacted or
substantially enacted tax rates.
Deferred tax assets are recognized, only if there is reasonable /
virtual certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
1.12 Provisions, Contingent Liabilities and Contingent Assets
Provisions, involving substantial degree of estimation in measurement,
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Accounts. Contingent assets are neither recognized nor
disclosed in the financial statements.
1.13 Impairment of Assets
An asset is treated as impaired, when the carrying cost of asset
exceeds its recoverable value. An impairment loss, if any, is charged
to Statement of Profit and Loss, in the year in which an asset is
identified as impaired.
2 Share Capital
The Company declares and pays dividend in Indian Rs.. The dividend
proposed by the Board of Directors is subject to the approval of the
shareholders in the ensuing Annual General Meeting.
During the year ended March 31, 2014, the amount of dividend per share
recognized as distribution to equity shareholders is Rs. 2.00/- (previous
year Rs. 2.50/-). The total dividend appropriation for the year ended
March 31, 2014 amounted to Rs. 15,000 lac (previous year Rs. 18,750 lac)
including corporate dividend tax of Rs. 2,549 lac (previous year Rs. 3,187
lac).
4 Long-Term Borrowings
2 Term Loans are secured by first ranking mortgage and first charge on
pari passu basis on all movable and immovable properties, both present
and future including current assets except on trade receivables on
which second charge is created on pari passu basis.
4 In respect of external commercial borrowings from International
Finance Corporation Washington D.C.,USA and Proparco, France, the
Company has entered into derivative contracts to hedge the loan amount
including interest. This has the effect of freezing the Rupee
equivalent of this liability as reflected under the Borrowings. Thus
there is no impact in the statement of Profit & Loss, arising out of
exchange fluctuations for the duration of the loan. Consequently,
there is no restatement of the loan taken in foreign currency.The
interest payable in Indian Rupees on the derivative contracts is
accounted for in the Statement of Profit & Loss.
Mar 31, 2013
1.01 Basis of preparation of financial statements
The financial statements are prepared under historical cost convention,
on a going concern basis and in accordance with the applicable
accounting standards prescribed in the Companies (Accounting Standards)
Rules, 2006 issued by the Central Government, in consultation with the
National Advisory Committee on Accounting Standards and relevant
provisions of the Companies Act, 1956. Accounting policies have been
consistently applied except where a newly issued accounting standard is
initially adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.
1.02 Use of Estimates
The preparation of financial statements requires management to make
certain estimates and assumptions that affect the amounts reported in
the financial statements and notes thereto. Differences between actual
results and estimates are recognized in the period in which they
materialise.
1.03 Fixed Assets, Intangible Assets and Capital Work-in-progress
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost of assets comprises of purchase price
and directly attributable cost of bringing the assets to working
condition for its intended use including borrowing cost and incidental
expenditure during construction incurred upto the date when the assets
are ready to use and share issue expenses related to funds raised for
financing the project. Capital work in progress includes cost of
assets at sites, construction expenditure, advances made for
acquisition of capital assets and interest on the funds deployed.
Intangible Assets are stated at cost less accumulated amortization and
impairment loss, if any.
Estimated amount of contracts remaining to be executed exceeding rupees
one lakh in each case are disclosed in the notes to accounts.
1.04 Depreciation / Amortisation Tangible Assets -
(a) Cost of leasehold land is amortized over the lease period.
(b) Depreciation on fixed assets other than those costing upto Rs.
5,000 is provided on straight line method in accordance with the rates
and in the manner specified in Schedule XIV of the Companies Act, 1956.
(c) Assets costing upto Rs. 5000/- are depreciated fully in the year of
purchase / capitalization.
Intangible Assets -
(d) Software / Licenses are amortised over 3 years on Straight Line
Method.
1.05 Investments
Trade investments are the investments made to enhance the Company''s
business interests. Investments are either classified as current or
long term based on Management''s intention at the time of purchase.
Current investments are carried at the lower of cost and fair value of
each investment individually. Overseas investments are recorded at the
exchange rate prevailing on the date of investment. Long term
investments are carried at cost after deducting provision, where the
decline in value is considered as other than temporary in nature.
1.06 Inventories
Raw material, stores and spares are valued at lower of cost or net
realizable value. Cost of stores and spares is determined on weighted
average cost. Cost of raw material is determined on FIFO basis for
respective categories of supplies.
1.07 Sale / Revenue Recognition
Revenue is primarily derived from Sale of RLNG and are net of sales
tax. Revenue from sales is recognised at the point of dispatch when
risk and reward of ownership stand transferred to the customers.
Services are net of service tax. Revenue from services is recognised
when services are rendered and related costs are incurred.
Interest income is recognised on time proportion basis.
Dividend income is recognised, when the right to receive the dividend
is established.
1.08 Foreign Currency Transactions
(a) Foreign currency transactions are recorded at the exchange rate
prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash,
receivables, payables etc.) outstanding at the year end, are translated
at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency, (such as fixed
assets) are valued at the exchange rate prevailing on the date of
transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on
translation or settlement are accounted for in the Statement of Profit
and Loss.
(e) In case of forward exchange contracts, the premium or discount
arising at the inception of such contracts, is amortised as income or
expense over the life of the contract.
1.09 Employee Benefits
Provision for gratuity and leave encashment is made on the basis of
actuarial valuation at the end of the year. Actuarial gains or losses
are recognized in the Statement of Profit and Loss.
Contribution to Provident Fund and Superannuation is accounted for on
accrual basis.
1.10 Borrowing Costs
Borrowing cost (net of any income on the temporary investments of those
borrowings) attributable to acquisition, construction or production of
qualifying assets are capitalised as part of the cost till the assets
are ready for use. Other borrowing costs are recognized as expense in
the period in which these are incurred.
1.11 Taxes on Income
Provision is made for deferred tax for all timing differences arising
between taxable income and accounting income at currently enacted or
substantially enacted tax rates.
Deferred tax assets are recognized, only if there is reasonable /
virtual certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
1.12 Provisions, Contingent Liabilities and Contingent Assets
Provisions, involving substantial degree of estimation in measurement,
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Accounts. Contingent assets are neither recognized nor
disclosed in the financial statements.
1.13 Impairment of Assets
An asset is treated as impaired, when the carrying cost of asset
exceeds its recoverable value. An impairment loss, if any, is charged
to Statement of Profit and Loss, in the year in which an asset is
identified as impaired.
Mar 31, 2012
1.01 Basis of preparation of financial statements
The financial statements are prepared under historical cost convention,
on a going concern basis and in accordance with the applicable
accounting standards prescribed in the Companies (Accounting Standards)
Rules, 2006 issued by the Central Government, in consultation with the
National Advisory Committee on Accounting Standards and relevant
provisions of the Companies Act, 1956. Accounting policies have been
consistently applied except where a newly issued accounting standard is
initially adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.
1.02 Use of Estimates
The preparation of financial statements requires management to make
certain estimates and assumptions that affect the amounts reported in
the financial statements and notes thereto. Differences between actual
results and estimates are recognized in the period in which they
materialize.
1.03 Fixed Assets, Intangible Assets and Capital Work-in-progress
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost of assets comprises of purchase price
and directly attributable cost of bringing the assets to working
condition for its intended use including borrowing cost and incidental
expenditure during construction incurred upto the date when the assets
are ready to use and share issue expenses related to funds raised for
financing the project. Capital work in progress includes cost of
assets at sites, construction expenditure, advances made for
acquisition of capital assets and interest on the funds deployed.
Intangible Assets are stated at cost less accumulated amortization and
impairment loss, if any.
Estimated amount of contracts remaining to be executed exceeding rupees
one lakh in each case are disclosed in the notes to accounts.
1.04 Depreciation / Amortisation Tangible Assets -
(a) Cost of leasehold land is amortized over the lease period.
(b) Depreciation on fixed assets other than those costing upto Rs.
5,000 provided on straight line method in accordance with the rates and
in the manner specified in Schedule XIV of the Companies Act, 1956.
(c) Assets costing upto Rs. 5000/- are depreciated fully in the year of
purchase/capitalization.
Intangible Assets -
(d) Software/Licenses are amortised over 3 years on Straight Line
Method.
1.05 Investments
Trade investments are the investments made to enhance the Company's
business interests. Investments are either classified as current or
long term based on Management's intention at the time of purchase.
Current investments are carried at the lower of cost and fair value of
each investment individually. Overseas investments are recorded at the
exchange rate prevailing on the date of investment. Long term
investments are carried at cost after deducting provision, where the
decline in value is considered as other than temporary in nature.
1.06 Inventories
Raw material, stores and spares are valued at lower of cost or net
realizable value. Cost is determined on weighted average cost.
1.07 Sale/Revenue Recognition
Revenue is primarily derived from Sale of RLNG and are net of sales
tax. Revenue from sales is recognised at the point of dispatch when
risk and reward of ownership stand transferred to the customers.
Services are net of service tax. Revenue from services is recognised
when services are rendered and related costs are incurred.
Interest income is recognised on time proportion basis.
Dividend income is recognised, when the right to receive the dividend
is established.
1.08 Foreign Currency Transactions
a) Foreign currency transactions are recorded at the exchange rate
prevailing on the date of the transaction.
b) Monetary items denominated in foreign currencies (such as cash,
receivables, payables etc.) outstanding at the year end, are translated
at exchange rates applicable on year end date.
c) Non-monetary items denominated in foreign currency, (such as fixed
assets) are valued at the exchange rate prevailing on the date of
transaction and carried at cost.
d) Any gains or losses arising due to exchange differences arising on
translation or settlement are accounted for in the Statement of Profit
and Loss.
e) In case of forward exchange contracts, the premium or discount
arising at the inception of such contracts, is amortised as income or
expense over the life of the contract.
1.09 Employee Benefits
a) Provision for gratuity and leave encashment is made on the basis of
actuarial valuation at the end of the year. Actuarial gains or losses
are recognized in the Statement of Profit and Loss.
b) Contribution to Provident Fund and Superannuation is accounted for
on accrual basis.
1.10 Borrowing Costs
Borrowing cost (net of any income on the temporary investments of those
borrowings) attributable to acquisition, construction or production of
qualifying assets are capitalised as part of the cost till the assets
are ready for use. Other borrowing costs are recognized as expense in
the period in which these are incurred.
1.11 Taxes on Income
Provision is made for deferred tax for all timing differences arising
between taxable income and accounting income at currently enacted or
substantially enacted tax rates.
Deferred tax assets are recognized, only if there is reasonable/virtual
certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
1.12 Provisions, Contingent Liabilities and Contingent Assets
Provisions, involving substantial degree of estimation in measurement,
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Accounts. Contingent assets are neither recognized nor
disclosed in the financial statements.
1.13 Impairment of Assets
An asset is treated as impaired; when the carrying cost of asset
exceeds its recoverable value. An impairment loss, if any, is charged
to Statement of Profit and Loss, in the year in which an asset is
identified as impaired.
The Company has only one class of shares referred to as equity shares
having a par value of Rs. 10. Each holder of equity shares is entitled
to one vote per share.
The Company declares and pays dividend in Indian rupees. The dividend
proposed by the Board of Directors is subject to the approval of the
shareholders in the ensuing Annual General Meeting.
During the year ended March 31, 2012, the amount of dividend per share
recognized as distribution to equity shareholders is Rs. 2.50/-
(previous year Rs. 2.00/-). The total dividend appropriation for the
year ended March 31, 2012 amounted to Rs. 18,750 lacs (previous year
Rs. 17,433 lacs) including coporate dividend tax of Rs. 3,042 lacs
(previous year Rs. 2,433 lacs)
Mar 31, 2011
1. Basis of Accounting
The financial statements are prepared under historical cost convention,
on a going concern basis and in accordance with the applicable
accounting standards prescribed in the Companies (Accounting Standards)
Rules, 2006 issued by the Central Government, in consultation with the
National Advisory Committee on Accounting Standards and relevant
provisions of the Companies Act, 1956
2. Use of Estimates
The preparation of financial statements requires management to make
certain estimates and assumptions that affect the amounts reported in
the financial statements and notes thereto. Differences between actual
results and estimates are recognized in the period in which they
materialise.
3. Fixed Assets
(a) Fixed Assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost of assets comprises of purchase price
and directly attributable cost of bringing the assets to working
condition for its intended use including borrowing cost and incidental
expenditure during construction incurred upto the date of ready to use
and share issue expenses related to funds raised for financing the
project.
(b) Capital Work in Progress
Capital work in progress includes cost of assets at sites, construction
expenditure, advances made for acquisition of capital assets and
interest on the funds deployed.
(c) Capital Commitments
Estimated amount of contracts remaining to be executed exceeding rupees
one lakh in each case are disclosed in the notes to accounts.
4. Depreciation / Amortisation
Tangible Assets -
(a) Cost of leasehold land is amortized over the lease period.
(b) Depreciation on fixed assets other than those costing upto Rs.
5,000 is provided on straight line method in accordance with the rates
and in the manner specified in Schedule XIV of the Companies Act, 1956.
(c) Assets costing upto Rs. 5000/- are depreciated fully in the year of
purchase / capitalization. Intangible Assets -
(d) Software / Licenses are amortised over 3 years on Straight Line
Method.
5. Investments
(a) Long term investments are carried at cost after deducting
provision, where the decline in value is considered as other than
temporary in nature.
(b) Current investments are valued at lower of cost or fair value.
6. Inventories
Raw material, stores and spares are valued at lower of cost or net
realizable value. Cost is determined on weighted average cost.
7. Sale / Revenue Recognition
(a) Sales are net of sales tax. Revenue from sales is recognised at the
point of dispatch when risk and reward stand transferred to the
customers.
(b) Services are net of service tax. Revenue from services is
recognised when services are rendered and related costs are incurred.
(c) Interest income is recognised on time proportion basis.
(d) Dividend income is recognised, when the right to receive the
dividend is established.
8. Foreign Currency Transactions
(a) Foreign currency transactions are recorded at the exchange rate
prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies (such as cash,
receivables, payables etc.) outstanding at the year end, are translated
at exchange rates applicable on year end date.
(c) Non-monetary items denominated in foreign currency, (such as fixed
assets) are valued at the exchange rate prevailing on the date of
transaction and carried at cost.
(d) Any gains or losses arising due to exchange differences arising on
translation or settlement are accounted for in the Profit and Loss
Account.
(e) In the case of forward exchange contracts, the premium or discount
arising at the inception of such contracts, is amortised as income or
expense over the life of the contract as well as exchange difference on
such contracts, i.e. difference between the exchange rate at the
reporting / settlement date and the exchange rate on the date of
inception / the last reporting date, is recognized as income / expense
for the period.
9. Employee Benefits
(a) Provision for gratuity and leave encashment is made on the basis of
actuarial valuation at the end of the year. Actuarial gains or losses
are recognized to the profit and loss account.
(b) Contribution to Provident Fund and Superannuation is accounted for
on accrual basis.
10. Borrowing Costs
Borrowing cost (net of any income on the temporary investments of those
borrowings) attributable to acquisition, construction or production of
qualifying assets are capitalised as part of the cost till the asset is
ready for use. Other borrowing costs are recognized as expense in the
period in which these are incurred.
11. Taxes on Income
Provision is made for deferred tax for all timing differences arising
between taxable income and accounting income at currently enacted or
substantially enacted tax rates.
Deferred tax assets are recognized, only if there is reasonable /
virtual certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
12. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Accounts. Contingent assets are neither recognized nor
disclosed in the financial statements.
13. Impairment of Assets
An asset is treated as impaired, when the carrying cost of asset
exceeds its recoverable value. An impairment loss, if any, is charged
to Profit and Loss account, in the year in which an asset is identified
as impaired.
Mar 31, 2010
1. Basis of Accounting
The financial statements are prepared under historical cost convention,
on a going concern basis and in accordance with the applicable
accounting standards prescribed in the Companies (Accounting Standards)
Rules, 2006 issued by the Central Government, in consultation with the
National Advisory Committee on Accounting Standards and relevant
provisions of the Companies Act, 1956
2. Use of Estimates
The preparation of financial statements requires management to make
certain estimates and assumptions that affect the amounts reported in
the financial statements and notes thereto. Differences between actual
results and estimates are recognized in the period in which they
materialise.
3. Fixed Assets
(a) Fixed Assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost of assets comprises of purchase price
and directly attributable cost of bringing the assets to working
condition for its intended use including borrowing cost and incidental
expenditure during construction incurred upto the date of ready to use
and share issue expenses related to funds raised for financing the
project.
(b) Capital Work in Progress
Capital work in progress includes cost of assets at sites, construction
expenditure, advances made for acquisition of capital assets and
interest on the funds deployed.
(c) Capital Commitments
Estimated amount of contracts remaining to be executed exceeding rupees
one lakh in each case are disclosed in the notes to accounts.
4. Depreciation / Amortisation
Tangible Assets -
(a) Cost of leasehold land is amortized over the lease period.
(b) Depreciation on fixed assets other than those costing upto Rs. 5000
is provided on straight line method in accordance with the rates and in
the manner specified in Schedule XIV of the Companies Act, 1956.
(c) Assets costing upto Rs. 5000/- are depreciated fully in the year of
purchase / capitalization. Intangible Assets -
(d) Software/Licenses are amortised over 3 years on Straight Line
Method.
5. Investments
(a) Long term investments are carried at cost after deducting
provision, where the decline in value is considerd as other than
temporary in nature.
(b) Current investments are valued at lower of cost or fair value.
6. Inventories
Raw Material, stores and spares are valued at lower of cost or net
realizable value. Cost is determined on weighted average cost.
7. Sale / Revenue Recognition
(a) Sales are net of sales tax. Revenue from sales is recognised at the
point of dispatch when risk and reward stand transferred to the
customers.
(b) Services are net of service tax. Revenue from services is
recognised when services are rendered and related costs are incurred.
(c) Interest income is recognised on time proportion basis.
(d) Dividend income is recognised, when the right to receive the
dividend is established.
8. Foreign Currency Transactions
(a) Foreign currency transactions are recorded at the exchange rate
prevailing on the date of transaction.
(b) Monetary items denominated in foreign currencies (such as cash,
receivables, payables etc.) outstanding at the year end, are translated
at exchange rates applicable on that date.
(c) Non-monetary items denominated in foreign currency, (such as fixed
assets) are valued at the exchange rate prevailing on the date of
transaction.
(d) Any gains or losses arising due to exchange differences arising on
translation or settlement are accounted for in the Profit and Loss
Account.
(e) In the case of forward exchange contracts, the premium or discount
arising at the inception of such contracts, is amortised as income or
expense over the life of the contract as well as exchange difference on
such contracts, i.e. difference between the exchange rate at the
reporting / settlement date and the exchange rate on the date of
inception / the last reporting date, is recognized as income / expense
for the period.
9. Employee Benefits
(a) Provision for gratuity and leave encashment is made on the basis of
actuarial valuation at the end of the year. Actuarial gains or losses
are recognized to the profit and loss account.
(b) Contribution to Provident Fund and Superannuation is accounted for
on accrual basis.
10. Borrowing Costs
Borrowing cost attributable to acquisition, construction or production
of qualifying assets are capitalised as part of the cost till the asset
is ready for use. Other borrowing costs are recognized as expense in
the period in which these are incurred.
11. Taxes on Income
Provision is made for deferred tax for all timing differences arising
between taxable income and accounting income at currently enacted or
substantially enacted tax rates.
Deferred tax assets are recognized, only if there is reasonable/
virtual certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
12. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Accounts. Contingent assets are neither recognized nor
disclosed in the financial statements.
13. Impairment of Assets
An asset is treated as impaired, when the carrying cost of asset
exceeds its recoverable value. An impairment loss, if any, is charged
to profit and loss account, in the year in which an asset is identified
as impaired.
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