NOTES TO FINANCIAL STATEMENT FOR THE YEAR ENDED 31st MARCH, 2015

NOTE 1 SIGNIFICANT ACCOUNTING POLICIES

1 Accounting Conventions and Basis of Presentation / Accounting

1.1 The financial statements are brpared under the historical cost convention, in accordance with the Generally Accepted Accounting Principles (GAAP), the provisions of the Companies Act, 2013 including the Accounting Standards specified under Section 133 of the Act , read with Rule 7 of the Companies (Accounts) Rules,2014.

1.2 All income and expenses to the extent considered receivable / payable with reasonable certainty are accounted for on accrual basis.

2 Use of Estimates

The brparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The difference between the actual results and estimates are recognised in the period in which the results are known / materialised.

3 Cash Flow Statement

Cash Flow Statement has been brpared under Indirect Method as set out in the Accounting Standard - 3 specified in Section 133 of the Companies Act,2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and as required by the Securities and Exchange Board of India.

4 Fixed Assets

4.1 Land is stated at historical cost less amortisation wherever applicable.

4.2 Other Fixed assets are stated at historical cost less accumulated debrciation/ amortisation and impairment.

4.3 Spares received along with the Plant or Equipment and those purchased subsequently for specific machinery and having irregular use are capitalised.

4.4 During the period of construction, directly identifiable expenses are capitalised at the first instance and all other allocable expenses are capitalised proportionately on the basis of the value of the assets.

4.5 Cost for this purpose includes purchase prices, taxes and duties (net of cenvat), incidental expenses, erection / commissioning expenses, technical knowhow fee, professional fee, interest upto the date the asset is put to use and exchange rate differences arising on long term foreign currency monetary items in so far as they relate to the acquisition of debrciable assets etc.

5 Impairment

Impairment of cash generating units / assets is ascertained and considered where the carrying cost exceeds the recoverable amount being the higher of net realisable amount and value in use.

6 Debrciation / Amortisation

6.1 Debrciation on Fixed Assets (including those taken on lease) is provided on Straight Line Method, at the rates and in the manner specified in Schedule II to the Companies Act, 2013.

6.2 Cost of leasehold land is amortised over the lease period. Cost of leasehold lands where the transfer of ownership to the company on expiry of the lease period is eventually certain are not amortised.

6.3 Debrciation on amounts capitalised on account of foreign exchange fluctuation is provided prospectively over residual life of the assets.

6.4 Debrciation on spares, having irregular use and purchased subsequent to the installation of specific machinery is provided prospectively over residual life of the specific machinery and written down value of the spare is charged to statement of Profit and Loss as and when replaced.

7 Intangible Assets

Cost incurred on intangible asset, resulting in future economic benefits are capitalised as intangible assets and amortised on equated basis over the estimated useful life of such assets.

8 Investments

8.1 Long term investments are valued at cost. Provision is made in the accounts for any diminution, other than temporary in nature.

8.2 Current Investments are valued at lower of cost and fair value.

9 Inventories

Inventories are valued at lower of cost or net realisable value. Cost of inventories comprises of purchase cost and other costs incurred in bringing inventories to their brsent location and condition. The cost has been determined as under:

9.1 Raw material - on First in First out (FIFO) basis.

9.2 Finished Products - at Raw material ,Conversion cost and excise duty.

9.3 Stock-in-Process - at Raw material and Proportionate Conversion cost.

9.4 Stores, Spares and other trading Goods - on weighted average cost basis

10 Revenue Recognition

10.1 Sales are recognised on transfer of custody of goods to customers and includes all statutory levies except Value Added Tax (VAT) and is net of discounts.

10.2 Dividend income is recognised when the right to receive the dividend is established.

10.3 Interest income is recognised on a time proportion basis

10.4 Revenue from sale of scrap are recognised on transfer of custody of goods to customers.

10.5 Revenue in respect of Liquidated Damages from contractors/ suppliers is recognised when determined as not payable.

10.6 Excise duty recovery from customer is deducted from Turnover (gross). Excise duty differential between closing and opening stock of excisable goods is included under other expenses.

11 Claims

11.1 Claims/Surrenders on/to Petroleum Planning and Analysis Cell, Government of India are booked on 'in principle acceptance' thereof on the basis of available instructions/clarifications subject to final adjustments, as stipulated.

11.2 Insurance Claims

11.2.1 In case of total loss of asset, on intimation to the insurer, either the carrying cost of the asset or insurance value (subject to deductible excess) whichever is lower is treated as claims recoverable from insurance company. In case insurance claim is less than the carrying cost of the asset, the difference is charged to statement of Profit and Loss .

11.2.2 In case of partial or other losses, expenditure incurred / payments made to put such assets back into use, to meet the third party or other liabilities (Less deductible excess) if any, are accounted for as claims receivable from insurance company. Insurance Policy deductible excess are expensed in the year of corresponding expenditure is incurred'

11.2.3 As and when claims are finally received from the insurance company, the difference, if any, between the claim receivable from insurance company and claims received is adjusted to statement of Profit and Loss

11.3 All other claims and provisions are booked on the merits of each case.

12 Foreign Currency Transactions

12.1 Foreign Currency Transactions are accounted for at the exchange rates brvailing on the date of the transactions.

12.2 The foreign currency assets / liabilities of monetary items are translated using the exchange rates brvailing on the reporting date.

12.3 The exchange differences on translation of foreign currency transacations on the reporting date are recognised as income or expense and adjusted to the statement of profit and loss except exchange differences arising on reporting of long term foreign currency monetary items in so far as they relate to the acquisition of debrciable capital assets are added to /or deducted from cost of the assets.

12.4 The mark to market losses (net) in respect of un-expired forward contracts entered into to hedge the risk of changes in foreign currency exchange rates on future export sales against the existing contract are recognised in the statement of profit and loss .

13 Employee Benefits

13.1 All short term employee benefits are recognised at their undiscounted amount in the accounting period in which they are incurred. Employee Benefits under defined contribution plans comprising provident fund and superannuation fund are recognised on the undiscounted obligations of the company to contribute to the plan. The same is paid to Provident Fund Trust authorities and to Life Insurance Corporation of India respectively, which are expensed during the year

13.2 Employee benefits under defined benefit plans comprising of Gratuity, leave encashment, long service emblem, post retirement medical benefits and other long term retirement benefits are recognised based on the brsent value of defined benefit obligation, which is computed on the basis of actuarial valuation using the Projected Unit Credit Method. Actuarial liability in excess of respective plan assets in respect of gratuity is recognised during the year.

13.3 Actuarial gains and losses are recognised in the statement of Profit and Loss as income or expenses.

13.4 Undiscounted amount of short-term liability on account of un-availed leave is determined and provided for at the year end.

13.5 Provision for Gratuity as per actuarial valuation is funded with a separate trust.

14 Leases

14.1 Lease rentals in respect of finance lease are segregated into cost of assets and interest component by applying the implicit rate of return.

14.2 Assets acquired on lease where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals are charged to the statement of Profit and Loss on accrual basis.

15 Borrowing Costs

Borrowing costs that are attributable to acquisition, construction or production of qualifying assets, are capitalised as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for intended use. All other borrowing costs are charged to the statement of Profit and Loss.

16 Research and Development expenditure

Capital expenditure on Research and Development is capitalised under the respective fixed assets. Revenue expenditure thereon is charged to statement of Profit and Loss.

17 Taxes on Income

17.1 Current tax is determined on the basis of taxable income computed in accordance with the provisions of the Income Tax Act, 1961.

17.2 Deferred tax is recognised on timing differences between taxable and accounting income/expenditure that originates in one period and are capable of reversal in one or more subsequent period(s). Deferred Tax Asset is recognised on the basis of virtual/reasonable certainty about its realisability, as applicable.

17.3 The Carrying amount of Deferred tax assets are reviewed at each balance Sheet date.

18 Provisions, Contingent Liabilities and Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognised when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities, if material, are disclosed by way of notes. Contingent Assets are neither recognised nor disclosed in the financial statements. .

NOTE 2 OTHER DISCLOSURES

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

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

2.02 Cash Flow Statements (AS-3)

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

2.03 Exceptional Items (AS-5)

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

2.04 Debrciation Accounting (AS-6)

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

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

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

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

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

2.06  Borrowing Costs (AS-16)

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

2.07 Leases (AS-19)

1 The Company has taken various brmises under cancellable operating lease.

02 These lease agreements are normally renewed on expiry of the term. 31.10.03 Lease rental expenses for the year ended 31st March, 2015in respect of operating leases are Rs. 37.73 Million (brvious year Rs. 37.70 Million)

2.08  Deferred Tax (AS-22)

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

2.09 Insurance Coverage

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

2.10 Trade Payables

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

2.11 Land Usage of HPCL Land

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

2.12 Loans and Advances :

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

2.13  Commercial Tax incentives:

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

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

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

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

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

2.14 Dues to Micro, Small & Medium enterprises:

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

2.15  Price Reduction Clause

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

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

2.17 Following expenses are included under other expenses

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

2.18 Disclosure as required by Clause 32 of the Listing agreement

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

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

As per our report of even date attached

For GOPALAIYER AND SUBRAMANIAN

Chartered Accountants

Firm Registration : 000960S

CA K. R. SURESH

Partner

Membership No. 025453

For A. RAGHAVENDRA RAO & ASSOCIATES

Chartered Accountants

Firm Registration No. : 003324S

CA K. R. SURESH

Partner

Membership No. 025453

For and on behalf of the Board

H KUMAR Managing Director

VISHNU AGRAWAL Director (Finance)

DINESH MISHRA Company Secretary

New Delhi : 22nd May, 2015

CA.GOPALAKRISHNA BHAT T.M

Partner

Membership No. 019798