STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES NOTE 1

1. BASIS OF brPARATION

1.1 The financial statements are brpared under historical cost convention in accordance with the mandatory accounting standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

1.2 The brparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates.

2. FIXED ASSETS

2.1 Tangible Assets

2.1.1 Fixed assets are stated at cost of acquisition less accumulated debrciation / amortization.

2.1.2 Land acquired on perpetual lease as well as on lease for over 99 years is treated as free hold land

2.1.3 Land acquired on lease for 99 years or less is treated as leasehold land

2.1.4 Technical know-how / license fee relating to plants/facilities are capitalised as part of cost of the underlying asset.

2.2 Capitalisation of Construction Period Expenses

2.2.1 Revenue expenses exclusively attributable to projects incurred during construction period are capitalised.

2.2.2 Financing cost incurred during construction period on loans specifically borrowed and utilised for projects is capitalised on quarterly basis up to the date of capitalisation.

2.2.3 Financing cost, if any, incurred on general borrowings used for projects is capitalised at the weighted average cost.

2.3 Capital Stores

2.3.1 Capital stores are valued at cost Specific provision is made for likely diminution in value, wherever required.

2.4 Intangible Assets

2.4.1 Technical know -how / license fee relating to production process and process design are accounted for as intangible assets and amortized on a straight line basis over a period of ten years or life of the said plant/facility, whichever is earlier.

2.4.2 Expenditure incurred on Research and Development, other than on capital account, is charged to revenue.

2.4.3 Costs incurred on computer software purchased/developed on or after 1st April 2003, resulting in future economic benefits are capitalized as Intangible Asset and amortised over a period of three years beginning from the quarter in which such software is capitalized. However, where such computer software is still in development stage, costs incurred during the development stage of such software are accounted as 'Intangible Assets Under Development'.

2.4.4 Cost of Right of way for laying pipelines is capitalised and amortised on a straight line basis over the period of such Right of way or 99 years whichever is less.

2.5 Debrciation / Amortisation

2.5.1 Cost of tangible fixed assets (net of residual value) is debrciated on straight-line method on the useful life brscribed in Schedule II to the Companies Act, 2013. Debrciation is charged pro-rata on quarterly basis on assets, from/upto the quarter of capitalisation/sale, disposal / dismantled during the year. Residual value is considered between 1% to 5% of cost of assets.

2.5.2 Assets costing upto Rs. 5000/- per item are debrciated fully in the year of capitalisation. Insurance spares are debrciated fully over the remaining useful life of the main asset.

2.5.3 Capital expenditure on assets on which the ownership and control does not vest with the company are charged to revenue in the year in which it is incurred.

2.5.4 Cost of leasehold land (including brmium) for 99 years or less is amortised over the lease period

2.6 Impairment of Assets

As at each balance sheet date, the carrying amount of Cash Generating Units/Assets is tested for impairment so as to determine:

(a) the provision for impairment loss, if any, required; or

(b) the reversal, if any, required of impairment loss recognized in brvious periods. Impairment loss is recognised where the carrying amount of an asset exceeds recoverable amount.

3. OPERATING LEASES (Other than Land leases)

Lease rentals are recognised as expense or income on a straight line basis with reference to lease terms except where another systematic basis is more rebrsentative of the time pattern of the benefit derived from the asset taken or given on lease.

4. BORROWING COST

Borrowing costs that are attributable to the acquisition and construction of the qualifying asset are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

5. FOREIGN CURRENCY TRANSLATION

5.1 Transactions in foreign currency are initially recorded at exchange rates brvailing on the date of transactions.

5.2 Monetary items denominated in foreign currencies (such as cash, receivables, payables etc) outstanding at the end of reporting period are translated at exchange rates brvailing as at the end of reporting period.

5.3 Non-monetary items denominated in foreign currency (such as investments, fixed assets etc) are valued at the exchange rate brvailing on the date of transaction.

5.4 (a) Any gains or losses arising due to differences in exchange rates at the time of translation or settlement are accounted for in the Statement of Profit & Loss either under the head foreign exchange fluctuation or interest cost, as the case may be, except those relating to long-term foreign currency monetary items relating to acquisition of debrciable assets.

(b) Exchange differences on long-term foreign currency monetary items relating to acquisition of debrciable assets are adjusted to the carrying cost of the assets and fully debrciated over the balance life of the assets.

5.5 Premium/discount arising at the inception of the forward exchange contracts entered into to hedge foreign currency risks are amortised as expense/income over the life of the contract Outstanding forward contracts as at the reporting date are restated at the exchange rate brvailing on that date.

6. INVESTMENTS

6.1 Long-term investments are carried at cost and provision for diminution in the value thereof other than temporary in nature, is accounted.

6.2 Current investments are carried at lower of cost or market value.

7. INVENTORIES

7.1 Raw Materials

7.1.1 Crude oil is valued at cost determined on weighted average basis or net realisable value, whichever is lower.

7.1.2 Crude oil in-transit is valued at cost or net realisable value, whichever is lower.

7.2 Stock-in-process

Stock-in-process is valued at raw material cost plus fifty percent of the cost of conversion or net realisable value, whichever is lower.

7.3 Finished Products

7.3.1 Finished products are valued at cost determined on 'First-in-First-out' basis or net realisable value, whichever is lower. Cost of finished products is determined based on crude cost and processing cost.

7.3.2 Imported products in-transit is valued at CIF cost or net realisable value, whichever is lower

7.4 Stores and Spares

7.4.1 Stores and Spares are valued at weighted average cost In case of declared surplus/obsolete stores and spares, provision is made for likely loss on sale/disposal and charged to revenue. Necessary provisions are also made in respect of non-moving stores and spares after review.

7.4.2 Stores and Spares in transit are valued at cost.

8. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS 8.1 Contingent Liabilities

8.1.1 Show Cause Notices issued by various Government Authorities are not considered as obligations.

8.1.2 When the demand notices are raised against such show cause notices and are disputed by the Company, then these are classified as disputed obligations.

8.1.3 The treatment in respect of disputed obligations, in each case above Rs. 5 lakhs, is as under:

a) A provision is recognized in respect of brsent obligations where the outflow of resources is probable.

b) All other cases are disclosed as contingent liabilities unless the possibility of outflow of resources is remote.

8.2 Capital Commitments

Estimated amount of contracts remaining to be executed on capital account above Rs. 5 lakhs in each case are considered for disclosure.

9. STATEMENT OF PROFIT AND LOSS

9.1 Revenue from sale of goods is recognised when significant risks and rewards are transferred to customers in accordance with the terms of sale.

9.2 Claims on Petroleum Planning and Analysis Cell (Formerly known as Oil Coordination Committee)/ Government arising on account of erstwhile Administered Pricing Mechanism / notified schemes are booked on acceptance in principle thereof. Such claims and provisions are booked on the basis of available instructions/clarifications subject to final adjustment as per separate audit.

9.3 Other claims (including interest on outstandings) are accounted:

a) When there is certainty that the claims are realizable

b) Generally at cost

9.4 Income and expenditure are disclosed as prior period items only when the value exceeds Rs. 5 lakhs in each case.

9.5 Prepaid Expenses upto Rs. 5 lakhs in each case are charged to revenue.

10. TAXES ON INCOME

Provision for current tax is made as per the provisions of the Income Tax Act, 1961. Deferred Tax Liability / Asset resulting from 'timing difference' between book and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Asset is recognized and carried forward only to the extent that there is virtual certainty that the asset will be realized in future.

11. EMPLOYEE BENEFITS

11.1 Short Term Benefits:

Short Term Employee Benefits are accounted in the period during which the services have been rendered.

11.2 Post-Employment Benefits and Other Long Term Employee Benefits:

11.2.1 The Company's contribution to the Provident Fund is remitted to separate trust established for this purpose based on a fixed percentage of the eligible employee's salary and charged to Statement of Profit and Loss. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company and charged to Statement of Profit and Loss.

11.2.2 The Company operates defined benefit plans for Gratuity. The cost of providing such defined benefits is determined using the projected unit credit method of actuarial valuation made at the end of the year and are administered through a fund maintained by Insurance Company. Actuarial gains/losses are charged to Statement of Profit and Loss.

11.2.3 The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on a monthly basis towards the defined contribution scheme maintained by Insurance Company, which is charged off to revenue.

11.2.4 Obligations on Compensated Absences, Post Retirement Medical Benefits and Long Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

11.3 Termination Benefits:

Payments made under Voluntary Retirement Scheme are charged to Statement of Profit and Loss.

12. COMMODITY HEDGING

The realized gain or loss in respect of commodity hedging contracts, the pricing period of which has expired during the year are recognised in the Statement of Profit and Loss. However, in respect of those contracts the pricing period of which extends beyond the balance sheet date suitable provision for likely loss, if any, is made.

NOTE 2_

1. Contingent Liabilities:

a) Claims against the company not acknowledged as debts Rs. 38669.59 lakhs (2014: Rs. 30524.95 lakhs). These mainly include:

i) Rs.619.54 lakhs (2014: Rs. 344.19 lakhs) in respect of Central Excise.

ii) Rs. 27028.27 lakhs (2014: Rs. 20620.57 lakhs) in respect of Sales Tax.

iii) Rs. 7075.98 lakhs (2014: Rs. 6926.63 lakhs) in respect of Income Tax.

iv) Rs. 1713.94 lakhs (2014: Rs. 1628.03 lakhs) relating to projects.

b) Interest/Penalty, if any, unascertainable, on the above claims is not considered

The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations.

c) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. 249455.02 lakhs (2014: Rs. 184959.97 lakhs).

2. Thirty four acres and forty nine cents of land has been taken on lease from a trust on a five-year renewable lease for the construction of Employees Township at Cauvery Basin Refinery.

3. Forty-one acres, twenty three and half acres and eleven acres and sixty two cents of land of the company are in the possession of IOT Infrastructure & Energy Services Limited, CPCL Educational Trust and Indian Oil Corporation Limited respectively under lease agreement.

4. (a) The cost of land includes provisional payments towards cost, compensation, and other accounts for which detailed accounts are yet to be received from the authorities concerned.

(b) The company is in possession of 135.93 acres of land (classified as Poramboke) for which value is to be determined and Assignment deed is yet to be received from Govt of Tamilnadu.

(c) Pending decision of the Government/Court, additional compensation, if any, payable to the landowners and the Government for certain lands acquired, is not considered

5. Valuation of Finished Products:

The overall gross margin percentage for all joint products is subtracted from the final net realisable value of each product to arrive at the total cost of each product which is taken as the basis for valuation of closing stock of finished products. (Refer Policy No 7.3 in Note - 1 - "Statement of Significant Accounting Policies").

6. The Company has no export obligation (2014: Nil) on account of concessional rate of customs duty availed under EPCG scheme on import of capital goods/Advance License scheme on import of crude oil

7. The company operates in a single segment viz. downstream petroleum sector. As such reporting is done on a single segment basis.

8. No provision for Income Tax (Current Tax) has been made in view of loss for the current year.

9. Foreign currency exposures as on 31.03.2015 is Rs. 392932.66 Lakhs (2014: Rs. 703338.45 Lakhs). The company has entered into four (2014: Nil) derivative transactions during the year. There are no outstanding Forward contracts as on 31st March 2015 (2014: Nil).

10. Disclosure as required under Accounting Standard - 15 (Revised) on "Employee Benefits" is provided in Annexure - I to this Note.

11. In compliance with Accounting Standard - 18 on "Related Party Disclosures", the required information is given in Annexure - II to this Note.

12. During the year, the company has undertaken a review of all fixed assets in line with the requirements of AS- 28 on "Impairment of Assets". Based on such review, no provision for impairment is required to be recognised for the year.

13. Previous year's comparative figures have been regrouped and recast, wherever necessary, to the extent practicable, for uniformity in brsentation.