SIGNIFICANT ACCOUNTING POLICIES

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 acquisition cost less accumulated debrciation / amortization and cumulative impairment.

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 Construction Period Expenses on Projects

2.2.1 Revenue expenses exclusively attributable to projects incurred during construction period are capitalized. However, such expenses in respect of capital facilities being executed along with the production/operations simultaneously are charged to revenue.

2.2.2 Financing cost incurred during construction period on loans specifically borrowed and utilized for projects is capitalized on quarterly basis up to the date of capitalization.

2.2.3 Financing cost, if any, incurred on General Borrowings used for projects is capitalized at the weighted average cost. The amount of such borrowings is determined on quarterly basis after setting off the amount of internal accruals.

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 Debrciation/Amortization

2.4.1 Cost of leasehold land for 99 years or less is amortized over the lease period.

2.4.2 Cost of tangible fixed assets (net of residual value) is debrciated on straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in case of following assets where useful life is considered based on technical assessment:

a) Useful life of 15 years for Plant and Equipment relating to Retail Outlets (other than storage tanks and related equipments) and LPG cylinders & brssure regulators

b) Useful life of 25 years for solar power plant/solar panels

Debrciation is charged pro-rata on quarterly basis on assets, from/upto the quarter of capitalization/ sale, disposal/ or earmarked for disposal. Residual value is considered between 1% to 5% of cost of assets.

2.4.3 Assets, other than LPG Cylinders and Pressure Regulators, costing upto X 5,000/- per item are debrciated fully in the year of capitalization. Insurance spares are debrciated up to 100% over the remaining life of the main asset.

2.4.4 Expenditure on the items, ownership of which is not with the Company are charged off to revenue in the year of incurrence of such expenditure.

2.5 INTANGIBLE ASSETS

2.5.1 Technical know-how / license fee relating to production process and process design are recognized as Intangible Assets and amortized on a straight line basis over a period of ten years or life of the underlying plant/ facility, whichever is earlier.

2.5.2 Expenditure incurred on Research & Development, other than on capital account, is charged to revenue.

2.5.3 Costs incurred on computer software purchased/developed resulting in future economic benefits, are capitalised as Intangible Asset and amortised over a period of three years beginning from the quarter in which such software is capitalised. 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".

2.5.4 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.

LEASES (other than Land Leases)

3.1 Operating Leases:

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

3.2 Finance leases as lessee:

The lower of the fair value of the assets and brsent value of the minimum lease rentals is capitalized as fixed assets with corresponding amount shown as lease liability. The principal component in the lease rental is adjusted against the lease liability and the interest component is charged to Statement of Profit and Loss as Finance Cost.

3.3 Debrciation on the assets taken on finance lease is charged in the same manner as applicable to similar type of owned fixed assets. If the leased assets are returnable to the lessor on the expiry of the lease period, full cost is debrciated over its useful life or lease period, whichever is less.

3.4 Finance leases as lessor:

All assets given on finance lease are shown as receivables at an amount equal to net investment in the lease. Principal component of the lease receipts are adjusted against outstanding receivables and interest income is accounted by applying the interest rate implicit in the lease to the net investment

4. 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 recognized when the carrying amount of an asset exceeds recoverable amount.

5. 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.

6. FOREIGN CURRENCY TRANSLATION

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

6.2 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.

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

6.4.1 (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.

(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 debrciated over the balance life of the assets in line with Para 46A of Accounting Standard -11. In other cases, exchange differences are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized over the balance period of such long-term foreign currency monetary item by recognition as income or expense in each of such periods.

6.4.2 Premium/discount arising at the inception of the forward contracts entered into to hedge foreign currency risks are amortized 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.

7. INVESTMENTS

7.1 Long term investments are valued at cost and provision for diminution in value, thereof is made, wherever such diminution is other than temporary.

7.2 Current investments are valued at lower of cost or fair market value.

8. INVENTORIES

8.1 Raw Materials & Stock-in-Process

8.1.1 Raw materials including crude oil are valued at cost determined on weighted average basis or net realizable value, whichever is lower.

8.1.2 Stock in Process is valued at raw material cost plus conversion costs as applicable or net realizable value, whichever is lower.

8.1.3 Crude oil in Transit is valued at cost or net realizable value, whichever is lower.

8.2 Finished Products and Stock-in-Trade

8.2.1 Finished products and stock in trade, other than lubricants, are valued at cost determined on 'First in First Out' basis or net realizable value, whichever is lower. Cost of Finished Products produced is determined based on raw material cost and processing cost.

8.2.2 Lubricants are valued at cost on weighted average basis or net realizable value, whichever is lower. Cost of lubricants internally produced is determined based on cost of inputs and processing cost.

8.2.3 Imported products in transit are valued at CIF cost or net realisable value whichever is lower.

8.3 Stores and Spares

8.3.1 Stores and Spares (including Barrels & Tins) are valued at weighted average cost. Specific provision is made in respect of identified obsolete stores & spares and chemicals for likely diminution in value. Further, an adhoc provision @ 5% is also made on the balance stores and spares (excluding barrels, tins, stores in transit, chemicals, crude oil, CERs rights and own products) towards likely diminution in the value.

8.3.2 Stores & Spares in transit are valued at cost.

8.3.3 Certified Emission Reductions (CERs) rights are valued at cost or net realizable value, whichever is lower.

9. TRADE RECEIVABLES

In addition to the specific provision made, an Adhoc provision @ 1% is also made in respect of Trade Receivables, other than those relating to Oil Marketing companies, Subsidiary & Joint Venture companies, Export Customers, DGS&D group of customers (i.e. DGS&D, Railway, Army, Air Force and Defence) and Retail Outlets enjoying temporary credit to recognize the element of uncertainty.

10. CONTINGENT LIABILITIES & CAPITAL COMMITMENTS

10.1 Contingent Liabilities

10.1.1 Show-cause Notices issued by various Government Authorities are not considered as Obligation.

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

10.1.3 The treatment in respect of disputed obligations, in each case above X5 lakh, are 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.

10.2 Capital Commitments

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

11. REVENUE RECOGNITION

11.1 Revenue from sale of goods is recognized when sufficient risks and rewards are transferred to customers, which is generally on dispatch of goods.

11.2 Dividend income is recognized when the company's right to receive dividend is established. Claims (including interest on outstanding) are accounted:

a) When there is certainty that the claims are realizable

b) Generally at cost

Income and expenditure upto Rupees five lakhs in each case pertaining to brvious years are accounted for in the current year.

11.5 Pre-paid expenses upto Rupees five lakhs in each case arecharged to Statement of Profit & Loss in the year in which it is incurred.

12. EXCISE DUTY

Excise duty is accounted on the basis of both, payments made in respect of goods cleared as also provision made for goods lying in stock. Closing stock value includes excise duty payable / paid on finished goods.

13. 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.

14. EMPLOYEES BENEFITS

14.1 Short Term Benefits:

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

14.2 Post-Employment Benefits and Other Long Term Employee

Benefits:

a) The Company's contribution to the Provident Fund is remitted to separate trusts 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.

b) The Company operates defined benefit plans for Gratuity and Post Retirement Medical Benefits. 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 respective Trusts. Actuarial gains/losses are charged to Statement of Profit and Loss.

c) Obligations on Compensated Absences, Resettlement, Long Service Awards and Ex-gratia are provided using the projected unit credit method of actuarial valuation made at the end of the year.

d) The Company operates a defined contribution scheme for Pension benefits for its employees and the contribution is remitted to a separate Trust.

14.3 Termination Benefits:

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

15. GRANTS 15.1

Capital Grants

In case of debrciable assets, the cost of the asset is shown at gross value and grant thereon is treated as Capital Grants which are recognized as income in the Statement of Profit and Loss over the period and in the proportion in which debrciation is charged.

Revenue Grants

Revenue grants are reckoned as per the respective schemes notified by Government from time to time, subject to final adjustments as per separate audit wherever applicable.

16. OIL & GAS EXPLORATION ACTIVITIES

16.1 The Company is following the "Successful Efforts Method" of accounting for Oil & Gas exploration and production activities as explained below:

a) Survey costs are expensed in the year of incurrence.

b) Acquisition cost, cost of incomplete / undecided exploratory wells and development costs are carried as capital work in progress/ Intangible assets under development till the time these are either transferred to producing properties on completion or expensed in the year when determined to be dry, as the case may be.

c) Expenditure towards unfinished Minimum Work Programme with and without extension of time is expensed in the year of incurrence.

16.2 Company's share of proved reserves of oil and gas are disclosed when notified by the Operator of the relevant block.

16.3 The Company's proportionate share in the assets, liabilities, income and expenditure of jointly controlled operations are accounted as per the participating interest in such jointly controlled operations.

17. COMMODITY HEDGING

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

NOTE - 2: OTHER DISCLOSURES

1 Purchase of crude oil from Oil India Limited and Panna Mukta Tapti JV and some other oilfields has been accounted for provisionally, pending finalization of agreements with respective parties. Adjustments, if any, will be made on finalization of agreements.

2 Transactions with other Oil Marketing Companies are jointly reconciled on an ongoing basis.

3 Exceptional income includes income of Rs. 1,668.09 crore arising out of additional state specific surcharge (SSC) towards U.P entry tax paid in earlier years, in pursuance with MOP&NG order dated 30th March 2013 (2014: Rs. 1,746.80 crore on account of recovery of entry tax paid in earlier years and other matters in relation to U.P. Entry Tax).

4 In accordance with requirements brscribed under Schedule II of Companies Act, 2013, the Company has adopted the useful lives as brscribed in Schedule II except in case of following assets where useful life is considered based on technical assessment:

a) Useful life of 15 years for Plant and Equipment relating to Retail Outlets (other than storage tanks and related equipments) and LPG cylinders & brssure regulators

b) Useful life of 25 years for solar power plant/solar panels

Due to revised useful lives, the debrciation expense for the year ended March 31, 2015 is lower by Rs. 1,650.02 crore. As per the transitional provisions of Schedule II of the Companies Act, 2013, the Company has debited Rs. 948.76 crore (net of deferred tax of Rs. 493.36 crore) to the opening balance of General reserve as at April 1, 2014 and Rs. 12.18 crore is capitalized in tangible capital work in progress. Additionally, capital grant of Rs. 2.82 crore is also transferred to General Reserve.

In line with the Notification dated August 29, 2014 issued by Ministry of Corporate Affairs (MCA), the Company will comply with the requirements of paragraph 4 of Notes to Schedule II of Companies Act, 2013, relating to componentization, from financial year 2015-16.

5 Previous year's comparative figures have been regrouped wherever necessary. Figures in brackets indicate deductions.

Sd/-(B. Ashok)

Chairman

Sd/- (A.K. Sharma)

Director (Finance)

Sd/- (Raju Ranganathan)

Company Secretary

As per our attached Report of even date

For DASS GUPTA & ASSOCIATES

Chartered Accountants

(Firm Regn. No. 000112N)  

Sd/- (CA. NARESH KUMAR)

Partner

M. No. 082069

For J GUPTA & CO.

Chartered Accountants

(Firm Regn. No. 314010E)  

Sd/- (CA. NANCY MURARKA)

Partner

M. No. 067953

For PARAKH & CO.

Chartered Accountants

(Firm Regn. No.001475C)

Sd/- (CA. INDRA PAL SINGH)

Partner

M. No. 410433

Place : New Delhi

Date :29 May, 2015