GAIL India Annual Report 2010-11

Description
The report for the financial year 2010 - 2011 of GAIL.

Growing with Green Energy

ANNUAL REPORT
2010-11

GAIL (India) Limited

Asia's No. 1 Gas Utility Company

Asia's No. 1 Gas Utility Company
GAIL has been ranked No. 1 Gas utility company in Asia and second in Gas utility globally. GAIL has also been conferred 17th rank by PLATTS in the fastest growing Asian Companies. PLATTS has been coming out with Top-250 ranks of Global Energy Company every year. This is one of the most prestigious awards in the field of Oil and Gas in the world. PLATTS ranks the energy companies' financial performance globally, regionally and by industrial sector. Its ranking is based on four key metricsassets worth, revenues, profits and return on invested capital. All companies in the list have more than US $2 billion assets. The fundamentals and market data comes from a database compiled and maintained by Capital IQ Compustat, a business of Standard & Poor’s, which like PLATTS, is a division of the McGraw-Hill Companies.

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An inherent weakness of the project is its reliance on capital & feedstock subsidies and limited period exemption from central excise duty and income tax. The possibility of cessation of government support in the future would remain a concern. Though the project envisages the accrual of socio economic benefits to the northeastern region, it is logistically disadvantaged by its location and lack of adequate infrastructure in and around the project site. Due to these very reasons, your company has been facing difficulties in attracting and retaining suitable experienced executives. Prolonged and heavy rains and climatic conditions caused major disruption in construction activities. However with improvement of facilities at site and introduction of other benefits, things are beginning to look up. OPPORTUNITIES AND THREATS The Indian polymer market is over 5MMTPA and growth is largely driven by internal consumption. A major market is the agro-based and rural populace which is relatively recession proof. Thrust areas are modern farming through plasticulture, packaging of processed food and consumer non-durables, better quality plastic for consumer durables. The finished products, mostly used in packaging are essential and the increasing demand for polymers in the agricultural sector, increasing penetration of synthetic bags in food grain packaging, changing lifestyle and rise in demand for FMCG products and cosmetics, change in food habits, increasing replacement of metal parts by PP in automotive and appliances, are expected to further stimulate growth in the polymer industry. The northeastern region has the lowest per capita consumption of polymers and plastics in India. Your company does not have any major competitor in the northeast and will be able to cater to the growing demand. Downstream industries are expected to emerge. The region also has large availability of labour at relatively cheap wages. Rising environmental concerns over the use of plastic is perceived as a threat. However, developments in the field of biodegradable and photodegradable plastic, improvement in quality of products with reduced negative impact on environment negate this threat perception to a great extent. Cost competitiveness has also to be ensured to withstand the threat from cheaper imports under the open market regime. RISKS AND CONCERNS A major concern has been delay in scheduled project implementation and resultant cost escalation. Sustained efforts are being made to ensure that there is no further delay. Project progress has improved in the recent past and the present physical progress is 37.7%. Though feedstock availability concerns are mitigated due to firm arrangements ensured by the Government of India for 15 years of plant operation, the long term availability, particularly of Natural Gas is to be ensured. Cost of feedstock is the biggest component in the cost of production of petrochemicals and future feedstock pricing is an area of concern as prices would be reviewed every five years from the date of production. There has already been a substantial increase in prices of feedstock since the time of approval of the project. Further, the possibility of cessation of government support in the form of subsidies and central excise duty/income tax exemptions in the future would remain a concern. As the company is in its construction phase it is not yet exposed to operational risks. However, efforts have already been initiated to have a risk

management system in place to identify and mitigate construction phase, financial, operational and other risks. The company’s legal compliances are subject to review by the Board of Directors. OUTLOOK In India, demand for commodity polymers grew by 19% in 2009-10 over the previous fiscal. This trend continued in the first half of 2010-11 with polyolefin and PVC demand growing by about 10% as compared with the corresponding previous. The domestic per capita consumption as well as the absolute consumption of commodity polymers is expected to grow because of various economic and demographic factors. The country is about to witness significant capacity additions, but continuing deficit in PE and PVC and growing market is expected to somewhat address supply concerns. However, producer margins may remain subdued over the medium term in line with global trends. The company expects to commission its plant and go into commercial production in December, 2013. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Your Company is committed to ensuring a comprehensive internal control system across its operations to ensure that all assets are adequately safeguarded and protected against loss from unauthorized use or disposition. The company is following the systems and policies of its holding company till its own policies are defined and in place. In all cases involving financial implication, various limits and authorities are specified. The Company’s progress is being monitored and reviewed at various levels by GAIL, the State and Central Government authorities and also monitored at the highest level. Internal audit is being carried out by the Internal Audit Department of GAIL, its holding company. HUMAN RESOURCES Being keenly aware that its greatest asset is its human resource, your company is committed towards ensuring that its potential is harnessed to the fullest for the growth of the organization. Effective human resource management is top priority of the company. During the year under review, the Company started to increase its own human capital base and adequate care is being taken in recruitment resulting in major representation of the locals. Most of the skilled / semi-skilled / unskilled workers engaged in the construction work are from the northeast. The present human strength of the company is 113, out of which 20 are on secondment from GAIL, 1 on deputation from NRL and 92 are the company’s regular employees. ENVIRONMENTAL PROTECTION AND CONSERVATION The Company is conscious of the environmental concerns over a petrochemical plant and is committed to acting with responsibility in this regard. Pollution control and other environment protection norms are being complied with. The project includes an effluent treatment plant for proper effluent discharge within the limit prescribed by the authorities. CORPORATE SOCIAL RESPONSIBILITY Despite being in its construction phase, the company has initiated CSR activities to contribute to the society in the areas of health care, education, infrastructure development & environment.

136

Annual Report 2010-2011

e)

The Capital Subsidy of ` 796.73 Crores (Previous Year: ` 316.31 Crores) has been received from the Government of India during the year by way of contribution towards the total capital outlay. Capital Subsidy is received for the project during construction and as such the same is utilized for making regular payments till the execution of the project. As no repayments are ordinarily expected, the same is recognized in the financial statement as Capital Reserve. As per directives from MOCF, interest earned from parking of fund from the capital subsidy after netting of tax thereon is to be reduced from the Capital Subsidy sought from GOI. As such interest income of ` 12.10 Crores (interest of ` 4.01 Crores for 2010-11 and ` 8.08 Crores for the period from 2007-08 to 2009-10) has been treated in consonance with Capital Subsidy. An amount of ` 5.02 Crores of capital subsidy remains unutilized as on 31.03.2011. As the interest income from parking of capital subsidy will be a capital receipt & hence not taxable in the hands of BCPL. So revised return for refund of income tax of ` 2.77 crores and `1.85 crores for the financial year 2008-09 and 2009-10 respectively has been filed with Tax Authority. In view of contingencies, a policy to account for the interest income by way of refund on receipt basis is being adopted as a disclosure. As the Assessing Officer is yet to pass the final Assessment Order, necessary adjustment in the books has not been carried out. During the year an amount of ` 283.00 Crores was drawn from OIDB as loan as per the agreement entered into with the lenders. The expenditure ` 3.84 Crores on leveling, clearing and grading of the land has been added to the cost of the particular buildings or other structures which stand on each particular land. An amount of ` 3.01 crores upto 31.03.2011 has been recognized as deferred revenue expenditure towards Incorporation expenses, CSR activities, Advertisement for development of public relation etc of the Company to be amortized equally over period of five years from the year the plant is ready for commercial production. The company has been incorporated and no commercial activity has been started from the date of incorporation 08.01.2007 to 31.03.2011. Accordingly, no profit and loss account has been prepared. However, the necessary information as per Part-II of schedule VI to Companies Act, 1956 has been disclosed to the extent applicable in the statement of “Incidental Expenditure during Construction” forming part of financial statements.

III.

Petronet LNG LTD. a) Custom Duty on import of Project Material / equipment has been assessed provisionally (current and previous years) and additional liability, if any, on this account will be provided on final assessment. The Company has claimed deduction under section 80IA of the Income Tax Act, 1961 in respect of Power Generation and Port Undertaking in its Tax Returns. However, provision for income tax has been made without considering the aforesaid deductions. In terms of para 10 of Accounting Standard 16 “Borrowing Costs” ` 21.73 Crores (Previous Year: NIL) has been reduced from the Interest and Financial Charges (Capital Work in Progress) being income on temporary surplus invested out of borrowings related to Capital Expenditures. In respect of external commercial borrowing of USD 150.00 million from International Finance Corporation, Washington D.C., USA outstanding as on 31th March, 2011, the Company has entered into derivative contracts to hedge the loan including interest. This has the effect of freezing the rupee equivalent of this liability as reflected under the Secured Loans. Thus there is no impact in the Profit & Loss account, 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 Profit & Loss account.

b)

c)

f)

d)

g)

223

h)

IV.

Indraprastha Gas Limited a) The Company has installed CNG Stations on land leased from various Government Authorities under leases for periods ranging from one to five years. However, assets constructed / installed on such land are being depreciated generally at rates specified in Schedule XIV to the Companies Act, 1956, as the management does not foresee non-renewal of the above lease arrangements by the Authorities. Deposits from commercial customers of natural gas, refundable on termination/alteration of the gas sales agreements, are considered as long term funds. The Company has taken certain equipments and vehicles under operating lease agreements. The total lease rentals recognized as expense during the year under the above lease agreements aggregates ` 12.44 Cr (Previous year: ` 11.36 Cr). Lease obligations under non-cancelable periods are as follows:

i)

b)

j)

c)

2010-11 i) ii) iii) V.

2009-10

e)

Amounts payable in next 1 year ` 22.62 Cr. ` 12.07 Cr. Amounts payable in next 2 years to 5 years NIL ` 11.21 Cr. Amounts payable in over 5 years NIL NIL Maharashtra Natural Gas Ltd. a) The Company has taken some office / residential premises and warehouses on operating lease, the future minimum payments in respect of which as on March 31, 2011 are as follows : 2010-11 ` 0.38 Cr. 2009-10 ` 0.39 Cr.

The Foreign Investment Promotion Board (FIPB) through its approval had allowed the Company to continue with the arrangements of foreign equity participation upto 50% in the paid up capital of the Company until December 2006. This approval was subject to the condition that the Company would be required to bring an IPO to divest the shareholding of the promoters to 35% each as per the Joint Venture Agreement. Shareholders are in discussion for making disinvestment in line with FIPB, requirements.

VII. Bhagyanagar Gas Limited a) The Company has availed Term Loans and non-fund based limits from consortium of bankers, secured by way of a first paripasu charge on all movable assets, finished goods, work in progress, raw materials and book debts. During the year, interest on term loan amounting to ` 6.48 Crores has been apportioned to Capital work-in progress.

Minimum lease payment i) ii) iii) Payable not later than 1 year Payable later than 1 year, but not later than 5 years Payable later than 5 years TOTAL

` 0.28 Cr. ` 0.29 Cr. ` 0.01 Cr. NIL Rs. 0.67 Cr. Rs. 0.68 Cr.

VIII. Central U.P. Gas Limited a) The Company has been sanctioned term loan facility of ` 65.00 Crores against the charge on immovable and movable assets, both present and future, of the Company by commercial banks, though the Company has not availed or utilized the facility.

VI.

Mahanagar Gas Ltd. a) Company has taken on lease few equipments / machines for some CNG Retail Outlets. Lease charges are dependent on sale of CNG at these outlets and hence there are no minimum lease payments. The term of the contract is three years, renewable for a further period of three years at the discretion of the Company. The Company can exercise purchase option at the end of the contract. The contract does not impose any restrictions concerning dividend, additional debt and further leasing. Lease payments recognized in the Profit and Loss Account for the year is ` 1.51 Cr (Previous year: ` 1.73 Cr). Company has taken certain vehicles under operating lease agreements. Lease payments recognized in the Profit and Loss account under “LCV Transportation” for the year is ` 2.68 Cr (Previous year: ` 2.81 Cr) and under “Travelling and Conveyance” for the year is ` 1.26 Cr (Previous Year: ` 1.23 Cr). Company has entered into agreements for taking on leave and license basis certain residential/office premises/godowns. All the agreements contain a provision for its renewal. Lease payments recognized in the Profit and Loss Account under rent for the year is ` 6.46 Cr (Previous year: ` 5.66 Cr).

IX.

Ratnagiri Gas and Power Private Limited (RGPPL) a) The Central Electricity Regulatory Commission (CERC) has issued the tariff orders for the control period 2009-14 on August 18, 2010. As a consequence sales of ` 62.66 crores pertaining to previous year has been recognized based on the orders issued by CERC. The Central Electricity Regulatory Commission (CERC) has issued tariff order for F.Y. 2007-08 & F.Y. 2008-09 in June 2009. The company aggrieved over many of the issues petitioned by the Company and not considered by CERC in the tariff orders, filed an appeal with Appellate Tribunal for Electricity (ATE). ATE has issued the orders and allowed the Appeal partly in respect of the Target Availability and the Operation & Maintenance expenditure and remanded the matter to the CERC to redetermine the norms in respect of these factors. CERC is yet to issue the order based on ATE orders. Change in the accounting policy as regards adoption of rates of depreciation from those prescribed by Schedule XIV to the Companies Act, 1956 to rates of depreciation as per the provisions of CERC Tariff Regulations, 2009 since 2009-10 has the effect of increase in profit of the Company by way of decrease in change of depreciation during the year by `337.23 crores including Rs 187.32 crores for the preceding year.

224

b)

b)

c)

c) d) The future minimum lease payments of non-cancellable operating leases are as under: 2010-11 Not later than one year Later than one year, but not later than five years Later than five years TOTAL ` 0.42 Cr. NIL NIL ` 0.42 Cr. 2009-10 ` 1.28 Cr. ` 0.42 Cr. NIL ` 1.70 Cr. 14.

Audited / Unaudited financial statements of joint venture – Petronet LNG Ltd., Indraprastha Gas Limited, Mahanagar Gas Limited, Bhagyanagar Gas Limited, Central UP Gas Limited, Green Gas Limited, Aavantika Gas Limited, Ratnagiri Gas & Power (Private)

Annual Report 2010-2011

Limited, Maharastra Natural Gas Limited, Tripura Natural Gas Co Limited, ONGC Petro-additions Limited & GAIL China Gas Global Energy Holdings Limited have been included in consolidation. The figures included in the consolidated financial statements relating to these audited / unaudited joint venture companies are as under: Total assets are ` 7067.71 Cr. ( Previous Year : ` 6233.87 Cr.) and total liabilities of ` 7067.71 Cr. ( Previous Year : ` 6233.87 Cr.) and Total Income of ` 4149.03 ( Previous Year : ` 3262.34 Cr.) and total expenditure of ` 3591.79 Cr. ( Previous Year : ` 2951.83 Cr.). 15. Unaudited financial statements of an associate – Gujarat State Energy Generation (GSEG) and China Gas Holding Limited, have been included in consolidation in absence of the audited financial statements. Total Share of Profit included in the Consolidated Financial Statements is ` 22.37 Crores (Previous Year: ` 20.20 Crores). Due to short participation by the other joint venture partners there is difference between the % of ownership as per Joint Venture Agreement and actual % of Share capital currently held by the Company i.e. GAIL (INDIA) LIMITED. The management is of the opinion that it is a temporary phase and other joint venture partner will contribute the balance contribution in the share capital of joint venture as per the joint venture agreement. Hence, GAIL (INDIA) LIMITED ownership in the joint ventures are considered only to the extent of % ownership mentioned in Joint Venture agreement. Excess contribution in the Equity Share Capital of the various Joint Ventures as on date, over and above the contractual % amounting to ` 46.90 Crores {previous year ` (116.57) Cr.} is included in the ‘Advance Recoverable in cash or in kind or for value to be received’. 17. In the previous year the Joint Venture/Associates were incorporated in the consolidated financial statement based on the unaudited financial statement, wherever audited financial statements were not available at the time of consolidation. Adjustment due to Joint Venture regrouping and adjustment due to Joint Venture/Associates audited statements of such Joint Venture/Associates on the profit/(loss) is ` (73.70) Crores [Previous Year ` (19.38) Crores]. The consolidated Financial Statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the Company’s separate Financial Statements. However, there are some differences in certain accounting policies followed by the company, subsidiary, joint ventures and associates but the impact of the same in the opinion of the management is not material. In compliance of Accounting Standard 17 on “Segment Reporting” as notified under Companies Accounting Standard Rules, 2006, the required information is given as per Annexure – A to this schedule. Business Segments: The business segments have been identified as:-

(i)

Transmission services a) Natural Gas b) LPG Natural Gas Trading Petrochemicals LPG and other Liquid Hydrocarbons City Gas Distribution Unallocable

(ii) (iii) (iv) (v) (vi) 20.

In compliance of Accounting Standard 18 on “ Related party Disclosures” as notified under Companies Accounting Standard Rules, 2006, the name of related parties, nature of relationship and details of transaction entered therewith are given in Annexure – B. i) In compliance of Accounting Standard 22 on “Accounting for taxes on Income” as notified under Companies Accounting Standard Rules, 2006, the Company has provided Accumulated net deferred tax liability in respect of timing difference as on 31st March, 2011. The item- wise details of deferred tax liability as on 31.03.2011 are as under: ( ` in crores) 2009-10

21.

16.

2010-11 Deferred Tax Liability a). b). Depreciation Others 2305.24 12.18

1641.04 12.47 225

Less :- Deferred Tax Assets a). b). c). d). Provision for Gratuity & Retirement Benefits Benefit u/s 35AD of the Income Tax Act, 1961 Provision for Doubtful Debts / Claims / Advances Preliminary Expenses & others

119.72 379.66 100.19 2.74 1715.12

122.59 NIL 64.59 1.29 1465.04

Deferred Tax Liability (net) ii)

18.

Income Tax Provisions for the current year includes ` 4.18 Crores related to Assessment Year 2008-09 & 2009-10 as per orders passed under Income Tax Act, 1961. Jointly Controlled Assets The Company has participated in joint bidding under the Government of India New Exploration Licensing Policy (NELP) and overseas exploration bidding and has 25 Blocks (PY 24 Blocks) as on 31.03.2011 for which the Company has entered into Production Sharing Contract with respective host Governments along with other partners for Exploration & Production of Oil and Gas. The Company is a non-operator, except in Block RJ-ONN-2004/1 where it is a joint operator and CY-ONN-2005/1 where it is an operator, and shares in Expenses, Income, Assets and Liabilities based upon its percentage in production sharing contract.

22. (I)

19.

The participating interest in the twenty five NELP Block in India as on 31st March, 2011 is as under:Sl Name of Block No. PartiSl Name of Block cipating No. Interest 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CY-DWN-2004/2 CY-DWN-2004/3 CY-DWN-2004/4 CY-PR-DWN-2004/1 CY-PR-DWN-2004/2 KG-DWN-2004/1 KG-DWN-2004/2 KG-DWN-2004/3 KG-DWN-2004/5 KG-DWN-2004/6 CY-ONN-2005/1 AN-DWN-2009/13 AN-DWN-2009/18 CB-ONN-2000/1RING FENCED CONTRACT Participating Interest

Particulars Income Expenses Fixed Assets (Gross block) Producing Property Other Assets Current Liabilities

2010-11 42.54 140.25 5.47 577.52 151.28

(` in Crores) 2009-10 32.54 382.96 4.93 432.60 109.17

1 2 3 4 5 6 7 8 9 10 11

MN-OSN-2000/2 20% CB-ONN-2000/1 50% AA-ONN-2002/1 80% AA-ONN-2003/1 35% CB-ONN-2003/2 20% AN-DWN-2003/2 15% RJ-ONN-2004/1 KG-ONN-2004/2 MB-OSN-2004/1 MB-OSN-2004/2 CY-DWN-2004/1 22.225% 40% 20% 20% 10%

10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 40% 10% 10% 50%

The above includes ` Nil, ` 17.39 Crores, ` 0.24 crores, ` 6.15 Crores and ` 47.65 Crores, towards total value of Income, Expenses, Fixed Assets(Gross Block), Other Assets and Current Liabilities respectively pertaining to 11 E&P Blocks relinquished till 31st March, 2011(including 7 Blocks relinquished in the earlier years). The company is non operator in these E&P Blocks. (v) List of the E&P and CBM Blocks relinquished till 31.03.2011 is given below : SL Name of the Block NO 1 2 3 4 5 6 7 8 9 10 11 (vi) GS-DWN-2000/2 MB-DWN-2000/2 KK-DWN-2000/2 MN-OSN-97/3 NEC-OSN-97/1 AD-7, Myanmar MN-ONN-2000/1 Block 56, Oman RM-CBM-2005/III MR-CBM-2005/III CY-ONN-2002/1 Participating Date of Interest Relinquishment 15% 15% 15% 15% 50% 10% 20% 25% 35% 40% 50% 24.01.2007 24.01.2007 15.08.2004 08.11.2007 11.09.2007 28.02.2008 10.11.2008 10.06.2010 11.05.2010 11.05.2010 28.03.2011

(ii)

Further the company has one Coal Bed Methane (CBM) Block (Previous Year: 3 Blocks) as on 31.03.2011 awarded under CBM-III bidding round of the Government of India in which the company is a non-operator. The details are as under : Sl Name of the Block No. 1 TR-CBM-2005/III Participating Interest 35%

226

(iii)

In addition to above, the Company has farmed-in as non – operator in the following blocks: Sl Name of the Block No. 1 2 3 A-1, Myanmar* A-3, Myanmar* CY-OS/2 Participating Interest 8.5% 8.5% 25%

Share of Minimum work program committed under various production sharing contracts in respect of E&P joint ventures is ` 837.46 Crores (Previous Year: ` 921.06 Crores). Quantitative information: Details of Company’s Share of Production of Oil during the year ended 31.03.2011: Production (Treated & pro cessed crude)
Qty Value (MT) ` Crores

(vii) (a)

*In addition, the company has 8.5% participating interest in offshore Midstream pipeline project in Myanmar for the purpose of transportation of gas from the delivery point in offshore, Myanmar to landfall point in Myanmar. (iv) The Company's share in the Assets, Liabilities, Income and Expenditure for the year in respect of joint operations project blocks has been incorporated in the Company’s financial statements based upon un-audited statement of accounts submitted by the operators and are given below : (Final adjustments are effected during the year in which audited accounts are received)

Particulars Opening stock
Qty Value (MT) ` Crores

Sales *

Closing Stock
Qty Value (MT) ` Crores 0.34 0.28

Crude Oil

Qty (MT)

Value ` Crores

Year ended 31/03/11 372.12 0.28 15673.84 Year ended 31/03/10 617.60 0.25 14380.00

- 15530.85 - 14625.48

41.41 515.11 33.20 372.12

Annual Report 2010-2011

* b)

includes test production sales for ` 0.78 Crores (Previous Year: ` 0.95 Crores) Net Quantities of Company's interest in proved reserves and proved developed reserves : Proved Reserves Reserves 2010-11 2009-10 Proved Developed 2010-11 710 604 16 90 2009-10 726 16 710

25.

Oil : in 000'MT Beginning of the year Additions Deletion Production Closing Balance Gas : in Million M3 Beginning of the year Additions Deletion Production Closing Balance 6220 6220 6,220 6,220 710 604 16 90 726 16 710

Following Government of India’s approval, the shareholders of the Company in the Annual General Meeting held on 15th September, 1997 approved the transfer of all the assets including Plant and Machinery, accessories and other related assets which are part of Lakwa Project to Assam Gas Cracker Complex at a price to be determined by an independent Agency and on terms and stipulations as the Board may in its discretion deem fit. The Cabinet committee on Economic affairs (CCEA) has approved the setting up of Assam Gas based cracker project at Lepetkata by formation of a company in which GAIL has equity participation of 70%. A company by the name of Brahmaputra Cracker and Polymer Limited has been incorporated during 2006-07 and construction of Gas cracker complex is in progress. The gross block of fixed assets and Capital work in progress value of Lakwa unit is ` 258.33 Crores as on 31st March, 2011 (Previous Year: ` 253.11 Crores). Previous year’s (PY) figures have been regrouped and recast to the extent practicable, wherever necessary. Figures in brackets indicate deductions. Jointly controlled Entity: GAIL (India) Limited share in assets, liabilities, income, expenses contingent liabilities and capital commitments of jointly controlled Entities as per Annexure – C.

26.

27.

Note: Company's interest in Oil Reserves is in Indian blocks and in Gas Reserves is in Myanmar c) In terms of Production Sharing Agreements/Contracts, the balance (company’s share) in cost recovery of Blocks (having proved reserves) to be made from future revenue of such Blocks ,if any, is ` 369.81 Crores at the end of year (previous year: ` 352.69 crores) In terms of Production sharing contract (PSC), Myanmar Oil and Gas Enterprise (MOGE) exercised its right to demand 15% undivided interest in A-1 and A-3 E&P blocks and off shore midstream project and entered into an agreement with the other consortium partners during the year for acquiring the 15% undivided interest. This has resulted in reduction of the participating interest of the company in these two blocks from 10% to 8.5%. MOGE has paid ` 50.97 Crores towards its share of past Petroleum Cost which has been adjusted against proportionate capital work in progress to the extent of ` 32.57 Crores and credited the balance of ` 18.40 Crores under the head “profit/loss on sale / write off of assets/rights (net)” in the Profit & Loss Account. In Compliance of Accounting Standard 29 on “Provisions, Contingent liabilities and Contingent Assets”, as against NIL opening balance of “Provision for probable obligation” , there is an addition of `155.48 crores during the year, NIL utilization /reversal and closing balance is ` 155.48 crores. Additions include ` 47.40 Crores (Previous Year NIL) capitalized in schedule 4. Expected timing of outflows is not ascertainable at this stage being legal cases under litigation.

N. K. Nagpal Secretary

P. K. Jain Director (Finance)

R. D. Goyal Director (Projects)

B. C. Tripathi Chairman & Managing Director

227

As per our separate report of even date 23. For M/s M L Puri & Co. Chartered Accountants Firm No: 002312N Navin Bansal (Partner) Membership No. 91922 Place : New Delhi Dated : May 23, 2011 For M/s Rasool Singhal & Co. Chartered Accountants Firm No: 500015N Anil Gupta (Partner) Membership No. 072767

24.

Growing with Green Energy

ANNUAL REPORT
2010-11

GAIL (India) Limited

Asia's No. 1 Gas Utility Company

Growing with green energy In almost all Asian cultures, the bamboo plant or more appropriate “bamboo grass” has been treated reverentially attributing to it several virtues such as creation, longevity, adaptability and humility. Bamboo's long life makes it a Chinese symbol of longevity, while in India it is a symbol of friendship. In Japan, bamboo forests often surround Shinto shrines as a sacred protection against evil spirits. In Vietnam, bamboo is a symbol for the soul and often represents ideas of hard-work, optimism, unity and adaptability. Some Asian cultures even believe that humanity emerged from a bamboo stem. In Hawaiian legend, bamboo is considered the corporal form of the Polynesian creator god, Kane Milohai. Myths and legends apart, Bamboo commonly referred to as the "Grass of steel" is a symbol of strength, versatility, flexibility, tenacity, and endurance. Which is why this mystical plant symbolizes GAIL in its myriad ways. Among the many amazing facets of bamboo is its fast rate of growth. In fact, no other plant in the world grows faster than bamboo. The growth of GAIL is almost similar, and inspite of being one of the youngest PSUs in the country it has a proven track record of robust growth and performance. And the growth story continues… Regd. Off. 16, Bhikaiji Cama Place, R.K. Puram, New Delhi-110 066 Website : www.gailonline.com



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