Bharat Petroleum Corporation

1) In respect of sharing of under-recoveries on sensitive petroleum
 products viz. MS, HSD, LPG (Domestic) and SKO (PDS), as advised by the
 Ministry of Petroleum & Natural Gas, a part of the under-recovery
 suffered by the Corporation during the year was compensated by ONGC and
 GAIL by offering discount on price of Crude Oil, SKO and LPG purchased
 from them. Further, the under-recoveries on import losses in respect of
 petrol and diesel to the extent of Rs. 237.86 crores (previous year Rs.
 Nil) was also compensated by way of discount on price of crude oil
 purchased from ONGC. Accordingly, the Corporation has accounted the
 discount as follows:
 
 a) Rs. 6,709.94 crores (previous year Rs. 5,243.03 crores) discount on
 crude oil purchased from ONGC has been adjusted against raw material
 cost; and
 
 b) Rs. 846.50 crores (previous year Rs. 732.09 crores) discounts on SKO
 and LPG purchased from ONGC/GAIL has been adjusted against Purchase of
 product for resale.
 
 2) In lieu of the under-recoveries on sale of sensitive petroleum
 products during 2008-09, based on the approval of Government of India,
 the Corporation has accounted for Oil Marketing Companies Government of
 India Special Bonds amounting to Rs. 16,216.38 crores (previous year
 Rs. 8,589.50 crores) as income. This compensation has been received in
 the form of Oil Marketing Companies Government of India Special Bonds
 amounting to Rs. 14,151.10 crores (previous year Rs. 4,618.05 crores)
 and accounted for as investments. The balance amount of Rs. 2,065.28
 crores (previous year Rs. 3,971.45 crores) which is receivable as on
 31st March 2009 from Government of India is shown as Other Current
 Asset in Schedule J.
 
 3) The Corporation has allotted redeemable non-convertible 10.35%
 Debentures of face value of Rs. 1,000 crores on 12th December 2008.
 These are secured by English mortgage, on first pari passu charge
 basis, by way of a Registered Debenture Trust Deed over the fixed
 assets of the Company, viz., a Flat at Mumbai and the Plant and
 Machinery in respect of Hydrocracker Unit and Aromatic Recovery Unit of
 the Mumbai Refinery. In order to maintain the security cover of 1.25
 times, all future immovable properties including Land, Plant &
 Machinery and Fixtures & Fittings shall be a part of the Premises and
 Plant & Machinery which are mortgaged. These Debentures are redeemable
 at par on 11th June 2010.
 
 4) As per the scheme of Amalgamation of the erstwhile Kochi Refineries
 Limited with the Corporation approved by the Government of India,
 33,728,738 equity shares of the Corporation were allotted (in lieu of
 the shares held by the Corporation in the erstwhile Kochi Refineries
 Limited) to a trust for the benefit of the Corporation in the financial
 year 2006-07. Accordingly the cost of the original investment of Rs.
 659.10 crores is reflected as Others in Schedule J - Other Current
 Assets. The income distributed by the trust during the year 2008-09
 amounting to Rs. 13.49 crores (previous year Rs. 33.73 crores) has been
 included in Other income in Schedule 0 - Miscellaneous Income.
 
 One shareholder of erstwhile KRL has challenged the amalgamation before
 Delhi High Court, which is pending adjudication.
 
 5) Provision for taxation in the Profit and Loss Account includes Rs.
 1.40 crores (previous year Rs. 0.90 crores) towards wealth tax.
 
 6) The Corporation has numerous transactions with other oil companies,
 which are reconciled on an ongoing basis and subject to confirmation.
 Adjustments, if any, arising therefrom are not likely to be material on
 settlement.
 
 7) The impact of pay revision due to Management staff w.e.f. 1stt
 January 2007 based on the guidelines given by Department of Public
 Enterprises is estimated at Rs. 243 crores. After considering Rs. 129
 crores already provided in 2007-08, the balance amount of Rs. 114
 crores has been provided in 2008r09. Further, this estimated increase
 in pay, along with the increase in gratuity limit at Rs. 10 iakhs per
 employee, have been considered for making provision at the year end for
 leave encashment and gratuity benefits based on actuarial valuations.
 
 8) Provision has not been made in the accounts towards revision in
 salary of: i) workmen at Mumbai Refinery w.e.f.  1st January 2007; ii)
 workmen at Kochi Refinery w.e.f. 1st August 2008; and iii) workmen at
 Marketing division w.e.f. 1st June 2008 as the additional liability
 arising from such revision is uriascertainable since no reliable
 estimate of this revision can be made as of date.
 
 9) The Corporation has classified investments in 6.35% Oil Marketing
 Companies GOI Special Bonds 2024 - Rs. 3,099.96 crores and 6.90% Oil
 Marketing Companies GOI Special Bonds 2026 - Rs. 4,986.71 crores as
 long term Investments. No provision for diminution in value has been
 made as there is no permanent decline in the value of these
 investments.
 
 10) Impairment of Assets
 
 Determination as to whether and how much an asset is impaired involve
 Management estimates of highly uncertain matters such as international
 prices of crude oil and products, duty structure and Government
 policies. It is assumed that suitable mechanism would be in place, in
 line with earlier/current year(s), to provide compensation towards
 under-recoveries of margin, if any, on account of sale of sensitive
 petroleum products in subsequent years. Hence, future cash flows have
 been worked out based on the desired margins for deciding on impairment
 of related Cash Generating Units. No impairment is therefore considered
 as at 31st March 2009.
 
 11) Disclosure as per requirements of Accounting Standard 15 -
 Employee Benefits:
 
 Gratuity: The Company has a defined benefit gratuity plan managed by a
 trust. The contribution based upon actuarial valuation is paid to a
 trust which is invested as per investment pattern prescribed by the
 Government in plan assets. Gratuity is paid to the Staff member who has
 put in a minimum qualifying period of 5 years of continuous service on
 superannuation, resignation, termination or to his nominee on death.
 
 Leave Encashment: The Employees are entitled to accumulate Earned Leave
 and Sick Leave, which can be availed during the service period.
 Employees are also allowed to encash the accumulated earned leave
 during the service period. Further, the accumulated earned leave and
 sick leave can be encashed by the employees on superannuation,
 resignation, and termination or by nominee on death.
 
 Other Defined Benefits: These are (a) Post Retirement Medical Scheme
 paid benefit to employees, spouse, dependent children and dependent
 parents, (b) Pension/ex-gratia scheme to the retired employees who are
 entitled to receive the monthly pension/ex-gratia for life; (c) Death
 in service/Permanent disablement given to employee, the spouse of the
 employee, provided the deceased family/disabled employee deposits
 retirement dues such as PF, Gratuity, Leave encashment dues payable to
 them with the Corporation; and (d) Resettlement allowance paid to
 employees to permanently settle down at a place other than the location
 of last posting at the time of retirement.
 
 12) Related Party Disclosures as per Accounting Standard 18
 
 Names of the Related parties
 Indraprastha Gas Limited
 Petronet India Limited
 Petronet CCK Limited
 Petronet CI Limited
 Petronet LNG Limited
 Bharat Oman Refineries Limited
 
 VI e Trans Private Limited
 
 Petroleum Infrastructure Limited
 Petroleum India International
 Maharashtra Natural Gas Limited
 Central UP Gas Limited
 Sabarmati Gas Limited
 Btiarat Stars Services Private LMted
 Premier Oil Cachar B.V.
 Bharat Renewable Energy Limited
 Matrix Bharat Marine Services Re. Ltd.
 VB (Brazil) Petroleo Private Ltda.
 DNP Limited
 Brahmaputra Cracker & Polymer Limited
 Key Management Personnel
 
 :   M/s. Ashok Sinha   (Chairman & Managing Director),
 S. Mohan                (Director HR) - w.e.f. 25.06.2008
 S. A. Narayan         (Director HR) - up to 09.06.2008
 S. Radhakrishnan   Director Marketing),
 S. K. Joshi              (Director Finance)
 R. K. Singh             (Director Refineries)
 
 13)  Capital Commitments and Contingent Liabilities:
 
                                                             31/03/2008
                                      Rs. Crores             Rs. Crores
 
 13.1 Capital Commitments:
 
 Estimated amount of contracts 
 remaining to be executed on            2,697.81              2,008.12
 capital account and not provided for
 
 13.2     Contingent Liabilities:
 
 (a)   In respect of taxation            45.30                  88.20
 (b)   Other Matters:
 i)Surety bonds executed on behalf of 
 other oil companies                    166.33                 152.24
 for excise/customs duties for which 
 BPCL has signed as
 surety
 
 ii) Claims against the Corporation 
 not acknowledged as
 debts:
 
 (a)   Excise and customs matters        253.84                  531.45
 (b)   Sales tax matters               2,412.98                1,870.15
 (c)   Others                            285.25                  431.91
 
 These include Rs. 668.14 crores (previous year Rs. 518.88 crores)
 against which the Corporation has a recourse for recovery and Rs. 30.80
 crores (previous year Rs. 233.51 crores) on capital account.
 
 iii) Claims on account of wages, bonus/ex-gratia payments in 1.10 1.15
 respect of pending court cases.
 
 iv) Guarantee in favour of banks for long-term loans extended to BPRL
 Ventures B.V., a subsidiary of Bharat Petro Resources Limited - USD 120
 million (Rs. 611 crores)
 
 14) 14.1 Foreign Exchange losses amounting to Rs. 194.58 crores
 (previous year Rs. 74.18 crores) are regarded as adjustment to Interest
 cost and debited to Interest expenditure.
 
 14.2 The deferred premium amounting to Rs. 123.21 crores (previous year
 Rs. 201.12 crores) in respect of forward exchange contract will be
 recognised in the Profit and Loss Account of one or more subsequent
 accounting periods.