1.  We have audited the attached Balance Sheet of Essar Oil Limited
 (the Company) as at 31st March, 2011, the Statement of Proft and Loss
 and the Cash Flow Statement for the year ended on that date, both
 annexed thereto. These fnancial statements are the responsibility of
 the Company''s management. Our responsibility is to express an opinion
 on these fnancial statements based on our audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 fnancial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the fnancial statements. An audit also includes
 assessing the accounting principles used and signifcant estimates made
 by management, as well as evaluating the overall fnancial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditor''s Report) Order, 2003, issued
 by the Central Government of India in terms of sub- section (4A) of
 section 227 of the Companies Act, 1956, we enclose in the Annexure, a
 statement on the matters specifed in paragraphs 4 and 5 of the said
 Order.
 
 4.  Without qualifying our report, we invite attention to: -
 
 i) Note B (11) (a) of schedule XVI to the fnancial statements detailing
 the state of the Master Restructuring Agreement and reasons for
 following principles laid down in (a) Accounting Standard (AS 30),
 Financial Instruments – Recognition & Measurement, issued by the
 Institute of Chartered Accountants of India; and (b) other
 internationally recognised fnancial reporting frameworks, in the
 absence of guidance available under the accounting standards referred
 to in sub-section (3C) of section 211 of the Companies Act, 1956.
 
 ii) Note B (11) (b) of schedule XVI to the fnancial statements with
 regard to following cash basis of accounting pursuant to the Court
 Order in respect of certain funded/accrued interest on debentures, and
 payable at various future dates as per the scheme of arrangement and
 compromise between the Company and its debenture holders.
 
 iii) Note B (16) of schedule XVI to the fnancial statements detailing
 the state of litigation in respect of availment of sales tax deferral
 scheme and presentation of assignment of deferred sales tax liability
 in the Statement of Proft and Loss.
 
 5.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 i) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 ii) In our opinion, proper books of account as required by law have
 been kept by the Company so far as appears from our examination of
 those books. Attention is invited to note (iv) below;
 
 iii) The Balance Sheet, Statement of Proft and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 iv) In our opinion, and according to the information and explanations
 given to us, the Balance Sheet, Statement of Proft and Loss and Cash
 Flow Statement dealt with by this report, read together with our
 remarks in para (4) above, are in compliance with the Accounting
 Standards referred to in sub-section (3C) of Section 211 of the
 Companies Act, 1956;
 
 v) In our opinion and to the best of our information and according to
 the explanations given to us, the said fnancial statements, give the
 information required by the Companies Act, 1956, in the manner so
 required and give a true and fair view in conformity with the
 accounting principles generally accepted in India and in respect of the
 matter described in paragraphs 4(i) above where accounting principles
 generally accepted in India do not provide specifc guidance, in
 conformity with the principles laid down in other internationally
 recognised fnancial reporting frameworks:
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011;
 
 (b) in the case of the Statement of Proft and Loss, of the proft of the
 Company for the year ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 6. On the basis of the written representations received from the
 directors other than nominee directors appointed by public fnancial
 institutions and banks who have been granted exemption from the
 provisions of Section 274(1)(g) of the Companies Act, 1956 and taken on
 record by the Board of Directors, we report that none of the directors
 is disqualifed as on 31st March, 2011 from being appointed as director
 under section 274(1)(g) of the Companies Act, 1956.
 
 Annexure to the Auditors'' Report to the members of Essar Oil Limited
 
 [referred to in paragraph (3) thereof]
 
 In our opinion and according to the information and explanations given
 to us, the nature of the Company''s business/activities during the year
 are such that clauses (iii), (x), (xii), (xiii), (xiv), (xviii) and
 (xx) of the Companies (Auditor''s Report) Order, 2003, are not
 applicable to the Company.
 
 1) In respect of its fxed assets:
 
 a.  The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fxed assets.
 
 b.  The fxed assets of the Company are physically verifed during the
 year by the Management according to a phased programme designed to
 cover all the items over a period of three years, which in our opinion,
 is reasonable having regard to the size of the Company and the nature
 of its assets. As per the information given to us by the management, no
 material discrepancies as compared to book records were noticed in
 respect of fxed assets verifed during the year.
 
 c. In our opinion and according to the information and explanations
 given to us, the Company has not made any substantial disposals of fxed
 assets during the year and the going concern status of the Company is
 not affected.
 
 2) In respect of its inventories:
 
 a.  As explained to us, inventories were physically verifed during the
 year by the Management at reasonable intervals.
 
 b.  In our opinion and according to the information and explanations
 given to us, the procedures of physical verifcation of inventories
 followed by the Management were reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 c.  In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories. No material discrepancies were noticed on physical
 verifcation as compared to book records.
 
 3) In our opinion and according to the information and explanations
 given to us, and considering that some of the items purchased are of
 specialised nature and suitable alternative sources do not exist for
 obtaining comparable quotations, there is an adequate internal control
 system commensurate with the size of the Company and the nature of its
 business for the purchase of inventory and fxed assets and for the sale
 of goods and services. Having regard to this, during the course of our
 audit, we have not observed any continuing failure to correct major
 weaknesses in internal controls.
 
 4) a.  To the best of our knowledge and belief and according to the
 information and explanations given to us, we are of the opinion that
 the particulars of contracts or arrangements that need to be entered
 into the register maintained under Section 301 of the Companies Act,
 1956 have been so entered.
 
 b. In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements entered in the register maintained under Section 301 of
 the Companies Act, 1956 and exceeding the value of rupees fve lakhs in
 respect of any party during the year have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time.
 
 5) In our opinion and according to the information and explanations
 given to us, the Company has not accepted any public deposits within
 the meaning of Section 58A and 58AA of the Companies Act, 1956, or any
 other relevant provisions of the Companies Act, 1956 and the Companies
 (Acceptance of Deposits) Rules, 1975 with regard to the deposits
 accepted from the public. No Order has been passed by the Company Law
 Tribunal or Reserve Bank of India or any Court or any other Tribunal.
 
 6) In our opinion, the Company has an internal audit system
 commensurate with the size of the Company and nature of its business.
 
 7) We have broadly reviewed the books of account maintained by the
 Company pursuant to the rules made by the Central Government for the
 maintenance of cost records under Section 209 (1) (d) of the Companies
 Act, 1956 in respect of manufacture of petroleum products and are of
 the opinion that prima facie the prescribed accounts and records have
 been made and maintained. We have, however, not made a detailed
 examination of the records with a view to determine whether they are
 accurate or complete.
 
 8) In respect of statutory dues:
 
 a.  According to the information and explanations given to us, the
 Company has been regular in depositing undisputed statutory dues,
 including Provident Fund, Investor Education and Protection Fund,
 Income Tax, Sales tax, Wealth Tax, Service Tax, Custom Duty, Excise
 duty, Cess and any other statutory dues, as applicable, with the
 appropriate authorities except in case of professional tax, where
 certain delays were noticed. As explained to us, the provisions of
 Employees State Insurance are not applicable to the Company during the
 year.
 
 There are no undisputed amounts payable in respect of above statutory
 dues outstanding as at 31st March, 2011 for a period exceeding six
 months from the date they became payable.
 
 b.  According to the information and explanations given to us, details
 of Excise Duty, Customs Duty, Sales Tax and Income Tax which have not
 been deposited as on 31st March, 2011 on account of disputes are given
 below:
 
                                   Amount  Period to which  
 Name of Statute   Nature of dues (Rs. In 
                                   Crores) amount relates  Forum where 
                                                            dispute is 
                                                            pending
 
 Central Excise 
 Act, 1944         Excise duty, 
                   interest          40.80   November-06  Central Excise
                                                          & Service
 Tax Appellate 
 Tribunal (CESTAT) and penalty               to May-07
 
 Central Excise 
 Act, 1944         Excise duty, 
                   interest           3.15   2006-07      Central Excise
                                                          & Service
 Tax Appellate 
 Tribunal (CESTAT) and penalty
 
 Central Excise 
 Act, 1944         Excise duty, 
                   interest           0.20   2009-10      Central Excise
                                                          & Service
 Tax Appellate 
 Tribunal (CESTAT) and penalty
 
 Central Excise 
 Act, 1944         Excise duty & 
                   Interest           0.12   2009-10     Central Excise
                                                         & Service 
 Tax Appellate 
 Tribunal (CESTAT)
 
 Central Excise 
 Act, 1944         Excise duty, 
                   interest          15.57   November-
                                               06 to     Commissioner of
                   and penalty              November-08  Central Excise
                                                        (Appeals)
 
 Service Tax 
 Rules, 1994       Service tax        0.05   2009-10     Commissioner of
                                                         Central Excise
                                                        (Appeals)
 
 Customs Act, 1962 Custom duty & 
                   interest           6.70   2006-07     Commissioner of
                                                         Custom (Appeals)
 
 Customs Act, 1962 Custom duty & 
                   interest           0.18   2009-10    Central Excise &
                                                        Service
 Tax Appellate 
 Tribunal (CESTAT)
 
 Gujarat Value 
 Added Tax Act 
 2003              Sales tax          0.20   2007-08    Gujarat Sales 
                                                        Tax Tribunal
 
 Madhya Pradesh 
 Sthaniya Kshetra  Madhya Pradesh     0.02   2008-09    Sales Tax 
                                                        Tribunal
 Me Mal Ke 
 Pravesh Par Kar   Entry tax
 Adhiniyam 
 Act, 1976
 
 Income Tax 
 Act, 1961         Tax deducted at 
                   source             5.49   2007 to 
                                              2009      Deputy 
                                                        Commissioner of
                                                        Income Tax
                   and interest
 
 According to the information and explanations given to us, there were
 no dues pending to be deposited on account of any dispute in respect of
 Income Tax, Wealth Tax, Service Tax, and Cess as on 31st March, 2011.
 
 9) In our opinion, according to the information and explanations given
 to us, and taking into consideration the terms of Master Restructuring
 Agreement (MRA) entered into with the fnancial institutions and banks
 pursuant to Corporate Debt Restructuring package approved under RBI''s
 Corporate Debt Restructuring Scheme (CDR scheme) and the terms of the
 approved schemes of arrangement with the debenture-holders and the
 scheme lenders, the Company has not defaulted in the repayment of dues
 to banks, fnancial institutions and debenture holders.
 
 10) In our opinion and according to the information and explanations
 given to us, the terms and conditions on which the Company has given
 guarantees for the loans taken by others from banks and fnancial
 institutions, are not, prima facie, prejudicial to the interest of the
 Company.
 
 11) To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, term loans
 availed by the Company were, prima facie, applied by the Company during
 the year for the purposes for which the loans were obtained, other than
 temporary deployment pending application.
 
 12) In our opinion and according to the information and explanation
 given to us, on the basis of review of utilization of funds, which is
 based on an overall examination of the Balance Sheet of the Company as
 at March 31, 2011, and having regard to the representation by the
 management that the short term liabilities of Rs.3,159 crore mainly
 comprising of buyers'' credit, bills payable and suppliers credit backed
 by Letter of Credit Facility as a sub-limit of long term loan
 facilities sanctioned for expansion of the existing refnery, are
 convertible into long term loans at the discretion of the Company upon
 them becoming due in line with the long term loan agreements entered
 into / to be entered into, we are of opinion that funds raised on
 short-term basis have prima facie not been used for long term
 investment.
 
 13) According to the information and explanations given to us and the
 records examined by us, the securities have been created in respect of
 the debentures except the personal guarantees by some of the directors
 together with collateral securities.
 
 14) To the best of our knowledge and belief and according to the
 information and explanations given to us, no material fraud on or by
 the Company was noticed or reported during the year.
 
                                     For Deloitte Haskins & Sells
 
                                     Chartered Accountants
 
                                    (Registration No. 117365W)
 
                                     Khurshed Pastakia
 
                                     Partner
 
                                     Membership No. 31544
 
 Mumbai, May 3, 2011