1.01 Accounting Convention
The financial statements are prepared on accrual basis of accounting
under historical cost convention in accordance with generally accepted
accounting principles in India and the relevant provisions of the
Companies Act, 1956 including accounting standards notified there
1.02 Use of Estimates
The preparation of financial statements requires estimates and
assumptions which affect the reported amount of assets, liabilities,
revenues and expenses of the reporting period. The difference between
the actual results and estimates are recognized in the period in which
the results are known or materialized.
(i) Stock of LNG and Natural Gas in pipelines is valued at cost on
First in First out (FIFO) basis or net realizable value, whichever is
(ii) Raw materials and finished products are valued at weighted average
cost or net realizable value, whichever is lower. Finished products
include excise duty and royalty wherever applicable.
(iii) Stock in process is valued at weighted average cost or net
realisable value, whichever is lower. It is valued at weighted average
cost where the finished products in which these are to be incorporated
are expected to be sold at or above the weighted average cost.
(iv) Stores and spares and other material for use in production of
inventories are valued at weighted average cost or net realisable
value, whichever is lower. It is valued at weighted average cost where
the finished products in which they will be incorporated are expected
to be sold at/or above cost.
(v) Surplus / Obsolete Stores and Spares are valued at cost or net
realisable value, whichever is lower.
(vi) Surplus / Obsolete Capital Stores, other than held for use in
construction of a capital asset, are valued at lower of cost or net
(vii) Renewable Energy Certificates (RECs) are valued at cost on First
in First out (FIFO) basis or net realizable value, whichever is lower.
1.04 Depreciation / Amortisation
(a) Depreciation on Fixed Assets other than those mentioned below is
provided in accordance with the rates as specified in Schedule XIV of
the Companies Act, 1956, on straight line method (SLM) on pro-rata
basis (monthly pro-rata for bought out assets).
(i) Assets costing upto Rs. 5,000/- are depreciated fully in the year of
(ii) Bunk Houses are amortised on assumption of five years life.
(iii) Oil and Gas Pipelines including other related facilities are
depreciated @ 3.17% per annum on SLM basis based on useful life of 30
(iv) Computers at the residence of the employees are depreciated @
23.75% per annum on SLM basis. Furniture, Electric Equipments and
Mobiles provided for the use of employees are depreciated @ 15% per
annum on SLM basis.
(v) Cost of the leasehold land not exceeding 99 years is amortised over
the lease period.
(vi) Depreciation due to price adjustment in the original cost of fixed
assets is charged prospectively.
(vii) Capital expenditure on the assets (enabling facilities), the
ownership of which is not with the Company, is charged off to Revenue.
(viii) Software / Licences are amortised in 5 years on straight line
(ix) Cost of the Right of Use (ROU) is amortized considering life of
RoU as 99 years.
(x) After impairment of assets, if any, depreciation is provided on the
revised carrying amount of the assets over its remaining useful life.
(b) Capital assets except gas pipelines related facilities installed at
the consumers premises on the land whose ownership is not with the
company, has been depreciated on SLM basis in accordance with the rates
as specified in Schedule XIV of the Companies Act, 1956.
1.05 Revenue recognition
(i) Sales are recognized on transfer of significant risks and rewards
of ownership to the buyer, which generally coincides with the delivery
of goods to customers. Sales include excise duty but exclude value
added tax. Any retrospective revision in prices is accounted for in the
year of such revision.
(ii) Income from Consultancy/Contract Services, if any, is recognized
based on Proportionate Completion Method.
(iii) Dividend income is accounted for when the right to receive it is
(iv) Claims (including interest on delayed realization from customers)
are accounted for, when there is no significant uncertainty that the
claims are realizable.
(v) Liability in respect of MGO of Natural gas is not provided for
where the same is secured by MGO recoverable from customers.
Payments/receipts during the year on account of MGO are adjusted on
(vi) Minimum charges relating to transportation of LPG are accounted
for on receipt basis.
(vii) Prepaid expenses and prior period expenses/income upto Rs.
5,00,000/- in each case are charged to relevant heads of account of the
1.06 Fixed Assets
(a) Fixed Assets are valued at historical cost on consistent basis and
are net of refundable taxes & levies wherever applicable. All costs
relating to acquisition of fixed assets till commissioning of such
assets are capitalized. In the case of commissioned assets where final
payment to the Contractors is pending, capitalization is made on
provisional basis, including provisional liability pending approval of
Competent Authority, subject to necessary adjustment in cost and
depreciation in the year of settlement.
(b) Machinery spares, which can be used only in connection with an item
of fixed asset and their use is expected to be irregular, are
capitalised with the cost of that fixed asset and are depreciated fully
over the remaining useful life of that asset.
1.07 Intangible Assets
Intangible assets like software, licenses and right-of-use of land
including sharing of ROU with other entities which are expected to
provide future enduring economic benefits are capitalized as Intangible
1.08 Capital Work in Progress
(a) Crop compensation is accounted for under Capital Work-in-Progress
on the basis of actual payments/estimated liability, as and when work
commences where ROU is acquired.
(b) The capital work in progress includes material in Transit/ value of
materials / equipment / Services, etc. received at site for use in the
(c) Pre-project expenditure relating to Projects which are considered
unviable / closed is charged off to Revenue in the year of
1.09 Expenses Incurred During Construction Period
All revenue expenditure incurred during the year, which is exclusively
attributable to acquisition / construction of fixed assets, is
capitalized at the time of commissioning of such assets.
1.10 Foreign Currency Translation
(i) Transactions in foreign currency are initially accounted at the
exchange rate prevailing on the transaction date.
(ii) Monetary items (such as Cash, Receivables, Loans, Payables, etc.)
denominated in foreign currencies, outstanding at the year end, are
translated at exchange rates (BC Selling Rate for Payables and TT
Buying Rate for Receivables) prevailing at year end.
(iii) Non monetary items (such as Investments, Fixed Assets, etc),
denominated in foreign currencies are accounted at the exchange rate
prevailing on the date of transaction(s).
(iv) Any gains or loss arising on account of exchange difference either
on settlement or on translation is adjusted in the Statement of Profit
& Loss except in case of long term foreign currency monetary items
relating to acquisition of depreciable capital asset in which case they
are adjusted to the carrying cost of such assets and in other cases,
accumulated in Foreign Currency Monetary item Translation Difference
Account in the financial statements and amortized over the balance
period of such long terms asset or liability, by recognition as income
or expenses in each of such period.
(v) In respect of derivative contracts, gain/losses on settlement and
losses on re-statement (by marking them to market) at the balance sheet
date are recognised in the statement of Profit & Loss.
In case of depreciable assets, the cost of the assets is shown at gross
value and grant thereon is taken to Capital Reserve which is recognised
as income in the statement of Profit and Loss over the useful life
period of the asset.
Investments are classified into current and non-current investments.
Current investments are stated at lower of cost or market value.
Non-current investments are stated at cost and provision for diminution
in value is made only if such decline is other than temporary in the
opinion of management.
1.13 Employees Benefits
(i) All short term employee benefits are recognized at the undiscounted
amount in the accounting period in which they are incurred.
(ii) The Company''s contribution to the Provident Fund is remitted to a
separate trust established for this purpose based on a fixed percentage
of the eligible employee''s salary and debited to statement of Profit
and Loss. Further, the company makes provision as per actuarial
valuation towards any shortfall in fund assets to meet statutory rate
of interest in the future period, to be compensated by the company to
the Provident Fund Trust.
(iii) Employee Benefits under Defined Benefit Plans in respect of leave
encashment, compensated absence, post retirement medical scheme, long
service award and other terminal benefits are recognized based on the
present value of defined benefit obligation, which is computed on the
basis of actuarial valuation using the Projected Unit Credit method.
Actuarial liability in excess of respective plan assets is recognized
during the year.
(iv) Provision for gratuity as per actuarial valuation is funded with a
1.14 Borrowing Cost
Borrowing cost of the funds specifically borrowed for the purpose of
obtaining qualifying assets and eligible for capitalization along with
the cost of the assets, is capitalized up to the date when the asset is
ready for use after netting off any income earned on temporary
investment of such funds.
1.15 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 profit 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,
if any, is recognized and carried forward only to the extent that there
is virtual certainty that the asset will be realized in future.
1.16 R&D Expenditure
All expenditure, other than on capital account, on research and
development are debited to statement of Profit and Loss.
The Carrying amount of assets are reviewed at each Balance Sheet date.
In case there is any indication of impairment based on Internal /
External factors, an Impairment loss is recognized wherever the
carrying amount of an asset exceeds its recoverable amount.
1.18 Provisions, Contingent Liabilities, Contingent Assets & Capital
(i) Provisions involving substantial degree of estimation in
measurement are recognized when there is a present obligation as a
result of past events and it is probable that there will be an outflow
of resources. Contingent Assets are neither recognized nor disclosed in
the financial statements. Contingent liabilities exceeding Rs.5 Lacs in
each case are disclosed by way of notes to accounts except when there
is remote possibility of any outflow in settlement.
(ii) Estimated amount of contracts remaining to be executed on capital
accounts are disclosed in each case above Rs.5 Lacs.
1.19 Exploration and Development Costs:- i) The Company follows
Method for accounting of Oil & Gas exploration and production
activities, which includes:-
a. Survey Costs are recognized as revenue expenditure in the year in
which these are incurred.
b. Cost of exploratory wells is carried as ''Exploratory wells in
progresses''. Such exploratory wells in progress are capitalized in the
year in which the Producing Property is created or is written off in
the year when determined to be dry / abandoned.
c. Cost of all exploratory wells in progress is debited to statement
of Profits and Loss except of those wells for which there are
reasonable indications of sufficient quantity of reserves and the
enterprise is making sufficient progress assessing the reserves and the
economic and operating viability of the project.
ii) Capitalization of Producing Properties
a) Producing Properties are capitalized as completed wells / producing
wells when the wells in the area / field are ready to commence
commercial production on establishment of proved developed oil and gas
b) Cost of Producing Properties includes cost of successful exploratory
wells, development wells, initial depreciation of support equipments &
facilities and estimated future abandonment cost.
iii) Depletion of Producing Properties
Producing Properties are depleted using the Unit of Production Method
(UOP). The depletion or unit of production charged for all the
capitalized cost is calculated in the ratio of production during the
year to the proved developed reserves at the year end.
iv) Production cost of Producing Properties
Company''s share of production costs as indicated by Operator consists
of pre well head and post well head expenses including depreciation and
applicable operating cost of support equipment and facilities..
(i) Liquidated Damages / Price Reduction Schedule, if any, are
accounted for as and when recovery is effected and the matter is
considered settled by the Management. Liquidated damages / Price
Reduction Schedule, if settled, after capitalization of assets are
charged to revenue if below Rs. 50 lacs in each case, otherwise adjusted
in the cost of relevant assets.
(ii) Insurance claims are accounted for on the basis of claims admitted
by the insurers.