GAIL India

On behalf of the Board of Directors of your Company, I am delighted to
 present the 24th Annual Report of your “Navratna” Company along with
 Audited Financial Statements for the Financial Year 2007-08.
 
 GROWTH
 
 Your Company has completed nearly two- and-half decades of an eventful
 journey.  Starting with a natural gas transmission Company, it is today
 an integrated energy Company along the natural gas value chain with
 global footprints. Having started as a gas transmission Company in the
 year 1984, it grew organically over the years by building a large
 network of natural gas trunk pipelines covering a length of around 7000
 km and over 1900 km of LPG pipeline transmission network. Your Company
 is adding another 5000 km of new pipelines by the year 2011 at an
 estimated cost of Rs. 14,500 Crores which have been approved by the
 Board of the Company under Navratna powers. Today, your Company has
 interests in the business of Natural Gas, LPG, Liquid Hydrocarbons and
 Petrochemicals, Exploration & Production, City Gas Distribution and is
 steadily developing its overseas presence.
 
 The major focus of your Company is to maintain its dominant position in
 the gas business, especially the transmission segment. The thrust is to
 continue the relationship with existing customers as well as add new
 customers. These new pipelines would include large trunk pipelines
 along with smaller pipelines which would provide connectivity among
 trunk lines so that prospective sources and consumers are connected.
 
 It gives me immense pleasure that the Board of the Company has
 recommended the issuance of one bonus share for every two equity shares
 held, subject to the requisite approval(s).
 
 During the year 2007-08, the important physical & fnancial highlights
 are as under:
 
 PHYSICAL HIGHLIGHTS
 Particulars                              2007-08     2006-07
 
 Gas Transmission (MMSCMD)                 82.10       77.28
 LPG Production (TMTs)                     1,043       1,026
 Pentane / Propane / SBP Solvents /
 Naptha Production (TMTs)                    305         317
 Polymer Production (TMTs)                   386         354
 LPG Transmission (TMTs)                   2,754       2,491
 
 FINANCIAL HIGHLIGHTS                                    (Rs. in Crores)
 
 Particulars                                         2007-08    2006-07
 
 Turnover (Net of ED)                                 18,008    16,047
 Other Income                                            556       545
 Cost of Sales (excluding Interest                    14,058    13,050
 and Depreciation and including extraordinary items)
 Gross Margin                                          4,506     3,542
 Interest                                                 80       107
 Depreciation                                            571       575
 Proft Before Tax                                      3,855     2,860
 Provision for Tax (after provision
 written back of earlier years, Rs. 339.92 Crores)     1,254       473
 Proft after Tax                                       2,601     2,387
 Appropriations
 Interim Dividend                                        338       676
 Proposed Final Dividend                                 507       169
 Corporate Dividend Tax                                  144       124
 Transfer to Bond Redemption Reserve                      32        32
 Transfer to General Reserve                             260       239
 Balance carried forward to Balance Sheet              1,320     1,147
 
 DIVIDEND
 
 The Board of Directors of the Company had earlier approved payment of
 an interim dividend @ 40% per equity share (Rs. 4 per equity share of
 Rs. 10 each) amounting to Rs. 338.26 Crores, which has since been paid
 to the members of the Company.
 
 The Board has recommended payment of fnal dividend @ 60% per equity
 share (Rs. 6 per equity share of Rs. 10 each) for the year 2007-08.
 With this, the total dividend payment for the fiscal 2007-08 will be at
 100% (Rs. 10 per equity share of Rs. 10 each) of the paid-up equity
 capital.
 
 CORPORATE STRATEGY
 
 Your Company had developed a long term strategic plan which has been
 reoriented during the year, keeping in view the unfolding demand and
 supply scenario, entry of new competitors, and changing dynamics in the
 market place. The goals set by your Company include doubling of top and
 bottom line in the near future.
 
 The strategy developed to realize the set goals is as under:
 
 1.  Tying-up with producers and suppliers for marketing and
 transmission of natural gas on long term and sustainable basis. This is
 likely to be realized by securing more gas from new gas finds and
 pursuing early finalization of contracts with customers and suppliers.
 
 2.  Expanding of the pipeline infrastructure from 7000 km to 12000 km
 with the laying of new pipelines by 2011-12.
 
 3.  Pursuing of City Gas distribution opportunities in the country.
 This requires the introduction of Compressed Natural Gas for the
 automotive sector and Piped Natural Gas for commercial and domestic use
 in 230 cities in a phased manner.
 
 Your Company also plans to strengthen E&P capability and resources by
 participating as a major partner / operator in domestic E&P/CBM
 bidding.  This would help in developing E&P as a self-sustainable
 business for augmenting additional supplies of natural gas. These would
 include investment in both domestic on-land and of-shore fields, with a
 balanced portfolio of developmental and exploratory projects.
 
 The natural gas demand in India is at an infection point and several
 forces are at work that could dramatically increase the natural gas
 demand. The present sources of natural gas are projected to deplete in
 the coming years and therefore, there is a need to look at new sources
 that are coming up.
 
 Your Company is aggressively pursuing gas sourcing options both from
 the new domestic sources as well as through international sources by
 way of pipelines and LNG route. Collectively, such a rapid rise in
 expected demand and re-alignment of sources of gas supply will interact
 to determine the robust future gas industry structure.
 
 In the area of Petrochemicals business, your Company is examining the
 possibility of expansion of Petrochemical Complex at Pata and exploring
 green field opportunities in this sector in India and abroad.
 
 On the globalization front, your Company is tapping areas having
 synergy with existing businesses by entering into new and emerging gas
 rich countries with focus on sourcing of gas and participation in
 downstream activities.
 
 BUSINESS SEGMENT PERFORMANCE
 
 Your Company has been achieving an all round “Excellent” rating by
 Government of India since MoU signing. During the year under review,
 the segment wise business performance of the Company is as under:
 
 Natural Gas
 
 Your Company owns and operates a network of over 7000 km of natural gas
 high pressure trunk pipeline. It supplies over 80 million cubic meters
 of natural gas per day as fuel to power plants, feedstock for gas based
 fertilizer plants and to over 500 small, medium and large industrial
 units to meet their energy and process requirements. Your Company’s
 share of gas transmission business is 79% and it holds 70% market share
 in gas marketing in India.
 
 Natural Gas continues to constitute the core business of your Company.
 During the year 2007-08, Gas Sales have increased marginally to 69.10
 MMSCMD from 67.83 MMSCMD in the previous financial year.  The Gas
 Transmission during the year was 82.10 MMSCMD compared to 77.28 MMSCMD
 in the previous financial year.
 
 Your Company continues to have focus on securing gas supplies from
 international markets. LNG and trans-national pipelines are the two
 prevalent modes of cross border gas trade and your Company has been
 making all eforts to bring natural gas in the country.
 
 Petrochemicals
 
 Your Company owns and operates a gas based integrated petrochemical
 plant at Pata, Uttar Pradesh with a capacity of producing 4,10,000 TPA
 of Polymers i.e.  HDPE and LLDPE, which has been enhanced by 1,00,000
 TPA from the earlier capacity of 3,10,000 TPA. Your Company is
 currently in the process of setting up a 2,80,000 TPA Assam
 Petrochemical Complex at an investment of Rs. 5,460 Crores. During
 2007-08, the production of polymer was 3,86,000 MT and polymer sales
 was 3,91,000 MT.
 
 LPG Transmission and Other Liquid Hydrocarbons
 
 Your Company has 7 LPG plants in the country. In the year 2007-08,
 total Liquid Hydrocarbon production was over 1.348 million MT which
 mainly included 1.043 million MT of LPG, 0.156 million MT of Propane
 and 0.074 million MT of Pentane.
 
 Your Company is the only Company in India which owns and operates
 pipelines for LPG transmission. It has a 1900 km LPG pipeline network,
 1300 km of which connects the Western and Northern parts of India and
 600 km of network is in the Southern part of the country. The LPG
 transmission system has a capacity to transport 3.8 MMTPA of LPG. LPG
 transmission throughput was 2.754 million MT in the year 2007-08.
 
 Exploration and Production (E&P)
 
 In line with your Company’s strategy and towards integration along the
 energy chain, E&P activities have gathered momentum during the year.
 The gas discovery in blocks A-1 and A-3 in Myanmar is maturing to
 development stage and various studies preliminary to finalization of
 the development plan and its implementation are underway.
 
 Presently, your Company is involved in oil and gas exploration
 activities over an acreage of 1.7 Lac sq. km. Your Company now holds a
 participating interest between 10 to 80 per cent in 27 oil and gas
 exploration blocks. Of these, 9 are on-land blocks and 18 are of-shore
 blocks.
 
 In India, there are 24 blocks which are in Basins such as Mahanadi,
 Bengal, Gujarat- Saurashtra, Mumbai, Cambay, Assam-Arakan and Cauvery.
 Your Company has got stake in the A-1 and A-3 blocks in Myanmar and
 Block No. 56 in Oman.
 
 A beginning has been made by your Company in earning revenue from E&P
 activities. One of the on-land block in Cambay basin started commercial
 production from February 2008 and Rs. 6.90 Crores has been generated as
 revenue during Feb-Mar 08.
 
 Coal Bed Methane
 
 Your Company has been participating interest in 3 Coal Bed Methane
 blocks with an area of 1561 sq. km, 2 of which are in Chattisgarh and 1
 in Jharkhand. These blocks were awarded to GAIL consortium in CBM-III
 bidding round.
 
 Telecommunications
 
 Leveraging on its pipeline network, your Company has built up an OFC
 network for leasing of bandwidth as a carriers’ carrier.  Your
 Company’s telecom business unit - `GAILTEL has approximately 13,000 km
 network. During the year under review, GAILTEL achieved profit before
 tax of Rs. 3 Crores.
 
 BUSINESS INITIATIVES
 
 With changes taking place in the gas market, GAIL is continuously
 evolving strategies to prepare itself for the regulated scenario. With
 the enactment of Petroleum and Natural Gas Regulatory Board Act, 2006
 by Parliament and announcement of Gas Pipeline Policy by Government of
 India for business of natural gas transmission, refining, processing,
 storage, transportation, distribution and marketing, the Regulator will
 oversee and promote the development of natural gas sector and also
 envisages an arms length relationship between transmission entity and
 marketing/ exploration activity.
 
 Domestic Initiatives
 
 In its eforts to reduce Green House Gas (GHG) emissions, your Company
 has signed an agreement with Apollo Tyres for sale of steam through
 waste heat recovery at its Vaghodia processing plant. This project will
 save substantial energy by utilizing the waste heat and will lead to
 emission control by avoiding CO2 generation.
 
 With a view to assist the National Capital in increasing power
 generation, your Company has signed Gas Sales Agreement with Pragati
 Power for gas supply to Bawana Power Plant. Your Company has also
 executed Gas Supply Agreements with major suppliers like ONGC, PMT etc
 for augmentation of gas supplies.
 
 Your Company has entered into Gas Transmission Agreement (GTA) with
 Reliance Gas Transportation Infrastructure Limited (RGTIL) for
 Transmission of natural gas from the Krishna-Godavari (KG) basin.  The
 Transmission Agreement provides for transportation of natural gas from
 the exploration block located in the Krishna- Godavari (KG) basin in
 the east coast of India through GAIL’s network and for booking of
 capacity by GAIL in RGTIL’s East-West pipeline.
 
 In order to strengthen the business activities in the area of
 Petrochemicals, your Company has signed a Memorandum of Understanding
 (MoU) with Reliance Industries Limited (RIL) for exploring
 opportunities for setting up a mega petrochemical complex outside India
 in one of the gas rich countries. Further, a Petrochemical plant at
 Vizag is envisaged with HPCL, TOTAL, OIL and Mittal Energy.
 
 Your Company has signed an MoU with ONGCL to work jointly for
 transportation, distribution and marketing of natural gas from its new
 gas finds in KG basin and Mahanadi basin.
 
 Your Company has signed a Gas Cooperation Agreement with Government of
 Puducherry envisaging setting up of a coordination group to study the
 demand potential of the Union Territory of Puducherry for R-LNG / CNG /
 PNG.
 
 Your Company has signed an agreement with the consortia of Reliance
 Industries, BG Group and ONGC, partners of PMT field for buying the
 entire quantity of 17.3 MMCSMD and the same has been efective from
 01.04.2008.
 
 Global Presence
 
 Your Company is continuing its efforts to build strategic alliance with
 international companies to gain entry in the international market.
 
 Apart from its equity participation in three retail gas companies in
 Egypt and China Gas Holdings Limited, participating interest in
 of-shore E&P blocks in Myanmar and one on-land E&P block in Oman, your
 Company is pursuing business opportunities in other regions of the
 world in its core area of operations. Your Company has set up a wholly-
 owned subsidiary company viz. GAIL Global (Singapore) Pte. Ltd. in
 Singapore to facilitate overseas investments.
 
 Your Company has recently formed a Joint Venture with China Gas
 Holdings Limited for taking up the projects in various cities of China.
 Your Company and China Gas Holdings Limited are equal partners in the
 JV. This is the first Joint Venture Company of your Company abroad.
 
 During the year under review, your Company has signed a Memorandum of
 Understanding (MoU) with ITERA Oil & Gas Company of Russia for
 cooperation in projects such as CNG, Gas based Petrochemicals and E&P.
 
 PIPELINE PROJECTS
 
 During the financial year 2007-08, your Company has completed a major
 pipeline project from Dahej to Dabhol via Panvel to supply gas to RGPPL
 which started supplying much needed power to the state of Maharashtra.
 Branch and spur lines to consumers like Deepak Fertilizer, MSEB Uran,
 BPCL and other consumers in the state of Maharashtra have also been
 completed.
 
 The works for providing the connectivity to Pune city and the consumers
 of Thal / Usar region is under progress. Connectivity to REL’s
 East-West Pipeline which will transport gas from Kakinada to Gujarat is
 being provided at Oduru in Andhra Pradesh, Mhaskal in Maharashtra and
 Ankot in Gujarat to enable the flow of gas to consumers in various
 regions enabling optimum utilization of networks on national basis.
 Your Company has received grant of authorization for laying new
 pipelines viz.  Dadri-Bawana-Nangal pipeline; Chainsa - Jhajjar-Hissar
 pipeline; Dabhol-Bangalore pipeline; Jagdishpur-Haldia pipeline and
 Kochi-Kanjirkodd-Mangalore/Bangalore pipeline.
 
 In addition to the above, your Company will also augment the
 GREP(Vijaipur-Dadri) Pipeline and Dahej-Vijaipur Pipeline (DVPL).
 
 These projects are at various stages of implementation. The foremost
 among them is the pipeline from Vijaipur to Bawana which envisages
 supply of gas to Pragati Power at Bawana targeted to supply power to
 NCR before commencement of Commonwealth Games 2010.
 
 These projects will also enable your Company to maintain its dominant
 position in the gas transmission and distribution business.
 
 SUBSIDIARIES & JOINT VENTURES
 
 Your Company has been the pioneer for City Gas Projects in India. With
 natural gas emerging as the fuel of choice in the country, your Company
 believes that the next decade will belong to the city gas.  Your
 Company was the first Company to introduce City Gas Projects in India
 for supplies to households, commercial users and for the transport
 sector by forming Joint Venture Companies.
 
 Subsidiaries
 
 GAIL Gas Limited
 
 Your Company has formed a wholly owned subsidiary named ‘GAIL Gas
 Limited’ for implementing City Gas Projects and CNG corridor in the
 country. The subsidiary company will act as a vehicle for bidding for
 laying of pipeline infrastructure in the country.
 
 GAIL Global (Singapore) Pte. Limited
 
 Your Company has a wholly owned subsidiary, namely, GAIL Global
 (Singapore) Pte. Ltd. to manage investments abroad.  Your Company is
 looking for further business opportunities through this subsidiary
 company.
 
 Brahmaputra Cracker and Polymer Limited
 
 Your Company has 70% equity share with Oil India Limited (OIL),
 Numaligarh Refnery Limited (NRL), Govt. of Assam, each having 10%
 equity share. The authorized capital of the company is Rs. 1,200
 Crores.  A Feedstock Supply Agreement has been signed between
 Brahmaputra Cracker and Polymer Limited (BCPL), and all the three
 suppliers viz., Oil and Natural Gas Company Limited, Oil India Limited
 and Numaligarh Refinery Limited. Financial closure for the project is
 likely to be completed during the year 2008-09.
 
 Joint Ventures
 
 Aavantika Gas Limited (AGL):
 
 AGL is a Joint Venture of your Company and Hindustan Petroleum
 Corporation Limited (HPCL) for implementation of City Gas Projects in
 the cities of Madhya Pradesh.  AGL has started project implementation
 activities in the city of Indore. Your Company has 22.5% stake in the
 Company along with HPCL as equal partner.
 
 Bhagyanagar Gas Limited (BGL):
 
 BGL is currently operating three Auto LPG stations in Hyderabad and one
 Auto
 
 LPG station in Tirupathi. It is currently operating six CNG stations in
 Vijayawada and three CNG stations in Hyderabad.  Your Company has 22.5%
 stake in the company along with HPCL as equal partner.
 
 Central U.P. Gas Limited (CUGL):
 
 CUGL is currently operating five CNG stations in Kanpur, one CNG
 station in Bareily and one CNG station in Kanpur is under
 commissioning. CUGL is building MDPE network for supply of PNG to
 domestic, commercial and industrial sectors in the city of Kanpur. Your
 Company has 22.5% stake in the company along with BPCL as equal
 partner.
 
 Green Gas Limited (GGL):
 
 GGL is currently operating four CNG stations in Lucknow and three CNG
 stations in Agra. GGL will also take up project implementation in other
 cities of Western UP on the basis of gas availability and project
 viability. Your Company has 22.5% stake in the company along with IOC
 as equal partner.
 
 Indraprastha Gas Limited (IGL):
 
 IGL is supplying piped gas to around 1 Lac domestic, 276 commercial, 16
 small industrial consumers and CNG to over 1.35 Lacs vehicles through
 153 CNG stations. IGL is catering to world’s largest CNG bus feet of
 over 11,000 buses in Delhi.  Your Company has 22.5% stake in the
 company along with BPCL as equal partner.
 
 Mahanagar Gas Limited (MGL):
 
 MGL has set up 128 CNG stations catering to over 1.85 Lacs vehicles
 spread over Mumbai, Thane, Mira- Bhayandar and Navi-Mumbai areas
 besides supplying PNG to over 3.40 Lacs domestic, 907 commercial and 36
 small industrial consumers. Your Company has 49.75% stake in the
 company along with British Gas as equal partner.
 
 Maharashtra Natural Gas Limited (MNGL):
 
 MNGL is a Joint Venture of your Company and Bharat Petroleum
 Corporation Limited (BPCL) for implementation of City Gas Projects in
 Pune city. MNGL is developing necessary infrastructure for supply of
 CNG and PNG in the city. Your Company has 22.5% stake in the company
 along with BPCL as equal partner.
 
 Petronet LNG Limited (PLL):
 
 PLL was formed for setting up of LNG import and regasifcation
 facilities. PLL has a long term LNG supply contract with Ras Gas, Qatar
 for import of 7.5 MMTPA. PLL Dahej terminal is being expanded to 10
 MMTPA capacity. Your Company has 12.50% stake in the company along with
 BPCL, IOC and ONGC as equal partners.
 
 Ratnagiri Gas and Power Private Limited (RGPPL):
 
 RGPPL is a Joint Venture Company between your Company, NTPC, Financial
 Institutions and MSEB. Your Company has 28.33% stake in the company
 along with NTPC as equal partner. The capacity of the Ratnagiri Gas &
 Power Station is 2,150 MW. Your Company has made an investment of Rs.
 500 Crores and has approved additional equity of Rs.  475 Crores to
 RGPPL, out of the Rs. 475 Crores, an amount of Rs. 92.90 Crores has
 been paid during the month of May, 2008.
 
 Tripura Natural Gas
 
 Company Limited (TNGCL):
 
 TNGCL is presently supplying gas to 6600 domestic, 104 commercial, 21
 industrial consumers and has set up one CNG station in Agartala city.
 Your Company has 29% stake in the company.
 
 Your Company has approved formation of JV for City Gas Projects in
 Vadodara with Vadodara Mahanagar Seva Sadan (VMSS) with 26 percent
 equity, while VMSS will have 24 per cent equity. The balance 50 per
 cent equity will be held by strategic investors and public. A JV
 agreement has also been signed with HPCL for city gas projects in
 Rajasthan.
 
 INITIATIVES
 
 Your Company is an IT savvy organization and has been continuously
 adopting state-of-the-art IT solutions keeping pace with fast changing
 industry. These solutions are not only helping in continuous
 improvement in efficiency and productivity but also ensuring ‘right
 information to right person’ by use of latest security solutions.
 
 Continuing with IT initiatives, your Company has launched e-tendering
 portal in 2007 and a large number of domestic and international tenders
 are being processed through this transparent and secured system across
 all offices.
 
 There have been a number of e-initiatives for increasing business
 process efficiency and development of manpower. Your Company has
 introduced several other web based online applications like Online
 Recruitment, e-Performance Management System (e-PMS), Grievance
 Redressal System, Online Vigilance Complaint Registration System,
 e-Budgeting System which has led to enhancing transparency, ready and
 structured availability of information, enhancing speed of operation
 and facilitating efficient decision making.
 
 Another major initiative towards IT risk management was to set up the
 state-of- the-art 3-way Disaster Recovery (DR) Centre at Jaipur. This
 will ensure resumption of business operations in the eventuality of any
 disaster like Fire, Flood, Earthquake, Cyber Attack etc. in the primary
 data centre at Noida. The DR setup will ensure uninterrupted IT
 operation and business continuity of your Company.
 
 Transparency
 
 Your Company signed a Memorandum of Understanding (MoU) with
 Transparency International India (TII) on ‘Integrity Pact Programme’ as
 a measure focused at enhancing operational transparency in its
 contracts and procurements process.  Integrity Pact is a tool devised
 by TII worldwide to fight corruption in public procurement and thus to
 assist in improving the credibility of public procedures and
 administration. Your Company is among the first few Indian corporates
 to introduce ‘Integrity Pact’ in procurement and contracts.
 
 Quality Management
 
 Under Quality Management Initiatives, customer satisfaction has been
 accorded highest priority. Corporate Quality Policy and objectives are
 aligned and integrated with Company’s Vision and Corporate Plan.  Some
 of major quality initiatives include ISO Certification of all
 units/plants of your Company to make working system specific; ISO 14000
 (Environment) & OHSAS 18000 (Occupational Health & Safety Assessment
 Series) Certification for all operating units; Customer Value
 Management (CVM) for all the business areas & Six Sigma Implementation
 for Improvement & cost saving in all business areas.
 
 HEALTH, SAFETY & ENVIRONMENT
 
 Your Company is a responsible corporate citizen and Health, Safety and
 Environment (HSE) excellence has been extensively promoted as a
 corporate culture within the organization. Safety & Health of employees
 are embedded values in the organization. HSE policy, inter-alia, aims
 to ensure safety of public, employees, plant & equipment, ensure
 compliance with rules and regulations, imparting training to its
 employees, carrying out safety audits of its facilities, and promoting
 eco-friendly activities.
 
 Major health and safety initiatives taken are mentioned below:
 
 Safety Performance
 
 On the road to HSE excellence, your Company has adopted a top-down
 approach and has embraced the principles and codes of best HSE
 practices in its HSE Management System. Your Company continues to
 demonstrate excellent safety performance. Safety Indices across all
 work centers are meticulously monitored with the aim of continuous
 improvement.
 
 Safety Training
 
 Your Company continues to give utmost importance to train the employees
 on HSE aspects. Apart from employees, spouses, children, contract
 workers, tanker drivers etc. are also imparted safety training.
 
 External Safety Audits (ESA)
 
 Your Company’s safety practices and systems are audited for continual
 improvement by national, international agencies and inter unit safety
 audit teams.  During the year 2007-08, ten safety audits were carried
 by external agencies. Major work centres have been certified for
 Integrated Management Systems (IMS). IMS outlines the standards needed
 to align with, or conform to, internationally accredited certifications
 such as ISO 9001 (quality assurance), ISO 14001 (environment) and OHSAS
 18001 (health and safety). During the year 2007-08, inter unit safety
 audits have been carried out for five units of GAIL.
 
 Occupational Health
 
 Your Company continued its commitment to improve the well being of its
 employees.  During the year 2007-08, all employees at the work centres
 were medically examined.  Besides, contract workers, CISF personnel,
 villagers from nearby areas were also covered under the programme.
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 Your Company has set high standards of discharging corporate social
 responsibilities.  The Company has earmarked 1% of profit after tax of
 the previous financial year for CSR programmes. The funds are
 channelised towards economic, environmental and social upliftment of
 communities in and around the work centres in the major thrust area
 such as Community Development, Infrastructure, Drinking
 Water/Sanitation, Literacy Enhancement/Empowerment, Educational Aids,
 Healthcare/Medical. Major initiatives undertaken by your Company
 towards community development to extend a helping hand to the society
 are detailed below:
 
 During the year, your Company launched a major education initiative
 called ‘e-Shiksha’ for villages in and around its major plants at Pata
 in U.P. and Vijaipur in M.P. The e-Shiksha programme was part of the
 CSR activities and was aimed at imparting basic computer knowledge in
 local language to school students and to school dropouts in respective
 rural areas.
 
 Your Company has created a ‘GAIL Charitable and Education Trust’ with a
 fund of Rs. 20 Crores to extend financial support on merit-cum-means
 basis to school going children as well as professionals.
 
 Your Company has handed over a Field Research Vehicle to Centre for
 Wild Life Studies. Your Company has also undertaken a wild life
 conservation project titled ‘Save Tiger Project’ at Mysore under its
 Corporate Social Responsibility Programme.
 
 Various other initiatives undertaken by your Company in Bangalore
 include aid to Amara Jyothi Handicap Welfare Association, Sree Ramana
 Maharishi Academy for the Blind, National Association for the Blind and
 Sadhana, NGO for welfare of SC/ST/OBC rural women.
 
 Your Company also provided aid for educational infrastructural
 development activities at Hasserraghatta, Magdi and Jambusavari Dinne
 Panchayats of Bangalore Rural District, presentation of a food
 distribution vehicle under Akshya Patra Foundation Scheme, sponsoring
 of artificial limbs/wheel chairs and other infrastructure facilities
 including computer lab for the benefit of the physically challenged
 students.
 
 Your Company has provided drinking water facilities to the drought
 prone 300 rural villages in Rajasthan benefiting around 2 lac
 villagers.
 
 HUMAN CAPITAL
 
 Various initiatives and continuous up- gradation of existing systems
 for proper nurturing of human capital has been the motto of your
 Company.
 
 Value additions were made in the Performance Management System with
 introduction of electronic appraisal system for non-executives. The
 e-PMS for executives was further strengthened and communication of
 their assessment ratings was done through Employee Self Service.
 
 For the first time, an online executive feedback survey titled ‘Right
 man at Right job’ was held. The information collected with regard to
 nature of jobs performed by employees in a particular department,
 location, preference of location etc was mapped for rationalization of
 manpower.
 
 As an improvement to recruitment practices, provision for online
 application by prospective candidates was introduced. As a result, the
 time involved in receiving and sorting of applications, conducting
 trade test & interviews has been considerably reduced.
 
 Training Initiatives
 
 Oil & Gas industry is rapidly transforming all along the value chain.
 This evolution poses new challenges and throws up siginificant growth
 opportunities to your Company. Training and Development is a strategic
 focus and essential to embark upon various growth initiatives. GAIL
 Training Institutes (GTI) at Noida & Jaipur have been set up as
 Intellectual wing to equip human resources with necessary Knowledge,
 Skills and Attitude (KSA) to retain your Company’s competitiveness in
 the emerging marketplace. Both these Institutes are certified for ISO
 9001 Quality Management System. The Training programmes are identified
 by synchronizing organizational needs with individual needs through an
 e-Performance Management System (e-PMS). It is one of the important
 parameters of assessment of MOU performance of your Company & track
 record of excellent performance has been maintained in FY 2007-2008.
 During the period under review, 12,707 training days were imparted.
 
 GTI is also pursuing opportunities to offer training programmes to
 Indian & Overseas companies to convert itself into a Profit Centre. GTI
 is committed to deliver its best with a team of highly skilled faculty
 which possesses a blend of academic and practical experiences to
 achieve the stature at par with other international Training Institutes
 of repute.
 
 Representation of Women Employees and SC/ST/OBC
 
 As on 31st March, 2008 there were 171 women employees (4.82%), (105
 executives and 66 non-executives) in the Company.
 
 The total manpower of the Company as on 31st March, 2008 stood at
 3,548, out of which 17.05% belong to SC, 6.99% belong to ST, 16.80% to
 OBC, 7.41% to Minorities and 2.25% to physically challenged.
 
 Vigilance
 
 The main thrust in your Company is given on Predictive & Preventive
 rather than punitive vigilance. During the year, apart from observing
 the Vigilance Awareness week, your Company conducted a number of
 seminars and awareness programmes for the benefit of employees as well
 as the vendors / customers. Your Company also signed an MOU with the
 Transparency International India (TII) for adopting the Integrity Pact,
 to be signed by all prospective bidders interested in having business
 with GAIL. The MOU / Integrity Pact are aimed at being transparent &
 fair in our day-to-day business activities and to achieve “EXCELLENCE
 WITH ETHICS”.
 
 Official Language
 
 Your Company has been making vigorous efforts for the propagation and
 successful implementation of the Official Language (OL) Policy of the
 Union. The Official Language Implementation Committees at Corporate,
 Regional, and Unit level held their quarterly meetings to monitor and
 review the progress made in achieving the targets fixed in the annual
 programme.
 
 In an endeavour to create awareness among employees about OL Policy of
 the Union, one session on Official Language has been included in each
 in-house training programme conducted by GTI, Noida and Jaipur. To
 enlist greater participation of the employees for accepting and
 implementing the message of Official Language in letter and spirit, the
 existing incentive schemes were made more attractive and some new
 incentive schemes were introduced. Latest bilingual software was
 provided to all the offices.
 
 With a view to create greater awareness and consciousness among
 employees, Hindi Diwas was observed on 14th September 2007 and Hindi
 Fortnight was organized from 14th to 28th September 2007.
 
 Various innovative and interesting competitions, cultural activities,
 seminars, Hindi skits and exhibition on Hindi activities were organized
 across the Company and the employees participated with great
 enthusiasm. A special issue of Hindi magazine is also being published
 on quarterly basis. In order to promote the usage of Hindi in day to
 day work and to create a conducive atmosphere in your Company, all the
 work centres organized several hindi workshops at their level.
 
 AWARDS & RECOGNITIONS
 
 During the year, under review, continuing the past trend, your Company
 was proud recipient of several awards. Some of the significant awards
 conferred upon your Company are as under:
 
 Corporate Award Your Company was adjudged the Oil and Gas
 Transportation Company of the Year, for the year 2006-07. The award was
 presented by Shri Murli Deora, Hon’ble Union Minister of Petroleum and
 Natural Gas to Dr. U.D. Choubey, CMD of the Company.
 
 Your Company was selected as the top Indian company in the
 Gas-Processing, Transmission and Marketing Sector for the Dun &
 Bradstreet Corporate Awards 2007.
 
 The Platts Top 250 Global Energy Rankings are created in collaboration
 with the world’s leading credit-rating and financial information
 Business Standards & Poor’s.
 
 Your Company has been adjudged as the #1 “Gas Utility in Asia” , 4th in
 Gas Utility worldwide, 28th overall in Asia region and 135th on overall
 global perfomance in Platts Top 250 Global Energy Company for 2007.
 
 Infraline Energy Awards 2007 - Service to the Nation Award.
 
 Infraline Energy Awards 2007 - Excellence in Development of Natural Gas
 Sector Award.
 
 HSE
 
 During the year 2007-08, your Company has been awarded with coveted
 awards/ appreciation for its excellent performance in HSE. Some of the
 significant awards are as under:
 
 Golden Peacock Award for Occupational Health & Safety - 2007 for HVJ
 Compressor Station, Vijaipur.
 
 Golden Peacock Award for Environment Management won by GAIL Pata.
 
 International Safety Award from British Safety Council to Rajamundary,
 Gandhar and Pata.
 
 Safety innovation award to Agartala, Gandhar, Hazira, Vagodia &
 Vijaipur .
 
 Two top awards from OISD for GPU Vijaipur and HVJ P/L viz. OISD Safety
 Award for best overall safety performance, Gr-6 for other process
 plants and Gr-5 for Cross- Country pipelines.
 
 Shrestha Suraksha Puruskar” from National Safety Council to HVJ
 compressor, Vijaipur.
 
 Certifcate of Appreciation” from Gujarat Safety Council to GAIL
 Vaghodia & Undera Gas terminal, Baroda.
 
 Prasansha Patra” from National Safety Council to LPG recovery plant,
 Vaghodia.
 
 Gujarat State Safety Award 2006” in Group C category II by Gujarat
 Safety Council to GAIL, Gandhar.
 
 CSR
 
 Conferred the “Silver Plate Award” instituted by Help Age India by Shri
 P. Chidambaram, Honble Finance Minister for commendable contribution
 and displaying true leadership in contributing generously towards
 healthcare of the needy and neglected elders of the country.
 
 Cost Management
 
 Your Company has once again received the national award for excellence
 in Cost Management 2007 from The Institute of Cost and Works
 Accountants of India (ICWAI). JLPL unit won the second award in Public
 Sector - Service category and Gandhar LPG unit won the 3rd award in
 Public Sector - Manufacturing category. This is the fourth time in a
 row your Company has secured the award for excellence in Cost
 Management.
 
 Others
 
 Dr. U.D. Choubey, CMD was awarded the Amity Lifetime Achievement Award.
 The Lifetime Achievement Award has been given to Dr. Choubey in
 recognition of his outstanding contribution to the overall development
 of social and business economies.
 
 Dr. U.D. Choubey, CMD was honoured with Distinguished Fellowship Award
 of Institute of Directors (IOD) which was presented by Shri N.
 Gopalaswami, Chief Election Commissioner.
 
 Shri M.R. Hingnikar, Director (HR) was honoured with Bharat Gaurav
 Award.
 
 RIGHT TO INFORMATION
 
 In order to promote transparency and accountability, an appropriate
 mechanism has been set up across the Company in line with the Right to
 Information Act, 2005.  Your Company has nominated APIO’s/PIO’s/ CPIO
 at its units/ofces across the country to provide information to
 citizens under the provisions of RTI Act.
 
 ENERGY CONSERVATION, TECHNOLOGY ABSORPTION
 
 Details of conservation of energy, technology absorption in accordance
 with Companies (Disclosure of Particulars in the Report of Board of
 Directors) Rules, 1988 are annexed at Annexure A.
 
 PARTICULARS OF EMPLOYEES UNDER SECTION 217 (2A) OF THE COMPANIES ACT,
 1956
 
 The particulars of employees u/s 217 (2A) of the Companies Act, 1956,
 read with Companies (Particulars of Employees) Rules, 1975 is annexed
 to this report at Annexure B.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 The detailed Management Discussion and Analysis of the financial
 condition and results of operations separately form part of this
 report.
 
 CORPORATE GOVERNANCE
 
 Your Company believes Corporate Governance is at the root of
 Shareholder’s Value creation. Pursuant to Clause 49 of the Listing
 Agreement with the Stock Exchanges, Corporate Governance Report forms
 part of this Report.
 
 The statutory auditors of the Company have examined and certified your
 Company’s compliance with respect to conditions enumerated in clause 49
 of the listing agreement and DPE guidelines on corporate governance.
 The certificate forms part of this Report.
 
 FIXED DEPOSITS
 
 Your Company has not accepted any Fixed Deposits and, as such no amount
 of principal or interest was outstanding as of the balance sheet date.
 
 FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 During the year, foreign exchange earnings were Rs. 6.87 Crores.
 Expenditure in foreign currency was Rs. 702.63 Crores.
 
 During the year, your Company has incurred expenditure of Rs. 1.61
 Crores on foreign tours, foreign training, seminars & conferences, Rs.
 0.45 Crores on entertainment and Rs. 9.16 Crores on advertising &
 publicity.
 
 DIRECTORS
 
 Articles of Association of the Company provide that the term of at
 least two- thirds of the Directors shall be subject to retirement by
 rotation. One third of these retiring Directors must retire from office
 at each Annual General Meeting of the Shareholders. A retiring Director
 is eligible for re-election.
 
 As per the provisions of the Articles of Association of the Company,
 Shri R.K. Goel, Director (Finance), Dr. Amit Mitra and Dr. A.K. Kundra,
 Director(s) retire by rotation and being eligible offer themselves for
 re- appointment at this Annual General Meeting.
 
 During the year, Shri B.C. Bora, non-official part-time (Independent)
 Director ceased to be Director w.e.f. 25.02.2008. Dr. U.K. Sen was
 appointed as non-official part-time (Independent) Director w.e.f.
 29.04.2008.
 
 CODE OF CONDUCT
 
 The Board members and senior management personnel, as defined in clause
 49 of listing agreement have affirmed compliance with the code of
 conduct during the financial year ending 31st March, 2008.
 
 DIRECTORS’ RESPONSIBILITY STATEMENT PURSUANT TO SECTION 217 (2AA) OF
 THE COMPANIES ACT, 1956
 
 Pursuant to the requirement of Section 217(2AA) of the Companies Act,
 1956 in relation to Directors’ Responsibility Statement, it is
 confirmed that:
 
 i) in the preparation of the annual accounts for the financial year
 ended 31st March, 2008, the applicable accounting standards have been
 followed along with proper explanation relating to material departures;
 
 ii) The Directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the Company at the end of the financial year and of the profit of
 the Company for the year under review;
 
 iii) The Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act,1956 for safeguarding the assets of the
 Company and for preventing and detecting fraud and other
 irregularities;
 
 iv) The Directors have prepared the annual accounts for the financial
 year ended 31st March, 2008 on a going concern basis.
 
 AUDITORS
 
 The Office of Comptroller & Auditor General of India vide its letter
 no. CA V/COY/ CENTRAL GOVT, GAIL (3)/247 dated 6th August, 2007 has
 appointed
 
 M/s Mehra Goel & Co., Chartered Accountants, New Delhi as Statutory
 Auditors of the Company, M/s. SCJ Associates, Chartered Accountants,
 Agra as Branch Auditors for U.P. Petrochemicals Complex at Pata and M/s
 Rupa Sekar & Associates, Chartered Accountants, Bhopal as Branch
 Auditors for LPG Plant at Vijaipur for the year 2007-08.
 
 Pursuant to the direction from the Ministry of Company Affairs vide its
 letter no.  52/52/CAB-2007 dated 24th January, 2007 for appointment of
 Cost Auditors, your Company has appointed M/s R.J. Goel & Co., Delhi
 for Vijaipur - LPG, M/s Ramnath Iyer & Co., New Delhi for Pata - LPG,
 M/s K.G.  Goyal & Co., Jaipur for Vaghodia - LPG, M/s Shome & Banerjee,
 New Delhi for Gandhar - LPG, M/s K. Narsimhma Murthy, Hyderabad for
 Usar - LPG, M/s Bandyopadhyaya & Bhaumik & Co., Kolkata for Lakwa - LPG
 and M/s R. M.  Bansal & Co., Kanpur for CNG Station, Baroda as Cost
 Auditor for the year ended 31st March, 2008.
 
 ACKNOWLEDGMENT
 
 The Board of Directors acknowledge their gratitude for the valuable
 guidance and support received from Government of India in particular,
 the Ministry of Petroleum and Natural Gas (MoPNG) and various State
 Governments.
 
 The Board acknowledges their deep and sincere thanks for the
 co-operation and assistance received from Shareholders,
 
 Bankers, Financial Institutions, Customers and Suppliers.  The Board
 would like to place on record its appreciation to the hard work,
 commit- ment and unstinting efforts put in by your Company’s employees
 at all levels.
 
                                          For and on behalf of the Board
                                                        Dr. U.D. Choubey
                                            Chairman & Managing Director
 Place: New Delhi
 Dated: 15th July, 2008