GAIL India
BSE: 532155 | NSE: GAIL | ISIN: INE129A01019 | Oil Drilling And Exploration
- Directors Report
- Chairman's Speech
- Auditors Report
- Notes To Accounts
- Accounting Policy
- Finished Products
- Raw Materials
| Notes to Accounts | Year End : Mar '09 |
1. Estimated amount of Contracts remaining to be executed on Capital Account and not provided for: i) Share in Capital Commitment of Joint Ventures based on their unaudited statement of accounts: Rs. 340.58 Crores (Previous Year: Rs.308.43 Crores). ii) Companys own unexecuted capital commitment: Rs 2890.08 Crores (Previous Year: Rs 452.26 Crores). 2. Contingent Liabilities :- I. Claims against the Company not acknowledged as debts: Rs 4758.54 Crores (Previous Year: Rs 3822.84 Crores), which mainly include:- (a) Claims of ONGCL for Rs 352.74 Crores (Previous Year: Rs 390.85 Crores) on account of interest for delayed payment and MGO, etc. Out of these MGO claims of Rs 48.69 Crores (Previous Year: Rs 68.23 Crores) are recoverable on back-to-back basis. (b) Income tax assessments up to the Assessment Year 2006-07 have been completed and a demand of Rs 1212.56 Crores relating to the Assessment Years 1996-97 to 2006-07 (Previous Year: Rs 1162.90 Crores) is raised by disallowing deductions claimed by the company. The company has already made the payment of Rs 1131.74 Crores (Previous Year: Rs 1160.69 Crores) under protest. Based upon the decision of the appellate authorities and the interpretation of the Income Tax Act, the company has been legally advised that the demand is likely to be deleted or it may be substantially reduced.The company has filed appeal against the demand for the Assessment Years 1996-97 to 2004-05 with Income Tax Appellate Tribunal (ITAT) and for Assessment Year 2005-06 & 2006-07 with Commissioner of Income Tax (Appeal). (c) Legal cases for claim of Rs 2507.59 Crores (Previous Year: Rs 2304.04 Crores) by vendors on account of Liquidated damages/Price Reduction Schedule, Natural Gas price differential etc and by customers for Natural gas transmission charges etc. Further details are not disclosed as same are expected to prejudice the legal proceedings. II. Bank Guarantee & Letters of Credit: Rs 1105.82 Crores (Previous Year: Rs 191.75 Crores) including bank guarantees issued on behalf of subsidiaries Rs 9.00 Crores (Previous Year: Nil) III. The Company has issued corporate guarantee for Rs. 254.34 Crores (Previous Year: Nil) in favour of Oil Industry Development Board (OIDB) on behalf of Brahamputra Cracker & Polymer Limited (BCPL), a subsidiary of the company, for raising a loan. IV. Share in Contingent Liabilities of Joint Ventures based on their unaudited statement of accounts: Rs 229.05 Crores (Previous Year: Rs 229.51 Crores). 3. Sales Tax demand of Rs 3449.18 Crores (Previous Year: Rs 3449.18) and interest thereon Rs 1513.04 Crores (Previous Year: Rs 1513.04) for Hazira unit in Gujarat State: Sales Tax Authorities, Ahmedabad have treated the transfer of Natural Gas by the company from the state of Gujarat to other states during the period April, 1994 to March, 2001 as inter-state sales under Section 3(a) of the Central Sales Tax Act. The company has been paying sales tax under section 12 of the Gujarat Sales Tax Act against Form 17 since inception (1987) and accordingly the sales tax assessments have been completed. Based on the interpretation of the provisions of the Sales Tax Act and legal advice from the experts, the company had filed writ petition and special leave petition in the Supreme Court of India. In February, 2005 the case was transferred by Honble Supreme Court to Gujarat Sales Tax Tribunal for decision. The Tribunal has given its judgment on 16.05.2005 accepting the contention of the company for interstate transfer of Natural Gas as branch transfer and not the interstate sale and set aside the demand under section 41-B of the Gujarat Sales Tax Act. The Honble Tribunal has given further instruction to the Assessing Authority to re- assess and decide tax liability in accordance with the law for the period 1998-99 to 2000- 2001 considering interstate transfer of natural gas as branch transfer. The Sales Tax Authorities had filed rectification application under section 72 of the Gujarat Sales Tax Act, 1969 in Gujarat Sales Tax Tribunal against its judgment dated 16.05.2005. The Tribunal had dismissed the rectification application of the sales tax authorities vide its order dated 06.07.2006. The sales tax authorities have now filed petition in honble high Court Ahmedabad against the order of the tribunal and no hearing has yet taken place. In opinion of the management there is a remote possibility of crystallizing this liability. 4. (a) Freehold land acquired for city gas Lucknow and Kanpur, Jhansi Maintenance Base Sectionalising Valves in Jamnagar Loni Pipeline and Mumbai valuing Rs 1.70 Crores (Previous Year: Rs 1.78 Crores) are valued / capitalized on provisional basis. (b) Title deeds for freehold land, valuing Rs 3.19 Crores (Previous Year: Rs 2.16 Crores) and leasehold land valuing Rs 23.23 Crores (Previous Year: Rs 21.91 Crores) are pending execution. (c) Title Deeds in respect often residential flats at Asiad Village, New Delhi, valuing Rsl. 17 Crores (Previous Year: Rs 1.17 Crores) are still in the name of ONGCL Concerned authorities are being pursued for getting the same transferred in the name of the Company. (d) The cost of right of use (ROU) amounting to Rs 53.96 Crores as on 31.03.2009 (Previous Year: Rs 46.64 Crores) has been capitalized as intangible asset. The Company has perpetual Right of Use but has no ownership of land. 5. (a) The balance retention from PMTJV consortium amounting to Rs 57.38 Crores (Previous Year: Rs 426.72 Crores) includes interest (net ofTDS) amounting to Rs 3.10 Crores (Previous Year: Rs 88.00 Crores) on Short term deposits for the year.The TDS amounting to Rs. Nil (Previous Year: Rs 21.14 Crores) has been deducted by the bankers on the interest earned on Short term deposits. This interest income and TDS does not belong to the company hence not accounted for. (b) Liability on account of Gas Pool Money amounting to Rs.1512.25 Crores (Previous Year: Rs. 710.60 Crores) includes interest amounting to Rs. 108.13 Crores (Previous Year: Rs. 19.55 Crores) on short term deposits. This interest does not belong to the company hence not accounted as income. 6. Advance recoverable in Cash or in kind or value to be received includes an amount of Rs.3.02 Crores (Previous Year: Rs.3.11 Crores) recoverable on account of Disinvestment by Government of India of its equity in the company by way of GDR/offer for sale. 7. The Pay Revision of the employees of the company due w.e.f. 1 st January 2007 has been approved by Government of India. Pending implementation of pay revision, provision of Rs. 184.39 Crores (upto Previous Year Rs 130.71 Crores) after adjustment of adhoc advance of Rs.58.94 Crores has been made on estimated basis having regard to the guidelines issued by Government of India. Further as per the guidelines, gratuity limit has been enhanced to Rs 10 Lakhs per employee. Considering these, the actuarial valuation for gratuity has been provided for during the year. 8. A net amount of Rs 2.22 Crores (Previous Year: Rs 6.22 Crores) has been credited to Profit & Loss account due to exchange rate variation. 9. The required disclosure under the Revised Accounting Standard 15 is given as below: (i) DEFINED CONTRIBUTION PLAN Company pays fixed contribution to Provident Fund at predetermined rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognized as expense and is charged to the Profit & Loss accounts. The obligation of the company is limited to such fixed contribution. However, the trust is required to pay a minimum rate of interest on contributions to the members as specified by Government of India (GOI). The fair value of the assets of the Provident Fund including the returns on the assets thereof, as on the Balance Sheet date is greater than the obligations under the defined contribution plan. An amount of Rs 20.25 Crores (Previous Year Rs. 15.50 Crores) expense recognized as for defined contribution plan (Contributory Provident Fund). (ii) DEFINED BENEFIT PLAN Brief description. A) Earned Leave Benefit (EL) Accrual 30 days per year. Encashment while in service 75% of Earned Leave balance subject to maximum of 90 days at a time, twice per calendar year. Encashment on retirement or superannuation maximum 300 days. B) Half Pay Leave (HPL) Accrual 20 days per year. Encashment while in service NIL. Full encashment on retirement. C) Gratuity 15 days salary for every completed year of service. Vesting period is 5 years and payment is restricted to Rs 10 Lakhs (Previous Year: Rs.3.50 Lakhs). D) Post Retirement Medical Benefit (PRMS) Upon payment of one time prescribed contribution by the superannuated employees/those who resigned from service can avail the facility subject to the completion of minimum of 10 years of service and 50 years of age. E) Terminal Benefits At the time of superannuation, employees are entitled to settle at a place of their choice and they are eligible for transfer of traveling allowance. Employees are gifted a gold coin weighing 25 grams. F) Long Service Award (LSA) Employees are eligible for gold coin after every five years depending upon the completion of service, subject to minimum of 15 years of service. The following table summarizes the components of net benefit expenses recognized in the Profit and Loss Account. NOTE: (i) The estimates of future salary increases considered in actuarial valuation, taken account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. 10. MOP&NG had issued scheme of sharing the under recoveries of Oil marketing Companies on account of non-revision in selling price of PDS Kerosene and domestic LPG. During the year, the Company has given discounts to Oil marketing Companies amounting to Rs.1781.20 Crores (Previous Year: Rs.1313.74 Crores) out of which Rs.86.98 Crores (Previous Year: Rs.387.24 Crores) pertain to short provision for the quarter Jan-March2008. Corresponding adjustment on account of CST amounting to Rs.20.93 Crores (Previous Year: Rs.20.05 Crores) has been made. 11. (a) The Company is raising provisional invoices for sale of R-LNG as the supplier M/s Petronet LNG Ltd (PLL) is also raising provisional invoices on the Company since customs duty on import of LNG by PLL has been assessed on provisional basis. (b) With effect from April 1,2002, Liquefied Petroleum Gas prices has been deregulated and is now based on the import parity prices fixed by the Oil Companies. However, the pricing mechanism is provisional and is pending finalization. Additional asset/liability or impact on profits, if any, arising due to such change, will be recognized on finalization of pricing mechanism. (c) Petroleum and Natural Gas Regulatory Board (PNGRB) have issued PNGRB (Determination of Natural Gas Pipeline Tariff) Regulations 2008 effective from 20th November 2008. As per these Regulations, the natural gas pipeline tariff being charged by the company for its pipeline networks in operation is subject to revision with retrospective effect in accordance with the Regulations. Impact on profits, if any, will be recognized when the pipeline tariff is revised in accordance with the Regulations. (d) Value of Annual Take or Pay Quantity (ATOPQ) of Gas is accounted for on receipt basis and shown as liability till make up Gas is delivered to customer, during the recovery period, in terms of the Gas Sales Agreement with the customers. 12. In compliance of Accounting Standard 17 on Segment Reportingas notified under Companies Accounting Standard Rules,2006, the required information is given as per Annexure A to this schedule.The Company has adopted following Business segments as its reportable segment. (i) Transmission services a) Natural Gas b) LPG (ii) Natural Gas Trading (iii) Petrochemicals (iv) LPG and other Liquid Hydrocarbons (v) GAILTEL (vi) Others There are no geographical segments. 13. In compliance of Accounting Standard 18 on Related party Disclosuresas notified under Companies Accounting Standard Rules,2006, the names of related parties, nature of relationship and detail of transactions entered therewith are given in Annexure B. 14. (b) Income Tax Provisions for the current year includes Rs. 22.17 Crores related to Financial Year 1998-99 being demand paid on an order passed under section 154 of the Income Tax Act, 1961. 15. In Compliance of Accounting Standard 27 on Financial Reporting of Interests in Joint Venturesas notified under Companies Accounting Standard Rules,2006, brief description of Joint Ventures of the Company are: (i) Mahanagar Gas Limited: A Joint venture with British Gas Pic and Government of Maharashtra to supply gas to domestic, commercial and small industrial consumers and CNG for transport sector in Mumbai.The Company has invested Rs 44.45 Crores for acquiring 4,44,49,960 equity shares of Rs 10 each of the Company, presently being 49.75% of the paid up capital. (ii) Indraprastha Gas Limited: A Joint venture with BPCL and Government of National Capital Territory (NCT) of Delhi to supply gas to domestic, commercial units and CNG for transport sector in Delhi. The Company has invested Rs 31.50 Crores for acquiring 3,15,00,000 equity shares of Rs 10 each of the Company, presently being 22.50% of the paid up capital. (iii) Petronet LNG Limited: A Joint venture with BPCL, IOCL and ONGCL for setting up LNG imports facilties.The Company has invested Rs 98.75 Crores for acquiring 9,37,50,000 equity shares of Rs 10 each of the Company, presently being 12.50% of the paid up capital. (iv) Bhagyanagar Gas Limited: A Joint Venture Company with HPCLfor distribution and marketing of CNG, Auto LPG, Natural Gas and other gaseous fuels in Andhra Pradesh with the equity participation of 22.50% of the paid up capital. The Company has an investment of Rs. 0.01 Crores and has been allotted 12,497 equity shares of Rs 10 each of the Company. The Company has further paid Rs 17.48 Crores [Previous Year: Rs. 9.98 Crores) as advance pending allotment of equity shares. (v) Tripura Natural Gas Company Limited: A Joint Venture Company with Assam Gas Company Limited and Tripura Industrial Development Corporation for transportation and distribution of natural gas through pipelines in Tripura with the equity participation of 29% of the paid up capital.The Company has paid Rs 0.83 Crores (Previous Year: Rs. 0.83 Crores) as advance pending allotment of equity shares. (vi) Central UP Gas Limited: A Joint Venture Company with BPCL to supply gas to domestic, commercial and small industrial consumers and CNG for transport sector in Kanpur, Uttar Pradesh with the equity participation of 22.50% of the paid up capital.The Company has an investment of Rs. 13.50 Crores and has been allotted 1,35,00,000 equity shares of Rs 10 each of the Company. (vii) Green Gas Limited: A Joint Venture Company with IOCL to supply gas to domestic, commercial and small industrial consumers and CNG for transport sector in Agra & Lucknow, Uttar Pradesh with the equity participation of 22.50% of the paid up capital.The Company has an investment of Rs. 0.01 Crores and has been allotted 12,500 equity shares of Rs 10 each of the Company. The Company has paid Rs 15.48 Crores (Previous Year: Rs. 7 Crores) as advance pending allotment of equity shares. (viii) Maharashtra Natural Gas Limited: A Joint Venture Company with BPCL to supply gas to domestic, commercial and small industrial consumers and CNG for transport sector in Pune, Maharashtra with the equity participation of 22.50% of the paid up capital.The Company has an investment of Rs. 0.03 Crores and has been allotted 25,000 equity shares of Rs 10 each of the Company. The Company has paid Rs 22.48 Crores (Previous Year: Rs. 18.48 Crores) as advance pending allotment of equity shares. (ix) Ratnagiri Gas and Power Private Limited: A Joint Venture company promoted by GAIL, NTPC and other Financial Institutions for the revival of the Dabhol Project with the equity participation of 28.33% of the paid up capital.The Company has an investment of Rs. 500.00 Crores and has been allotted 50,00,00,000 equity shares of Rs 10 each of the Company. The Company has paid Rs 192.90 Crores (Previous Year: Nil) as advance pending allotment of equity shares. (x) Avantika Gas Ltd. A Joint Venture company promoted by GAIL and HPCL to supply gas to domestic, commercial and small industrial consumers and CNG for transport sector in MP with the equity participation of 22.5% of the paid up capital.The Company has an investment of Rs. 0.01 Crores and has been allotted 12,500 equity shares of Rs 10 each of the Company. The Company has paid Rs 13.50 Crores (Previous Year: Rs. 13.50 Crores) as advance pending allotment of equity shares. The Companys share in the assets and liabilities as at 31 st March, 2009 and in the Income and expenditure for the year in respect of above Joint ventures, based on unaudited statements of accounts as furnished by them, is as under: Final adjustments shall be effected during the year in which audited accounts are received. 16. Jointly Controlled Assets (i) The Company has participated in joint bidding under the Government of India New Exploration Licensing Policy and overseas exploration bidding and has 24 Blocks (PY 24 Blocks) 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 would share in Expense/lncome/Assets/Liabilities based upon (iv) The Companys share in the assets and liabilities as at 31st March 2009 and in the Income and the expenditure for the year in respect of joint operations project blocks has been incorporated in the Companys financial statements based upon un audited statement of accounts submitted by the operators are given below and final adjustments shall be effected during the year in which audited accounts are received. (v) Share of Minimum work programme committed under various production sharing contracts in respect of E & P joint ventures is Rs 585.67 Crores (Previous Year: Rs 449.72 Crores) 17. In compliance with amended Clause 32 of the Listing Agreement with Stock Exchanges, the required information are given in Annexure C. 18. In some cases, the Company has received intimation from Micro and Small Enterprises underThe Micro, Small and Medium Enterprises Development Act, 2006. The Company has certified that as a practice, the payment to Suppliers is made within 7-10 days. No payments beyond appointed date were noticed. The amount remaining unpaid as at 31st March 2009isRs.1741.78Crores (Previous Year: Rs. 1627.02 Crores). No payments beyond the appointed date were noticed. No interest was paid or payable under the Act. 19. Following Government of Indias 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 JVC in which GAIL will have equity participation of 70%. A company by the name of Brahmaputra Cracker and Polymer Limited has been incorporated during 2006-07. The gross block of fixed assets and Capital work in progress value of Lakwa unit is Rs.252.58 Crores as on 31 st March 2009 (Previous Year: Rs. 252.16 Crores). 20. Non-Refundable Deposits made with the concerned authorities for railway crossings, forest crossings, removal and laying of electric/telephone poles and lines are accounted for under Capital Work-in-Progress on the basis of work done/confirmation from the concerned department. 21. Balances grouped under Material with Contractors, Sundry Debtors, Loans and Advances, Deposits and Sundry Creditors, etc. are subject to confirmation. 22. Duty Entitlement Pass Book (DEPB)/Duty Entitlement Exemption Certificate (DEEC) income is accounted for on the basis of acceptance/certificate issued by Director General of Foreign Trade (DGFT). 23. The Company has incurred an expenditure of Rs 0.32 Crores (Previous Year: Rs. 0.32 Crores) on account of proposed City gas projects to be set up under JV which is accounted under capital Work in progress.This amount would be recoverable from the proposed Joint ventures to be formed for city gas distribution projects in India. 24. In accordance with the approval of the Shareholders in the Annual General Meeting held on 4th September 2008, the Company has during the year allotted Bonus Shares in the ratio of one equity share for every two equity shares held by share holders.The paid up share capital of the company increased to Rs. 1268.48 Crores. EPS of the current and previous year has been calculated in accordance with Accounting Standard-20 as notified under Companies Accounting Standard Rules, 2006. Further, the Board in its meeting held on 6th October 2008 had approved the appointment of Independent Trustee for disposal of odd lot of shares. Accordingly, resulting 17,532 fractional equity shares for 35,064 shareholders were consolidated and allotted to the Trustee who sold the same and distributed the sale proceeds equally among all entitled shareholders. The calculation of basic and diluted earnings per share for the year ended 31.03.08 has been adjusted for bonus shares issued during 2008-09. 25. In terms of approval of Board of Directors, theCompany levied service charge Rs.110/- per 1000 SCM w.e.f. 1.10.2008 on supply of Natural Gas to APM customers and intimated to Ministry of Petroleum & Natural Gas (MOP&NG). In terms of MOP&NG letter dated 20.04.2009, revenue of Rs.89.41 Crores recognised in the books of Accounts towards service charge till 31.3.2009 have been reversed and provision of Rs. 2.64 Crores has been made for taxes doubtful of recovery. 26. The Profit & Loss Account includes: - (a) Expenditure on Public Relations amounting to Rs 11.89 Crores (Previous Year: Rs 9.16 Crores). The ratio of annual expenditure on Public Relations and Publicity to the annual turnover is 0.0005:1 (Previous Year: 0.0005:1). (b) Research and Development Expenses Rs Nil (Previous Year: Rs 0.01 Crores). (c) Entertainment Expenses Rs.0.11 Crores (Previous Year: Rs 0.45 Crores). 27. Previous Years (PY) figures have been regrouped and recast to the extent practicable, wherever necessary. Figures in brackets indicate deductions RELATED PARTY DISCLOSURES U I) Relationship A) Joint Venture Companies/Associates 1) Mahanagar Gas Limited 2) Indraprastha Gas Limited 3) Petronet LNG Limited 4) Bhagyanagar Gas Limited 5) Tripura Natural Gas Corporation Limited 6) Central UP Gas Limited 7) Green Gas Limited 8) Maharashtra Natural Gas Limited 9) Avantika Gas Ltd. 10) Shell Compressed Natural Gas 11) Gujrat State Electricity Generation Ltd. 12) National Gas Company Nat Gas 13) Fayum Gas Company 14) China Gas Holding Ltd. 15) GAIL China Gas Global Energy Holding Ltd. B) Whole time Directors: 1) Dr U. D. Choubey .Chairman and Managing Director 2) ShriR.K.Goel 3) Shri M. R. Hingnikar (up to 27th July 2008) 4) Shri Santosh Kumar 5) Shri A.K. Purwaha 6) Shri BCTripathi C) Unincorporated Joint venture for Exploration & Production Activities: 1) NEC-OSN-97/1 (Non-operator with participating interest: 50%, GAIL has relinquished from the Block on 11th September 2007) 2) CB-ONN-2000/1 (Non-operator with participating interest: 50%) 3) A-1, Myanmar (Non-operator with participating interest: 10%) 4) CY-OS/2 (Non-operator with participating interest: 25%) 5) AA-ONN-2002/1 (Non-operator with participating interest: 80%) 6) CY-ONN-2002/1 (Non-operator with participating interest: 50%) 7) AA-ONN-2003/2 (Non-operator with participating interest: 35%) 8) CB-ONN-2003/2 (Non-operator with participating interest: 20%) 9) AN-DWN-2003/2 (Non-operator with participating interest: 15%) 10) A-3, Myanmar (Non-operator with participating interest: 10%) 11) Block 56, Oman (Non-operator with participating interest: 25%) 12) RJ-ONN-2004/1 (Joint operator along with GSPCL and having participating interest of 22.225%) 13) KG-ONN-2004/2 (Non-operator with participating interest: 40%) 14) MB-OSN-2004/1 (Non-operator with participating interest: 20%) 15) MB-OSN-2004/2 (Non-operator with participating interest: 20%) 16) RM-CBM-2005/III (Non-operator with participating interest: 35%) 17) TR-CBM-2005/III (Non-operator with participating interest: 35%) 18) MR-CBM-2005/III (Non-operator with participating interest: 40%) 19) AD-7, Myanmar (Non-operator with participating interest: 10%) |
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