Gujarat Gas Company

1.  We have audited the attached consolidated balance sheet of Gujarat
 Gas Company Limited and its subsidiaries (the Group) as at December 31
 , 2008, the consolidated profit and loss account and the consolidated
 cash flow statement for the year ended on that date, annexed thereto,
 which we have signed under reference to this report. These consolidated
 financial statements are the responsibility of Gujarat Gas Company
 Limited’s management. Our responsibility is to express an opinion on
 these consolidated financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are prepared, in all material respects, in
 accordance with an identified financial reporting framework and are
 free of material misstatement. An audit includes examining, on a test
 basis, evidence supporting the amounts and disclosures in the financial
 statements. An audit also includes assessing the accounting principles
 used and significant estimates made by management, as well as
 evaluating the overall financial statement presentation. We believe
 that our audit provides a reasonable basis for our opinion.
 
 3.  We report that the consolidated financial statements have been
 prepared by the company in accordance with the requirements of
 Accounting Standard 21 , Consolidated Financial Statements, notified
 under section 211(3C) of the Companies Act, 1956 and on the basis of
 the separate audited financial statements of Gujarat Gas Company
 Limited and its subsidiaries included in the consolidated financial
 statements.
 
 4.  On the basis of the information and explanations given to us and on
 consideration of the separate audit reports on individual audited
 financial statements of Gujarat Gas Company Limited and its aforesaid
 subsidiaries, in our opinion, the consolidated financial statements
 give a true and fair view in conformity with the accounting principles
 generally accepted in India:
 
 (a) in the case of the consolidated balance sheet, of the consolidated
 state of affairs of the Group as at December 31, 2008;
 
 (b) in the case of the consolidated profit and loss account, of the
 consolidated results of operations of the Group for the year ended on
 that date; and
 
 (c) in the case of the consolidated cash flow statement, of the
 consolidated cash flows of the Group for the year ended on that date.
 
 Annexure to Auditors’ Report
 
 [Referred to in paragraph 3 of the Auditors’ Report of even date to the
 members of Gujarat Gas Company Limited on the financial statements for
 the year ended December 31, 2008]
 
 i) a) The Company is maintaining proper records showing full
 particulars including quantitative details and situation of its fixed
 assets.
 
 b) The fixed assets are physically verified 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. Pursuant to the
 programme, a portion of the fixed assets has been physically verified
 by the management during the year and no material discrepancies between
 the book records and the physical inventory have been noticed.
 
 c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 off by the Company during the year.
 
 ii) a) The inventory (excluding stocks with third parties) has been
 physically verified by the management during the year. In respect of
 inventory lying with third parties, these have been confirmed by them.
 In our opinion, the frequency of verification is reasonable.
 
 b) In our opinion, the procedures of physical verification of inventory
 followed by the management are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 c) On the basis of our examination of the inventory records, in our
 opinion, the Company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material.
 
 iii) a) The Company has not granted any loans, secured or unsecured, to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act.
 
 b) The Company has not taken any loans, secured or unsecured, from
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act.
 
 iv) In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain items
 purchased are of special nature for which suitable alternative sources
 do not exist for obtaining comparative 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, fixed assets
 and for the sale of goods and services. Further, on the basis of our
 examination of the books and records of the Company, and according to
 the information and explanations given to us, we have neither come
 across nor have been informed of any continuing failure to correct
 major weaknesses in the aforesaid internal control system.
 
 v) a) In our opinion and according to the information and explanations
 given to us, the particulars of contracts or arrangements referred to
 in Section 301 of the Act have been entered in the register required to
 be maintained under that section.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements and exceeding the value of Rupees Five 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.
 
 vi) The Company has not accepted any deposits from the public within
 the meaning of Sections 58A and 58AA of the Act and the rules framed
 thereunder.
 
 vii) In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 viii) The Central Government of India, under clause (d) of sub-section
 (1) of Section 209 of the Act, has prescribed the maintenance of cost
 records. The company is in the process of preparing the cost records
 and accounts for the year.
 
 ix) a) According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion, the Company
 is regular in depositing the undisputed statutory dues including
 provident fund, investor education and protection fund, employees’
 state insurance, income-tax, sales-tax, wealth tax, service tax,
 customs duty, excise duty, cess and other material statutory dues as
 applicable with the appropriate authorities.
 
 b) According to the information and explanations given to us and the
 records of the company examined by us, there are no dues of income tax,
 wealth tax, service tax, customs duty, excise duty and cess which have
 not been deposited on account of any dispute.
 
 x) The Company has no accumulated losses as at December 31, 2008 and it
 has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 xi) According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or debenture
 holders as at the balance sheet date.
 
 xii) The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 xiii) The provision of any special statute applicable to chit fund/
 nidhi/ mutual benefit fund/ societies are not applicable to the
 Company.
 
 xiv) In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 xv) During the year, the company has not obtained any term loans.
 
 xvi) In our opinion, and according to the information and explanations
 given to us, on an overall basis, the term loans have been applied for
 the purposes for which they were obtained.
 
 xvii) On the basis of an overall examination of the balance sheet of
 the Company, in our opinion and according to the information and
 explanations given to us, there are no funds raised on a short-term
 basis which have been used for long-term investment.
 
 xviii) The Company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under Section
 301 of the Act during the year.
 
 xix) The Company has not issued any debentures during the year and
 there are no debentures outstanding as at the year end.
 
 xx) The Company has not raised any money by public issues during the
 year.
 
 xxi) During the course of our examination of the books and records of
 the Company, carried out in accordance with the generally accepted
 auditing practices in India, and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the management.
 
                                                      V. Nijhawan
 
                                        Membership Number: F87228
                                                          Partner
 
                                             For and on behalf of
 Place : Ahmedabad                               Price Waterhouse
 Date  : February 26, 2009                  Chartered Accountants