1.  We have audited the attached Balance Sheet of Gujarat Gas Company
 Limited, as at December 31, 2010, and the related Profit and Loss
 Account and Cash Flow Statement for the year ended on that date annexed
 thereto, which we have signed under reference to this report. These
 financial statements are the responsibility of the Companys
 management. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements 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.  As required by the Companies (Auditors Report) Order, 2003, as
 amended by the Companies (Auditors Report) (Amendment) Order, 2004,
 issued by the Central Government of India in terms of sub-section (4A)
 of Section 227 of The Companies Act, 1956 of India (the Act) and on
 the basis of such checks of the books and records of the Company as we
 considered appropriate and according to the information and
 explanations given to us, we give in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief, were necessary for the purpose of our
 audit;
 
 b) In our opinion, proper books of account as required by law have been
 kept by the Company so far as appears from our examination of those
 books;
 
 c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement dealt with by this report comply with the accounting
 standards referred to in sub-section (3C) of section 211 of the Act;
 
 e) On the basis of written representations received from the directors,
 and taken on record by the Board of Directors, none of the directors is
 disqualified as on December 31,2010 from being appointed as a director
 in terms of clause (g) of sub- section (1) of section 274 of the Act;
 
 f) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements together
 with the notes thereon and attached thereto give in the prescribed
 manner the information required by the Act and give a true and fair
 view in conformity with the accounting principles generally accepted in
 India;
 
 i) in the case of the Balance Sheet of the state of affairs of the
 Company as at December 31, 2010;
 
 ii) in case of the Profit and Loss Account, of the profit for the year
 ended on that date; and
 
 iii) in the case of the Cash Flow Statement, of the cash flows 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,
 2010]
 
 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
 there under.
 
 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, the particulars of income tax as
 at December 31, 2010 which have not been deposited on account of
 dispute as follows:
 
 Name of the            Nature of Dues                  Amount
 statute                                             (Rs. in million)
 
 Income Tax Act,       Corporate Tax                    4.08
 1961
 
 Name of the Statue     Period to which the          Forum where the
                        amount relates               dispute is pending
 
 Income Tax Act,        Assessment Year                 Commissioner of
 1961                   2007-08                    Income Tax (Appeals)
 
 There are no dues of wealth tax, service tax, customs duty, excise duty
 and cess which have not been deposited on account of any dispute.
 
 x) The Company does not have accumulated losses as at December 31, 2010
 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) In our opinion and according to the information and explanations
 given to us, the company has not given any guarantee for loans taken by
 others from banks or financial institutions during the year.
 
 xvi) During the year, the company has not obtained any term loans.
 
 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.
 
                                            For Price Waterhouse
 
                                 Firm Registration No. - 301112E
 
                                           Chartered Accountants
 
                                                     V. Nijhawan
 
 Place   :  Ahmedabad                                    Partner
 
 Date    :   February 28, 2011         Membership Number: F87228