I.  Background
 
 Hindustan Oil Exploration Company Limited (''the Company'') was
 incorporated in India on September 22, 1983 under the provisions of the
 Companies Act, 1956 and is listed on the National Stock Exchange
 (''NSE'') and Bombay Stock Exchange (''BSE''). Te Company is engaged in the
 exploration, development and production of crude oil and natural gas in
 India, both onshore and ofshore.
 
 Te Company is participant in various Oil and Gas blocks/fields (which
 are in the nature of jointly controlled assets) granted by the
 Government of India through Production Sharing Contracts (''PSC'')
 entered into between the Company and Government of India and other
 venture partners.  Te Company has seven onshore assets of which three
 are located in Cambay basin in the state of Gujarat, one in Assam
 Arakan basin in the state of Assam, two in Jaisalmer Basin in the state
 of Rajasthan and one in Pranhita Godavari basin in the state of Andhra
 Pradesh. Te Company has three ofshore assets of which two assets are
 located in the Cauvery basin on the east coast of India, and one in
 Gulf of Cambay on the west coast of India. Details of Company''s
 participating interest are fully discussed in Note 12 to Schedule 15.
 
 1.  Secured Loans (Foreign Currency and Rupee Term Loans)
 
 (a) Te term loans from State Bank of India, Axis Bank and HDFC Bank
 amounting to Rs. 311,495,432 as at March 31, 2011 (Rs. 479,900,983 as
 at March 31, 2010), are secured by way of charge on the Company''s
 Participating Interest in PY-3 and Palej Fields, first charge on the
 Company''s share of Crude Oil Receivables from PY-3 and Palej Fields and
 charge on the Debt Service Reserve Account. Also see Note 2 of Schedule
 15.
 
 (b) Te term loans from Axis Bank amounting to Rs. 275,321,991 as at
 March 31, 2011 (Rs. 347,276,208 as at March 31, 2010) is secured by way
 of charge on all movable properties pertaining to PY-1 Gas Project, the
 Company''s Participating Interest in PY-1 Field and on the PY-1 Trust
 and Retention Accounts. Also see Note 2 of Schedule 15.
 
 2.  Bank Balances – Scheduled Banks
 
 (a) Current Accounts with Scheduled Banks include Lien Marked Accounts
 Rs. 941,993 as at March 31, 2011 (Rs. 1,261,453 as at March 31, 2010).
 Also see Note 1 of Schedule 15.
 
 (b) Deposits with Scheduled Banks include:
 
 – Lien Marked Deposits Rs. 60,534,613 as at March 31, 2011 (Rs.
 39,298,606 as at March 31, 2010). Also see Note 1 of Schedule 15.  
 
 – Deposits amounting to Rs. 264,294,120 as at March 31, 2011 (Rs.
 227,273,440 as at March 31, 2010) placed as Site Restoration Fund
 under Section 33ABA of the Income Tax Act, 1961.
 
 3.  Bank Balances – Non-Scheduled Banks
 
 Te balance with Non-Scheduled Bank represents the Company''s share in
 the balance in a foreign currency account with Barclays Bank, London
 amounting to Rs. 6,586,423 as at March 31, 2011 (Rs. 24,381,396 as at
 March 31, 2010) and Banque ENI Belgium (a ENI Group Entity) amounting
 to Rs. Nil as at March 31, 2011 (Rs. Nil as at March 31, 2010). Te
 maximum amount outstanding at any time during the year in respect of
 these accounts were Rs. 35,839,383 (Previous Year Rs. 103,143,622) and
 Rs. Nil (Previous Year Rs. 6,165,000,000) respectively.
 
 4.  Long Term Incentive Plan, Scheme 2005
 
 Under the HOEC Limited Employee Stock Option Scheme – 2005 (ESOS
 Scheme) approved by the Shareholders, and as amended from time to time,
 the Board had on January 31, 2011 approved grant of 17,680 options
 (Previous Year 16,828 options approved on January 27, 2010) to eligible
 Independent Directors at Nil exercise price as part of the Long Term
 Incentive Plan (LTIP). In terms of the ESOS Scheme, the options would
 vest at the third anniversary of the end of the financial year for which
 the grant corresponds to. For the year ended March 31, 2011 an
 aggregate amount of Rs. 20,000,000 (Previous Year Rs. 16,200,000) has
 been provided towards performance bonus and stock options as per the
 LTIP Scheme 2005.  During the year, the Company has written back excess
 provision towards cash and ESOS (deferred bonus) made during the prior
 years amounting to Rs. 6,527,308 (Previous Year Rs. 8,813,666) based on
 the approval/ratification of the Board of Directors of the Company.
 
 Method used for Accounting for Share Based Payment Plan:
 
 Under the LTIP Scheme 2005, the eligible employees are granted options
 in the succeeding year after adoption of the Annual Audited Accounts
 for the given year. Te Company charges the entire amount provided
 towards performance bonus and stock options to the Profit and Loss
 
 Account for the year for which the grant corresponds to. Any upward
 variation in the market price/acquisition price of the ESOS stocks, as
 may be applicable, as on the date of Balance Sheet, is charged to the
 Profit and Loss Account for the period as per LTIP.
 
 5. Employee benefits a.  Gratuity
 
 The Company''s obligation towards the Gratuity Fund is a Defined benefit
 Plan. Every employee who has completed five years or more of service
 gets a gratuity on departure at 15 days salary (last drawn salary) for
 each completed year of service. Te scheme is funded with Life Insurance
 Corporation of India in the form of a qualifying insurance policy.
 
 The following tables summarize the components of net benefit expense
 recognised in the Profit and Loss Account and the funded status and
 amounts recognised in the Balance Sheet.
 
 6. Segmental Reporting
 
 Te Company is primarily engaged in a single business segment of
 Hydrocarbons and other incidental services. All the activities of the
 Company revolve around the main business. Further, the Company does not
 have any separate geographic segments other than India. Hence, there
 are no separate reportable segments as per AS-17 Segmental Reporting.
 
 7. Related Party Disclosures
 
 (i) Te related parties of the Company as at March 31, 2011 are as
 follows:
 
 (A) Wholly Owned Subsidiary Company: 
 
 HOEC Bardahl India Limited
 
 (B) Promoter Group:
 
 1.  ENI UK Holding plc (Wholly Owned Subsidiary of ENI S.p.A, Italy)
 
 2.  Burren Shakti Limited (Wholly Owned Indirect Subsidiary of ENI UK
 Holding plc)
 
 3.  Burren Energy India Limited (Wholly Owned Indirect Subsidiary of
 ENI UK Holding plc)
 
 (C) Other Group Entities:
 
 1.  ENI Coordination Center S.A., Belgium
 
 2.  ENI India Limited, United Kingdom
 
 3.  Banque ENI, Belgium
 
 (D) Unincorporated Joint Ventures:
 
 As per details given in Note 12 of Schedule 15.
 
 (E) Key Management Personnel:
 
 1.  Mr. Luigi Ciarrocchi – Managing Director
 
 2.  Mr. Manish Maheshwari – Joint Managing Director
 
 8. Taxation
 
 (i) MAT Credit
 
 Provision for Income Tax for the current year as well as the previous
 year has been computed based on Minimum Alternate Tax in accordance
 with Section 115JB of the Income Tax Act, 1961. Taking into
 consideration the future Profitability and the taxable position in the
 subsequent years, the Company has recognised MAT Credit Entitlement
 to the extent of Rs. 232,000,000 (Previous Year Rs. 108,000,000) during
 the current year in accordance with the Guidance Note on Accounting for
 Credit Available in respect of Minimum Alternate Ta x under Income Ta x
 Act, 1961 issued by the Institute of Chartered Accountants of India.
 
 9. Quantitative and Other Related Disclosures
 
 Te Company is not a manufacturing company but holds participating
 interest in Unincorporated Joint Ventures engaged in prospecting,
 exploring and producing oil and gas. Te information given below as
 required under items 4-C and 4-D of Part II of Schedule VI to the
 Companies Act, 1956 represents the Company''s share in the
 Unincorporated Joint Ventures.
 
 10. Recovery of Expenses
 
 Recovery of expenses represents expenditure incurred by the Company for
 the UJVs where the Company is the Operator. Such costs are recovered
 from the respective UJVs as per the terms of the Production Sharing
 Contract. Recovery of expenses also includes an amount of Rs.
 12,728,726 (Previous Year Rs. 57,969,229) recovered as parent company
 overhead pursuant to the respective Production Sharing Contracts.
 
 11. Impairment
 
 As of March 31, 2011, the Company has reviewed the carrying amount of
 its assets for indications of impairment and based on such review, the
 Company has concluded that none of the assets of the Company has
 sufered impairment loss as at March 31, 2011.
 
 12. Previous Year Figures
 
 Previous Year''s fgures have been regrouped wherever necessary to
 conform to the current year presentation.
 
 The fgures of Previous Year were audited by a form of Chartered
 Accountants other than S. R. Batliboi & Associates.