Hindustan Petroleum Corporation

1.  We have audited the attached Balance Sheet of Hindustan Petroleum
 Corporation Limited as at March 31, 2009, and also the Profit and Loss
 Account and the Cash Flow Statement of the Company for the year ended
 on that date annexed thereto. 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 widi the auditing standards
 generally accepted in India. These Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatements. 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 Companies (Auditors Report) (Amendment) Order, 2004
 (together the Order), issued by the Central Government of India in
 terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we
 give in the Annexure, a statement on the matters specified in paragraph
 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 the
 audit;
 
 (b) In our opinion, proper books of account, as required by law, have
 been kept by the Company, so far as it appears from our examination of
 these books, and proper returns, adequate for the purposes of our
 audit, have been received from the branches not visited by us;
 
 (c) The Branch Auditors report, made available to us, has been
 appropriately dealt with while preparing our report;
 
 (d) The Balance Sheet, Profit and Loss account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account
 and with the audited returns from the branches;
 
 (e) 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 Companies Act, 1956;
 
 (f) On the basis of the written representations received from directors
 of the Company, as at March 31, 2009 and taken on record by the Board
 of Directors, we report that none of the directors is disqualified as
 at March 31, 2009, from being appointed as a director in terms of
 clause (g) of sub-section (1) of Section 274 of the Companies Act,
 1956; and
 
 (g) In our opinion, and to the best of our information and according to
 the explanations given to us, the said accounts read together with
 notes thereon, give the information required by the Companies Act,
 1956, in the manner so required 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 March 31, 2009; (ii) in the 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 the Auditors Report
 
 (Referred to in Paragraph 3 of our Report of even date)
 
 1.  (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets except for items likes pipes, valves, meters, instruments and
 other similar items peculiar to a continuous process industry.
 
 (b) As explained to us, the Company, having regard to the size and
 nature of its business, has adopted a practice of carrying out physical
 verification of its fixed assets, except LPG cylinders and fixed assets
 of the erstwhile Kosan Gas Company undertaking, not handed over, on a
 staggered basis, over a period of five years in the case of furniture,
 fixtures and office equipment and over a period of three years in the
 case of Plant and Machinery and other assets. We were informed that
 discrepancies noticed on such verification were not material as
 compared to the book records and have been properly dealt with in the
 books of account. The existence of fixed assets situated at the
 residence of employees has, however, been ascertained on a
 self-declaration basis.
 
 (c) Fixed Assets disposed off during the year were not substantial and,
 therefore, do not affect the going concern assumption.
 
 2.  (a) As explained to us, the inventories were physically verified
 during the year by the Management at reasonable intervals. In the case
 of materials lying with third parties, certificates confirming stocks
 held have been received from them.
 
 (b) In our opinion and according to the information and explanations
 given to us, 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) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of inventory. We
 were informed that discrepancies noticed on physical verification, as
 compared to the book records, were not material and have been properly
 dealt with in the books of account.
 
 3.  Based on the audit procedures applied by us and according to the
 information and explanations given to us, the Company has neither
 granted nor taken loans, secured or unsecured to or from companies,
 firms or other parties covered in the register maintained under Section
 301 of the Companies Act, 1956. Consequently, sub clauses (b), (c),
 (d), (e), (0 and (g) of sub-para (iii) of para 4 of the Order are not
 applicable.
 
 4.  In our opinion and according to the information and explanations
 given to us, and having regard to the explanations that some of the
 items are of a specialized nature, in respect of which suitable
 alternative sources do not exist for obtaining comparative quotations,
 there are adequate internal control procedures commensurate with the
 size of the Company and nature of its business for the purchase of
 inventory and fixed assets and for the sale of goods and services.
 
 5.  In our opinion and according to the information and explanations
 given to us, there are no contracts and arrangements referred to in
 Section 301 of the Companies Act, 1956 entered into during the year
 that need to be entered in the register maintained under that Section.
 Accordingly, sub clause (b) of sub-para (v) of para 4 of the Order is
 not applicable to the Company for the current year.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has complied with the directives issued by the
 Reserve Bank of India and the provisions of Section 58A and Section
 58AA or any other relevant provisions of the Companies Act, 1956, and
 the rules framed thereunder with regard to deposits accepted from the
 public. We have been informed that no order has been passed by the
 Company Law Board or National Company Law Tribunal or Reserve Bank of
 India.
 
 7.  In our opinion the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 8.  We have broadly reviewed the books of account maintained by the
 Company in respect of products where, pursuant to the Rules made by the
 Central Government, the maintenance of cost records has been prescribed
 under Section 209 (1) (d) of the Companies Act, 1956. We are of the
 opinion that prima facie the prescribed accounts and records have been
 maintained and are being made. We have not, however, made a detailed
 examination of the records with a view to determine whether they are
 accurate or complete.
 
 Annexure to the Auditors Report
 
 9. (a) According to the information and explanations given to us and on
 the basis of our examination of the books of account, the Company has,
 during the year, been generally regular in depositing with the
 appropriate authorities, undisputed statutory dues, including Provident
 Fund, Investor Education and Protection Fund, Income Tax, Sales Tax,
 Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other
 material statutory dues.
 
 (b) According to the information and explanations given to us and on
 the basis of our examination of the books of account, no undisputed
 amounts payable in respect of Income Tax, Sales Tax, Wealth Tax,
 Service Tax, Custom Duty, Excise Duty, Cess were in arrears, as at
 March 31, 2009, for a period of more than six months from the date they
 became payable.
 
 (c) According to the information and explanations given to us, dues
 relating to Income Tax, Sales Tax, Custom Duty, Service Tax, Excise
 Duty which have not been deposited on account of disputes with the
 related authorities, have been reflected in the table below:
 
 STATUTE                      FORUM WHERE
                          DISPUTE IS PENDING
 
 Income Tax Act, 1961     Appellate Tribunal
 Central Excise Act, 1944   Commissioner (A)
                          Assistant Commissioner
                          CESTAT
                          Revisionary Authority
 
 Various  Central &       Board of Revenue
 State Sales Tax Acts     Rajasthan Kar Board
                          CESTAT
                          High Court
                          Supreme Court
                          Commissioner / DCCT /
                          ADC/JCCT/ACCT
 
 Custom Act, 1962         CESTAT
                          Commissioner (A)
 
 Service Tax              CESTAT
                          Commissioner (A)
 
                           Grand Total
 
 AMOUNT IN        PERIOD TO WHICH
 Rs. / Crores     THE AMOUNT RELATES
 
 0.20              2006-07.
 0.20
 13.31             1998-99, 1999-00, 2000-01, 2001-02, 2002-03,
                   2003-04, 2004-05, 2005-07, 2006-08.
 
 47.81             1994 -96, 1997-98, 1994-01, 1999-00, 2001-02,
                   2000-02, 2002-03, 2003-04, 2004-05.
 
 367.58            1992-97, 1994-99, 1999-00, 2000-01,
                   2001- 05, 2005-06, 2006-07.
 
 1.66              1994-96, 1999-02, 1994-95, 1997-98, 1999-02,
                   2001-02, 2002-03, 2003-04, 2004-05, 2004-06.
 
 430.36
 
 0.19              1985-86, 1986-87.
 1.41              1999-00.
 597.45            1987-88, 1988-99, 1994-97, 1997-00, 2000-03,
                   2003-04, 2004-05, 2005-06.
 605.77            1984-85, 1987-88, 1994-98, 1990-91, 1993-94,
                   1994-95, 1990-91, 1998-99, 2001-02, 2002-03,
                   2003-04, 2004-05, 2005-06, 2006-07.
 
 1.23              2005-2006 to 2007-2008.
 4055.02           1976-77, 1977-78, 1978-79, 1985-86, 1986-87,
                   1987-88, 1991-93, 1993-94 ,1994-95, 1995-96
                   1996-97,1997-98,1999, 1999-00, 2000-01,
                   2001-02, 2002-03, 2003-04, 2004-05, 2005-06.
 5261.07
 
   27.65           1993-97, 1995-98, 1998-99, 2002-03, 2002-04.
    3.97           1998-02, 2004-05.
 
   31.62
 
   16.49           2002-03, 2003-06, 2005-06, 2005-07,
    1.61           2002-06, 2004-05, 2005-06, 2006-07, 2004-06.
 
   18.09
 
 5741.34
 
 10.  The Company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial year
 and in the financial year immediately preceding such financial year.
 
 11.  According to the information and explanations given to us, and
 based on checks carried out by us, the Company has not defaulted in
 repayment of dues to financial institutions or banks. The question of
 default in repayment of dues to debenture holders does not arise since
 no debentures were outstanding during the financial year.
 
 12.  According to the information and explanations given to us, the
 Company has not granted loans and advances on the basis of security by
 way of pledge of shares, debentures and other securities.
 
 13.  In our opinion and according to information and explanations given
 to us, the Company is not a chit fund or a nidhi/mutual benefit
 fund/society. Therefore, the provisions of sub-para (xiii) of para 4 of
 the Order are not applicable to the Company.
 
 14.  According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments. Therefore, the provisions of sub-para (xiv) of para
 4 of the Order are not applicable to the Company.
 
 15.  In our opinion and according to information and explanations given
 to us, the Company has not given guarantees for loans taken by others
 from banks and financial institutions.
 
 16.  In our opinion and according to information and explanations given
 to us, the term loans taken during the year, prima facie, have been
 applied for the purpose for which they were raised.
 
 17.  According to the information and explanation given to us, and
 based on our overall examination of Balance Sheet and considering
 investment in Oil Bonds issued by the Government of India towards
 under-recoveries on sale of sensitive petroleum products as short term
 application of funds, funds raised on short- term basis have, prima
 facie, not been used for making long-term investments.
 
 18.  According to the information and explanations given to us, during
 the year the Company has not made any preferential allotment of shares
 to parties and companies covered in the Register maintained under
 Section 301 of the Companies Act, 1956.
 
 19.  The Company has not raised any monies byway of issue of
 debentures. Therefore, the provisions of sub-para (xix) of para 4 of
 the Order are not applicable to the Company.
 
 20.  The Company has not raised any money by way of public issue during
 the financial year.
 
 21.  According to information and explanations given to us and based on
 audit procedures performed and representations obtained from the
 management, we report that no material fraud on or by the Company, has
 been noticed or reported during the year under audit.
 
 For Sudit K. Parekh & Co.                    For V. Sankar Aiyar & Co.
 Chartered Accountants                            Chartered Accountants
 
 Raman Jokhakar                                               G. Sankar
 Partner                                                        Partner
 Membership No. 103241                             Membership No. 46050
 
 Place : New Delhi
 Date : June 02, 2009