1.  We have audited the attached Balance Sheet of Hindustan Petroleum
 Corporation Limited as at March 31, 2011, and also the Profit and Loss
 Account and the Cash Flow Statement of the Company for the year ended
 on that date annexed thereto in which are incorporated Accounts of the
 Branch audited by the Branch Auditor. These financial statements are the
 responsibility of the Company''s 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. 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 (Auditor''s Report) Order, 2003 as
 amended by Companies (Auditor''s 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 specifed 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 branch 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 fow statement
 dealt with by this report are in agreement with the books of account
 and with the audited returns from the branch;
 
 (e) The balance sheet, Profit and loss account and cash fow 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) Disclosure in terms of clause (g) of sub-section (1) of Section 274
 of the Companies Act, 1956 is not required for Government Companies as
 per Notifcation No. GSR 829(E) dated October 21, 2003 issued by the
 Department of Company Affairs.
 
 (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, 2011;
 
 (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 fow statement, of the cash fows 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 fxed 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
 verifcation of its fxed assets, except LPG cylinders and fxed 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,
 fxtures 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 verifcation were not material as compared
 to the book records and have been properly dealt with in the books of
 account. The existence of fxed 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 verifed
 during the year by the Management at reasonable intervals. In the case
 of materials lying with third parties, certificates confrming 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 verifcation 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 verifcation, 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,
 frms or other parties covered in the register maintained under Section
 301 of the Companies Act, 1956. Consequently, sub clauses (b), (c),
 (d), (e), (f) 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 fxed 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 there under 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.
 
 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, 2011, 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 refected in the table below:
 
 STATUTE     FORUM WHERE   AMOUNT IN RS./  PERIOD TO WHICH
             DISPUTE IS 
             PENDING               CRORES  THE AMOUNT RELATES
 
 Income Tax  CIT (Appeals)         0.54    Various Years pertaining to
                                           2009 to 2011
                                   0.54
 
 Central 
 Excise      CESTAT              489.08    Various Years pertaining to
                                           1992 to 2009
 
             Commissioner Appeal   2.78    Various Years pertaining to 
                                           1998 to 2009
 
             High Court            0.25    Pertaining to 2004
 
             RA                    0.21    Various Years pertaining to
                                           1999 to 2006
                                 492.31
 
 Customs     CCEA                  1.99    Various Years pertaining to
                                           2003 to 2005
 
             CESTAT               64.72    Various Years pertaining to
                                           1992 to 2006
 Total                            66.71
 
 Service Tax CCEA                  0.05    Various Years pertaining to
                                           2004 to 2006
 
             CESTAT              127.22    Various Years pertaining to
                                           2002 to 2009
                                 127.26
 
 Sales Tax   Board of revenue      0.03    Various Years pertaining to
                                           1985 to 1987
 
             Rajasthan Kar Board   2.22    Various Years pertaining to
                                           1999 to 2001
 
             STAT                789.15    Various Years pertaining to
                                           1985 to 2008
 
             High Court          480.18    Various Years pertaining to
                                           1979 to 2007
 
             Supreme Court       158.94    Various Years pertaining to
                                           2002 to 2004
 
             Commissioner/DCCT/
             ADC/               6183.58    Various Years pertaining to
                                           1976 to 2009
 
             JCCT/ACCT
 
                                7614.09 
 
             Grand Total        8300.91
 
 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, banks or debenture holders.
 
 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
 provided 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 explanations 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 created necessary securities or charge as per the
 debenture trust deed in respect of debentures issued and outstanding at
 the year end.
 
 20.  The Company has not raised any money by way of public issue during
 the financial year.
 
 21.  According to the 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 V. Sankar Aiyar & Co.              For Om Agarwal & Co.
 
 Chartered Accountants                  Chartered Accountants
 
 Firm No. : 109208w                     Firm No. : 000971c
 
 G. Sankar                              Thalendra Sharma
 
 Partner                                Partner
 
 Membership No.46050                    Membership No. 079236
 
 Place: New Delhi
 
 Date: 26th May 2011