Hindustan Petroleum Corporation

1.  During the year, ONGC and GAIL offered discount on prices of crude,
 SKO and LPG purchased from them. Accordingly, the Corporation has
 accounted the discount as under :
 
 (a) Rs. 995.13 crores (2007-08 : Rs. 847.00 crores) discount received
 on purchase of SKO (PDS) and LPG (Domestic) from ONGC and GAIL has been
 adjusted against Purchase of Product for Resale.
 
 (b) Rs. 6,181.82 crores (2007-08 : Rs. 4,561.89 crores) discount
 received on crude oil purchased from ONGC has been adjusted against
 Raw Material Cost.
 
 2.  In principle approval of Government of India for issuance of Oil
 Bonds amounting to Rs. 14,692.77 crores (2007-08 : Rs.  7,703.00
 crores), has been received and the same have been accounted under
 Recovery under Subsidy Schemes.
 
 3.  (a) Inter-Oil Company transactions are reconciled on a continuous
 basis. However, year end balances are subject to
 
 confirmation/reconciliation.  (b) Customers Accounts are reconciled on
 an ongoing basis and such reconciliation is not likely to have a
 material impact on the outstanding or classification of the accounts.
 
 4.  Provision for taxation of earlier years amounting to Rs. 138.66
 crores has been written back during the year considering the fact that
 the issues are strong on merits / covered by favourable decisions.
 
 5.  The Corporation has, as at the balance sheet date, entered into
 forward contracts amounting to USD 900.12 million (2007-08 : USD
 1,170.12 million) to hedge its foreign currency exposure towards
 loans/export earnings. The Corporation does not generally hedge the
 risks on account of foreign currency exposure for the payment of crude.
 Exposures not hedged as of balance sheet date amounted to USD 562.13
 million (2007-08 : USD 1,100.83 million) towards purchase of crude and
 USD 170.12 million (2007-08 : USD 440.03 million) in respect of loans
 taken.
 
 6.  In line with the prevailing accounting policy relating to commodity
 hedging contracts, provision has been made in books for Rs. Nil
 (2007-08 : Rs. 9.34 crores).
 
 7.  A new subsidiary company, M/s. CREDA-HPCL Biofuel Limited has
 been formed (incorporated on October 14, 2008) with Chhattisgarh State
 Renewable Energy Development Agency for the development of renewable
 energy sources in the State of Chhattisgarh. The Corporation is holding
 74% stake in this company.
 
 8.  The employee cost for the year 2008-09 is higher due to provision
 made for Rs. 243.60 crores towards revision in the salary for
 management staff w.e.f. 1st January, 2007. Pending finalization of
 salary revision in respect of non-management employees, no provision
 has been made in the books, as the amount is not determinable.
 
 9.  The Corporation has exercised the option as per AS-11 (notified
 under the Companys Accounting Standard Rules, 2006) and has changed
 its accounting policy for recognition of exchange differences arising
 on long term foreign currency monetary items and adjusted the same to
 the cost of assets, which hitherto were charged to the Profit and Loss
 Account. This change has resulted in increase in Profit for the current
 year by Rs. 203.30 crores. The exchange difference of Rs. 199.46 crores
 pertaining to financial year 2007-08 has been adjusted to General
 Reserve.
 
 10.  Operating Leases :
 
 Assets taken on lease primarily consist of properties for use by the
 Corporation and leased land taken for the purpose of setting up retail
 outlets. These lease arrangements are normally renewed on expiry of the
 term. Amount of lease rental expenses recognized in the Profit and Loss
 Account is given under Schedule 17 - Other Operating Expenses.
 
 11.  Considering the Government policies and modalities of compensating
 the oil marketing companies towards under-recoveries, future cash flows
 have been worked out based on the desired margins for deciding on
 impairment of related Cash Generating Units. Since there is no
 indication of impairment of assets as at Balance Sheet date as per the
 assessment carried out, no impairment has been considered. In view of
 assumptions being technical, peculiar to the industry and Government
 policy, the auditors have relied on the same,
 
 12.  Previous years figures have been regrouped / reclassified
 wherever necessary.