Dear Shareholder''s
 
 The year 2011-12 for IndianOil was one with very many significant
 positives, yet some of the negatives, mostly due to external factors
 beyond its control continued to make its impact. Some of the
 significant achievements were the stabilisation of petrochemical
 operations at Panipat Complex, ensuring it operated at 100% capacity
 from May''12 onwards; achieving the highest ever throughput in our
 refineries, recording 102% capacity utilisation marking the fifth
 consecutive year that we have done this; improving distillate yield to
 a record 77.8% and achieving the lowest MBIM (indicating the combined
 energy utilization factor); record highest ever products sale as well
 as open the highest number of retail outlets in any one of the last
 five years, with over 60% outlets of them in high growth rural centres.
 We also automated the highest number of outlets in any one year, which
 helped in improving our customer connect.
 
 Our Gross Refinery Margins have gone through a tumultuous phase being
 at reasonable levels in the first six months and thereafter plunging
 into a tightening trajectory before recovering in the last quarter of
 the year. Despite the tight GRMs for the year, we were able to push up
 our supplies and achieve healthy profit levels. Imposition of Entry Tax
 by the State Govt, of UP on crude oil received at our Mathura Refinery
 and the subsequent vacation of the Stay Order granted to the
 Corporation by the Hon''ble Supreme Court had its implications.
 Consequent to the payment of entry tax, retrospectively from 2007
 onwards, wiped off our profits resulting in a lowered profit after tax
 of Rs. 3955 crore.  While we have taken various steps to pass on,
 prospectively. a sizeable component of this tax through sale of major
 petroleum products in the State, we are still hopeful to see if the
 impact of entry tax for the past period can be mitigated. On the whole,
 our business, barring such one-time burdens continued to grow at a
 healthy pace, helping us retain market leadership in India''s Downstream
 Sector.
 
 Globally, the Oil & Gas industry continued to be impacted by
 geo-political tensions rocking the oil markets and bringing in a
 heightened volatility in oil prices. Despite the supply dislocations
 and increase in demand albeit at a reduced pace due to drop in
 consumption in OECD countries, there was continued healthy demand from
 emerging economies. The good news also came in the form of increase in
 gas and oil production in the United States.  The continued tensions at
 the global flashpoints with supply-demand mismatch manifested in high
 crude oil prices with the Brent average at USD 115/bbl during the year
 vis a vis USD 87/bbl in 2010-11. The emergence of US as a potential
 petroleum product and gas exporter was a game changer which will
 definitely impact the dynamics of Oil & Gas markets in the coming
 years. The other high impact development is the discovery of huge gas
 resources in some countries in the African Region. Possibilities of
 Shale gas and oil in certain countries would further impact these
 dynamics of energy market.
 
 Undoubtedly, we are in for an interesting and at the same time
 uncertain times and a continued vigil and understanding of the markets
 will be the key to enable us to manoeuvre through the emerging
 scenario. The refining sector is especially expected to pass through a
 tough time primarily because of the slowdown in growth all around,
 including in scaling down of growth rates in emerging economies from
 Asia essentially due to the increased inter-connectivity of the global
 business. The refining margins have also been undergoing surprising
 swings. There has been increased realization of these emerging global
 developments in recent times in the Corporation and a number of
 initiatives are already in place to gear up and optimise our operations
 to remain in healthy state of affairs. Building up our capability to
 process heavier crudes is a part of such initiatives besides an
 emphasis on improving Supply Chain Management and minimising logistics
 costs.
 
 As a country, we have achieved 8-9% growth rates continuously over the
 last six years. However, the year 2011 -12 saw the growth rate plummet
 to 6.5%, although, still much higher than many other countries. The
 widening fiscal deficit and trade gap, combined with high inflation and
 reduced growth has pushed the country at the moment into the danger
 zone of stagflation, having the worst of both the worlds - anemic
 growth and high inflation. POL demand growth on the other hand remains
 robust at 4.9%, and in terms of value crude oil imports stood at 7.5%
 of the GDP - easily amongst the highest in the world.  Due to
 uncertainties in domestic gas production, we have turned into the third
 largest importer of natural gas among Asian countries, after Japan and
 South Korea. If the country has to continue to grow on a high
 trajectory, access to energy has to be ensured. The unfortunate aspect
 of the current policy of subsidization of the energy products in the
 country is that it is reducing the maneuvering space for policy makers
 both ways. While subsidies promote inefficient use of products, the
 rising demand for them forces imports thereby hitting both our fiscal
 and trade deficit. All these portend to a serious need for structural
 and policy changes or else the India Energy growth story is going to
 unravel very differently.
 
 Despite the challenges, IndianOil continued to do well and with a
 series of initiatives taken, will continue to do well in all our
 operations be it in refining, pipeline transportation and marketing of
 petroleum products etc. We have lined up more than Rs. 46000 crore in a
 host of projects for augmentation of refining, pipelines and
 petrochemicals capacities, expansion of marketing infrastructure,
 technology induction, product quality upgradation etc. In
 petrochemicals, we are uniquely poised to take full advantage of the
 growth opportunities. India''s polymer market is set to grow to over 12
 MMTPA in the next five years supported by demographics, changing
 lifestyles and growing income levels. The Indian petrochemicals
 industry will face competition from hubs in China, Singapore and West
 Asia for global markets yet the growing market of India and our
 competitiveness, places us in a unique position to tap these
 opportunities. All these projects, including the petrochemical value
 projects, new grass-root refinery at Paradip, Butadiene extraction unit
 at Panipat, FCC revamp at Mathura as well as new pipelines like
 Paradip-Raipur-Ranchi and Paradip-Haldia- Durgapur (LPG), are intended
 to ensure availability of the petro products to our customers on one
 hand and enhancing our profitability on the other.
 
 For over five decades, IndianOil has been the standard bearer in the
 petroleum business in India, delivering energy assurance to several
 generations of Indians.  We have continued to invest in not only our
 existing business but also diversified into related areas. Many of the
 cutting edge breakthroughs in alternative fuels like Biodiesel, HCNG
 and Biotechnology have been nurtured by us. Across India, whether it is
 in the deserts of Rajasthan, the verdant landscape of the North East,
 the Deccan Plateau or the distant outreaches of Andamans, we have
 always delivered. Our footprints can be found in many foreign countries
 as well.
 
 When a new generation arrives we will be there to meet the Future of
 Energy.  This we shall do, well aware that sustainable energy solutions
 are not just a short term fix but a long term value. In fact, our
 diversifications into Wind Energy, Solar Power and Nuclear Power only
 demonstrates to generation next our continued commitment and is
 expected to take us to the next logical step in our progression as a
 truly world class energy company.
 
 Our endeavour continues to ensure that future India will have the
 assurance of inclusive growth and uninterrupted clean energy. The task
 before us is enormous to say the least, with the present scenario of
 price uncertainty, political instability in pockets of the world and
 general economic volatility the challenge of investing for the future
 is even more daunting. But we have faced several such tests in the
 past. I want to thank all our customers and shareholders for their
 understanding and unstinted support. With the power of the stakeholders
 behind us and dedication of the Indian Oil People, nothing is
 impossible.
 
                                                      R.S. Butola
 
                                                         Chairman