Mangalore Refinery and Petrochemicals

The Directors are pleased to present the 20th Annual Report of the
 Company, together with the audited accounts for the financial year
 ended 31st March 2008.
 
 It is a matter of immense satisfaction that the performance of your
 Company has reached new heights of excellence during the year under
 review:
 
 - Highest-ever capacity utilization at 130 %.
 
 - Highest-ever Refinery crude thruput at 12.55 MMT
 
 - Highest ever accident free operation days-1301 days- reached on
 03.07.2007.
 
 - Highest ever Turnover at Rs.37,339 crores
 
 - Highest ever Net Profit after Tax at Rs. 1,272 crores
 
 1.1 FINANCIAL PERFORMANCE
                                                         (Rs. in Crore)
                                            Year ended      Year ended
                                            31st March,     31st March,
                                                  2008            2007
 
 Turnover                                    37,339.12      32,208.13
 Profit before Depreciation,
 Interest and Tax                             2,258.59       1,658.34
 Interest and Finance Charges                   147.59         214.53
 Gross Profit after interest
 but before Depreciation and Tax              2,111.00       1,443.81
 Depreciation and Amortisations                 377.82         354.86
 Provision for Wealth Tax                         0.28           0.14
 Current Tax and Fringe Benefit Tax             584.25          72.35
 Previous Years Tax adjustment                 118.95          29.12
 MAT Entitlement Credit
 receivables adjusted                          (174.35)         -
 Deferred Tax                                   (68.18)        461.82
 Profit after Tax                             1,272.23         525.52
 Balance of Profit/(Loss) brought
 forward from previous year                     645.94         284.48
 Balance available for appropriation          1,918.17         810.00
 Appropriations:
 Proposed dividend on
 Preference Shares (Rs. 9,186)                    0.00           0.00
 Proposed Dividend on
 Equity Shares (12%)                            210.35         140.23
 Tax on Dividend                                 35.75          23.83
 Transfer to General Reserve                      1.90          -
 Balance carried to Balance Sheet             1,640.17         645.94
 Total                                        1,918.17         810.00
 
 1.1.1 Your Company has achieved a turnover of Rs. 37,339 Crore (up 16%
 from Rs. 32,208 Crore), earning a net profit of Rs. 1,272 Crore (up
 142% from Rs.525 Crore).
 
 1.2 DIVIDEND
 
 Considering substantial improvement in performance, and also keeping in
 view the large requirement of funds for the Phase III Refinery project,
 the Board of the company has decided to recommend higher dividend of
 12% (previous year.8%) on the equity shares which will absorb Rs. 210
 Crore excluding Rs.36 Crore as tax on dividend.
 
 1.3 OPERATIONAL PERFORMANCE
 
 During the financial year 2007-08, the refinery processed a record
 throughput of 12.55 Million Metric Tonne (MMT) crude oil (12.54 MMT)
 achieving 130% capacity utilisation (129%). It despatched 11.83 MMT
 (11.44 MMT) of finished products.
 
 1.4 EXPORTS
 
 The exports of petroleum products (Motor Spirit, Naphtha, Reformate,
 Mixed Xylene, ATF, HSD, VGO and FO) during the year amounted to Rs.
 11,141 Crore against Rs.11,615 Crore in the previous year, which is
 about 41 % (previous year 47%) of the total dispatches of 11.83 MMT.
 Mixed Xylene is a new value-added product, which is being produced from
 the Mixed Xylene unit, which became operational last year. MRPL is now
 one of the Eight Companies in Western Zone having Premier Trading House
 status granted by Director General of Foreign Trade (DGFT) Government
 of India.
 
 1.5 ENVIRONMENT MANAGEMENT
 
 In Environment Management, the companys Philosophy is to perform
 beyond Compliance - that is perform better than minimum required by
 statutes. The Refinery is certified with ISO 14001: 2004 for
 Environment Management Systems. The major Achievements include:
 
 - 70-75% of the total treated Effluent is recycled back to the Cooling
 towers.
 
 - The Company is meeting the stipulations of KSPCB with regard to
 quality of treated effluent, which is well below the standards in every
 aspect, on a continuous basis.
 
 - A Bio Gas plant has been commissioned for generating Biogas and
 manure using canteen and colony waste, and the generated biogas is
 being used in the canteen burners for substituting LPG as fuel.
 
 - Innovative methods of solid waste reduction have been carried out by
 using Bioremediation process.
 
 - SOX and NOX emissions to ambient air are well below the standards
 stipulated by pollution control board, the monitoring of which in and
 around the refinery, is being done by M/s. National Institute of
 Technology, Karnataka.
 
 - Gauge pole socks and Secondary seals are being installed in floating
 roof tanks for reducing fugitive emissions. Wherever they have been
 installed emission have reduced significantly (95% reduction with gauge
 pole socks and 50% reduction with secondary seals).
 
 - Low sulphur Fuel oil with less than 1% sulphur is being used in all
 the Refinery furnaces and boilers simultaneously. Maximizing the usage
 of ultra low sulphur fuel gas generated in the refinery process units.
 
 - A fortnightly Marine Environment Impact Assessment study is being
 carried out through the College of Fisheries from 7 Monitoring
 stations, set-up in the vicinity of Treated Effluent Disposal point (at
 sea) & 3 Stations on the Seashore. The monitoring of Flora and Fauna,
 Studies on Phytoplankton, Zooplankton & Benthic Organisms in the Ocean
 are being
 
 - conducted. Study on Bioaccumulation of Heavy metals in Marine
 Organisms are also conducted twice every year.
 
 - Ten Nos. of Ground Water Monitoring stations in and around the
 Refinery have been set up and regular monitoring of the ground water
 quality is being carried out along with KSPCB.
 
 - Volatile Organic Compound Emission was checked at 33,000 points in
 the refinery through an External agency and corrective measures are
 being taken to effectively minimize the same, wherever needed.
 
 - Work Environment Study was conducted by CLI (Central Labour
 Institute) and employees were sent for medical check up and found to
 have no adverse effect.
 
 - Special health check-up is being carried out for employees working in
 high noise and dust area and in units where Benzene is present.
 
 1.6 MARKETING
 
 1.6.1 Direct Marketing :
 
 Direct marketing sales of the Company continued their growth during the
 year 2007-08. The Direct Marketing Sales were at Rs. 2,137.35 Crore up
 by 10.82% from Rs. 1,928.64 Crore in the previous yea MRPL retained its
 market leader position with respect to sale of Bitumen in its refinery
 zone.
 
 The Product Supply agreement with State Trading Corporation (STC),
 Mauritius entered into last year for supply of Petroleum Products
 (Petrol, Diesel, ATF and Fuel Oil) for a year was renewed for a further
 period of three years (August 2007 to July 2010). The agreement signed
 on 6th July, 2007 is for supply of one Million Metric Tonnes of
 Petroleum products per annum and is a testimony of the timely supply of
 quality products from the Refinery.  Mauritius imports the entire need
 of the above petroleum products of the country from MRPL only, Crumb
 Rubber Modified Bitumen (CRMB) sales recorded a growth of 109.95 % with
 sales of 14,602 MT during 2007-08, as against sales of 6,955 MT during
 2006-07. The customer base for Bitumen and CRMB has grown considerably
 with inroads made in all States adjoining Karnataka.  MRPL continued to
 follow non-aggressive and cautious approach in developing High Speed
 Diesel (HSD) consumer market due to prevailing under-recovery in sales
 of Diesel.  Three satellite depots at Kasargod (Kerala), Hosur
 (Tamilnadu) and Hindupur (Andhra Pradesh) were commissioned during the
 year to facilitate and support marketing activities in States adjoining
 Karnataka.
 
 1.6.2 Retail Marketing:
 
 MRPL entered the retail segment with its first HiQ retail outlet at
 Maddur in Karnataka State on 12th January, 2008 inaugurated by the
 Secretary, MoP&NG, Government of India. In order to enhance the
 non-fuel income and to attract more customers to the retail outlet,
 MRPL has already tied up with Baskin Robbins Ice-cream Parlor, Cafe
 Coffee day, etc. MRPL and Corporation Bank, signed a Memorandum of
 Understanding (MOU) on 26th February 2008 to leverage their respective
 strengths to provide a wholesome bouquet of services to customers in
 the fuel retail segment.  Corporation Bank will set up ATMs at the MRPL
 HiQ retail outlets coming up across Karnataka and other Southern
 States, to provide banking facilities for customers on the move. Also
 being proposed are other value-added financial products, including
 co-branded credit and fleet cards, cashless transactions using smart
 cards for the agricultural community etc. Although the Company has
 approval from the Govt, of India to set up 500 retail outlets across
 the country, it is proceeding cautiously in setting up the retail
 outlets in view of the heavy under recoveries in retail marketing of
 transportation fuels, (Petrol & HSD), as the Govt, has decided to
 compensate for under recoveries only to IOC/BPC/HPC. Fur.ther MoP&NG
 (the Administrative Ministry) has also recently directed the company to
 put on hold setting up of new retail outlets for a period of two years.
 
 1.6.3 Under-recoveries:
 
 Your company had been representing to MoP&NG for compensating the
 Company for the under-recoveries being sustained in direct sale of HSD
 to Railways, State Road Transport Corporations and other large
 consumers and had appealed that MRPL should be treated on par with
 other PSU OMCs. However, the Govt, did not accede to the request of the
 company, due to which the company had to take steps to reduce these
 supplies, since April, 2008 to restrict heavy under recoveries on these
 sales.  1.6.4 Joint Venture in Marketing:
 
 MRPL and Shell Gas B. V., Netherland entered into a Joint Venture
 agreement on 5th Feb 2008 to form a joint venture company Shell MRPL
 Aviation Fuel and Services Private Limited for marketing of Aviation
 Turbine Fuel (ATF) to both Domestic and International airlines at
 Indian airports. The Promoter Companies will bring in respective
 services and strengths together to the JV. MRPL will bring its
 expertise and high quality products and Shell Aviation will bring its
 global brand, network and customer base in addition to stringent
 quality control procedure. The JV will initially commence its marketing
 operations at Mangalore, Bangalore and Hyderabad airports and later
 will extend its operations all over India in due course. This JV
 between MRPL and Shell in the field of aviation fuel will offer the
 best quality of aviation fuel and other related services at the most
 competitive price.  You will be glad to know that MRPL has received
 permission of Airport Authority of India for supply of ATF to Airlines/
 operators through mobile refuellers at Mangalore Airport.
 
 2.  AWARDS AND RECOGNITIONS
 
 The following awards/ recognitions were received during the year:
 
 i) First Prize in the prestigious Jawaharlal Nehru Centenary Award for
 Energy conservation in refineries for the year 2006-07, received on
 20th September, 2007 instituted by the Ministry of Petroleum & Natural
 Gas (MoP&NG), for the fourth consecutive year. The award is based on
 the annual energy performance of the refinery measured in terms of
 energy index for specific complexity (MBTU/Bbl/ NRGF or MBN).
 
 ii) Energy Efficient Unit Award from CM (Confederation of Indian
 Industry) at the National Award for Excellence in Energy Management
 2007 on 13.09.2007.
 
 iii) Certificate of Merit from Karnataka Renewable Energy Development
 Limited for 2006-07. This award has been conferred for the second time
 in succession for MRPLs lowest Specific Energy consumption figures,
 various Energy conservation measures implemented during the last three
 years and our organizational set up & commitment towards Energy
 conservation.
 
 iv) National Safety Award for 2006 under Scheme II from the Directorate
 General Factory Advice Service & Labour Institutes, received on 16*
 August, 2007.  Ministry of Labour and Employment, Government of India.
 
 v) ISO/ IEC 17025: 2005 accreditation by NABL (National Accreditation
 Board for testing and calibration Laboratories), Department of Science
 and Technology, Govt, of India to MRPLs quality control Lab on
 24.09.2007.
 
 3.  CREDIT PROFILE
 
 i) CRISIL has reaffirmed the domestic corporate credit rating of CCR
 AAA (Pronounced as CCR Triple A) to MRPL after due surveillance
 valid- for a period of one year. This rating indicates highest degree
 of strength with regard to honouring debt obligations.
 
 ii) ICRA Limited has also reaffirmed Issuer Rating IR AAA (Pronounced
 as IR Triple A) to MRPL. This rating indicates the highest credit
 quality and lowest credit risk of MRPL.
 
 iii) ICRA has also reaffirmed the A1 + rating to the companys
 short-term borrowings including commercial paper. This rating indicates
 that these instruments carry lowest credit risk.
 
 iv) MRPL had been ranked 7th in BT 500 (16th December, 2007) rating
 based on Turnover for the year 2006-07.  4.  PROJECTS
 
 4.1 Phase III Refinery Project :
 
 As you are aware that the Company is implementing Phase III Refinery
 Project at a cost of Rs.7,943 Crore. This will enhance the refining
 capacity from the existing 9.69 MMTPA to 15 MMTPA and also increase the
 distillate yield (Petrol, Diesel, LPG, Propylene, Naphtha etc.) by
 about 10% eliminating the low value Black Oil (FO/ Bitumen) even while
 using more of low Price High Sulphur Heavy oils and high- acid crude
 oils. Selection of Licensors for Process Technologies for major units
 has been completed. M/s.  Lummus Technologies Inc, US for Delayed Coker
 Unit (DCU), M/s. Axens, France for Diesel Hydrotreater (DHT), M/s.
 Shaw Stone & Webster, US for Petrochemical Fluid Catalytic Cracking
 Unit (PFCC) and M/s UOP LLC, US for Heavy Coker gas oil Hydrotreating
 unit (CHT) have been selected.  All the agreements in this regard have
 been signed with the Licensors and work on Process and Engineering
 Packages is in progress. SIA approvals from Department of Industrial
 Policy & Promotion, Ministry of Commerce & Industry, Government of
 India, have been received for all these foreign technology
 collaborations.  Ministry of Environment and Forests, Government of
 India has since issued Environmental Clearance for the project.
 Consent for establishment from KPCB separately for Phase- Ill Refinery
 Project is expected shortly.  Global Tenders for Invitation of Bids on
 LSTK basis, for all Major non Licenced Units like new CDU/VDU, Hydrogen
 unit, Captive Power Plant, Tankages are under finalisation.  Govt, of
 India vide its notification no.66/2008 dt.30th May,2008 has notified
 the Phase-Ill refinery project of the company eligible for Income tax
 exemption under section 80 IB(9) of The Income Tax Act, subject to
 fulfilling the conditions stipulated therein.
 
 The delayed receipts of the Environmental/ Pollution Clearances coupled
 with over stretched order book position of licensors & contractors will
 lead to time & cost overruns although all out efforts are being made to
 minimize the impact.
 
 4.2 Rajasthan Refinery
 
 As earlier informed, the establishment of a 7.5 MMTPA Refinery at the
 wellhead at Barmer would largely depend on the availability of crude
 oil from Rajasthan blocks at an economically viable price as well as
 adequate fiscal incentives from the State Government, for which the
 company is still in discussion with Rajasthan State Government.
 
 4.3 Acquisition of Nitrogen Facilities
 
 You will be glad to know that Your Company has acquired the Nitrogen
 manufacturing facilities (Nitrogen Unit) from M/s. Essel Mining
 Industries Limited (EMI) (formerly Hindustan Gas Industries Ltd.)
 located in the close proximity of our Refinery at Mangalore for Rs.
 6.43 crores, based on the valuation carried out by SBI Capital Markets
 Ltd. (A subsidiary of State Bank of India).  Pursuant to this
 acquisition, the Nitrogen Unit, alongwith all its assets and
 liabilities were brought into MRPL and were suitably integrated with
 the refinery. Eleven employees of EMI also became part of the MRPL
 family. Considering the fact that EMI Nitrogen unit was dedicated to
 MRPL alone, the above acquisition is of strategic importance to MRPL,
 in terms of supply security and quality of Nitrogen which is a critical
 utility for smooth operation of the Refinery.
 
 4.4 JOINT VENTURE PROJECTS
 
 4.4.1 Aromatics Complex
 
 As already reported last year, a separate Company promoted by ONGC and
 MRPL in the name of ONGC Mangalore Petrochemicals Ltd. (OMPL) has begun
 implementation of the Aromatics Project, estimated to cost about
 Rs.4852 Crore, to produce Paraxylene and Benzene value added products,
 using Naphtha feed stock from MRPL. ONGC will contribute 46% equity
 (Rs.744 Crore) while MRPL will have 3% equity (Rs.48 Crore). M/s. Toyo
 Engineering India Ltd., have been appointed as Project Management
 Consultant (PMC) in February, 2007. Mangalore SEZ Ltd. (MSEZ) have
 allotted 454 acres of land to OPML. M/s. UOP - USA have been selected
 as process licensor. SIA approval has been obtained for this Foreign
 Technology Collaboration. SBI Capital Markets Ltd. (SBI Caps) have been
 engaged as advisors to finalise Long Term product offtake agreement for
 Paraxylene and Benzene.
 
 4.4.2 Kakinada Refinery and SEZ
 
 As earlier reported, the financial appraisal report submitted by SBI
 Capital Market for the Kakinada Refinery, showed that 7.5 MMTPA
 Refinery Project was not financially viable.  Engineers India Ltd.
 (EIL) were thereafter engaged to conduct a Techno Economic Feasibility
 Study for setting , up 15 MMTPA Refinery. EIL has since submitted the
 Draft Feasibility Report. Independent Financial appraisal was entrusted
 to SBI Caps, who have also submitted the Draft Appraisal Report. These
 draft reports are presently being reviewed and a final decision for
 implementation or otherwise will be taken shortly. As already informed
 KSEZ has been notified by Govt, of India in April, 2007 and master
 planning of SEZ is in progress.
 
 5.  CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
 EARNINGS AND OUTGO:
 
 The additional information required to be disclosed pursuant to section
 217(1)(e) of the Companies Act, 1956 read with the Companies
 (Disclosure of Particulars in the Report of Directors) Rules, 1988 is
 given in Annexure -1 which forms part of this Report.
 
 6.  PARTICULARS OF EMPLOYEES
 
 There are no employees whose particulars are required to be shown in
 terms of the provisions of Section 217(2A) of the Companies Act, 1956
 read with the Companies (Particulars of Employees) Rules, 1975 as
 amended.
 
 7.  HUMAN RESOURCES
 
 7.1 The Long Term Agreement with the Employees Union came to an end on
 31st March 2007. Negotiations with the employees for a fresh long term
 settlement are in progress.
 
 7.2 Your company has completed the exercise of aligning the pay scales
 of management employees with other PSU Oil Companies scales in line
 with Department of Public Enterprises Guidelines with effect from
 06.01.2005 i.e., the day when MRPL was declared a Schedule B PSU.
 Similarly, the perquisites applicable to downstream Oil Sector PSUs are
 being introduced by the company in phases and during the year under
 review about sixteen new / amended HR Policies have been introduced for
 the employees.
 
 7.3 In order to mitigate the hardships being faced by the employees
 pending revision of Pay Scales for Management employees due from
 01.01.2007 and due from 01.04.2007 for Non-management employees, the
 company gave adjustable ad-hoc relief to employees as advance, in line
 with the similar payments made by other Oil PSUs.
 
 7.4 The company continued to enjoy cordial and harmonious relationship
 with its collectives.
 
 8.  OFFICIAL LANGUAGE:
 
 8.1 MRPL is promoting Official Language Policy as per the Annual
 Programme given by the Department of Official Language, Ministry of
 Home Affairs, Government of India.
 
 8.2 In order to promote use of Hindi among the employees, Hindi
 Workshops have been conducted on a regular basis at Mangalore, Mumbai &
 Bangalore Offices. Similarly, to create Hindi awareness, Hindi Week was
 celebrated and many Hindi competitions were held.
 
 Hindi computer seminar was organized in the month of August 2007 for
 the Town Official Language Implementation Committee (TOLIC) members. To
 enable correspondence in Hindi, by the employees, computers are
 installed with Hindi software APS 2000++. MRPL participated at TOLIC
 level Hindi competitions and won nine prizes and stood II at TOLIC
 level competition at Mangalore. Hindi Hasya Kavi Sammelan was organized
 with the participation of seven poets of national repute in the month
 of March 2008.
 
 9.  VIGILANCE FUNCTION:
 
 A series of initiatives taken by the Vigilance Department have led to
 increased transparency and the commencement of e-auctioning. First
 e-auction of the scrap material was carried out on 9.10.2007. In
 respect of e-procurement, Application Service Provider for e-tendering
 has been appointed. The Vigilance Department conducted Vigilance
 Awareness Programme at Mangalore, Mumbai and Delhi offices. The
 Vigilance Awareness Week was organized from 12.11.07 to 16.11.2007 in
 all the offices during which the importance/ relevance of vigilance
 function was impressed upon in the context of good corporate
 governance. In an effort to ensure smooth business and transparency, a
 vendors meet for chemicals and catalyst suppliers was held during the
 year.
 
 10.  CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES
 
 10.1 As a socially responsive organisation, your Company is committed
 to the well being of the communities around the refinery area.
 
 10.2 As an endeavour to empower women, the company took lead in
 organizing a skill development programme for women from surrounding
 villages who were trained in tailoring & stitch craft. A skill
 development center for women from fishermen community under women
 empowerment programme has been also built. As a measure of goodwill to
 the project- displaced families, the company is also providing a
 overhead water tank to ease the drinking water problem of the
 rehabilitation colony. The internal roads of this colony are being
 asphalted.
 
 10.3 Your company has donated one laser and one dialysis machine to
 Government Wenlock District Hospital, Mangalore and necessary Medical
 Equipment to the maternity ward of the Government Ladygoshan Hospital
 for women in Mangalore. We have constructed one Samudaya Bhavan at
 Sarpady from where we are drawing raw water from river Nethravathi.
 
 10.4 Your Company has taken an initiative to develop a beautiful Public
 Park in Kadri, and in providing Mid Day meal to the children of 11
 schools covering 2,600 students, in association with ISKON Mangalore.
 
 To educate regarding the water conservation and preservation among
 school children, Rain Water Harvesting Projects have been implemented
 in five schools of neighbouring villages. With a view to provide better
 education to Government School children, the company has provided
 Teaching Aids, Sports Materials, benches & desks, water coolers to 70
 schools of neighbouring villages. Your Company has been providing
 scholarship assistance to students securing first two ranks in all the
 classes of the above schools. The total amount spent during the year on
 CSR initiatives amounted to Rs.151.16 lakhs as compared to Rs.40.92
 lakhs during the previous year.  10.5 Your. Company has committed to
 take part in the establishment of a Childrens Paediatric ward, with
 all modern diagnostic instruments and facilities in Government Wenlock
 Hospital, Mangalore.
 
 11.  DIRECTORS
 
 11.1 The President of India appointed Shri Vivek Kumar, Director,
 MoP&NG as a Government director and accordingly Shri Vivek Kumar was
 appointed as an additional director on the Board of Company w.e.f.
 29/10/2007.
 
 11.2 Shri V. P. Singh an Independent Director on the Board of ONGC was
 appointed as an additional director on the Board of the Company w.e.f
 29/10/2007 pursuant to the Corporate Governance Guidelines issued by
 the Department of Public Enterprise requiring appointment of one of the
 Independent Directors of the holding company, on the Board of its
 subsidiary company.
 
 11.3 In accordance with the provisions of the Companies Act, 1956 and
 Articles of Association of the Company, Shri Vivek Kumar and Shri V. P.
 Singh shall hold office upto the date of the Annual General Meeting
 (AGM). The Company has received notice from the shareholders proposing
 their names to the office of the Directors at the ensuing Annual
 General Meeting.
 
 11.4 Shri N.K.Mitra, will retire by rotation at the 20th Annual General
 Meeting of the Company. Shri N.K.Mitra, being eligible, offers himself
 for re-appointment.
 
 11.5 Brief resumes of the Directors seeking appointment / re-
 appointment, together with the nature of their expertise in specific
 functional areas, the names of the companies in which they, hold the
 directorship and the memberslrp / chairmanship of committees of the
 Board, and shareholding in the Company as stipulated under Clause 49 of
 the Listing Agreement with the Stock Exchanges are given in the
 Annexure to the AGM notice.
 
 11.6 The Company continues to pursue with the Government of India
 (Ministry of Petroleum & Natural Gas) for appointment of the
 Independent Directors which are required to be appointed on the Board
 of the Company pursuant to the Listing requirements.
 
 12.  DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to the requirement under Section 217 (2AA) of the Companies
 Act, 1956 with respect to Directors Responsibility Statement, it is
 hereby confirmed that;
 
 i) In the preparation of the Annual Accounts the applicable Accounting
 Standards had been followed and there are no material departures from
 the same;
 
 ii) The Directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 & prudent so as to give a true and fair view of the state of affairs of
 the Company as at the 31stMarch, 2008, and of the Profit & Loss of the
 Company for the year ended on that date;
 
 iii) The Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956, for safeguarding the assets of
 the Company and for preventing and detecting fraud and other
 irregularities; and iv) The Directors have prepared the Annual Accounts
 on a Going Concern basis.
 
 13.  FIXED DEPOSIT:
 
 The Company has not accepted any fixed deposit during the year from the
 public.
 
 14.  AUDITORS
 
 14.1 M/s. SRRK Sharma & Associates, Chartered Accountants were
 appointed as Statutory Auditors of the Company for the Financial Year
 2007 ¦ 08 by Comptroller & Auditor General of India (C&AG).
 
 14.2 The Report of the C&AG at Annexure - II forms part of this Report.
 
 15.  CORPORATE GOVERNANCE
 
 15.1 The Company has complied with all the mandatory provisions of
 Clause 49 of the Listing Agreement relating to the Corporate Governance
 requirements, except with the requirement of Independent Directors on
 the Board of the company. Your company is pursuing with the
 Administrative Ministry, MOP&NG for appointment of the Independent
 Directors on the Board. The Annual Report contains a separate section
 on Corporate Governance.
 
 15.2 Your company is listed withthe Bombay Stock Exchange Limited and
 National Stock Exchange Limited
 
 15.3 As required under Clause 49 of the Listing Agreement with Stock
 Exchanges, your Company has obtained the Certificate from the Auditors
 of the Company, for compliance of Corporate Governance pursuant to
 Clause 49 (VII) (1) which is annexed to and forms part of the Annual
 Report.
 
 15.4 The Management Discussion and Analysis Report forms part of the
 Annual Report.
 
 16.  ACKNOWLEDGEMENT:
 
 16.1 Your Directors sincerely thank the Government of India (GOI),
 Ministry of Petroleum and Natural Gas (MOP&NG), Ministry of Finance,
 Ministry of Shipping and other Ministries and Departments of the
 Central Government and the State Governments of Karnataka, Andhra
 Pradesh and Tamilnadu for their valuable support and co-operation.
 
 16.2 Your Directors gratefully acknowledge the support and direction
 provided by the parent company, ONGC.
 
 16.3 Your Directors appreciate the continuing co-operation and support
 received from New Mangalore Port Trust, Financial Institutions, Banks
 and all other stakeholders such as suppliers of crude oil and other
 inputs, vendors, contractors, transporters and others.
 
 16.4 Your Directors express their sincere thanks to all the
 shareholders for their continued confidence shown in the Management and
 the Company.
 
 16.5 Your Company recognizes its valued customers for their continued
 patronage for the products of the company.
 
 16.6 Your Directors wish to place on record their appreciation for the
 total commitment shown by each and every one of the employees of the
 Company without whom, it would not have been possible for the company
 to scale the newer heights year after year.
 
                                       For and on behalf of the Board
 
 Place: New Delhi                           (R. S. SHARMA)
 Date : 20th June, 2008                       Chairman