1. We have audited the attached Balance Sheet of OIL AND NATURAL GAS
CORPORATION LIMITED (the Company) as at 31st March, 2011, the Profit
and Loss Account and the Cash Flow Statement for the year ended on that
date, annexed thereto in which are incorporated the Company’s share in
the total value of assets, liabilities, expenditure and income of 135
blocks under New Exploration Licensing Policy (NELPs)/ Joint Venture
(JVs) accounts for exploration and production out of which 12 NELPs
/JVs accounts have been certified by other firms of Chartered
Accountants and 7 NELP/JVs are as certified by the management in
respect of NELPs/ JVs operated by other operators (Refer Note 20.3.1
and 20.3.2 of Schedule 27 of the financial statements). 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 auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amount and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by the management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. We have placed reliance on technical/ commercial evaluation by the
management in respect of categorization of wells as exploratory,
development and producing, allocation of cost incurred on them,
depletion of producing properties / impairment on the basis of the
proved developed hydrocarbon reserves, liability for abandonment costs,
liability under NELP and nominated blocks for under performance against
agreed Minimum Work Programme and allocation of depreciation on process
platforms to transportation and facilities.
4. As required by the Companies (Auditor’s Report) Order, 2003 (as
amended) issued by the Central Government of India in terms of Section
227(4A) of the Companies Act, 1956, we enclose in the Annexure (read
with paragraph 1 above) a statement on the matters specified in
paragraph 4 and 5 of the said Order.
5. Further to our comments referred to in paragraph 4 above we report
as follows:
5.1. We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our
audit;
5.2. In our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books;
5.3. The Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of
account;
5.4. In our opinion, the Balance Sheet, the Profit and Loss Account and
the Cash Flow Statement comply with the accounting standards referred
to in sub-section (3C) of Section 211 of the Companies Act, 1956.
5.5. Disclosure in terms of clause (g) of sub-section (1) of section
274 of the Companies Act, 1956 is not required as per notification
number GSR 829(E) dated October 21, 2003 issued by the Department of
Company Affairs.
5.6. Without qualifying our opinion we invite attention to Note no. 2.1
of Schedule 27 of financial statement in respect of recognition of
sales revenue of crude oil and natural gas, in our opinion and to the
best of our information and according to the explanations given to us,
the said accounts read with notes to account, 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:
a) In the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2011;
b) In the case of the Profit & Loss Account, of the profit of the
Company for the year ended on that date; and
c) In the case of the Cash Flow Statement of the cash flows of the
Company for the year ended on that date.
Annexure to The Audditors '' Report (Referred to in paragraph 4 of
our report of even date)
1. a) The Company has generally maintained proper records showing full
particulars including quantitative details and situation of fixed
assets.
b) As per information and explanations given to us, the fixed assets
having substantial value, other than those which are underground/
submerged/ under joint venture/assets held by employees have been
physically verified by the management in phased manner, which in our
opinion is reasonable, having regard to the size of the Company and
nature of its business. The reconciliation of physically verified
assets with the book records is in progress. Discrepancies noticed on
physical verification and consequential adjustments are carried out on
completion of reconciliation. According to the information and
explanations given by the management and in our opinion, the same is
not material.
c) The Company has not disposed off a substantial part of fixed assets
during the year.
2. a) The inventory has been physically verified in a phased manner
(excluding inventory lying with third parties, at some of the site-
locations, inventory with joint ventures and material in transit)
during the year by the management. In our opinion, the frequency of
verification is reasonable.
b) In our opinion, the procedures of physical verification of inventory
followed by the management were generally reasonable and adequate in
relation to the size of the Company and nature of its business.
c) The Company has generally maintained proper records of inventory
except for recording of consumption at a few of its site- locations. In
our opinion the discrepancies noticed on physical verification between
the physical stock and book records were not material having regard to
the size of the Company and nature of its business. In case where
discrepancies noticed on physical verification have been identified
with inventory records, necessary adjustments have been carried out in
the books. In respect of cases where the reconciliation is not
complete, the management has stated that the same would be adjusted in
due course.
3. a) The Company has granted secured loans to 3 parties covered in
the register maintained under section 301 of the Companies Act, 1956.
The amount outstanding at the year end is Rs. 0.26 million and the
maximum amount outstanding at any time during the year was Rs. 0.56
million.
b) The rate of interest and other terms and conditions of the loans
granted are not prima facie prejudicial to the interest of the Company.
c) The payment of principal amount and interest are regular.
d) There is no overdue amount in respect of loans granted to the
parties listed in the register maintained under Section 301 of the
Companies Act, 1956.
e) The Company has not taken any loans, secured or unsecured, from
companies, firms or other parties covered in the register maintained
under section 301 of the Companies Act, 1956. And consequently, the
requirement of clause (iii) (f) and (iii) (g) of paragraph 4 of the
Companies (AuditorRs.s Report) Order, 2003 are not applicable.
4. In our opinion, and according to the information and explanations
given to us, the internal control procedures are generally adequate and
commensurate with the size of the Company and the nature of its
business with regard to purchases of inventory, fixed assets and sale
of goods and services. During the course of our audit we have not
observed any continuing failure to correct major weaknesses in internal
controls.
5. a) In our opinion and according to the information and explanations
given to us, there is no contract or arrangement that needs to be
entered in the register required to be maintained in pursuance of
section 301 of the Companies Act, 1956.
b) Accordingly, the provisions of clause 4 (v) (b) of the Companies
(Auditor’s Report) Order, 2003 is not applicable to the Company.
6. The Company has not accepted any deposits from the public.
7. In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
8. We have broadly reviewed the books of account relating to
materials, labour and other items of costs maintained by the Company
pursuant to the Rule made by the Central Government for the maintenance
of cost records under section 209 (1)(d) of the Companies Act, 1956 and
we are of the opinion that prima facie the prescribed accounts and
records have been made and maintained.
9. a) The Company is generally regular in depositing with appropriate
authorities undisputed statutory dues including Provident Fund,
Investor Education and Protection Fund, Employees’ State Insurance,
Income Tax, Sales Tax, Service Tax, Wealth Tax, Custom Duty, Excise
Duty, Cess and other statutory dues applicable to it. There are no such
material outstanding statutory dues accrued in accounts as of the last
date of the financial year concerned for a period of more than six
months from the date they became payable.
Further, since the Central Government has till date not prescribed the
amount of cess payable under section 441A of the Companies Act, 1956,
we are not in position to comment upon regularity or otherwise of the
Company in depositing the same.
b) According to the information and explanations given to us, the
disputed statutory dues are as under:
Nature of the Nature of Amount Period
to which Forum where
Statute the dues (Rs. In
Million) the amount
relates dispute is
pending
(financial
year)
Income tax Act,
1961 Income Tax / 8,506.95 1991-2011 Revisionary
Authority
Penalty / 1,873.46 2004-2011 Appellate
Authority
Interest 147.61 1995-2011 High Court
673.60 1984-2011 Supreme Court
Total 11,201.62
Central Excise
Act 1944 Central Excise
duty / 850.27 2002-2011 Commissioner
of Central
Service Tax / Excise, Customs
& Service Tax
Interest /
Penalty 957.85 2005-2011 Central Board
of Excise & Customs
1,882.69 2007-2011 Custom, Excise
and Service
Tax Appellate
Tribunal
1,233.30 1984-2011 Supreme Court
Total 4,924.11
The Customs Act,
1962 Customs Duty 4,895.28 1995-2011 Asst. Commissi
-oner of
Central Excise,
Penalty /
Interest Customs &
Service Tax
10.00 2007-2011 Custom Excise
and Service
Tax Appellate
Tribunal
Total 4,905.28
Oilfields
(Regulation & Royalty / 19,484.60 1992-2011 Dept. of
Geology and
Development
Act, 1948) / Surface rent / Mining. AP
High Court
AP Mines and
Geology Act Interest /
Penalty
AP Mineral
Bearing Lands Cess 1,470.22 2005-2011 Dept. of
Geology and
(Infrastructure)
Cell Mining. AP
High Court
Oil Industries Cess / Interest 6.57 2005-2011 Commissioner
of Central
Excise,
(Development)
Act,1974 Customs &
Service Tax
Central Sales
Tax Act 1956 Sales tax / 2,959.04 2002-2011 Demand Notice
and respective
States'' Turnover Tax/ 1,900.52 2001-2011 Deputy
Commissioner
Sales Tax Act Penalty /
Interest 7,934.40 1999-2011 Joint Commiss
ioner CT - Appeals
19,359.75 1994-2011 Appellate
Tribunal
270.75 1977-2011 High Court
Total 32,424.46
Municipal
Corporation Octroi Duty 66.89 1978-79 to
2010-11 Supreme Court
of Mumbai Act
(Octroi Rules,
1956)
Assam Specified
Land Tax on Crude oil
and 2,526.40 2004-2011 Guwahati High
Court
Taxation Act Natural Gas
Service Tax Service Tax /
Cess 1,197.33 2004-2011 Commissioner
of Central Excise,
Customs &
Service Tax
10. The Company does not have accumulated losses at the end of the
current financial year and has not incurred cash losses either during
the year or during the immediately preceding financial year.
11. The Company has not issued any debentures and has not defaulted in
repayment of dues to financial institutions or banks.
12. In our opinion and 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. The Company is not a chit fund or a nidhi, mutual benefit fund/
society. Accordingly, the provisions of clause (xiii) of paragraph 4 of
the Companies (Auditor’s Report) Order, 2003 are not applicable to the
Company
14. In our opinion and according to the information and explanations
given to us, the Company is not dealing or trading in shares,
securities, debentures and other investments.
15. In our opinion and according to the information and explanations
given to us, the terms and conditions on which the Company has given
guarantees for loans taken by others from banks or financial
institutions are not prima facie prejudicial to the interest of the
Company since these guarantees are given for the subsidiary/ company
promoted by the Company.
16. In our opinion, the term loans have been applied for the purpose
for which they were raised.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, we report
that no funds raised on short terms basis have been used for long term
investment.
18. The Company has not made any preferential allotment of shares
during the year.
19. The Company has not issued any debentures.
20. The Company has not raised any money by way of public issue during
the year.
21. According to the information and explanations given to us, there
was a fraud on the Company by way of theft of pipelines reported during
the year. The same is under investigation and the amount involved on
account of theft has been ascertained by the Company atRs.119.44 million.
Other than this there was no fraud on or by the Company noticed or
reported during the year.
For M/s Kalyaniwalla & Mistry
Chartered Accountants
Firm Reg No. 104607W
(Ermin K. Irani)
Partner (Mem. No. 035646)
For M/s Arun K Agarwal & Associates
Chartered Accountants
Firm Reg No. 003917N
(Vimal Kumar Jain)
Partner (Mem. No. 086657)
For M/s S Bhandari & Co.
Chartered Accountants
Firm Reg No.000560C
(P.P.Pareek)
Partner (Mem. No. 071213)
For M/s Ray & Ray
Chartered Accountants
Firm Reg No.301072E
(B.K. Ghosh)
Partner (Mem. No. 051028)
For M/s M Kuppuswamy P S G & Co.
Chartered Accountants
Firm Reg No.001616S
(M.K. Krishnan)
Partner (Mem. No.020116)
New Delhi
May 30th, 2011
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