1. We have audited the attached Balance Sheet of OIL AND NATURAL GAS
 CORPORATION LIMITED (the Company) as at 31st March, 2012, the
 Statement of Profit and Loss and the Cash Flow Statement for the year
 ended on that date, annexed thereto in which incorporated the Company''s
 share in the total value of assets, liabilities, expenditure and income
 of 139 blocks under New Exploration Licensing Policy (NELPs) / Joint
 Venture (JVs) accounts for exploration and production out of which 9
 NELPs / JVs accounts have been certified by other firms of Chartered
 Accounts and 11 NELP / JVs have been certified by the management in
 respect of NELps / JVs operated by other operators (Refer note
 no.41.3.1 and 41.3.2 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
 bases 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 well 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, liabily for abondonment costs,
 liability under NELP and nominated blocks for under-performances
 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 paragrph 1 above) a statement on the matters specified in
 paragraphs 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 Statement of Profit and Loss 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 Statement of Profit and Loss
 and the Cash Flow 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.
 
 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, Government of India.
 
 5.6 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 fairview 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, 2012;
 
 b) In the case of the Statement of Profit and Loss, 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 Auditors'' 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 substantaial value, other than those which are underground /
 submerged / under joint venture have been physically verified by the
 management in a phased manner, which in our opinion is reasonable,
 having regard to the size of the Company and nature of its business.
 The reconcilliation 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
 reconcillation. 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) According to the information and explanations given by the
 management, 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 intra site 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.
 According to the information and explanations given by the management
 and 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 reconcilliation
 is not complete, the management has stated that the effect of the same
 on the accounts would be adjusted on completion of reconcilliation.
 
 
 3.a) The company has granted secured loans to three parties covered in
 the register maintained under section 301 of the Companies Act, 1956.
 The amount outstanding at the year end is Rs.0.35 million and the
 maximum amount outstanding at any time during the year was Rs.0.92
 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
 reporting requirements of clause (iii) (f) and (iii) (g) of paragraph 4
 of the Companies (Auditor''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 reporting requirement of clause (v) (b) of
 paragraph 4 of the Companies (Auditor''s Report) Order, 2003 is not
 applicable. 
 
 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 cost records 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. However, we have not made a
 detailed examination of the cost records with the view to determine
 whether they are accurate or complete.
 
 9.a) According to records of the Company, undisputed statutory dues
 including provident Fund, Investor Education and Protection Fund,
 Employee''s State Insurance, Income Tax, Sales Tax, Service Tax, Wealth
 Tax, Custom Duty, Excise Duty, Cess and other statutory dues have been
 generally regularly deposited with the appropriate authorities.
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of the aforesaid dues were
 outstanding as at March 31,2012 for a period more than six months from
 the date of becoming payable.
 
 b) According to the information and explanations given to us, the
 disputed statutory dues are as under:
 
 Name of the Statute          Nature of the dues          Amount 
                                                         (Rs. In 
                                                          Million)
 
 Income tax Act,1961          Income Tax/                  7,321.80
 
                              Penalty/                     3,689.80
 
                              Interest                     2,213.24
 
                                                           4,481.99
 
                              Total                       17,706.83  
 
 Central Excise Act,1944      Central Excise duty/         1,195.96
                              Service Tax/
                              Interest / Penalty           1,338.41
 
                                                           1,892.98
 
                                                             696.57
 
                                                           1,283.30
 
                              Total                        6,407.22
 
 The Customs Act,1962         Customs Duty/                5,067.88
                              Penalty / Interest
 
                                                               5.00
 
                              Total                        5,072.88
 
 Oilfields (Regulation &      Royalty/                    66,123.54
 Development Act, 1948)/      Surface rent/ 
 AP Mines and Geology Act     Interest / Penaity 
 
 AP Mineral Bearing Lands     Cess                         1,694.82
 (infrastructure) Cell
 
 Oil Industries               Cess / Interest                  6.57
 (Development) Act,1974
 
 Central Sales Tax Act,1956   Sales tax/                   2,960.23
 and respective States''       Turnover Tax / 
                                                           1,900.53
 Sales Tax Act                Penalty / Interest  
                                                          16,391.55
 
                                                          19,594.44
 
                                                             291.40
 
                              Total                       41,138.16
 
 Municipal Corporation        Octroi Duty                     66.89
 Greater Mumbai Act
 (Octroi Rules, 1965)
 
 Assam Specified Land         Tax on Crude oil and         2,860.57
 Taxation Act                 Natural Gas 
 Service Tax                  Service Tax / Cess           3,513.00
 
                                                           1,014.16
 
                              Total                        4,527.16
 
 Name of the Statute        Period to which      Forum where dispute
                            the amount relates   is pending
                            (financial year)     
 
 Income tax Act,1961        1991-2012            Revisionary Authority
 
                            2004-2012            Appellate Authority
 
                            1995-2012            High Court
 
                            1984-2012            Supreme Court
 
 Central Excise Act,1944    2002-2012            Commissioner of Central
                                                 Excise, Customs & 
                                                 Service Tax
 
                            2005-2012            Central Board of Excise
                                                 & Customs
 
                            2007-2012            Custom, Excise and 
                                                 service Tax Appelate
                                                 Tribunal
 
                            2011-2012            Directorate General of 
                                                 Central Excise  
                                                 Intelligent       
 
                            1984-2012            Supreme Court
 
 The Customs Act,1962       1995-2012            Commissioner of Central
                                                 Excise, Customs & 
                                                 Service Tax
 
                            2007-2012            Custom Excise and 
                                                 Service Tax Appellate
                                                 Tribunal
 
 Oilfields (Regulation &    1992-2012            Dept.of Geology and
 Development Act, 1948)/                         Mining.AP High Court
 AP Mines and Geology Act
 
 AP Mineral Bearing Lands  
 (infrastructure) Cell      2005-2012            Deot. of Geology and
                                                 Mining.AP High Court
 
 
 Oil Industries 
 (Development) Act,1974     2005-2012            Commissioner of Central
                                                 Excise, Customs &
                                                 Service Tax
 
 
 Central Sales Tax Act,     2002-2012            Demand Notice
 1956 and respective        2001-2012            Deputy Commissioner
 States'' Sales Tax Act      1999-2012            Joint Commissioner/
                                                 Commissioner CT-Appeals
 
                            1994-2012            Appellate Tribunal 
                                                 Commissioner
 
                            1977-2012            High Cout
 
                    
 Municipal Corporation      1978-2012            Supreme Court     
 Greater Mumbai Act
 (Octroi Rules, 1965)
 
 Assam Specified Land       2004-2012            High Court
 Taxation Act  
 Service Tax                2004-2012            Commissioner of Central
                                                 Excise, Customs & 
                                                 Service Tax
 
                            2004-2012            Commissioner of Central
                                                 Excise & Customs
 
 
 10. The Company does not have accumulated losses at the end of the
 Curent 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 reporting requirements 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. 
 
 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, no fraud
 on or by the Company has been noticed or reported during the year.
 
 
 For Kalyanlwalla & Mistry  For Varma & Varma      For S Bhandari & Co.
 
 Charterd Accountants       Chartered Accountants  Charterd Accountants
 
 Firm Reg No.104607W        Firm Reg No.004532S    Firm Reg No.000560C
 
 (Emin K Irani)            (K M Submarni)          (P P pareet)
 
 Parter (Mem No.035646)     Partner (Mem No.015707) Partner 
                                                   (Mem.No.071213)  
 
 For Ray & Ray              For Mehra Goel & Co.,
 
 Chartered Accountants      Chartered Accounts 
 
 Firm Reg No.301072E        Firm Reg No.000517N
 
 (B K Ghosh)               (R K Mehra)
 
 Partner (Mem No.051028)    Partner (Mem No. 006102)
 
 
 New Delhi  
 
 May 29,2012