Reliance Industries

1.  We have audited the attached Balance Sheet of Reliance Industries
 Limited as at March 31, 2008, the Profit and Loss Account and also the
 Cash Flow Statement for the year ended on that date annexed thereto.
 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 amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation.  We believe that our audit provides a reasonable basis
 for our opinion.
 
 3.  As required by the Companies (Auditor’s Report) Order 2003 issued
 by the Central Government of India in terms of sub- section (4A) of
 Section 227 of the Companies Act, 1956, we enclose in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the said
 Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 a.  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;
 
 b.  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;
 
 c.  The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 d.  In our opinion and read with Note No. 5 of Schedule “O” regarding
 accounting for foreign currency exchange differences on amounts
 borrowed for acquisition of fixed assets, the Balance Sheet, Profit and
 Loss Account and Cash Flow Statement dealt with by this report are in
 compliance with the Accounting Standards referred to in sub-section
 (3C) of Section 211 of the Companies Act, 1956;
 
 e.  On the basis of written representations received from the Directors
 as on March 31, 2008 and taken on record by the Board of Directors, we
 report that none of the Directors is disqualified as on March 31, 2008
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of Section 274 of the Companies Act, 1956;
 
 f.  In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with the
 Significant Accounting Policies and notes thereon 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:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2008;
 
 (ii) in the case of the Profit and Loss Account, of the Profit for the
 year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the Cash flows for the
 year ended on that date.
 
 Annexure to Auditors’ Report
 
 Referred to in Paragraph 3 of our report of even date
 
 1.  In respect of its fixed assets:
 
 a.  The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets on the
 basis of available information except in respect of Naroda complex
 wherein the fixed assets register is in the process of being updated.
 
 b.  As explained to us, all the fixed assets have been physically
 verified by the management in a phased periodical manner, which in our
 opinion is reasonable, having regard to the size of the Company and
 nature of its assets. No material discrepancies were noticed on such
 physical verification.
 
 c.  In our opinion, the Company has not disposed off a substantial part
 of its fixed assets during the year and the going concern status of the
 Company is not affected.
 
 2.  In respect of its inventories:
 
 a.  The inventories have been physically verified during the year by
 the management. In our opinion, the frequency of verification is
 reasonable.
 
 b.  In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 c.  The Company has maintained proper records of inventories. As
 explained to us, there were no material discrepancies noticed on
 physical verification of inventories as compared to the book records.
 
 3.  In respect of the loans, secured or unsecured, granted or taken by
 the Company to/from companies, firms or other parties covered in the
 Register maintained under Section 301 of the Companies Act, 1956:
 
 a.  The Company has given loans to a wholly owned subsidiary of the
 Company. In respect of the said loans, the maximum amount outstanding
 at any time during the year and the year-end balance is Rs. 2,887.87
 crore.
 
 b.  In our opinion and according to the information and explanations
 given to us, the rate of interest, where applicable and other terms and
 conditions, are not prima facie prejudicial to the interest of the
 Company.
 
 c.  The principal amounts, are repayable on demand and there is no
 repayment schedule. The interest, where applicable, is payable on
 demand.
 
 d.  In respect of the said loans, the same are repayable on demand and
 therefore the question of overdue amounts does not arise. In respect of
 interest, where applicable, there are no overdue amounts.
 
 e.  The Company has not taken any loan during the year from companies,
 firms or other parties covered in the Register maintained under Section
 301 of the Companies Act, 1956. Consequently, the requirements of
 Clauses (iii) (f) and (iii) (g) of paragraph 4 of the Order are not
 applicable.
 
 4.  In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business for the
 purchase of inventory and fixed assets and also for the sale of goods
 and services. During the course of our audit, we have not observed any
 continuing failure to correct major weaknesses in internal control
 system.
 
 5.  In respect of the contracts or arrangements referred to in Section
 301 of the Companies Act, 1956:
 
 a.  In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements, that need to be entered in the Register maintained under
 section 301 of the Companies Act, 1956 have been so entered.
 
 b.  In our opinion and according to the information and explanations
 given to us, these contracts or arrangements represent fees for
 professional services rendered aggregating to Rs. 0.86 crore which
 appear reasonable.
 
 6.  According to the information and explanations given to us, the
 Company has not accepted any deposits from the public.  Therefore, the
 provisions of Clause (vi) of paragraph 4 of the Order are not
 applicable to the Company.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 8.  The Central Government has prescribed maintenance of cost records
 under Section 209 (1) (d) of the Companies Act, 1956 in respect of
 certain manufacturing activities of the Company.  We have broadly
 reviewed the accounts and records of the Company in this connection and
 are of the opinion, that prima facie, the prescribed accounts and
 records have been made and maintained. We have not, however, carried
 out a detailed examination of the same.
 
 9.  In respect of statutory dues:
 
 a.  According to the records of the Company, undisputed statutory dues
 including Provident Fund, Investor Education and Protection Fund,
 Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service
 Tax, Customs Duty, Excise Duty, Cess and any 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, 2008 for a period of more than six months
 from the date of becoming payable. Amounts due and outstanding for a
 period exceeding 6 months as at March 31, 2008 to be credited to
 Investor Education and Protection Fund of Rs. 6.11 crore, which are
 held in abeyance due to pending legal cases, has not been considered.
 
 b.  The disputed statutory dues aggregating to Rs. 1,752.95 crore, that
 have not been deposited on account of disputed matters pending before
 appropriate authorities are as under:
 
 Sr.  Name of                Nature of              Amount
 No.  the statute            the Dues              (Rs. in
                                                    crore)
 
 1.   Income Tax            Income-Tax/           1,258.29
      Act, 1961             Penalties
                                                      3.30
 
 2.   Central Excise        Excise Duty              14.62
      Act, 1944             and Service
                            Tax
                                                    166.26
 
 3.   Central Sales Tax      Sales Tax/              10.76
      Act, 1956 and          VAT and
      Sales Tax Act          Entry Tax
      of various states
                                                     69.24
                                                    108.68
 
 4.   Customs Act,           Custom Duty             94.50
      1962
                                                     22.98
                                                      3.15
 
 5.   Textile                 Textile                 1.17
      Committee               Committee
      Act, 1963               Cess
 
      TOTAL                                       1,752.95
 
 Period to          Forum where
 which the          dispute is
 amount             pending
 relates
 
 Various years      Commissioner of
 from 2000-01       Income-Tax
 to 2006-07        (Appeals)
 
 2001-02 and        Income-Tax
 2002-03            Appellate
                    Tribunal
 
 Various years      Commissioner of
 from 1992-1993     Central Excise
 to 2004-2005      (Appeals)
 
 Various years      Central Excise
 from 1986-87       and Service Tax
 to 2006-07         Appellate
                    Tribunal
 
 Various years      Joint/ Deputy
 from 1991-92       Commissioner/
 to 2003-04         Commissioner
                   (Appeals)
 
 Various years      Sales Tax
 from 1992-93       Appellate
 to 2006-07         Tribunal
 
 Various years      High Court
 from 1996-97
 to 2003-04
 
 2002-03 and        Commissioner
 2007-08            of Customs
                   (Appeals)
 
 Various years      Central Excise
 from 1997-98       and Service Tax
 to 2005-06         Appellate
 Tribunal
 
 1997-98            High Court
 
 Various years      Textile
 from 1997-98       Committee
 to 2003-04         Tribunal
 
 10.  The Company does not have accumulated losses at the end of the
 financial year. The Company has not incurred cash losses during the
 financial year covered by the audit and in the immediately preceding
 financial year.
 
 11.  Based on our audit procedures and according to the information and
 explanations given to us, we are of the opinion that the Company has
 not defaulted in repayment of dues to financial institutions, banks and
 debenture holders.
 
 12.  In our opinion and according to the explanations given to us and
 based on the information available, no loans and advances have been
 granted by the Company on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 13.  In our opinion, the Company is not a chit fund / nidhi / mutual
 benefit fund / society. Therefore, the provisions of clause (xiii) of
 paragraph 4 of the Order are not applicable to the Company.
 
 14.  The Company has maintained proper records of the transactions and
 contracts in respect of dealing or trading in shares, securities,
 debentures and other investments and timely entries have been made
 therein. All shares, securities, debentures and other investments have
 been held by the Company in its own name.
 
 15.  The Company has given guarantees for loans taken by others from
 banks and financial institutions. According to the information and
 explanations given to us, we are of the opinion that the terms and
 conditions thereof are not prima facie prejudicial to the interests of
 the Company.
 
 16.  The Company has raised new term loans during the year. The term
 loans outstanding at the beginning of the year and those raised during
 the year have been applied for the purposes 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 are of
 the opinion that there are no funds raised on short- term basis that
 have been used for long-term investment.
 
 18.  The Company has not made any preferential allotment of shares to
 parties and companies covered in the Register maintained under Section
 301 of the Companies Act, 1956.
 
 19.  The Company has created securities / charges in respect of secured
 debentures issued.
 
 20.  The Company has not raised any monies by way of public issues
 during the year.
 
 21.  In our opinion and according to the information and explanations
 given to us, no material fraud on or by the company has been noticed or
 reported during the year.
 
 For Chaturvedi & Shah  For Deloitte Haskins & Sells  For Rajendra & Co.
 Chartered Accountants  Chartered Accountants      Chartered Accountants
 
 D. Chaturvedi              A. Siddharth                 A. R. Shah
    Partner                    Partner                     Partner
 Membership No.: 5611    Membership No.: 31467      Membership No.: 47166
 
 Mumbai
 April 21, 2008