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BSE: 500312ISIN: INE213A01029INDUSTRY: Oil Drilling And Exploration

BSE   ` 147.00   Open: 145.50   Today's Range 144.35
148.30
+2.95 (+ 2.01 %) Prev Close: 144.05 52 Week Range 127.90
194.15
Year End :2018-03 

Independent Auditors' Report

To the Members of Oil and Natural Gas Corporation Limited 1.    Report on the Standalone Indian Accounting Standards (Ind AS) Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Oil and Natural Gas Corporation Limited (‘the Company'), which comprise the Balance Sheet as at 31st March, 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended and a summary of the significant accounting policies and other explanatory information.

2.    Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act”) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditors’ Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Board of Directors as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

4.    Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the financial position of the Company as at 31st March, 2018, and its profit, other comprehensive income, cash flows and the changes in equity for the year ended on that date.

5.    Emphasis of Matter

We draw attention to Note 48.1.1(c) of the standalone Ind AS financial statements, wherein it is stated that during the year, Directorate General of Hydrocarbons (DGH) has raised a demand on all the JV partners of Panna-Mukta and Mid and South Tapti Fields JV (PMT), being BG Exploration and Production India Limited (BGEPIL) and Reliance Industries Limited (RIL) (together "the Claimants”) and the Company and the differential GOI share of Profit Petroleum and Royalty alleged to be payable by contractor pursuant to Government's interpretation of the Final Partial Award (40% share of the Company amounting to US$ 1,574.76 million equivalent to '102,233.41 millions including interest up to November 30, 2016). Subsequent to London High Court Orders dated April 16, 2018 and May 2, 2018, DGH vide letter dated May 4, 2018 and May 15, 2018 has asked for re- casting of accounts of the PMT JV and for remitting the respective PI share of balance dues including interest till the date of remittance. As the Company is not a party to the arbitration, the details of the proceedings of arbitration and copy of order of London High Court are not available with the Company. The Company has responded that as of now, neither the Arbitral Tribunal nor the London High Court has passed any order or quantified any amount due and payable by the Company and in the circumstances, the demand of DGH from the Company for any sum or interest thereon is premature and not justified. In the Company's view, pending final quantification of liabilities by the Arbitration Tribunal, it is not liable to implement the Final Partial Award (FPA) being pre-mature and therefore no provision for the same has been considered necessary and the same has been considered as contingent liability.

Our opinion is not modified in respect of this matter.

6. Other Matters

i.    The standalone Ind AS financial statements include the Company's share in the total value of assets, liabilities, expenditure and income of 136 blocks under New Exploration Licensing Policy (NELP) / Joint Operations (JOs) accounts for exploration and production out of which 3 NELP / JOs accounts have been certified by other Chartered Accountants and 11 NELP / JOs have been certified by the management in respect of NELP / JOs operated by other operators. In respect of these 11 NELP/ JOs, Ind AS financial statements include proportionate share in assets and liabilities as on 31st March, 2018 amounting to Rs,74,914.29 millions and Rs,54,785.18 millions respectively and revenue and profit including other comprehensive Income for the year ended 31st March, 2018 amounting to Rs,82,340.43 millions and Rs,16,375.29 millions respectively, Our opinion is based solely on the certificate of the other Chartered Accountants and management certified accounts.

ii.    We have placed reliance on technical/ commercial evaluation by the management in respect of categorization of wells as exploratory, development, producing and dry well, allocation of cost incurred on them, proved (developed and undeveloped) hydrocarbon reserves and depletion thereof on Oil and Gas Assets, impairment, liability for decommissioning costs, liability for NELP and nominated blocks for under performance against agreed Minimum Work Programme.

Our opinion is not modified in respect of these matters.

7. Report on Other Legal and Regulatory Requirements

i.    As required by the Companies (Auditor's Report) Order, 2016 ("the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure 1” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

ii.    Based on the verification of books of account of the Company and according to information and explanations given to us, we give below a report on the Directions issued by the Comptroller and Auditor General of India in terms of Section 143 (5) of the Act:

a. On the basis of the information to the extent compiled by the Company pending the reconciliation of the available records with the books of account and considering the voluminous nature and various locations, we report that the title/lease deeds for free hold/lease hold land are held in the name of Company except for the following where the title deeds are not available with the Company:

                                                                             (Rs, in million)

Nature

Number of assets

Gross Block

Net Block

Lease hold land

14

632.03

392.40

Free hold land

4

58.21

58.21

Total

18

690.24

450.61

Pending compilation by the management of all the relevant details covering all the units, area under respective line item for the above could not be given.

b.    According to information and explanations given to us, the cases of waiver/write off of debts / loans / interest wherever applicable during the year along with the reasons and amount involved are stated in "Annexure 2”

c.    According to information and explanations given to us, the Company has maintained adequate records in respect of inventories lying with third parties and assets received by the Company as gift/grants from Government or other authorities.

iii. As required by Section 143(3) of the Act, we report that:

a.    we have sought and 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 it appears from our examination of those books;

c.    the Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash flows and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

d.    in our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act;

e.    as per notification number G.S.R. 463(E) dated 5th June, 2015 issued by Ministry of Corporate Affairs, section 164(2) of the Act regarding the disqualifications of Directors is not applicable to the Company, since it is a Government Company;

f.    with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure 3”; and

g.    with respect to the other matters to be included in the Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i.    the Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer Note 48.1.1 to the standalone Ind AS financial statements;

ii.    the Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses-Refer Note 53.2 to the standalone Ind AS financial statements;

iii.    there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

(Referred to in paragraph 7(i) under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date)

a.    The Company has generally maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b.    As per the information and explanations given to us and on the basis of our examination of the records of the Company, the fixed assets having substantial value, other than those which are underground/ submerged/ under joint operations have been physically verified by the management in a phased manner, which in our opinion is reasonable, having regard to the size of Company and nature of its business. The reconciliation of physically verified assets with the book records is in progress. Discrepancies noticed on the physical verification and consequential adjustments are carried out on completion of reconciliation. According to information and explanations given by the management and in our opinion, the same are not material.

c.    On the basis of the information to the extent compiled by the Company pending the reconciliation of the available records with the books of account and considering the voluminous nature and various locations, we report that the title/lease deeds of immovable properties are held in the name of Company except for the following where the title/lease deeds are not available with the Company:

                                                                             (Rs, in millions)

Nature

Number of assets

Gross Block

Net Block

Lease hold land

14

632.03

392.40

Free hold land

4

58.21

58.21

Building

6

154.92

57.65

Total

24

845.16

508.26

ii.    According to the information and explanations given to us, the inventory has been physically verified in phased manner at reasonable intervals (excluding inventory lying with third parties, at some of the site-locations, inventory under joint operations and material in transit) during the year by the management which did not reveal any material discrepancies. However, in our opinion, procedures for physical verification of Stores and Spare parts, ascertainment of discrepancies and carrying out of consequent accounting adjustments need to be made compliant with internal guidelines of the Company and further strengthened so as to make the same commensurate with the size of the Company and the nature of its business.

iii.    The Company has not granted loans, secured or unsecured to any companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act.

iv.    In our opinion and according to the information and explanations given to us, the Company has not advanced loans to directors / to a Company in which the Director is interested to which provisions of section 185 of the Act apply. The provisions of section 186 of the Act, in our opinion, are not applicable to the Company.

v.    In our opinion and according to information and explanations given to us, the Company has not accepted any deposits as per the provisions of the Act.

vi.    We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government under sub section(1) of section 148 of the Act 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.

vii.    a. According to records of the Company, undisputed statutory dues including Provident Fund, Employees' State

Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Goods and Service Tax, Cess and other statutory dues have generally been 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 31st March, 2018 for a period more than six months from the date of becoming payable.

b. According to the information and explanations given to us, there were no dues in respect of Income Tax, Duty of Excise, Duty of Customs, Sales Tax, Service Tax, Value Added Tax and Goods and Service Tax which have not been deposited on account of any dispute except the following:

                                                                                                                         (Rs, in million)

Name of Statute

Forum where Dispute is pending

Period to which the amount relates (Financial Year)

Gross Amount Involved

Amount paid under protest

Amount

Unpaid

CENTRAL EXCISE ACT, 1944

Commissioner / (Appeals) of Custom, Excise and Service Tax

2015-17

0.92

0.05

0.87

Custom , Excise and Service Tax Appellate Tribunal

2001-09;

2011-16

8,735.84

275.31

8,460.53

Hon. High Court

1996-97;

2007-14;

2015-2016

353.68

4.32

349.36

Hon. Supreme Court

2000-01

1,176.60

-

1,176.60

Total (A)

 

10,267.04

279.68

9,987.36

THE CUSTOMS ACT, 1962

Commissioner / (Appeals) of Custom, Excise and Service Tax

1987-88

304.95

Rs,

304.95

Custom , Excise and Service Tax Appellate Tribunal

2007-08 2010 -11

6.50

1.11

5.39

Total(B)

 

311.45

1.11

310.34

INCOME TAX ACT, 1961

Commissioner/ (Appeals)

2006-09;

2011-14

76,071.83

76,063.07

8.76

Income Tax Appellate Tribunal

1999-2001;

2007-11

18,530.92

18,514.92

16.00

High Court

2000-01

8.91

-

8.91

Total(C)

 

94,611.66

94,577.99

33.67

GOODSAND SERVICES TAX

Commissioner (Appeals) of GST and Central Excise

2017-18

14,315.98#

11,704.68*

2,611.30

Total (D)

 

14,315.98

11,704.68

2,611.30

 

Name of Statute

Forum where Dispute is pending

Period to which the amount relates (Financial Year)

Gross Amount Involved

Amount paid under protest

Amount

Unpaid

 

Commissioner/ Joint Commissioner/ Commissioner - Appeals/ Joint Commissioner- Appeals

2000 -02 2004 -07 2009 -12 2013-14

2,459.21

7.68

2,451.53

CENTRAL SALES TAX ACT,1956 AND RESPECTIVE

Appellate Tribunal

1993-94;

1998-2000;

2001-03;

2005-06;

2011-14

7,399.40

54.28

7,345.12

STATES SALES TAX ACT

Hon. High Court

1978-79;

1992-95;

2006-07;

2011-2013

51.77

26.48

25.29

 

Hon. Supreme Court

2002-13;

2016-17

11,493.48

623.96

10,869.52

 

Total(E)

 

21,403.86

712.40

20,691.46

 

Commissioner/ (Appeals),Joint Comm., Additional Comm. of Custom, Excise and Service Tax

2004-05;

2006-07;

2009-13

8,657.79

0.27

8,657.52

 

Commissioner (Appeals) of GST and Central Excise

2017-18

19,834.29#

13,448.61*

6,385.68

SERVICE TAX

Custom , Excise and Service Tax Appellate Tribunal

2003-04;

2005-13;

2014-15;

2017-18

721.49

19.64

701.85

 

Hon. High Court

2004-16

34.80

2.56

32.24

 

Hon. Supreme Court

2015-16

1.35

0.37

0.98

 

Total(F)

 

29,249.72

13,471.45

15,778.27

Grand Total (A+B+C+D+E+F)

 

170,159.71

120,747.31

49,412.40

#    Excluding penalty

*    The amount has been since deposited in May 2018, refer note no.48.1.1.b

viii.    The Company has not defaulted in repayment of dues to banks. The Company has not issued any debentures and has not borrowed any amount from financial institutions or government.

ix.    Based on our audit procedures performed and according to the information and explanations given by the management, the Company has not raised any money by way of initial public offer or further public offer and term loan.

x.    According to the information and explanations given to us, no fraud on the Company by its officers or employees or by the Company has been noticed or reported during the year.

xi.    As per notification number G.S.R. 463 (E) dated 5th June, 2015 issued by Ministry of Corporate Affairs, section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.

xii.    In our opinion, the Company is not a nidhi Company. Therefore, the provisions of clause 3(xii) of the Order are not applicable to the Company.

xiii.    According to the information and explanations given by the management, transactions with the related parties are in compliance with section 177 and 188 ofCompanies Act, 2013, where applicable and the details have been disclosed in the notes to the standalone Ind AS financial statements, as required by the applicable accounting standards.

xiv.    According to the information and explanations given to us and on an overall examination of the Balance Sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv.    According to the information and explanations given by the management, the Company has not entered into any non-cash transactions specified under section 192 of the Act with directors or persons connected with him.

xvi.    In our opinion, the Company is not required to register under section 45-IA of the Reserve Bank of India Act, 1934.

 

For MKPS & Associates                                       For Khandelwal Jain & Co.

For Lodha & Co                                                    Chartered Accountants

 Firm Reg. No: 301051E                                       Sd/-

                                                                              (Prashant Khandelwal)          

Partner

(M.No.056652)

For K. C. Mehta & Co.

Chartered Accountants

Firm Reg. No.106237W

Sd/-

(Vishal P. Doshi)

Partner (M. No.101533)

 

Chartered Accountants                             Chartered Accountants

Firm Reg. No: 302014E                           Firm Reg. No: 105049W

Sd/-                                                            Sd/-

(Nikhil K. Agrawalla)                               (Narendra Jain)

Partner (M.No. 157955)                            Partner (M.No. 048725)

For PKF Sridhar & Santhanam LLP         For Dass Gupta & Associates

Chartered Accountants                              Chartered Accountants

Firm Reg. No.003990S/S200018               Firm Reg. No. 000112N

Sd/-                                                             Sd/-

(V. Kothandaraman)                                  (Raaja Jindal)

Partner (M. No 025973)                             Partner (M. No.504111)

New Delhi 30.05.2018