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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 500312ISIN: INE213A01029INDUSTRY: Oil Drilling And Exploration

BSE   ` 207.15   Open: 201.75   Today's Range 200.35
208.45
+7.20 (+ 3.48 %) Prev Close: 199.95 52 Week Range 155.30
212.00
Year End :2017-03 

1. Corporate information

Oil and Natural Gas Corporation Limited (‘ONGC’ or ‘the Company’) is a public limited company domiciled and incorporated in India having its registered office at Pandit Deendayal Upadhyaya Urja Bhawan, 5, Nelson Mandela Marg, Vasant Kunj, New Delhi - 110070. The Company’s shares are listed and traded on Stock Exchanges in India. The Company is engaged in exploration, development and production of crude oil, natural gas and value added products.

2. Application of new IndianAccounting Standards

2.1 All the Indian Accounting Standards issued and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) till the financial statements are authorized have been considered in preparing these financial statements.

2.2 In March 2017, Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to the Ind AS 7 ‘Statement of Cash flows’ and Ind AS 102, ‘Share - Based Payment’, which are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS -7, ‘Statement of Cash flows’ and IFRS - 2, ‘Share - Based Payment’ respectively. These amendments are applicable w.e.f. 1stApril, 2017

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.

As the Company has no liabilities arising from financing activities presently, hence this amendment has no effect on the financial statements of the Company.

Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.

As the Company has not issued any stock options planspresently, hence this amendment has no effect on the financial statements of the Company.

3. Critical Accounting Judgments,

Assumptions and Key Sources of Estimation Uncertainty

Inherent in the application of many of the accounting policies used in preparing the Financial Statements is the need for Management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual outcomes could differ from the estimates and assumptions used.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.

Key source of judgments, assumptions and estimation uncertainty in the preparation of the Financial Statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of Oil and Gas reserves, impairment, useful lives of Property, Plant and Equipment, depletion of oil and gas assets, decommissioning provision, employee benefit obligations, impairment, provision for income tax, measurement of deferred tax assets and contingent assets and liabilities.

3.1. Critical judgments in applying accounting policies

The following are the critical judgements, apart from those involving estimations (Note 4.2), that the Management have made in the process of applying the Company’s accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.

(a) Determination of functional currency

Currency of the primary economic environment in which the Company operates (“the functional currency”) is Indian Rupee (Rs.) in which the Company primarily generates and expends cash. Accordingly, the Management has assessed its functional currency to be Indian Rupee ( Rs.).

(b) Classification of investment

Judgement is required in assessing the level of control obtained in a transaction to acquire an interest in another entity; depending upon the facts and circumstances in each case, the Company may obtain control, joint control or significant influence over the entity or arrangement. Transactions which give the Company control of a business are business combinations. If the Company obtains joint control of an arrangement, judgement is also required to assess whether the arrangement is a joint operation or a joint venture. If the Company has neither control nor joint control, it may be in a position to exercise significant influence over the entity, which is then classified as an associate.

The Company has 49.36% equity interest in ONGC Petro Additions Limited (OPAL). The Company has also subscribed for 1,922 million share warrants on August 25, 2015 entitling the Company to exchange each warrant with an equity share of face value of Rs.10 each against which Rs.9.75 has been paid.

Further the Company has also entered into an arrangement on July 2, 2016 for backstopping support towards repayment of principal and cumulative coupon amount for compulsory convertible debentures amounting to Rs.56,150 Million and cumulative interest thereon amounting to Rs.16,570.00 Million issued by OPAL.

The Management has however evaluated the interest in OPAL to be in the nature of joint venture as the shareholder agreement between all the shareholders provides for sharing of control of the decisions of relevant activities that require the unanimous consent of all the parties sharing control.

(c) Determining whether an arrangement contain leases and classification of leases

The Company enters into service/hiring arrangements for various assets/services. The determination of lease and classification of the service/hiring arrangement as a finance lease or operating lease is based on an assessment of several factors, including, but not limited to, transfer of ownership of leased asset at end of lease term, lessee’s option to purchase and estimated certainty of exercise of such option, proportion of lease term to the asset’s economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset.

(d) Evaluation of indicators for impairment of Oil and Gas Assets

The evaluation of applicability of indicators of impairment of assets requires assessment of external factors (significant decline in asset’s value, significant changes in the technological, market, economic or legal environment, market interest rates etc.) and internal factors (obsolescence or physical damage of an asset, poor economic performance of the asset etc.) which could result in significant change in recoverable amount of the Oil and Gas Assets.

(e) Oil & Gas Accounting

The determination of whether potentially economic oil and natural gas reserves have been discovered by an exploration well is usually made within one year of well completion, but can take longer, depending on the complexity of the geological structure. Exploration wells that discover potentially economic quantities of oil and natural gas and are in areas where major capital expenditure (e.g. an offshore platform or a pipeline) would be required before production could begin, and where the economic viability of that major capital expenditure depends on the successful completion of further exploration work in the area, remain capitalized on the balance sheet as long as additional exploration or appraisal work is under way or firmly planned.

It is not unusual to have exploration wells and exploratory-type stratigraphic test wells remaining suspended on the balance sheet for several years while additional appraisal drilling and seismic work on the potential oil and natural gas field is performed or while the optimum development plans and timing are established. All such carried costs are subject to regular technical, commercial and management review on at least an annual basis to confirm the continued intent to develop, or otherwise extract value from the discovery. Where this is no longer the case, the costs are immediately expensed.

3.2. Assumptions and key sources of estimation uncertainty

Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.

(a) Estimation ofprovision for decommissioning

The Company estimates provision for decommissioning as per the principles of Ind AS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ for the future decommissioning of Oil and Gas assets at the end of their economic lives. Most of these decommissioning activities would be in the future, the exact requirements that may have to be met when the removal events occur are uncertain.

Technologies and costs for decommissioning are constantly changing. The timing and amounts of future cash flows are subject to significant uncertainty.

The timing and amount of future expenditures are reviewed at the end of each reporting period, together with rate of inflation for escalation of current cost estimates and the interest rate used in discounting the cash flows. The economic life of the Oil and Gas assets is estimated on the basis of long term production profile of the relevant Oil and Gas asset. The General Consumer Price Index (CPI) for inflation i.e. 3.81% (Previous year 4.83%) has been used for escalation of the current cost estimates and discounting rate used to determine the balance sheet obligation as at the end of the year is 7.12% (Previous year 7.56%), which is the risk free government bond rate with 10 year yield.

(b) Determination of cash generating unit (CGU)

The Company is engaged mainly in the business of oil and gas exploration and production in Onshore and Offshore. In case of onshore assets, the fields are using common production/ transportation facilities and are sufficiently economically interdependent to constitute a single cash generating unit (CGU). Accordingly, impairment test ofall onshore fields is performed in aggregate of all those fields at the Asset Level. In case of Offshore Assets, a field is generally considered as CGU except for fields which are developed as a Cluster, for which common facilities are used, in which case the impairment testing is performed in aggregate for all the fields included in the cluster.

(c) Impairment of assets

Determination as to whether, and by how much, a CGU is impaired involves Management estimates on uncertain matters such as future prices, the effects of inflation on operating expenses, discount rates, production profiles for crude oil, natural gas and value added products. For Oil and Gas assets, the expected future cash flows are estimated using Management’s best estimate of future crude oil and natural gas prices, production and reserves volumes.

The present values of cash flows are determined by applying pre tax-discount rates of 14.88% (previous year 19.06 %) for Rupee transactions and 10.57% (previous year 13.37 %) for crude oil and value added products revenue, which are measured in USD. Future cash inflows from sale of crude oil and value added products are computed using the future prices, on the basis of market-based average prices of the Dated Brent crude oil as per assessment by ‘Platt’s Crude Oil Market wire’ and its co-relations with benchmark crudes and other petroleum products. Future cash flows from sale of natural gas are also computed based on the expected future prices on the basis of the notification issued by the Government of India and discounted applying the rate applicable to the cash flows measured in USD in view of the new pricing guidelines issued by GoI.

The discount rate used is based upon the cost of capital from an established model.

The Value in use of the producing/developing CGUs is determined under a multi-stage approach, wherein future cash flows are initially estimated based on Proved Developed Reserves. Under circumstances where the further development of the fields in the CGUs is under progress and where the carrying value of the CGUs is not likely to be recovered through exploitation of proved developed reserves alone, the Proved and probable reserves (2P) of the CGUs are also taken for the purpose of estimating future cash flows. In such cases, full estimate of the expected cost of evaluation/ development is also considered while determining the value in use.

The discount rates applied in the assessment of impairment calculation are re-assessed each year.

(d) Estimation of reserves

Management estimates production profile (proved and developed reserves) in relation to all the Oil and Gas Assets based on the policies and procedures determined by the Reserves Estimation Committee of the Company (REC). The estimates so determined are used for the computation of depletion and impairment testing.

The year-end reserves of the Company have been estimated by the REC which follows international reservoir engineering procedures consistently. The Company has adopted deterministic approach for reserves estimation and is following Society of Petroleum Engineers (SPE) - 1997 guidelines which defines reserves as “estimated volumes of crude oils, condensate, natural gas, natural gas liquids and associated substances anticipated to be commercially recoverable from known accumulations from a given date forward, under existing economic conditions, by established operating practices, and under current Government regulations.” Volumetric estimation is the main procedure in estimation, which uses reservoir rock and fluid properties to calculate hydrocarbons in-place and then estimate that portion which will be recovered from it. As the field gets matured with reasonably good production history available then performance methods such as material balance, simulation, decline curve analysis are applied to get more accurate assessments of reserves.

The annual revision of estimates is based on the yearly exploratory and development activities and results thereof. New in- place Volume and Ultimate Reserves are estimated for new field discoveries or new pool discoveries in already discovered fields. Also, appraisal activities lead to revision in estimates due to new sub-surface data. Similarly, reinterpretation exercise is also carried out for old fields due to necessity of revision in petro-physical parameters, updating of static and dynamic models and performance analysis leading to change in reserves. Intervention of new technology, change in classifications and contractual provisions also necessitate revision in estimation of reserves.

The Company uses the services of third party agencies for due diligence and it gets the reserves ofits assets audited by third party periodically by internationally reputed consultants who adopt latest industry practices for their evaluation.

(e) Defined benefit obligation (DBO)

Management’s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, medical cost trends, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.

4.1 Includes assets pertaining to production and allied facilities as on April 1, 2015 classified as “Oil and Gas Assets”under Property, Plant and Equipment in terms of EAC opinion issued by the Institute of Chartered Accountants of India (iCAI) (Note 56.1).

4.2 The Company has elected to continue with the carrying value of its Oil and Gas Assets recognised as ofApril 1, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date as per Para D7AA of Ind AS 101 except for decommissioning and restoration provision included in the cost of Oil and Gas Assets which have been adjusted in terms of para D21 of Ind AS 101 ‘First -time Adoption of Indian Accounting Standards’ (Note 3.34 (v))

a. Land includes 36 numbers (Previous year 158) of lands in respect of certain units amounting to Rs.88.89 million (Previous year Rs.184.61 million) for which execution of conveyance deeds is in process.

b. Registration of title deeds in respect of 12 numbers (Previous year 12) buildings is pending execution having carrying amount of Rs.61.10million(Previous year Rs.64.94 million).

c. Building includes cost of undivided interest in land.

5.1. Carrying value of Assets pertaining to production and allied facilities as on April 1, 2015 has been reclassified from other Property, Plant and Equipment (PPE) to “Oil and Gas Assets” to reflect the aggregate amount of Oil and Gas Assets.

5.2. The Company has elected to continue with the carrying value of its other Property Plant & Equipment (PPE) recognised as of April 1, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date as per Para D7AA of Ind AS 101 except for decommissioning provision included in the cost of other Property, Plant and Equipment (PPE) which has been adjusted in terms of para D21 of Ind AS 101 ‘First -time Adoption of Indian Accounting Standards’ (Note 3.34 (v)).

6.1 The Company has elected to continue with the carrying value of its Capital Works-in-Progress recognised as of April 1, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date as per Para D7AA of Ind AS 101 except for decommissioning and restoration provision included in the cost of Capital Works-in-Progress which have been adjusted in terms of para D21 of Ind AS 101 ‘First -time Adoption of Indian Accounting Standards’ (Note 3.34 (v)).

6.2 Includes Rs.7,156.89 million (Previous year Nil) in respect of Tapti A series assets and facilities which were a part of the assets of PMT Joint Operation ( JO) and surrendered by the JO to the Government of India as per the terms and conditions of the JO Agreement. During the year these assets and facilities have been transferred by Government of India to the Company free of cost as its nominee. The Company has assessed the fair value of the said assets & facilities at Rs.7,156.89 million based on the valuation report by a third party agency, which has been accounted as Capital work-in-progress with a corresponding liability as Deferred Government Grant (Note 27.1).

While transferring these assets to the Company, the decommissioning obligation has been delinked by Government of India. The same will be considered as decided by the Government of India. However decommissioning provision towards 40% share being partner in the JO is being carried in the financial statements.

7.1 The Company has elected to continue with the carrying value of its Intangible Assets, recognised as of April 1, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date as per Para D7AA of Ind AS 101 ‘First -time Adoption of Indian Accounting Standards’ Standards’ (Note 3.34 (v)).

8.1. The Company had acquired during 2004-05, 90% Participating Interest in Exploration Block KG-DWN-98/2 from M/s Cairn Energy India Ltd for a lump sum consideration of Rs.3,711.22 million which, together with subsequent exploratory drilling costs of wells had been capitalised under exploratory wells in progress. During 2012-13, the Company had acquired the remaining 10% participating interest in the block from M/s Cairn Energy India Ltd on actual past cost basis for a consideration of Rs.2124.44 million. Initial in-place reserves were established in this block and adhering to original PSC time lines, a Declaration of commerciality (DOC) with a conceptual cluster development plan was submitted on December 21, 2009 for Southern Discovery Area and on July 15, 2010 for Northern Discovery Area. Thereafter, in the revised DOC submitted in December, 2013, Cluster-wise development of the Block had been envisaged by division of entire development area into three clusters. The DOC in respect of Cluster II had been reviewed by the Management Committee (MC) of the block on September 25, 2014. Field Development Plan (FDP) for Cluster-II was submitted on September 8, 2015 and the same had been approved by MC on March 31, 2016. Investment decision has been approved by the Company. Work on the block has started and is in progress.

The exploration period of this block was restructured byGovernment upto December 29, 2013 in accordance with the Rig Holiday Policy and further extended to January 25, 2014. Under the new policy framework for relaxation, extensions and clarifications at the development and production stage under the PSC regime notified by MoP&NG vide GO dated November 11, 2014; drilling and testing of appraisal wells were completed. Revised DOC for Clusters I and III were submitted to MC for review on April 27, 2016. The DOC for Cluster-I has been reviewed by MC on December 14, 2016. FDP for Cluster-I is under preparation. Revised DOC of Cluster-III is under review by MC and on completion of review, FDP will be prepared.

In view of the definite plans for development of discoveries in the block, in FY 2015-16, the Company had reversed provision of Rs.15,482.32 million recognised in the past.

9.1.1 The Company has elected to continue with the carrying value of its investments in subsidiaries, joint ventures and associates, measured as per the Previous GAAP and used that carrying value on the transition date April 1, 2015 in terms of Para D15 (b) (ii) of Ind AS 101 ‘First -time Adoption of Indian Accounting Standards’.

9.1.2 ONGC Mangalore Petrochemicals Limited has been classified as subsidiary as the Company holds 48.99% ownership interest and its subsidiary Mangalore Refinery and Petrochemicals Limited holds 51.01%.

9.1.3 Petronet LNG Limited (PLL) was classified as Joint Venture in Previous GAAP, however, in terms of Para 7 of Ind AS 111 “Joint Arrangements”, unanimous consent of all promoters is not required in relevant activities in PLL and therefore PLL is not classified as Joint Venture. Since the Company has significant influence on PLL, the same has been assessed and classified as an Associate.

9.1.4 The Company is restrained from diluting the investment in the respective companies till the sponsored loans are fully repaid as per the covenants in the respective loan agreements of the companies.

9.2.1 The amount of Rs.30.53 million (Previous year Rs.26.05 million) shown as deemed equity investments denotes the fair value of fees towards financial guarantee given for Mangalore Refinery and Petrochemicals Limited without any consideration.

9.2.2 The amount ofRs.5,259.47 million ( Previous year Rs.54,807.29 million) shown as deemed equity investments in respect of ONGC Videsh Limited includes (i) Loan Rs.Nil (Previous year Rs.50,000.00million) which has been converted into equity shares in 2016-17, (ii) Rs.3,674.35 million (Previous year Rs.2,753.34 million) towards the fair value of guarantee fee on financial guarantee given without any consideration and (iii) Rs.1,585.11 million (Previous year Rs.2,053.94 million) towards fair value of interest free loan.

9.2.3 During 2015-16, the Company had subscrib ed Share Warrants of ONGC Petro Additions Limited, entitling the Company to exchange each warrant with Equity Share of Face Value of Rs.10/- each after a balance payment of Rs.0.25/- per equity share within forty eight months of subscription of the Share warrants issued on August 25, 2015.

9.2.4 The Company had entered into an arrangement on July 2, 2016 for backstopping support towards repayment of principal and cumulative coupon amount for compulsory convertible debentures amounting to Rs.56,150.00 million issued by ONGC Petro Additions Limited and interest for the year ending March 31, 2017 amounting to Rs.3,612.06 million

9.2.5 The aggregate investments in each subsidiary, associates and joint ventures is as follows:

10.1 Generally, the Company enters into long-term crude oil and gas sales arrangement with its customers. The average credit period on sales of crude, gas and value added products is 7 - 30 days. No interest is charged during this credit period. Thereafter,interest on delayed payments is charged at SBI Base rate plus 4%-6% per annum compounded each quarter on the outstanding balance.

Of the trade receivables balance as at March 31, 2017 of Rs.54,071.42 million (as at March 31, 2016 of Rs.47,815.95 million; as at April 1, 2015 of Rs.128,226.21 million) is due from Oil Marketing Companies, the Company’s largest customers. There are no other customers who represent more than 5% of the total balance of trade receivables.

Accordingly, the Company assesses impairment loss on dues from Oil Marketing Companies on facts and circumstances relevant to each transaction.

The Company has concentration of credit risk due to the fact that the Company has significant receivables from Oil Marketing Companies. However, these companies are reputed and creditworthy public sector undertakings (PSUs).

10.2 Includes Rs.126.39 million and Rs.91.71 million due from Indian Oil Corporation Limited (IOC) and Numaligarh Refinery Limited (NRL) respectively towards Value Added Tax on discount that could not be adjusted in credit notes in view of Assam VAT amendment Act, 2014. The matter is being pursued with IOC, NRL and Government of Assam.

11.1 Loans to employees include an amount of Rs.0.72 million (As at March 31, 2016 Rs.1.66 million; As at April 1, 2015 Rs.1.04 million) outstanding from Key Managerial Personnel.

The above amount has been deposited with banks under section 33ABA of the Income Tax Act, 1961 and can be withdrawn only for the purposes specified in the Scheme i.e. towards removal of equipment’s and installations in a manner agreed with Central Government pursuant to an abandonment plan to prevent hazards to life, property, environment etc. This amount is considered as restricted cash and hence not considered as ‘Cash and cash equivalents’.

12.1 During the financial year 2010-11, the Oil Marketing Companies, nominees of the GoI recovered USD 32.07 million (equivalent to Rs.2,079.90 million) ONGC’s share as per directives of GoI in respect of Joint Operation - PannaMukta and Tapti. The recovery is towards certain observations raised by auditors appointed by the Director General of Hydrocarbons (DGH) under Production Sharing Contract (PSC) for the period 200203 to 2005-06 in respect of cost and profit petroleum share payable to GoI. BGEPIL along with RIL (“Claimants”) have served a notice of arbitration on the GoI in respect of dispute, differences and claims arisen in connection with the terms of Panna, Mukta and Tapti PSCs. Since the Company is not a party to the arbitration proceedings, it had requested MoP&NG that in case of an arbitral award the same be made applicable to ONGC also, as a constituent of contractor for both the PSCs. Subsequently, vide letter dated July 4, 2011 MoP&NG has advised ONGC not to participate in the arbitration initiated by RIL and BGEPIL under Panna Mukta and Tapti PSCs. MoP&NG has also stated that in case of an arbitral award, the same will be applicable to ONGC also as a constituent of the contractor for both the PSCs. Pending final arbitral award, the same has been shown as Receivable from GoI under ‘Advance Recoverable in Cash under financial assets -others. (Figures in ‘are restated).

12.2 In Ravva Joint Operation, the demand towards additional profit petroleum raised by Government of India (GoI), due to differences in interpretation of the provisions of the Production Sharing Contract (PSC) in respect of computation of Post Tax Rate of Return (PTRR), based on the decision of the Malaysian High Court setting aside an earlier arbitral tribunal award in favor of operator, was disputed by the operator M/s Cairn India Limited. The Company is not a party to the dispute but has agreed to abide by the decision applicable to the operator. The Company had made an impairment towards the claim made by the GoI in earlier years and the amount of impairment outstanding as at March 31, 2017 is Rs.10,884.73 million (equivalent to USD 167.84 million) after adjustments for interest and exchange rate fluctuations. The GoI had recovered the above amount including interest thereon USD 54.88 million ( Rs.3,558.97 million) from the Company in earlier years which has been carried under Non-Current Financial Assets in the Balance Sheet as at March 31,2017.

In subsequent legal proceedings, the Appellate Authority of the Honorable Malaysian High Court of Kuala Lumpur had set aside the decision of the Malaysian High Court and the earlier decision of arbitral tribunal in favour of operator was restored, against which the GoI has preferred an appeal before the Federal Court of Malaysia. The Federal Court of Malaysia, vide its order dated October 11, 2011, has dismissed the said appeal of the GoI.

The Company has taken up the matter regarding refund of the recoveries made in view of the favorable judgment of the Federal Court of Malaysia with MoP&NG. However, according to a communication dated January 13, 2012 received, MoP&NG expressed the view that ONGC’s proposal would be examined when the issue of ONGC carry under Ravva PSC is decided in its entirety by the Government along with other partners.

In view of the perceived uncertainties in obtaining the refund at this stage, the impairment made in the books as above has been retained and netted off against the amount recoverable as above in the Financial Statements for the year ending March 31, 2017. (Figures in ‘are restated).

13.1 Includes Nil under current assets (As at March 31, 2016 Rs.21,690.24 million; As at April 1, 2015 Rs.21,067.60 million) towards differential royalty being deposited from February 1, 2014 as per the interim order of the Hon’ble Supreme Court of India. (Note. 49.1.b)

14.1 This includes an amount of Rs.2.15 million (as at March 31, 2016 Rs.3.37 million; as at April 1, 2015 Rs.7.68 million) in respect of Carbon Credits.

14.2 Inventory amounting to Rs.81.58 million (as at March 31, 2016 Rs.105.26 million) has been valued at net realisable value. Write down amounting to Rs.24.40 million (as at March 31, 2016 Rs.149.45 million) has been recognised as expense in the Statement of Profit and Loss under note 35.

15.1 The deposits maintained by the Company with banks comprise time deposit, which can be withdrawn by the Company at any point without prior notice or penalty on the principal (Note 28.1).

15.2 Amount deposited in unclaimed dividend account is earmarked for payment of dividend and cannot be used for any other purpose. No amount is due for deposit in Investor Education and Protection Fund.

15.3 Matter of Dispute on Delivery Point of Panna-Mukta gas between Government of India and PMT JO Partners arose due to differing interpretation of relevant PSC clauses. According to the JO Partners, Delivery Point for Panna-Mukta gas is at Offshore, however, MoP&NG and GAIL maintained that the delivery point is onshore at Hazira. The gas produced from Panna-Mukta fields was transported through Company’s pipelines. Owing to the delivery point dispute neither the seller (PMT JO) nor the buyer of gas (GAIL) was paying any compensation to ONGC for usage of its pipeline for gas transportation.

Hon’ble Gujarat High Court decided that the Panna Mukta oil fields from where the movement of goods is occasioned fall within the customs frontiers of India Consequently, the sale of goods cannot be said to have taken place in the course of import of goods into the territory of India. The state Government of Gujarat has filed a petition with the Hon’ble Supreme Court of India against the decision of Hon’ble Gujarat High Court.

Since the said matter of determination of delivery point is pending with the Hon’ble Supreme Court of India, the amount is maintained in the escrow accounts by the JO Partners.

16.1 On transition date, the Company reclassified Two Helicopters (“the Helicopters”) as “Assets classified as held for sale’.

During the current year, the Helicopters have been sold for total consideration of Rs.147.81 million resulting in profit on sale of non-current asset ofRs.124.07 million recorded under ‘Other Income”. (Note 32).

16.2 Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.5 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to

16.3 Pursuant to the approval of the shareholders accorded by postal ballot on December 12, 2016 record date for ascertaining the eligibility of the shareholders for receiving the bonus shares was fixed on December 16, 2016. Accordingly, the Company has allotted 4,277,745,060 number of fully paid Bonus shares on December 18, 2016 in the ratio of one equity share of Rs.5 each fully paid up for every two existing equity shares of Rs.5 each fully paid up.

16.4 18,972 equity shares of Rs.10 each (equivalent to 37,944 equity shares of Rs.5 each) were forfeited in the year 2006-07 against which amount originally paid up was Rs.0.15 million.

17.1 Represent assessed value of assets received as gift.

17.2 The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. This reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are disposed.

17.3 The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another.

17.4 The amount that can be distributed by the Company as dividends to its equity shareholders is determined considering the requirements of the Companies Act, 2013 and the dividend distribution policy of the Company. Thus, the amount reported in General Reserve is not entirely distributable.

18.1 As per the lease agreement, the Company is required to pay annual lease rental of Rs.35.03 million till perpetuity. The finance lease obligation represents the perpetuity value of annualized lease payment, which is Rs.417.96 million.

On August 23, 2016, a final dividend of Rs.3.25 per share for 2015-16 was paid to holders of fully paid equity shares.

On October 27, 2016 and on January 31, 2017 the Company had declared interim dividend ofRs.4.50 per share (90%) and Rs.2.25 per share (45%) respectively which has since been paid.

In respect of the year ended March 31, 2017, the Board of Directors has proposed a final dividend of’.0.80 per share be paid on fully paid equity shares. This equity dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed equity dividend is payable to all holders of fully paid equity shares. The total estimated equity dividend to be paid is Rs.10,266.61 million and the dividend distribution tax thereon amounts to Rs.2,090.04 million.

18.2 The Company estimates provision for decommissioning as per the principles of Ind AS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ for the future decommissioning of Oil and Gas assets at the end of their economic lives. Most of these decommissioning activities would be in the future for which the exact requirements that may have to be met when the removal events occur are uncertain. Technologies and costs for decommissioning are constantly changing. The timing and amounts of future cash flows are subject to significant uncertainty. The economic life of the Oil and Gas assets is estimated on the basis of long term production profile of the relevant Oil and Gas asset. The timing and amount of future expenditures are reviewed annually, together with rate of inflation for escalation of current cost estimates and the interest rate used in discounting the cash flows.

19.1 This represents the fair value of fee towards financial guarantee issued on behalf of subsidiaries, recognised as financial guarantee obligation with corresponding debit to investment in subsidiaries.

19.2 No amount is due for deposit in Investor Education and Protection Fund.

19.3 Decommissioning provision in respect to PMT Joint Operation was provided based on the technical estimates of the Company till previous year. During the year, the said provision has been provided based on the technical estimates provided by the operator of the Joint Operation.

As a result decommissioning provision is higher by Rs.11,143. 47 million and depletion for the year is higher by Rs.4,080.36 million in respect of PMT Joint Operation.

20.1 Includes Rs.7,615.73 million in respect of Tapti A series assets, facilities and inventory which were a part of the assets of PMT Joint Operation and surrendered by the JO to the Government of India as per the terms and conditions of the JO Agreement. During the year these assets, facilities and inventory have been transferred by Government of India to the Company free of cost as its nominee. The Company has assessed the fair value of the said assets & facilities at Rs.7,156.89 million based on the valuation report by a third party agency, which has been accounted as Capital work in progress with a corresponding liability as Deferred Government Grant. Inventory valuing Rs.458.84 million has been accounted with a corresponding liability as Deferred Government Grant.

20.2 Includes Rs.8.57 million is on account of reimbursement of capital expenditure of research & development.

21.1 Secured against NIL (as at March 31, 2016 NIL; As at April 1, 2015 Rs.17,340 million) of principal amount of Term deposit receipt.

22.1 No discount was given by the Company to the Oil Marketing Companies during the year (Previous year Rs.10,961.20 Million).

22.2 Revenue from nominated crude (except North East crude) is accounted for in terms of Crude Oil Sales Agreements (COSAs) signed and made effective from April 1, 2010. For Crude Oil produced in Assam, sales revenue is based on the pricing formula provided by Ministry of Petroleum and Natural Gas, Government of India.

22.3 Sales revenue of Natural Gas is based on domestic gas price of US$ 3.06/mmbtu and US$ 2.50/mmbtu (on GCV basis) notified by GoI for the period April 1, 2016 to September 30, 2016 and October 1, 2016 to March 31, 2017 respectively in terms of “New Domestic Natural Gas Pricing Guidelines, 2014”. For gas consumers in North-East, consumer price is 60% of the domestic gas price and the difference between domestic gas price and consumer price is paid to the Company through GoI Budget and classified as ‘North-East Gas Subsidy’.

22.4 The Company is supplying majority of Natural gas to GAIL (India) Limited which also purchases gas from other sources and sells to different consumers at different prices. Based on the Government directives, excess in Gas Pool Account at the end of financial year is transferred to ONGC/Oil India Limited in accordance with their contribution. Based on the details received from GAIL (India) Limited, the said amount has been classified as ‘Surplus from Gas Pool Account’.

23.1 Pay revision of officers and unionized category is due w.e.f. 01.01.2017. Pending finalization of the same, the Company has provided for a sum of Rs.19,440.72 million as estimated by the management including long term benefit obligation viz. leave, gratuity (at max limit of Rs.2.00 million) etc. The same has been allocated to activities as per the policy of the Company.

23.2 The CSR expenditure comprises the following:

(a) Gross amount required to be spent by the Company during the year: Rs.5,356.66 million (Previous year Rs.5,936.96 million)

(b) Amount spent during the year on:

24.1 The Company has allotted 4,277,745,060 number of fully paid Bonus shares on December 18, 2016 in the ratio of one equity share of Rs.5 each fully paid up for every two existing equity shares of Rs.5 each fully paid up. In accordance with Ind AS 33 ‘Earnings per Share’, basic and diluted earnings per equity share have been adjusted for bonus issue for previous year.

25. Leases

25.1 Finance leases

Leasing arrangements

Leasehold land where lease term is till perpetuity has been classified under finance lease.

25.2 Operating lease arrangements

25.2.1 Leasing arrangements

The Company has applied Appendix C to Ind AS 17 ‘Leases’ to hiring/service contracts of rigs, vessels, helicopters, etc. to evaluate whether these contracts contains a lease or not. Based on evaluation of the terms and conditions of the arrangements, the Company has of the Company is to make such fixed contribution and to ensure a minimum rate of return to the members as specified by Government of India. As per report of the actuary, overall interest earnings and cumulative surplus is more than the statutory interest payment requirement. Hence, no further provision is considered necessary. The details of fair value of plan assets and obligations are as under:

26. Employee benefit plans

26.1 Defined Contribution plans:

26.1.1 Provident Fund

The Company pays fixed contribution to provident fund at predetermined rates to a separate trust, which invests the funds in permitted securities. The obligation evaluated such arrangements to be operating leases.

Operating leases relate to leases of rigs, vessels, helicopters etc. with lease terms upto 10 years. The Company does not have an option to purchase the leased rigs, vessels, helicopters etc. at the expiry of the lease periods.

Provident Fund is governed through a separate trust. The board of trustees of the Trust functions in accordance with any applicable guidelines or directions that may be issued in this behalf from time to time by the Central Government or the Central Provident Fund Commissioner, the board of trustees have the following responsibilities:

(i) Investments of the surplus as per the pattern notified by the Government in this regard so as to meet the requirements of the fund from time to time.

(ii) Raising of moneys as may be required for the purposes of the fund by sale, hypothecation or pledge of the investment wholly or partially.

(iii) Fixation of rate of interest to be credited to members’ accounts.

26.1.2 Post Retirement Benefit Scheme

The defined contribution pension scheme of the Company for its employees is administered through a separate trust. The obligation of the Company is to contribute to the trust to the extent of amount not exceeding 30% of basic pay and dearness allowance less employer’s contribution towards provident fund, gratuity, post-retirement medical Benefit (PRMB) or any other retirement benefits.

The board of trustees of the Trust functions in accordance with any applicable guidelines or directions that may be issued in this behalf from time to time by the Central Government, the board of trustees have the following responsibilities:

(i) Investments of the surplus as per the pattern notified by the Government in this regard so as to meet the requirements of the fund from time to time.

(ii) Fixation of rate of contribution and interest thereon.

(iii) Purchase of annuities for the members.

26.2 Employee Pension Scheme 1995

The Employee Pension Scheme -1995 is administered by Employees Provident Fund Organization of India, wherein the Company has to contribute 8.33% of salary (subject to maximum of Rs.15,000 per month) out of the employer’s contribution to Provident Fund.

26.3 Composite Social Security Scheme (CSSS)

The Composite Social Security Scheme is formulated by the Company for the welfare of its regular employees and it is administered through a separate Trust, named as Composite Social Security Scheme Trust. The obligation of the Company is to provide matching contribution to the Trust to the extent of contribution of the regular employees of the Company. The Trust provides an assured lump sum support amount in the event of death or permanent total disablement of an employee while in service. In case of Separation other than Death/Permanent total disability, employees own contribution along with interest is refunded.

The Board of trustees of the Trust functions in accordance with Trust deed, Rule, Scheme and applicable guidelines or directions that may be issued by Management from time to time.

The Board of trustees has the following responsibilities

(i) Investments of the surplus as per the pattern notified by the Government in this regard so as to meet the requirements of the fund from time to time.

(ii) Fixation of rate of interest to be credited to members’ accounts.

(iii) To provide cash benefits to the nominees in the event of death of an employee or Permanent Total Disablement leading to the cessation from service and refund of own contribution along with interest in case of separation other than death.

26.4 The amounts recognized in the financial statements before allocation for the defined contribution plans are as under:

26.5 Defined benefit plans

26.5.1 Brief Description: A general description of the type of Employee Benefits Plans is as follows:

26.5.2 All the employee benefit plans of the Company are run as Group administration plans (Single Employer Scheme) including employees seconded to ONGC Videsh Limited (OVL), 100% subsidiary.

26.5.3 Gratuity

15 days salary for each completed year of service. Vesting period is 5 years and the payment is restricted to Rs.1 million on superannuation, resignation, termination, disablement or on death.

Scheme is funded through own Gratuity Trust. The liability for gratuity as above is recognized on the basis of actuarial valuation.

For the purpose of actuarial valuation and provision there of the maximum limit of gratuity payable w.e.f January 1, 2017 has been considered at Rs.2 million in line with the 3rd Pay Revision Committee report submitted to Government of India.

26.5.4 Post-Retirement Medical Benefits

The Company has Post-Retirement Medical benefit (PRMB), under which the retired employees, dependent parents and their spouses are provided medical facilities in the Company hospitals/empanelled hospitals up on payment of one time prescribed contribution by the employees. They can also avail treatment as outpatient. The liability for the same is recognized annually on the basis of actuarial valuation. Full medical benefits on superannuation and on voluntary retirement are available subject to the completion of minimum 20 years of service and 50 years of age.

An employee should have put in a minimum of 15 years of service rendered in continuity in ONGC at the time of superannuation to be eligible for availing post-retirement medical facilities.

26.5.5 Terminal Benefits

At the time of superannuation, employees are entitled to settle at a place of their choice and they are eligible for Settlement Allowance.

26.5.6 These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

26.6.4 Good Health Reward (Half pay leave)

Accrual - 20 days per year

Encashment while in service - Nil

Encashment on retirement - 50% of Half Pay Leave balance.

Scheme is funded through Life Insurance Corporation of India. (LIC).

The liability for the same is recognized annually on the basis of actuarial valuation.

26.7 The principal assumptions used for the purposes of the actuarial valuations were as follows.

No other post-retirement benefits are provided to these employees.

In respect of the above plans, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at March 31, 2017 by a member firm of the Institute of Actuaries of India. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

26.6 Other long term employee benefits

26.6.1 Brief Description: A general description of the type of Other long term employee benefits is as follows:

26.6.2 All the employee benefit plans of the Company are run as Group administration plans (Single Employer Scheme) including employees seconded to ONGC Videsh Limited (OVL), 100% subsidiary.

26.6.3 Earned Leave (EL) Benefit

Accrual - 30 days per year

Encashment while in service - 75% of Earned Leave balance subject to a maximum of 90 days per calendar year

Encashment on retirement - maximum 300 days

Scheme is funded through Life Insurance Corporation of India (LIC).

The discount rate is based upon the market yield available on Government bonds at the Accounting date with a term that matches. The salary growth takes account inflation, seniority, promotion and other relevant factors on long term basis. Expected rate of return on plan assets is based on market expectation, at the beginning of the year, for return over the entire life of the related obligation.

Expected Contribution in respect of Gratuity for next year will be Rs.1904.73 million (For the year ended March 31, 2016 Rs.739.45 million)

The Company has recognized a gratuity liability of Rs.78.78 as on March 31, 2017 (As at March 31, 2016 Rs.82.30 million; As at April 1, 2015 Rs.78.72 million) as per actuarial valuation for 228 (415 As at March 31, 2016; 558 as at April 1, 2015) contingent Employees engaged in different work centres.

26.7.1 The fair values of the above equity and debt instruments are determined based on quoted market prices in active markets.

26.7.2 Cost of Investment is taken as fair value of Investment in Unit Linked Plan of Insurance Company (ULIPs) and Bank TDR.

26.7.3 All Investments in PSU Bonds, G Sec and T Bill are quoted in active market.

26.7.4 Fair value of Investment in Group Gratuity Cash Accumulation Scheme (Traditional Fund) of Insurance Company is taken as book value on reporting date.

26.7.5 Net Current Assets represent Accrued Interest on Investments minus outstanding gratuity reimbursements as on reporting date.

26.7.6 The actual return on plan assets of gratuity during FY 2016-17 was Rs.1,888.26 million(during FY 2015-16 Rs.1,689.33 million) and for Leave Rs.1,739.55 million (during FY 2015-16 Rs.1,691.87 million).

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Sensitivity due to mortality & withdrawals are not material & hence impact of change not calculated.

26.8 Significant actuarial assumptions for the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

27. Segment Reporting

27.1 The Company has identified and reported segments taking into account the different risks and returns, the organization structure and the internal reporting systems. Accordingly, the Company has identified following geographical segments as reportable segments

A. Offshore

B. Onshore

27.2 Segment revenue and results

27.2.1 The following is an analysis of the Company’s revenue and results from continuing operations by reportable segment.

27.2.2 Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sale in the current year (year ended March 31st, 2016: Nil)

27.2.3 The accounting policies of the reportable segments are the same as the Company’s accounting policies described in Note 3. Segment profit represents the profit before tax earned by each segment excluding finance cost and other income like interest/dividend income. This is the measure reported to the Chief Operating Decision maker for the purposes of resource allocation and assessment of segment performance.

For the purpose of monitoring segment performance and allocating resources between segments:

27.3.1 All assets are allocated to reportable segments other than investments in subsidiaries, associates and joint ventures, other investments, loans and current and deferred tax assets.

27.3.2 All liabilities are allocated to reportable segment other than borrowing, current and deferred tax liabilities.

27.3.3 Segment revenue, results, assets and liabilities include the respective amounts identifiable to each of the segments and amount allocated on reasonable basis. Unallocated expenditure includes common expenditure incurred for all the segments and expenses incurred at the corporate level. Finance cost includes unwinding of discount on decommissioning provisions not allocated to segment.

27.4 Information about major customers

Company’s significant revenues (more than 85%) are derived from sales to Public Sector Undertakings. The total sales to such companies amounted to Rs.682,865.03 million in 2016-17 and Rs.694,590.86 million in 2015-16.

No other single customer contributed 10% or more to the Company’s revenue for 2016-17 and 2015-16.

27.5 Information about geographical areas:

The Company is domiciled in India. The amount of its revenue from external customers broken down by location of customers is tabulated below:

The total of non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets, broken down by location of assets are shown below:

27.6 Information about products and services:

The Company derives revenue from sale of crude oil, natural gas and value added products. The information about revenues from external customers about each product is disclosed in Note no. 31.5 of the financial statements.

28. Related Party Disclosures

28.1 Name of related parties and description of relationship:

Notes:

28.1.1 Subsidiary Company OVL has 47.52% effective ownership interest, but it has 55.90% of voting rights in LLC Sibinterneft.

28.1.2 LLC Imperial Frac Services is under liquidation.

28.2 Details of Transactions:

28.2.3 The loan is unsecured carrying interest rate of 8.12% based on G-sec yield for 5 years tenor as per FIMMDA of 7.72 % plus spread of 0.40 bps (previous year 10.6% based on SBAR minus 3.85%) and is recoverable in half-yearly installments by financial year 2020-21.

28.2.4 The loan is Interest free and unsecured. The loan has been granted to fund the OVL’s overseas projects and is recoverable out of the surplus cash flows arising from the projects. However, Company has the right to demand loan by serving a notice period of 15 months. Pending the final approval of Government for conversion of loan into equity, loan to the extent of Rs.50,000.00 million has been re-classified as deemed equity as on April 1, 2015 & March 3, 2016 respectively based on approval of board. During the year, the Company has received Government approval for such conversion and accordingly the same has been converted into equity. The remaining loan has been fair valued based on effective interest rate (EIR) method as per Ind AS-32 and the same has been presented in balance sheet. The fair value of remaining OVL loan Rs.163.45 million (previous year Rs.6687.64 million) base on effective interest rate 8.12% (previous year 10.60% ) is included in note 12.

28.2.9 The loan in previous year was secured by hypothecation of 7 new Helicopters and carries interest rate of 10.80% based on SBI base rate plus 1.5% and is recoverable in sixty equal monthly installments starting from loan granted which has been recovered in full by 2016-17.

The above transactions with the government related entities cover transactions that are significant individually and collectively. The Company has also entered into other transactions such as telephone expenses, air travel, fuel purchase and deposits etc. with above mentioned and other various government related entities. These transactions are insignificant individually and collectively and hence not disclosed.

29. Financial instruments Disclosure

29.1 Capital Management

The Company’s objective when managing capital is to:

- Safeguard its ability to continue as going concern so that the Company is able to provide maximum return to stakeholders and benefits for other stakeholders; and

- Maintain an optimal capital structure to reduce the cost of capital.

The Company maintains its financial framework to support the pursuit of value growth for shareholders, while ensuring a secure financial base. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The capital structure of the Company consists of total equity (Refer Note 21 & 22). The Company is not subject to any externally imposed capital requirements.

The Company’s financial management committee reviews the capital structure on a regular basis. As part of this review, the committee considers the cost of capital, risks associated with each class of capital requirements and maintenance of adequate liquidity.

29.1.1 Gearing Ratio

The Company has no outstanding debt as at the end of reporting period. Accordingly, the Company has zero gearing ratio as at March 31, 2017 and March 31, 2016. Gearing ratio was 0.0096 as at April 1, 2015.

29.3 Financial risk management objectives

While ensuring liquidity is sufficient to meet Company’s operational requirements, the Company’s financial management committee also monitors and manages key financial risks relating to the operations of the Company by analyzing exposures by degree and magnitude of risks. These risks include market risk (including currency risk and price risk), credit risk and liquidity risk.

29.4 Market Risk

Market risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of a business. The major components of market risk are commodity price risk, foreign currency risk and interest rate risk.

The primary commodity price risks that the Company is exposed to include international crude oil prices that could adversely affect the value of the Company’s financial assets or expected future cash flows. Substantial or extended decline in international prices of crude oil and natural gas may have an adverse effect on the Company’s reported results.

29.5 Foreign currency risk management

Sale price of crude oil is denominated in United States dollar (USD) though billed and received in Indian Rupees (INR). The Company is, therefore, exposed to foreign currency risk principally out ofINR appreciating against USD. Foreign currency risks on account of receipts/revenue and payments/expenses are managed by netting off naturally-occurring opposite exposures through export earnings, wherever possible and carry unhedged exposures for the residual considering the natural hedge available to it from domestic sales.

The Company undertakes transactions denominated in different foreign currencies and consequently exposed to exchange rate fluctuations. Exchange rate exposures are managed within approved policy parameters. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows.

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

Sensitivity of profit or loss before tax to change in /- 1 USD in prices of crude oil, natural gas & value added products (VAP) and /- Re. 1 in exchange rate between INR-USD currency pair is presented as under:

29.5.1 Foreign currency sensitivity analysis

The Company is principally exposed to foreign currency risk against USD. Sensitivity of profit or loss arises mainly from USD denominated receivables and payables.

As per management’s assessment of reasonable possible changes in the exchange rate of /- 5% between USD-INR currency pair, sensitivity of profit or loss only on outstanding foreign currency denominated monetary items at the period end is presented below:

29.5.2 Forward foreign exchange contracts

The Company has not entered into any forward foreign exchange contracts during the reporting period.

29.6 Interest rate risk

The Company has not availed borrowings, hence is not exposed to interest rate risk.

29.7 Price risks

The Company’s equity securities price risk arises from investments held and classified in the balance sheet either at fair value through OCI or at fair value through profit or loss. The Company’s equity investments in IOC and GAIL are publicly traded.

Investment of short-term surplus funds of the Company in liquid schemes of mutual funds provides high level of liquidity from a portfolio of money market securities and high quality debt and categorized as ‘low risk’ product from liquidity and interest rate risk perspectives.

29.7.1 Price sensitivity analysis

The sensitivity of profit or loss in respect of investments in equity shares and mutual funds at the end of the reporting period for /-5% change in price and net asset value is presented below:

- Profit before tax for the year ended March 31, 2017 would increase/decrease by Rs.1,817.16 million (For the year ended March 31, 2016 would increase/decrease by Rs.1,501.62 million) as a result of 5% changes in net asset value of investment in mutual funds; and

- Other comprehensive income for the year ended March 31, 2017 would increase/decrease by Rs.14,478.68 million (for the year ended March 31, 2016 would increase/decrease by Rs.7,670.74 million) as a result of 5% changes in fair value of equity investments measured at FVTOCI.

29.8 Interest rate risk management

The Company invests the surplus fund generated from operations in term deposits with banks and mutual funds. Bank deposits are made for a period of upto 12 months carry interest rate as per prevailing market interest rate. Considering these bank deposits are short term in nature, there is no significant interest rate risk. Average interest earned on term deposit for the year ended March 31, 2017 was 7.74%.

29.9 Credit risk management

Credit risk arises from cash and cash equivalents, investments carried at amortized cost and deposits with banks as well as customers including receivables. Credit risk management considers available reasonable and supportive forward-looking information including indicators like external credit rating (as far as available), macro-economic information (such as regulatory changes, government directives, market interest rate).

Major customers, being public sector oil marketing companies (OMCs) and gas companies having highest credit ratings, carry negligible credit risk. Concentration of credit risk to any other counterparty did not exceed 3.19% (previous year 3.61%) oftotal monetary assets at any time during the year Credit exposure is managed by counterparty limits for investment of surplus funds which is reviewed by the Management. Investments in liquid plan/schemes are with public sector Asset Management Companies having highest rating. For banks, only high rated banks are considered for placement of deposits.

Bank balances are held with reputed and creditworthy banking institutions.

The Company is exposed to default risk in relation to financial guarantees given to banks/vendors on behalf of subsidiaries/joint venture companies for the estimated amount that would be payable to the third party for assuming the obligation. The Company’s maximum exposure in this regard as at March 31, 2017 is Rs.443,308.48 million (As at March 31, 2016 is Rs.326,089.32 million).

29.10 Liquidity risk management

The Company manages liquidity risk by maintaining sufficient cash and cash equivalents including bank deposits and availability of funding through an adequate amount of committed credit facilities to meet the obligations when due. Management monitors rolling forecasts of liquidity position and cash and cash equivalents on the basis of expected cash flows. In addition, liquidity management also involves projecting cash flows considering level of liquid assets necessary to meet obligations by matching the maturity profiles of financial assets & liabilities and monitoring balance sheet liquidity ratios.

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The information included in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Company may be required to pay.

The following table details the Company’s expected maturity for its non-derivative financial assets. The information included in the table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

The Company has access to committed credit facilities as described below, of which Rs.Nil were unused at the end of the reporting period (as at March 31, 2016 Rs.Nil). The Company expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.

29.11 Fair value measurement

This note provides information about how the Company determines fair values of various financial assets.

29.12 Fair value of the Company’s financial assets that are measured at fair value on a recurring basis

Some of the Company’s financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined.

29.13 Fair value of financial assets and financial liabilities that are not measured at fair value (but fair value disclosures are required)

Management considers that the carrying amounts of financial assets and financial liabilities recognized in the financial statements except as per note 46.12 approximate their fair values.

30. Disclosure of Interests in Joint Arrangements and Associates:

30.1 Joint Operations

In respect of certain unincorporated PSC/NELP/CBM blocks, the Company’s Joint Operation (JO) with certain body corporates have entered into Production Sharing Contracts (PSCs) with GoI for operations in India. As per signed PSC & JOA, Company’s has direct right on Assets, liabilities, income & expense of blocks. Details of these Joint Operation Blocks are as under:

30.1.1 Approval towards assignment of PI is awaited from GoI

Abbreviations:- APGIC- AP Gas Infrastructure Corporation Limited, AWEL- Adani Welspun Exploration Limited, BGEPIL- British Gas Exploration & Production India Limited, BPRL- Bharat Petro Resources Limited, Cairn India-Cairn India Limited, CEHL- Cairn Energy Hydrocarbons Limited, CIL-Coal India Limited, EEPL- Essar Exploration & production Limited, ENI- Ente Nazionale Idrocarburi, EOL-Essar Oil Limited, GAIL- Gas Authority of India Limited, GSPC- Gujarat State Petroleum Corporation Limited, HEPI- Hardy Exploration & Production India Limited, HOEC- Hindustan Oil Exploration Company Limited, IOC- Indian Oil Corporation Limited, NTPC-National Thermal Power Corporation Limited, OIL-Oil India Limited, PEPL-Prabha Energy Pvt Limited, RIL- Reliance Industries Limited, ROPL- Ravva Oil (Singapore) Private Limited, TPL- Tata Petrodyne Limited, VIL- Videocon Industries Limited

30.1.2 The financial statements of 125 (124 in FY 2015-16, 117 as on April 1, 2015 ) out of 135 (135 in FY 2015-16, 134 as on April 1, 2015) Joint operation (PSC/NELP/CBM blocks) have been incorporated in the accounts to the extent of Company’s participating interest in assets, liabilities, income, expenditure and profit/(loss) before tax on the basis of statements certified in accordance with production sharing contract and in respect of balance 10 (11 in FY 2015-16, 17 as on April 1, 2015) Joint operation (PSC/NELP/CBM blocks), the figures have been incorporated on the basis of uncertified statements prepared under the production sharing contracts. Financial statements of Joint operated blocks have been adjusted for changes as per Note No. 3.4. The financial positions of Company share of Joint operation (PSC/NELP/CBM blocks) are disclosed in note 47.1.4

30.1.3 Financial position of the Joint Operation -Company’s share are as under:

The financial statements of 125 nos. (124 in FY 2015-16, 117 as on April 1, 2015 ) out of 135 nos. (135 in FY 15-16, 134 as on April 1, 2015) Joint operation block (jOs/NELP) have been incorporated in the accounts to the extent of Company’s participating interest in assets, liabilities, income, expenditure and profit/(loss) before tax on the basis of statements certified in accordance with production sharing contract and in respect of balance 10 (11 in FY 2015-16, 17 as on April 1, 2015) Joint operation blocks (jOs/ NELP), the figures have been incorporated on the basis of uncertified statements prepared under the production sharing contracts. Both the figures have been adjusted for changes as per Note No. 3.4. The financial positions of JO/NELP are as under:-

30.1.4 In respect of 6 NELP blocks (previous year 10) which have expired as at March 31, 2017, the Company’s share of Unfinished Minimum Work Programme (MWP) amounting to Rs.1,167.54 million (previous year to Rs.2,966.53 million) has not been provided for since the Company has already applied for further extension of period in these blocks as ‘excusable delay’/special dispensations citing technical complexities, within the extension policy of NELP Blocks, which are under active consideration of GoI. The delays have occurred generally on account of pending statutory clearances from various Govt. authorities like Ministry of Defense, Ministry of Commerce, environmental clearances, State Govt. permissions etc. The above MWP amount of Rs.1,167.54 million (previous year Rs.2,966.53 million) is included in MWP commitment under Note no. 49.3.2.

30.1.5 As per the Production Sharing Contracts signed by the Company with the GoI, the Company is required to complete Minimum Work Programme (MWP) within stipulated time. In case of delay in completion of the MWP, Liquidated Damages (LD) are payable for extension of time to complete MWP. Further, in case the Company does not complete MWP or surrender the block without completing the MWP, the estimated cost of completing balance work programme is required to be paid to the GoI. LD (net of reversal) amounting to (-) Rs.14.90 million (Previous year Nil) and cost of unfinished MWP (net of reversal) Rs.965.69 million (Previous year Rs.454.13 million), paid/ payable to the GoI is included in survey and wells written off expenditure respectively.

30.1.6 The Company has proposed to relinquish30% Participating Interest (PI) in SGL Field with future interest in block RJ-ON/6 Jaisalmer Basin Rajasthan to Focus Energy Limited (Operator) which is subject to approval from Government, on condition that Focus Energy Limited (Operator) to pay towards 100% past royalty obligation, PEL/ML fees, other statutory levies and waive off development/ Production costs payable by ONGC in SGL Field of the block as well as take all future 100% royalty obligation of ONGC as licensee and also not exercise its option of acquiring 30% PI in two gas discoveries namely SSG-1 and SSF-2 in Block. Pending farm out agreement/ government approval, no adjustment is made in the accounts in respect of relinquishment of RJ-ON/6.

30.1.7 In respect of Jharia CBM block, there are certain overlapping issues with Steel Authority of India Limited (SAIL). Due to overlap issue, operations (except incidental gas production) is suspended since June 2014. A Co-Development Plan/Agreement with SAIL is being finalised to commence the activity in the overlap area. Similarly, in Raniganj CBM Block, Airport City Project of Bengal Aerotropolis Projects Limited (BAPL) overlaps affecting both FDP and assessment areas of Raniganj CBM Block. The issue is being discussed with BAPL and Government of West Bengal. Techno-economics of the block is being re-worked.

30.1.8 The Company has approved the proposal for acquisition of the entire 80% Participating Interest (PI) of Gujarat State Petroleum Corporation Limited (GSPC) along with operatorship rights, ata purchase consideration of US$ 995.26 million ( Rs.64,542.61 million) for Deen Dayal West (DDW) Field in the Block KG-OSN-2001/3. The Company shall also pay part consideration of US$ 200 million ( Rs.12,970.00 million) to GSPC towards acquisition rights for discoveries other than DDW Field in the Block KG-OSN-2001/3 to be adjusted against the valuation of such fields based on valuation parameters agreed between the GSPC and ONGC. A Farm-in Agreement has been signed with GSPC on March 10,2017 with an economic date of March 31,2017 (23:59 Hrs - IST).

31. Disclosure under Indian Accounting Standard 36 - Impairment ofAssets

31.1 The Company is engaged mainly in the business of oil and gas exploration and production in On-shore and Offshore. In case of onshore assets, the fields are using common production/transportation facilities and are sufficiently economically interdependent to constitute a single cash generating unit (CGU). Accordingly, impairment test of all onshore fields is performed in aggregate of all those fields at the Asset Level. In case of Offshore Assets, a field is generally considered as CGU except for fields which are developed as a Cluster, for which common facilities are used, in which case the impairment testing is performed in aggregate for all the fields included in the cluster.

31.2 The Value in Use of producing/developing CGUs is determined under a multi-stage approach, wherein future cash flows are initially estimated based on Proved Developed Reserves. Under circumstances where the further development of the fields in the CGUs is under progress and where the carrying value of the CGUs is not likely to be recovered through exploitation of proved developed reserves alone, the Proved and probable reserves (2P) of the CGUs are also taken for the purpose of estimating future cash flows. In such cases, full estimate of the expected cost of evaluation/development is also considered while determining the value in use.

31.3 In assessing value in use, the estimated future cash flows from the continuing use of assets and from its disposal at the end of its useful life are discounted to their present value. The present value of cash flows has been determined by applying discount rates of 14.88 % (as at March 31, 2016- 19.06%) for Rupee transactions and 10.57 % (as at March 31, 2016- 13.37%) for crude oil and value added products revenue, which are measured in USD. Future cash inflows from sale of crude oil and value added products have been computed using the future prices, on the basis of market-based average prices of dated Brent crude oil as per ‘Platt’s Crude oil market wire’ and its Co-relations with benchmark crude and other petroleum products. Future cash flows from sale of natural gas is also computed based on the expected future prices on the basis of the notification issued by the Government of India and discounted applying the rate applicable to the cash flows measured in USD in view of the new pricing guidelines issued by GOI. (Refer Note 31.3)

31.4 The Company had provided for an impairment loss of Rs.32,520.07 million in the previous year, mainly pertaining to on onshore CGU Sibsagar amounting to Rs.29,972.00 million and Rs.1,569.00 million in Pre NELP JO block RJ-ON-90/1 considering the major decrease in crude oil prices in the international market. However, there has been improvement in prices of crude oil and reduction in the Gas prices in the current financial year. Accordingly, the Company has assessed the impairment as at March 31, 2017 for its CGUs. As a result of the change in prices and other variables, there has been a reversal of an amount of Rs.13,979.63 million (Previous year Rs.254.22 million) mainly consisting of Rs.12,203.54 million for onshore CGU Sibsagar and Rs.1,569 million in Pre NELP JO block RJ-ON-90/1. Balance reversal of impairment loss amounting to Rs.207.09 million pertains to other CGUs.

During the year Rs.715.62 million has been provided for impairment loss mainly consisting of Rs.468.11 million in respect of RJ ON 6 (Previous year Rs.127.09 million) and Rs.235.11 million in respect of onshore CGU Silchar and Jodhpur (Previous year Rs.18.87 million). Balance impairment loss amounting to Rs.12.41 million (Previous year Rs.833.11 million) pertains to other CGUs.

31.5 Impairment testing of assets under exploratory phase (Exploratory wells in progress) has been carried out as on March 31, 2017 and an amount of Rs.4,539.44 million (For the year ended March 31, 2016 Rs.626.36 million) has been provided during the year 2016-17 as impairment loss. Further, Rs.966.05 million (For the year ended March 31, 2016 Rs.3,466.20 million) impairment losses has been reversed in the Standalone statement of Profit and Loss as exploratory phase assets have been transferred to Oil and Gas Assets.

32. Contingent liabilities, Contingent Assets and commitments (to the extent not provided for)Contingent Liabilities & Contingent Assets:

a. The Company’s pending litigations comprise of claims against the Company and proceedings pending with Tax/Statutory/Government Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial position. Future cash outflows in respect of the above are determinable only on receipt of judgments/decisions pending with various forums/authorities.

b. In terms of the statutory provisions of Oilfields (Regulation and Development) Act, 1948 (ORDA), Petroleum & Natural Gas (PNG) Rules 1959 and Notifications issued thereunder; the Company is liable to pay royalty to Central Government (GoI) and State Governments, on production of Crude Oil and Natural Gas from offshore fields and onshore fields, respectively. Since 2008-09, in terms of GoI directives, the Company had been paying royalty on crude oil at realized price which was net of discount (share of under-recovery of the OMCs as per GoI directives). On an application filed by the State of Gujarat, The Hon’ble High Court of Gujarat in its order dated November 30, 2013 had directed the Company to pay the shortfall of royalty on crude oil produced from the onshore fields in the State of Gujarat on pre-discount prices from April 1, 2008 onwards. Based on the Special Leave Petition filed by the Company against the said order of the Hon’ble High Court of Gujarat, pending further orders, Hon’ble Supreme Court vide order dated February 13, 2014 stayed the operation of the impugned judgment subject to the condition that the Company pays royalty to the State of Gujarat on pre-discounted price of crude oil w.e.f. February 1, 2014 onwards. Accordingly, w.e.f. February 1, 2014, the Company had started depositing royalty with the State of Gujarat on pre-discount prices in respect of crude oil production from Gujarat.

Government of Assam had also filed a Writ Petition in The Hon’ble High Court of Guwahati for payment of differential royalty on pre- discount sale price of crude oil for the period 2008-09 to 2013-14 which was pending adjudication. Government of Assam had also filed an Interlocutory Application seeking payment of royalty on pre-discount sale price of crude oil w.e.f. February 1, 2014 in terms of The Hon’ble Supreme Court order dated February 13, 2014.

In the meantime in terms of GoI order dated July 15, 2016, the Company paid royalty w.e.f. February 1, 2014 to other similarly placed states at pre-discount prices.

Pending the final outcome of the SLP filed before the Hon’ble Supreme Court, differential royalty (royalty on pre-discount price minus royalty on post-discount price) of Rs.148,722.46 million on this account for the period from April, 2008 to March, 2016 had been considered as Contingent Liability as at March 31, 2016.

Differential royalty amounting to Rs.24,444.27 million paid to the State Governments w.e.f. February, 2014 had been considered as deposit.

During the year, a settlement was made by GoI on February 17, 2017 amongst GoI, State of Gujarat/Assam and the Company wherein following was agreed:

i. The outstanding amount towards differential royalty would be paid by the GoI directly to the Government of Gujarat and Assam.

ii. Any payments already made to the State Governments by the Company shall not be re-opened and will not be reimbursed or paid by GoI.

iii. All other mutual claims and liabilities shall be extinguished on the basis of the agreement.

Subsequently, based on affidavits filed by the Petitioners, Hon’ble Supreme Court disposed the pending SLP with Supreme Court and Writ Petition with Guwahati High Court. In view of settlement and disposal of pending SLP, the Company has charged differential royalty amounting to Rs.24,444.27 million paid to State Governments w.e.f. February 1, 2014 to Statement of Profit and Loss.

32.1 A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity. During the normal course of business, several unresolved claims are currently outstanding. The inflow of economic benefits, in respect of such claims cannot be measured due to uncertainities that surround the related events and circumstances.

32.2 Commitments

32.2.1 Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account:-

i) In respect of Company: Rs.110,082.89 million (Previous year Rs.122,679.23 million).

ii) In respect of Joint Operations: Rs.2,596.09 million (Previous year Rs.20.52 million).

32.2.2 Other Commitments

(i) Estimated amount of Minimum Work Programme (MWP) committed under various ‘Production Sharing Contracts’ with Government of India/Nominated Blocks:

a) In respect of NELP blocks in which the Company has 100% participating interest: Rs.3,325.69 million (Previous year Rs.2,394.45 million).

b) In respect of NELP blocks in Joint Operations, Company’s share: Rs.7,576.08 million (Previous year Rs.24,680.51 million).

(ii) In respect of ONGC Petro Additions Limited, A Joint Venture Company Rs.480.50 million on account of subscription of Share Warrants with a condition to convert it to shares after a balance payment of Rs.0.25/- per share.

(iii) The Company has entered into an arrangement on July 2, 2016 for backstopping support towards repayment of principal and cumulative coupon amount for three years for compulsory convertible debentures amounting to Rs.56,150.00 Million issued by OPAL and interest for the year ending March 31, 2017 amounting to Rs.3612.06 million

(iv) The Company has approved the proposal for acquisition of the entire 80% Participating Interest (PI) of Gujarat State Petroleum Corporation Limited (GSPC) along with operatorship rights, at a purchase consideration of US$ 995.26 million (Rs.64,542.61 million) for Deen Dayal West (DDW) Field in the Block KG-OSN-2001/3. The Company shall also pay part consideration of US$ 200 million (Rs.12,970.00 million) to GSPC towards acquisition rights for discoveries other than DDW Field in the Block KG-OSN-2001/3 to be adjusted against the valuation of such fields based on valuation parameters agreed between the GSPC and ONGC. A Farm-in Agreement has been signed with GSPC on March 10, 2017. (Note 47.1.10)

33.1 The loan is Interest free and unsecured. The loan has been granted to fund the OVL’s overseas projects and is recoverable out of the surplus cash flows arising from the projects. However, Company has the right to demand loan by serving a notice period of 15 months. Pending the final approval of Government for conversion of loan into equity, loan to the extent of Rs.50000.00 million has been re-classified as deemed equity as on April 1, 2015 & March 31, 2016 respectively based on approval of board. During the year, the Company has received Government approval for such conversion and accordingly the same has been converted into equity. The remaining loan has been fair valued based on effective interest rate (EIR) method as per Ind AS-32 and the same has been presented in balance sheet. The fair value of remaining OVL loan Rs.163.45 million (previous year Rs.6,687.64 million) base on effective interest rate 8.12% (previous year 10.60% ) is included in note no. 12.

33.2 Loan to MRPL carries interest as G-Sec yield for 5-year tenor as on March 31, 2016 (as per FIMMDA) plus a spread of 40 (forty) basis points which amounts to 8.12% (7.72% spread of 40 basis points) for financial year 2016-17 in place of present rate of SBAR with spread of minus 385 basis points. Interest rate shall be reset on 1 April every year by applying G-Sec yield for 5-year tenor, as per FIMMDA as on 31 March of the preceding financial year. Spread of 40 (forty) basis points over and above G-Sec yield for 5-year tenor shall continue to remain applicable for the entire tenure of the loan. The Loan is repayable quarterly in 28 equal installments. The repayment of loan had started from the last quarter of FY 2013-14. ONGC can call these loans on notice of 90 days. MRPL can prepay whole or part of the loan to ONGC as per its requirement.

33.3 The Company has not advanced any money to its employees for the purposes of investment in the securities of the Company.

34. The Company has a system of physical verification of Inventory, Fixed assets and Capital Stores in a phased manner to cover all items over a period of three years. Adjustment differences, if any, are carried out on completion of reconciliation.

35.1 The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

35.2 Further, some balances of Trade and other receivables, Trade and other payables and Loans are subject to confirmation/reconciliation. Adjustments, if any, will be accounted for on confirmation/reconciliation of the same, which will not have a material impact.

35.1.1 Adjustment to Oil and gas assets and Decommissioning Provisions: Under the Previous GAAP, discounting of provisions was not required whereas under Ind AS, provisions are measured at discounted amounts, if the effect of time value of money is material. The Company has re-measured (as mentioned in note 4.2.a ) decommissioning provisions at the transition date by availing optional exemption as per para D21 of Ind AS 101 ‘First time Adoption oflndian Accounting Standards’. This has resulted in decrease in decommissioning provision by Rs.61,250.20 million and decrease in oil and gas assets by Rs.65,876.14 million, CWIP-Development wells in progress by Rs.259.58 million, CWIP-Other by Rs.120.00 million, as at April 1, 2015.

Similarly, it has resulted in decrease in decommissioning provision by Rs.88,388.01 million and decrease in oil and gas assets by Rs.90,955.17 million, Other Property plant & equipment by Rs.187.50 million, CWIP-Development wells in progress by Rs.34.17 million, CWIP-Others by Rs.1,222.70 million and Inventory by Rs.164.89 million as at March 31, 2016. Further there is reduction in transfer from CWIP-Development wells in progress by Rs.202.66 million.

The net effect of aforesaid changes is decrease in total equity by Rs.5,005.26 million as at April 1, 2015 and Rs.4,396.16 million as at March 31, 2016.

35.1.2 Leasehold Land: Under the Previous GAAP, leasehold land were accounted as part of fixed assets and amortized over the lease period (except for perpetual lease). Under Ind AS, leasehold land for perpetual period are considered as finance lease. As stated at note no. 3.16 the Company has carried the finance lease at transition date at the fair value amount of leasehold land on transaction date resulting in increase in carrying amount of leasehold land by Rs.417.96 million with corresponding recognition of finance lease obligation of Rs.417.96 million. Further, the lease rentals capitalized to leasehold land have been reversed resulting in decrease in total equity by Rs.267.25 million as at April 1, 2015 and Rs.267.25 million as at March 31, 2016.

35.1.3 Reclassification of leasehold land : Under Previous GAAP, leasehold land was shown as part of fixed assets, whereas under Ind AS all leases are considered as operating leases (except perpetual leases) and therefore are shown as prepayments. Consequently, as on the transition date April 1, 2015 an amount of Rs.3,276.90 million has been decapitalized and shown as prepayments under Ind AS. Similarly, an amount of Rs.3,375.38 million has been shown as prepayments as at March 31, 2016. This reclassification has no impact on equity.

35.1.4 Reclassification of Unamortized expenditure: Under Previous GAAP, unamortized portion of dry dock expenses were shown a part of other current assets (Rs.3,574.22 million)/noncurrent assets (Rs.4,426.69 million). However, under Ind AS, as at transition date April 1, 2015, dry dock expenses of Rs.7,552.79 million has been capitalized as a component of rigs/vessels as part of property plant & equipment and Rs.448.21 million has been treated as Capital work in progress. Similarly, an amount of Rs.4,727.46 million has been capitalized as component of rig/vessels and Rs.1,830.87 million has been treated as Capital work in progress as at March 31, 2016. These reclassifications have no impact on equity.

35.1.5 Reclassification of assets held for sale: As at the transition date an amount of Rs.11.42 million representing helicopters held for sale have been reclassified from Other Property plant & equipment to asset held for sale. Similarly, an amount of Rs.12.32 million has been reclassified from Inventory to asset held for sale. These reclassifications have no impact on equity.

35.1.6 Deemed Equity: Under Previous GAAP interest free loan given to group companies were recorded at their transaction value. Under Ind AS, such loans are recognized at fair value on the date of disbursements and the fair value loss on respective transaction dates is recognized as deemed investment in subsidiary. Considering the management intention to convert an amount of Rs.50,000.00 million into equity of ONGC Videsh limited, loan amount of Rs.50,000.00 million has been considered as deemed equity and added to the carrying amount of investment in subsidiary. Accordingly, the balance loan outstanding of Rs.16,142.28 million given to its wholly owned subsidiary ONGC Videsh Limited on respective dates of transaction have been fair valued. Consequently, the interest amount of Rs.155.82 million has been adjusted to opening equity. Further on fair valuation on transition date, the fair valuation difference of Rs.2,114.04 million has been treated as deemed equity and added to the carrying amount of investment in subsidiaries. Similarly, an amount of Rs.2,053.95 million has been added to the cost of investment in subsidiaries as deemed equity at March 31, 2016 on account of disbursements/repayments of loan, there is a reduction in value of loan by Rs.897.56 million on valuation of interest free loan resulting in increase in equity by Rs.1,156.40 million.

35.1.7 Financial Guarantees: Under Ind AS, financial guarantee contracts are accounted as financial liabilities and measured initially at fair value and subsequently accounted as mentioned in note no. 3.30.a. Accordingly, an amount of Rs.2,437.97 million has been recognized as deferred financial obligation as at April 1, 2015 with corresponding debit to deemed equity in the carrying amount of investment in subsidiaries. Similarly, an amount of Rs.2,326.06 million has been recognized as financial guarantee obligation as on March 31, 2016, the corresponding amount along with the changes in the guarantee during 2015-16, aggregating to Rs.2,779.39 million has been taken to deemed equity.

35.1.8 Fair valuation of Investments in Equity Instruments: Under the Previous GAAP, long term investments were measured at cost less diminution in value which is other than temporary. Under the Ind AS, investments in equity instruments of companies other than Subsidiaries, Associates & Joint Ventures are measured at fair value. As at the transition date, the Company has made irrevocable choice to account for these investments at fair value through other comprehensive income (OCI), resulting in increase in total equity by Rs.104,118.44 million and Rs.110,535.77 million as at April 1 2015 and March 31, 2016 respectively.

35.1.9 Deemed Investment in ONGC Petro Additions Limited (OPaL) and ONGC Tripura Power Company Limited (OTPC):

The Company had extended Advances against equity pending for allotment as at the transition date, to Joint Venture Companies OPaL and OTPC for Rs.7,505.52 million and Rs.4,645.36 million respectively. As at the transition date, these have been treated as deemed investments in these companies and accordingly reclassified from Loans under Previous GAAP to Investments under Ind AS.

35.1.10 Prior period items: Under Previous GAAP, prior period items were reflected as part of current year expense or income in the statement of profit & loss. Under Ind AS, material prior period items are adjusted to the period to which they relate and in case they relate to the period earlier than period presented, these are adjusted against opening equity of the earliest period presented. Accordingly, the prior period items (net) of Rs.228.10 million have been adjusted against equity as on the transition date i.e. April 1, 2015.

35.1.11 Accounting of loans to employees on amortised cost method under effective rate of interest: Under the Previous GAAP, loans to employees were recorded in the financial statements at transaction value. Under Ind AS, loans given to employees at concessional rate are required to be recognized at amortised cost method with Effective Interest Rate. The difference between the amortized cost of such loans and transaction value as on the transition date 1 April 2015, has been adjusted to retained earnings, resulting in decrease in total equity by Rs.3,883.38 million. Subsequent to the transition date, such difference is charged against statement of profit & loss, resulting in decrease in profit before tax by Rs.811.90 million for the year ended March 31, 2016. Further, the amortized cost accounting of such loan under the effective interest rate method, has resulted in increase in interest income by Rs.593.20 million for the year ended March 31, 2016. The net effect of above is decrease in total equity by Rs.4,102.06 million as at March 31, 2016.

35.1.12 Accounting of other financial assets and liabilities on amortised cost method under effective rate of interest: The adjustments on account of valuation of financial assets by applying amortised cost method using Effective Interest Rate as per requirements of Ind AS 109 ‘Financial Instruments’ Rs.55.67 million and liabilities Rs.40.33 million as at transition date, has been adjusted to retained earnings resulting in decrease in to total equity by Rs.15.34 million. Subsequent to the transition date, such valuation difference on financial assets and liabilities has been recognized in statement of profit & loss resulting in increase in other expenditure by Rs.22.56 million and increase in other income by Rs.15.25 million respectively for the year ended March 31, 2016. Further, the accounting of such financial assets and liabilities under the effective interest rate method, has resulted in increase in interest income by Rs.24.60 million and increase in finance cost by Rs.20.13 million for the year ended March 31st, 2016. The net effect of above is decrease in financial assets by Rs.42.35 million, decrease in financial liabilities by Rs.24.16 million and decrease in total equity by Rs.18.19 million as at March 31, 2016.

35.1.13 Deferred Tax: Deferred tax has been recognized on the account of adjustments made due to application of Ind AS. These adjustments have resulted in an increase in equity by Rs.2,948.00 million as at April 1, 2015 and Rs.2,383.02 million as at March 31, 2016.

35.1.14 Government Grant: Under Previous GAAP grant received from government for fixed assets were shown as “Deferred Government Grant” under the head “Reserve and Surplus”. Under Ind AS, the deferred government grant are required to be shown as non-current liability. The Company has reclassified the deferred government grant from reserve and surplus to non-current liability resulting in decrease in total equity by Rs.10.49 million as at April 1, 2015 and by Rs.8.01 million as at March 31, 2016.

35.1.15 Proposed Dividend: Under the Previous GAAP, dividends on equity shares recommended by the Board of Directors after the end of the reporting period but before the financial statements were approved for issue were recognised as a provision in the financial statements. However, under Ind AS, such dividends are recognized when declared by shareholders in the annual general meeting. Accordingly, the provision for proposed dividend of Rs.5,148.60 million as at April 1, 2015 included under provisions has been reversed with corresponding adjustment to retained earnings, this has been recognized during the year ended March 31, 2016. Similarly, the proposed dividend as at March 31, 2016 has also been reversed resulting in increase in total equity by an amount of Rs.33,465.84 million as at March 31, 2016.

35.3.1 Revenue from Operations:

Excise duty: Under Previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty and the excise duty paid is presented on the face of statement of profit and loss as part of expenses. This has resulted in an increase in total revenue and total expenses by Rs.1,971.17 million for the year ended March 31, 2016.

Sales tax and Octroi: As per practice followed under Previous GAAP, revenue from sale of products was presented inclusive of sales tax and octroi with corresponding charge to the Statement of Profit and Loss. In terms of Para 8 of Ind AS 18 ‘Revenue’ sale of goods has been presented net of sales tax and Octroi. This has resulted in a decrease in total revenue and total expenses by Rs.8,234.34 million for the year ended March 31, 2016.

35.3.2 Loans to Subsidiaries accounted at amortised cost method under effective rate of interest: Interest free loan given to wholly owned subsidiary ONGC Videsh Limited has been valued by applying amortised cost method using Effective Interest Rate as per requirements of Ind AS 109 ‘Financial Instruments’ and resulting difference has been recognized as cost of investment in the subsidiary. As a result of accounting loan amount of Rs.16,142.28 million (after considering Rs.50,000.00 million as deemed equity) under effective interest rate method, interest income has increased by Rs.1,000.58 million for the year ended March 31, 2016.

35.3.3 Loans to employees accounted at amortised cost method under effective rate of interest: Loans given to employees at concessional rate have been valued by applying amortised cost method using Effective Interest Rate as per requirements of Ind AS 109 ‘Financial Instruments’. The resulting fair value difference in respect of loans disbursed after the transition date has been recognized in statement of profit & loss, resulting in increase in other expenditure by Rs.811.90 million for the year ended March 31, 2016. Further, the accounting ofsuch loan under the effective interest rate method has resulted in increase in interest income by Rs.593.20 million for the year ended March 31, 2016.

35.3.4 Other financial assets and liabilities accounted at amortised cost method under effective rate of interest: Financial assets and liabilities have been valued by applying amortised cost method using Effective Interest Rate as per requirements of Ind AS 109 ‘Financial Instruments’. Subsequent to transition date, the fair valuation difference on financial assets and liabilities has been recognized in statement of profit & loss, resulting in increase in other expenditure by Rs.22.56 million and increase in other income by Rs.15.25 million respectively for the year ended March 31, 2016. Further, the accounting of such financial assets and liabilities under the effective interest rate method has resulted in increase in interest income by Rs.24.60 million and increase in finance cost by Rs.20.13 million for the year ended March 31, 2016.

35.3.5 Amortization of financial guarantees: As stated at note 3.30.a, financial guarantees have been recognized as deferred financial guarantee obligation as at the transition date.

Such guarantees have been amortized to statement of profit & loss over the guarantee period, resulting in increase in other income by Rs.453.33 million during year ended March 31, 2016.

35.3.6 Reclassification of Unamortized Dry dock: Under Previous GAAP, the dry dock expenses were amortized and relevant portion was shown as other expenditure. However, under Ind AS, dry dock expenses have been capitalized as a component of rigs/vessels and charged as depreciation in the statement of profit & loss. This has resulted in decrease in other expenditure by Rs.3,312.69 million and with corresponding increase in depreciation by Rs.3,312.69 million.

35.3.7 Reclassification of leasehold land : Under Previous GAAP, leasehold land was shown as part of fixed assets and depreciated based on leasehold period, whereas under Ind AS all leases are considered as operating leases (except perpetual leases) and therefore are shown as prepayments and amortized over the leasehold period. This reclassification resulted in decrease in depreciation expense by Rs.69.71 million with corresponding increase in other expenditure.

Further, as stated at note no. 3.16 the Company has assessed a perpetual lease hold land as finance lease consequently annual finance lease charges amounting to Rs.35.04 million has been accounted as finance cost.

35.3.8 Depreciation, Depletion, Amortisation and Impairment: As stated at note no. 56.1.1 Oil and gas assets were adjusted as on the transition date consequent to application of para D21 of Ind AS 101 on First time Adoption of Indian Accounting Standards. This has resulted in decrease in carrying value of oil and gas assets by Rs.65,876.14 million as at the transition date. Accordingly, the depletion under Ind AS for the year ended 31 March 2016 has reduced by Rs.8,460.62 million. Further impairment shown as exceptional item under IGAAP has reduced by Rs.801.37 million on account of the same.

Further, as a result of decrease in depletion, the closing stock valuation has decreased by Rs.164.89 million as at March 31, 2016

Any change in the present value of the estimated decommissioning expenditure other than the periodic unwinding of discount is adjusted to the decommissioning provision and the carrying value of the corresponding asset. In case reversal of provision exceeds the carrying amount of the related asset, the excess amount is recognized in the Statement of Profit and Loss. On remeasurement of decommissioning provision where the provision exceeded the carrying amount of the related assets, the excess provision of Rs.6,084.86 million has been written back as other income during the year ended 31st March, 2016. Further there is a decrease in other expenditure amounting to Rs.225.57 million due to foreign exchange difference on re-measurement of decommissioning provisions.

35.3.9 Impairment. As stated at note no. 3.34 as on transition date, the net book value of property plant & equipment has been carried forward as deemed cost consequent to para 7AA of Ind AS 101 on First time Adoption of Indian Accounting Standards. As a result of this, the accumulated impairment has been deemed to be subsumed in the net book value of property plant & equipment. Accordingly, impairment of Rs.1,645.10 million written back and shown under exceptional items in IGAAP has been adjusted in the Ind AS accounts for the year ended 31st March, 2016.

35.3.10 Unwinding of discount on Decommissioning Provisions: Under the Previous GAAP, discounting of provisions was not required whereas under Ind AS, provisions are measured at discounted amounts, if the effect of time value of money is material. As a result, the unwinding of discount on decommissioning provisions has been recognized in the Statement of profit and loss as finance cost i.e. Rs.13,136.26 million for the year ended March 31, 2016.

35.3.11 Prior period items: Under Previous GAAP, prior period items were reflected as part of current year expense or income in the statement of profit & loss. Under Ind AS, material prior period items are adjusted to the period to which they relate and in case they relate to the period earlier than period presented, these are adjusted against opening equity of the earliest period presented. Accordingly, the prior period items (net) of Rs.228.10 million have been adjusted against equity as on the transition date i.e. April 1, 2015 resulting in increase in profit before tax for the year ended March 31, 2016.

35.3.12 Deferred Tax: Deferred tax has been recognized on the account of adjustments made due to application of Ind AS. These adjustments have resulted in an increase in deferred tax by Rs.722.38 million during year ended March 31, 2016.

35.3.13 Remeasurement of defined benefit plans: Under Ind AS 19 Employee Benefits’ Remeasurement i.e. actuarial gains and losses of defined benefit plans amounting to Rs.454.78 million (deferred tax impact Rs.157.39 million) have been recognised in other comprehensive income. Accordingly remeasurement for 2015-16 amounting to Rs.443.09 million and Rs.11.69 million have been adjusted from Production, Transportation, Selling & Distribution expenditure and Survey costs respectively resulted in corresponding increase in Net Profit after tax.

35.3.14 Fair valuation of Investments in Equity Instruments: As stated at note no.3.34 (viii), the Company has irrevocably elected to present the changes in fair value of equity instruments of companies other than Subsidiaries, Associates & Joint Ventures are measured at fair value in Other Comprehensive Income (OCI), as at April 1, 2015. Subsequent fair value changes have been recognized in Other Comprehensive Income (OCI). This has resulted in increase in other comprehensive income by Rs.6,417.34 million during year ended March 31, 2016.

35.6 .1 Reclassification of Unamortized expenditure:

Under Previous GAAP, the unamortized portion of dry dock expenses was shown a part of other current/noncurrent assets. However, under Ind AS, these have been capitalized as a component of rigs/vessels as part of property plant & equipment. This has resulted in increase in Net cash flows from operating activities by Rs.1,870.01 million with corresponding decrease in “Net cash flows from investing activities”.

35.6 .2 Reclassification of leasehold land: Under Previous GAAP, leasehold land was shown as part of fixed assets, whereas under Ind AS all leases are considered as operatingleases (except perpetual leases) and therefore are shown as prepayments. This has resulted in decrease in Net cash flows from operating activities by Rs.168.19 million with corresponding increase in “Net cash flows from investing activities”.

35.6.3 Reclassification ofInterest accrued on non current deposits: Under Previous GAAP, interest accrued on non-current deposits was shown separately as interest accrued under noncurrent assets and accordingly the changes in interest accrued was shown as part of adjustment to interest received under cash flow from investment activities. Under Ind AS, these are shown as part of deposits against which interest has been accrued. This has resulted in decrease in Net cash flows from operating activities by Rs.14.31 million with corresponding increase in “Net cash flows from investing activities”.

35.6.4 Short term investment in mutual funds:

Under previous GAAP, short term investments in mutual funds were shown as part of reconciliation to cash and cash equivalents for the purposes of Cash Flow Statement. Under Ind AS, these investments have been carried at fair value through profit and loss and hence have not been treated as part of cash and cash equivalents for the purposes of statement of cash flows. Accordingly, changes in investment in mutual funds amounting to Rs.30,032.38 million have been reflected as part of “Net cash flows from investing activities” under Ind AS.

36 Approval of financial statements

The Standalone Financial Statements were approved by the Board of Directors on May 26, 2017.