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

BSE: 532155ISIN: INE129A01019INDUSTRY: Oil Drilling And Exploration

BSE   ` 331.75   Open: 331.00   Today's Range 324.50
336.30
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398.80
Year End :2018-03 

Notes to Financial Statements for the year ended 31st March 2018

1. Significant accounting judgments, estimates and assumptions

The preparation of the Company's standalone financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities/assets at the date of the standalone financial statements. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require adjustment to the carrying amount of assets or liabilities affected in future periods.

In particular, the Company has identified the following areas where significant judgments, estimates and assumptions are required. Further information on each of these areas and how they impact the various accounting policies are described below and also in the relevant notes to the financial statements. Changes in estimates are accounted for prospectively.

2. Judgments

In the process of applying the Company's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the standalone financial statements:

Contingencies

Contingent liabilities and assets which may arise from the ordinary course of business in relation to claims against the Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involve the exercise of significant judgments and the use of estimates regarding the outcome of future events.

3. Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

a) Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

b) Defined benefit plans

The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

c) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

d) Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgments in making these assumptions and selecting the inputs to the impairment calculation, based on Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Impairment of investment in subsidiaries, joint ventures or associates is based on the impairment calculations using discounted cash flow/net asset value method, valuation report of external agencies, Investee Company's past history etc.

4. Contingent Liabilities and Commitments:

I. Contingent Liabilities:

(a) Claims against the Company not acknowledged as debts:

(i) Legal cases for claim of Rs, 1,805.11 crore (Previous Year: Rs,1,622.61 crore) by suppliers/contractors etc. on account of liquidated damages/price reduction schedule, natural gas price differential etc. and by customers for natural gas transmission charges etc.

(ii) Income tax demands of H38.04 crore (net of provision of Rs,254.33 crore) (Previous Year Rs, 1128.26 crore net of provision of Rs,209.33 crore) against which the Company has filed appeals before appellate authorities & courts. Further, the Income Tax Department has also filed appeals before ITAT against the relief granted by CIT (Appeals) to the Company. The aggregate amount involved in appeals filed by department is Rs,674.89 crore (including interest) (Previous Year: Rs, 628.09 crore).

(v) Some of the customers have submitted counter claims amounting to Rs, 15,028crore against Ship or Pay charges / consequential losses for not supplying gas. As per legal opinion such claims are not arbitrable / barred by limitation.

(b) Corporate Guarantees

The Company has issued Corporate Guarantees for Rs,2,207 crore (Previous Year: Rs,2,203 crore) on behalf of related parties for raising loan(s).The amount of loans outstanding as at the end of the year under these Corporate Guarantees are 1,254 crore (Previous Year: 1,306 crore).

II. Capital Commitments:

(a) Estimated amount of contracts (Net of advances) remaining to be executed on capital account as at 31st March 2018 is 1,472.82 crore (Previous Year: Rs,3,128.92 crore).

(b) Other Commitments:

(i) The Company has commitment of Rs,771.56crore (Previous Year: Rs,740.15crore) towards further investment and disbursement of loan in the subsidiaries, JointVentures, Associates and other companies.

(ii) Commitments made by the Company towards the minimum work programme in respect of Jointly Controlled Assets have been disclosed in Note 51 (B) (v).

31 Sales Tax Department has raised a demand of Rs,3,449.18 crore (Previous Year: Rs,3,449.18 crore) and interest thereon 1,513.04 crore (Previous Year: 1,513.04 crore) in respect of Hazira unit in Gujarat, treating the transfer of natural gas from the State of Gujarat to other states, as interstate sales, during the period from April 1994 to March 2001. Aggrieved by the order of the Tribunal in favour of the company, the Sales Tax Department has filed petition in HonRs,ble High Court of Gujarat. Final hearing in the matter has concluded in the month of November 2016 and the order of HonRs,ble high court is awaited. In the opinion of the management, there is a remote possibility of crystalizing this liability.

5.In terms of the Gas Sales Agreement with the customers, value of Annual Take or Pay Quantity (ATOPQ) of Gas is accounted for on the basis of realization and shown as liability till make up Gas is delivered to customer as per the contract.

6. In respect of certain customers towards Ship or Pay charges being sub-judice/under dispute, the Company has been issuing claim letters, aggregate amount of which is 1268.77 crore (Previous Year I725.43 crore) as at the end of the year. Income in respect of the same shall be recognized on final disposal of the matter.

7 Pending court cases in respect of certain customers for recovery of invoices raised by the company for use of APM gas for non-specified purposes by fertilizer companies pursuant to guidelines of Ministry of Petroleum & Natural Gas (MOP&NG), the Company has issued claim letters amounting to Rs,2990.39 crore on the basis of information provided to Company by ICC.

8 Pricing and Tariff

(a) Petronet LNG Ltd (PLL), a supplier of R-LNG, has been raising invoices on the company on provisional basis on certain matters and considering the same the Company has been raising provisional invoices for sale of R-LNG to its customers. Impact of any changes in such provisional invoices is taken as and when settled.In view of the management, the differential amount will not be material.

(b) With effect from 1st April 2002, Liquefied Petroleum Gas (LPG) prices has been deregulated and is now based on the import parity prices fixed by the Oil Marketing Companies. However, the pricing mechanism is provisional and is yet to be finalized by the MoPNG. Impact on pricing, if any, will be recognized as and when the matter is finalized.

(c) Natural Gas Pipeline Tariff and Petroleum and Petroleum Products Pipeline Transportation Tariff are subject to various Regulations issued by Petroleum and Natural Gas Regulatory Board (PNGRB) from time to time. Impact on profits, if any, is being recognized consistently as and when the pipeline tariff is revised by orders of PNGRB.

(d) As per directions of Appellate Tribunal (APTEL), till date, PNGRB has issued 06(Six) final tariff orders applicable from financial year 2016-17. The Company has filed appeal(s) before Appellate Tribunal (APTEL), against various moderations done by PNGRB in these tariff orders. Aforesaid appeals are pending for disposal. Nonetheless, impact on profits, if any, is being recognized consistently as and when the pipeline tariff is revised by orders of PNGRB. As regards rest of the provisional orders, PNGRB is yet to issue its final orders.

(e) The Company has filed a Writ Petition, during the financial year 2015-16, before the Hon'ble Delhi High Court challenging the jurisdiction of PNGRB on fixation of transmission tariff for pipelines. The Hon'ble Delhi High Court has dismissed the aforesaid Writ Petition vide its Order dated 11.04.2017. In this regard, the Company has filed a Review Petition before the Hon'ble Delhi High Court on 12th May 2017 against the said Order which has been admitted by the Hon'ble Court for review.

9 Land & Building

(a) Freehold and Leasehold Land amounting to Rs,26.67 crore and Rs,15.84 crore (Previous Year: Rs,26.14 crore and Rs,40.45 crore) respectively are capitalized on provisional basis.

(b) Title deeds for freehold (6.85 hectares) and leasehold (198.98 hectares) land amounting to Rs,23.35 crore and Rs,8.84 crore (Previous Year: Rs,19.43 crore and Rs,36.75 crore) respectively are pending execution for transfer in the name of the Company. This includes Rs,4.59crore (Previous year Rs,9.39 crore ) amount of Lease hold Land shown under 'Prepayments' in Note no 12 (Other Non Current Assets - Non financial)

(c) Net Block for "Building" includes an amount of Rs,1.90 crore (Previous Year Rs,2.04 crore) earmarked for disposal but in use.

10 Earmarked Balances

(a) The balance retention from Panna Mukta Tapti (PMT) JV consortium amounting to Rs,22.80 crore (Previous Year: Rs,21.80 crore) (shown in Note No 11A) is kept as Earmarked Balance in short term deposit in banks. It includes interest accrued but not due amounting to Rs,0.20 crore (Previous Year: Rs,0.15 crore). This interest income does not belong to the Company and not accounted for as income.

(b) Liability on account of "Gas Pool Account" amounting to Rs,299.93 crore (Previous Year: Rs,268.56 crore) (shown in Note No. 11A) represents amount held by the Company as custodian pursuant to directions of MOPNG. The amount received is kept as Earmarked Fund in the form of ShortTerm Deposits in banks (shown in Note No 11A). It includes interest accrued but not due amounting to Rs,7.79 crore (Previous Year: Rs,4.55 crore). This interest does not belong to the Company and not accounted for as income.

(c) Gas Pool Money (Provisional) shown under "Other Long Term Liabilities" amounting to Rs,654.83 crore (Previous Year: Rs,655.48 crore) (shown in Note No 16) with a corresponding debit thereof under Trade Receivable (after reversal during the year in case of certain customers) will be invested/paid as and when said amount is received from the customers.

(d) Liability on account of Pipeline Overrun and Imbalance Charges amounting to Rs, 112.30 crore (Previous Year: Rs,99.74 crore) (shown in Note No 11A) represents amount held by the Company as custodian pursuant to directions of PNGRB. The amount received is kept as Earmarked Fund in the form of Short Term Deposits in banks (shown in Note No.11A). It includes interest accrued but not due amounting to Rs,3.21 crore (Previous Year: Rs,3.82 crore) on short term deposits. This interest does not belong to the Company and not accounted for as income.

11 The Company has an equity investment amounting to Rs, 974.31 crore, in a joint venture company, Ratnagiri Gas and Power Pvt. Ltd. (RGPPL), which is equivalent to -25.50% of the paid-up equity capital of RGPPL.

During the year the Demerger Scheme of RGPPL was approved by NCLAT vide its order dated 28.02.2018. Pursuant to the scheme, the assets and liabilities of LNG business stands transferred to the demerged entity Konkan LNG Pvt. Ltd. (KLPL) and paid up share capital of RGPPL was reduced with a corresponding issue of shares of KLPL to shareholders of RGPPL. Accordingly, a sum of Rs, 139.75 crore was transferred to investment in KLPL out of total investment of Rs, 974.31 crore in RGPPL by the Company

In order to comply with the provision of Ind AS 109 "Impairment of Assets" as on 31.03.2018 for aforesaid investments in RGPPL and KLPL, the company has undertaken impairment study for both the investments. Based upon the study, a provision of Rs, 139.75 crore is made during the year towards impairment loss in carrying value of investment in KLPL. As regards investment in RGPPL, a sum of I65.89 crore has been reversed from the impairment made in the previous financial year.

12 (a) GAIL is acting as pool operator in terms of the decision of

Government of India for pooling of natural gas for Urea Plants. The scheme envisages uniform cost of gas for urea production by settlement of difference in weighted average price of gas of each plant to the weighted average price for the industry. Accordingly, an amount of Rs,368.37 crore (Previous Year ?78.34 crore) is payable to and correspondingly receivable from Urea Plants, as on 3^^ March 2018. After netting of the payable and receivable amounts, there is no impact in the financial statements.

(b) GAIL is acting as pool operator in terms of the decision of the Government of India for capacity utilization of the notified gas based power plants. The Scheme, which was applicable till 31st March 2017, envisaged support to the power plants from the Power Sector Development Fund (PSDF) of the Government of India. The gas supplies were on provisional / estimated price basis which were to be reconciled based on actual cost. Accordingly, current liabilities include a sum of Rs,87.63 crore (Previous Year Rs,87.63 crore) on this account, as on 31st March 2018 which is payable to the above said power plants and / or to the Government of India.

13 During the year the Company has entered into settlement in respect of its disputed claim of ship or pay charges amounting to Rs, 255.36 crore with Indian Oil Corporation Ltd. According to the settlement the Company has received Rs, 175 crore against aforesaid amount and has issued credit notes for balance amount of Rs, 80.36 crore and adjusted the same in income for the year.

14 Pending agreement on terms of settlement and execution of Indenture agreement in respect of certain dues with one of the customers, an amount of Rs, 132.98 crore received in this regard has been kept as advance received from customers.

15 As per the provision of IND AS 109 (Financial instruments), the Company has adopted Hedge Accounting for derivative contracts entered on or after 1st October 2017 due to substantial increase in commodity hedging transactions. Derivative contracts prior to 1st October 2017 will continue to be accounted as Derivative. Pursuant to changes as referred above, Mark to Market losses of I50.90 crore net of deferred tax of Rs, 81.05 crore pertaining to derivative contracts entered from 1st Oct 2017 onwards are recognized in the Other Comprehensive Income as on 31st March 2018.

16 PNGRB on 19.02.2014 notified insertion of Regulation 5A in the Amended Affiliate Code of Conduct Regulations that an entity engaged in both marketing and transportation of natural gas shall create a separate legal entity on or before 31.03.2017 so that the activity of transportation of natural gas is carried on by such separate legal entity and the right of first use shall, however, remain with the affiliate of such separate legal entity. The Company has challenged the said PNGRB Regulations before Hon'ble Delhi High Court by way of writ and the same is pending adjudication.

17 The Presidential directives for the implementation of the revised pay scales and allowances (w.e.f. 01/01/2017 based on DPE Office Memorandum No. W-02 / 0028/ 2017 - DPE (WC) - GL - XIII / 17 dated 3rd August, 2017) were issued on 23rd November, 2017. Pursuant to the aforesaid directives, revised pay scales and allowances for the Executives were implemented during the year. Further, in accordance with the guidelines for pay revision as aforesaid, the impact of increase in Gratuity ceiling from 10 lakhs to Rs,20 lakhs amounting to Rs, 150.51 crore provided in the Statement of Profit & Loss during FY 2016-17, was reversed during the year and is shown as recoverable from Superannuation Benefit Fund along with accrued interest thereon.

Pay revision of Non-Executives of the Company is due w.e.f 1st Jan 2017. Pending finalization of pay revision, a provision of Rs, 36 crore has been made based on estimated basis.

18 During the year the Company has been entrusted with developing 6 CGD projects in cities of Varanasi, Bhubaneswar, Cuttack, Jamshedpur, Ranchi and Patna. Authorization letter has already been issued by PNGRB to the Company for these 6 CGDs and these CGDs are to be developed as per Minimum Work Program (MWP) set by PNGRB following a defined timeline.

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19. Disclosure under the Ind AS 19 on Employee Benefits is given as below:

I. Superannuation Benefit Fund (Defined Contribution Fund)

The Company has paid for an amount of Rs,56.16 crore (Previous Year: Rs,55.83 crore) towards contribution to Superannuation Benefit Fund Trust and charged to statement of profit and loss.

II. Provident Fund

The Company has paid contribution of Rs,63.09 crore (Previous Year Rs,54 98 crore) to Provident Fund Trust at predetermined fixed percentage of eligible employees' salary and charged to statement of profit and loss. Further, the obligation of the Company is to make good shortfall, if any, in the fund assets based on the statutory rate of interest in the future period. During the year, surplus in the fund is more than the interest rate guaranteed liability of the Company hence, the Company has reversed a provision of ' Nil (Previous Year ' Nil), as per actuarial valuation and the balance provision to meet any short fall in the future period to be compensated by the Company to the Provident Fund Trust as at the end of the current financial year is ' Nil (Previous Year' Nil).

III. Other Benefit Plans

a) Gratuity:

15 days salary for every completed year of service. Vesting period is 5 years. Payment is limited to Rs,20 lakh(increased from Rs, 10 lakh as per Central Government notification S.O. 1420 (E) dated 29.03.2018).

b) Post-Retirement Medical Scheme (PRMS)

The Company contributes to the defined benefit plans for Post Retirement Medical Scheme using projected unit credit method of actuarial valuation. Under the scheme eligible ex-employees are provided medical facilities. During the year the Company has earmarked Rs,263.86 crore (Previous Year Rs, 248.99) towards the PRMS in a separate bank account.

c) Earned Leave Benefit (EL)

Accrual 30 days per year. Encashment while in service 75% of accumulated Earned Leave balance subject to maximum of 90 days at a time; provided a minimum balance of 15 days is left over in the respective employee's account. Encashment on retirement or superannuation maximum 300 days.

d) Terminal Benefits (TB)

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

e) Half Pay Leave (HPL)

Accrual 20 days per year. The encashment of unavailed HPL is allowed as per approved Company rule at the time of Superannuation.

f) Long Service Award (LSA)

On completion of specified period of service with the company and also at the time of retirement, employees are rewarded monetarily based on the duration of service completed.

The following table summarizes the components of net benefit expenses recognized in the statement of profit and loss based on actuarial valuation.

Note:

i. The actuarial valuation takes into account the estimates of future salary increases, inflation, seniority, promotion and other relevant factors.

ii. The management has relied on the overall actuarial valuation conducted by the actuary.

48. Disclosure as per Ind AS 23 on 'Borrowing Costs':

Borrowing costs capitalized in assets including amount allocated towards Capital Work in Progress during the year was Rs,8.57 crore (Previous Year: Rs,49.16 crore).

20. In compliance of Ind AS 108 on "Operating Segment" the Company has adopted following Business segments as its reportable segments:

(i) Transmission services

a) Natural Gas

b) LPG

(ii) Natural Gas Marketing

(iii) Petrochemicals

(iv) LPG and other Liquid Hydrocarbons

(v) Other Segments (include GAIL TEL, E&P, Power Generation and City Gas)

There are no geographical segments in the Company.

The disclosures of segment wise information is given as per Annexure-A.

21. In compliance of Ind AS 24 on "Related Party Disclosures" the names of related parties, nature of relationship and detail of transactions entered therewith are given in Annexure- B.

22. Disclosure under Ind AS 112 on "Disclosure of Interests in Other Entities":

(2) To the extent of information available with the Company

B) Jointly Controlled Assets

I The Company has participating interest in blocks offered under New Exploration Licensing Policy (NELP), in 8 Blocks (Previous Year: 10 Blocks) for which the Company has entered into Production Sharing Contract(s) with respective host Governments along with other partners for exploration and production of oil and gas. The Company is a non-operator, except in Block CB-ONN-2010/11, where it is the operator. The expenses, incomes, assets and liabilities are shared by the company based upon its participating interest in production sharing contract(s) of respective blocks.

""Exit from the block is pending for approval from the Directorate General of Hydrocarbons (DGH)

v) Share of Minimum work program committed under various production sharing contracts in respect of E&P joint ventures is Rs,37.72 crore (Previous Year Rs,174.64 crore).

vi) Quantitative information:

a) Details of the Company's Share of Production of Crude Oil and Natural Gas during the year ended 31st March 2018:

Notes:

i. The Company is Non-operating partner in E&P blocks except for one block for which reserves are disclosed.

ii. The initial oil and gas reserve assessment was made through expert third party agency / internal expert assessment by respective Operator of E&P blocks. The year-end oil reserves are estimated based on information obtained from Operator / on the basis of depletion during the year. Re-assessment of oil and gas reserves carried out by the respective Operator as and when new significant data or discovery of hydrocarbon in the respective block.

iii. The Company's share of crude oil production for the year 2017-18 is 1,15,057 barrels (Previous year 1,28,836 barrels).

iv. E&P blocks are assessed individually for impairment.

c) The Company's share of balance cost recovery is Rs,738.12 crore (Previous Year Rs,970.92 crore) to be recovered from future revenues from E&P blocks having proved reserves as per Production sharing contracts.

23India (TAPI) Gas Pipeline. GAIL currently holds 265,000 equity shares of USD 10 value per share and 25 equity shares of USD Nil value inTPCL as shown in Note no.5 (a) 10.

As at 31s March 2018, the Company has made a total payment of Rs, 26.87 crore, equivalent to USD 4.15 million (Previous Year Rs,26.87 crore, equivalent to USD 4.15 million) towards Pre Project Expenditure of the aforesaid project, out of which shares of Rs, 17.70 crore equivalent to USD 2.65 million as aforesaid have been allotted during the year and the balance of Rs,9.17 crore equivalent to USD 1.5 million has been shown as Advance against Equity in Note no.8.

24. Advance against equity pending allotment paid to South East Asia Gas Pipeline (SEAGP) in earlier years was I05.70 crore equivalent to USD 22,528,552. The Board of Directors and Shareholders of SEAGP in meeting held on 11.4.2018, approved refund of partial amount of such advance against equity. Accordingly, the amount recoverable by the Company of I4.48 crore equivalent to USD 2,240,334.80 is shown as current financial assets as at the end of the year and balance amount of Rs,95.78 crore equivalent to USD 20,282,217.20, has been shown as advance against equity pending allotment in Note no.8. Further, the Board of Directors and Shareholders of SEAGP has decided that subsequent refund will be determined based on their future cash flows and shall be subject to approval of Board and Shareholders of SEAGP

25. In settlement for recovery of bridge loan of 120 crore (Principle Rs,75 crore along with accrued interest of Rs,45 crore) due from Joint Venture Company, Bhagya nagar Gas Limited (BGL), the Company has received 2,11,50,000 equity shares of 10 each at a premium of Rs,40 per share amounting to I05.75 crore of BGL during the year and balance amount of Rs, 14.24 crore was refunded by BGL.

26. In compliance of Ind AS 36 on Impairment of Assets, the Company has carried out an assessment of impairment in respect of its following assets as on 31.03.2018:

i) During the year the Company has made a reversal of impairment of Rs,0.37 crore against an earlier impairment provision of Rs,0.40 crore provided during the last financial year in respect of its GAIL Tel assets and the same has been recognized as impairment gain in the statement of profit and loss.

ii) During the year the Company has made net impairment of Rs,0.64 crore(Previous Year Rs,6.82 crore) in respect of its unused dedicated pipelines and the same has been recognized as impairment loss in the statement of profit and loss.

iii) No impairment loss was considered necessary by the management of the Company in respect of Gas Processing Unit, Usar which is under shutdown condition since 16th July 2014 due to nonavailability of rich feed gas. The management has decided to keep the plant in preservation mode till the availability of rich feed gas in the future.

27. In compliance of Ind AS 109 on Impairment of Assets, the Company has carried out an assessment of impairment in respect of its following assets as on 31.03.2018:

i) During the year the Company has made a reversal of impairment of Rs,1.55 crore against an earlier impairment provision of Rs,5.04 crore provided during the last financial year. The CarryingValue of Company's investment in Fayum Gas Company S.A.E., Egypt after reversal of aforesaid impairment provisionason31.03.2018stands atRs,4.62 crore.

ii) During the year, based on increase in fair value of Company's investment in RGPPL over and above its carrying value after adjustment on account of Demerger, the Company has made a reversal of impairment of Rs,165.89 crore against an earlier impairment provision of ^783 crore provided during the last financial year. The Carrying Value of Company's investment in RGPPL after reversal of aforesaid impairment provision as on 31.03.2018 stands at Rs,217.45 crore (Previous year: I91.31 crore)as mentioned at Note no 5 (b) 1.

iii) During the year, based on fair value of Company's investment in KLPL, the Company has provided for loss on impairment of I39.75 crore. The Carrying Value of Company's investment in KLPL after aforesaid impairment provision as on 31.03.2018 stands at ' NIL as mentioned at Note no. 5(b) 2. "excludes amount which is naturally hedged against foreign currency inflows.

28. Details of Loans, Investments, Guarantee and Security given by the Company covered U/S 186 (4) of the Companies Act 2013.

a. Investments made and Loans given are disclosed under the respective notes No 5 and 7.

b. Corporate Guarantees given by the Company in respect of loans as at the end of the current financial year are as under:

c. There is no security provided by the Company.

29. Interest free advance has been given to Petronet LNG Ltd. (PLL) for booking of degasification capacity to the tune of ' 561.80 crore up to 31.03.2018 (Previous year ' 561.80 crore). The said advance is to be adjusted within 15 years against degasification invoices of PLL. Out of above advance, PLL has adjusted Rs, 38.20 crore during the year (Previous year Rs,9.55 crore). Balance amount of Rs,514.04 crore (Previous year Rs,552.25 crore) has been carried over as advance in Note No 12 and 12A.

30. In some cases, the Company has received intimation from Micro and Small Enterprises regarding their status under "The Micro, Small and Medium Enterprises Development Act, 2006" As per practice, the payment to all suppliers has been made within 7 -10 days of receipt of valid invoice. The amount remaining unpaid to all suppliers as at the end of the financial year is Rs,68.11 crore (Previous Year Rs,33.28 crore). No interest for delay was paid or payable under the Act.

31. Cabinet Committee on Economic Affairs (CCEA), Government of India in its meeting held on 21st September 2016 has approved 40% capital grant of estimated capital cost of Rs,12,940 crore i.e. Rs,5,176 crore to the Company for execution of Jagdishpur Haldia Bokaro Dhamra Pipeline Project (JHBDPL). The Company has received Rs, 850 crore (Previous year Rs,450 crore) towards Capital Grant on above ground till 31.03.2018. During the year, the Company has amortised the capital grant amounting Rs,0.24 crore (Previous year nil) based on the life of the asset capitalized.

32. In compliance with Regulation 34(3) and 53(f) of Listing Obligations and Disclosure Requirements (LODR) of SEBI, the required information is given in Annexure-C.

33. Financial Risk management

The company is exposed to a number of different financial risks arising from natural business exposures as well as its use of financial instruments including market risks relating to commodity prices, foreign currency exchange and interest rates; credit risk; and liquidity risk.

With all other variables held constant, the following table demonstrates the sensitivity to a reasonably possible change in interest rates on Corporate Linked Deposit Scheme (CLTD) outstanding as on 31.03.2018 which are linked with MIBOR:-

a. Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, and derivative financial instruments.

i. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the long-term foreign currency loans with floating interest rates. The Company manages its interest rate risk according to its Board approved Foreign Currency and Interest Rate Risk Management policy. Market interest rate risk is mitigated by hedging through appropriate derivatives products such as interest rate swaps & full currency swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount.

Interest rate sensitivity

With all other variables held constant, the following table demonstrates the sensitivity to a reasonably possible change in interest rates on floating rate portion of forex loans and borrowings outstanding as on 31.03.2018, after considering the impact of swap contracts.

b. Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Company transacts business in local currency and in foreign currency, primarily U.S. dollars. Company has obtained foreign currency loans and has foreign currency trade payables and receivables and is therefore, exposed to foreign exchange risk. As per its Board approved policy, Company may mitigate its foreign currency risk through plain vanilla derivative products such as foreign exchange option contracts, swap contracts or forward contracts towards hedging

c. Commodity Price risk

Company imports LNG for marketing and for its internal consumption on an on-going basis and is not exposed to the price risk to the extent it has contracted with customers in India and overseas on back to back basis. However, the company is exposed to the price risk on the volume which is not contracted on back to back basis. As most of the LNG purchase and sales contracts are based on natural gas or crude based index, such price risk arises out of the volatility in these indices. In order to mitigate this index linked price risk, Company has been taking appropriate derivative products in line with the Board approved ' Natural Gas Price Risk Management Policy'

d. Equity Price Risk

The Company's listed and non-listed equity investments are susceptible to market price risk arising from uncertainties about future values of these investments. The Company manages the equity price risk through review of investments by Company's senior management on a regular basis. The Company's Board of Directors reviews and approves all the equity investment decisions of the Company. such risks. These foreign exchange contracts, carried at fair value, may have varying maturities depending upon the underlying contract requirement and risk management strategy of the Company.

Foreign Currency Sensitivity

The following table demonstrates the sensitivity in the USD, Euro, and other currencies to the functional currency of Company, with all other variables held constant. The impact on the Company's profit before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives.

At the reporting date, the exposure to unlisted equity investments at fair value was Rs,172.90 Crore (Previous Year 188.07Crore).

At the reporting date, the exposure to listed equity investments at fair value was Rs,5 488.92 Crore (Previous Year Rs,5 712.87 Crore). A variation of ( /-) 10% in share price of equity investments listed on the stock exchange could have an impact of approximately ( /-) Rs,549 Crore (Previous Year Rs,571 Crore) on the OCI and equity investments of the Company. These changes would not have an effect on profit or loss.

2. Liquidity Risk

Liquidity is the risk that suitable sources of funding for Company's business activities may not be available. The Company's objective is to maintain optimum level of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It also maintains adequate sources to finance its short term and long term fund requirement such as overdraft facility and Long term borrowing through domestic and international market.

# Borrowings include impact of derivative contracts.

## includes interest accrued but not due as on 31.03.2017 as well as interest to be paid till maturity.

34. Credit risk

Credit risk is the risk that a customer or counterparty to a financial instrument will fail to perform or fail to pay amounts due, causing financial loss to the company and arises from cash and cash equivalents, derivative financial instruments and deposits with financial institutions and principally from credit exposures to customers relating to outstanding receivables. Credit exposure also exists in relation to guarantees issued by company. Each segment is responsible for its own credit risk management and reporting. Credit risk is considered as part of the risk-reward balance of doing business. On entering into any business contract the extent to which the arrangement exposes the company to credit risk is considered.

Trade receivables

Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major clients.

Financial Instruments and Cash Deposits

Credit risk from balances with banks and financial institutions is managed by the Company's treasury department in accordance with approved limits of its empanelled bank for the purpose of Investment surplus funds and foreign exchange transactions. Foreign exchange transaction and Investments of surplus funds are made only with empanelled Banks. Credit limits of all Banks are reviewed by the Management on regular basis.

35. Capital management

For the purpose of the capital management, capital includes issued capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders, or issue new shares. No changes were made in the objectives, policies or processes during the reporting years.

36. The Company is evaluating applicability of provisions of Ind AS 109 w.r.t certain contracts of the Company with vendors awarded through ICB (International competitive bidding) which are denominated in third currency (i.e. a currency which not the functional currency of any of the parties to the contract). In this regard, in line with other PSU, the Company has sought opinion from the Expert Advisory Committee (EAC) constituted by The Institute of Chartered Accountants of India on the above matter vide letter no GAIL/ND/F&A/CO/EAC Opinion/201819 dated 21st May 2018. On receipt of opinion / clarification from EAC, the Company will take necessary action in the matter.

Further the Company has sought opinion of the EAC of ICAI on the following issues during the financial 2017-18 for which opinion is awaited:

a) Disclosure in Notes to Financial Statements / inclusion under contingent liabilities of Corporate Guarantees issued by parent company to a bank for issuance of Performance Bank Guarantee on behalf of its wholly owned subsidiary company.

b) Disclosure of impairment loss on long term investment as Exceptional Items in the statement of profit and loss.

Pending opinion, the Company has considered same accounting treatment in respect of these matters in consistent with the previous financial year.

37. Accounting classifications and fair value measurements

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: technique which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

As at 31 March 2018, the Company held the following financial instruments carried at fair value on the statement of financial position:

Note:

1. The carrying cost of Interest-bearing loans & borrowings is approximately equal to their Fair Market Value

2. The carrying amount of trade receivables, cash and cash equivalents, other bank balance, others receivables, trade payables, interest accrued and due, other payables and other financial liabilities are considered to be same as their fair value due to their short term nature.

3. With respect to loans, the fair value were calculated based on cash flows discounted using the current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

As at 31st March 2017, the Company held the following financial instruments carried at fair value on the statement of financial position:

Note:

1. The carrying cost of Interest-bearing loans & borrowings is approximately equal to their Fair Market Value

2. The carrying amount of trade receivables, cash and cash equivalents, other bank balance, others receivables, trade payables, interest accrued and due, other payables and other financial liabilities are considered to be same as their fair value due to their short term nature.

3. With respect to loans, the fair value were calculated based on cash flows discounted using the current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

38. Hedging activities and derivatives

Derivatives not designated as hedging instruments

The Company uses forward currency contracts, interest rate swaps, cross currency interest rate swaps, commodity swap contracts to hedge its foreign currency risks, interest rate risks and commodity price risks. Derivative contracts not designated by management as hedging instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value on each reporting date. Such contracts are entered into for periods consistent with exposure of the underlying transactions.

Derivatives designated as hedging instruments:

Cash flow hedges

The Company enters into hedging instruments in accordance with policies as approved by the Board of Directors with written principles which is consistent with the risk management strategy of the Company. Company has decided to apply hedge accounting for certain derivative contracts that meets the qualifying criteria of hedging relationship entered into post October 01, 2017.

Foreign currency risk

Foreign exchange forward contracts are designated as hedging instruments in cash flow hedges of firm commitment of capital purchases in US dollar and existing borrowings e.g. US dollars/ Japanese Yen etc.

Commodity price risk

The Company purchases and sells natural gas on an ongoing basis as its operating activities. The significant volatility in natural gas prices over the years has led to Company's decision to enter into hedging instruments through swaps transactions including basis swaps. These contracts are designated as hedging instruments in cash flow hedges of forecasted sales and purchases of natural gas.

The table below shows the position of hedging instruments and hedged items (underlying) as of the balance sheet date.

39. a. Confirmation of balances has been received for trade receivables and payables. These confirmations are subject to reconciliation and consequential adjustments, which in the opinion of the management are not material.

b. In the opinion of management, the value of assets, other than fixed assets and non-current investments, on realization in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet.

69. Value of Raw Materials, Stores / spares and Components consumed during the year.

40 Other Quantitative details are given in Annexure-E.

41. Statement containing salient features of the financial statements of Subsidiaries/Joint Ventures of the Company pursuant to Section 129 (3) of Companies Act, 2013 in form AOC I is attached in Annexure-F.

42. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

73. The comparative financial information of the Company for the year ended 31st March 2017 included in the Standalone Ind AS financial statements, are based on the previously issued statutory financial statements audited by G.S. Mathur & Co. and O.P. Bagla & Co. vide their unmodified audit report (Revised) dated July 20, 2017 whose audit report has been relied upon by the newly appointed auditors.

I) Relationship

A) Joint Venture Companies/Associates/ Employees trust Details of Subsidiary Companies

1) GAIL Global (Singapore) Pte. Ltd.*

2) GAIL Gas Ltd.*

3) GAIL Global (USA) Inc. *

4) Tripura Natural Gas Corporation Limited*

5) GAIL Global USA LNG LLC*

Details of Joint Venture Companies

6) Ratnagiri Gas & Power Pvt. Ltd.*

7) Konkan LNG Private Limited*

8) Central UP Gas Limited

9) Green Gas Limited

10) Maharashtra Natural Gas Limited

11) Aavantika Gas Ltd.

12) Bhagyanagar Gas Limited

13) Vadodara Gas Limited*

14) Talcher Fertilizers Limited*

15) Tapi Pipeline Company Ltd

16) GAIL China Gas Global Energy Holding Ltd.

17) Andhra Pradesh Gas Distribution Corporation Limited

18) Kerala GAIL GAS Limited

19) Rajasthan State Gas Limited

20) Haridwar Gas Private Limited

21) GOA Natural Gas Private Limited Details of Associate Companies

22) China Gas Holdings Ltd.

23) Petronet LNG Limited

24) Mahanagar Gas Limited

25) Indraprastha Gas Limited

26) Brahmaputra Cracker and Polymer Limited*

27) Fayum Gas Company Limited

28) ONGC Petro Additions Ltd (OPAL)*

Details of Trusts

29) GAIL Employees Superannuation Benefit Fund

30) GAIL (India) Ltd. Employees Provident Fund Trust

31) GAIL (India) Ltd. Employees Death-cum- Superannuation Gratuity Scheme

* Transactions with these companies excluded as Government-related entity defined in IndAS 24

B) Key Management Personnel

i) Whole time Directors:

1) Shri B C Tripathi , Chairman and Managing Director

2) Dr. Ashutosh Karnatak, Director (Projects)

3) Shri Subir Purkayastha, Director (Finance) and CFO

4) Shri P K Gupta, Director (HR)

5) Shri Gajendra Singh, Director (Marketing) w.ef. (05.04.2017)

ii) Independent Directors:

1) Shri S.K. Srivastava

2) Shri Anupam Kulshreshtha

3) Shri Sanjay Tandon

4) Shri Dinkar P Srivastava

5) Dr. Anup K Pujari

6) Shri Jayanto Narayan Choudhury

7) Dr. Rahul Mukherjee

iii) Company Secretary

1) Shri Anil Kumar Jha

C) Unincorporated Joint venture for Exploration & Production Activities:

1) NEC - OSN - 97/1 (Non-operator with participating interest: 50%,

GAIL has relinquished from the Block)

2) A-1, Myanmar (Non-operator with participating interest: 8.5%)

3) A-3, Myanmar (Non-operator with participating interest: 8.5%)

4) SHWE Offshore Pipeline (Non-operator with participating interest: 8.5%)

5) CY-OS/2 (Non-operator with participating interest: 25%)

6) RM-CBM-2005/III (Non-operator with participating interest: 35%)

(GAIL has relinquished from the Block)

7) TR-CBM-2005/III (Non-operator with participating interest: 35%)

(GAIL has relinquished from the Block)

8) MR-CBM-2005/III (Non-operator with participating interest: 45%)

(GAIL has relinquished from the Block)

9) AD-7, Myanmar (Non-operator with participating interest: 10%)

(GAIL has relinquished from the Block)

10) BLOCK-56, Oman (Non-operator with participating interest: 25%)

(GAIL has relinquished from the Block)