Annual Report 2006-07 HPCL

55th Annual Report 2006-07

3

Chairman‘s Message .......................................................... 4

Our Directors .................................................................. 7

Senior Management Team.................................................. 8

Offices, Auditors & Bankers ............................................ 11

Notice of AGM .............................................................. 12

Performance Profile ........................................................ 18

Director’s Report ........................................................... 26

Annexure to Director’s Report ........................................ 31

Management Discussion & Analysis Report ....................... 45

Special Focus Areas ....................................................... 52

Auditor’s Report ............................................................ 61

Balance Sheet ................................................................ 66

Profit & Loss Account .................................................... 67

Schedules to Accounts ................................................... 68

Cash Flow Statement ....................................................... 92

C & AG’s Comments ...................................................... 96

Joint Venture Companies ................................................. 97

Consolidated Financial Statements .................................. 100

Corporate Governance Report ....................................... 116

Annual Report of Guru Gobind SinghRefineries Limited (Subsidiary Company) ......................... 138

Contents


4

Chairman’s Message

Dear Shareholder,

This is my first communication to you after taking charge as C&MD of your Corporation with effect

from April 01, 2007. I am sure you must have noticed that the Corporation has achieved significant

physical and financial performance for the year 2006-07. The Board of Directors have proposed a

final equity dividend of 120% for the year 2006-07 taking the total dividend for the year to 180% with

60% interim dividend already been paid to the Shareholders. While the details of the performance

of the Corporation have been given in detail in this report elsewhere, I would like to focus on some

important and strategic issues.

Both Mumbai Refinery and Visakh Refinery recorded significant performance during the year and

were able to achieve a thruput of 16.66 MMT representing 128% capacity utilization. The completion

of major maintenance programme at both the Refineries and the several initiatives taken aimed

towards improving unit performance, reduction in instances of downtime, maintenance and

upgradation of equipment have all contributed to the enhanced performance of the Refineries.

Optimum capacity utilization, improving yield pattern, production of high value products, innovative

blend management skills, energy conservation measures, close coordination with Marketing,

International Trade & Supplies Dept. etc. will be the focus area for the Refineries. When the

ongoing Refinery upgradation programme gets completed at both Mumbai and Visakh, it would

result in the refining capacity getting enhanced to 18 MMTPA and production of Euro III / Euro IV MS/

Euro III HSD, flexibility to process different types of crude including higher quantum of heavier crudes

by both the Refineries.


5

The Marketing Division has achieved highest ever sales volume of 21.69 MMT which resulted in the

Corporation recording the highest ever turnover of Rs.91,448 crores representing a growth of 23.5%.

The Mundra Delhi Pipeline is mechanically completed and Mumbai Pune Pipeline extension to

Solapur has been completed and commissioned by the Marketing Division.

In the core area of Refining and Marketing , while it would be our endeavour to ensure enhanced

performance in terms of Refinery thruput and Market sales, the marketing margins would continue

to be an area of concern. The crude oil prices continue to remain high and there appears to be no

indication currently of a significant fall in the price in the near future. On the contrary, further increase

cannot be ruled out. Crude oil prices are influenced not only by the market determined forces but

also other geo-political factors.

As a Government Company, your Corporation functions having regard to the overall economic

policies of the Government of India which include equitable distribution of petroleum products across

the cross sections of the society and more importantly at affordable prices. Hence the continued

subsidies on products like LPG and Kerosene and non-revision in the prices of products like petrol

and diesel resulting in under-recoveries. The Government continues to be seized of the matter and

is compensating your Corporation as well as other downstream oil companies thru issue of oil

bonds as well as making the upstream companies share a portion of the subsidy burden.

Having regard to the constraints as explained above, your Corporation continues to look for other

areas of revenue generation and profitability. The Corporation is focusing on opportunities in the

area of Exploration and Production, Natural Gas (CNG/LNG), Bio-diesel options , Wind Power Project

etc, The Corporation is pursuing such projects either through Joint Ventures or joint initiatives with

reputed companies who have core capabilities in the respective segment. Several steps have

been taken and the Corporation would scale up its activities in these areas in a phased manner.

Various HR initiatives taken and implemented during the last few years which included the ‘Balanced

Scorecard’ tool to set up performance targets and evaluation, Competency Mapping Process to

enhance employee capabilities, Six Sigma approach for quality improvement have all resulted in

enhanced capabilities, vigour and commitment in our employees. This fills me with the confidence

that the Organisation is fully equipped to take on the challenges in its pursuit of growth and thereby

the transition from a Downstream Company to an Integrated Energy Company.



6

The details of various ongoing major and other projects including the prestigious Joint Venture LPG

Cavern project which is nearing completion at Visakh have been given in the report. Your Corporation

is contemplating several new projects both in Refineries as well as Marketing with an outlay of Rs.30000

crores over the next 5 years. This would include Lube Oil Base stocks upgradation at MR, new VR

expansion project, SPM facilities at Visakh for importing crude oil in large carriers, mixed xylene and

propylene production at Mumbai and Visakh Refineries, petro-chemical complex at APSEZ at

Visakhapatnam. These projects when completed would bring in significant revenue contribution to

the Corporation. These projects would be financed both thru internal resources and borrowings.

Quality / Quantity assurances to customers, automation of facilities, increased thruput per retail

outlet, penetrating to rural and highway segments, aggressive marketing in the area of Lubricants,

Industrial and Consumer Business, Aviation, Bitumen which are non subsidy products, penetration

to rural and highway segment etc will be the focus area of Marketing Division in the coming period.

The Corporation’s 9 MMTPA grassroot Refinery project at Bhatinda, Punjab has received significant

boost in the form of the globally well known Mittals joining as a JV partner for implementing the

project. M/s. Mittal Energy Investments Pte Ltd., also received approval from the Government for

their equity investment through one of their Affiliate Company. Various critical project related activities

are in an advanced stage of finalization which includes financial closure, refinery configuration,

selection of process packages, engagement of various Consultants for the project. This project

which is estimated to cost close to Rs.18000 crores would be completed in a period of about 4

years from now. This will enable HPCL to have independent source of products to cater to its

requirement in the North and any excess would be exported. The Mundra Delhi Pipeline which

would be commissioned shortly would enable the Corporation to move its products from Mundra to

cater to its requirement in several areas in the North. It could be also utilized to move the product

from the Refinery at Punjab to other Market locations and also for exports, if required.

We are grateful to all our esteemed Shareholders, our Stakeholders like dealers, customers, vendors,

contractors business associates, employees and all others who have reposed their faith in HPCL.

Our Administrative Ministry, Ministry of Petroleum & Natural Gas, has been providing continuous

guidance and support in our efforts. We, on our part, would continue to take HPCL further towards

growth and profitability by meeting the challenges that we face and on capitalizing the opportunities

that arise. We look forward to your continued support in this ongoing journey.

Thank you,

ARUN BALAKRISHNAN



7

Shri T L SankarDirector

Shri P K SinhaDirector

Shri Prabh DasDirector

Shri M NandagopalDirector

Shri S Roy ChoudhuryDirector - Marketing

Shri Rajesh V ShahDirector

Prof. Prakash G. ApteDirector (From 20.07.07)

Shri C RamuluDirector - Finance

Shri M A TankiwalaDirector - Refineries

Shri Arun BalakrishnanChairman & Managing Director

(From 01.04.2007)

Shri M B LalChairman & Managing Director

(Till 31.03.2007)

Prof. I M PandeyDirector

Shri P.V. RajaramanDirector (From 20.07.07)

Our Directors

Shri V ViziasaradhiDirector - HR

(From 03.08.2007)


8

Senior Corporate Officers

Shri S.T. SathiavageeswaranGeneral Manager - ERP

Shri M.V. SreeramGeneral Manager - IT (Corp.)

Shri R. GanesanGeneral Manager - Tax

Shri Ajit SinghDGM (I/C), DCO

Shri L.M. MotwaniDGM - PR&CC

Shri D.M. SabaleGeneral Manager - SH&E

Shri G. HariharanGeneral Manager - Legal

Shri Sandeep JosephGeneral Manager - IR

Shri A.B. PaiGeneral Manager - HRD

Shri K.V. RaoGeneral Manager - IA & JVC

Shri S.P. GuptaFinancial Controller

Shri O.P. PradhanGeneral Manager - CP & S

Shri B. MukherjeeExecutive Director - T & T

Ms. Nishi VasudevaExecutive Director - IT & ERP

Shri K.S.R. PrasadExecutive Director - IA & JVC

Shri A.K. BhideExecutive Director - CF**

Shri N.R. NarayananCompany Secretary

Shri K. MuraliExecutive Director - R&D

Shri S.K. MukherjeeExecutive Director - SH&E**

Shri B.R. MandalChief Vigilance Officer

Shri D.K. HotaGeneral Manager - MRA & P

**: Retired from the services of the Corporation


9

Refineries Team

Shri S.V. SahniExecutive Director - CE,

Refineries

Shri D.K. DeshpandeExecutive Director - MR

Shri A.B. SatheExecutive Director - IT & S

Shri A.S. RaoExecutive Director - VR

Shri P. A. B. RajuGeneral Manager - Operations, VR

Shri B.K. NamdeoGeneral Manager - CEC

Shri S.C. MehtaGeneral Manager - Operations, MR

Shri Rakesh KumarGeneral Manager - Finance, MR

Shri V. JagannathanGeneral Manager - Special

Assignment, VR

Shri K. SrinivasanGeneral Manager - Projects, MR

Shri R.M.N. MararGeneral Manager - Projects, VR

Shri G. SriganeshGeneral Manager - R & D

Shri R.K. GuptaGeneral Manager -Projects, GGSRL*

Shri A.V. SarmaManaging Director, BGL*

Shri T.K.Kalyanaraman

Director - Commercial, AGL*

Joint Ventures

*: On deputation

Shri K.R. ShankaranExecutive Chairman, PII*

Shri Rajan K. PillaiChief Executive Officer -

ISPRL*


10

Marketing Team

Shri M.S. DamleGeneral Manager -

West Zone

Shri B. GururajanGeneral Manager - Retail

(Branding / Loyalty Cards)

Shri R. Sudhakara RaoGeneral Manager - Lubes

Shri A.B. ThosarGeneral Manager - Pipelines

Shri S.M. PalavGeneral Manager - IT (Mktg.)

Shri G.A. ShirwaikarExecutive Director - LPG

Shri S.K. BiswasExecutive Director - P & P

Shri S.P. ChaudhryExecutive Director - Retail

Shri Rakesh MisriDGM (I/C), North Zone

Shri R. RadhakrishnanDGM (I/C), South Zone

Shri S. JeyakrishnanDGM (I/C), East Zone

Shri S.P. SinghDGM - Aviation

Shri P. RajendranGeneral Manager - Marketing

Projects

Shri C.S. KrishnaswamyGeneral Manager - R&D & Quality

Control

Shri S.Y. NarvekarGeneral Manager - Industrial &

Consumer Sales

Shri Y.K. GawaliGeneral Manager - O&D


11

Registered Office & Headquarters Office

Petroleum House,

17, Jamshedji Tata Road,

Mumbai - 400 020.

e-mail: [email protected]

website: www.hindustanpetroleum.com

Marketing Headquarters

Hindustan Bhavan,

8, Shoorji Vallabhdas Marg,

Ballard Estate, Mumbai - 400 001.

Mumbai Refinery

B.D. Patil Marg, Chembur,

Mumbai - 400 074.

Visakh Refinery

Post Box No. 15,

Visakhapatnam - 530 001.

Bankers

State Bank of IndiaUnion Bank of India

Punjab National BankStandard Chartered Bank

Bank of BarodaBank of IndiaCitibank N.A.

Corporation BankICICI Bank

HDFC Bank

Company Secretary

Shri N. R. Narayanan

Zonal Offices

East Zone

6, Church Lane,Post Box No.146,Kolkata-700 001.

West Zone

R&C Building,Sir J.J. Road, Byculla,

Mumbai - 400 008.

North Zone

6th & 7th Floor,Core 1 & 2, North Tower,

Scope Minar,Laxmi Nagar,

Delhi - 110 092.

South Zone

Thalamuthu Natarajan Building,4th Floor, 8,Gandhi Irwin Road,Post Box No. 3045, Egmore,

Chennai - 600 008.

Statutory Auditors

N.M. Raiji & Co.Chartered Accountants

Mumbai

Sudit K. Parekh & Co.Chartered Accountants

Mumbai

Branch AuditorsB.V. Rao & Co.

Chartered AccountantsVisakhapatnam

Offices, Auditors and Bankers


12

Notice of Annual General MeetingNotice of Annual General MeetingNotice of Annual General MeetingNotice of Annual General MeetingNotice of Annual General Meeting

HINDUSTAN PETROLEUM CORPORATION LIMITED(A Government of India Enterprise)

REGISTERED OFFICE : 17 JAMSHEDJI TATA ROAD, MUMBAI 400 020

NOTICE

NOTICE is hereby given that the 55th ANNUAL GENERAL MEETING of the Members of Hindustan PetroleumCorporation Limited will be held on Thursday, September 06, 2007, at 3.00 P.M. at “Yashwantrao ChavanPratishthan Auditorium, Chavan Centre, General Jagannath Bhosale Marg, Mumbai - 400 021”, totransact the following business :

ORDINARY BUSINESS:

1. To receive, consider and adopt the Balance Sheet as on March 31, 2007, Profit and Loss Account for theyear ended on that date and Reports of the Board of Directors and Auditors thereon.

2. To declare Equity Dividend for the Financial Year 2006-2007.

3. To appoint a Director in place of Shri T.L. Sankar, who retires by rotation and is eligible for reappointment.

4. To appoint a Director in place of Shri Prabh Das, who retires by rotation and is eligible for reappointment.

5. To appoint a Director in place of Shri C. Ramulu, who retires by rotation and is eligible for reappointment.

6. To appoint a Director in place of Shri Rajesh V. Shah, who retires by rotation and is eligible forreappointment.

7. To appoint a Director in place of Shri M.A. Tankiwala, who retires by rotation and is eligible forreappointment.

8. To approve payment of Rs.15 Lakhs as remuneration to the Statutory Auditors of the Company to beappointed by the Comptroller & Auditor General of India for auditing the Accounts of the Company for theFinancial Year 2007-08.

SPECIAL BUSINESS:

APPOINTMENT OF DIRECTORS:

9. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as anOrdinary Resolution.

“RESOLVED that Prof. Prakash G. Apte who was appointed as an Additional Director of the Companyby the Board of Directors under Article 112 of the Articles of Association of the Company with effectfrom 20.07.2007 and who holds office under the said Article and pursuant to Section 260 of theCompanies Act, 1956 only upto the date of this Annual General Meeting, and who is eligible for re-appointment under the relevant provisions of the Companies Act, 1956, and in respect of whom theCompany has received a notice in writing from a member signifying his intention to propose him asa candidate for the office of the Director, be and is hereby appointed as a Director of the Companyliable to retire by rotation.”


13



“RESOLVED that Shri P.V. Rajaraman who was appointed as an Additional Director of the Company bythe Board of Directors under Article 112 of the Articles of Association of the Company with effect from20.07.2007 and who holds office under the said Article and pursuant to Section 260 of the CompaniesAct, 1956 only upto the date of this Annual General Meeting, and who is eligible for re-appointment underthe relevant provisions of the Companies Act, 1956, and in respect of whom the Company has receiveda notice in writing from a member signifying his intention to propose him as a candidate for the office ofthe Director, be and is hereby appointed as a Director of the Company liable to retire by rotation.”


“RESOLVED that Shri V. Viziasaradhi who was appointed as an Additional Director of the Company bythe Board of Directors under Article 112 of the Articles of Association of the Company with effect from03.08.07 and who holds office under the said Article and pursuant to Section 260 of the Companies Act,1956 only upto the date of this Annual General Meeting, and who is eligible for re-appointment under therelevant provisions of the Companies Act, 1956, and in respect of whom the Company has received anotice in writing from a member signifying his intention to propose him as a candidate for the office of theDirector, be and is hereby appointed as a Director of the Company liable to retire by rotation.”

BY THE ORDER OF THE BOARD

N.R. NarayananCompany Secretary

Date : August 03, 2007Regd. Office : 17, Jamshedji Tata Road

Churchgate, Mumbai - 400 020

NOTES :

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXYTO ATTEND AND VOTE INSTEAD OF HIMSELF AND SUCH PROXY NEED NOT BE A MEMBER OFTHE COMPANY. Proxies in order to be effective, must be deposited at the Registered Office of theCompany not less than 48 hours before the time of the meeting.

2. The Explanatory Statement made pursuant to Section 173(2) of the Companies Act, 1956 in respect ofthe item Nos. 8 to 11 of the Notice is annexed herewith.

3. Dividend on Equity Shares as recommended by the Directors for the year ended March 31, 2007, ifapproved at the meeting, will be payable to those eligible members whose names appear :

(1) As Beneficial owners, as on August 21, 2007 as per the list to be furnished by National SecuritiesDepository Ltd. and Central Depository Services (India) Ltd. in respect of shares held in electronicform, and

(2) As Members in the Register of Members of the Company after giving effect to all valid share transfersin physical form lodged with the Company on or before August 21, 2007.

4. Members are requested to bring their copies of the Annual Report to the Meeting. Members / Proxies attendingthe Meeting should bring the Attendance Slip, duly filled, for handing over at the venue of the meeting.


14

5. (a) Members holding shares in physical form are requested to advise immediately change in their address,if any, quoting their Folio number(s), to M/s. Intime Spectrum Registry Limited (ISRL), the Registrarsat their address given below.

(b) Shareholders holding shares in dematerialised form are requested to advise immediately change inaddress, if any, quoting their respective Client ID / DP ID Nos., to their respective Depository Participantsand not to M/s. ISRL or to the Company.

6. (a) Members holding shares in physical form, who have not given the Bank Particulars / Mandate, ECSMandates earlier or if there is any change in the details, are requested to send the same quoting theFolio number(s), to our Registrars M/s. ISRL on or before August 21, 2007.

(b) All Shareholders who are holding shares in Dematerialised form are requested to advise change, ifany, in details of their bank account / ECS mandates to their respective Depository Participantsimmediately to enable the Company to pay the dividend accordingly.

7. Members are hereby informed that Dividends which remain unclaimed / unencashed over a period of 7years have to be transferred by the Company to Investor Education & Protection Fund constituted by theCentral Government under Section 205A and 205C of the Companies Act, 1956.We give below the details of Dividends paid by the Company and their respective due dates of transfer tothe Fund of the Central Government if they remain unencashed.

Date of declaration of Dividend for the year Month & year ofDividend transfer to the Fund

08.09.2000 1999-2000 (Final) Oct. 2007

28.09.2001 2000-2001 Oct. 2008

28.08.2002 2001-02 Sep. 2009

30.01.2003 2002-03 (Interim) Feb. 2010

24.09.2003 2002-03 (Final) Oct. 2010

22.12.2003 2003-04 (Interim) Jan. 2011

09.09.2004 2003-04 (Final) Oct. 2011

09.12.2004 2004-05 (Interim) Jan. 2012

21.09.2005 2004-05 (Final) Oct. 2012

14.09.2006 2005-06 Oct. 2013

20.12.2006 2006-07 (Interim) Jan. 2014

It may please be noted that no claim can be made by the shareholders for the unclaimed Dividends whichhave been transferred to the credit of the Investor Education & Protection Fund of the Central Governmentunder the amended provision of Section 205B of the Companies (Amendment) Act, 1999.

In view of the above regulation, the shareholders who are yet to encash the dividend are advised to sendrequests for duplicate dividend warrants in case they have not received the Dividend Warrants for any ofthe above mentioned financial years and / or revalidation of unencashed Dividend Warrants still held bythem to the Registrars and Transfer Agents of the Company so that dividends can be encashed.

8. The name and address of Registrars and Transfer Agents of the Company is as follows :M/s. INTIME SPECTRUM REGISTRY LTD.Unit: HINDUSTAN PETROLEUM CORPORATION LTD.C-13, Pannalal Silk Mills CompoundLBS Marg, Bhandup (West), Mumbai - 400 078Telephone No.: 022 - 25963838 / Fax No.: 022 - 25946969



15

9. Appointment / Re-appointment of Directors

At the ensuing Annual General Meeting, S / Shri T.L. Sankar, Prabh Das, C. Ramulu, Rajesh V. Shah andM.A. Tankiwala retire by rotation and being eligible, offer themselves for re-appointment.

EXPLANATORY STATEMENT IN PURSUANCE OF SECTION 173(2) OF THE COMPANIES ACT, 1956.

8. HPCL is a Government Company within the meaning of Section 617 of the Companies Act, 1956. In termsof the provisions of Section 619 of the Companies Act, 1956, Statutory Auditor/s for a Government Companyis/are appointed by the Comptroller & Auditor General of India (C&AG). In terms of Section 224 (8) (aa) ofthe Companies Act, 1956, the remuneration of the Auditors is required to be fixed by the Company in aGeneral Meeting or in such a manner as the Company in a General Meeting may determine.

The Board of Directors of the Company have recommended a remuneration of Rs.15 Lakhs plus out ofpocket expenses to the Statutory Auditors (including Joint / Branch Auditors, if any) of the Company to beappointed by the C&AG for auditing the Accounts of the Company for the Financial Year 2007-08 for theapproval of the shareholders. The Corporation will shortly submit an application to the Comptroller &Auditor General of India, regarding appointment of Statutory Auditors.

9. Prof. Prakash G. Apte was appointed as an Additional Director on the Board effective 20.07.2007. In termsof Section 260 of the Companies Act, 1956 and Article 112 of the Articles of Association of the Company,he holds office upto the date of this Annual General Meeting and is eligible for re-appointment. TheCompany has received a notice proposing the candidature of Prof. Prakash Apte for the office of a Directorin terms of Sections 255 & 257 of the Companies Act, 1956.

Prof. Prakash Apte, is a Director, in the Indian Institute of Management, Bangalore. The Board recommendsappointment of Prof. Prakash Apte.

None of the Directors other than Prof. Prakash Apte are interested in the resolution.

10. Shri P.V. Rajaraman was appointed as an Additional Director on the Board effective 20.07.2007. In termsof Section 260 of the Companies Act, 1956 and Article 112 of the Articles of Association of the Company,he holds office upto the date of this Annual General Meeting and is eligible for re-appointment. TheCompany has received a notice proposing the candidature of Shri P.V. Rajaraman for the office of aDirector in terms of Sections 255 & 257 of the Companies Act, 1956.

Shri P.V. Rajaraman was the former Chairman of Tamilnadu Industrial Investment Corporation. The Boardrecommends appointment of Shri P.V. Rajaraman.

None of the Directors other than Shri P.V. Rajaraman are interested in the resolution.

11. Shri V. Viziasaradhi was appointed as an Additional Director on the Board effective 03.08.2007. In termsof Section 260 of the Companies Act, 1956 and Article 112 of the Articles of Association of the Company,he holds office upto the date of next Annual General Meeting and is eligible for re-appointment. TheCompany has received a notice proposing the candidature of Shri V. Viziasaradhi for the office of aDirector in terms of Sections 255 & 257 of the Companies Act, 1956.

Shri V. Viziasaradhi was Executive Director – Industrial Relations. The Board recommends appointmentof Shri V. Viziasaradhi.

None of the Directors other than Shri V. Viziasaradhi are interested in the resolution.

BY THE ORDER OF THE BOARD

N.R. NarayananCompany Secretary

Date : August 03, 2007Regd. Office : 17, Jamshedji Tata Road

Churchgate, Mumbai - 400 020.



16


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17

Presentation of Service Awards to employees who completed more than 15 years of dedicatedservice during Independence Day 2007 celebration at Corporate & Marketing Headquarters.

Independence Day being Celebrated at Corporate Headquarters.

Independence Day CelebrationIndependence Day CelebrationIndependence Day CelebrationIndependence Day CelebrationIndependence Day Celebration


18

PPPPPerformance Prerformance Prerformance Prerformance Prerformance Profileofileofileofileofile

Turnover

Market Sales (Incl. Export)


19

2006-07 2006-07 2005-06 2004-05 2003-04 2002-03

FINANCIAL US$ Million Rs./CroresSales / Income from operations 22,143 96,918.15 76,920.26 65,218.33 57,511.13 54,259.48

Gross Profit 707 3,094.14 1,151.21 2,381.83 3,642.66 3,139.06

Depreciation 161 704.00 690.23 659.59 606.58 574.25

Interest 97 422.98 175.88 81.64 55.65 153.02

Tax (Incl. Def Tax) 88 386.15 (131.91) 363.27 1,076.49 874.43

Provision for Fringe Benefit Tax 2 9.84 11.38 - - -

Net Profit 359 1,571.17 405.63 1,277.33 1,903.94 1,537.36

Dividend 140 610.80 101.80 509.00 746.81 678.66

Tax on Distributed Profits 22 97.75 14.28 71.15 95.65 78.26

Retained Earnings 197 862.62 289.55 697.18 1,061.48 780.44

INTERNAL RESOURCES GENERATED 366 1,603.08 989.47 1,277.44 1,722.10 1,375.76

VALUE ADDED 1,419 6,209.19 4,198.13 5,208.06 6,061.19 5,115.14

WHAT CORPORATION OWNSGross Fixed Assets 3,573 15,638.48 13,479.25 12,393.17 11,387.43 10,754.32

Depreciation 1,558 6,817.64 6,141.85 5,449.53 4,809.32 4,319.12

Net Fixed Assets 2,015 8,820.84 7,337.40 6,943.64 6,578.11 6,435.20

Capital Work in Progress 970 4,243.56 2,363.88 786.84 496.14 347.68

Investments - JVCs & Subsidiary 235 1,029.73 825.76 825.76 817.34 784.14

Investments - Others 1,393 6,097.74 3,201.88 931.08 1,231.08 1,231.08

Net Current Assets 307 1,345.21 3,055.09 2,513.63 1,775.02 646.72

Deferred Tax Liability (325) (1,420.90) (1,384.44) (1,374.75) (1,454.08) (1,400.04)

Total 4,596 20,116.18 15,399.57 10,626.20 9,443.61 8,044.78

WHAT CORPORATION OWESNet Worth 2,193 9,598.65 8,735.74 8,440.85 7,742.81 6,678.85

Share Capital 77 338.95 338.94 338.93 338.90 338.83

Reserves 2,116 9,259.70 8,396.80 8,101.92 7,403.91 6,340.02

Borrowings 2,403 10,517.53 6,663.83 2,185.35 1,700.80 1,365.93

Total 4,596 20,116.18 15,399.57 10,626.20 9,443.61 8,044.78

PHYSICAL Million TonnesCRUDE THRUPUT 16.66 13.82 13.94 13.70 12.93

Investments - Mumbai Refinery 7.42 6.25 6.12 6.11 6.08

Investments - Visakh Refinery 9.24 7.57 7.82 7.59 6.85

PIPELINE THRUPUT 6.73 5.65 6.05 6.14 6.11

MARKET SALES 21.69 19.42 20.09 19.53 18.84


Notes: 1. Previous year figures have been regrouped/reclassified wherever necessary2. 1 US$ = Rs.43.77 (Exchange Rate as on 31.03.2007)


20


Distribution of Earnings 2006-2007

Contribution to Exchequer


21

2006-07 2006-07 2005-06 2004-05 2003-04 2002-03FUND FLOW STATEMENT US$ Million Rs./Crores

Sources of Funds :Profit after Tax 359 1,571.17 405.63 1,277.33 1,903.94 1,537.36Depreciation 161 704.00 690.23 659.59 606.58 574.25LPG Deposits 35 152.55 124.57 175.92 172.12 177.87Borrowings (Net) 864 3,784.38 4,322.23 307.37 382.32 -Share Capital 0 0.01 0.01 0.03 0.07 0.02Share Premium 0 0.47 0.39 0.83 2.41 0.70Redemption of Oil bonds 446 1,950.73 850.00 300.00 - 250.00Receipt of Capital Grants from OIDB 0 - 4.94 - - -Amortisation of Capital Grantreceived from OIDB 0 (0.19) - - - -Redemption/Sale of Investment 0 - - - 0.21 9.00Prov. for Deferred Tax 8 36.46 9.69 (79.33) 54.04 226.99Adj on account of sale/deletionof Assets & Prov. for diminutionin Investment 23 99.30 1.66 6.81 43.37 7.92Total 1,896 8,298.88 6,409.35 2,648.55 3,165.06 2,784.11

Utilisation of Funds :Dividend 140 610.80 101.80 509.00 746.81 678.66Tax on Distributed Profits 22 97.75 14.28 71.15 95.65 78.26Capital Expenditure 936 4,096.30 2,694.43 1,322.63 941.32 577.58Working capital : Increase/ (Decrease) (367) (1,607.02) 456.75 738.65 1,347.07 699.82Repayment of Loans (Net) 0 - - - - 640.91Investment - JVCs (Incl. Adv.towards Equity & Share app.Money pending allotment) 39 171.16 21.29 7.12 34.21 108.88Investment Oil Bonds 1,126 4,929.89 3,120.80

Total 1,896 8,298.88 6,409.35 2,648.55 3,165.06 2,784.11

CONTRIBUTION TO EXCHEQUERExcise Duty 1,679 7,349.34 5,852.34 6,189.05 6,128.99 5,661.39Customs Duty 588 2,575.38 1,423.52 1,397.73 1,139.70 872.57Sales Tax 2,152 9,416.65 8,811.86 7,977.27 6,986.11 6,168.46Service Tax 5 23.57 11.13 6.74 0.15 -Income Tax 16 72.29 (141.49) 629.82 617.70 433.91Fringe Benefit Tax 2 9.82 11.07 - - -

Total 4,442 19,447.05 15,968.43 16,200.61 14,872.65 13,136.33

RATIOSGross Profit/Sales (%) 3.19 1.50 3.65 6.33 5.79Net Profit/Sale (%) 1.62 0.53 1.96 3.31 2.83Earnings Per Share (Rs.) 46.35 11.97 37.69 56.18 45.37Cash Earnings Per Share (Rs.) 68.20 32.62 54.81 75.67 62.94Avg. Sales/Employee (Rs. Crores) 8.40 6.87 6.13 5.08 4.70Avg. Net Profit/Employee (Rs. Crores) 0.14 0.04 0.12 0.17 0.14Debt Equity Ratio (Long termdebt to equity) 0.24:1 0.13:1 0.02:1 0.05:1 0.09:1

MANPOWER (Nos.) 10,891 10,778 10,561 11,088 11,213



22

2006-07 2006-07 2005-06 2004-05 2003-04 2002-03

How Value is Added US$ Million Rs./Crores

Income:

Sales / Income from operations 22,143 96,918.15 76,920.26 65,218.33 57,511.13 54,259.48

Add: Increase/(Decrease)

in Inventory 56 243.55 1,408.96 34.87 357.50 1,187.90

22,198 97,161.70 78,329.23 65,253.20 57,868.63 55,447.38

Cost of Raw materials:

Raw Material Consumption 8,183 35,816.79 25,450.29 20,576.22 14,940.83 14,366.80

Purchase for resale 10,704 46,850.22 42,178.12 33,842.86 30,304.41 29,936.30

Packages 24 105.11 95.99 90.38 79.15 68.60

Stores & Spares 24 103.57 85.86 70.77 67.87 52.88

Utilities 37 160.58 129.60 114.34 104.10 107.40

18,971 83,036.27 67,939.86 54,694.57 45,496.36 44,531.98

Duties applicable to products 1,809 7,916.24 6,191.23 5,350.57 6,311.08 5,800.26

Total Value added 1,419 6,209.19 4,198.13 5,208.06 6,061.19 5,115.14

How Value is Distributed

Operations:

Operating & Service Costs 545 2,385.63 2,405.43 2,113.82 1,848.97 1,429.95

Employees’ Benefits 167 729.42 641.49 712.41 569.56 546.13

Providers of Capital

Interest on borrowings 97 422.98 175.88 81.64 55.65 153.02

Dividend 162 708.55 116.08 580.15 842.46 756.92

Income Tax/Fringe Benefit Tax 90 395.99 (120.53) 363.27 1,076.49 874.43

Re-deployment in Business

Retained Profit 197 862.62 289.55 697.18 1,061.48 780.44

Depreciation 161 704.00 690.23 659.59 606.58 574.25

Total Value distributed 1,419 6,209.19 4,198.13 5,208.06 6,061.19 5,115.14



23

2006-07 2005-06 2004-05 2003-04 2002-03

SALES VOLUME * 000 Tonnes

Light Distillates

Liquified Petroleum Gas 2,650.51 2,526.37 2,510.97 2,282.47 2,025.44

Naphtha 2,223.37 1,876.85 2,160.90 2,245.74 1,966.02

Motor Spirit 2,377.89 2,078.61 2,035.96 1,948.79 1,873.63

Hexane 29.40 27.40 42.64 44.50 36.28

Propylene 33.37 31.75 32.61 31.58 30.00

Sub-total 7,314.54 6,540.98 6,783.08 6,553.08 5,931.37

Middle Distillates

Mineral Turpentine Oil 50.06 41.35 56.74 47.96 47.68

Aviation Turbine Fuel 596.83 504.18 409.34 277.95 224.55

Superior Kerosene Oil 1,793.02 1,732.63 1,766.41 1,792.98 1,840.18

High Speed Diesel 7,907.08 7,353.38 7,632.80 7,453.77 7,539.97

JBO/WO 3.57 4.83 6.91 8.50 8.24

Light Diesel Oil 154.74 196.27 289.98 309.69 342.78

Sub-total 10,505.31 9,832.64 10,162.18 9,890.85 10,003.40

Lubes & Greases 320.23 287.84 254.25 334.08 329.23

Heavy Ends

Furnace Oil 2,256.13 1,685.15 1,726.04 1,429.23 1,425.61

Low Sulphur Heavy Stock 351.15 388.03 457.25 554.14 570.86

Bitumen 756.54 543.48 574.31 656.79 506.42

Others 181.62 139.60 131.53 108.00 77.07

Sub-total 3,545.44 2,756.26 2,889.13 2,748.16 2,579.96

Total 21,685.52 19,417.72 20,088.64 19,526.17 18,843.96

* Including Exports

MARKETING NETWORK Numbers

Regional Offices 86 85 85 81 76

Terminals/Installations/TOPs 37 37 36 36 35

Depots 93 92 100 89 92

LPG Bottling Plants 42 41 40 40 40

ASFs 13 13 10 10 10

Retail Outlets 7909 7313 6667 5502 4863

SKO/LDO Dealers 1648 1648 1648 1647 1644

LPG Distributors 2238 2202 2153 1993 1898

LPG Customers (in crores) 2.39 2.28 2.17 1.99 1.77



24

2006-07 2005-06 2004-05 2003-04 2002-03

PRODUCTION VOLUME - MUMBAI REFINERY 000 Tonnes

Light Distillates

Liquified Petroleum Gas 250.80 193.00 172.20 161.50 154.50

Naphtha 936.00 714.90 744.30 695.40 659.80

Motor Spirit 418.20 280.40 308.40 259.00 253.40

Hexane 27.00 35.30 38.90 42.80 36.10

Solvent 1425 7.80 6.10 8.90 11.20 11.20

Sub-total 1,639.80 1,229.70 1,272.70 1,169.90 1,115.00

Middle Distillates

Mineral Turpentine Oil 50.60 44.60 54.00 50.80 44.80


Superior Kerosene Oil 239.00 279.40 335.90 392.10 491.80


Light Diesel Oil 108.30 174.40 241.50 287.70 282.70

Sub-total 3,045.90 2,759.60 2,732.60 2,725.00 2,682.00

LOBS/TOBS 338.10 279.70 214.00 277.60 305.50

Heavy Ends

Furnace Oil 1,256.90 976.60 933.50 976.20 1,046.70


Bitumen 499.20 401.20 324.80 338.30 273.40

Others (Incl.input of BH Gas) 73.40 55.80 49.50 47.10 39.00

Sub-total 1,940.70 1,530.00 1,500.40 1,536.20 1,561.80

Total 6,964.50 5,799.00 5,719.70 5,708.70 5,664.30

Intermediate Stock Differential (16.00) 27.10 (3.90) (0.60) (3.20)

Fuel & Loss 470.30 422.50 402.20 400.20 418.20

Total 7,418.80 6,248.60 6,118.00 6,108.30 6,079.30



25

2006-07 2005-06 2004-05 2003-04 2002-03

PRODUCTION VOLUME - VISAKH REFINERY 000 Tonnes

Light Distillates

Liquified Petroleum Gas 343.60 273.76 296.81 323.55 279.40

Naphtha 1,195.20 928.74 812.59 845.98 602.70

Motor Spirit 811.20 661.81 677.37 734.83 676.30

Propylene 33.20 32.92 32.15 31.66 29.70

Sub-total 2,383.20 1,897.23 1,818.92 1,936.02 1,588.10

Middle Distillates

Mineral Turpentine Oil - - - 1.71 1.10


Superior Kerosene Oil 1,016.00 824.17 715.32 731.81 637.30


JBO/WO 3.80 3.62 5.38 7.75 7.30

CO 0.00 28.05 - - -

Light Diesel Oil 70.90 63.71 89.21 110.54 113.80

Sub-total 4,833.40 3,934.32 4,073.94 3,676.07 3,554.10

Heavy Ends

Furnace Oil 989.50 839.31 926.45 848.47 623.00


Bitumen 230.80 156.75 240.09 288.51 220.90

Others 20.90 8.78 11.68 11.32 11.10

Sub-total 1,462.20 1,295.81 1,444.72 1,532.93 1,243.40

Total 8,678.80 7,127.36 7,337.58 7,145.02 6,385.60

Intermediate Stock Differential 29.30 (6.66) 7.01 (18.86) 58.20

Fuel & Loss 536.40 453.60 477.59 465.32 407.50

Total 9,244.50 7,574.30 7,822.18 7,591.48 6,851.30



26

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ Report

TO THE MEMBERS

On behalf of the Board of Directors, I have great pleasure in presenting to you the fifty fifth Annual Report on theworking of the Company, together with the Audited Accounts for the year ended 31st March 2007. The periodwas yet another year of excellent all round performance by the company.

HIGHLIGHTS

FINANCIAL (Rs./Crores) 2006-07 2005-06

Sales/Income from Operations 96,918.15 76,920.26Profit before Depreciation, Interest and Tax 3,094.14 1,151.21Depreciation (704.00) (690.23)Interest (422.98) (175.88)Profit before Tax 1,967.16 285.10Provision for Tax

� Current Tax (652.67) (78.45)� Deferred Tax (36.46) (9.69)� Taxation of earlier years written back 302.98 220.05� Fringe Benefit Tax (9.84) (11.38)

Profit after Tax 1,571.17 405.63Balance brought forward from previous year 6,186.63 5,937.64

Appropriations

General Reserve (157.12) (40.56)Proposed Dividend : Interim (203.60) -

Final (407.20) (101.80)Tax on distributed profits (97.75) (14.28)

Balance carried forward 6,892.13 6,186.63

PHYSICAL PERFORMANCE (MMT)

Market Sales (incl. Exports) 21.69 19.42Crude Thruput:

- Mumbai Refinery 7.42 6.25- Visakh Refinery 9.24 7.57

SHAREHOLDERS’ VALUE (Rupees)

Earnings Per Share 46.35 11.97Cash Earnings Per Share 68.20 32.62Book Value Per Share 283.19 257.74

DIVIDEND

Your Directors, after taking into account the financial results of the Company during the year, have recommendeddividend of 180% (including interim dividend of 60%) for the year 2006-07 as against 30% dividend paid for theyear 2005-06. The dividend for 2006-07, including dividend tax provision will absorb Rs.708.55 crores (2005-06:Rs. 116.08 crores).


27


SALES/INCOME FROM OPERATIONS

Your Company has achieved sales/income from operations of Rs. 96,918.15 crores as compared to Rs.76,920.26crores in 2005-06.

PROFIT

Your Company has earned gross profit of Rs. 3,094.14 crores as against Rs. 1,151.21 crores in 2005-06 andprofit after tax of Rs. 1,571.17 crores as compared to Rs. 405.63 crores in 2005-06.

INTERNAL RESOURCES GENERATION

The Internal Resources generated were Rs. 1,603.08 crores as compared to Rs. 989.47 crores in 2005-06.

CONTRIBUTION TO EXCHEQUER

Your Company has contributed a sum of Rs.19,447.05 crores to the exchequer by way of duties and taxes, ascompared to Rs. 15,968.43 crores in 2005-06.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, your Directors state that:

(i) In the preparation of the Annual Accounts, all the applicable Accounting Standards have been followedalong with proper explanation relating to material departures.

(ii) The Company has selected such Accounting Policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of the State of Affairs of thecompany as on 31st March 2007 and of the Profit & Loss Account of the company for the year ended onthat date.

(iii) The Company has taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the companyand for preventing and detecting fraud and other irregularities.

(iv) These Accounts have been prepared on a going concern basis.

MEMORANDUM OF UNDERSTANDING WITH GOVERNMENT OF INDIA

The Corporation has been achievingan all round “Excellent” rating vis-à-vis MOU targets for fifteen consecutiveyears upto 2005-06 as a result of theconcerted efforts of all the employees.The performance of the Corporation ofthe year 2006-07 also qualifies for“Excellent” rating basis selfassessment. The details ofperformance vis-à-vis MOU 2006-07targets are enclosed (Annexure I).Signing of MOU with Govt. of India for the year2007-08. Seen in the photograph are Shri M. S.Srinivasan, Secretary - MOP & NG, Shri P. K. Sinha,Jt. Secy. & Financial Advisor - MOP & NG,Shri Prabh Das, Jt. Secy. (Refineries) - MOP & NGand Shri M. B. Lal, then C & MD


28


REFINERY PERFORMANCE

HPCL refineries achieved the highest ever combinedcrude thruput of 16.66 MMT as against 13.82 MMTachieved during 2005-06.

During the year, Mumbai Refinery achieved crude thruputof 7.42 MMT as against 6.25 MMT for the year 2005-06,which corresponds to capacity utilization of 134.80%.The Fuel and Loss at Mumbai Refinery was 6.34% duringthe year, an improved performance over the previousyear’s fuel and loss of 6.76%.

During the year, Visakh Refinery achieved crude thruputof 9.24 MMT as against 7.57 MMT for the year 2005-06,which corresponds to capacity utilization of 123.20%.The Fuel and Loss at Visakh Refinery was 5.80% during

the year, an improved performance over the previous year’s fuel and loss of 5.99%.

Gross refining margins of Mumbai Refinery averaged at $ 4.78 per barrel as against $ 3.22 per barrel for the year2005-06. Gross refining margins of Visakh refinery averaged at $ 3.51 per barrel as against $ 2.56 per barrel forthe year 2005-06. Both refineries are on the verge of completing new facilities to produce environment friendly fuel.

MARKETING PERFORMANCE

The market sales (including exports) registered 21.69 MMT as against 19.42 MMT recorded in 2005-06. Thecompany achieved highest ever turnover of Rs. 91,448.03 crores during the year as against Rs.74,044.11 croresduring 2005-06.

VIGILANCE

The vigilance function in HPCL is instrumental to createan environment of proactive vigilance and transparency.The stress has been on preventive vigilance rather thanbeing on fault finding mission. During the vigilanceawareness week from 6th to 10th November 2006, variousinteractive sessions were conducted across the countryin various offices of HPCL, to increase the awarenessamong the employees and other stakeholders at largeabout the specific role and functions of vigilancedepartment in the organization. To reduce the scope ofcorruption, measures such as e-procurement, e-disposal,e-payment and e-tendering are initiated by leveragingtechnology.

INDUSTRIAL RELATIONS

The Industrial Relations climate during the year 2006-07 continued to be generally harmonious in the Corporation.

OFFICIAL LANGUAGE IMPLEMENTATION

Progressive use of Hindi in the Corporation continues to receive due importance. More details are given in theManagement Discussion & Analysis Report.

Shri M.S. Srinivasan, Secretary - MOP&NG Inaugurating Mumbai RefinerySub-station

Signing of MOU with Transparency International India (TII) on IntegrityPact Programme. Seen in the photograph (L-R) are Shri B.R. Mandal, ChiefVigilance Officer, Admiral R.H. Tahiliani, Chairman - TII, Shri ArunBalakrishnan, CMD, and Shri S. Roy Choudhury, Director - Marketing


29

SC / ST LIAISON

The overall representation of SC / ST employees inthe Corporation is 27.89%. During the year, yourCorporation has carried out a number of Welfare /Development activities. Further details are given inthe Management Discussion & Analysis Report.

CORPORATE GOVERNANCE

The Corporation has complied with the variousrequirements of Corporate Governance. The detailsin this regard form part of this Annual Report (beinggiven separately).

MANAGEMENT DISCUSSION & ANALYSISREPORT

This report has been given separately.

PARTICULARS OF EMPLOYEES

A statement providing the information as required under Section 217 (2A) of the Companies Act, 1956 isannexed herewith (Annexure IV). The details regarding the number of women employees vis-à-vis the totalnumber of employees in each group is also annexed (Annexure V).

DIRECTORS

HPCL Board presently comprises of 10 Directors. The Whole-time Directors are S/Shri Arun Balakrishnan, C&MD,C. Ramulu, Director-Finance, S. Roy Choudhury, Director-Marketing and M.A. Tankiwala, Director-Refineries.

The Part-time Directors are S/Shri P.K. Sinha, Prabh Das, T.L. Sankar, Rajesh V. Shah, M.Nandagopal andI.M. Pandey.

Shri P.K. Sinha, Joint Secretary & Financial Advisor, MOP&NG and Shri Prabh Das, Joint Secretary, MOP&NGcontinue to be ex-officio Part-time Directors of the Corporation.

S/Shri T.L. Sankar, Rajesh V. Shah, M. Nandagopal and I. M. Pandey continue to be part-time non-officialDirectors of the Corporation.

Shri M.B. Lal, Chairman & Managing Director retired from the services of the Corporation on 31.03.2007 uponattainting the age of superannuation. Shri Arun Balakrishnan, Director-Human Resources who was appointedas the Chairman and Managing Director of the Corporation by the Government of India assumed charge asC&MD effective 01.04.2007. S/Shri C. Ramulu, Director-Finance, S. Roy Choudhury, Director-Marketing andM.A. Tankiwala, Director-Refineries continue as the whole time Directors of the Corporation.

As per the provisions of Section 256 of the Companies Act, 1956, S/Shri T.L. Sankar, Prabh Das, C. Ramulu,Rajesh V. Shah and M.A. Tankiwala are the Directors who will retire by rotation at the next AGM and are eligiblefor reappointment.

The Board of Directors place on record their sincere appreciation of the valuable services rendered byShri M. B. Lal during his tenure on the Board.


Smt Sheila Dixit, Hon’ble Chief Minister of Delhi presenting the GoldenPeacock Corporate Governance Award 2006 to Shri N R Narayanan, CompanySecretary


30

ACKNOWLEDGEMENTS

The Directors gratefully acknowledge the valuable guidance and support extended by the Government of India,Ministry of Petroleum and Natural Gas, other Ministries, Petroleum Planning & Analysis Cell and the StateGovernments.

The Directors also acknowledge the contribution made by the large number of dealers and distributors spreadall over the country towards improving the service to our valued customers as well as for the overall performanceof the Company.

The employees of the Company have continued to display their total commitment towards the pursuit of excellence.Your Directors take this opportunity to place on record their appreciation for the valuable contribution made bythe employees and look forward to their services with zeal and dedication in the years ahead to enable theCompany to scale even greater heights.

Your Directors are thankful to the shareholders for their faith and continued support in the endeavors of theCompany.

For and on behalf of the Board of Directors

ARUN BALAKRISHNANChairman & Managing Director

May 29, 2007


HPCL Directors at a Board Meeting held on August 22, 2007


31

Annexure to Directors’ ReportAnnexure to Directors’ ReportAnnexure to Directors’ ReportAnnexure to Directors’ ReportAnnexure to Directors’ Report

Annexure – I

MOU TARGETS VERSUS ACTUAL PERFORMANCE : 2006-07

CRITERIA UNIT Target Actual“Excellent” Achieved

Level

COMMON PARAMETERS (A)

I. STATIC FINANCIAL PARAMETERS:

a) Financial Performance Indicators:

i) Gross Margin / Gross Block % 24.14 27.15

ii) Net Profit / Net Worth % 18.28 22.74

iii) Gross Profit / Capital Employed % 27.15 33.68

b) Financial Indicators (size):

i) Gross Margin Rs. Crs. 4097 4246

ii) Gross Sales Rs. Crs. 65545 91448

c) Financial Returns:

i) PBDIT / Total Employment Rs. Lakhs 36.47 38.99

ii) Added Value / Gross Sales % 4.55 4.80

II. DYNAMIC PARAMETERS:

EMPLOYEE TRAINING & MOTIVATION

No. of Training Programmes Designed Nos. 7 10

Leadership Development No. of programs 12 18

Competency Profiling for Officers No. of officers 150 644

Six sigma Projects No. of Projects 15 30

Learning Organisation Workshops

(For Non -management Employees) No. of workshops 24 28

Development of Internal faculty – Officers Nos. 25 48

III. CUSTOMER SATISFACTION:

Retail % 98 98

LPG % 98 98

Direct Sales % 98 98

Aviation % 98 99

IV. R & D for Sustained & Continuous Innovation:

No. of Products Launched /R&D efforts Nos. 5 5

Filing of Patents Dates 31-01-2007 20-11-2006


32



Level

V. Project Implementation / Modernisation:

MR-Green Fuels & Emission Control Project

Date of Approval: 16/10/2002, Approved Cost: Rs. 1,850 Crs.

Completion of civil structure works for NHT/CCR/ISOM Dates Jun-06 Jun-06

Completion of mechanical works for SWS/ARU/Prime G Dates Oct-06 Apr-07

Erection of all columns of NHT/CCR/ISOM Dates Oct-06 Sep-06

VR-Clean fuels & Emission Control Project

Date of Approval: 30/04/2003, Approved cost : Rs. 2,147.80 Crs.

Mechanical completion of GTGs-5 alongwith HRSG Dates Dec-06 Dec-06

Mechanical completion of sea water cooling tower Dates Sep-06 Sep-06

Mechanical completion of Cryogenic Nitrogen Plant Dates Nov-06 Oct-06

Loni – Solapur Pipeline Project

Date of Approval : 30/01/2004, Approved cost: Rs. 335.17 Crs.

Despatch of Mainline and Booster pumps for Vashi and

Loni Pump stations (FOB basis) Dates Jun-06 May-06

Completion of Pipeline laying from Loni to Solapur Dates Nov-06 Sep-06

Mundra-Delhi Pipeline Project

Date of Approval: 28/07/2004, Approved cost: Rs. 1,623.84 Crs.

Completion of Plant Buildings at Mundra & Bahadurgarh Dates Sep-06 Sep-06

Completion of Line Pipe Manufacturing Dates Nov-06 Sep-06

Completion of Line Pipe Coating Works Dates Dec-06 Sep-06

SAFETY PARAMETERS:

Reportable accidents in Refineries Accident/Million 0.40 0.40

Man Hrs.

Number of surveillance Safety Audits to

be conducted by SH&E Dept. Nos. 24 27


33



Level

EVALUATED MARKS – DYNAMIC PARAMETERS

SPECIFIC PARAMETERS (B)

I. Sector Specific:

Crude Thruput:

Mumbai Refinery MMT 6.20 7.42

Visakh Refinery MMT 7.10 9.24

Distillate Yields:

Mumbai Refinery Wt% 68.00 70.87

Visakh Refinery Wt% 76.50 76.78

Specific Energy consumption:

Mumbai Refinery MBTU/NRGF 102.40 90.70

Visakh Refinery MBTU/NRGF 100.10 87.90

Market Share:

MS - Retail % 25.62 24.01

HSD - Retail % 23.69 21.54

II. Enterprise Specific & Efficiency Parameters:

Addition of Branded Fuels in Club HP outlets

POWER Nos. 2200 2402

TURBOJET Nos. 2800 3515

Addition of LPG Distributorships % 75 100

Branding of Retail Outlets (Club HP) Nos. 3500 3528

Average Refining cost (Excl. Depreciation,turnaround & one time expenses) Rs./MT 389 313

Average Marketing cost (Excluding Depreciation) Rs./MT 535 528

OVERALL RATING EXCELLENT


34


Annexure – II

Particulars with respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earning/Outgo as per Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

ENERGY CONSERVATION & TECHNOLOGY ABSORPTION

I. CONSERVATION OF ENERGY

a) Energy Conservation measures undertaken and Additional Investment / proposals forimplementation on conservation of energy

Mumbai and Visakh Refineries accorded highest priority to energy conservation and have undertakenseveral Encon measures by operational improvements and implementing of Encon projects. VariousEncon measures undertaken during 2006-07 are as follows:

Mumbai Refinery

i. Improved heaters / boilers efficiency from 86.5 % to 87.2 % by periodic surveys, cleaning & decokingof the tubes.

ii. Improved condensate recovery by 4 T/hr by replacing steam traps with efficient steam traps andcleaning of Naphtha stabilizer re-boiler.

iii. Repaired / replaced primary & secondary seals of six floating roof storage tanks to reduce emissionlosses.

iv. Improved CDU / VDU heaters efficiency around 2 - 2.8% by on-line chemical cleaning.

v. Techno economic study of GTGs is being conducted by M/s NTPC to evaluate and reduce energyconsumption and power generation cost.

vi. Carried out the study of LNG firing in heaters / boilers based upon economic consideration / environmentalnorms and proposal is being developed accordingly.

vii. Steam leak survey was carried out by CHT nominated team as a part of Oil & Gas ConservationFortnight in Jan 07 and steam leak performance was found excellent.

viii. Organised Oil Conservation Fortnight during January 15 to 31, 2007 to generate mass awareness inpublic for conservation of petroleum products. During the fortnight, several activities like free PUCcheck up for vehicles, display of oil conservation posters & slogan/quiz drawing competitions in variousschools at Chembur area were conducted.

ix. Proposal has been developed to replace FRE-CDU rotary Air Pre-heater with stationery Air Pre-heatersto improve the furnace efficiency and pre heat augmentation.

x. Schemes have been developed to convert FRE & LR–VDU natural draft furnace to energy efficientbalance draft furnace.

xi. Proposal has been developed to generate low pressure flash steam from Light Ends Unit condensate.

xii. Initiatives have been undertaken to optimize FR / FRE crude exchangers preheat to improve the crudepreheat temperature.

xiii. It has been planned to route CDU-I & II vacuum column off gas to respective CDU furnaces.


35


Visakh Refinery

i. Conducted comprehensive energy audit / Hydrogen Loss survey during the year and recommendationsare under implementation.

ii. Reduced steam leaks approx. 2.5 T/hr by installing MST 21 steam traps on Copper tracing lines.

iii. Reduced Specific fuel consumption to approx. 0.37 MT / MWH in CPP as compared to 0.391 MT/MWH during 2005-06 and achieved estimated energy saving of 3828 SRFT (Rs 8.38 crores).

iv. Conducted a training program on Energy conservation along with M/s National Productivity Council,Chennai to create the awareness.

v. Improved CDU / VDU heater efficiency by on-line furnace tubes chemical cleaning.

vi. Organised Oil Conservation Fortnight during January 15 to 31, 2007 to generate mass awareness inpublic for conservation of petroleum products. During the fortnight, several activities like display of oilconservation posters / slogans, distribution of literature on energy conservation and organising quiz /drawing competitions in the schools.

vii. Steam leak survey was carried out by CHT nominated team as a part of Oil & Gas ConservationFortnight in Jan 07 and steam leak performance was found excellent.

viii. Initiated steam purity study for improving turbine steam quality.

b) Impact of above on energy conservation measures and consequent impact on cost ofproduction of goods.

Various measures undertaken during the year 2006-07 would result in estimated energy savings ofapprox. 19451 SRFT, which is equivalent to Rs 31.14 crores.

c) Total energy consumption and energy consumption per unit of production:

Please refer Form – A of the Annexure to the Directors’ Report.

Visakh Refinery GTG Piling In Progress 2004 Visakh Refinery GTG Completed in 2006


36


II. TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION

a) Efforts made towards technology absorption, adaption & innovation information is given in Form B

b) Imported Technology (Imported during last 5 years) :

Technology Imported Year of Whether fully If not absorbed,Import absorbed or not Reasons

Mumbai Refinery:

Diesel Hydro De-sulfurisationUnit 2nd Reactor at MR 2004 Yes

Continuous Catalytic Reformer 2004 No Plant under construction

Isomerisation Unit 2004 No Plant under construction

Fluidized Catalytic Cracking Unit 2004 No Plant under construction

Flue Gas Desulphurization 2004 No Plant under construction

Visakh Refinery:

Diesel Hydro De-sulfurisationUnit 2nd Reactor 2005 Yes

Continuous Catalytic Reactor 2004 No Plant under construction

Isomerisation Unit 2004 No Plant under construction

Fluidized Catalytic Cracking Unit (Revamp) 2004 No Plant under construction

Sulfur Recovery Unit 2005 No Plant under construction

Flue Gas Desulphurization 2005 No Plant under construction

III. FOREIGN EXCHANGE EARNING AND OUTGO

a) Activities relating to exports:

Various initiatives have been taken to increase exports and for development of new export marketsfor products and services. Efforts are on to access international markets and to tap export potentialfor free trade products and lubricants.

b) Total Foreign Exchange used and earned:

Please refer Notes to Accounts – Schedule 20 B, Note 12 F,G,H, & I.


37


FORM-A

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

MUMBAI REFINERY

(A) Power and Fuel Consumption 2006-07 2005-06

1. (a) Electricity PurchasedUnits (Million KWH) 122.22 36.36Total Amount (Rs. Crores) 51.44 22.12Rate Per Unit (Excluding demand charges) (Rs./KWH) 3.32 3.61Maximum Demand Charges (Rs. Crores) 10.85 9.01

(b) Own GenerationThrough Steam Turbine / GeneratorUnits (Million KWH) 216.25 257.06Units per tonne of fuel 2405.85 2538.11Cost per unit (Rs./KWH) 9.39 7.32

2. Furnace Oil / LSHSQuantity (Thousand tonnes) 191.87 165.00Total amount (Rs. Crores) 297.76 231.50Average rate (Rs./Ton) 15519.00 14030.00

3. NaphthaQuantity (Thousand tonnes) 121.17 130.54Total amount (Rs. Crores) 312.64 280.28Average rate (Rs./Ton) 25802.00 21471.00

4. LPGQuantity (Thousand tonnes) 5.00 2.73Total amount (Rs. Crores) 12.28 6.21Average rate (Rs./ Ton) 24568.00 22743.00

5. Refinery GasQuantity (Thousand tonnes) 64.52 39.09Total amount (Rs. Crores) 100.13 54.84Average rate (Rs./ Ton) 15519.00 14030.00

6. BH GasQuantity (Thousand tonnes) 7.83 8.98Total amount (Rs. Crores) 4.39 3.65Average rate (Rs./ Ton) 5607.00 4066.00

7. CokeQuantity (Thousand tonnes) 32.41 21.96Total amount (Rs. Crores) 50.30 30.81Average rate (Rs./ Ton) 15519.00 14030.00

(B) Consumption per Unit of ProductionElectricity (KWH/Ton of crude) 45.62 46.96Fuel Oil (Tons/TMT of crude) 42.19 47.30Gas (Tons/TMT of crude) 10.43 8.13Coke (Tons/TMT of crude) 4.37 3.51


38


VISAKH REFINERY

(A) Power and Fuel Consumption 2006-07 2005-06

1. (a) Electricity purchased

Units (Million KWH) 6.57 4.57

Total amount (Rs. Crores) 5.19 4.60

Rate Per Unit(Rs./KWH- excluding demand charges) 3.18 4.75

Electricity Exported (Million KWH) 0.00 0.01

Maximum Demand charges (Rs. Crores) 3.10 2.43

(b) Own Generation (CPP)

Units (Million KWH) 301.62 248.99

Units Per Ton of Fuel 2697.67 2558.40

Cost Per Unit (Rs./KWH) 5.45 4.83

2. Furnace Oil /LSHS

Quantity (TMT) 129.88 128.38


Average Rate (Rs./Ton) 16246.54 14205.38

3. CPP Fuel

Quantity (TMT) 111.81 97.32



4. Naphtha (DHDS)




5. Refinery Gas




6. Coke




(B) Consumption per unit of production

Electricity KWH/Ton of Crude 33.34 33.90

Liquid fuel (Tons/TMT of Crude) 31.31 33.83

Gas fuel (Tons/TMT of Crude) 11.70 11.87

Coke Fuel ( Tons / TMT of Crude ) 9.18 9.45


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FORM B

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ADAPTION & INNOVATION

1. RESEARCH & DEVELOPMENT (R&D)

� COLLABORATIVE R & D PROJECTS

MOU have been finalised with Research collaborators for the following projects:

a. Energy efficient De-asphalting process using supercritical solvent recovery (With IIP, EIL & CHT)

In the energy efficient super-critical approach, solvent recovery is done under supercritical processconditions, resulting in an overall energy savings of about 20 to 40 percent (mainly in utilities) andlower solvent losses.

After incorporating the required hardware modification in the Mumbai Refinery PDA unit , test runwas successfully carried out in Sept 2006. It was observed that under supercritical conditions,separation of propane & DAO was achieved in high pressure separator by isolating re-boiler &minimising steam consumption in heater.

Test run has confirmed that steam saving of about 3.0 - 3.5 T/hr (worth Rs. 3.0 - 3.5 crores / year)can be achieved under the supercritical process conditions.

b. Optimisation studies of food grade Hexane manufacturing unit and feasibility study for producingpolymer-grade Hexane (With IIP)

Study was initiated along with IIP during 2004-05 for optimizing the existing Mumbai RefineryHexane plant operating conditions to explore the possibility to produce WHO and Polymer gradeHexane, which have more stringent quality specifications w.r.t. sulphur & benzene content.

A feasibility study and test run has been planned during 2007-08.

c. Optimisation studies of NMP Lube Extraction Unit (With IIP)

Study was initiated along with IIP during 2004-05 to optimize Mumbai Refinery NMP Lube ExtractionUnit operating parameters to obtain specific product quality & thruput maximisation. Improvementin colour, sulphur and saturates is also expected by increasing the severity of hydrofining andselection of suitable catalyst. A substantial energy saving is also expected by pinch analysis ofheat exchangers in the unit.

A controlled test run was conducted jointly by IIP-HPCL personnel. The test run samples arebeing analyzed by IIP for Physico Chemical Characterisation.

d. Improvement of Propylene Purity (With IICT Hyderabad)

Proposal has been signed with IICT Hyderabad to improve the purity of Propylene throughmembrane separation, which is economical, safe, energy efficient, environmental friendly andsimplicity in process.

Validation of Membrane and test run with pure gas was done. Test run with gas mixture is beingcarried out.

e. Implementation of Advance Process Control Technology

Visakh refinery has engaged M/s Honeywell to Implement Advance Process Control Technologyin all process units.


40

f. Collaborative Research Project with RTI, USA.

A MoU has been signed between Hindustan Petroleum Corporation Limited and Research TriangleInstitute (RTI) International based in North Carolina, USA on 16.01.2007 for collaboration in R&D,which would cover one or more of the following areas:

a. Advisory support for the establishment of a catalyst laboratory and its associated developmentfor synthesis and evaluation.

b. Diesel desulphurisation including demonstration scale-up, protocols, knowledge transfer andIP access to assist in achieving tight timelines for 2010 quality standards, and

c. Resid gasification including characterisation.

g. Collaborative Research Project with TERI, New Delhi

A MoU has been signed between Hindustan Petroleum Corporation Limited and The Energy andResources Institute (TERI), New Delhi on 18.01.2007. This agreement is for “Screening andselection of efficient microbial strains for Bio hydrogen production” project.

h. Collaborative Research Project with IIT, Kanpur

A MoU has been signed between Hindustan Petroleum Corporation Limited and Indian Institute ofTechnology (IIT), Kanpur on 21.03.2007. This agreement is for “Industrial HiGee Applications inthe Refining Sector” project.

i. Collaborative Research Project with IIT Kanpur / ART / Chevron

Earlier HPCL has entered into an agreement with IIT Kanpur/ART/Chevron for few collaborativeresearch projects undertaken at Kanpur. A proposal has been submitted for sponsorship of thefollowing two additional projects under the same collaboration:

a. Supported Ionic Liquid Catalysis and Hydrodynamics in Packed bed.

b. Modeling of mass transfer effects in resid FCC.

j. Collaborative Research Project with GITAM, Visakhapatnam

A MoU has been signed between Hindustan Petroleum Corporation Limited and Gandhi Instituteof Technology and Management (GITAM), Visakhapatnam on 06.01.2001. This agreement coversthe following areas:

a. Effect of Nano-particle inclusion in the lubricating properties of lubricants.

b. Bioremediation: Bio desulphurisation of petroleum oil by non pathogenic microorganisms.

c. Bioremediation of petroleum oil by non pathogenic microorganisms.

� EXPENDITURE ON R&D

� Capital Expenditure : NIL

� Revenue Expenditure : Rs. 46.89 Lakhs

2. UPGRADATION INITIATIVES

MUMBAI REFINERY

a) Altered CDU-II process parameters suitably to maximise ATF pool by blending MH / PG ATF. It hasimproved ATF production substantially. It resulted in highest-ever ATF production of 659.9 TMT duringthe year against previous best of 571.4 TMT during 2005-06.



41

b) Implemented online blending and blends optimisation, which enabled to maximise HSD production.

c) Initiated to produce heavy FO (bunker fuel of 380cst viscosity) for exports, which enabled to increaseHSD produce .

d) Optimised FCC operations by importing VGO feed from MRPL, which enabled to achieve highest everFCC thruput (968.1 TMT) and highest ever production of value added products like LPG & MS duringthe year.

VISAKH REFINERY

a) Optimized Gasoline Sulphur reduction additive in FCC catalyst to increase medium / high sulphurcrude processing to improve margins.

b) Used DESOx additive to increase HS crude processing by controlling SO2 emissions to improve

margins.

c) Commissioned LPG Merox caustic regeneration facility to reduce chemical consumption and to improveproduct quality.

ANNEXURE-III

Control of Pollution & other initiatives taken by Refineries are as follows:

MUMBAI REFINERY:

A. HAZARDOUS WASTE MANAGEMENT

� Crude sludge Treatment

Mumbai Refinery has started Ex-situ cleaning of crude tanks (crude sludge) by applying mechanicaloil recovery process from April 2003 onwards. About 8000M3 of crude sludge was processed in phaseI and in Phase II; about 17500M3 of crude sludge was processed. In Phase III during financial year2006 - 07, 4216 M3 sludge was processed and the cumulative amount of oil recovered was 2966 M3with a net gain of about Rs. 2.9 Crores.

� Hazardous Waste Disposal

In line with the Hazardous Waste Management rules, Mumbai Refinery has become a member ofM/s. Mumbai Waste Management Ltd., and disposed off about 561 MT of different hazardous wastessuch as spent catalysts, Oily silt and non-oily insulation to M/s. MWML,Taloja.

B. AIR EMISSION CONTROL & MONITORING

The present Ambient Air Analysers (SO2, NOx, SPM, RSPM & CO) which have become obsolete have

been replaced with latest art of technology analyzers (Manufacturers: M/s. Environment S.A., France) inall three Ambient Air Stations. All the three stations are connected to a Central PC in PS&E’s room in newAdmin. building for monitoring the analysed data online.

C. EFFLUENT WATER TREATMENT & CONTROL

� Installation of RDS: Refinery is to install two nos. of Rotary Drum Skimmers (RDS) upstream of Old &New API separators for better recovery of free oil and reduce load on API Separators. Expected to beinstalled in 2007-08.

� Integrated Effluent Treatment Project (IETP): Replacement of existing ETP-I & ETP-II with new IntegratedETP by adopting Cyclic Activated Sludge treatment followed by Membrane Bio-Reactor and TTP, hasbeen approved. Design basis and Process Package finalisation has been completed, LSTK bidsreview completed by PMC consultant M/s. EIL. Presently, PO placement is in progress.



42

� Tank farm Modification Project: Tank farm modifications in Fuels Refinery to segregate Oily water &Rain water and reduce load on New Integrated ETP / API Separators has been approved under NPCB2006-07. Presently, placement of PMC on M/s. EIL is in progress.

� Action initiated for improving the underground sewer system based on the recommendations of in-house survey for better monitoring and control/operation of ETP-II / API Separators. Various sewerstreams of under ground sewer system were flushed to facilitate free flow of oily water, routing of thesystem was checked and drawings were updated accordingly. All the jobs predominantly have beencompleted.

D. ISO 14001:2004 CERTIFICATE RENEWAL

� Mumbai Refinery has been awarded with “EMS/ ISO-14001:2004” certification for implementing andoperating the “Environmental Management System” (EMS) with revised standards, with continualimprovement, by the appointed ‘Certification Agency’ i.e. M/s. SGS India Pvt. Ltd. in June 2006.“EMS/ ISO-14001:2004” certification validity period is up to May 2009.

� The ‘Two Surveillance Verification / Certification Audit’ was successfully conducted by the appointed“Certification Agency”, M/s. SGS India Pvt. Ltd. as per the charted second tenure ISO-14001 Auditprogram. The “Certification Agency” (SGS) has recommended the continuation of the Certification ofEMS/ISO-14001:2004 Std. for HPCL-MR based on their observations during the Verification/ CertificationAudit.

� Instituted “The Best Internal Auditor Of The Year Award” (ISO-14001: 2004) in the year 2007.This award will be presented every year to the best internal Auditor.

E. PUBLIC AWARENESS ACTIVITIES

As a part of public awareness campaign, following environmental awareness activities were carried out:

� Observed ‘INTERNATIONAL EARTH DAY’ on 22 April 2006. Banners were displayed at prominentlocation in refinery premises containing environment protection messages.

� Mumbai Refinery celebrated “World Environment Day”, on 05 June 2006 by organising an informativelecture on ‘Environmental Management through Legislation’. Shri Ashok Jain, Legal Advisor ofMaharashtra Pollution Control Board delivered the lecture.

� HPCL - Mumbai Refinery being the winner of “GREENTECH ENVIRONMENT EXCELLENCE GOLDAWARD”, during the last four consecutive years in a row, presented an advertisement in the “Post-Event Souvenir - 2006”, published by “Greentech Foundation”, New Delhi. The advertisementdisplays the message on Environment Protection, to get publicity as a part of environment awarenesscampaign of Mumbai Refinery.

� HPCL has also published an advertisement in ENVIRON FRIEND INSTITUTE MAGAZINE as a part ofMR public awareness campaign on Environment Protection.



43

VISAKH REFINERY:

A. EMISSIONS MANAGEMENT

� Treated DHDS-SWSG I & II in DHDS-SRU.

� Treated VBU gas in ARI-SRUs when DHDS was not in operation.

B. LIQUID EFFLUENT MANAGEMENT

� H2O

2 dosing system was modified to reduce the consumption.

� Modification of Clarifier-II top scum collection pit to improve upon the clarifier performance.

� Aeration facility in ETP-II equalisation east tank.

C. HAZARDOUS WASTE MANAGEMENT

� Washed all the empty chemical drums internally using in-house developed facility and sold about 800washed empty drums to registered recycler.

D. OTHER ACTIVITIES UNDERTAKEN

� ISO 14001: 2004 recertified in May 2006 which is valid till May 2009.

� Service Factors of SRUs has been maintained at 100% matching with gas generation.

� Service Factors of all analysers in the three Continuous Ambient Air Monitoring Stations (CAAMS) andone Weather Monitoring Station (WMS) are maintained at 100%.

� Service Factors of online stack analysers has improved to 95%.

� Excess Oil Ingress prevention project is in progress.

� Zero Effluent Discharge study by EIL was completed.

� Sour Water Segregation study by EIL was completed.

� ETP-II Bioreactor Performance Improvement study by NEERI was completed.

� Processed about 4,000 m3 of oily sludge (cumulative 38,000 m3 of sludge).

� Process Safety Risk Management programme is under implementation as per OSHA-PSM and EPARMP.

� Initiated action for entering into an agreement with Visakh Port Trust for Offsite Oil SpillResponse Plan.



44

1 2 3 4 5 6 7 8 9

Sr. Name Designation / Remuneration Qualifications Exper- Date of Age Last EmploymentNo Nature of Duties ience Joining

(Years)

1 PATIL S N LPG OPERATOR(SG) 806,790 DME 37 10 August 1969 60 KOSAN GAS COMPANY PVT LTD2 TRIVEDI N C CHIEF ADMIN. ASST. 640,351 HSC/INTER/PUC 39 13 March 1968 60 KOSAN GAS COMPANY PVT LTD3 GULRAJANI VEENA HASHMATRAI DEPOT MANAGER 1,794,625 SSC/SSLC 40 17 May 1967 60 M/S. ARCHITECTS PARTNERSHIPS4 DIXIT ANAND NARAYAN CH MANAGER - OPERATIONS 1,509,697 B.COM 34 7 January 1973 58 KHOSLA PLASTICS PVT LTD5 SARODE D K CH REGIONAL MANAGER 2,003,038 BE (MEHANICAL) 32 2 January 1975 60 MILITARY ENGG SERVICES6 SAVLA S K GEN MANAGER-ENGG & PROJ 2,598,922 BE (ELECTRICAL) 32 14 April 1975 60 REMI UDYOG, MUMBAI7 TURE JAGANNATH KASHIRAM SR MANAGER - OPERATIONS 1,687,171 BSC 30 7 January 1977 60 MAHARASHTRA LEGISLATURE

ASSEMBLY OFFICE8 PAL SUDIP KUMAR DGM-CRUDE 975,689 B TECH (CHEMICAL) 24 22 September 1983 48 NIL9 ARTE VANITA SANJAY DY GEN MGR - PERFORMANCE MGT 1,243,709 B.COM, MMS 23 5 February 1984 46 NIL10 DE SOURAV EXECUTIVE SALES OFFICER - LPG 665,256 B TECH (CIVIL), DMM 13 27 December 1993 37 D R SARKAR R K & ASSOCIATES,

CALCUTTA11 AGRAWAL SAMEER MANAGER - FINANCE 1,025,258 B.COM,FCA/ACA 12 16 August 1995 38 M/S. JINDAL & ASSOCIATES12 NAIR ANUJ KUMAR NARAYANAN SR CONST. ENGR. (VISAKH TML) 403,813 B TECH (MECHANICAL) 10 30 May 1997 33 TELESYSTEM (INDIA) PVT LTD13 GANGINENI MOHANA VAMSI DEPUTY MANAGER - FINANCE 440,435 CISA, DSM, FCA/ACA 8 5 July 1999 31 M/S. BRAHMAYYA & CO.14 ROY KALYAN K MANAGER - INSTALLATION 1,046,762 BA 27 8 April 1980 52 M/S. WISS - CHAS15 MATHUR BHAVNA EXECUTIVE SALES OFFICER 825,699 MA 31 7 December 1976 55 RAMA INDUSTRIES16 KUMAR SUNIL MANAGER - PROCESS 643,977 BE (CHEMICAL) 18 1 September 1989 43 NIL17 FRANCIS ANDREWS CHIEF ADMN. ASST 637,667 BA 24 27 July 1983 60 RADIO AND LINE CORPS OF SIGNALS

INDIAN ARMY18 JOSEPH C V SR. MAINT. TECH/OPT 672,409 NON SSC 28 1 October 1979 60 NIL19 PATIL K N DY MGR-MNTC 1,173,197 SSC/SSLC 32 2 March 1975 60 M/S. KUMUD CONSTRUCTIONS20 SANYAL PINAKI RANJAN ROTATING EQUIPMENT ENGINEER 783,723 BE(MEHANICAL) 18 1 February 1989 44 NIL21 J S C B KUMAR MANAGER - ECONOMICS 1,043,787 B TECH (CHEMICAL) 16 29 October 1990 39 NIL22 RAJU S S DY MGR-QC 1,140,792 MSC 31 6 January 1976 60 NIL23 MURTHY K V S N SUPDT - P&U 955,137 LICENSIATE IN 24 9 September 1983 60 INDIAN AIR FORCE

MECHANICAL ENGG24 RAHIM NAJI K MANAGER - ROTARY 1,080,923 B TECH (MECHANICAL) 16 29 October 1990 42 NIL25 RAMANATHAN RAMKUMAR DY MGR - TECH. 755,295 B TECH (CHEMICAL) 15 28 October 1991 38 NIL26 DINESH MAHANTY MANAGER - MINOR PROJECTS 1,068,383 BSC ENGG (CIVIL) 15 6 August 1992 40 NIL

Information as per Section 217(2A), read with Companies (Particulars of Employment) Rules, 1975 andforming part of the Directors’ Report for the period 1st April 2006 to 31st March 2007.

Annexure - IV

1 Employees listed in the statement were employed for part of the year and were in receipt of remuneration at the rate of not less thanRs. 200,000/- per month.

2 Employment in the corporation is non-contractual

3 Employment provides for termination of services by either party giving one month’s notice

4 None of the Employees are related to any of the Directors.

Annexure - V

STATEMENT SHOWING WOMEN EMPLOYEES AS ON MARCH 31, 2007

Group Total No. of No. of Women % of WomenEmployees Employees Employees

A 4074 277 6.80

B* — — —

C 6619 422 6.38

D 198 9 4.55

TOTAL 10891 708 6.50

*HPCL has no posts classified under group ‘B’ as the entry in non-management grades has been re-classifiedin group ‘C’ effective 01.01.1994.



45

Management Discussion & Analysis ReportManagement Discussion & Analysis ReportManagement Discussion & Analysis ReportManagement Discussion & Analysis ReportManagement Discussion & Analysis Report

OverviewThe Indian economy continued to be one of the most dynamic economies in the world in 2006-07, recording agrowth of 9.4%. The growth has been supported by a sustained increase in savings and capital formation overlast few years. Capital inflows have supplemented domestic savings, boosting capital formation in the country.On sectoral basis, growth in 2006-07 was underpinned by double-digit growth in the Industry and Servicessector. The Agriculture sector posted a modest growth of about 3%.

Crude oil prices generally remained above $55 per barrel throughout 2006-07 due to geopolitical tensions,outages in oil producing regions such as Nigeria, Alaska and tight capacity along the entire oil supply chain, beit production, refining or pipeline. The problem has been exacerbated by mismatch between installed refinerycapacity and crude type. Indian crude basket price averaged around $62 per barrel during 2006-07. High priceshave also caused a fundamental power shift in the oil industry. Resource nationalism has resurfaced with anumber of oil producing states consolidating their hold on oil resources. Increasingly, state-owned enterprisesof oil consuming nations are aggressively seeking access to resources competing and co-opting with otherstate-owned companies. Current conditions portend high prices in near-term future also.

The robust growth in the Indian economy is reflected in petroleum product consumption. Consumption rose byabout 6% during 2006-07, the highest growth recorded since 1999-00. However, oil production in the countrycontinues to be stagnant around 33 MMT. A number of basins owned by ONGC/OIL have matured. Resultantdecline in production has been made up by private and joint venture fields. The country is dependent on oilimports for more than 75% of its crude requirements. In 2006-07, about 111 MMT of crude oil valued at $48billion was imported while about 32 MMT of petroleum products were exported. In value terms, petroleumproduct exports were around $18 billion during 2006-07. Private sector refineries are the major source of exports.Most of the private players have virtually exited the indigenous market.

Company OverviewHindustan Petroleum, with about 16% market share, is one of the major players in Indian downstream oilsector. The Company is ranked 336 in the Fortune 500 of 2007. Total turnover of the Company in 2006-07 wasRs. 91,448.03 crores. Profit after tax was Rs.1,571.17 crores as against Rs.405.63 crores in 2005-06. TheGovernment continued to shield the consumer from high oil prices through subsidy sharing mechanism involvingdownstream oil companies, the Government and upstream oil companies. Refineries also shared the burdenthrough Trade parity pricing mechanism comprising of 80% import parity prices (IPP) & 20% export parityprices as against full IPP paid to refineries earlier. Further, Stand alone refineries did not offer any discounts onPDS Kerosene & Domestic LPG during the year. The net under recovery absorbed by HPCL on marketing ofsensitive products during 2006-07 was about Rs.772 crores. Refining and marketing is the core area for theCompany and its efforts are directed at ensuring smooth flow of petroleum products throughout the length andbreadth of the country at the least possible cost.

With the spiraling crude prices, price inflexibility and squeeze on margins, the treasury management has beenunder severe pressure throughout the year. The average borrowings have gone up to Rs. 6,147 crores as of 31st

March 2007 in relation to the figure of Rs. 2,991 crores the previous year. The Corporation resorted to manyinnovative solutions such as proper mixture of long term and short term borrowings, funds through ECB route,very close monitoring of collections and fund flow. Further the year 2006-07 saw a very volatile foreign exchangemarket. Suitable steps to minimize the adverse impacts have been taken by timely hedging of foreign exchangeexposures and proper mix of hedging instruments.


46

RefiningRefineries at Mumbai and Visakh processed 16.66 MMT of crudein 2006-07 as against 13.82 in 2005-06. Capacity utilization byrefineries amounted to 128%. Gross refining margins (GRM) of theMumbai Refinery averaged $4.78 per barrel as against $3.22 perbarrel for the year 2005-06 while the Visakh Refinery posted a GRMof $3.51 per barrel versus $2.56 per barrel for the year 2005-06. Therefineries are in the process of upgrading their facilities to produceEuro-III equivalent grade of gasoline and diesel. The projects envisagea cost of around Rs. 4000 crores. Once completed, projects willalso increase refining capacity. The Mumbai refinery envisagesincrease in refining capacity from the current 5.5 MMTPA to 7.9

MMPTA while the Visakh refinery capacity would increase to 8.33 MMTPA from the current level of 7.5 MMTPA.Both the refineries have brought down the fuel and loss levels to improve the profitability of the operations.

A risk management policy has been developed and approved to manage exposure to fluctuations in crude oiland product prices. Accordingly, after due training, a trading desk has been established and derivative tradingactivity commenced in February 2007. The establishment of an integrated software solution for the trading teamis in progress.

RetailThe business environment in the petro-retailing in India has changed significantly. Oil Companies are transitioningfrom providing random experience to providing differentiated experience in customized formats at the retail outlets.Sales of auto-fuels and SKO/LDO through Retail SBU contribute about 57% of the Company sales. In 2006-07,673 new retail outlets were commissioned to expand the reach of the Company taking the total to 7986 as onMarch 2007. To achieve its Retail Vision, the Company has developed a Retail Value Proposition, keeping the“Customer experience” as the core of strategy. Brand strategy has been aligned to customer needs by focusingon Driver brands – Power, Turbojet, Loyalty Cards, HP Junction, Club HP, Hamara Pump, “Fleurs” Clean toilets.Through these initiatives, aim is to deliver compelling, differentiated and consistent experience to the customers.


Shri M.S. Srinivasan, Secretary - MOP&NG at SynergyMeet, Mumbai Refinery

HP Junction Outlet at Pattarsi, Chandigarh


47

HPCL has positioned a number of retail outlets on the platform of “Outstanding Customer & Vehicle Care” andbranded these as “Club HP” outlets. During 2006-07, 662 outlets were branded as “Club HP” taking the totalnumber to 3515. Club HP outlets now constitute 44% of total Retail network. To ensure consistency in thedelivery of superior customer services, all the Club HP Outlets are certified by M/s Bureau Veritas, a reputedthird party agency. Market research shows that customers demand several non-fuel offerings at fuel outlets. Itprovides a great opportunity for the Company to sweat the retail outlet real estate. The focus now is to partnerwith the best in class brands in the relevant categories.

As incomes rise, rural markets present an attractive opportunity to expand market share. ‘Hamara Pump’format is targeted specifically at rural market. In 2006-07, 318 “Hamara Pumps” were commissioned taking thetotal number to 925 as on March end 2007. Seeds, pesticides and fertilizers are also being sold to the farmersthrough 60 “Kisan Vikas Kendras” set up at select “Hamara Pump” outlets.

Fuel adulteration remains a major area of concern for consumers. The Company has undertaken a number ofinitiatives to address these concerns by leveraging technology. These include inter-alia retail automation, vehiclemanagement system and electronic sealed parcel delivery system. Retail Automation provides end to endsolution in monitoring the sales and stocks online and eliminates manual intervention. The features include realtime density display at the point of sale to enhance customer confidence; plugging loop holes across thesupply chain through GPS/GSM technology based Vehicle Management System. As an added check, Markerdoping in SKO was also commenced by the Company with effect from 01/10/2006 to curb kerosene adulterationin auto- fuels.

The Company aims to increase its market share in petrol/diesel retail segment from current 22% through theseinitiatives.

PipelinesIn an endeavor to enhance product availability andminimize transportation cost two major pipeline projectsviz. Mundra-Delhi pipeline and Pune-Solapur were plannedby the Company. Pune Solapur Pipeline wascommissioned in November 2006 while mechanicalcompletion of the Mundra Delhi Pipeline has been achievedin April 2007.

LPGThe LPG Business line accounts for approximately 13% of the total volume base of HPCL. HPCL was the firstCompany to brand LPG Marketing under the platform of “Ji Haan” with focus on instant service to LPG customers.The Company launched a web-based registration system for new and double bottling connections. Also, aComplaint Management System, a portal for integrating customer complaints, was launched to provide anefficient, effective and user-friendly system for handling of customer complaints so as to reduce the lead-time inreaching and resolving complaints.

Suraksha rubber hoses were promoted through various means like street plays, banners, posters, leaflets etc.,to ensure safety of the user. Campaigns involved NGOs, Self Help Groups & Tribal Groups also to improveeffectiveness. The Company introduced a co-branded “Green Label” series of higher thermal efficiency stoves in


Mundra Delhi Pipeline


48

all markets across India. These stoves have thermalefficiency of minimum 68% and provide 10% savings in fuelexpenses for customers.

The unique ‘HP Gas Rasoi Ghar’ concept was furtherextended at hospitals and forest areas. Today, there areover 1740 ‘Rasoi Ghars’ operating across the countrybenefiting over 25,000 families.

All the bottling plants have been upgraded with the ‘state-of-art’ world class bottling and quality assurance facilitiesto ensure the weight and safety of cylinders.

In order to curb the misuse of subsidized fuel for non-domestic purposes, the Company has intensified controls and surveillance to ensure refill supplies to genuinecustomers including colour coding of domestic/non-domestic cylinders. Intensive efforts have been initiated innon-domestic segment. As a result, the non-domestic sector posted a growth of 62% in 2006-07.

Industrial & Aviation Fuels

In the last few years, demand for industrial fuels especially FO/LSHS and Naphtha has been affected bygreater availability of gas and trend is expected to continue in future. However, despite decline in sales at theaggregate industry level, HPCL posted a growth of 2.2% in FO/LSHS sales in 2006-07. Massive road constructionprojects have created a huge demand for Bitumen and the Company has seized this opportunity by posting agrowth of 33% in Bitumen sales. Scorching growth in the Aviation sector is another growth area for the Companyand the same is reflected in 18% growth in ATF sales.

LubricantsHPCL has a strong legacy in the lubricants sector and it is being

strengthened continuously through introduction of new products.The Company continues to promote major brands through innovative

promotional activities. A new brand of Diesel Engine Oil “HP Milcy

Turbo 15W40” was launched last year. Upgraded version of “HP

Racer 4 Excel”, which is an API SL level product, was also

introduced. In the industrial /direct segment, the Company continued

to focus on core sectors such as Railways, Coal, and Steel etc.and on corporate/genuine oil tie-ups. Strong R&D focus enables

the Company to continuously upgrade its product offerings in line with evolving customer needs.


Madurai LPG Bottling Plant

HPCL Refuelling US Air Force One and A380

Launch of HP ACE, genuine oil for Tata petrol cars


49

Alternate Energy sourcesThe current market imperatives are motivating the oil companies look at alternate energy sources like bio

diesel, ethanol etc. HPCL has also developed its plans and is implementing projects in the field of alternate

energy. HPCL has signed an agreement with G.B.Pant University for tissue culture research to improve theyield from Jatropha seeds. The Company is in the process of finalizing contract farming for cultivation of

Jatropha in an area of about 5000 acres in collaboration with the Govt of Chattisgarh and TERI. Ethanol

extracted from Molasses is blended 5% with petrol as an alternate option. Projects are under implementation

for setting up of 100MW electricity generation capacity through wind mill turbines and initial commissioning

of 2 turbines of 5 MW capacity has been completed.

Information TechnologyInformation technology is being harnessed by the Company to improve productivity across the functions. The

Enterprise Resource Planning (ERP) system is now operational on Oracle Software across the Company. The

migration of all balances from the legacy systems has been completed. The functionality of the ERP system is

being further enhanced by development of various add-on functionalities using work flow applications. The

system has substantially reduced the time taken for closing of accounts. Tracking of cost of operations hasbecome easy and there is an improvement in management control due to standardization of various business

processes. A Data Centre is being set up in Hyderabad to provide complete backup and mirror image for the

main IT base in Mumbai, thereby, ensuring uninterrupted operations in case of an emergency.

Human ResourcesBustling economy has created huge

demand for trained manpower across

industries. As a result, contrary to earlier

trend of attrition at junior levels, the

Company is facing increasing attrition at

the middle-management level. This is one

of the major challenges facing the

Company today. Replacing this level of

experience requires at least 2 to 3 years of

training to existing employees. Specific

processes have been put in place to continually

upgrade skills of the employees through training

and rotational assignments. On an average 300

new officers have been recruited in last two years

to mitigate manpower crunch in future.


Outstanding Achievers 2006 with C&MD and Directors

All India Employees Annual Sports Meet 2007


50


Official Language ImplementationProgressive use of Hindi in the Corporation continues to receive due importance. Details are given under the

segment Special Focus Areas.

Corporate GovernanceThe Corporation has completed the steps required to comply with the various Corporate Governance regulationsincluding those relating to Compliance of Clause 49 of the Listing Guidelines, as notified by SEBI A separatesegment on Corporate Governance has been included in the Annual Report.

Corporate Social Responsibility

HPCL is a conscious Corporate Citizen and Corporate social responsibility is an integral part of HPCL’s outlook.The Company takes conscious steps to nurture and protect the environment and provide valuable support tovarious social causes. During 2006-07, the Company spent Rs. 7.61 crores as part of component plan spanningareas like education, health care, vocational training etc. As an unique initiative, the Company focused onspecific causes like girl child education, AIDS prevention campaigns, computer education to children, supportand development of street children etc., through distinctly rolled out nine different projects. These were monitoredby the Company in association with NGOs and other welfare organizations. HPCL remains committed tosupport such noble causes.

Diversification & Joint VenturesAlthough, refining and marketing is the core area for the Company, new opportunities are being explored toaccess new revenue streams and even out variations in cash flows from downstream business. Accordingly, theCompany has ventured in upstream and city gas distribution. The Company has shares of about 10- 20 %share in the 15 blocks awarded to various consortia under NELP-VI, taking the total blocks to 22 numbersincluding blocks in Oman and Australia. For distribution of CNG and City gas distribution in the States of AndhraPradesh, Madhya Pradesh and Rajasthan the Company has entered into Joint venture with GAIL.

The Government of Andhra Pradesh has nominated HPCL as an anchor Company for development of Petroleum,Chemicals and Petrochemicals Investment Region (PCPIR) in Visakh. The Company is in talks with nationaland international companies for development of the PCPIR.

Glimpses of CSR activities


51

LPG cavern storage facility being set up inVisakhapatnam, in joint venture with TOTAL,is nearing completion. The project is the firstof its kind in south and south-east Asia.

A joint venture has been established with MittalEnergy Investments Pte. Ltd. for setting up ofa green field refinery at Bhatinda, Punjab. Thiswill be a state-of-art refinery with an initialcapacity of 9 MMTPA. The Project is expectedto cost around Rs. 18000 crores and thefacilities include refinery units, pipeline from

Mundra to Bhatinda, crude oil receiving terminal, SPM and jetty at Mundra port. The Project has achieved thefinancial closure and is expected to be completed by the year 2011.

Indian economy is expected to grow at around 8% in near future. As income levels rise, demand for petroleumproducts will also increase, thereby providing great opportunity for oil companies. The Company will continue toconsolidate its core business while making judicious investments in related business fields. The Company hasfinalized an investment outlay of over Rs 11000 cores in XI Plan. Some of the major projects under XI planinclude Lube Oil Base Stock Upgradation at Mumbai Refinery, upgradation and retrofitting for production ofEuro IV Compliant fuels, facilities for Mixed Xylene and Propylene production at Mumbai and Visakh Refineries,and Delayed Coker unit for bottoms upgradation at Visakh.

The Company remains firmly committed to meeting the fuel requirements without compromising on Quality andQuantity, extending the refining capacity through brown field and green-field additions, maintaining and improvingits market share across segments and grow in the organic and inorganic growth areas of the value chain. TheCompany also maintains very good relations with major international oil companies and is planning to leverageon their financial strengths and best practices on mutually reciprocate areas for a win win combination.

The continued support of the government has always been critical for our success and enables effectiveimplementation of various government policies and initiatives.

Cautionary StatementMatters covered in the Management Discussion and Analysis describing the Company’s objectives, projections,estimates, expectations may be “forward looking statements” within the meaning of applicable securities, lawsand regulations. The actual performance could vary from those projected or implied. Important or unforeseenfactors that could make a difference to the Company’s operations include economic conditions affecting demand/supply and price conditions in the domestic market in which the Company predominantly operates, changes inregulations, and other incidental factors.

The road ahead is challenging. The Corporation could continue to face pressures on margins. The scenario callsfor action plans not only to sustain in current position but also to look for avenues to sustain the growth anddevelopment. The various initiatives that have been highlighted would provide the platform to the Corporation tochart its activities aligned to its Corporation Vision. The Corporation with its strong fundamentals and growth plansis confident of meeting the challenges ahead and live up to the expectations of all segments of its Stakeholders.


Shri Arun Balakrishnan, C&MD handing over GGSRL Share Certificate to Shri L N Mittal,Founder Promoter of Mittal Investments s.a.r.l (MI)


52

SAFETY, HEALTH & ENVIRONMENT CAREHPCL maintains high standards ofsafety, health and environmental care atall its operating locations, alwaysensuring that increasing scale ofoperations have no negative impact onthe standards of safety, health andenvironment and without losing sight ofits long term goal of zero injuries,incidents / accidents and environmentalviolations. HPCL has made significantimprovements in its safety performanceover the years.

HPCL is committed to conductingbusiness with a strong focus onpreserving the environment, sustainabledevelopment, safe work place and

enrichment of the quality of life of employees, customers and the community. Established systems and proceduresare constantly revised for continual improvement to achieve the higher standards of safety, occupational healthand environment protection.

HPCL has well equipped health care facilities / arrangements at all major locations. Occupational Health isfocus area for HPCL and all issues pertaining to occupational health are addressed comprehensively.

Our Refineries and major Marketing locations have been awarded ISO 14001 & OHSAS 18001 certifications.

The Corporation’s major Safety, Health & Environment achievements include:

Safety

� Visakha Refinery completed 4.72 Million Man Hours without any Lost Time Accident.

� Mumbai Refinery completed 0.63 Million Man Hours without any Lost Time Accident.

� Ajmer LPG Plant have been awarded ISRS level 7.

� Kondapalli, Visakha & khapri LPG plants have been awarded ISRS level 6.

� MLIF, Kondapalli, Pampore, Jind, Jammu, Ajmer , Raipur , Patna LPG Plants have been awarded OHSAS18001-1999 certificate.

Environment

� Adopting ECO – friendly technologies such as changeover from phenol to NMP solvent and changeoverfrom Oleum to NMP. These initiatives have been widely appreciated and have won for HPCL various national& international awards / citations. Diesel Desulphurisation facilities are fully operational in both the Refineries.

� Significant reduction in SO2 emission has been brought about in both the Refineries through design and

operating strategies.

� Both the Refineries have commenced supply of BIS – II MS / HSD and EURO – III HSD. Project for Euro –III MS is under implementation.

Special FSpecial FSpecial FSpecial FSpecial Focus Areasocus Areasocus Areasocus Areasocus Areas

Shri Sunil Porwal, Secretary (Labour), Government of Maharashtra lighting the lamp during theSeminar on Disaster Management & Safety Preparedness. Also seen in the photgragph are ShriArun Balakrishnan, C&MD, Shri U S Jha, Chairman (RCF), Shri Kiran Kadam, Chief Fire Officer,Mumbai Fire Service and Shri S K Mukherjee, Executive Director (SH&E)


53

� Both the Refineries have taken initiative for treating the crude tank sludge in an environmental friendlymanner using in-situ BLABO technology of M/s Balmer Lawrie & Co Ltd.

� Over 75% of the petroleum products from the refineries are being evacuated through pipelines. Dependenceon road transport for evacuation of products has been reduced significantly, resulting in considerablereduction in auto emissions into atmosphere.

� In line with the Hazardous Waste Management rules, different hazardous wastes like spent catalyst, oilysilt, non-oily insulation etc are being disposed off to ‘Treatment, Storage & Disposal Facility’, a PollutionBoard approved hazardous waste disposal facility.

� In order to comply the future proposed liquid effluent norms, replacement of existing ETP-I & ETP-II withnew Integrated ETP by adopting Cyclic Activated Sludge treatment followed by Membrane Bio-Reactor andTTP, has been approved and work placement is in progress.

� Ambient Air Quality is being monitored and maintained as per National Ambient Air Quality Standard.

� On-line monitoring of pollutants like CO, NOx, HC, SO2, SPM from all the stacks are being carried out.

� Extensive green coverage has been provided in and around the refineries and housing colonies.

Health

� No cases of occupational illness diagnosed and reported.

� Periodical medical examination for employees completed as per schedule.

� Special medical examination for canteen workers, welders and fire & safety personnel.

� Health awareness programs on topics like heart disease, HIV, AIDS, Yoga, meditation etc. organized foremployees, family members & community.

� Vaccinations for various diseases.

� Training programmes on cardio-pulmonary resuscitation (CPR), First Aid, lifestyle management andoccupational health conducted at various locations.

� Specialized training for medical personnel to handle cardiac emergencies conducted.

� Study on hygiene practices covering canteens and guest houses.

Awards

The Corporation’s commitment to excellence won several national awards and accolades for outstandingperformance in the field of Safety & Environment.

Mumbai Refinery

� conferred with “GREENTECH AWARD” for theyear 2006 under the ‘Environmental Excellence’category by Greentech Foundation, New Delhi.

� conferred with “GOLDEN PEACOCK AWARD”for the year 2006 for excellence in EnvironmentalManagement Systems.


His Excellency - Governor of Himachal Pradesh, Shri V SKokje handing over the Golden Peacock Environment

Management Award to Shri K. Srinivasan, GM (Projects), MR


54

� won the ‘SURAKSHA PURASKAR’ from National Safety Council in 2006 for developing andimplementing

� won “GREENTECH SAFETY GOLD AWARD 2006” for excellent safety record in Refinerysector.

Lube Blending

� “OISD SAFETY AWARD 2005-06” has been conferred for best performance category.

� “Greentech Environment Excellence Award 2006” was conferred on Silvassa Lube plant.

Aviation

� Santacruz ASF has been conferred with “Safety Innovation Award 2006” by The Institute Of Engineers,Safety & Quality Forum.

� Aviation SBU bagged “ Greentech Environment Excellence Award 2006” for Santacruz ( Gold), Palam( Silver) & Cochin ( Bronze) ASF Stations.

LPG

� Jammu LPG Plant has been conferred with “Safe Industry Award 2006” & “Green Industry Award”from Govt. of Jammu & Kashmir.

OFFICIAL LANGUAGE IMPLEMENTATION

Official Language Implementation has been

given utmost importance in the Corporation.

Efforts taken in the direction of associating

Official Language with productivity of various

Strategic Business Units of the Organisation

further gained momentum. A social, Literary

and Cultural Institution “Ashirwad” awarded

HPCL first prize for Official Language

Implementation for the year 2005-2006.

“Hindi Pakhwada” was celebrated from 11-25

September, 2006 to create an awareness about

Official Language Implementation and to

motivate employees. To further enhance the

vocabulary and knowledge of Official Language

among the employees and to encourage the hidden talents of our employees, various competitions such as group

discussions, news reading, elocution, letter and essay writing and poetry writing etc., were organised. Eminent

personalities dedicated towards propagation of Hindi were invited as Judges. Various activities were carried out

during the year. A compilation of poems “Kavita Ke Rang Tasveeron Ke Sang” written by the employees was

published. Some of the important activities are :-

� MS Office 2003 Hindi Computer training programmes were organised at Head Quarters Office, Zonal level

and both the Refineries.


Shri B Mukherjee, then Executive Director (HRD) receiving the Ashirwaad Award forBest Implementation of Official Language.


55


� Workshops for senior managers and above were organised. Also Workshops and Conferences for the

Officers/Clerical Staff to encourage employees for implementation of Official Language as also to rejuvenate

their capabilities in Official Language were organised at HQO, all Zonal offices and both the Refineries.

� All India Hindi Mahotsav 2007 was organised by HQO wherein employees of four Zones and both the

Refineries participated along with their family members. Similarly, Hindi Utsav was organised by all Zonal

offices and both the Refineries.

� Inspections were carried out by the Sub-Committee of the Parliament Committee on Official Language at

Bhubaneshwar, Bangalore and Udaipur Regional Offices and the efforts of our Corporation in this regard

were appreciated.

The Corporation continues to head the Town

Official Language Implementation Committee in

Mumbai for Government Undertakings/

Corporations since its formation. Half yearly

meetings were held. During TOLIC Meetings, the

progress of implementation of TOLIC members

is reviewed and discussed on effective

implementation of Official Language and

experiences are shared so that others can benefit

from it. Besides, Symposium / programmes -

Behavioural and Functional were conducted by

various member Organisations under the aegis

of TOLIC. HPCL also organised a training program on Positive Health and Energizing life for TOLIC members.

Activities about Hindi Pakhwada and Hindi Utsav were published in In-House magazine ‘HP News’ and other

activities performed by TOLIC members were also published in “TOLIC” News.

Other activities specified in the Annual Program 2006-2007 issued by the Official Language Department were

also carried out.

GLOBAL COMPACT PROGRAMME

HPCL has been participating in the UN Global Compact Programme which is aimed at promoting Global

Compact principles. It also lays emphasis on Responsible Corporate Citizenship. As a part of this programme,

HPCL undertakes several Corporate Social Responsible programme which are highlighted in the MDA Report.

Launch of TOLIC Magazine by Shri Arun Balakrishnan, C&MD


56


JOINT VENTURES

Manglore Refinery and Petrochemicals Ltd. (MRPL)

MRPL with a capacity of 3 MMTPA was commissioned in March 1996. The capacity of the refinery was enhanced

to 9 MMTPA during 1999-2000 . ONGC acquired the entire equity stake of IRIL in MRPL on 03.03.2003 and also

infused Rs 600 crores into MRPL as additional equity on 30.03.2003. The FIs/Lenders of MRPL converted Rs

365 crores of debt into equity and Rs 160 crores debt into ZCBs. Consequent to the above, HPCL’s equity

stands at 16.95% after which a fresh Shareholder Agreement dated 03.03.2003 has been signed by HPCL with

ONGC to take care of the intersts of HPCL. MRPL has declared a dividend of 8% for the financial year 2006-07.HPCL and MRPL have been exchanging intermediate process streams between their refineries to supplement

efforts to meet new environmental norms in respect of products like MS and HSD on mutually agreed terms

Hindustan Colas Ltd. (HINCOL)

The performance of HINCOL, a Joint Venture Company jointly promoted with M/s COLAS SA, France continuesto be encouraging. HINCOL currently operates six manufacturing plants across India, manufacturing international

quality value-added bituminous products such as bitumen emulsions & cutbacks and modified bitumen.

During the year, HINCOL consolidated its growth further by achieving a 42% growth in volumes and an all

impressive 118% growth in profitability. The products of HINCOL are widely used by agencies associated with

road construction.

The introduction of cost effective emulsifiers for emulsion and cost effective modifiers for Modified Bitumen has

helped HINCOL to be competitive in the market. The market is widely receptive of the concept of Emulsions inHDPE drums which has enhanced the brand perception of HINCOL. The focus on Invert Emulsions (SS1)

enabled HINCOL to realise better margins on its products.

The Joint Venture Company maintained the dividend of 15% during the year 2006-07

South Asia LPG Co. Pvt. Ltd. (SALPG)

This Joint Venture Company with Total Gas and

Power India (a wholly owned subsidiary of Total

of France) was incorporated on November 16,

1999, with HPCL’s equity participation of 50%.

SALPG is constructing the first underground

cavern storage facility in the country. The SALPGproject envisages the construction of a 60,000

MT LPG Underground Mined Cavern with its

associated receiving & despatch facilities at

Visakhapatnam. The storage will be the largest

LPG storage facility in South Asia and would

enable meeting the growing demand of LPG inProgress of the underground cavern storage


57

India and also the export of LPG to the deficit markets in South Asia / South East Asia.

The financial outlay for the project is Rs.333.30 crores and it is being financed through Debt-Equity of 2.33:1.

Debt is fully tied up with a consortium of seven banks led by State Bank of India. The financial closure of the

project has already been achieved.

The SALPG cavern would be the second deepest mined cavern in the world. Geostock of France is the consultant

for the project and the facility is being constructed by Larsen and Toubro Ltd. The construction work for the

underground cavern has been completed and for the above ground facilities the same is in progress. The project

is expected to be commissioned by September 2007.

Petronet India Ltd. (PIL)

Petronet India Ltd. (PIL) was formed in May 1997 as a joint venture company with 50% equity by oil PSUs and

balance 50% being taken by private companies/financial institutions. Special Purpose Vehicles (SPVs) were

floated by PIL with oil companies for implementing individual pipeline projects, viz, Petronet MHB, Petronet

CCK and Petronet VK which are operating companies.

Since oil companies are now having pipelines independently, PIL has initiated action to disinvest its equity

holding in individual JVCs.

Petronet MHB Ltd. (PMHBL)

HPCL alongwith Petronet India Ltd.(PIL) had promoted Petronet MHB Ltd (PMHBL) for the construction and

operation of Mangalore – Hassan - Bangalore pipeline. PIL and HPCL were the promoters of PMHBL, each

having 26% equity participation. ONGC has joined as a strategic partner in the Company by taking 23% equity.

The product pipeline from Mangalore to Bangalore, with a tap off point at Hassan, has been executed at a cost

of 639 crores. The pipeline is meeting the transportation needs between Mangalore, Hassan and Bangalore.

Due to lower thruput and pipeline tariff, the operational and financial viability of the project has been affected.

PMHBL has gone for the Debt restructuring process. The same has been approved and is under implementation.

As a part of this process, PMHBL has allotted equity shares to ONGC, HPCL and lending banks. Their equity

shareholding in PMHBL now stands at 28.77%, 28.77% and 34.56% respectively.

PMHBL achieved a throughput of 1.428 MMT during the year 2006-07, which is 40% higher compared to 1.013

MMT achieved during 2005-06.

Prize Petroleum Co. Ltd.

HPCL, in partnership with ICICI and HDFC, had formed this Joint Venture E&P Company viz Prize Petroleum

Company Ltd for participating in exploration and production of hydrocarbons. Prize Petroleum Company Ltd is

also providing consultancy services related to E&P.

During the year, Prize Petroleum along with its consortium partners, M/s Hindustan Petroleum Corporation

Limited and M3nergy has signed Service Contract for an offshore field cluster consisting of three fields (Cluster-

7). The Company has also been awarded an onshore block along with a consortium partner under NELP VI and



58

signed Production Sharing Contract with MOP &

NG. The company is a Joint Executing Operator

for these offshore and onshore fields.

The company has drilled 3 new wells at Hirapur

field and one well at Khambel field. The total crude

oil production from these fields was 74,412 bbls

during 2006-07. The total revenue during 2006-07

was Rs.402 lacs which is higher by 211% over

the revenue of Rs 190 lacs of the last year.

Bhagyanagar Gas Ltd.

Bhagyanagar Gas Ltd. (BGL) has been

incorporated on August 22, 2003 as a Joint

Venture Company by GAIL and HPCL for distribution and marketing of environmental friendly fuels (green fuels)

viz. CNG and Auto LPG for use in the transportation, in the state of Andhra Pradesh. HPCL and GAIL would hold

22.5% of the equity while 5% would be held by the

Government of Andhra Pradesh and 50% by Strategic/

Financial investors.

BGL successfully launched CNG in Hyderabad during

the year 2006-07. At present, Vijayawada and

Hyderabad are the two cities to have CNG as alternate

fuel in the entire South India. The joint venture

company commissioned 5 CNG dispensing stations

in Vijayawada and Hyderabad taking the total number

of CNG dispensing stations to 8. BGL is also

operating 4 Auto LPG Outlets – 3 in Hyderabad and

one in Tirupati. BGL signed an agreement with

APSRTC for supplying CNG to its buses at

Vijayawada.

Aavantika Gas Ltd.

Aavantika Gas Limited has been incorporated on June 07, 2006 as a Joint Venture Company by GAIL and

HPCL for distribution and marketing of environmental friendly fuels (green fuels) viz. CNG and Auto LPG for use

in the transportation, in the State of Madhya Pradesh.

The joint venture company has drawn up the Business Plan for implementing its activity initially at Indore.

Construction of first CNG Mother Station and four Daughter Stations at Indore is in progress.


ONGC signs service contract for development of three Offshore Marginal Fields withthe consortium of Prize Petroleum Company Ltd (Prize), Hindustan PetroleumCorporation Ltd. (HPCL) and Trenergy (Malaysia). Seen in the photograph areShri M. B. Lal, former C & MD and Shri R. S. Sharma, Chairman - ONGC.

Exchange of Agreements between Shri C N Trivedi, then MD (BGL) and ShriM V Krishna Rao, Vice C&MD (APSRTC) in the august presence of Shri KannaLakshminarayana, the Hon’ble Minister for Transport & Cooperation, AndhraPradesh State Government


59

AWARDS / RECOGNITIONS� Greentech Safety Awards - 2006 from Shri G. Vinod – Hon’ble Minister for Labour Employment, Handlooms

& Textiles – Govt. of Andhra Pradesh for outstanding achievements in the field of Safety, Health & Environment:

� Gold Award bagged by Mumbai Refinery / Mangalore POL Terminal/ Mangalore LPG Import facility /Mazagaon Lube Plant / Santacruz ASF

� Silver Award bagged by Loni LPG Plant / Palam ASF / Dum Dum ASF /

� Bronze Award bagged by Chennai ASF

� National Safety Council Award – “Suraksha Puraskar” to Mumbai Refinery for outstanding Performance inOccupational Safety & Health Management Systems from Shri K. Chandra Sekhar Sahu, Hon’ble Ministerof State for Labour and Employment.

� Green Industry Award for 2005-06 to Jammu LPG Bottling Plant for Pollution Control & Development ofGreenery from Mayor of Jammy Smt. Bharti Bakshi.

� Reader’s Digest Trusted Brands Survey 2006 Platinum Award to Club HP for outstanding achievement of “AchaLagata Hai” Brand of Club HP from Ms.Rosemarie Wallace MD Reader’s Digest (Asia Pacific Region).

� Golden Peacock Global Award and certificate for Environmental Leadership – 2006 and Certificate Award toMumbai Refinery from Institute of Directors for various SH&E initiatives in Environment Management fromHon’ble Governer of Himachal Pradesh, Shri Vishnu Sadashiv Kokje/Mahadev Mehra – EnvironmentFoundation, UK & WCFCG.

� Golden Peacock Environment Management Award 2005 to Santacruz ASF from Institute of Directors foroutstanding contributions to Petroleum Industry from Hon’ble Governor of Himachal Pradesh, Shri VishnuSadashiv Kokje.

� Corporate Social Responsibility Award for 2004-05 from The Energy and Resources Institute (TERI) forefforts towards good Corporate citizenship & sustainable initiatives amongst Corporate turnover aboveRs.500 Crores from Shri R.K.Pachauri, Director General, TERI.

� Awaaz Consumer Award for 2006 from Awaaz CNBC TV for India’s most Preferred Auto Fuel from Shri L.Mansingh, Secretary-Consumer Affairs Govt. of India.

� Greentech Environment Excellence Awards for 2006 from Hon’ble Governor of Goa Shri S.C.Jamir & Shri WilfredD’souza, Dy. Chief Minister of Goa for highest achievements in the field of Safety & Environment Management:

� Gold Award Under petroleum Refining Sector category bagged by Mumbai Refinery

� Gold Award under Aviation Sector category Santacruz ASF / Palam ASF / Cochin ASF

� Bronze Award under Petroleum Sector category bagged by Silvassa Lube Plant / Mangalore POLTerminal

� Excellence Award under Marketing sector category bagged by Nasik LPG Plant / Loni LPG Plant

� Greentech Foundation Safety Innovation Award bagged by Santacruz ASF

� Images Retail Award for 2006 - “the Retailer of the year” Fuel & Forecourt Award for excellence in theBusiness of Retail in India by India Retail Forum.

� India’s 25 Innovative Companies Award of 4Ps Business & Marketing Power Brand Award institutionalizedby Planman Media from Shri Aleque Padamsee – Ad Guru & Consultant for innovative approach in businessand marketing.



60

� HPCL ranked 14th for ASTD Best Award - 2006 from American Society for Training & Development forinnovative learning and development practices in the organization from Shri Tony Bingham – President &CEO, ASTD.

� HPCL bagged OISD Award 2005-06 for the 3rd consecutive year from Oil Industry Safety Directorate for thebest performance in Lube Blending Category from Shri Murli Deora, Hon’ble Minister for Petroleum andNatural Gas, MOP&NG.

� Golden Peacock Corporate Governance Award 2006 from Institute of Directors for Corporate Governancefrom Hon’ble Chief Minister of New Delhi, Smt.Sheila Dixit.

� Suraksha Puraskar 2005 to MLIF from National Safety Council – Karnataka Chapter for Safety Practicesfrom Shri A.S.Laxmanan, Chairman – NSC, Karnataka.

� Popular Consumer Award to Lubes SBU from DNA & DAKS for Master Brand in the Oil & Lubricantscategory from Shri K.U. Rao, Chief Executive Officer, DNA & Ms.Ritika Dalal, CEO, DAKS.

� Fellowship conferred upon Shri Arun Balakrishnan by All India Management Association for achievementsand contribution in the field of Professional Management from Shri Priya Ranjan Deshmukh – Hon’bleUnion Minister for Information, Broadcasting & Parliamentary Affairs.

� Vishala Bharati Gaurav Satkar conferred upon Shri C. Ramulu by Delhi Telegu Academy for dedicated andoutstanding contributions to the field of Financed in the Oil Industry from Shri Ponnala Lakshmaiah, Hon’bleMinister for Major Irrigation Government of Andhra Pradesh.


Shri Murli Deora, Hon’ble Minister for Petroleum & Natural Gas presentsOISD Award.

Shri R Radhakrishnan, then DGM (Training) receiving the ASTD Best Awardfrom Shri Tony Bingham, President & CEO, ASTD.

Shri G. Vinod – Hon’ble Minister for Labour Employment, Handlooms & Textiles– Govt. of Andhra Pradesh presenting the Greentech Safety Award 2006.

Shri S.P. Chaudhry, Executive Director (Retail) alongwith the retail teamreceiving the Images Retail Award 2006.


61

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ Report

TO THE MEMBERS OF HINDUSTAN PETROLEUM CORPORATION LIMITED

1. We have audited the attached Balance Sheet of Hindustan Petroleum Corporation Limited as atMarch 31, 2007, and also the Profit and Loss Account and Cash Flow Statement of the Company for theyear ended on that date annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. These Standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatements. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 as amended by Companies (Auditor’s Report)(Amendment) Order, 2004 (together ‘the Order’), issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we give in the Annexure, a statement on thematters specified in paragraph 4 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:(a) We have obtained all the information and explanations which, to the best of our knowledge and belief,

were necessary for the purpose of the audit;(b) In our opinion, proper books of account, as required by law, have been kept by the Company, so far as

it appears from our examination of these books, and proper returns, adequate for the purposes of ouraudit, have been received from the branches;

(c) The Branch Auditors’ report, made available to us, has been appropriately dealt with while preparingour report;

(d) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are inagreement with the books of account;

(e) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this reportcomply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the CompaniesAct, 1956;

(f) On the basis of the written representations received from directors of the Company, as at March 31,2007 and taken on record by the Board of Directors, we report that none of the directors is disqualifiedas at March 31, 2007, from being appointed as a director in terms of clause (g) of sub-section (1) ofSection 274 of the Companies Act, 1956; and

(g) In our opinion, and to the best of our information and according to the explanations given to us andread with Note No. 6 to Schedule 20B, regarding treatment of certain Income Tax benefits, the saidaccounts give the information required by the Companies Act, 1956, in the manner so required andgive a true and fair view in conformity with the accounting principles generally accepted in India;(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2007;(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

For N.M. Raiji & Co. For Sudit K. Parekh & Co.Chartered Accountants Chartered Accountants

Vinay D. Balse Srikant V. JillaPartner PartnerMembership No. 39434 Membership No. 39461

Place : New DelhiDate : May 29, 2007


62

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ Report

(Referred to in Paragraph 3 of our Report of even date)

1. (a) The Company has maintained proper records showing full particulars including quantitative details andsituation of fixed assets except for items likes pipes, valves, meters, instruments and other similaritems peculiar to a continuous process industry.

(b) As explained to us, the Company, having regard to the size and nature of its business, has adopted apractice of carrying out physical verification of its fixed assets, except LPG cylinders and fixed assetsof the erstwhile Kosan Gas Company undertaking, not handed over, on a staggered basis, over aperiod of five years in the case of furniture, fixtures and office equipment and over a period of threeyears in the case of Plant and Machinery and other assets. We were informed that discrepanciesnoticed on such verification as compared to the book records have been properly dealt with in thebooks of account. The existence of fixed assets situated at the residence of employees has, however,been ascertained on a self-declaration basis.

(c) Fixed Assets disposed off during the year were not substantial and, therefore, do not affect the goingconcern assumption.

2. (a) As explained to us, the inventories were physically verified during the year by the Management atreasonable intervals.

(b) The procedures of physical verification of stocks followed by the management are reasonable andadequate in relation to the size of the Company and the nature of its business. In the case of materialslying with third parties, certificates confirming stocks held have been received from them.

(c) The Company has maintained proper records of inventory. We were informed that discrepancies noticedon such verification, as compared to the book records, were not material and have been properly dealtwith in the books of account.

3. Based on the audit procedures applied by us and according to the information and explanations given tous, the Company has neither granted nor taken loans, secured or unsecured to/from companies, firms orother parties covered in the register maintained under Section 301 of the Companies Act, 1956. Consequently,sub clauses (b), (c), (d), (e), (f) and (g) of sub-para (iii) of para 4 of the Order are not applicable.

4. In our opinion and according to the information and explanations given to us, and having regard to theexplanations that some of the items are of a specialized nature, in respect of which suitable alternativesources do not exist for obtaining comparative quotations, there are adequate internal control procedurescommensurate with the size of the Company and nature of its business for the purchase of inventory andfixed assets and for the sale of goods and services.

5. In our opinion and according to the information and explanation given to us, there are no contracts andarrangements referred to in Section 301 of the Companies Act, 1956 entered into during the year that needto be entered in the register maintained under that Section. Accordingly, sub clause (b) of sub-para (v) ofpara 4 of the Order is not applicable to the Company for the current year.

6. In our opinion, and according to the information and explanations given to us, the Company has compliedwith the directives issued by the Reserve Bank of India and the provisions of Section 58A and Section 58AA


63

or any other relevant provisions of the Companies Act, 1956, and the rules framed there under with regardto deposits accepted from the public. We have been informed that no order has been passed by theCompany Law Board or National Company Law Tribunal or Reserve Bank of India.

7. In our opinion, the Company has an internal audit system commensurate with its size and the nature of itsbusiness.

8. We have broadly reviewed the books of account maintained by the Company in respect of products where,pursuant to the Rules made by the Central Government, the maintenance of cost records has been prescribedunder Section 209 (1) (d) of the Companies Act, 1956. We are of the opinion that prima facie the prescribedaccounts and records have been maintained and are being made. We have not, however, made a detailedexamination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and on the basis of our examination of thebooks of account, the Company has, during the year, been generally regular in depositing with theappropriate authorities, undisputed statutory dues, including Provident Fund, Investor Education andProtection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax,Custom Duty, Excise Duty, Cess and any other material statutory dues.

(b) According to the information and explanations given to us and on the basis of our examination of thebooks of account, no undisputed amounts payable in respect of Income Tax, Sales Tax, Wealth Tax,Service Tax, Custom Duty, Excise Duty, Cess were in arrears, as at March 31, 2007, for a period ofmore than six months from the date they became payable.

(c) According to the information and explanations given to us, dues relating to Sales Tax/Custom Duty/Wealth Tax/Service Tax/Excise Duty/Cess, which have not been deposited on account of disputeswith the related authorities, have been reflected in the table below:

STATUTE FORUM WHERE AMOUNT IN PERIOD TO WHICH

PENDING Rs. / Crores THE AMOUNT RELATES

Central Excise Act, 1944 Commissioner (A) 70.86 1988-1994, 1994-1995, 1996-1999,

1999-2000, 2000-2003, 2001-2006

Assistant

Commissioner 51.95 1994-2002, 2000-2002, 2001-2004

CESTAT 430.75 1993-1995, 1994-2005, 1996-2002,

1997-2001, 1998-2003, 1999-2004,

2000-2001, 2001-2006

Department of

Revenue 0.97 1999-2000,2001-2004,2004-2005

554.53



64

Various Central and Board of Revenue 0.19 1985-1986,1986-1987

State Sales Tax

Acts

Civil Court 0.14 2001-2005

Rajasthan Kar Board 2.58 1999-2000, 2002-03

Sales Tax Appellate

Tribunal 95.97 1985-1989, 1987-1988, 1994-1997,

1994-2002, 1994-2003, 1994-2004,

1995-2003, 1995-1997, 1996-1998,

2001-2004

High Courts 967.17 1979-1987, 1987-1991, 1987-1996,

1991-1993, 1994-1996, 1994-2003,

1994-2004, 2000-2001, 2001-2003,

2005-2006

Commissioner /

DCCT / ADC /

JCCT / ACCT 2,116.56 1976-1979, 1985-1988, 1989-2006,

1991-1994, 1994-1995, 1994-2004,

1995-1997,1997-2001, 1999-2002,

2002-2006

3,182.61

Customs Act, 1962 CESTAT 18.74 1992-1999

18.74

Service Tax CESTAT 0.13 2003-2004

0.13

Grand Total 3,756.00

STATUTE FORUM WHERE AMOUNT IN PERIOD TO WHICH

PENDING Rs. / Crores THE AMOUNT RELATES



65

10. The Company does not have any accumulated losses at the end of the financial year and has not incurredcash losses in the financial year and in the financial year immediately preceding such financial year.

11. According to the information and explanations given to us, and based on checks carried out by us, theCompany has not defaulted in repayment of dues to financial institutions or banks. The question of defaultin repayment of dues to debenture holders does not arise since no debentures were outstanding during thefinancial year.

12. According to the information and explanations given to us, the Company has not granted loans and advanceson the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to information and explanations given to us, the Company is not a chit fund ora nidhi/mutual benefit fund/society. Therefore the provisions of sub-para (xiii) of para 4 of the Order are notapplicable to the Company.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares,securities, debentures and other investments. Therefore the provisions of sub-para (xiv) of para 4 of theOrder are not applicable to the Company.

15. In our opinion and according to information and explanations provided to us, the Company has not providedguarantees for loans taken by others from banks and financial institutions.

16. In our opinion, the term loans taken during the year have been applied for the purpose for which they wereraised.

17. According to the information and explanations given to us, and on an overall examination of the BalanceSheet of the Company, funds raised on short-term basis have, prima facie, not been used during the yearfor making long-term investments.

18. According to the information and explanations given to us, during the year the Company has not made anypreferential allotment of shares to parties and companies covered in the Register maintained under Section301 of the Companies Act, 1956.

19. The Company has not raised any monies by way of issue of debentures. Therefore, the provisions of sub-para (xix) of para 4 of the Order are not applicable to the Company.

20. The Company has not made any public issue of securities during the year.

21. According to information and explanations given to us and based on audit procedures performed andrepresentations obtained from the management, we report that no material fraud on or by the Company,has been noticed or reported during the year under audit.






66

SCHEDULE 2006-07 2005-06

SOURCES OF FUNDSShareholders’ Funds:

a) Capital 1 338.95 338.94b) Reserves and Surplus 2 9,259.70 8,396.80

9,598.65 8,735.74Loan Funds:

a) Secured Loans 3 1,005.48 1,486.16b) Unsecured Loans 4 9,512.05 5,177.67

10,517.53 6,663.83Deferred Tax Liability 1,420.90 1,384.44

TOTAL 21,537.08 16,784.01

APPLICATION OF FUNDSFixed Assets: 5

a) Gross Block 15,638.48 13,479.25b) Less: Depreciation 6,817.64 6,141.85

c) Net Block 8,820.84 7,337.40d) Capital Work-in-Progress 6 4,243.56 2,363.88

13,064.40 9,701.28Investments 7 7,127.47 4,027.64Current Assets, Loans and Advances:

a) Inventories 8 8,098.40 7,810.29b) Sundry Debtors 9 1,577.78 1,392.26c) Cash and Bank Balances 10 86.79 42.59d) Other Current Assets 11 92.33 11.38e) Loans and Advances 12 1,609.40 1,753.46

11,464.70 11,009.98Less:Current Liabilities and Provisions: 13

a) Liabilities 8,891.77 7,394.74b) Provisions 1,227.72 560.15

10,119.49 7,954.89

Net Current Assets 1,345.21 3,055.09

TOTAL 21,537.08 16,784.01

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIESAND NOTES FORMING PART OF ACCOUNTS 20

Rs./ Crores

Balance Sheet as at 31st MarBalance Sheet as at 31st MarBalance Sheet as at 31st MarBalance Sheet as at 31st MarBalance Sheet as at 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007


C.RAMULU FOR N. M. RAIJI & CO. FOR SUDIT K. PAREKH & CO.Director-Finance Chartered Accountants Chartered Accountants

N.R. NARAYANAN VINAY D. BALSE SRIKANT V. JILLACompany Secretary Partner Partner



67

SCHEDULE 2006-07 2005-06INCOME

Sale of Products 91,448.03 74,044.11(Net of Discount Rs. 728.98 crores; 2005-06 Rs.564.67 crores)Less : Excise Duty Paid 7,876.89 6,014.23Net Sales 83,571.14 68,029.88Recovery under Subsidy Schemes 5,470.12 2,876.15Other Income 14 684.51 349.46

89,725.77 71,255.49

INCREASE /(DECREASE) IN INVENTORY 15 243.55 1,408.96EXPENDITURE AND CHARGES

Purchase of Products for resale 46,850.22 42,178.12Raw materials consumed 35,816.79 25,450.29Packages consumed 105.11 95.99Excise Duty on Inventory differential 45.40 177.00Transhipping Expenses 1,749.46 1,520.14Payments to and provisions for Employees 16 729.42 641.49Exploration Expenses 20.11 12.42Other Operating Expenses 17 1,564.72 1,437.79Depreciation/Amortisation 704.00 690.23Borrowing Cost 18 422.98 175.88

88,008.21 72,379.35PROFIT FOR THE YEAR BEFORE PRIOR PERIODADJUSTMENTS AND TAXES 1,961.11 285.10PRIOR PERIOD ADJUSTMENTS 19 (6.05) -

PROFIT BEFORE TAXES 1,967.16 285.10PROVISION FOR CURRENT TAXATION 652.67 78.45PROVISION FOR DEFERRED TAXATION (NET) 36.46 9.69PROVISION FOR TAXATION OF EARLIER YEARS WRITTEN BACK (302.98) (220.05)PROVISION FOR FRINGE BENEFIT TAX 9.84 11.38

PROFIT AFTER TAXES 1,571.17 405.63Balance brought forward 6,186.63 5,937.64

PROFIT AVAILABLE FOR APPROPRIATION 7,757.80 6,343.27APPROPRIATED FOR:General Reserve 157.12 40.56Interim Dividend 203.60 -Proposed Final Dividend 407.20 101.80Tax on Distributed Profits 97.75 14.28

BALANCE CARRIED FORWARD 6,892.13 6,186.63EARNINGS PER SHARE (in Rs.) - Basic & Diluted 46.35 11.97

(2006-07 : EPS = Net Profit - Rs. 1,571.17 crores / Weighted avg. no. of shares - 33.895 crores;2005-06 : EPS = Net Profit - Rs. 405.63 crores / Weighted avg. no. of shares - 33.894 crores)

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIESAND NOTES FORMING PART OF ACCOUNTS 20

Rs./ Crores

PrPrPrPrProfit and Loss Aofit and Loss Aofit and Loss Aofit and Loss Aofit and Loss Account for the year ended 31st Marccount for the year ended 31st Marccount for the year ended 31st Marccount for the year ended 31st Marccount for the year ended 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007






68

Rs./ Crores

Schedules forming part of the Balance SheetSchedules forming part of the Balance SheetSchedules forming part of the Balance SheetSchedules forming part of the Balance SheetSchedules forming part of the Balance Sheet

2006-07 2005-061. CAPITAL

A. Authorised:75,000 Cumulative Redeemable Preference Shares of Rs. 100/- each 0.75 0.7534,92,50,000 Equity Shares of Rs.10/- each 349.25 349.25

350.00 350.00B. Issued, Subscribed & Called up:

33,93,30,000 Equity Shares of Rs.10/- each fully paid up 339.33 339.33Less: Calls unpaid by Others 0.38 0.39

338.95 338.94NOTES :-(1) 77,50,000 fully paid up equity shares of Rs. 10/- each were allotted to

the shareholders of Lube India Limited on the amalgamation of that

company for consideration other than cash.

(2) 52,00,000 fully paid up equity shares of Rs. 10/- each were allotted to

the President of India, for consideration other than cash, on the

amalgamation of Caltex Oil Refining India Limited with the Corporation.

(3) 26,44,30,000 shares of Rs. 10/- each were allotted as fully paid bonus

shares by capitalisation of Capital Reserve, Capital Redemption

Reserve and accumulated profits.

2. RESERVES AND SURPLUSShare Premium AccountAs per last Balance Sheet 1,164.12 1,164.12

Less : Calls Unpaid 12.41 12.88

1,151.71 1,151.24

Capital GrantAs per last Balance Sheet 4.94 -

Received during the year - 5.02

4.94 5.02

Less: Amortised during the year (0.19) (0.08)

4.75 4.94

General ReserveAs per last Balance Sheet 1,053.99 1,013.43

Add : Transfer from Profit & Loss Account 157.12 40.56

1,211.11 1,053.99

Profit and Loss AccountSurplus as per Account annexed 6,892.13 6,186.63

9,259.70 8,396.80


69

2006-07 2005-063. SECURED LOANS

i. Collateral Borrowing and Lending Obligation (CBLO) 460.00 1,010.00(Secured by Pledge of Oil Bonds)[Due for repayment within one year - Rs. 460 crores;2005-06 : Rs. 1,010 crores]

ii. Overdrafts from Banks 545.48 476.16(Secured by hypothecation of Stock-in-Trade)

1,005.48 1,486.16

4. UNSECURED LOANS

Fixed Deposits 0.02 0.02

Clean Loans from Banks 5,830.00 2,300.00(Due for repayment within one year - Rs. 5,830 crores;2005-06 : Rs. 2,300 crores)

Short Term Loans from Banks 1,356.87 1,768.05(repayable in foreign currency)[Due for repayment within one year - Rs. 1,356.87 crores;2005-06 : Rs. 1,768.06 crores]

Term Loan From Oil Industry Development Board 1,250.00 650.00(Due for repayment within one year - Rs. 200 crores; 2005-06: Nil)

Syndicated Loans from Foreign Banks (repayable in foreign currency) 1,075.16 459.60[Due for repayment within one year - Rs. Nil; 2005-06: Rs. Nil]

9,512.05 5,177.67

Rs./ Crores



70

5. FIXED ASSETS (A & B) Rs. /CroresGross Block Additions/ Deductions/ Gross Block Depreciation Total Net Net

at cost Reclassifi- Reclassifi- at cost and Depreciation Block Blockas at cations cations as at Amortisation and as at as at

01-04-2006 31-03-2007 for the year Amortisation 31-03-2007 31-03-20062006-2007 upto

31-03-2007

A. OTHER THAN INTANGIBLE ASSETS1. Land -Freehold (C) 210.99 266.69 - 477.68 - - 477.68 210.992. Roads and Culverts (E&F) 643.88 128.64 0.86 771.66 11.47 68.45 703.21 586.813. Buildings (D) 1,237.30 263.06 1.63 1,498.73 27.49 183.79 1,314.94 1,080.624. Leasehold Property - Land 93.10 2.00 5.06 90.04 3.02 23.04 67.00 73.075. Railway Siding and 274.76 6.64 - 281.40 12.82 127.21 154.19 160.38

Rolling Stock (E)6. Plant and Equipment(E, F & G) 10,586.54 1,477.82 20.85 12,043.51 614.11 6,161.40 5,882.11 5,022.967. Furniture, Fixtures 297.32 36.52 12.34 321.50 23.72 168.47 153.03 142.34

and Office/Lab.Equipment

8. Transport Equipment 91.25 10.53 1.28 100.50 7.17 53.07 47.43 44.199. Unallocated capital 0.20 - - 0.20 - 0.20 - -

Expenditure onLand DevelopmentTotal (A) 13,435.34 2,191.90 42.02 15,585.22 699.80 6,785.63 8,799.59 7,321.36

B. INTANGIBLE ASSETS1. Right of Way 1.72 6.95 - 8.67 - - 8.67 1.722. Technical / Process Licences 9.47 0.84 - 10.31 0.52 3.11 7.20 6.883. Software 32.72 1.85 0.29 34.28 3.90 28.90 5.38 7.44

Total (B) 43.91 9.64 0.29 53.26 4.42 32.01 21.25 16.04

GRAND TOTAL (A+B) 13,479.25 2,201.54 42.31 15,638.48 704.22 6,817.64 8,820.84 7,337.40

Previous Year 12,393.17 1,121.34 35.26 13,479.25 690.23 6,141.85 7,337.40


A. Includes assets costing Rs. 0.07 Crore (2005-2006: Rs. 0.14 Crore) of erstwhile Kosan Gas Company not handed over to theCorporation consisting of : Freehold Land Rs.76,191/- (2005-2006 : Rs.76,191/-) Building Rs.0.06 Crore (2005-2006 : Rs. 0.06Crore) Plant & Equipment Rs. 30,454/- (2005-2006 : Rs. 0.07 Crore). Consequently, cumulative Depreciation on the Fixed Assetsamounting to Rs. 0.05 Crore (2005-2006: Rs.0.12 Crore) has not been provided for. In case of Land, the Kosan Gas Companywere to give up their claim. However, in view of the tenancy right sought by third party, the matter is under litigation.

B. Includes Rs. 74.75 Crores (2005-2006 : Rs.63.66 Crores) being the Corporation’s Share of Cost of Land & Other Assets jointlyowned with Other Oil Companies.

C. Title Deeds to some of the lands acquired are still to be obtained. In certain cases, registration of the title of the assets is pendingas the legal formalities are yet to be completed.

D. Includes Rs.0.01 lakh (2005-2006 : Rs.0.01 lakh) being share application money in Co-operative Housing Societies.E. Includes Rs. 42.56 Crores (2005-2006 : Rs. 40.50 Crores) towards Plant and Machinery, Roads & Culverts and Railway Sidings

& Rolling Stock, ownership of which does not vest with the Corporation. These assets are amortised at the rate of depreciationspecified in Schedule XIV of the Companies Act,1956.

F. Includes following assets which are used for distribution of PDS Kerosene under Jana Kalyan Pariyojana against whichfinancial assistance is being provided by OIDB. (Rs . /Crores )

Description First Cost (31/03/2007) First Cost (31/03/2006)Roads & culverts 0.16 0.16Buildings 1.70 1.70Plant & Equipment 3.30 3.30Total 5.16 5.16

G. Includes Assets retired from active use and held for disposal - Gross Block : Rs.4.97 Crores / Net Block : Rs.0.82 Crore (2005-2006 : NIL)


71

2006-07 2005-066. CAPITAL WORK-IN-PROGRESS (at Cost)

Unallocated Capital Expenditureand Materials at Site 3,683.14 1,609.56Advances for Capital Expenditure 83.68 91.24Capital Stores 33.44 423.87Capital Stores lying with Contractors 109.87 117.60Capital goods in transit 124.62 40.38

4,034.75 2,282.65Construction period expenses pending apportionment(Net of recovery) :Establishment charges 57.36 39.14Interest 130.06 34.51Other Borrowing Cost 21.09 7.50Depreciation 0.30 0.08

208.81 81.234,243.56 2,363.88

7. INVESTMENTS

I. LONG TERM INVESTMENTS (at Cost):

A. TRADE INVESTMENTS

Quoted

1. Mangalore Refinery and Petrochemicals Ltd.29,71,53,518 Equity Shares of Rs. 10/- each fully paid up 471.68 471.68

2. 6.96% Oil Companies Government Of India Special Bonds 2009 - 81.00

3. 7.00% Oil Companies Government Of India Special Bonds 2012* 777.02 777.02

Unquoted

1. Guru Gobind Singh Refineries Ltd. (Wholly owned subsidiary)33,54,60,000 Equity Shares of Rs. 10/- each fully paid-up 335.46 295.71(3,97,50,000 Equity Shares of Rs. 10/- eachpurchased/allotted during the year)

2. Hindustan Colas Ltd.47,25,000 Equity Shares of Rs. 10/- each fully paid up 4.73 4.73

3. Petronet India Ltd.1,59,99,999 Equity Shares of Rs. 10/- each fully paid up 16.00 16.00Less : Provision for Diminution (16.00) -

4. Petronet MHB Ltd.15,78,41,000 Equity Shares of Rs. 10/- each fully paid up 157.84 0.13(15,77,11,000 Equity Shares of Rs. 10/- eachpurchased/allotted during the year)

5. Prize Petroleum Co. Ltd99,99,600 Equity Shares of Rs. 10/- each fully paid up 10.00 10.00

Rs./ Crores



72

Rs./ Crores


6. South Asia LPG Co. Pvt. Ltd.5,00,00,000 Equity Shares of Rs. 10/- each fully paid up 50.00 27.50(2,25,00,000 Equity Shares of Rs. 10/- eachpurchased/allotted during the year)

7. Bhagyanagar Gas Ltd.12,497 Equity Shares of Rs. 10/- each fully paid up 0.01 0.01

8. Avantika Gas Ltd.12,498 Equity Shares of Rs. 10/- each fully paid up 0.01 -(12,498 Equity Shares of Rs. 10/- eachpurchased/allotted during the year)

TOTAL(A) 1,806.75 1,683.78

B. OTHER INVESTMENTS

Quoted

1. Government Securities of the face value of Rs. 0.02 crore

(2005-06 : Rs. 0.02 crore)

- Deposited with Others 0.02 0.02

- On hand - Rs. 0.25 lakh (2005-06 : Rs. 0.25 lakh) 0.00 0.00

2. Scooters India Ltd.

10,000 Equity Shares of Rs. 10/- each fully paid up 0.01 0.01

Unquoted

1. Government Securities of the face value of Rs. 0.24 lakh

(2005-06 : Rs. 0.24 lakh)

- Deposited with Others - Rs. 0.10 lakh (2005-06 : Rs. 0.10 lakh) 0.00 0.00

- On hand** - Rs. 0.14 lakh ( 2005-06 : Rs. 0.14 lakh) 0.00 0.00

2. East India Clinic Ltd.

- 1/2% Debenture of face value of Rs.0.15 lakh

- Rs.0.15 lakh (2005-06 : Rs.0.15 lakh) 0.00 0.00

- 5% Debenture of face value of Rs.0.07 lakh

- Rs.0.07 lakh (2005-06 : Rs.0.07 lakh) 0.00 0.00

3. Shushrusha Citizen Co-operative Hospital Limited

100 Equity Shares of Rs. 100/- each fully paid up

- Rs. 0.10 lakh (2005-06 : Rs. 0.10 lakh) 0.00 0.00

4. Petroleum India International (Association of Persons)***

Contribution towards Seed Capital 0.05 0.05

TOTAL (B) 0.08 0.08

TOTAL LONG TERM INVESTMENTS 1,806.83 1,683.86

Less: Provision for loss on Investments** - Rs. 0.14 lakh 0.00 0.00

(2005-06 : Rs. 0.14 lakh)

TOTAL: I 1,806.83 1,683.86

2006-07 2005-06


73


Rs./ Crores

2006-07 2005-06

II. CURRENT INVESTMENTS (at Cost or Fair Value whichever is lower)TRADE INVESTMENTSQuotedi. 7.07% Oil Marketing Companies’ GOI Special Bonds, 2009 - 400.00ii. 7.33% Oil Marketing Companies’ GOI Special Bonds, 2009 - 398.92iii. 7.44% Oil Marketing Companies’ GOI Special Bonds, 2012 - 400.00iv. 7.47% Oil Marketing Companies’ GOI Special Bonds, 2012 * 393.77 400.00v. 7.59% Oil Marketing Companies’ GOI Special Bonds, 2015 - 344.74vi. 7.61% Oil Marketing Companies’ GOI Special Bonds, 2015 380.92 400.12vii. 7.75% Oil Marketing Companies’ GOI Special Bonds, 2021 991.51 -viii. 8.01% Oil Marketing Companies’ GOI Special Bonds, 2023 838.08 -ix. 8.13% Oil Marketing Companies’ GOI Special Bonds, 2021 691.47 -x. 8.20% Oil Marketing Companies’ GOI Special Bonds, 2024 1,006.95 -xi. 8.40% Oil Marketing Companies’ GOI Special Bonds, 2026 1,017.94 -

TOTAL CURRENT INVESTMENTS - II 5,320.64 2,343.78TOTAL [I+II] 7,127.47 4,027.64

Cost Market / Redemption Value

2006-07 2005-06 2006-07 2005-06Aggregate of quoted Investments 6,653.74 3,674.59 7,094.89 4,458.23Aggregate of unquoted Investments 574.11 354.13

7,227.84 4,028.72

* Pledged with Clearing Corporation of India Limited against CBLO Loan** Includes Rs. 0.14 lakh (2005-06 : Rs. 0.14 lakh) not in the possession of

the Company*** Members in Petroleum India International (AOP) where Hindustan

Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd.,Bongaigaon Refineries & Petrochemicals Ltd., Kochi Refineries Ltd.,Engineers India Ltd.,IBP Co. Ltd., Indian Petrochemicals CorporationLtd., Chennai Petroleum Corporation Ltd. have a share of 12.50 % each

8. INVENTORIES(As per Inventory taken, valued and certified by the Management)Raw Materials (Including in-transit - Rs. 799.54 crores;2005-06 : Rs. 632.94 crores) 1,897.14 1,856.59Finished Products(Including in-transit between locations - Rs. 52.04 crores;2005-06 : Rs. 39.53 crores) 5,636.65 5,384.74Stock in Process 398.11 406.47Packages 7.92 6.36

7,939.82 7,654.16Stores and Spares * (Including in-transit - Rs. 7.07 crores; 158.58 156.132005-06 : Rs. 7.35 crores) 8,098.40 7,810.29

* Includes stock lying with contractors Rs. 0.96 crore(2005-06 : Rs. 1.39 crores)


74

Rs./ Crores

2006-07 2005-06

9. SUNDRY DEBTORS : (Unsecured)

Over six months :

Considered good 74.19 294.89

Considered doubtful [Refer Note 20B (4)] 63.61 36.58

Others :

Considered good 1,519.35 1,097.37

1,657.15 1,428.84

Less: Provision for Doubtful Debts 79.37 36.58

1,577.78 1,392.26

10. CASH AND BANK BALANCES

Cash on hand 1.38 2.89

Cheques Awaiting Deposit 5.19 0.41

With Scheduled Banks:

On Current Accounts 76.90 36.11

On Non-operative Current Accounts* 0.01 0.01

On Fixed Deposit Accounts ** 3.24 3.11

With Others:

In Current Account with Municipal Co-operative

Bank Ltd. (maximum balance during the year

Rs. 0.11 crore, 2005-06 : Rs. 0.09 crore) 0.07 0.06

86.79 42.59

* Represents amount deposited as per Court Order pending

final disposal.

** Includes lodged as security deposit

with Mumbai Port Trust - Rs. 0.54 crore ( 2005-06 : Rs.0.54 crore)

and with IAAI - Rs. 0.24 crore (2005-06 : Rs.0.24 crore).

11. OTHER CURRENT ASSETS

Interest accrued on Bank Deposits and Investments 92.33 11.38



75

Rs./ Crores

2006-07 2005-06

12. LOANS AND ADVANCES

Secured, considered good :

Advances recoverable in cash or in kind or

for value to be received * 350.48 356.72

Interest Accrued thereon 125.16 114.44

Unsecured, considered good :

Advances recoverable in cash or in kind or

for value to be received 61.99 52.60

Balances with Excise, Customs, Port Trust etc. 258.17 256.77

Other Deposits 135.23 142.57

Prepaid Expenses 9.95 7.18

Amounts recoverable under Subsidy Schemes 21.74 41.11

Share application money pending allotment 8.46 61.27

Advance towards equity 17.00 13.00

Other Accounts Receivable ** 621.22 707.80

Unsecured, considered doubtful :

Accounts Receivable & Deposits 2.92 2.99

1,612.32 1,756.45

Less : Provision for Doubtful Receivables 2.92 2.99

1,609.40 1,753.46

* Includes Rs. 0.38 crore, (2005-06 : Rs.0.31 crore) due from Directors;

maximum balance - Rs. 0.42 crore, (2005-06 : Rs.0.33 crore) and

Rs. 0.01 crore (2005-06 : Rs. 0.01 crore) due from an Officer; maximum

balance - Rs. 0.02 crore, (2005-06 : Rs.0.01 crore)

** Includes Rs. 10.88 crores (2005-06 : Rs.10.83 crores) being amount due

towards Company’s share of profit in Petroleum India International



76

Rs./ Crores

2006-07 2005-0613. CURRENT LIABILITIES AND PROVISIONS

A. Current LiabilitiesSundry Creditorsi) Total outstanding dues of small scale industrial undertakings * 3.78 3.38ii) Total outstanding dues of creditors other than small scale 4,372.63 3,373.66

industrial undertakingsDeposits from Dealers/Consumers for LPG Cylinders 2,826.45 2,673.90Other Deposits 131.77 103.48Accrued Charges/Credits 106.50 122.83Interest accrued but not due on loans 47.38 25.59Preference share capital redeemed remaining unclaimed/unencashed 0.01 0.01Unclaimed Dividend** 11.52 11.19Other Liabilities 1,391.73 1,080.70

8,891.77 7,394.74B. Provisions

Provision for Tax (Net) 578.25 301.78Provision for Dividend 407.20 101.80Provision for Pension 41.40 39.84Provision for other retirement benefits 131.03 102.14Provision for Fringe Benefit Tax 0.64 0.31Tax on Distributed Profits 69.20 14.28

1,227.72 560.1510,119.49 7,954.89

* Outstanding Dues of Small Scale Undertakings for More than 30 Days :M/s PYRO ELECTRIC INSTRUMENTS G M/s S.K.M.L. ENTERPRISES, M/s NEWAGE INDUSTRIES M/s M. SAGAR, M/s KEVIN ENTERPRISESPRIVATE LTD. M/s SRI MANOJ ELECTRICAL WORKS, M/s K.V. FIRE CHEMICALS (INDIA) M/s SRI TRINADHA ELECTRICAL WORKS, M/s JOSEPHLESLIE DRAGER MFG.PVT. LTD. M/s LEVCON INST. PVT. LTD., M/s GASKETS (INDIA) PRIVATE LTD M/s CHEMTROLS ENGINEERING LTD, M/s EX-PROTECTA M/s REMI PROCESS PLANT & MACHINERY, M/s SHANMUKA ENGINEERING WORKS M/s SRI BALAJI ASSOCIATES, M/s EBYFASTENERS M/s PACKINGS & JOINTINGS GASKET, M/s CDC CARBOLINE INDIA PVT LTD. M/s SOUTHERN GASKET PRODUCTS, M/s A.K. DEY& COMPANY M/s IGP ENGINEERS PVT LIMITED, M/s HYDRO - PNEUMATICS M/s MADRAS INDUSTRIAL PRODUCTS, M/s DEMBLA VALVES PVT.LIMITED M/s GOODRICH GASKET (P) LIMITED, M/s H. GURU INDUSTRIES M/s SEBIM VALVES INDIA PVT. LTD., M/s A.N. INSTRUMENTS PRIVATELTD M/s VIRGO ENGINEERS LIMITED, M/s JAYALAKSHMI ENGINEERING CON M/s FLOWAY VALVES PVT. LIMITED, M/s PRECISION ENGINEERINGWORKS M/s J R U CONTROLS PVT. LTD., M/s COASTAL AMMONIA PRIVATE LTD M/s GUJARAT INFRAPIPES PVT LTD., M/s ASSOCIATEDSUPPLIERS M/s M.S. FITTINGS MANUFACTURING, M/s PRIME MOVER GOVERNER SERVICES M/s A.V. VALVES LIMITED, M/s SRIRAM & CO M/s ECONO VALVES PRIVATE LIMITED, M/s X TECHS M/s CHAUDHRY HAMMER WORKS PVT.LTD., M/s COROMANDEL PAINTS & CHEMICALS M/s FLASH FORGE PVT LIMITED, M/s GEETHA ENTERPRISES M/s SWARAN SINGH & CO, M/s RAO WELDING WORKS M/s PRESIDENTENGINEERING WORKS, M/s LEAK STOP EXPERTS M/s MULTITHREAD FASTENERS, M/s PRECISION MANAGEMENT COUNCIL M/s AEPCOMPANY, M/s NCON TURBO TECH (PVT) LTD M/s PTD FASTENERS PVT. LIMITED, M/s GANGOTRI TURBO TECH. ENGG. M/s NIREKAENGINEERING & CO.PVT LTD., M/s MODERN ELECTRICAL WORKS M/s SWAN ENTERPRISES PVT. LIMITED, M/s MAHALAKSHMI ENGINEERSM/s SRI GAJALAKSHMI INDUSTRIES, M/s PAVANI ENTERPRISES M/s VOLTAMP TRANSFORMERS PVT. LTD., M/s GOPAL ENGINEERING WORKSM/s WAAREE INSTRUMENTS LTD, M/s PRAVASI ENTERPRISES M/s SWARAN SINGH & CO, M/s GANESH ENGINEERING WORKS M/s MASTANENGINEERING WORKS, M/s SABARI ENGINEERING CONTRACT M/s TAS ENGINEERING CO PVT LTD, M/s USHA ENGINEERING WORKS M/sTECHNIKA, M/s SRI SANARI ELECTRICAL & ENG M/s GLOBAL ENTERPRISES, M/s SHIVA JYOTHI ENTERPRISES M/s M. SOMESWARA RAO,M/s SRI GANESH ELE & REWINDING M/s RAMAKRISHNA ELECTRICAL WIND, M/s S. VENKATA RAO M/s PRATHYUSHA SAFETY MFG. CO,M/s UNITED ELECTRICAL & REWINDING M/s PIPEFIT ENGINEERS, M/s S.K. AHMED M/s SOHAN ENGINEERING ENTERPRISES, M/s INMACROM/s CARTAL TECHNICAL SERIVCES, M/s STEEL SAMRAT (India) M/s PAVAN KUMAR BLASTINGS, M/s J.J. INDUSTRIES M/s AES ENERGYWORKS(P) LTD, M/s SURESH ENGINEERING WORKS M/s H.M. TECHNOLOGIES, M/s IGP ENGINEERS LTD. M/s PREM ENTERPRISES,M/s SWAN ENTERPRISES PVT. LTD. M/s MICROCARE COMPUTERS PVT LTD, M/s RANK CONTROLS & INSTRUMENTS M/s UNITED ELECTRICAL& REWINDING, M/s MIKROFLO FILTERS (P) LTD. M/s C & I SYSTEMS, M/s CHHABI ELECTRICALS M/s FIX FIT FASTENERS MFG PVT. LTD.,M/s EVANS ELECTRICALS M/s PAVING STONE, M/s HI-TEC VALVES M/s SHARP TANKS & STRUCTURE PVT. LTD., M/s TECHNO PROCESSEQUIPMENTS LTD M/s PACE ENGINEERS INDL., M/s JOSEPH LESLIE DRAGGER M/s TEEKAY TUBES PVT. LTD.,


** No amount is due as at the end of the year for credit to Investors’ Education and Protection Fund.


77

Rs./ Crores

2006-07 2005-0614. OTHER INCOME

Interest (Gross): *On Investments 265.08 73.56On Deposits 0.11 0.15On Staff Loans 16.56 16.75On Customers’ Accounts 10.18 17.55On Others 3.31 12.46

295.24 120.47Dividend income 21.51 30.42Share of Profit from Petroleum India International (AOP) 0.95 1.03Rent Recoveries 41.27 37.21Profit on sale of Long Term Investments - 4.78Exchange rate variation (Net) 202.63 37.36Miscellaneous Income ** 122.91 118.19

389.27 228.99684.51 349.46

Note:* Tax deducted at source amounts to Rs. 1.19 crores (2005-06 : Rs. Nil)** Miscellaneous Income Includes Rs. 0.19 crore (2005-06 : 0.09 crore) on

account of amortisation of capital grant and Rs. Nil (2005-06 : Rs. 4.95crores) on account of recognition of revenue grant from OIDB during the year

15. INCREASE / (DECREASE) IN INVENTORYClosing Stock:

Stock in Process 398.11 406.46 Finished Products 5,636.64 5,384.74

6,034.75 5,791.20Less: Opening Stock:

Stock in Process 406.46 275.07 Finished Products 5,384.74 4,107.17

5,791.20 4,382.24

243.55 1,408.96

16. PAYMENTS TO AND PROVISIONS FOR EMPLOYEESSalaries, Wages, Bonus etc. * 556.86 461.66Contribution to Provident Fund 41.04 36.69Pension, Gratuity etc. 7.46 24.29Employee Welfare Expenses ** 125.87 119.83Less: Recoveries 1.81 0.98

124.06 118.85729.42 641.49

* Includes Rs. 28.30 crores (2005-06 : Rs.12.89 crores) towards LeaveEncashment on the basis of actuarial valuation

** Includes Rs. 0.59 crores (2005-06 : Rs.4.28 crores) towards Postretirement medical benefits on the basis of actuarial valuation

Schedules forming part of the PrSchedules forming part of the PrSchedules forming part of the PrSchedules forming part of the PrSchedules forming part of the Profit and Loss Aofit and Loss Aofit and Loss Aofit and Loss Aofit and Loss Accountccountccountccountccount


78

Schedules forming part of the PrSchedules forming part of the PrSchedules forming part of the PrSchedules forming part of the PrSchedules forming part of the Profit and Loss Aofit and Loss Aofit and Loss Aofit and Loss Aofit and Loss Accountccountccountccountccount

Rs./ Crores

2006-07 2005-0617. OTHER OPERATING EXPENSES

Consumption of Stores, Spares and Chemicals 103.57 85.86Power and Fuel 1,681.58 1,306.32Less : Fuel of own production consumed 1,667.64 1,287.65

13.94 18.67Repairs and Maintenance - Buildings 18.95 19.17Repairs and Maintenance - Plant & Machinery 241.23 277.95Repairs and Maintenance - Other Assets 7.65 6.75Insurance 19.20 20.24Rates and Taxes 29.16 23.37Irrecoverable Taxes and Other Levies 203.40 257.90Equipment Hire Charges 3.36 2.08Rent 123.42 104.57Travelling and Conveyance 74.25 68.23Printing and Stationery 9.96 8.68Electricity and Water 146.64 110.93Charities and Donations 14.56 8.91Stores & spares written off 4.87 2.48Loss on Sale of Current Investment 18.49 -Loss on Sale of Long Term Investment 1.54 -Provision for Diminution in value of Current Investments 83.30 1.08(After adjusting provision no longer requiredwritten back Rs. 1.08 crores, 2005-06 : Rs. Nil)Provision for Investment 16.00 -Provision for Doubtful Receivables - (1.18)(After adjusting provision no longer requiredwritten back Rs. Nil , 2005-06 : Rs. 1.22 crores)Provision for Doubtful Debts 42.79 5.02(After adjusting provision no longer requiredwritten back Rs. 4.23 crores , 2005-06 : Rs. 3.76 crores)Provision for asset under reconciliation no longer required - (7.68)Loss on Sale/ write off of Fixed Assets/ CWIP 3.41 7.59Security Charges 32.92 31.50Advertisement & Publicity 110.27 105.30Sundry Expenses and Charges (Not otherwise classified) 222.50 247.75Consultancy & Technical Services 19.34 32.62

1,564.72 1,437.7918. BORROWING COST

Interest on :Long Term Loans 3.00 -Short Term Loans 385.12 149.60Overdraft from Banks 18.32 9.07Others 0.10 0.07

Other Borrowing Costs 16.44 17.14

422.98 175.8819. PRIOR PERIOD DEBITS / (CREDITS)

Excise duty provision reversed (6.05) -

(6.05) 0.00


79

Statement of Significant AStatement of Significant AStatement of Significant AStatement of Significant AStatement of Significant Accounting Pccounting Pccounting Pccounting Pccounting Policies and Notes forming part of Aolicies and Notes forming part of Aolicies and Notes forming part of Aolicies and Notes forming part of Aolicies and Notes forming part of Accountsccountsccountsccountsccounts

20 A. SIGNIFICANT ACCOUNTING POLICIES

Accounts are prepared under the historical cost convention in accordance with Generally AcceptedAccounting Principles (GAAP), Accounting Standards issued by The Institute of Chartered Accountantsof India (ICAI) and the relevant provisions of the Companies Act, 1956. All income and expenditurehaving material bearing are recognised on accrual basis, except where otherwise stated. Necessaryestimates and assumptions of income and expenditure are made during the reporting period anddifference between the actual and the estimates are recognised in the period in which the resultsmaterialise.

1. FIXED ASSETS

Land acquired on lease for 99 years or more is treated as freehold land.

2. INTANGIBLE ASSETS

a. Cost of Right of Way for laying pipelines is capitalised as Intangible Asset and being perpetual innature, is not amortised.

b. Costs incurred on technical know-how / license fee relating to process design / plants / facilitiesare capitalised as Intangible Assets.

c. Cost of Software directly identified with hardware is capitalised along with the cost of hardware.Application software is capitalised as Intangible Asset.

3. CONSTRUCTION PERIOD EXPENSES ON PROJECTS

a. Related expenditure (including temporary facilities and crop compensation expenses) incurredduring construction period in respect of plan projects and major non-plan projects are capitalised.

b. Financing cost incurred during the construction period on loans specifically borrowed and utilisedfor projects is capitalised.

c. Financing cost, if any, incurred on general borrowings used for projects is capitalised at theweighted average cost.

4. DEPRECIATION

a. Depreciation on Fixed Assets is provided on the Straight Line method, in the manner and at therates prescribed under Schedule XIV to the Companies Act, 1956 and is charged pro rata on amonthly basis on assets, from / upto and inclusive of the month of capitalisation / sale, disposalor deletion during the year.

b. All assets costing upto Rs. 5,000/-, other than LPG cylinders and pressure regulators, are fullydepreciated in the year of capitalisation.

c. Premium on leasehold land is amortised over the period of lease.

d. Machinery Spares, which can be used only in connection with an item of fixed asset and the useof which is expected to be irregular, are depreciated over a period not exceeding the useful life ofthe principal item of fixed asset.

e. Intangible Assets other than application software are amortised on a straight line basis over theuseful life of the parent asset.

f. Application software are normally amortised over a period of four years, or over its useful life,before it becomes obsolete, whichever is earlier.


80

5. IMPAIRMENT OF ASSETS

At each balance sheet date, an assessment is made of whether there is any indication of impairment.An impairment loss is recognised whenever the carrying amount of assets of cash generating units(CGU) exceeds their recoverable amount.

6. FOREIGN CURRENCY AND DERIVATIVE TRANSACTIONS

a. Foreign Currency transactions during the year are recorded at the rates of exchange prevailing onthe dates of transactions.

b. All foreign currency assets, liabilities and forward contracts are restated at the rates ruling at theyear end.

c. All exchange differences are dealt with in the profit and loss account, except those relating toacquisition of fixed assets, which are adjusted in the cost of assets and those covered by forwardcontract rates, where the premium / discount arising from such contracts are recognised over theperiod of contracts.

d. The realised gain or loss in respect of commodity hedging contracts, the pricing period of whichhas expired during the year, are recognised in the Profit & Loss Account along with the underlyingtransaction. However, in respect of contracts, the pricing period of which extend beyond thebalance sheet date, suitable provision is made for likely loss, if any.

7. INVESTMENTS

a. Long-term investments are valued at cost and provision for diminution in value thereof is made,wherever such diminution is other than temporary.

b. Current investments are valued at the lower of cost and fair value.

8. INVENTORIES

a. Crude oil is valued at cost on First In First Out (FIFO) basis or at net realisable value, whicheveris lower.

b. Raw material for lubricants and finished lubricants are valued at weighted average cost or at netrealisable value whichever is lower.

c. Stock-in process is valued at raw material cost plus cost of conversion or at net realisable value,whichever is lower.

d. Finished products other than Lubricants are valued at cost (on FIFO basis) or at net realisablevalue, whichever is lower.

e. Empty packages are valued at weighted average cost.

f. Stores and spares are valued at weighted average cost.

g. Value of surplus, obsolete and slow moving stores and spares, if any, is reduced to net realisablevalue. Surplus items, when transferred from completed projects are valued at cost / estimatedvalue, pending periodic assessment / ascertainment of condition.

9. DUTIES ON BONDED STOCKS

Excise / Customs duty is provided on stocks stored in Bonded Warehouses (excluding goods exemptedfrom duty / exports or where liability to pay duty is transferred to consignee).



81

10. GRANTS

a. In case of depreciable assets, the cost of the asset is shown at gross value and grant thereon istreated as Capital Grants, which are recognised in the Profit and Loss Account over the periodand in the proportion in which depreciation is charged.

b. Grants received against revenue items are recognised as income.

11. PROVISIONS

A provision is recognised when there is a present obligation as a result of a past event and it isprobable that an outflow of resources will be required to settle the obligation in respect of which areliable estimate can be made.

12. EXPLORATION & PRODUCTION EXPENDITURE

“Successful Efforts Method” of accounting is followed for Oil & Gas exploration and production activitiesas stated below:

a. Cost of surveys, studies, carrying and retaining undeveloped properties are expensed out in theyear of incurrence.

b. Cost of acquisition, drilling and development are treated as capital work-in-progress when incurredand are capitalised when the well is ready to commence commercial production.

c. Accumulated costs on exploratory wells in progress are expensed out in the year in which theyare determined to be dry.

The proportionate share in the assets, liabilities, income and expenditure of joint operations are accountedas per the participating interest in such joint operations.

13. RETIREMENT BENEFITS

Liability towards leave encashment, pension, post - retirement medical benefits and gratuity toemployees is determined on actuarial valuation done at the year end. Liability so determined is fundedin the case of gratuity and provided for in other cases.

14. SALE OF PRODUCTS

Sales are net of discount, include applicable excise duty, surcharge and other elements as are allowedto be recovered as part of the price but exclude VAT/sales tax.

15. RESEARCH & DEVELOPMENT

Expenditure incurred on research activities are charged off in the year in which they are incurred.Expenses directly related to development activities which are capable of generating future economicresources, are treated as intangible assets.

16. TAXES ON INCOME

a. Provision for current tax is made in accordance with the provisions of the Income Tax Act, 1961.

b. Deferred tax on account of timing difference between taxable and accounting income is providedby using tax rates and tax laws enacted or substantively enacted as at the balance sheet date.



82

17. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

Contingent Liabilities and Capital Commitments are considered only for items exceeding Rs.1.00Lakh in each case. Contingent Liabilities in respect of show cause notices are considered only whenconverted into demands.

18. ACCOUNTING/CLASSIFICATION OF EXPENDITURE AND INCOME

a. Insurance claims are accounted on acceptance basis.

b. All other claims/entitlements are accounted on the merits of each case/realisation.

c. Raw materials consumed are net of discount towards sharing of under-recoveries.

d. Income and expenditure of previous years, individually amounting to Rs. 5 lakhs and below arenot considered as prior period items.

20 B. NOTES FORMING PART OF ACCOUNTS

1. In respect of sale of sensitive petroleum products (MS, HSD, LPG (Domestic) and SKO (PDS)), asadvised by the Ministry of Petroleum & Natural Gas, a part of the under-recovery suffered by theCorporation during the year was compensated by ONGC and GAIL, by offering discounts on prices ofcrude, SKO and LPG purchased from them. Accordingly, the Corporation has accounted the discountreceived as follows:

(a) Rs.3,238.73 crores (2005-06 : Rs.2,531.11 crores) discount received, on crude oil purchasedfrom ONGC, has been adjusted against ‘Raw Material Cost’.

(b) Rs.922.41 crores (2005-06 : Rs.690.48 crores) discount received on purchase of SKO (PDS) andLPG (Domestic) from ONGC and GAIL has been adjusted against ‘Purchase of Product for Resale’.

2. Oil Bonds issued by the Government of India towards under-recoveries suffered by the Corporation onsale of sensitive petroleum products during 2006-07 for Rs.4,929.89 crores (2005-06 : Rs. 2,344.86crores), have been accounted under ‘Recovery under Subsidy Schemes’.

3. The process of eliminating inter divisional margin on inventories has been extended during the year toinclude finished lubricants leading to reduction in the closing valuation of inventories as of March 31,2007 and profit for the year by Rs. 50.38 crores.

4. During the year Significant Accounting Policy with respect to accounting of Machinery Spares wasmodified in line with the opinion obtained from Expert Advisory Committee of the Institute of CharteredAccountants of India, resulting in an increase in profit before tax by Rs. 0.69 crore (net).

5. (a) Inter-Oil Company transactions are reconciled on a continuous basis. However, year end balancesare subject to confirmation/reconciliation.

(b) Customers’ Accounts are reconciled on an ongoing basis and are not likely to have a materialimpact on the outstanding or classification of the accounts.

(c) In respect of doubtful debts, in addition to specific provisions made, an ad-hoc provision @ oneper cent of outstanding domestic debts (other than those relating to oil marketing companies andsubsidiary/joint venture companies) as of March 31, 2007 has also been made resulting in anadditional provision of Rs.15.76 crores.



83

6. Considering the uncertainties attached to certain benefits under the Income Tax Act, the Corporationhas been accounting for such tax benefits in the year they are allowed in the assessments. Accordingly,the Corporation, upon completion of assessment for the financial year 2003-04 (assessment year2004-05) has reversed provision for tax amounting to Rs. 302.98 crores (2005-06: Rs. 217.36 crores).

7. The Corporation has, as at the balance sheet date, entered into forward contracts amounting to USD589 million (2005-06: USD 389.13 million) to hedge its foreign currency exposure towards loans/Export Earnings. The Corporation does not generally hedge the risks on account of foreign currencyexposure for the payment of Crude. Exposures not hedged as of balance sheet date amounted to USD555.99 million (2005-06: USD 403.99 million) towards purchase of crude and USD 144 million (2005-06: USD 50 million) in respect of loans taken.

8. Deferred Tax Assets/(Liabilities) arising due to timing differences comprise of:

Rs./Crores

2006-07 2005-06

Deferred Tax AssetProvision for Gratuity / Pension 14.07 13.41Provision for Medical Benefits 4.40 4.16Provision for Leave Encashment 32.84 22.99Others 73.92 36.61Total (A) 125.23 77.17Deferred Tax LiabilityDepreciation (1,503.60) (1,418.89)Others (42.53) (42.72)Total (B) (1,546.13) (1,461.61)

Deferred Tax Liability (A + B) (1,420.90) (1,384.44)

9. Pending finalisation of the salary revision in respect of management employees effective 01 January2007, no provision has been made in the accounts for the differential amount payable, if any, as theamount is not determinable.

10. Related Party disclosure:


(Rs. /Crores)

Particulars Subsidiary Company Joint Venture Companies Total

2006-07 2005-06 2006-07 2005-06 2006-07 2005-06

Sales - - 198.16 267.02 198.16 267.02Purchases 0.74 6.16 7,760.36 6,907.32 7,761.11 6,913.48Sale of Assets - - - - - -Investment in Land 13.99 - - - 13.99 -Investment in equity 35.46 - 128.21 - 163.67 -Adv. Towards equity 7.50 - 12.00 5.00 19.50 5.00Share applicationpending allotment 3.48 4.29 0.21 12.00 3.69 16.29Interest - - 0.72 0.90 0.72 0.90Services - - 0.41 (1.36) 0.41 (1.36)Others 3.50 2.69 6.24 2.28 9.74 4.97


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The Corporation has entered into production sharing oil & gas exploration contracts with Govt. of India inconsortium with other body corporates, details of which are as under :

A) Name of the Block Participating Interestof HPCL in %

31/03/2007 31/03/2006

In India

Under NELP IV

KK- DWN-2002/2 20 20

KK- DWN-2002/3 20 20

Under NELP V

AA-ONN-2003/3 15 15

Under NELP VI

CY-DWN-2004/1 10 -

CY-DWN-2004/2 10 -

CY-DWN-2004/3 10 -

CY-DWN-2004/4 10 -

CY-PR-DWN-2004/1 10 -

CY-PR-DWN-2004/2 10 -


The names of related parties are as follows:

Subsidiary Company: Guru Gobind Singh Refineries Ltd.

Joint Venture Companies: Mangalore Refinery and Petrochemicals Ltd., Hindustan Colas Ltd.,

Prize Petroleum Co. Ltd., Petronet India Ltd., Petronet MHB Ltd.,

South Asia LPG Co. Pvt. Ltd., Bhagyanagar Gas Ltd., and Aavantika

Gas Limited

Key Management Personnel: Shri M. B. Lal, Chairman & Managing Director

Shri Arun Balakrishnan, Director - Human Resources *

Shri C. Ramulu, Director - Finance

Shri S. Roy Choudhury, Director - Marketing

Shri M. A. Tankiwala, Director - Refineries

* Appointed as Chairman & Managing Director effective April 01, 2007 in place of Shri M. B. Lal

Details of remuneration to directors are given in note 20 B. 12 E of Notes to Accounts.


85

KG-DWN-2004/1 10 -

KG-DWN-2004/2 10 -

KG-DWN-2004/3 10 -

KG-DWN-2004/5 10 -

KG-DWN-2004/6 10 -

MB-OSN-2004/1 20 -

MB-OSN-2004/2 20 -

RJ-ONN-2004/1 20 -

RJ-ONN-2004/3 15 -

Others

ONGC Cluster 7 60 -

Outside India

BLOCK 56-OMAN 12.50 -

BLOCK WA-388-P, AUSTRALIA 20 -

B) The approval of assignment of Cambay block- CB-ONN-2002/3 in favour of the Company by Prize PetroleumCo. Ltd, awarded under NELP IV is awaited from Ministry of Petroleum and Natural Gas.

11. In compliance with AS-27 ‘Financial Reporting of Interest in Joint Ventures’, the required information isas under:

a) Jointly Controlled Entities

Country of Percentage of Percentage ofIncorporation ownership ownership

interest as on interest as on31st March, 2007 31st March, 2006

Hindustan Colas Ltd. India 50.00 50.00

South Asia LPG Company Pvt. Ltd. India 50.00 50.00

Prize Petroleum Company Ltd. India 50.00 50.00

Mangalore Refinery andPetrochemicals Ltd. India 16.95 16.95

Bhagyanagar Gas Ltd. India 25.00 25.00

Petronet India Ltd. India 16.00 16.00

Petronet MHB Ltd. India 28.77 26.00

Avantika Gas Ltd. India 25.00 -



86

b) In respect of jointly controlled entities, the Corporation’s share of assets, liabilities, income,expenses, contingent liabilities and capital commitments as furnished below, have been includedon the basis of audited / unaudited financial statements received from these joint venture companies:

Rs. / Crores

2006-07 2005-06

i. Assets� Long Term Assets 1,027.61 977.88� Investments 15.16 13.00� Current Assets 800.25 674.22

ii. Liabilities� Loans (Secured & Unsecured) 520.95 741.76� Current Liabilities & Provisions 572.75 438.56� Deferred Tax Liability 83.57 9.75

iii. Income 4,954.86 4,298.58iv. Expenses* 4,868.03 4,252.14v. Contingent Liabilities 141.30 142.65vi. Capital Commitments 50.29 113.81

* Including TaxRs. / Crores

2006-07 2005-0612 A. Estimated amount of contracts remaining to

be executed on Capital Account not provided for 2,600.38 3,492.52

B. No provision has been made in the accounts inrespect of the following disputed demands/claimssince they are subject to appeals/representationsfiled by the Corporationi. Income Tax 0.20 -ii. Sales Tax/Octroi 3,241.37 1,811.78iii. Excise/Customs 574.70 788.64iv. Land Rentals & Licence Fees 91.37 65.41v. Others 37.12 29.69

3,944.76 2,695.52

C. Contingent Liabilities not provided for in respectof appeals filed against the Corporationi. Income Tax 0.00 10.55ii. Sales Tax/Octroi 84.43 84.53iii. Excise/Customs 75.55 69.59iv. Employee Benefits/Demands

(to the extent quantifiable) 89.37 72.15v. Guarantees on behalf of others 160.88 158.53vi. Claims against the Corporation not

acknowledged as debts 200.65 189.07vii. Others 20.57 -

631.45 584.42



87

Rs. / Crores

2006-07 2005-06

D. Payment to Auditors:

- Audit fees 0.13 0.11

- Tax audit fees 0.01 0.01

- Other Services 0.09 0.05

- Reimbursement of expenses 0.03 0.03

0.26 0.20

E. Managerial Remuneration :

- Salary and Allowances 0.61 0.52

- Contribution to Provident Fund and other funds 0.04 0.05

- Pension and Gratuity 0.02 0.02

- Other benefits 0.14 0.14

F. C.I.F.value of imports during the year (excludes

canalised imports):

- Raw materials 27,746.34 19,923.73

- Stores, Spares and Chemicals 42.68 53.93

- Capital Goods, Components and Spares 205.80 85.16

G. (i) Expenditure in foreign currency on account of:

Engineering, Technical and other services,

demurrage charges, royalties and other matters 107.74 105.79

(ii) Foreign Currency payments for crude 27,260.55 19,058.79

H. Earnings in foreign exchange: (On accrual basis)

Export of goods calculated on FOB basis 5,198.84 3,271.39

Includes Rs. 449.57 crores (2005-06 : Rs. 453.11 crores)

received in Indian currency out of repatriable funds

of foreign airlines customer

I. Value of Raw Materials, Spare Parts and

Components consumed

(i) Raw Materials

- Imported (in %) 82.33 81.75

- Imported (in Value) 29,486.89 20,913.10

- Indigenous (in %) 17.67 18.25

- Indigenous (in Value) 6,329.91 4,669.08



88

Rs. / Crores

2006-07 2005-06

(ii) Spare Parts & Components:

- Imported (in %) 33.11 22.02

- Imported (in Value) 30.27 26.90

- Indigenous (in %) 66.89 77.98

- Indigenous (in Value) 61.15 95.27

J. Licensed capacity at year end in Metric Tonnes p.a.

(a) Petroleum fuel and lube products 13,000,000 13,000,000

(b) Lubricating Oils 122,173 122,173

(c) Textile Auxiliaries 3,391 3,391

(d) Hydraulic Brake Fluid 556 556

(e) Insecticides 782 782

(f) Greases 5,913 5,913

K. Installed capacity at year end in Metric Tonnes

per annum as certified by the Management on

which the Auditors have relied upon:

(a) Petroleum fuel and lube products 13,000,000 13,000,000

(b) Lubricating Oils,Greases and Textile Auxiliaries * 319,779 319,779

(c) Hydraulic Brake Fluid and Insecticides 4,062 4,062

* Product manufacturing facilities are

interchangeable

L. Production in Metric Tonnes:

(a) Petroleum fuel and lube products

i. Bulk Petroluem Products 15,358,188 12,734,631

ii. Lubricating Oil Base Stocks(including

Transformer Oil Base Stocks) 338,074 279,757

iii. Carbon Black Feed Stock 35,324 27,818

iv. Rubber Processing oil 32,274 22,555

(b) Lubricating Oils 155,164 130,519

(c) Textile Auxiliaries 575 554

(d) Hydraulic Brake Fluid 309 -

(e) Insecticides 331 360

(f) Greases 2,490 2,100



89

No adjustment for transit/operational/temparature variation/consumption for own operation have been made inregard to quantitative information

M. Information for each class of goods purchased, sold and stocks during the year :Rs./Crores

Opening Stock Purchases Sales Closing Stock

2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06

Bulk MT 1892101 1556197 13448825 13555011 28808571 25903093 1889164 1892101Petroleum Value 5,160.43 3,876.43 46,840.56 42,136.65 89,259.71 72,373.63 5,320.28 5,160.43Products

Lubricating MT 18634 31033 - - 55763 58486 52813 18634Oil Base Stocks Value 58.99 61.95 - - 259.44 216.61 148.13 58.99(IncludingTransformer oilBase stock)

Carbon Black MT 1157 193 - 26852 34278 53301 1203 1157Feed Stock Value 1.98 0.24 - 41.47 64.34 97.48 1.86 1.98

Axle Oil MT 28 40 - - 16 12 12 28Value 0.13 0.13 - - 0.06 0.03 0.06 0.13

Lubricating MT 24223 31308 - - 279648 274479 28143 24223Oi ls Value 147.87 155.88 - - 1,830.11 1,334.01 147.30 147.87

Textile MT 41 33 - - 593 546 23 41Auxillaries Value 0.24 0.14 - - 4.02 3.00 0.16 0.24

Insecticides MT 397 584 - - 304 547 424 397Value 3.43 2.99 - - 2.31 3.89 3.48 3.43

Greases MT 1894 1985 1480 - 3833 2191 2031 1894Value 11.67 9.30 9.66 - 28.04 15.46 15.38 11.67

AutomotiveAccessories Value - 0.11 - - - - - -

Total 5,384.74 4,107.17 46,850.22 42,178.12 91,448.03 74,044.11 5,636.65 5,384.74



90

N. Raw Materials consumed:

(a) Crude Oil Processed:

- Tonnes 16,659,701 13,795,237

- Value 35,365.11 25,210.51

(b) Other Petroleum Products

- Tonnes 75,385 51,879

- Value 324.26 150.06

(c) Additives, Inhibitors and Chemicals:

- Value 72.29 73.03

(d) Non-Petroleum Products:

- Value 55.14 16.69

O. Expenditure incurred on Research and Development

- Capital 0.00 0.78

- Revenue 2.92 0.71

P. Interest on Project specific borrowings capitalised 142.40 41.31

Q. Exchange Differences

i) Adjusted in the carrying amount of

Fixed Assets during the accounting period 4.25 0.13

ii) In respect of Forward Exchange contracts

to be recognised in Profit or Loss for one or 207.75 94.66

more subsequent accounting periods


Rs. / Crores

2006-07 2005-06


91

R. Information regarding Primary Segment Reporting as per AS-17 for the year ended March 31, 2007 isas under:

Rs. / Crores

Notes:1. The Company is engaged in the following business segments:

a) Downstream i.e. Refining and Marketing of Petroleum Products.b) Exploration and Production of Hydrocarbons Segments have been identified taking into account the

nature of activities and the nature of risks and returns.2. Segment Revenue comprises the following:

a) Turnover (Net of Excise Duties).b) Subsidy from Government of India.c) Other income (excluding interest income, dividend income and investment income).

3. There are no geographical segments.

13. Previous year’s figures have been regrouped / reclassified wherever necessary.

2006-07 2005-06

Downstream Exploration Total Downstream Exploration TotalPetroleum & Production Petroleum & Production

RevenueExternal Revenue 89,408.07 - 89,408.07 71,098.79 - 71,098.79Inter-segment Revenue - - - - - -

Total Revenue 89,408.07 - 89,408.07 71,098.79 - 71,098.79

ResultSegment Results 2,211.88 (20.11) 2,191.77 317.78 (12.42) 305.36Less: Unallocated Expenses - - - - - -Net of unallocated Income - - - - - -

Operating Profit 2,211.88 (20.11) 2,191.77 317.78 (12.42) 305.36

Less:Borrowing Cost 422.98 175.88Provision for diminutionin investments 99.30 1.08Loss / (Profit) on Sale ofInvestments 20.03 -Add: Interest/Dividend(Incl. Share of profit from PII) 317.70 151.92Profit/(Loss) on Saleof Investments - 4.78Profit before Tax 1,967.16 285.10Less: Taxes (includingDeferred tax / FBT) 395.99 (120.53)Profit after Tax 1,571.17 405.63Other InformationSegment Assets 23,931.09 4.58 23,935.67 20,154.45 - 20,154.45Corporate Assets 7,720.90 4,584.45Total Assets 31,656.57 24,738.90Segment Liabilities 9,012.11 40.56 9,052.67 7,509.65 15.87 7,525.52Corporate Liabilities 13,005.25 8,477.64Total Liabilities 22,057.92 16,003.16Capital Expenditure 4,091.72 4.58 4,096.30 2,694.43 - 2,694.43Depreciation 704.22 - 704.22 690.31 - 690.31



92

2006-07 2005-06

A. Cash Flow From Operating ActivitiesNet Profit before Tax & Extraordinary items 1,967.16 285.10Adjustments for :

Depreciation / Amortisation 704.00 690.23Provision for assets under reconciliation written back - (7.68)Loss on Sale/write off of Fixed Assets/ CWIP 3.41 7.59Amortisation of capital grant (0.19) (0.08)Spares written off 4.87 2.48Provision for diminution in value of investments 99.30 1.08Borrowing Cost 422.98 175.88Exchange rate difference on loans - 7.71Provision for Doubtful Receivables written back - (1.18)Provision for Doubtful Debts 42.79 5.02Interest Income (265.19) (73.72)Share of Profit from PII (0.95) (1.03)Dividend Received (21.51) (30.42)(Profit)/Loss on sale of Oil bonds 20.03 (4.78)

Operating Profit before Working Capital Changes 2,976.70 1,056.20(Increase) / Decrease in Working Capital :Trade Receivables (228.31) (348.67)Other Receivables 95.25 838.52Inventories (292.98) (2,098.81)Trade and other Payables 1,319.59 1,026.94

893.55 (582.02)Cash generated from operations 3,870.25 474.18

Direct Taxes / FBT refund / (paid) - Net (82.74) 130.41

Cash Flow before extraordinary items 3,787.51 604.59Extraordinary items - -

Net Cash from operating activities (A) 3,787.51 604.59B. Cash Flow From Investing Activities

Purchase of Fixed Assets (including Capital Workin Progress / excluding interest capitalised) (3,851.02) (2,482.91)Sale of Fixed Assets 10.47 1.74Purchase of Investment (Including share application moneypending allotment/Adv. towards Equity) (5,101.05) (3,143.17)Sale Proceeds of Oil bonds 1,930.70 854.78Interest received 184.24 62.69Dividend Received 21.51 30.42Share of profit from PII 0.95 1.03

Net Cash from investing activities (B) (6,804.20) (4,675.42)

Rs./ Crores

Cash Flow Statement for the year ended 31st MarCash Flow Statement for the year ended 31st MarCash Flow Statement for the year ended 31st MarCash Flow Statement for the year ended 31st MarCash Flow Statement for the year ended 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007


93

C. Cash Flow From Financing ActivitiesProceeds from Calls in Arrear(Net) 0.48 0.40Long term loans raised 1,249.99 902.00Fixed deposits / debentures repaid - (0.09)Short term loans raised / (repaid) 2,586.41 3,408.81Interest Paid on Loans (497.41) (174.03)Dividend paid (including dividend distribution tax) (347.90) (386.57)Capital grant against purchase of assets - 5.02

Net Cash from financing activities (C) 2,991.57 3,755.54Net Increase / (Decrease) in Cash andCash Equivalents (A) + (B) + (C) (25.12) (315.29)

Cash & Cash Equivalents as on 1st April (Opening) :Cash / Cheques on Hand 3.30 1.80Balances with Scheduled Banks

- On Current Accounts 36.11 196.74- Others 3.12 3.03

Balances with other Banks 0.06 0.0642.59 201.63

Overdrafts from Banks (476.16) (319.91)(433.57) (118.28)

Cash & Cash Equivalents as on 31st March (Closing):Cash / Cheques on Hand 6.57 3.30Balances with Scheduled Banks


Balances with other Banks 0.07 0.0686.79 42.59

Overdrafts from Banks (545.48) (476.16)(458.69) (433.57)

Net Increase / (Decrease) in Cash and Cash Equivalents (25.12) (315.29)

Note: Previous year’s figures have been regrouped / reclassifiedwherever necessary.

Rs./ Crores

2006-07 2005-06

FOR AND ON BEHALF OF THE BOARD




Date : May 29, 2007Place : New Delhi

Cash Flow Statement for the year ended 31st MarCash Flow Statement for the year ended 31st MarCash Flow Statement for the year ended 31st MarCash Flow Statement for the year ended 31st MarCash Flow Statement for the year ended 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007


94

Balance Sheet Abstract and CompanyBalance Sheet Abstract and CompanyBalance Sheet Abstract and CompanyBalance Sheet Abstract and CompanyBalance Sheet Abstract and Company’s General Business Pr’s General Business Pr’s General Business Pr’s General Business Pr’s General Business Profileofileofileofileofile

I. REGISTRATION DETAILSREGISTRATION NO. : 0 8 8 5 8 STATE CODE: 1 1BALANCE SHEET DATE: 3 1 0 3 2 0 0 7

II. CAPITAL RAISED DURING THE YEAR (Amount in Rs.Thousands)PUBLIC ISSUE RIGHTS ISSUE

N I L N I LBONUS ISSUE PRIVATE PLACEMENT

N I L N I LIII. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs.Thousands)

TOTAL LIABILITIES TOTAL ASSETS2 1 5 3 7 0 7 8 7 2 1 5 3 7 0 7 8 7

SOURCES OF FUNDSPAID -UP CAPITAL RESERVES & SURPLUS

3 3 8 9 5 3 9 9 2 5 9 6 9 3 3SECURED LOANS UNSECURED LOANS

1 0 0 5 4 8 5 8 9 5 1 2 0 4 6 0DEFFERED TAX LIABILITY

1 4 2 0 8 9 9 7APPLICATION OF FUNDS

NET FIXED ASSETS INVESTMENTS1 3 0 6 4 4 0 5 5 7 1 2 7 4 6 7 0

NET CURRENT ASSETS MISC.EXPENDITURE1 3 4 5 2 0 6 2 N I L

ACCUMULATED LOSSESN I L

IV. PERFORMANCE OF THE COMPANY (Amount in Rs.Thousands)TURNOVER TOTAL EXPENDITURE

9 1 4 4 8 0 2 9 5 8 7 7 6 4 6 5 4 7PROFIT /LOSS BEFORE TAX PROFIT /LOSS AFTER TAX

+ 1 9 6 7 1 6 2 1 + 1 5 7 1 1 6 7 3EARNINGS PER SHARE IN RS. DIVIDEND RATE %

4 6 . 3 5 1 8 0V. Generic Names of Three Principal

Products of the Company(as per monetary terms )Item Code No. (ITC Code) 2 7 1 0Product Description B U L K P E T R O L E U M

P R O D U C T S

Item Code No. (ITC Code) 2 7 1 0 0 0 4 1 / 6 1Product Description L U B R I C A N T S

Item Code No. (ITC Code) 2 9 0 1 2 2 0 0Product Description P R O P Y L E N E

ARUN BALAKRISHNAN C. RAMULU N.R.NARAYANANChairman & Managing Director Director - Finance Company Secretary



95

1. Name of the Subsidiary company Guru Gobind Singh Refineries Ltd.

2. Financial period of the subsidiary company ended 31st March 2007

3. Total issued Share Capital of the subsidiary company 33,89,40,000 Equity Shares of Rs.10 each

4. Number of shares held in the subsidiary company 33,54,60,000 Equity Shares of Rs. 10 each

5. Percentage of shares held in the subscribed capital

of the subsidiary 100%

6. The net aggregate amount, so far as it concerns

the members of the company and is not dealt within

the accounts, of the Subsidiary’s

i) Profit / (Loss) for the year ended 31st March 2007 NIL

ii) Profit / (Loss) of the previous financial years of

the subsidiary since it became the Company’s

subsidiary NIL

7. The net aggregate amount, so far as it concerns the

members of the Company and is dealt within the

Company’s accounts, of the subsidiary’s

i) Profit / (Loss) for the year ended 31st March 2007 NIL

ii) Profit / (Loss) of the previous financial years of the

subsidiary since it became the Company’s subsidiary NIL

Statement pursuant to Section 212 of the Companies Act, 1956Statement pursuant to Section 212 of the Companies Act, 1956Statement pursuant to Section 212 of the Companies Act, 1956Statement pursuant to Section 212 of the Companies Act, 1956Statement pursuant to Section 212 of the Companies Act, 1956relating to Subsidiarrelating to Subsidiarrelating to Subsidiarrelating to Subsidiarrelating to Subsidiary Companies.y Companies.y Companies.y Companies.y Companies.

For and on behalf of the Board

ARUN BALAKRISHNAN C. RAMULU N.R.NARAYANANChairman & Managing Director Director - Finance Company Secretary



96

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619 (4) OF

THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF HINDUSTAN PETROLEUM CORPORTION LIMITED

FOR THE YEAR ENDED 31 MARCH 2007

The preparation of financial statements of Hindustan Petroleum Corporation Limited for the year ended

31 March 2007 in accordance with the financial reporting framework prescribed under the Companies Act,

1956 is the responsibility of the management of the company. The statutory auditors appointed by the Comptroller

and Auditor General of India under Section 619(2) of the Companies Act, 1956 are responsible for expressing

opinion on these financial statements under section 227 of the Companies Act, 1956 based on independent

audit in accordance with the auditing and assurance standards prescribed by their professional body the

Institute of Chartered Accountants of India. This is stated to have been done by them vide their Audit Report

dated 29 May 2007.

I, on the behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit under

section 619 (3) (b) of the Companies Act, 1956 of the financial statements of Hindustan Petroleum Corporation

Limited for the year ended 31 March 2007. On the basis of my audit nothing significant has come to my

knowledge which would give rise to any comment upon or supplement to Statutory Auditors’ report under

section 619(4) of the Companies Act, 1956.

For and on the behalf of the

Comptroller and Auditor General of India

Revathy Iyer

Principal Director of Commercial Audit

& ex-officio Member, Audit Board-II, Mumbai.

Place: Mumbai

Date: 4 July, 2007

C & AGC & AGC & AGC & AGC & AG’s Comments’s Comments’s Comments’s Comments’s Comments


97

Joint VJoint VJoint VJoint VJoint Venturesenturesenturesenturesentures

Sl. Name of the Date of Major Shareholdings Nature of OperationsNo. Joint Venture Incorporation

1. Mangalore Refinery & 07.03.1988 ONGC - 71.62% Refining of crude oil andPetrochemicals Ltd. HPCL - 16.95% manufacturing of petroleum

products.

2. Hindustan Colas Ltd. 17.07.1995 HPCL - 50.00% Manufacture and MarketingCOLASIE - 50.00% of Bitumen Emulsions &

Modified Bitumen.

3. Petronet India Ltd. 26.05.1997 HPCL - 16.00% To act as nodal agency forFinancial / developing identified andStrategic prioritized petroleumInvestors - 50.00% products pipelines in theOther PSUs - 34.00% country.

4. Petronet MHB Ltd.* 31.07.1998 HPCL - 28.77% Operation and maintenancePetronet of petroleum productsIndia Ltd. - 7.89% pipeline betweenONGC - 28.77% Mangalore-Hassan-Financial / Bangalore.StrategicInvestors - 34.57%

* Company has gone through the process of financial restructuring

5. Prize Petroleum Co. Ltd. 28.10.1988 HPCL - 50.00% Exploration and productionICICI & activities in the oil and gasAssociates - 45.00% sector.HDFC - 5.00%

6. South Asia LPG Co. 16.11.1999 HPCL - 50.00% Construction of LPGPvt. Ltd. TOTAL - 50.00% underground cavern storage

of 60,000 MT capacity andassociated receiving anddespatch facilities atVisakhapatnam.

7. Bhagyanagar Gas Ltd. 22.08.2003 HPCL - 25.00% Distribution and marketingGAIL - 25.00% of environmental friendlyAP Govt. - 50.00% fuels (green fuels) viz.

CNG and Auto LPG in theState of Andhra Pradesh.

8. Aavantika Gas Ltd. 07.06.2006 HPCL - 25.00% Distribution and marketingGAIL - 25.00% of environmental friendlyFinancial - 50.00% fuels (green fuels) viz.Institutions CNG and Auto LPG in the

State of Madhya Pradesh.


98


AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF HINDUSTAN PETROLEUM CORPORATION

LIMITED ON THE CONSOLIDATED FINANCIAL STATEMENTS OF HINDUSTAN PETROLEUM

CORPORATION LIMITED, ITS SUBSIDIARY AND ITS INTERESTS IN JOINT VENTURE COMPANIES

1. We have audited the attached Consolidated Balance Sheet of Hindustan Petroleum Corporation

Limited, its Subsidiary and its interests in Joint Venture Companies as at March 31, 2007, the Consolidated

Profit and Loss Account and Consolidated Cash Flow Statement for the year ended on that date annexed

thereto, which we have signed under reference to this report. These financial statements are the

responsibility of Hindustan Petroleum Corporation Limited’s Management. Our responsibility is to

express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with Generally Accepted Auditing Standards in India. These

Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial

statements are prepared, in all material respects, in accordance with an identified financial reporting

framework and are free of material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by management, as well as evaluating the

overall financial statement presentation. We believe that our audit provides a reasonable basis for our

opinion.

3. The audited financial statements of the Subsidiary reflecting total assets of Rs. 338.94 crores as at

March 31, 2007 and Nil revenue for the year ended on that date and of six of the Joint Venture Companies

reflecting total assets of Rs. 1,258.30 crores as at March 31, 2007 and revenue of Rs. 4,954.69 crores for

the year ended on that date, have been audited by other auditors, on which we have relied. We have also

relied on unaudited provisional financial statements of two other Joint Venture Companies, viz. Avantika

Gas Limited and Petronet India Limited, reflecting total assets of Rs. 12.18 crores as at March 31, 2007

and revenues of Rs. 0.17 crores for the year ended on that date, for the purpose of our examination of the

consolidated financial statements.

4. We report that the consolidated financial statements have been prepared by the Company in accordance

with the requirements of Accounting Standard 21 “Consolidated Financial Statements” and Accounting

Standard 27 “Financial Reporting of Interests in Joint Ventures”, issued by the Institute of Chartered

Accountants of India, on the basis of separate audited financial statements of Hindustan Petroleum

Corporation Limited, its subsidiary and six Joint Venture Companies and unaudited provisional financial

statements of two Joint Venture Companies.

5. On the basis of information and explanations given to us and read with note no. 12 of Schedule 20

regarding treatment of Income Tax benefits, and in consideration of separate audit reports on individual

financial statements, of Hindustan Petroleum Corporation Limited, its Subsidiary and Joint Venture

Companies, in our opinion, the consolidated financial statements give a true fair view in conformity with

the accounting principles generally accepted in India:


99

(a) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of Hindustan

Petroleum Corporation Limited, its Subsidiary and its Joint Venture Companies as at March 31,

2007;

(b) in the case of the Consolidated Profit and Loss Account, of the consolidated results of operations of

Hindustan Petroleum Corporation Limited, its Subsidiary and its Joint Venture Companies for the

year ended on that date; and

(c) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of Hindustan

Petroleum Corporation Limited, and its Subsidiary and eight Joint Venture Companies for the year

ended on that date.





Launch of DRP Module by Shri S Roy Choudhury, Director (Marketing) Signing of ‘Contract of Affreightment’ with SCI

Signing of Agreement for External Commercial BorrowingBetween HPCL & M/s DePfa Investment Bank


100

Consolidated Balance Sheet as at 31st MarConsolidated Balance Sheet as at 31st MarConsolidated Balance Sheet as at 31st MarConsolidated Balance Sheet as at 31st MarConsolidated Balance Sheet as at 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007

Rs./Crores

SCHEDULE 2006-07 2005-06SOURCES OF FUNDSShareholders’ Funds:

a) Capital 1 340.51 340.50b) Reserves and Surplus 2 9,227.34 8,294.29

9,567.85 8,634.79Share Application Money Pending Allotment 1.24 28.40Loan Funds:

a) Secured Loans 3 1,189.33 1,753.82b) Unsecured Loans 4 9,842.41 5,648.44

11,031.74 7,402.26Deferred Tax Liability 1,504.47 1,394.19TOTAL 22,105.30 17,459.64

APPLICATION OF FUNDSFixed Assets: 5

a) Gross Block 17,250.73 14,983.41b) Less: Depreciation 7,394.38 6,640.22c) Net Block 9,856.35 8,343.19d) Capital Work-in-Progress 6 4,546.09 2,635.09

14,402.44 10,978.28Investments 7 6,112.90 3,214.87Current Assets, Loans and Advances:

a) Inventories 8 8,528.45 8,134.39b) Sundry Debtors 9 1,790.40 1,594.43c) Cash and Bank Balances 10 125.76 56.01d) Other Current Assets 11 92.63 11.55e) Loans and Advances 12 1,724.53 1,852.41

12,261.77 11,648.79Less:Current Liabilities and Provisions: 13

a) Liabilities 9,423.79 7,808.54b) Provisions 1,254.55 578.47

10,678.34 8,387.01Net Current Assets 1,583.43 3,261.78Miscellaneous Expenditure to the extent notwritten off or adjusted 6.53 4.71TOTAL 22,105.30 17,459.64

NOTES FORMING PART OF CONSOLIDATED ACCOUNTS 20

ARUN BALAKRISHNAN FOR N.M.RAIJI & CO. FOR SUDIT K. PAREKH & CO.Chairman & Managing Director Chartered Accountants Chartered Accountants

C. RAMULU VINAY D. BALSE SRIKANT V. JILLADirector-Finance Partner Partner

N.R. NARAYANANCompany Secretary



101

Rs./Crores

SCHEDULE 2006-07 2005-06INCOME

Sale of Products 97,019.84 78,881.98Less: Excise duty Paid 8,520.42 6,575.07Net Sales 88,499.42 72,306.91Recovery under Subsidy Schemes 5,470.12 2,876.15Other Income 14 711.09 358.93

94,680.63 75,541.99INCREASE / (DECREASE) IN INVENTORY 15 378.40 1,359.64

EXPENDITURE AND CHARGESPurchase of Products for resale 46,854.33 42,180.80Raw materials consumed 40,462.38 29,349.43Packages consumed 111.65 101.28Excise duty on inventory differential 57.20 171.95Transhipping Expenses 1,749.53 1,520.15Payments to and provisions for Employees 16 741.59 651.84Exploration Expenses 20.74 12.44Other Operating Expenses 17 1,664.49 1,551.27Depreciation/Amortisation 778.18 762.07Borrowing Cost 18 459.81 220.91Miscellaneous Expenditure written off 0.06 6.01

92,899.96 76,528.15PROFIT FOR THE YEAR BEFORE PRIORPERIOD ADJUSTMENTS AND TAXES 2,159.07 373.48PRIOR PERIOD DEBITS / (CREDITS) (NET) 19 (6.05) -

PROFIT BEFORE TAXES 2,165.12 373.48PROVISION FOR CURRENT TAXATION 667.45 85.54PROVISION FOR DEFERRED TAXATION (NET) 111.79 44.07PROVISION FOR TAXATION IN EARLIER YEARSWRITTEN BACK (298.22) (219.88)PROVISION FOR FRINGE BENEFIT TAX 10.08 11.68

PROFIT AFTER TAXES 1,674.02 452.07BALANCE BROUGHT FORWARD 6,197.29 5,926.50PROFIT AVAILABLE FOR APPROPRIATION 7,871.31 6,378.57

APPROPRIATED FOR:General Reserve 157.36 40.67Interim Dividend 203.60 -Proposed Final Dividend 431.67 123.32Tax on Distributed Profits 101.91 17.29Market Development Fund - -

BALANCE CARRIED FORWARD 6,976.77 6,197.29EARNINGS PER SHARE (in Rs.) 49.39 13.34

(2006-07 : EPS = Net Profit - Rs. 1674.02 crores / Weighted avg. no. of shares - 33.895 crores;2005-06 : EPS = Net Profit - Rs. 452.07 crores / Weighted avg. no. of shares - 33.894 crores )

NOTES FORMING PART OF CONSOLIDATED ACCOUNTS 20

Consolidated PrConsolidated PrConsolidated PrConsolidated PrConsolidated Profit & Loss Aofit & Loss Aofit & Loss Aofit & Loss Aofit & Loss Account for the year ended 31st Marccount for the year ended 31st Marccount for the year ended 31st Marccount for the year ended 31st Marccount for the year ended 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007






102

Rs./Crores2006-07 2005-06

1. CAPITAL

A. Authorised :75,000 Cumulative RedeemablePreference Shares of Rs. 100/- each 0.75 0.7534,92,50,000 Equity Shares of Rs. 10/- each 349.25 349.25

350.00 350.00B. Issued :

33,93,30,000 Equity Shares of Rs.10/- each 339.33 339.33

C. Issued, Subscribed & Called up :33,93,30,000 Equity Shares of Rs. 10/- each fully paid up 339.33 339.33Less: Calls unpaid by Others 0.38 0.39

338.95 338.94

Preference Shares 1.56 1.56340.51 340.50

2. RESERVES AND SURPLUS

Share Premium AccountAs per last Balance Sheet 1,044.66 1,048.72Less : Calls Unpaid 12.46 12.93

1,032.20 1,035.79Capital GrantAs per Last Balance Sheet 4.94 -Received during the year - 5.02Less: Amortised during the year 0.19 0.08

4.75 4.94

Capital Reserve 0.08 0.08Market Development Reserve 1.40 1.40General ReserveAs per last Balance Sheet 1,054.78 1,014.12Add : Transfer from Profit & Loss Account 157.36 40.67

1,212.14 1,054.79Profit & Loss Account Surplus as per Account annexed 6,976.77 6,197.29

9,227.34 8,294.29

3. SECURED LOANS

Collateral Borrowing and Lending Obligation (CBLO) 460.00 1,010.00Overdrafts from Banks 545.49 476.16Rupee Term Loan 28.82 26.32Long Term Loans from Banks 63.07 138.16Interest accrued and due - 11.34Foreign Currency Loan 45.39 64.02Others 46.56 27.82

1,189.33 1,753.82

Schedules forming part of the Consolidated Balance SheetSchedules forming part of the Consolidated Balance SheetSchedules forming part of the Consolidated Balance SheetSchedules forming part of the Consolidated Balance SheetSchedules forming part of the Consolidated Balance Sheet


103

A. OTHER THAN INTANGIBLE ASSETS1. Land - Freehold 300.13 266.87 - 567.00 - - 567.00 300.132. Roads and Culverts 664.99 128.64 0.86 792.77 11.82 70.16 722.61 606.563. Buildings 1,296.40 264.44 1.63 1,559.21 28.84 194.10 1,365.11 1,130.764. Leasehold Land 132.51 7.34 14.96 124.89 4.57 28.27 96.62 107.655. Railway Siding and

Rolling Stock 274.78 6.64 - 281.42 12.82 127.21 154.21 160.396. Plant and Machinery 11,856.22 1,568.81 23.63 13,401.40 684.77 6,709.34 6,692.06 5,814.077. Furniture, Fixtures

and Office/LaboratoryEquipment 317.06 36.74 12.42 341.38 25.31 174.62 166.76 157.48

8. Transport Equipment 92.82 10.92 1.54 102.20 7.34 53.64 48.56 45.219. Unallocated Capital Expenditure

on Land Development 0.20 - - 0.20 - 0.20 - -10. Share of FA in Joint Venture

- ONGC Onshore Marginal Fields 0.01 2.10 - 2.11 0.05 0.05 2.06 0.01- Project Sanaganpur 0.27 1.61 - 1.88 - - 1.88 0.27

Total (A) 14,935.39 2,294.11 55.04 17,174.46 775.52 7,357.59 9,816.87 8,322.53

B. INTANGIBLE ASSETS1. Right of Way 18.12 7.47 - 25.59 - 0.01 25.58 18.122. Technical/Process Licences 14.37 0.84 - 15.21 1.50 6.71 8.50 9.163. Software 32.82 1.87 0.29 34.40 3.93 29.00 5.40 7.47

Total (B) 65.31 10.18 0.29 75.20 5.43 35.72 39.48 34.75

Assets not in use held for disposal - 1.07 - 1.07 0.66 0.66 0.41 -Less : Provision - - - - - 0.41 (0.41) -

Total (C) - 1.07 - 1.07 0.66 1.07 - -

GRAND TOTAL (A+B+C) 15,000.70 2,305.36 55.33 17,250.73 781.61 7,394.38 9,856.35 8,357.28

Previous Year 13,884.19 1,155.69 56.45 14,983.43 764.48 6,640.22 8,343.21

Gross Blockat cost

as at01-04-2006

Additions/Reclassifi-

cations

Gross Blockat cost

as at31-03-2007

Depreciationand

Amortisationfor the year

2006-2007

Deductions/Reclassifi-

cations

TotalDepreciation

andAmortisation

upto31-03-2007

Net Blockas at

31-03-2007

Net Blockas at

31-03-2006


5. FIXED ASSETS Rs./Crores

Rs./Crores2006-07 2005-06

4. UNSECURED LOANSFixed Deposits 0.02 0.02From Oil Industry Development Board 1,250.00 650.00Clean Loans 5,830.00 2,300.00Syndicated Loans from Foreign Banks 1,075.16 459.60Foreign Currency Loans 44.51 186.38Advance towards Equity 1.25 2.64Interest Accrued & Due - 1.05Short Term Loans From Banks 1,356.87 1,770.93Sales Tax Deferment Loan 30.33 23.57Bank Overdraft 0.02 -Others 254.25 254.25

9,842.41 5,648.44


104


Rs./Crores

2006-07 2005-066. CAPITAL WORK-IN-PROGRESS (at cost)

Unallocated Capital Expenditure and Materials at Site 3,878.91 1,786.06Advances for Capital Expenditure 84.93 93.52Capital Stores 33.45 426.72Capital Stores lying with Contractors 109.87 117.60Capital goods in transit 124.62 40.38

4,231.78 2,464.28

Construction period expenses pending apportionment (Net of recovery) 0.15 0.22Establishment charges 148.85 121.86Interest 135.05 34.51Other Borrowing Cost 21.09 7.50Depreciation 9.17 6.72

314.31 170.814,546.09 2,635.09

7. INVESTMENTS

I. LONG TERM INVESTMENTS (at cost) :


Quoted

1. Mangalore Petrochemicals Ltd. 0.00 -

2. 6.96% Oil Companies Government Of India Special Bonds 2009 - 81.00

3. 7.00% Oil Companies Government Of India Special Bonds 2012 781.64 781.64

Unquoted

1. Petronet MHB Limited 6.93 0.05

2. Petronet VK Limited 4.16 4.16Less : Provision for Investment (2.72) -

3. Petronet CCK Limited 4.16 4.16Less : Provision for Investment (1.99) -

4. Petronet CI Limited 0.60 0.60Less : Provision for Investment (0.60) (0.60)

TOTAL (A) 792.18 871.01

B. OTHER INVESTMENTS

Quoted

1. Government Securities of the face value of Rs. 0.02 crore(2005-06 : 0.02 crore)Deposited with Others 0.02 0.02On hand (Rs. 25,000/- ) 0.00 0.00

2. Scooters India Ltd.10,000 Equity Shares of Rs. 10/- each fully paid up 0.01 0.01


105


Unquoted1. Government Securities of the face value of Rs. 0.24 lakh

(2005-06 : 0.24 lakh)Deposited with Others - Rs. 0.10 lakh (2005-06 : 0.10 lakh) 0.00 0.00On hand - Rs. 0.14 lakh (2005-06 : 0.14 lakh) 0.00 0.00

2. East India Clinic Ltd.1/2% Debentures of face value of Rs. 0.15 lakh (2005-06 : 0.15 lakh) 0.00 0.005% Debentures of face value of Rs. 0.07 lakh (2005-06 : 0.07 lakh) 0.00 0.00

3. Shushrusha Citizen Co-operative Hospital Limited100 Equity Shares of Rs. 100 each fully paid up Rs. 0.10 lakh(2005-06 : 0.10 lakh) 0.00 0.00

4. Petroleum India International (AOP)Contribution towards Seed Capital 0.05 0.05

TOTAL (B) 0.08 0.08TOTAL LONG TERM INVESTMENTS 792.26 871.09

Less: Provision for loss on Investments** - Rs. 0.14 lakh 0.00 0.00TOTAL I 792.26 871.09

II. CURRENT INVESTMENTS(at Cost or Fair Value whichever is lower)


Quoted

i. 7.07% Oil Marketing Companies’ GOI Special Bonds, 2009 - 400.00

ii. 7.33% Oil Marketing Companies’ GOI Special Bonds, 2009 - 398.92

iii. 7.44% Oil Marketing Companies’ GOI Special Bonds, 2012 - 400.00

iv. 7.47% Oil Marketing Companies’ GOI Special Bonds, 2012 * 393.77 400.00

v. 7.59% Oil Marketing Companies’ GOI Special Bonds, 2015 - 344.74

vi. 7.61% Oil Marketing Companies’ GOI Special Bonds, 2015 380.92 400.12

vii. 7.75% Oil Marketing Companies’ GOI Special Bonds, 2021 991.51 -

viii. 8.01% Oil Marketing Companies’ GOI Special Bonds, 2023 838.08 -

ix. 8.13% Oil Marketing Companies’ GOI Special Bonds, 2021 691.47 -

x. 8.20% Oil Marketing Companies’ GOI Special Bonds, 2024 1,006.95 -

xi. 8.40% Oil Marketing Companies’ GOI Special Bonds, 2026 1,017.94 -TOTAL (A) 5,320.64 2,343.78TOTAL CURRENT INVESTMENTS - II 5,320.64 2,343.78

TOTAL [I + II] 6,112.90 3,214.87

* Pledged with Clearing Corporation of India Limited against CBLO Loan

** Includes Rs. 0.14 lakh (2005-06 : Rs. 0.14 lakh) not in the possession of the Company

Rs./Crores

2006-07 2005-06


106


8. INVENTORIES

Raw Materials 2,070.78 2,062.99

Finished Products 5,852.89 5,477.17

Stock in Process 423.20 420.52

Packages 8.17 6.448,355.04 7,967.12

Stores and Spares 173.41 167.278,528.45 8,134.39

9. SUNDRY DEBTORS : (Unsecured)

Over six months :

Considered good 79.49 317.22

Considered doubtful 66.61 39.63

Others :

Considered good 1,726.67 1,277.21

Considered doubtful 1.24 0.171,874.01 1,634.23

Less: Provision for Doubtful Debts 83.61 39.801,790.40 1,594.43

10. CASH AND BANK BALANCES

Cash on hand 1.40 2.90

Cash & Cheques Awaiting Deposit 7.02 1.12

With Scheduled Banks:

On Current Accounts 86.40 42.13

On Non-operative Current Accounts 0.01 0.39

On Fixed Deposit Accounts 30.86 9.41

With Others:

In Current Account with Municipal Co-operative

Bank Ltd. (maximum balance during the year

Rs. 0.11 crore ; 2005-06 : Rs. 0.09 crore) 0.07 0.06125.76 56.01

11. OTHER CURRENT ASSETS

Interest accrued on Bank Deposits and Investments 92.63 11.55

Rs./Crores

2006-07 2005-06


107


12. LOANS AND ADVANCES

Secured, considered good :Advances recoverable in cash or in kind or for value to be received 353.32 359.35Interest Accrued thereon 125.16 114.44

Unsecured, considered good :Advances recoverable in cash or in kind or for value to be received 155.86 88.36Balances with Excise, Customs, Port Trust etc. 270.99 266.20Other Deposits 137.70 145.18Prepaid Expenses 17.79 7.30Amounts recoverable under Subsidy Schemes 21.74 41.11Advance towards Equity 10.25 9.67Share Application Money Pending Allotment 3.73 46.21Other Accounts Receivable 627.99 774.59

Unsecured, considered doubtful :Accounts Receivable & Deposits 3.10 3.16

1,727.63 1,855.57Less : Provision for Doubtful Receivables (3.10) (3.16)

1,724.53 1,852.41

13. CURRENT LIABILITIES AND PROVISIONS

A. Current Liabilities

Sundry Creditorsi) Total outstanding dues of small scale industrial undertakings 3.87 3.45ii) Total outstanding dues of creditors other than small

scale industrial undertakings 4,879.37 3,751.89Deposits from Dealers/Consumers for LPG Cylinders 2,826.45 2,673.90Other Deposits 136.47 108.00Accrued Charges/Credits 106.50 122.83Interest accrued but not due on loans 48.07 26.26Interest accrued and due on Debentures 0.52 0.86Preference share capital redeemedremaining unclaimed/uncashed 0.01 0.01Unclaimed Dividend 12.12 11.19Unpaid Matured Debentures / fixed deposits 1.98 2.33Other Liabilities 1,408.43 1,107.82

9,423.79 7,808.54B. Provisions

Provision for Tax (Net) 574.14 294.03Proposed Dividend 431.67 123.32Provision for Gratuity / Pension 41.44 39.87Provision for other retirement benefits 133.27 103.64Provision for Fringe Benefit Tax 0.67 0.32Tax on Distributed Profits 73.36 17.29

1,254.55 578.4710,678.34 8,387.01

Rs./Crores

2006-07 2005-06


108

Schedules forming part of the Consolidated PrSchedules forming part of the Consolidated PrSchedules forming part of the Consolidated PrSchedules forming part of the Consolidated PrSchedules forming part of the Consolidated Profit & Loss Aofit & Loss Aofit & Loss Aofit & Loss Aofit & Loss Accountccountccountccountccount

14. OTHER INCOME

Interest (Gross):

On Investments 265.41 73.57

On Deposits 0.37 0.40

On Staff Loans 16.56 16.74

On Customers’ Accounts 10.18 17.55

On Others 6.66 15.14299.18 123.40

Dividends 21.51 30.42

Share of Profit from Petroleum India International (AOP) 0.95 1.03

Rent Recoveries 41.27 37.21

Profit on sale of Investments - 4.78

Exchange rate variation (Net) 208.14 25.31

Miscellaneous Income 140.04 136.78411.91 235.53711.09 358.93

15. INCREASE / (DECREASE) IN INVENTORY

Closing Stock:


Finished Products 5,852.99 5,477.276,276.19 5,897.79

Less: Opening Stock:


Finished Products 5,477.27 4,241.545,897.79 4,538.15

378.40 1,359.64

16. PAYMENTS TO AND PROVISIONS FOR EMPLOYEES

Salaries, Wages, Bonus etc. 567.61 470.82

Contribution to Provident Fund 41.81 37.36

Pension, Gratuity etc. 7.48 24.31

Employee Welfare Expenses 126.50 120.33

Less: Recoveries 1.81 0.98124.69 119.35741.59 651.84

Rs./Crores

2006-07 2005-06


109

Schedules forming part of the Consolidated PrSchedules forming part of the Consolidated PrSchedules forming part of the Consolidated PrSchedules forming part of the Consolidated PrSchedules forming part of the Consolidated Profit & Loss Aofit & Loss Aofit & Loss Aofit & Loss Aofit & Loss Accountccountccountccountccount

17. OTHER OPERATING EXPENSES

Consumption of Stores, Spares and Chemicals 107.15 95.01Power and Fuel 1,864.96 1,468.94Less : Fuel of own production consumed 1,848.09 1,447.67

16.87 21.27

Repairs and Maintenance - Buildings 19.34 19.22Repairs and Maintenance - Plant & Machinery 248.78 282.90Repairs and Maintenance - other assets 9.58 8.09Insurance 21.71 22.64Rates and Taxes 29.41 23.92Irrecoverable Taxes and Other Levies 276.51 335.40Equipment Hire Charges 3.35 2.08Rent 124.99 105.78Travelling and Conveyance 74.86 68.74Printing and Stationery 10.03 8.72Electricity and Water 146.95 111.21Charities and Donations 14.56 8.91Loss on Sale/ write off of Fixed Assets/ CWIP 3.92 7.71Stores & spares written off 5.27 2.50Provision for Dimunition in value of Current Investments 83.30 1.21Loss on Sale of Current Investment 18.49 -Loss on Sale of Long Term Investment 1.54 -Provision for Investments 4.71 -Provision for Doubtful Debts and write-off 43.81 6.52Provision for Doubtful Receivables - (1.17)Provision for assets under reconciliation no longer required - (7.68)Security Expenses 33.04 31.60Advertisement & Publicity 110.48 105.40Consultancy and Technical Charges 19.97 33.03Sundry Expenses and Charges (Not otherwise classified) 235.87 258.26

1,664.49 1,551.2718. BORROWING COST

Interest on :Long Term Loans 25.11 33.88Short Term Loans 385.33 149.78Overdraft from Banks 18.32 9.07Others 14.61 11.04

Other Borrowing Cost 16.44 17.14459.81 220.91

19. PRIOR PERIOD DEBITS/(CREDITS)Excise Duty Reversed (6.05) -

(6.05) -

Rs./Crores

2006-07 2005-06


110

Notes forming part of the Consolidated Financial StatementsNotes forming part of the Consolidated Financial StatementsNotes forming part of the Consolidated Financial StatementsNotes forming part of the Consolidated Financial StatementsNotes forming part of the Consolidated Financial Statements

20. Notes forming part of the Consolidated Financial Statements for the year ended 31st March, 2007

1. Basis of preparation

The Company has prepared the consolidated financial statements by consolidating its accounts with itswholly owned subsidiary in accordance with Accounting Standard 21 (Consolidated Financial Statements)and its Joint Ventures in accordance with Accounting Standard 27 (Reporting for Financial Interest in JointVentures)

2. Principles of Consolidation

The Financial Statements of all these companies are prepared according to uniform accounting policies,in accordance with Generally Accepted Accounting Principles in India.

3. Companies included in Consolidation

Subsidiary % Holding

Guru Gobind Singh Refineries Limited 100.00

Joint Ventures % Holding

Hindustan Colas Limited 50.00

South Asia LPG Company Pvt. Ltd. 50.00

Prize Petroleum Company Limited 50.00

Mangalore Refinery and Petrochemicals Limited 16.95

Bhagyanagar Gas Limited 25.00

Petronet India Limited 16.00

Petronet MHB Limited 28.77

Avantika Gas Limited 25.00

4. In respect of sale of sensitive petroleum products (MS, HSD, LPG (Domestic) and SKO (PDS)), asadvised by the Ministry of Petroleum & Natural Gas, a part of the under-recovery suffered by the ParentCompany during the year was compensated by ONGC and GAIL, by offering discounts on prices ofcrude, SKO and LPG purchased from them. Accordingly, the Parent Company has accounted the discountreceived as follows:

(a) Rs.3238.73 crores (2005-06 : Rs.2531.11 crores) discount received, on crude oil purchased fromONGC, has been adjusted against ‘Raw Material Cost’.

(b) Rs.922.41 crores (2005-06 : Rs.690.48 crores) discount received on purchase of SKO (PDS) andLPG (Domestic) from ONGC and GAIL has been adjusted against ‘Purchase of Product for Resale’.

5. Oil Bonds issued by the Government of India towards under-recoveries suffered by the Parent Companyon sale of sensitive petroleum products during 2006-07 for Rs.4929.89 crores (2005-06 : Rs. 2344.86crores), have been accounted under ‘Recovery under Subsidy Schemes’.

6. During the year, the process of eliminating inter divisional margin on inventories by the parent companyhas been extended to include finished lubricants leading to reduction in the closing valuation of inventoriesas of March 31, 2007 and profit for the year by Rs. 50.38 crores.

7. During the year, the Policy with respect to accounting of Machinery Spares was modified in line with theopinion obtained from Expert Advisory Committee of the Institute of Chartered Accountants of India by theParent Company, resulting in an increase in profit before tax by Rs. 0.69 crore (Net).

8. In respect of doubtful debts in the Parent Company, in addition to specific provisions made, an ad-hocprovision @ one per cent of outstanding domestic debts (other than those relating to oil marketing companies


111


and subsidiary/joint venture companies) as of March 31, 2007 has also been made resulting in an additionalprovision of Rs.15.76 crores.

9. Other Significant Accounting Policies and additional information

The other Significant Accounting Policies have been set out in the notes to accounts of the parentCompany Hindustan Petroleum Corporation Limited as the same have been applied to the accounts ofthe parent, subsidiary and joint ventures. Additional information not impacted by consolidation is also setout in the notes to the accounts of the parent company.

10. Figures pertaining to the Subsidiary Company and Joint Ventures have been reclassified wherever necessaryto conform to the Company’s Financial Statements.

11. Related Party disclosure:

Rs. / Crores

2006-07 2005-06

Sales 6.16 -

Purchases 0.12 0.16

Dividend 0.35 0.35

Advance towards equity - 1.25

Share application money pending allotment - 6.00

Services 0.51 0.27

Others 0.05 -

Interest paid - 0.01

Services received 0.82 1.52

The names of parties are as follows:

Joint Venture Companies : M/s. Colasie, M/s. Colas SA, Gas Authority of India Ltd.

Key Management Personnel : Shri M. B. Lal, Chairman & Managing DirectorShri Arun Balakrishnan, Director - Human Resources*Shri C. Ramulu, Director - FinanceShri S. Roy Choudhury, Director - MarketingShri M. A. Tankiwala, Director - RefineriesShri R. Rajamani, Managing Director (from April 20, 2006)Shri L. K. Gupta, Director (from May 12, 2006)Dr. M. N. Prasad, Manager

* Appointed as Chairman & Managing Director of the Parent Company effective April 01, 2007 in place ofShri M. B. Lal

Details of remuneration to directors are given in Note 13 (E) of Consolidated Notes to Accounts

12. Considering the uncertainties attached to certain benefits under the Income Tax Act, the Parent Company(Hindustan Petroleum Corporation Limited) has been accounting for such tax benefits in the year they areallowed in the assessments. Accordingly, the Parent Company, upon completion of assessment for thefinancial year 2003-04 (assessment year 2004-05) has reversed provision for tax amounting to Rs. 302.98crores (2005-06 : Rs. 217.36 crores).


112

Rs./ Crores

2006-07 2005-0613 A. Estimated amount of contracts remaining to be executed

on Capital Account not provided for 3,344.65 3,669.64

B. No provision has been made in the accounts in respect ofthe following disputed demands/claims since they are subjectto appeals/representations and a substantial portionthereof is recoverable from Pool Accounti. Income Tax 0.20 -ii. Sales Tax/Octroi 3,241.37 1,811.78iii. Excise/Customs 574.70 788.64iv. Land Rentals & Licence Fees 91.37 65.41v. Others 37.12 29.69

C. Contingent Liabilities not provided for in respect ofi. Income Tax 3.73 25.27ii. Sales Tax/Octroi 149.34 131.53iii. Excise/Customs 81.89 102.60iv. Employee Benefits/Demands 89.37 72.15

(to the extent quantifiable)v. Guarantees on behalf of others 168.84 171.17vi. Claims against the Corporation not acknowledged as debts 259.16 231.58vii. Enhancement of Compensation against land acquired 23.78 23.00viii. Service Tax 0.08 0.08ix. Others 34.00 5.78

D. Payment to Auditors:- Audit fees 0.19 0.17- Tax audit fees 0.02 0.02- Other services 0.10 0.09- Reimbursement of expenses 0.12 0.06

E. Managerial Remuneration :- Salary and Allowances 0.92 0.71- Contribution to Provident Fund and other funds 0.06 0.06- Pension and Gratuity 0.02 0.02- Other benefits 0.19 0.18

F. Deferred Tax Assets/(Liabilities) arising due to timing differencescomprises of:Deferred Tax AssetsProvision for Gratuity/Pension 14.10 13.43Provision for Medical Benefits 4.40 4.16Provision for Leave Encashment 32.84 22.99Provision for doubtful debts 0.04 0.04Unabsorbed Losses and Allowances 81.41 156.88Others 81.70 39.90Total 214.49 237.41Deferred Tax LiabilitiesDepreciation 1,676.44 1,589.24Others 42.53 42.36Total 1,718.97 1,631.60Deferred Tax Asset/(Liability) (1,504.47) (1,394.19)



113


G. Information regarding Primary Segment Reporting as per AS-17 for the year ended March 31, 2007 is asunder:

2006-07 2005-06

Downstream Exploration Total Downstream Exploration TotalPetroleum & Production Petroleum & Production

RevenueExternal Revenue 94,358.99 - 94,358.99 75,382.36 - 75,382.36Inter-segment Revenue - - - - - -

Total Revenue 94,358.99 - 94,358.99 75,382.36 - 75,382.36

ResultSegment Results 2,426.02 (20.74) 2,405.28 448.41 (12.44) 435.97Less: Unallocated Expenses - - - - - -Net of unallocated Income - - - - - -

Operating Profit 2,426.02 (20.74) 2,405.28 448.41 (12.44) 435.97Less:Interest & Other BorrowingCosts 459.81 220.91Provision for dimunition ininvestments 88.01 1.21Loss on Sale of Investments 20.03 -Add:Interest/Dividend (Incl Shareof profit from PII) 321.64 154.85Provision for dimunition inInvestments written back - -Prior year Income 6.05 -Profit on Sale of Investments - 4.78Profit before Tax 2,165.12 373.48Less: Taxes (includingDeferred tax / FBT) 491.10 (78.59)Profit after Tax 1,674.02 452.07Other InformationSegment Assets 26,074.54 4.58 26,079.12 22,085.85 - 22,085.85Corporate Assets 6,704.52 3,760.80Total Assets 32,783.64 25,846.65Segment Liabilities 9,494.59 41.21 9,535.80 7,895.51 15.89 7,911.40Corporate Liabilities 13,679.99 9,300.46Total Liabilities 23,215.79 17,211.86Capital Expenditure 3,982.09 4.58 3,986.67 2,662.08 - 2,662.08Depreciation 780.63 - 780.63 768.79 - 768.79

Notes:1. The Group is engaged in the following business segments:

a) Downstream i.e. Refining and Marketing of Petroleum Products.b) Exploration and Production of Hydrocarbons.

Segments have been identified taking into account the nature of activities and the nature of risksand returns.

2. Segment Revenue comprises the following:a) Turnover (Net of Excise Duties).b) Subsidy from Government of India.c) Other income (excluding interest income, dividend income and investment income).

3. There are no geographical segments.14. Previous year’s figures have been regrouped/reclassified wherever necessary.

Rs./Crores


114

Rs./Crores

2006-07 2005-06A. Cash Flow From Operating Activities

Net Profit before Tax & Extraordinary items 2,165.12 373.48Adjustments for :

Depreciation / Amortisation 778.18 762.07Miscellaneous Expenditure written off 0.06 6.01Provision for assets under reconciliation written back - (7.68)Loss on Sale/write off of Fixed Assets/ CWIP 3.92 7.71Amortisation of capital grant (0.19) (0.09)Spares written off 5.27 2.50Provision for diminution in investments 88.01 1.21Interest Expense 459.81 220.91Provision for Doubtful Receivables written back - (1.17)Provision for Doubtful Debts 43.81 6.52Interest Income (265.78) (123.40)Share of Profit from PII (0.95) (1.03)Dividend Received (21.51) (30.42)(Profit)/Loss on sale of Oil bonds 20.03 (4.78)

Operating Profit before Working Capital Changes 3,275.78 1,211.84

(Increase) / Decrease in Working Capital :Trade Receivables (239.78) (385.76)Other Receivables 85.98 850.88Inventories (399.33) (2,096.70)Trade and other Payables 1,492.48 1,099.74

939.35 (531.84)

Cash generated from operations 4,215.13 680.00Direct Taxes / FBT refund / (paid) - Net (98.85) 117.87

Cash Flow before extraordinary items 4,116.28 797.87Extraordinary items - -

Net Cash from operating activities ( A ) 4,116.28 797.87

B. Cash Flow From Investing ActivitiesPurchase of Fixed Assets (including Capital Workin Progress / excluding interest capitalised) (3,986.67) (2,662.08)Sale of Fixed Assets 24.94 1.85Purchase of Investment (Including share application moneypending allotment/Adv. towards Equity) (4,898.93) (3,136.38)Misc Expenditure incurred by GGSRL (1.88) (1.98)Sale Proceeds of Oil bonds 1,930.70 854.78Interest received 184.70 112.49Dividend Received 21.51 30.42Share of profit from PII 0.95 1.03

Net Cash from investing activities ( B ) (6,724.68) (4,799.87)

Consolidated Cash Flow Statement for the year ended 31st MarConsolidated Cash Flow Statement for the year ended 31st MarConsolidated Cash Flow Statement for the year ended 31st MarConsolidated Cash Flow Statement for the year ended 31st MarConsolidated Cash Flow Statement for the year ended 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007


115

Consolidated Cash Flow Statement for the year ended 31st MarConsolidated Cash Flow Statement for the year ended 31st MarConsolidated Cash Flow Statement for the year ended 31st MarConsolidated Cash Flow Statement for the year ended 31st MarConsolidated Cash Flow Statement for the year ended 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007

Rs./Crores

2006-07 2005-06C. Cash Flow From Financing Activities

Proceeds from Calls in Arrear(Net) 0.48 0.39Share application money received/(paid) (27.16) 6.00Advance towards equity received (1.39) 1.24Long term loans raised 1,143.08 924.31Fixed deposits / debentures repaid (0.35) (36.01)Short term loans raised / (repaid) 2,430.83 3,423.40Interest Paid on Loans (564.86) (213.02)Dividend paid (including dividend distribution tax) (371.83) (421.26)Capital grant against purchase of assets - 5.02

Net Cash from financing activities (C) 2,608.80 3,690.07

Net Increase / (Decrease) in Cash and

Cash Equivalents (A) + (B) + (C) 0.40 (311.93)

Cash & Cash Equivalents as on 1st April (Opening) :Cash / Cheques on Hand 4.02 2.09Balances with Scheduled Banks


Balances with other Banks 0.06 0.06

56.01 211.91Overdrafts from Banks (476.16) (320.13)

(420.15) (108.22)

Cash & Cash Equivalents as on 31st March (Closing):Cash / Cheques on Hand 8.42 4.02Balances with Scheduled Banks

- On Current Accounts 86.40 42.13 - Others 30.87 9.80

Balances with other Banks 0.07 0.06

125.76 56.01Overdrafts from Banks (545.51) (476.16)

(419.75) (420.15)

Net Increase / (Decrease) in Cash and Cash Equivalents 0.40 (311.93)

Note: Previous year’s figures have been regrouped / reclassified wherever necessary.

FOR AND ON BEHALF OF THE BOARD






116

Corporate GovernanceCorporate GovernanceCorporate GovernanceCorporate GovernanceCorporate Governance

HPCL lays special emphasis on conducting its affairs within the framework policies, internal and externalregulations and in a transparent manner. Being a Government Company its activities are subject to review byseveral external authorities like the Comptroller & Auditor General of India (CAG), the Central VigilanceCommission (CVC), Parliamentary Committees etc.

Decision making process:

At the apex level is the HPCL Board of Directors (The Board). The Board has constituted several sub-committees,such as the Committee of Functional Directors (CFD), the Audit Committee, the Investment Committee, the HRCommittee, the Investor Grievance Committee, etc. The composition of these Committees is given in thisReport. The meetings of these committees are convened on need basis and minutes of these meetings areplaced for information of the Board. Majority of the members of the Committees except the CFD are IndependentNon-Executive or Government nominated Directors with the Whole Time Directors playing a facilitating role.

The Corporation has constituted an Executive Council comprising of Chairman & Managing Director, the FunctionalDirectors and the SBU Heads of the Corporation. This Council discusses important issues concerning theorganization, analyses the same and recommends the ‘way forward’ in respect of matters discussed. Emphasisis laid on team approach, mutual support of functions and joint deliberations on issues by the Council which hasenhanced further the decision making process. It has thus facilitated an integrated thinking process and analigned approach across the Corporation for achieving the Corporate Vision and each one of the aspirationalaspects contained in the Vision Statement.

Advisory Council

The Advisory Council constituted by the Corporation in the year 2005 is meeting regularly. The Council comprisesof S/Shri V. K. Shunglu, Ex-CAG, Shri N.R. Narayana Murthy, Chairman and Chief Mentor, Infosys TechnologiesLimited, Shri Manab Bose, Managing Director, Connectivity Consulting (P) Ltd., Shri Naresh Narad, Member,Public Enterprises Selection Board, Ms. Shailaja Chandra Chairperson, Public Grievance Commission and Ms.Rama Bijapurkar, Marketing Consultant, Strategic Marketing Consulting.

Details of important on-going activities, future plans etc., are placed before the Council. The suggestions /observations made by the Council Members are borne in mind while progressing the activities further.

The advice from this Eminent Group immensely benefits the Corporation.

Exercise of Authority:

The Corporation has well documented Limits of Authority Manual, Purchase Manual, Chart of Accounts, etc.,facilitating the decentralized decision making process in the organization spread out in the country at variouslevels of the organization.

Limits of Authority Manual (LAM):

The LAM lays down the authorities that can be exercised at various levels, i.e., the Board, Committee ofFunctional Directors, the Executive Committee, the Contracts Committee, the Bids Committee and the seniorindividual positions, etc., for different activities of the Corporation. The manual is divided into segments,representing different functions, like, Sales, Crude & Shipping, Capital Projects, Operations & Distribution,Finance, HR, etc., and provides for a decision making process through various committees as above, representedby inter-functional groups including Finance. This ensures a transparent, well considered and streamlineddecision making process adhering to the laid down systems and procedures and thereby leaving no room forarbitrariness.

Purchase Manual:

This Manual lays down elaborate procedures to be followed while undertaking purchases and in finalisation ofcontracts. It lays down, inter-alia, the purchasing authorities at various levels, norms and processes for procurement.


117

Corporate Governance (Contd.)Corporate Governance (Contd.)Corporate Governance (Contd.)Corporate Governance (Contd.)Corporate Governance (Contd.)

Integrity Pact

The Corporation has initiated the process of introducing “Integrity Pact” (IP) to bring in transparency and integrityin the process of awarding contracts. An MOU has been signed with ‘Transparency International’ on July 13,2007. The Integrity Pact would be a part of tender documents to be signed by the Company and by thesuccessful vendor / bidder. Failure by the bidder to return the Integrity Pact duly signed along with the bid shalllead to outright rejection of such bid. It provides for responsibilities and obligation of both the parties.

The Integrity Pact aims to achieve the following :

� To enable companies to achieve transparency in its functioning by providing assurances to them that :

� Their competitors will also follow transparent process

� Government procurement, privatization or licensing agencies will undertake to prevent corruption,including extortion, by their officials and to follow transparent procedures and

� To enable governments to reduce the high cost and the distortionary impact of corruption on publicprocurement, privatization or licensing.

Beyond the individual contract in question, the IP is also intended to create confidence and trust in the decisionmaking process in general, a more ethical environment and public support in the country for the government’sprocurement, licensing activities, etc.

Disclosures :

Given below are the various information forming part of Corporate Governance disclosures :-.

1. BOARD OF DIRECTORS :

1.1 Composition of Board of Directors

Executive Directors including Chairman (Whole-time) 4

Non-Executive Govt. Directors (Ex-officio) 2

Non-Executive Independent Directors (non-official) 6

Total 12

1.2 Board Meetings:

Thirteen Board Meetings were held during the Financial Year on the following dates:

18th April 2006 25th May 2006 22nd June 2006 26th July 2006

18th October 2006 27th October 2006 1st November 2006 15th November 2006

12th December 2006 20th December 2006 31st January 2007 19th February 2007

22nd March 2007


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121


1.4 PROFILES OF DIRECTORS:

Shri Arun Balakrishnan

Shri Arun Balakrishnan took charge as Chairman & Managing Director of the Corporation effectiveApril 01, 2007.

Shri Arun Balakrishnan is a Chemical Engineer and an alumni of the Indian Institute of Management,Bangalore. He joined HPCL in 1976 as a Management Trainee. He has held various positions inMarketing and Corporate functions around the country. These include positions such as RegionalManager of Orissa, Director-Planning - OCC, General Manager - International Operations, GeneralManager - Lubricants & Specialities and Chief General Manager - Direct Sales.

He is credited with launching a number of successful lubricant brands and for spreading the HP Lubesdistributors network in the ASEAN countries. Shri Arun Balakrishnan attended a program on Managementin the United Kingdom under the Colombo Plan Program. He has also attended various seminars andconferences related to Petroleum & Energy.

Shri Mahesh B. Lal

Shri Lal is a Chemical Engineer from Indian Institute of Technology, Kanpur and a Post GraduateDiploma in Management from IIM, Ahmedabad. Shri Lal has a vast and extensive experience in thePetroleum Industry. He was earlier Advisor - Refineries in the Ministry of Petroleum & Natural Gas,Government of India. In this capacity, he was the Government Director on the Boards of Kochi RefineriesLtd., IBP Co. Ltd. and Numaligarh Refineries Ltd. Thereafter, he was Director (Operations) of MadrasRefineries Ltd. (now Chennai Petroleum Corporation Limited) before moving back to Bharat PetroleumCorporation Limited as Director (Refineries). IIT Kanpur bestowed the distinguished Alumnus Award onShri Lal in the year 2002.

Shri Lal retired from the services of the Corporation on attaining the age of superannuation onMarch 31, 2007.

Shri P.K. Sinha

Shri P.K. Sinha, Joint Secretary & Financial Advisor, Ministry of Petroleum & Natural Gas is a PostGraduate from Delhi School of Economics and an IAS officer of U.P. Cadre. Shri P.K. Sinha also holdsM.Phil in Social Sciences and Masters Diploma in Public Administration. Shri Sinha has served bothin the Central and State Governments, including as District Magistrate of Jaunpur and Agra Districts,Commissioner of Varanasi Division and Principal Secretary, Irrigation, Uttar Pradesh. Shri Sinha hasalso served in the Ministry of Power, Department of Youth Affairs and Sports in the Central Governmentbefore joining the MOP&NG.

Shri Prabh Das

Shri Prabh Das, Joint Secretary of Ministry of Petroleum & Natural Gas, is a member of IndianAdministrative Service. He is a B.Tech (Hons) from IIT, Kharagpur. He has also completed his Masterof Business Administration from Southern Cross University, Australia. He has worked as a DistrictMagistrate and Collector in Midnapur & Jalpaiguri Districts for a period of 5 years. Shri Prabh Das has


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also worked as a Deputy Secretary / Director in the Department of Ocean Development and Ministryof Commerce, Government of India. He has also worked as a Special Secretary (Transport) Government.of West Bengal and Chief Executive Officer of Calcutta Metropolitan Development Authority.

Shri Prabh Das joined the Ministry of Petroleum & Natural Gas as Joint Secretary in March 2003.He is also a Director on the Boards of Mangalore Refineries & Petrochemicals Ltd. and EngineersIndia Ltd.

Shri T. L. Sankar

Shri Sankar is a retired Indian Administrative Service Officer with M.Sc. (Chemistry), Madras and M.A.(Development Economics) from Williams College, USA. Shri Sankar has held several assignments forthe Government of Andhra Pradesh, the Government of India, and international organizations in his 35years career with the Indian Administrative Service. He continues to be associated with severalCommittees of the Government of India in the areas of Energy Economics, Public Policy Analysis,and restructuring of Public Enterprises. He has served as the Principal of Administrative Staff Collegeof India; Director General - National Institute of Rural Development, Director, Institute of PublicEnterprises, Hyderabad, Advisor to the Governments of India, Bangladesh, Sri Lanka, Tanzania andNorth Korea on energy policy and as Leader of the United Nations Team to design Regional EnergyDevelopment Programme and the Asian Development Bank’s Regional Energy Survey. He was alsothe Chairman, Gas Price Revision Committee. He was a member of the Power Minister’s Committeeof Eminent Persons and the Independent Standing Group under Justice P.N. Bhagawati. Shri Sankarhas jointly edited two books, co-authored one, wrote several book chapters, and articles in nationaland international journals.

Shri Rajesh V. Shah

Shri Rajesh V. Shah obtained his first degree in Mathematics from the University of Cambridge in1973, later obtained a Master’s Degree in Business Administration from the University of California,Berkeley. He has also attended the Programme for Management Development (PMD) from HarvardBusiness School in 1983.

Shri Shah is presently the Co-Chairman of Mukand Ltd. In this capacity, he is responsible for all thediverse activities of the Company, which is India’s leading speciality steel producer and executingprojects for road construction and power plants.

He has served on various business councils, is a past president and has been a member of theNational Council of the apex Indian business body, the Confederation of Indian Industry (CII) since1986. He has been a member of the International Young Presidents’ Organization (YPO) and was alsoChairman of the YPO International Conference held in Mumbai in February, 1996 and on the InternationalBoard of Directors in the same year.

Shri Rajesh Shah has been a strong believer in bringing about change within his Company through theapplication of ‘Total Quality Management’ and has been awarded the Qimpro Gold Standard in 1990and Platinum Standard in 1994 by Qimpro (an affiliate of Juran International Inc., USA), for his contributionin building India Inc.



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Shri M. Nandagopal

Shri M. Nandagopal is a B.Sc (Agriculture) from Agricultural University, Coimbatore. He is an Industrialistholding the position of Director in various Companies. He is the Managing Director of Mohan Breweries& Distilleries Ltd. He is a Trustee in Sri Ramachandra Medical College & Research Institute, Chennai,Sakthi Trust, Delhi and Mother Service Society, Pondicherry. Shri M.Nandagopal is also a member ofCosmopolitan Club and Madras Cricket Club.

Shri I.M. Pandey

Shri I.M. Pandey has done his Ph. D in Finance from Delhi School of Economics, University of Delhi.Currently, Professor at the Indian Institute of Management, Ahmedabad (IIMA), Shri Pandey is alsoDean of School of Management, Asian Institute of Technology, Bangkok. Shri Pandey is a Director onthe Boards of IFCI, Cochin Shipyard Limited and Indo-Rama Polymers, Thailand. In the past, heserved as Member of Controller of Capital Issues, Government of India, Member of Ahmedabad StockExchange, Member of IDBI Western Advisory Board, and Member of Board of Directors of IDBI-Principal.

Shri I.M. Pandey has carried out research focussed on Corporate Finance Policies and practices,strategic finance management and financial market in the emerging economies. He has publishedseveral articles in these areas. He has authored ten books, six monographs and many managementcases. Shri I.M. Pandey is also on the editorial boards of several journals in India and abroad. Shri I.M.Pandey is consultant to many public and private sectors organizations, and has conducted managementtraining programmes for many domestic and multinational companies.

Prof. Prakash G. Apte

Prof. Prakash G. Apte is the Director and UTI Chair Professor at the Indian Institute of ManagementBangalore. His special areas of interest are international finance, exchange rate behaviour, financialderivatives and risk management.

Prof. Apte holds a Ph.D. in Economics from Columbia University, PGDM from IIM Calcutta andB. Tech. from IIT Bombay. He has taught Economics at the Vassar College, Poughkeepsie, USA andColumbia University. He was a Consultant at Edison Electric Institute, New York and a Project Managerat Centron Industrial Alliance, Bombay.

Prof. Apte has published four books - International Financial Management, Global Business Finance,Text Book of Econometrics and Macro Economics and several articles in professional journals andeconomic and financial periodicals. He has served on expert committees appointed by NSE, SEBIand RBI. He is on the Board of several companies and institutions such as BEML, Power FinanceCorporation and IIT-B. He is also a consultant to several leading organizations in government, publicand private sectors. He has been a Visiting Faculty at the Katholieke Universiteit Leuven, Belgium,Goteborg University, Sweden and S.P. Jain Centre of Management, Singapore.

Shri P. V. Rajaraman

Shri P.V. Rajaraman is a retired IAS Officer. He holds Master's degrees in Physics ( Madras University)and Management (University of Leeds, U.K.) He has worked as Director in the Ministry of Chemicalsand Fertilizers, Government of India, Managing Director, India Cements, Chairman and ManagingDirector, Tamilnadu Housing Board , Commissioner of Sugar and Chairman and Managing Director,Tamilnadu Sugar Corporation, Secretary to the Government of Tamilnadu in the Commercial Taxes,



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Home and Finance Departments, Development Commissioner and Chairman, Tamilnadu IndustrialInvestment Corporation.

Shri P.V. Rajaraman is a Director on the Board of the Small Industries Development Bank of India.

Shri C. Ramulu

Shri C. Ramulu is currently holding the portfolio of Director- Finance. Shri C. Ramulu is a CharteredAccountant and Company Secretary and is a rank holder at the All India level. Shri C. Ramulu secureddistinction in MBA from the University of Leeds, U.K.

Shri C. Ramulu commenced his career in the Petroleum Industry with Caltex India Ltd., which wasnationalized and merged with HPCL. His wide experience encompasses Financial Management invaried positions spread across the organization in Refining, Marketing and Corporate Divisions andGeneral Management including Strategy, Planning, Management of Joint Ventures, etc. He has attendedseveral International Senior Management Programmes. He has also presented several papers at National& International Conferences, Seminars, etc. Shri Ramulu successfully handled the Public issue ofHPCL for raising equity capital of Rs.1200 Crores.

Shri S. Roy Choudhury

Shri S. Roy Choudhury is a Mechanical Engineer from the University of Assam. He commenced hiscareer in the Petroleum Industry with Assam Oil Company, Digboi, a subsidiary of Burma Oil Company.Shri S. Roy Choudhury joined HPCL on June 21, 1982 as a Construction Engineer.

He has held various positions in the Company in Refinery, Marketing (Operations), Projects and SalesDivisions of HPCL. He is well known in the Oil Industry for his knowledge and expertise in the crossCountry Pipeline Projects.

Shri M.A. Tankiwala

Shri M.A. Tankiwala was the Managing Director of Guru Gobind Singh Refineries Ltd. (GGSRL), a fullyowned subsidiary of HPCL and was instrumental in developing the grass root project.

He also served on the Board of Mangalore Refineries & Petrochemicals Limited (MRPL) the firstrefinery in the Joint Sector as Managing Director (Technical) and ensured that due share was given toMRPL in meeting the country’s energy demand.

Shri M.A. Tankiwala, a Graduate in Mechanical Engineering, commenced his career in the MumbaiRefinery of HPCL. He has had a wide exposure to the Petroleum Industry, spanning more than threedecades in the Refining Sector.

He has worked in both Mumbai and Visakh Refineries of HPCL in various capacities and contributedto the growth and development of the refinery operations of the Corporation.

Shri V. Viziasaradhi

Shri V. Viziasaradhi has done Graduation and Post Graduation in Industrial Relations and PersonnelManagement from University of Andhra. He joined HPCL in December 1979. Before joining HPCL, hehad 4 years of experience in Bharat Heavy Plate & Vessels.

He has had a wide exposure to the Petroleum Industry over 28 years in Human Resources andIndustrial Relations in Refineries, Marketing and Corporate Divisions of HPCL.

Prior to taking over as Director(HR), Shri V. Viziasaradhi was Executive Director (Industrial Relations)of HPCL.



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2. REMUNERATION OF DIRECTORS :� HPCL being a Government Company, the remuneration payable to its whole-time directors is approved

by the Government and advices received through the Administrative Ministry, viz., Ministry of Petroleum& Natural Gas.

� The non-official part–time Directors are paid Sitting Fees for Board Meetings attended by them.� HPCL does not have a policy of paying commission on profits to any of the Directors of the company.

� The remuneration payable to officers below Board level is also approved by the Government of India.

3. BOARD SUB-COMMITTEES :

A. Audit Committee :

The Audit Committee comprises of Non-Executive Directors as follows:

1. Shri T L Sankar Non-Executive Independent Director

2. Shri P.K. Sinha * Non-Executive Govt. Director

3. Shri Rajesh V Shah Non-Executive Independent Director

4. Shri M. Nandagopal Non-Executive Independent Director

5. Shri I.M. Pandey ** Non-Executive Independent Director

* : Shri P.K.Sinha has resigned from the Audit Committee effective November 01, 2006.

** : Shri I.M. Pandey was inducted in the Audit Committee effective November 01, 2006.

Shri T. L. Sankar is the Chairman of the Audit Committee.

The terms of reference of the Audit Committee are as provided under the Companies Act, 1956 andother applicable regulations.

The scope of the Audit Committee includes the following:

� Reviewing with the Management the annual financial statements before submission to the Board.

� Reviewing with the Management, Statutory Auditors and Internal Auditors, the adequacy of internalcontrol systems.

� Reviewing the adequacy of internal audit function, including the structure of the internal auditdepartment, staffing and seniority of the official heading the department, reporting structure, coverageand frequency of internal audit.

� Discussion with internal auditors on any significant findings and follow up thereon.

� Reviewing the findings of any internal investigations by the internal auditors into matters wherethere is suspected fraud or irregularity or a failure of internal control systems of a material natureand reporting the matter to the Board.

� Reviewing the Company’s financial and risk management policies.

The Committee, at the meeting held on May 29, 2007, reviewed the Annual Accounts for the year2006-07, before the Accounts were adopted by the Board.

Dates when Audit Committee Meetings held:

25th May, 2006 25th July, 2006 26th July, 2006 18th October 2006

27th October, 2006 31st January 2007 29th May, 2007



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Attendance at the Audit Committee Meetings:

Name of No. of No. of % ofthe Members Meetings held Meetings attended attendance

Shri T. L. Sankar 7 7 100%

Shri P.K. Sinha * 5 1 20%

Shri Rajesh V. Shah 7 4 57%

Shri M. Nandagopal 7 5 71%

Shri I.M. Pandey ** 2 1 50%

* : Shri P.K.Sinha has resigned from the Audit Committee effective November 01, 2006.

** : Shri I.M. Pandey was inducted in the Audit Committee effective November 01, 2006.

B. Committee on HR Policies :

The Company has constituted the Board Sub - Committee on HR Policies to look into variousaspects including remuneration as well as Compensation and Benefits for the employees. TheCommittee comprised of:1. Shri T.L. Sankar - Non-Executive Independent Director2. Shri Rajesh V. Shah - Non-Executive Independent Director3. Shri Arun Balakrishnan *

* : Shri Arun Balakrishnan was appointed as Chairman & Managing Director effective 01.04.2007.Director-Human Resources, is the Convenor of the Committee.

C. Investment Committee :

The Company has constituted the Investment Committee with the following members.1. Shri T. L. Sankar - Non-Executive Independent Director2. Shri Rajesh V. Shah - Non-Executive Independent Director3. Shri Prabh Das - Non-Executive Government Director4. Shri C. Ramulu

Shri T. L. Sankar is the Chairman of the Committee. This Committee reviews investment proposalsbefore they are placed before the Board for its consideration.

D. Investor Grievances Committee:

The Company has constituted an Investor Grievances Committee comprising of Non-Executive Directorsas follows :1. Shri M. Nandagopal - Non-Executive Independent Director2. Shri Rajesh V. Shah - Non-Executive Independent Director3. Shri C. Ramulu **

** Shri C. Ramulu was inducted as member of Investors Grievances Committee effectiveApril 18, 2006.

Shri M. Nandagopal is the Chairman of the Committee.

The Committee reviews the status of Investor Grievances and Services and other important matters ofinvestors’ interest.



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Dates of Investor Grievance Committee Meetings:

18th April, 2006 25th July, 2006 31st January, 2007 29th May, 2007

E. Remuneration Committee:HPCL has not felt the need for a Remuneration Committee in view of the fact that the Company is aGovernment Company as per Section 617 of the Companies Act, 1956 and since the remuneration ofthe Whole-Time Functional Directors are fixed by the Government of India.

The details of Remuneration paid to all the Functional Directors are given below:

� The remuneration of the whole time Functional Directors include basic salary, allowances andperquisites as determined by the Government of India. Moreover, they are entitled to providentfund and superannuation contributions as per the rules of the Company.

� The gross value of the fixed component of the remuneration, as explained above, paid to theWhole-time Functional Directors, during the financial year 2006-07 is given below:

(Rs. in Lakhs)

Name of the Salaries & Contribution to Contribution to Other TotalDirector Allowances Provident Superannuation Benefits

Fund Fund andGratuity

Arun Balakrishnan ** 13.38 0.86 0.32 2.29 16.85

M.B. Lal * 12.88 0.85 0.31 2.22 16.27

C. Ramulu 12.76 0.86 0.37 2.74 16.73

S. Roy Choudhury 11.00 0.70 0.28 2.43 14.40

M.A. Tankiwala 11.44 0.73 0.29 0.57 13.03

* : Shri M.B. Lal retired from the services of the Corporation after attaining the age of superannuationon 31.03.07.

** : Shri Arun Balakrishnan was appointed as Chairman & Managing Director effective 01.04.2007.

4. Sitting Fees for the year 2006-2007:The details of Sitting Fees paid to Part-time Independent Directors for the year 2006-07 for attending theBoard / Sub-committee meetings are given below:

DETAILS OF SITTING FEES PAID TO PART-TIME INDEPENDENT DIRECTORS FOR THE YEAR 2006-07 FOR ATTENDING MEETINGS

(Figures in Rs.)

Details of Meetings T.L.Sankar Rajesh V.Shah M.Nandagopal I.M.Pandey

Board 110000 50000 60000 60000

Audit 70000 40000 50000 10000

HR - - - -

Investor - 20000 40000 -

Retail - - - -

Total Sitting fees paid 180000 110000 150000 70000



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5. DIRECTORS’ SHAREHOLDING

Shri T. L. Sankar is holding 150 shares of the Corporation as of date. Other than Shri T. L. Sankar none ofthe other non-officio and ex-officio Directors of the Corporation are holding any shares in the Corporation.

6. RIGHT TO INFORMATION ACT 2005

The Right to Information Act, 2005(RTI) that became effective 12th October 2005 is being compliedwi th by HPCL. HPCL has hosted deta i led in format ion in i ts WEB por ta l“www.hindustanpetroleum.com”, and update the same on need basis. Officers across the country,representing different departments, have been appointed as Public Information Officers andAppellate Authorities to deal with the queries from the Indian Citizens.

7. Shares Department Activities :

HPCL has a Shares Department under the Company Secretary, which monitors the activities of R&TAgents and looks into the issues relating to shareholders. Share transfers, transmissions and otherimportant matters are approved by the Share Transfer Committee.

Presently, HPCL has over 94037 shareholders. The Corporation regularly interacts with the shareholdersthrough letters, investors’ meets, at the AGM, wherein the activities of the Corporation, its performanceand its future plans are provided to the Shareholders.

The Company has been taking appropriate steps to ensure that Shareholder related activities are givendue priority and references/representations, if any are resolved at the earliest.

The Company Secretary of the Corporation is the Compliance Officer in terms of the requirements of TheStock Exchange, Mumbai.

The quarterly results are published in the English and Vernacular newspapers. The Company also organisesPress Meets and Press Releases. The Financial Performance and other details are also posted on theCompany’s web-site viz. www.hindustanpetroleum.com.

8. During the year 2006-07, there were no material transactions with Directors or their relatives havingpotential conflict with the interests of the Company at large.

There have been no instances of non-compliance by the Company or penalties, strictures imposed on theCompany by any Stock Exchange or SEBI or any Statutory Authority, on any matters relating to capitalmarkets during the last 3 years.

9. DETAILS OF ANNUAL GENERAL MEETINGS :

9.1 Location and time, of the three Meetings held :

Year Location Date Time

2005-06 Y.B. Chavan Auditorium, Mumbai 14.09.06 3.00 p.m.



9.2 Whether Special Resolutions were passed in last 3 AGM’s?

Yes

9.3 Whether Special Resolutions were put through postal ballot last year?

No.

9.4 Are votes proposed to be conducted through postal ballot this year?

No.



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10. MEANS OF COMMUNICATION :

� Half yearly report Press Advertisements, advices to Stock Exchanges, etc.

� Quarterly results Mainly business / regional newspapers, like Economic Times,� Which newspapers Times of India, Financial Express, Indian Express, Loksatta, etc. normally published in

� Websites where quarterly www.hindustanpetroleum.comresults are displayed

� Whether it also displays Yesofficial news releases &presentations made toinstitutional investors/ analysts

� Whether Management YesDiscussion & AnalysisReport is a part ofAnnual Report

� Whether shareholder Shareholder information has been incorporated in the Annual Report.information section The Company also communicates with the shareholders from timeforms part of to time.Annual Report

11. GENERAL SHAREHOLDER INFORMATION :

11.1 55th Annual General MeetingDate and Time : September 06, 2007

at 3.00 PM

Venue : Yashwantrao Chavan Pratishthan Auditorium,

General Jagannath Bhosale

Marg, Next to Sachivalaya

Gymkhana,

Mumbai-400 021

11.2 Financial calendar

Financial reporting for Qtr. ending 30/06/07 End Jul. 2007

Financial reporting for Qtr. ending 30/09/07 End Oct. 2007

Financial reporting for Qtr. ending 31/12/07 End Jan. 2008

Financial reporting for Qtr. ending 31/03/08 End May 2008

Annual General Meeting for year ending 31/03/2008 Aug-Sep. 2008



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11.3 Book Closure : August 22, 2007 to September 06, 2007

11.4 Dividend payment date (tentative) : September 11, 2007

11.5 (a) Listing on Stock Exchanges as of 31.03.07 :

The Bombay Stock Exchange Ltd. The National Stock Exchange of India Ltd.Phiroze Jeejeebhoy Towers, Exchange Plaza, 5th Floor,Dalal Street, Mumbai – 400 001 Plot No. C/1, G-Block,

Bandra-Kurla Complex,Bandra (East), Mumbai – 400 051

The Calcutta Stock Exchange The Delhi Stock Exchange7 Lyons Range , Kolkata 700001 DSE House, 3/1, Asaf Ali Road,

New Delhi – 110 002

The Shareholders at the 54th AGM of the Corporation held on 14th September, 2006 have approveddelisting of HPCL shares from Chennai / Delhi & Calcutta Stock Exchanges. We have alreadyobtained the approval of delisting from Chennai Stock Exchange. The process of delisting theshares from Delhi / Calcutta Stock Exchanges is in progress.

11.5 (b) Listing fees : Listing fees for financial year2006-07 have been paid to theStock Exchanges in April, 2006.

11.6 Stock Codes :BSE : 500104NSE : HINDPETRO

ISIN (for trading in Demat form) : INE094A01015

11.7 Stock Market Data :

HPCL Share Price – BSE

Year High Rs. Low Rs.

2006-07 361.00 206.00

2005-06 348.00 283.30

2004-05 538.50 225.55

2003-04 542.45 269.40

2002-03 329.60 166.50

Performance in comparison to broad based indices

As on HPCL Share BSE 30 SENSEX NSE 50 NIFTYprice Rs.

31-3-2007 246.70 13072.10 3821.55

31-3-2006 322.90 11279.96 3402.55

31-3-2005 305.95 6492.82 2035.65

31-3-2004 507.60 5590.60 1771.90

31-3-2003 294.40 3048.72 978.20



131

HPCL SHARE PRICE MONTHLY DATA

Month Mumbai Stock Exchange National Stock Exchange

High Low Close Volume High Low Close VolumeRs. Rs. Rs. Nos. Rs. Rs. Rs. Nos.

April 2006 360.00 311.00 320.00 2476270 359.90 310.00 320.15 6240063

May 2006 361.00 288.00 306.05 2627275 360.00 290.00 306.75 6585617

June 2006 311.50 211.10 235.50 2508863 316.60 211.05 235.45 7591430

July 2006 242.00 206.00 224.65 1351440 241.50 198.20 224.95 4115282

Aug 2006 292.90 211.00 277.95 9935451 292.70 211.55 277.65 29979864

Sept 2006 312.80 273.95 279.65 11020147 315.00 272.50 279.70 31240785

Oct 2006 332.00 279.45 324.85 11234883 337.55 279.70 324.90 29824744

Nov 2006 337.00 278.50 281.45 6917848 337.45 278.10 281.80 24095484

Dec 2006 298.55 243.30 278.40 4159695 298.75 242.45 278.50 15177864

Jan 2007 330.00 275.00 311.70 3718650 334.90 275.20 312.10 14083394

Feb 2007 310.70 262.05 270.80 2273836 314.45 261.15 271.60 8998624

Mar 2007 277.00 238.90 246.70 2227496 275.90 238.25 247.80 8829771


HPCL SHARE PRICE V/S NSE NIFTY - 2006-07

HPCL SHARE PRICE V/S BSE SENSEX - 2006-07


132


PER SHARE AND RELATED DATA :

2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Per Share Data Unit

EPS Rs. 46.35 11.97 37.69 56.18 45.37 23.26

CEPS Rs. 68.20 32.62 54.81 75.67 62.94 42.85

Dividend Rs. 6.00 3.00 15.00 22.00 20.00 10

Book Value Rs. 283.19 257.74 249.05 228.47 197.12 174.07

Share Related Data Unit

Dividend Payout % 45.10 28.62 45.42 44.23 49.24 43.06

Price to Earnings* Multiple 5.32 26.98 8.12 9.03 6.49 12.49

Price to Cash Earnings* Multiple 3.62 9.90 5.58 6.71 4.68 7.47

Price to Book Value * Multiple 0.87 1.25 1.23 2.22 1.49 1.67

*Based on March 31 Rs. 246.70 322.90 305.95 507.60 294.40 290.60

closing prices

11.8 Registrars and Transfer Agents : M/s. INTIME SPECTRUM REGISTRY LTD

C-13, Pannalal Silk Mills Compound,

LBS Marg,

Bhandup (W),

Mumbai - 400 078.

11.9 Share Transfer System

Activities relating to Share Transfers are carried out by M/s. ISRL who are the Registrars andTransfer Agents of the Company, who have arrangements with the Depositories, viz., NationalSecurities Depository Limited and Central Depository Services (India) Limited. The transfers anddematerialisation requests, duplicate share certificate cases are approved by the SharesCommittee. Share transfers are registered and Share Certificates are despatched within a periodof 30 days from the date of receipt, if the documents are correct and valid in all respects.

The number of shares transferred during last the two years:

2006-07 59,100

2005-06 79,200


133

11.10 Status of Investor Services:

Investor correspondence replied during the year are as follows:

Nature of Correspondence Number

1. Share Transfers and related issues 65

2. Transmission of Shares / Nomination for shares 184

3. Issue of Duplicate share certificates 219

4. Dividend related issues 1882

5. ECS / Bank Mandates / Request for Change of Address 1048

6. Call Money Payment Correspondence / Reminders 397

7. SEBI / Stock Exchange / Legal cases 12

8. Others 415

Total 4222

All complaints received from SEBI, Stock Exchanges, Department of Company Affairs, etc.,

have been appropriately dealt with.

11.11 Dematerialisation of shares and liquidity:

The total number of shares dematerialised as on 31.03.2007 is 162577192 representing 97.79%

of share capital excluding shares held by the Government of India.

Trading in Equity shares of the Company is permitted only in dematerialised form, w.e.f.,

February 15, 1999 as per notification issued by the Securities and Exchange Board of India

(SEBI).

11.12 Outstanding GDRs/ADRs/Warrants or any convertible instruments, conversion date and

likely impact on equity

There are no outstanding Warrants to be converted into Equity shares.

Detachable Tradeable Warrants issued alongwith public issue shares in April 1995 were

converted into equity shares during the period February 1997- April 1997. The Warrant

certificates were not called back by the Company and bear no value.



134

11.13 Plant Locations:

The Corporation has 2 Refineries located at Mumbai and Visakh. It has 86 Regional offices,

37 Terminals / Installations / Tap off Points, 93 Depots, 42 LPG Bottling Plants, 7909 Retail

outlets, 13 ASFs, 1648 SKO / LDO Dealers and 2238 LPG Distributors etc., located all over

the country.

11.14 Address for correspondence

Registrars and Transfer Agents: Company’s Shares Department:

M/s. INTIME SPECTRUM REGISTRY LTD. Shares Department

Unit:HINDUSTAN PETROLEUM HINDUSTAN PETROLEUM

CORPORATION LTD. CORPORATION LIMITED

C-13, Pannalal Silk Mills Compound, 2nd Floor, Petroleum House,

LBS Marg, 17, Jamshedji Tata Road,

Bhandup (West), Mumbai - 400 078 Churchgate, Mumbai - 400 020

Telephone No.: 022 – 25963838. Telephone No.: 022 - 2286 3900

Ext.3204/3201/3233/3239/3208

Fax No.: 022 - 25946969 Fax No.: 022-2287 4552/2284 1573

11.15 DISTRIBUTION SCHEDULE AS ON 31.03.2007

No. of Shares Physical Holding Dematerialised TotalHolding Shareholding Percentage

No. of No. of No. of No. of No. of No. of Share HoldingShare Shares Share Shares Share Shares holders

Holders Holders Holders

1-500 14745 2697847 72050 8559118 86795 11256965 92.30 3.32

501-1000 658 481840 3933 2947480 4591 3429320 4.88 1.01

1001-5000 74 124821 2064 3909650 2138 4034471 2.27 1.19

5001-10000 3 19050 179 1329589 182 1348639 0.19 0.40

10001 & Above 3 173429250 328 145831355 331 319260605 0.35 94.09

TOTAL 15483 176752808 78554 162577192 94037 339330000 100.00 100.00



135

11.16 Shareholding pattern as on :

31/03/2007 31/03/2006

Category No. of No. of % No. of No. of %Share Shares Share Shares

holders Holders

President of India 1 173076750 51.01 1 173076750 51.01

Financial Institutions 23 59329055 17.48 28 56128800 16.54

FIIs/OCBs 155 53018946 15.62 160 78890243 23.25

Banks 16 1033322 0.30 34 1488303 0.44

Mutual Funds 73 24139353 7.11 41 5186993 1.53

NRIs 3085 1185976 0.35 3206 1078869 0.31

Employees 974 435240 0.13 1053 467585 0.14

Others 89710 27111358 7.99 87610 23012457 6.78

Total 94037 339330000 100.00 92133 339330000 100.00


SHAREHOLDING PATTERN AS ON MARCH 31, 2007


136

11.17 Code of Conduct:

In compliance with the terms of clause 49 of the Listing Agreement with Stock Exchanges, “Code

of conduct for Board Members and Senior Management Personnel of Hindustan Petroleum

Corporation Limited” has been devised and made effective 1.1.2006. The purpose of this Code is

to enhance further ethical and transparent process in managing the affairs of the company. This

Code has been made applicable to

a) All Whole-Time Directors

b) All Non-Whole Time Directors including Independent Directors under the provisions of law

and

c) Senior Management Personnel.

This code would be read in conjunction with the Conduct, Discipline & Appeal Rules for Officers

applicable to Whole time Directors and Senior Management Personnel.

All the Board Members and Senior Management Personnel have provided the Annual Compliance

Certificate duly signed by them as on March 31, 2007.

11.18 Compliance of Clause 49 of the Listing Agreement:

The Corporation is complying with the various mandatory and non-mandatory Corporate Governance

requirements envisaged under Clause 49 of the Listing Agreement with the Stock Exchanges.



137

This is to certify that the company has laid down Code of Conduct for all Board Members and

Sr. Management of the Company and the same are uploaded on the website of the company -

www.hindustanpetroleum.com.

Further certified that the Members of the Board of Directors and Sr. Members have affirmed and

having complied with the code as applicable to them during the year ended March 31, 2007.

Arun Balakrishnan

Chairman & Managing Director

Declaration of the Chairman & Managing DirectorDeclaration of the Chairman & Managing DirectorDeclaration of the Chairman & Managing DirectorDeclaration of the Chairman & Managing DirectorDeclaration of the Chairman & Managing Director

To,

The Board of Directors of

Hindustan Petroleum Corporation Limited

We have examined the compliance of Corporate Governance by Hindustan Petroleum Corporation Limited,for the year ended on March 31, 2007, as stipulated in Clause 49 of the Listing Agreement of the said Companywith stock exchanges in India.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examinationwas limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance ofthe conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financialstatements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that theCompany has complied with the conditions of Corporate Governance as stipulated in the abovementionedListing Agreement.

We further state that such compliance is neither an assurance as to the future viability of the Company nor theefficiency or effectiveness with which the management has conducted the affairs of the Company.

For and on behalf of For and on behalf of

N.M. Raiji & Co. Sudit K. Parekh & Co.Chartered Accountants Chartered Accountants

Vinay D. Balse Shrikant V. JillaPartner Partner(Membership No. 39434) (Membership No. 39461)

Place : MumbaiDated : 23-07-2007

AAAAAuditoruditoruditoruditoruditor’s Certificate on Corporate Governance’s Certificate on Corporate Governance’s Certificate on Corporate Governance’s Certificate on Corporate Governance’s Certificate on Corporate Governance


138

Guru Gobind Singh Refineries LimitedGuru Gobind Singh Refineries LimitedGuru Gobind Singh Refineries LimitedGuru Gobind Singh Refineries LimitedGuru Gobind Singh Refineries Limited

Shri C RamuluDirector

Shri M A TankiwalaDirector

Shri Arun BalakrishnanChairman

Shri Sudhir MaheswariDirector

(From 25.07.2007)

Shri T L SankarDirector

(Till 24.07.2007)

Shri C B SinghDirector

(Till 24.07.2007)

Shri S P ChaudhryDirector

(Till 24.07.2007)

Board of Directors

Registered Office Administrative Office

Village : Phulokhari 3rd Floor, UCO Bank Building,Taluka : Talwandi Saboo Sansad Marg,District : Bhatinda New Delhi : 110001State : Punjab

Statutory Auditors Bankers

M/s Rawla & Company Punjab National BankChartered Accountants State Bank of IndiaNew Delhi

Company Secretary

Shri Sidhartha Tyagi

Shri B P BankaDirector

(From 25.07.2007)


139


On behalf of the Board of Directors of your Company, I present the 6th Annual Report on the working of your

Company together with the Audited Statement of Accounts, the Auditors Report and the Review of the Accounts

by the Comptroller and Auditor General of India for the financial year ended on 31st March 2007. As you are

aware, your Company was incorporated on December 13, 2000 with the objective of setting up a 9 MMTPA

grass root refinery along with associated facilities in the State of Punjab.

As on March 31, 2007, your company is a wholly owned subsidiary of Hindustan Petroleum Corporation Limited

(HPCL). As the implementation of this project needed mobilization of huge financial resources, induction of a

Joint Venture Partner was considered very vital to accelerate the implementation process. After protracted

negotiations, HPCL has on March 2, 2007 entered into a Joint Venture Agreement (JVA) with a partner of

International repute viz. M/s Mittal Investments S.a.r.l (MI) for execution of this project at current core capital

cost of Rs. 17,200 crores.

As per the JVA, both the partners viz.

HPCL and MI shall hold 49% equity stake

each in the company and the balance

2% would be held by Financial

Institution(s).

Your company during the year has also

finalized the refinery configuration & cost

estimate for execution of the 9 MMTPA

refinery and its associated facilities. The

refinery has been configured for

processing heavy and sour crudes to take

advantage of the price differentials vis-à-

vis light and sweet crudes. Refinery margins would be higher because of the flexibility to process low cost

opportunity crudes and produce high value products. The refinery would be capable of meeting the Euro-IV

quality norms for transport fuels. The Nelson Complexity Index (NCI), which is a measure of the refinery’s

capability to upgrade low value heavy crudes to high value products, is quite high at 9.6 vis-à-vis its peers. The

major products from the refinery would be LPG, Naphtha, MS, HSD, Kerosene, Jet Fuel, Polypropylene, Coke

etc. The refinery shall cater to the demand of the States of Punjab, J&K, Himachal Pradesh, Delhi and parts of

Haryana and Rajasthan.

M/s SBI Capital Markets Limited (SBICAP) have carried out the financial appraisal of the project and are the

lead managers for debt syndication requirements for the project. The overall financial, liquidity and profitability

parameters of the project are robust.

A green belt having various species of trees and a width of approx. 125 meters along the refinery boundary,

covering an area of 120 hectares, is under development through the State Forest Department.

Photograph taken during Execution of Financing Documents of GGSRL


140


STATUTORY DISCLOSURES

(A) Particulars of Employees u/s 217(2A) of the Companies Act, 1956:

There are no employees under the category covered by Section 217 (2A) of the Companies Act, 1956.

(B) Conservation of Energy:

As required under 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particularsin the Report of Board of Directors) Rules, 1988 regarding Energy Conservation and Technology Absorption,the Board hereby discloses as follows:

(i) That the Board, as part of its existing internal control measures, is striving for the conservation ofEnergy under the supervision of Managing Director on a continuous basis and is satisfied that theutilisation of energy is optimum for the present working of the Company.

(C) Technology Absorption:

The Company has not made any absorption, adaptation & import of technology from the date of incorporation.

(D) Foreign exchange earnings and outgo:

The required information in respect of foreign exchange earnings and outgo is given in Note no. 8(b) of theAccounts.

DIRECTORS

Shri M.B. Lal has ceased to be the Director of your Company consequent to his retirement as C&MD of HPCLupon attaining the age of superannuation effective March 31, 2007. In his place, M/s Hindustan PetroleumCorporation Limited (HPCL) has nominated Shri Arun Balakrishnan, Chairman & Managing Director, HPCL asDirector of your Company effective April 03, 2007.

Subsequently, Shri Balakrishnan has been appointed as Chairman of your Company. He has been co-opted asadditional Director, liable to retire at the ensuing Annual General Meeting and is eligible for reappointment.

As per the provisions of Section 256 of the Companies Act, 1956, and the Articles of Association of yourCompany, S/Shri M.A. Tankiwala and S.P. Chaudhry, retire by rotation at the forthcoming Annual GeneralMeeting and being eligible, offer themselves for reappointment under the provisions of Section 255 of the CompaniesAct, 1956.

S/Shri T.L. Sankar, C.B. Singh & C. Ramulu continue to be the part time Directors and Shri B.S. Sant asManaging Director of the Company.

Your Directors place on record their sincere appreciation for the invaluable services rendered by Shri M.B. Lal,and extend a warm welcome to Shri Arun Balakrishnan.


141


DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors state that:

(i) In the preparation of the annual accounts for the financial year 2006-07, the applicable accounting standards

have been followed along with proper explanation relating to material departures.

(ii) The Company has selected such accounting policies and applied them consistently and made judgments

and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the

Company as on 31st March, 2007.

(iii) The Company has taken proper and sufficient care for the maintenance of adequate accounting records in

accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company

and for preventing and detecting fraud and other irregularities.

(iv) These accounts have been prepared on a going concern basis.

ACCOUNTS

There being no commercial activities, the Company is only required to prepare the Balance Sheet for the period

of 12 Months from 01/04/2006 to 31/03/2007.

ACKNOWLEDGMENT

Your Directors acknowledge with thanks the continued help, support and guidance received from the Government

of India, especially, the Ministry of Petroleum and Natural Gas, Department of Public Enterprises, Government

of Punjab, Punjab State Industries Development Corporation, Government of Gujarat, Government of Rajasthan,

Government of Haryana & the holding Company HPCL in guiding the Company in its activities. Your Directors

also take this opportunity to place on record their appreciation on the valuable contribution made by the employees.

For and on behalf of the Board of Directors

Arun Balakrishnan

Date: May 04, 2007 Chairman


142

AAAAAuditoruditoruditoruditoruditor’s Report’s Report’s Report’s Report’s Report

To,

The Members,

GURU GOBIND SINGH REFINERIES LIMITED

1. We have audited the attached Balance Sheet of M/s. Guru Gobind Singh Refineries Limited as on 31st

March, 2007 along with Statement of Incidental Expenses incurred for the year ended on that date annexed

thereto. No Profit & Loss Account has been prepared since the Company is under construction stage

during the year. These financial statements are the responsibility of the Company’s management. Our

responsibility is to express an opinion on these financial statements based on our Audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. These

standards require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatements. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing

the accounting principles used and significant estimates made by management, as well as evaluating the

overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of India in

terms of subsection (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a

statement on the matters specified in paragraphs 4 and 5 of the said order.

4. Further to our comments in the annexure referred to in above, we report that:

a) We have obtained all the information and explanations, which to best of our knowledge and belief were

necessary for the purpose of our audit.

b) In our opinion, proper books of account, as required by law, have been kept by the Company so far as

appears from our examination of these books.

c) The Balance Sheet and the Statement of Incidental Expenses dealt with by this report are in agreement

with books of accounts.

d) In our opinion, the said Balance Sheet and Statement of Incidental Expenses incurred during

Construction Period dealt with by this report complies with the accounting standards, referred in

Section 211 (3C) of the Companies Act, 1956.

e) On the basis of written representations received from the Directors, as on March 31, 2007 and taken

on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31,

2007 from being appointed as a Director of the Company under clause (g) of sub-section (1) of Section

274 of the Companies Act, 1956.


143

f) In our opinion, and to the best of our information and according to explanations given to us, the said

Accounts read together with the notes thereon, give the information required by the Companies Act,

1956, in the manner so required and give a true & fair view in conformity with the accounting principles

generally accepted in India.

(i) In so far as it relates to Balance Sheet, of the state of affairs of the Company as on 31st March,

2007; and

(ii) In so far as it relates to “Statement of Incidental Expenses”, of the expenses incurred for the year

ended on that date.

For Rawla & Company

Chartered Accountants

Y.P. Rawla

Partner

Membership No.: 10475

Place : New Delhi

Date : May 04, 2007

AAAAAuditoruditoruditoruditoruditor’s Report’s Report’s Report’s Report’s Report


144

AnneAnneAnneAnneAnnexure to the Axure to the Axure to the Axure to the Axure to the Auditoruditoruditoruditoruditor’s Report’s Report’s Report’s Report’s Report

(Referred to in paragraph 3 of our report of even date)

(1) (a) The Company has maintained a register showing full particulars including quantitative details andsituation of fixed assets.

(b) All the assets have been physically verified by the management during the year and there is a regularprogramme of verification which, in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year, the Company has not disposed of any fixed assets except possession of 80 acres ofland given to M/s. Hindustan Petroleum Corporation Limited, Holding Company pending execution offinal agreement.

(2) As the Company is under construction stage therefore the clause of physical verification and maintainingof proper records relating to inventory is not applicable to the Company.

(3) The Company had not taken/granted any loans, secured or unsecured during the year from other/toCompanies covered in the register maintained under Section 301 of the Companies Act, 1956, hence thisclause is not applicable to the Company.

(4) In our opinion and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and the nature of its business with regardto fixed assets. As the Company is under construction stage therefore this clause relating to inventory andsale of goods is not applicable. During the course of our audit, we have not observed any major weaknessesin internal control.

(5) (a) According to the information and explanations given to us, there are no such transactions whichneeds to be entered into the register maintained in pursuance of Section 301 of the Companies Act,1956.

(b) In our opinion and according to the information and explanations given to us, there are no transactionsmade in pursuance of contracts or arrangements entered into the register maintained in pursuance ofSection 301 of the Companies Act, 1956, hence this clause is not applicable.

(6) The Company has not accepted any deposits from public during the year, hence the requirements ofSection 58A and Section 58AA of Companies Act, 1956 and Rules framed there under are not applicable.

(7) In our opinion, the Company has an internal audit system commensurate with the size and nature of itsbusiness.

(8) The Company is under construction stage, therefore, maintenance of Cost Records under Section 209(1)(d)of the Companies Act, 1956 is not applicable to the Company.

(9) (a) The Company is regular in depositing with Appropriate Authorities undisputed statutory dues includingIncome Tax, Sales Tax, Excise Duty, Custom Duty, Cess and other material statutory dues applicableduring the year to the Company.

(b) According to the information and explanations given to us, no undisputed amounts payable in respectof Income Tax, Sales Tax, Excise Duty, Custom Duty and Cess were in arrears, as at March 31, 2007for a period of more than six months from the date they became payable.

(c) According to the information and explanation given to us, there are no disputed dues of Sales Tax,Income Tax, Custom Duty, Excise Duty and Cess.


145

AnneAnneAnneAnneAnnexure to the Axure to the Axure to the Axure to the Axure to the Auditoruditoruditoruditoruditor’s Report’s Report’s Report’s Report’s Report

(10) The Company is under construction stage hence this clause of accumulated losses is not applicable.

(11) The Company has not taken any loan from Bank & Financial Institution, and not issued any debenture;hence this clause is not applicable to the Company.

(12) The Company has not granted any loans and advances against pledge of shares, debentures and othersecurities; hence this clause is not applicable.

(13) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/ society. Therefore, theprovisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 are not applicable to theCompany.

(14) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and otherinvestments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor’s Report) Order, 2003are not applicable to the Company.

(15) In our opinion, the Company has not given any guarantee for loans taken by others from banks or financialinstitutions; hence this clause is not applicable.

(16) In our opinion, the Company has not applied for any term loan; hence this clause is not applicable.

(17) According to the information and explanations given to us and on the basis of overall examination of thebalance sheet of the Company, we report that no fund raised on short-term basis have been used for long-term investment; hence this clause is not applicable.

(18) According to the information and explanations given to us, the Company has not made preferential allotmentof shares to parties and companies covered in the register maintained under Section 301 of the CompaniesAct, 1956; hence this clause is not applicable.

(19) According to the information and explanations given to us, the Company has not issued any Debentureduring the period covered by the audit report; hence this clause is not applicable.

(20) The Company has not raised any money by public issue; hence this clause is not applicable.

(21) According to the information and explanations given to us, no fraud on or by the Company has beennoticed or reported during the course of our audit.

For Rawla & CompanyChartered Accountants

Y.P. RawlaPartnerMembership No.: 10475

Place : New Delhi

Date : May 04, 2007


146

Balance Sheet as at 31st MarBalance Sheet as at 31st MarBalance Sheet as at 31st MarBalance Sheet as at 31st MarBalance Sheet as at 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007

Schedule 2006-07 2005-06

SOURCES OF FUNDS

Shareholder’s funds:a) Share Capital 1 3,354,600 2,957,100b) Share Application Pending Allotment 34,800 42,900

TOTAL 3,389,400 3,000,000APPLICATION OF FUNDSFixed Assets:

a) Gross Block 2 1,621,997 1,670,154b) Less: Depreciation 96,536 83,771

c) Net Block 1,525,461 1,586,383d) Capital Expenditure (In respect of assets

not owned by the Company) 3 21,460 49,935e) Capital Work in Progress 4 1,557,378 1,354,718

3,104,299 2,991,036Current Assets, Loan & Advances:

a) Sundry Debtors 5 122,586 13,985b) Cash and Bank Balance 6 706 3,339c) Other Current Assets 7 12 8d) Loans and Advances 8 141,303 34,073

264,607 51,405Less:

Current Liabilities and Provisions:a) Liabilities 9 42,471 88,355b) Provisions 239 21

42,710 88,376

Net Current Assets 221,897 (36,971)Miscellaneous Exp.(to the extent not written off or adjusted) 10 63,204 45,935

TOTAL 3,389,400 3,000,000STATEMENT OF SIGNIFICANT ACCOUNTINGPOLICIES AND NOTES FORMING PART OF ACCOUNTS 11

Amount (Rs.’000)

As per our report of the even date

For Rawla & Company B.S. Sant C.RamuluChartered Accountants Managing Director Director

Y.P. Rawla S. Malhotra S.TyagiPartner DGM-Finance Company Secretary



147


Amount (Rs.’000)

2006-07 2005-06SCHEDULE 1

SHARE CAPITAL

A AUTHORISED

6,000,000,000, (Previous year : 550,000,000)

Equity Shares of Rs. 10/- each 60,000,000 5,500,000

60,000,000 5,500,000

B ISSUED CAPITAL

338,940,000, (Previous year : 300,000,000) 3,389,400 3,000,000

Equity Shares of Rs. 10/- each 3,389,400 3,000,000

C SUBSCRIBED & PAID UP CAPITAL

335,460,000, (Previous year : 295,710,000)

Equity Shares of Rs. 10/- each fully paid up 3,354,600 2,957,100

3,354,600 2,957,100

SCHEDULE 2

FIXED ASSETS

Description As at01.04.06

Additions/reclassifi-

cationduring

the year

Ded/Recl.

As at31.03.07

As at01.04.06

For theyear

2006-07

Ded/Recl.

Total Up to31.03.07

As at31.03.06

As at31.03.07

GROSS BLOCK DEPRECIATION BLOCK NET BLOCK

A. TANGIBLE ASSETS

Land- Freehold 876,648 - - 876,648 - - - - 876,648 876,648

Road & Culverts 204,057 - - 204,057 13,318 3,326 - 16,644 190,739 187,413

Buildings 59,171 - - 59,171 8,889 1,850 - 10,739 50,282 48,432

Land- Lease Hold 332,864 50,541 98,943 284,462 44,811 14,275* 11,564 47,522 288,053 236,940

Plant & Machinery 75,603 462 266 75,799 15,517 4,608 3 20,122 60,086 55,677

Furniture & Fixture 4,289 - 93 4,196 1,236 289 16 1,509 3,053 2,687

TOTAL (A) 1,552,632 51,003 99,302 1,504,333 83,771 24,348 11,583 96,536 1,468,861 1,407,797

B. INTANGIBLE ASSETS

Right of Use 117,522 142 - 117,664 - - - - 117,522 117,664

TOTAL (B) 117,522 142 - 117,664 - - - - 117,522 117,664

GRAND TOTAL (A+B) 1,670,154 51,145 99,302 1,621,997 83,771 24,348 11,583 96,536 1,586,383 1,525,461

Previous year 1,640,624 29,530 - 1,670,154 62,494 21,277 - 83,771 1,578,130 1,586,383

Amount (Rs.’000)

* The amount of amortization on leasehold land over a period of 30 years has been reflected under the “Direct Revenue Expenses-SPM/COT” & “Prior period debits” in Schedule 4(II)Leasehold land appearing in “Capital Work in progress-SPM/COT” of Rs. 50,541 thousands capitalised during the year.

Land Freehold Includes:Rs. 875,800 thousands (Previous year Rs. 875,800 thousands) towards 1,992.575 acres of Refinery land at Bathinda for which the Company is in advanced stage for conclusion of“Conveyance Deed”.

Rs. 800 thousands (Previous year Rs. 800 thousands) towards 15.84 acres of land along the Pipeline route for pumping/service stations, deposited with statutory authorities viz SubDivisional Officers / Tehsildar, documents pending registration.


148


Amount (Rs.’000)

2006-07 2005-06SCHEDULE 3

CAPITAL EXPENDITURE

NOT REPRESENTED BY ASSET

OWNED BY THE COMPANY

Capital Expenditure not represented

by asset owned by the Company 50,389 144,190

Less : Amortised during the year 28,929 94,255*

TOTAL 21,460 49,935

* Includes Rs. 6,54,17,000 pertaining

to period prior to 2005-06

SCHEDULE 4

I CAPITAL WORK IN PROGRESS (at cost)

Capital work in progress - Pipeline 196,412 201,247

Capital work in progress - Refinery 541,052 356,060

Advance for Capital Expenditure 3,215 3,215

Capital work in progress - Wind Power - 1,390

Capital work in progress - SPM/COT - 50,542

TOTAL (I) 740,679 612,454

II Incidental expenses during construction

(pending apportionment)

Opening Balance 742,264 562,010

Direct revenue Exp-SPM/COT

Lease Rent 26,337 32,637

Amortisation of land 10,077 36,414 11,782 44,419

Direct revenue Exp-Refinery

Amortisation Assets not

owned by the Company 28,929 28,838

Configuration and cost study 6,044 34,973 8,916 37,754


149

Amount (Rs.’000)

2006-07 2005-06


Other Incidental Expenses

Salary & Wages (Reimbursed to holding co.) 21,820 15,338

Travel/ Conveyance/Transportation Charges 4,779 3,043

Professional Charges 1,375 597

Outsourced Services 3,222 2,622

Rent 1,373 1,502

Insurance 3 1

Postage & Telephone 780 682

Staff Welfare Expenses 370 309

Security Charges 1,992 1,754

Fuel Electricity & Water 1,014 928

Stationary & Office Supplies 415 338

Repair & Maintenance 1,838 1,719

Books & Periodicals 47 155

General Expenses 2,307 4,563

Audit Fees 50 56*

Rates & Taxes 207 113

Depreciation 9,633 9,495

Provision for Fringe Benefit Tax 519 428

Provision for Income Tax 22 51,766 3 43,646

Prior period

Debit 4,638 65,417

Credit (53,291) (48,653) (10,555) 54,862

Sub Total 816,764 742,691

Less:

Interest on Term Deposits 65 9

Misc. Income - 65 418 427

Sub Total 65 427

Total (II) 816,699 742,264

Grand Total (I + II) 1,557,378 1,354,718

* Inclusive of service tax


150


SCHEDULE 5

SUNDRY DEBTORS (Unsecured)Debt outstanding for a period exceeding six months

Considered good - -

Considered doubtful - -

Other debts - -

Considered good (Due from HPCL, holding Company) 122,586 13,985

Total 122,586 13,985

SCHEDULE 6

CASH AND BANK BALANCE

Cash on hand 130 100

Balance with Schedule Bank

On Current Account with Punjab National Bank 576 3,239

Total 706 3,339

SCHEDULE 7

OTHER CURRENT ASSETSInterest Accrued on bank deposits but not due 12 8

Total 12 8

SCHEDULE 8

LOANS AND ADVANCES

(UNSECURED CONSIDERED GOOD)

(Advance recoverable in cash or kind for

the value to be received)

Security Deposits Paid 9,479 8,928

TDS on Interest Income 15 -

CENVATABLE Claim 55,207 25,112

Other Advances 76,602* 33

Total 141,303 34,073

* Includes Rs. 75,000 thousands (Previous year: Nil) paid asdeposit towards land litigation case, refer note 9(a)

Amount (Rs.’000)

2006-07 2005-06


151

SCHEDULE 9

CURRENT LIABILITIES AND PROVISIONS

A Current Liabilities

Duties and Taxes 1,392 2,698

Sundry Creditors - 9,169

Earnest Money Deposits 218 96

Retention Money & Deductions 5,121 3,403

Security Deposits Received 4,132 3,183

Other Liabilities 41 -

Liabilities for

Works Contract 29,645 55,731

Expenses 1,922 995

ROU Compensation - 13,080

42,471 88,355

B Provisions

Income Tax 22 3

Fringe Benefit Tax 217 18

239 21

Total 42,710 88,376

There are no outstanding dues towards

Small Scale Industrial Undertakings

for more than 30 days

SCHEDULE 10

MISCELLANEOUS EXPENDITURE

(To the extent not written off or adjusted)

Preliminary Expenses 20,803 20,803

Financial Appraisal & Advisory 9,595 5,287

Sponsorships 10,210 10,210

Project Launch Expenses 21,006 9,635

Wind Power Project 1,590 -

63,204 45,935


Amount (Rs.’000)

2006-07 2005-06


152


SCHEDULE 11

A. SIGNIFICANT ACCOUNTING POLICIES

a. Accounts are prepared under the historical cost convention in accordance with Generally AcceptedAccounting Principles (GAAP) & Accounting Standards issued by the Institute of Chartered Accountantsof India (ICAI) and the provisions of the Companies Act, 1956. All income and expenditure havingmaterial bearing are recognised on the accrual basis, except where otherwise stated.

b. Land

Land acquired on lease for less than 99 years is treated as leasehold land. Cost of “Right of Use” iscapitalized. Leasehold land is amortised over the period of lease.

c. Fixed Assets

Cost of Fixed Assets comprises of purchase price, duties, statutory levies (net of Cenvatable claim) andany directly attributable cost of bringing the asset to its working condition for its intended use.

d. Intangible Assets

1. Cost of “Right of Use” is capitalised. However, such “Right of Use” being perpetual in nature is notamortized.

2. Expenditure on Intangible assets in the nature of “Assets not owned by the Company” are amortisedafter completion of assets over a period of five years or its period of utility, whichever is less.

e. Depreciation

1. Depreciation on fixed assets is provided on straight line basis, in the manner and at the ratesprovided under Schedule XIV of the Companies Act, 1956. Depreciation is charged pro-rata onmonthly basis on assets, from/ up to and inclusive of the month of capitalisation/ sale, disposalor deletion during the year.

2. Premium on leasehold land and amount incurred on development of such land are amortised overthe period of lease.

f. Expenses During Construction Period

The direct project expenditure incurred during the construction period has been shown under the head“Capital Work in Progress” which will be transferred to relevant fixed assets as and when they arecompleted.

Indirect expenditure relating to project have been shown under the head “Incidental Expenditure duringconstruction relating to project (pending apportionment)” which will be apportioned to fixed assetsupon completion of the project.

g. Miscellaneous Expenditure

The expenditure shown under the head “Miscellaneous Expenditure (to the extent not written off/adjusted)” will be amortised over a period of five years after commencement of commercial production.


153


B. NOTES FORMING PART OF ACCOUNTS

1. The entire equity contribution to Guru Gobind Singh Refineries Limited (GGSRL) has been made byHindustan Petroleum Corporation Limited (HPCL). Hence, GGSRL is a wholly owned subsidiary ofHPCL and a Government company u/s 617 of the Companies Act, 1956.

2. The Company has prepared the “Statement of Incidental Expenditure during construction” instead of aProfit and Loss Account. The necessary details as per Part II of Schedule VI of the Companies Act,1956, have been disclosed in the said statement.

3. The Company has acquired 310 acres of land on 30 year lease, out of which possession of 80 acreshas been given to HPCL on cost basis and margins, if any, to be considered up to the date of transfer.The aforesaid transfer is pending execution of agreement and approval from M/s Mundra Port SpecialEconomic Zone (MPSEZ).

4. The Company has over the years spent an amount of Rs. 15.90 lakhs towards feasibility of establishingWind Energy Project. As the Company has suspended the Wind Power Project, the amount spent onthe activity has been considered as Miscellaneous expenses.

5. The entire manpower of the Company, except the Managing Director, has been assigned by HPCL, onfull time basis and are continuing their lien with HPCL and their salary and retirement benefits areregularly disbursed to HPCL. Accordingly, provision for retirement benefits in respect of such employeesis not required to be made in the books of the Company.

Further the provisions of Section 217 (2A) of the Companies Act, 1956 are not applicable to theCompany.

6. The amount of CENVAT claim in Schedule-8 represents excise duties, countervailing duties and servicetax paid by the Company which shall be utilized as a set off from the excise duty and service taxpayments as and when the Company commences commercial production.

7. A Project Management Consultancy (PMC) contract has been awarded by the Company during theyear pursuant to approval of a revised configuration.

The amounts already spent by the Company on PMC and feasibility activities with regard to its earlierconfiguration and capacities are currently reflected under “Capital Work in Progress” and “IncidentalExpenses” account. These amounts shall be suitably treated to the extent of its actual usage in theproject activities.

8. Information pursuant to the provision of paragraph 3, 4C and 4D of Part II of Schedule VI of theCompanies Act, 1956.

a. As the Company is in process of construction of Refinery and its associated facilities, henceinformation containing in paragraph 3 & 4C of Part II of Schedule VI is not applicable.


154

(Rs./Lakhs)

2006-07 2005-06

b. Expenditure in foreign currency on account of :

(i) Purchase of Books/Magazines 0.06 0.06

(ii) Business Travel & Training fees 5.85 6.80

9. Contingent Liabilities not provided for in respect of

(a) Land- Refineries 2,378.33* 2,300.00

* Amount towards enhancement of land compensationas per orders of Hon’ble District Court, Bathinda forland owners who had filed an appeal u/s 18 of LandAcquisition Act, 1894. The Company has filed appealin the Hon’ble Punjab & Haryana High Court againstthe order and obtained a stay of demand from Hon’bleSupreme Court against the payment of enhancedcompensation. As per the order of Hon’ble SupremeCourt, the Company has deposited Rs. 7.50 crores withDistrict Court, Bathinda, pending outcome of the appealin High Court.

Interest if any, on the amount shall be accounted for inthe year of receipt.

(b) Others 369.76 354.76

10. Claims against the Company not acknowledged as 996.06 952.37debts

11. Estimated amount of contract remaining to be 69,398.30 6,384.00executed on Capital Account not provided for

12. Related Party disclosure(With HPCL, Holding Company)

(a) Issuance of Share Capital 3,894.00 -

(b) Share Application (Pending Allotment) 348.00 429.00

(c) Expenses Reimbursed 14.39 -

(d) Sale of steel plates

Qty.(MT) 175.34 3,383.52

Amount 31.24 503.42

(e) Cost of Employees assigned to Company 210.84 151.50

(f) Transfer of land 1,395.25 -



155

(Rs./Lakhs)

2006-07 2005-06

13. Capital Work in Progress (Refinery) includes

(a) Steel plates- Qty.(MT) 6,169.24 6,344.58

(b) Steel plates- Amount 1,335.98 1,361.58

14. Managerial Remuneration

As Managing Director

(a) Salary & Allowances 5.33 2.53

(b) Gratuity 0.27 0.10

(c) Contribution to Provident Fund 0.75 0.12

(c) Other Benefits 1.66 0.10

15. Auditors Remuneration

(a) Audit Fees 0.50 0.56*

(b) Certification work 0.15 0.05

* Inclusive of service tax

16. Amounts due from the Directors to the Company

(a) As on 31.03.2007 - -

(b) Maximum amount due during the year - -

17. Intangible assets (not internally generated)(a) Assets owned by the Company : Right of Use 1,176.63 1,175.00

Amounts paid to Competent Authority for acquiring“Right of Use” to lay the pipeline and expenditure oninvestigating the title & measurement of the land.The “Right of Use” is a perpetual right of use of landbut the ownership of the land does not rest with theCompany.

(b) Assets not owned by the Company (net ofAmortisation): 214.60 499.35

Represents expenditure incurred towardsconstruction & widening of roads, the ownershipof which rests with Government of Punjab.



156

(Rs. /Lakhs)

2006-07 2005-06


18. Prior period Credits/ Debits

(a) Credits

(i) Service Tax - 3.45

(ii) Sponsorship Expenses - 102.10

(iii) Project Launch Expenses 113.71 -

(iv) Lease Rental 303.56 -

(v) Amortisation of Lease Hold Land 115.64 -

(b) Debits

(i) Amortisation of Assets not owned by Company - 654.17

(ii) Depreciation/ Amortisation 46.38 -

19. Previous year’s figures have been regrouped, recasted and reclassified wherever necessary.

20. Schedule “1” to “11” form an integral part of the Balance Sheet and “Incidental Expense duringConstruction”.

21. Figures under Schedule “1” to “10” have been rounded off to the nearest thousand rupees.


157

Balance Sheet Abstract and CompanyBalance Sheet Abstract and CompanyBalance Sheet Abstract and CompanyBalance Sheet Abstract and CompanyBalance Sheet Abstract and Company’s General Business Pr’s General Business Pr’s General Business Pr’s General Business Pr’s General Business ProfileofileofileofileofileSchedule VI Part IV of Companies Act, 1956Schedule VI Part IV of Companies Act, 1956Schedule VI Part IV of Companies Act, 1956Schedule VI Part IV of Companies Act, 1956Schedule VI Part IV of Companies Act, 1956

I. REGISTRATION DETAILSREGISTRATION NO. : U 2 3 2 0 1 P B 2 0 0 0 G O I 0 2 4 1 2 6 STATE CODE: 1 6BALANCE SHEET DATE : 3 1 0 3 2 0 0 7

II. CAPITAL RAISED DURING THE YEAR (Amount in Rs.Thousands)PUBLIC ISSUE RIGHTS ISSUE

N I L N I LBONUS ISSUE PRIVATE PLACEMENT

N I L 3 8 9 4 0 0III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousands)

TOTAL LIABILITIES TOTAL ASSETS3 4 3 2 1 1 0 3 4 3 2 1 1 0

SOURCES OF FUNDSPAID-UP CAPITAL RESERVES & SURPLUS

3 3 5 4 6 0 0 N I LSECURED LOANS UNSECURED LOANS

N I L N I L

APPLICATION OF FUNDSNET FIXED ASSETS INVESTMENTS

3 1 0 4 2 9 9 N I LNET CURRENT ASSETS MISC.EXPENDITURE

2 2 1 8 9 7 6 3 2 0 4ACCUMULATED LOSSES

N I LIV. PERFORMANCE OF THE COMPANY (Amount in Rs. Thousands)

TURNOVER TOTAL EXPENDITUREN I L N I L

PROFIT /LOSS BEFORE TAX PROFIT /LOSS AFTER TAX+ N I L + N I L

EARNINGS PER SHARE IN RS. DIVIDEND RATE %N I L N I L

V. Generic Names of Three PrincipalProducts of the Company(as per monetary terms )Item Code No. (ITC Code) 2 7 1 0Product Description B U L K P E T R O L E U M

P R O D U C T S

Item Code No. (ITC Code)Product Description

Item Code No. (ITC Code)Product Description

B.S. SANT C. RAMULU S. MALHOTRA S. TYAGIManaging Director Director DGM Finance Company SecretaryPlace : New DelhiDate : May 04, 2007

*Includes Capital Work in Progress, Incidental Expenses, Capital Expenditure & Advance against Capital Assets.


158

Cash Flow Statement for the YCash Flow Statement for the YCash Flow Statement for the YCash Flow Statement for the YCash Flow Statement for the Year ended 31st Marear ended 31st Marear ended 31st Marear ended 31st Marear ended 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007

(Rupees in Millions)

2006-07 2005-06

A. Cash Flow From Operating ActivitiesNet Profit before Tax & Extraordinary items

Adjustments for :

Depreciation / Amortisation - -

Interest - -

Dividend received - -

Deletion of Fixed Assets/CWIP - -

Interest received on Long Term Investments - -

Interest received on Fixed Deposits - -

Misc. Expenses to the extent written off - -

Provision for Doubtful Debts & write offs - -

Profit on Sale of Investment - -

Provision for Loss on Investments - -

Operating Profit before Working Capital changes - -

Adjustments for :

Trade Receivables (108.60) 53.66

Other Receivables (107.23) 0.38

Other Current Assets - -

Inventories - -

Trade and other Payables (45.67) (35.10)

(261.50) 18.94

Amounts recoverable from Pool Account - -

Cash generated from operations (261.50) 18.94

Provision for taxes (Net) - -

Cash Flow before extraordinary items (261.50) 18.94

Extraordinary items - -

Net Cash from Operating activities (A) (261.50) 18.94

B. Cash Flow From Investing ActivitiesPurchase of Fixed Assets (incl. Capital Work (212.56) (38.68)

in Progress / excluding interest capitalised)

Sale of Fixed Assets 99.30 -

Preliminary / Pre-operative expenses (17.27) (19.92)

Purchase of Investment - -

Redemption of Investments - -

Interest received on Fixed Deposits - -

Interest received on Investments - -

Dividend received - -

Net Cash used in Investing Activities (B) (130.53) (58.60)


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Cash Flow Statement for the YCash Flow Statement for the YCash Flow Statement for the YCash Flow Statement for the YCash Flow Statement for the Year ended 31st Marear ended 31st Marear ended 31st Marear ended 31st Marear ended 31st March, 2007ch, 2007ch, 2007ch, 2007ch, 2007

C. Cash Flow From Financing ActivitiesProceeds from issue of Share Capital :- Share Allotment/Call monies (incl. Share Premium) 397.50 -- Excess Share Application Money (adj.) - -- Share Application money pending allotment (8.10) 42.90Proposed public issue expenses - -Repayment of Loans - -Loans raised during the year - -Interest other than for Long Term Loans - -Interest on Long Term Loans (including interest capitalised) - -Dividends paid - -Net Cash used in Financing Activities (C) 389.40 42.90Net Increase / (Decrease) in Cash andCash Equivalents (A) + (B) + (C) (2.63) 3.24Cash & Cash Equivalents as on 1st April 06 (Opening) :Cash on Hand 0.10 0.10Balances with Scheduled Banks- On Current Accounts 3.24 -- Others - -Balances with other Banks - -Overdrafts from Banks - -

3.34 0.10Cash & Cash Equivalents as on 31st March 07 (Closing):Cash on Hand 0.13 0.10Balances with Scheduled Banks- On Current Accounts 0.58 3.24- Others - -Balances with other Banks - -Overdrafts from Banks - -

0.71 3.34Net Increase / (Decrease) in Cash and

Cash Equivalents (2.63) 3.24

(Rupees in Millions)

2006-07 2005-06

For Rawla & CompanyChartered Accountants

Y.P. Rawla S. MalhotraPartner DGM- Finance



160

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDERSECTION 619 (4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF GURUGOBIND SINGH REFINERIES LTD. FOR THE YEAR ENDED 31ST MARCH 2007The preparation of financial statements of Guru Gobind Singh Refineries Ltd. for the yearended 31-03-2007 in accordance with the financial reporting framework prescribed underthe Companies Act, 1956 is the responsibility of the management of the Company. The statutoryauditors appointed by the Comptroller and Auditor General of India under Section 619(2) ofthe Companies Act, 1956 is responsible for expressing opinion on these financial statementsunder Section 227 of the Companies Act, 1956 based on independent audit in accordancewith the auditing and assurance standards prescribed by their professional body, the Instituteof Chartered Accountants of India. This is stated to have been done by them vide their AuditReport dated 04-05-2007.

I, on the behalf of the Comptroller and Auditor General of India, have conducted a supplementaryaudit under section 619 (3) (b) of the Companies Act, 1956 of the financial statements of GuruGobind Singh Refineries Ltd. for the year ended 31-03-2007. This supplementary audit hasbeen carried out independently without access to the working papers of the statutory auditorsand is limited primarily to the inquiries of the statutory auditors and company personnel and aselective examination of some of the accounting records. On the basis of my audit nothingsignificant has come to my knowledge which would give rise to any comment upon or supplementto Statutory Auditors’ report under Section 619(4) of the Companies Act, 1956.

For an on the behalf of the

Comptroller and Auditor General of India

(Saroj Punhani)

Principal Director of Commercial Audit& Ex-officio Member, Audit Board-II, New

Delhi.

Place : New DelhiDate : 25.06.2007

C & AGC & AGC & AGC & AGC & AG’s Comments’s Comments’s Comments’s Comments’s Comments

Annual Report 2006-07 HPCL

Documents

Transcript of Annual Report 2006-07 HPCL