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

BSE: 500104ISIN: INE094A01015INDUSTRY: Refineries

BSE   ` 475.80   Open: 477.70   Today's Range 470.30
479.05
+5.15 (+ 1.08 %) Prev Close: 470.65 52 Week Range 220.85
594.45
Year End :2023-03 

1. Includes assets of gross block H 0.007 Crore (31.03.2022: H 0.007 Crore) of erstwhile Kosan Gas Company that have not been handed over to the Corporation. Though Kosan Gas Company was to give up their claim, in view of the tenancy right sought by third party, the matter is under litigation.

2. Includes Gross Block of H 1,092.01 Crore (31.03.2022: H 1,057.73 Crore) towards Land, Building, Plant & Equipment, Furniture & Fixtures, Transport equipments, Office/lab Equipments, Roads & Culverts, Pipelines, Railway Sidings, etc. representing Corporation's share of Assets, jointly owned with other Companies.

3. Includes Gross Block of H 10.93 Crore (31.03.2022: H 11.03 Crore) towards Roads & Culverts, Transformers & Transmission lines, Railway Sidings & Rolling Stock for which though ownership does not vest with the Company, operational control over such assets is exercised. These assets are amortized as per useful life specified in Schedule II of Companies Act, 2013.

4. a) Includes following assets used for distribution of PDS Kerosene under Jana Kalyan Pariyojana against which financial

assistance had been provided by Oil Industry Development Board:

5. Assets held for sale consists of items such as plant and equipment, office equipment, transport equipment, buildings, furnitures & fixtures and roads & culverts which have been identified for disposal due to replacement/ obsolescence of assets which happens in the normal course of business. These assets are expected to be disposed off within the next twelve months. On account of classification of these assets as 'Asset held for sale', a loss of H 54.80 Crore (2021-22: H 92.20 Crore) has been recognised in the statement of profit and loss.

6. Includes Right of Use Assets having Gross Block H 103.75 Crore (31.03.2022: H 92.43 Crore) for land acquired on lease-cum-sale basis from Karnataka Industrial Area Development Board (KIADB), that has not been amortized over the period of lease in view of freehold title that would vest upon fulfilment of certain terms and conditions, as per allotment letter.

7. Includes adjustment to Cost of Assets pursuant to exchange differences arising on long term foreign currency monetary items, which, in accordance with Para 7AA of Ind AS 21 read with Para D13AA of Ind AS 101, are capitalized and depreciated over the balance useful life of the assets.

8. The Corporation has considered pipeline assets laid within the boundary limit of its premises as integral part of Tanks / Other Plant and Machinery and have been depreciating such assets based on the useful life of associated Plant & Equipment, in line with the Schedule II of the Companies Act, 2013.

9. Includes a reduction in depreciation by H 184.17 Crore (2021-22: H Nil Crore) on account of change in accounting estimate regarding the residual value of LPG cylinders and pressure regulators from 15% to 25% of the original cost, implemented during FY 2022-23 based on assessment carried out by the Management. The residual value of LPG cylinders and pressure regulators was earlier revised from 5% to 15% of the original cost during FY 2019-20.

10. Includes depreciation of H 9.05 Crore (2021-22: H Nil Crore) on account of determining the useful life of assets at lower of life as per specific agreements pertaining to Railway Consumer Depots or Schedule II of the Companies Act, 2013.

11. During the year, in respect of LPG consumers who have been inactive for 15 years and the useful life of equipment they are holding is also over, the equipment value (First Cost: H 97.11 Crore, 2021-22: H Nil Crore) along with the LPG consumer deposit (H 127.88 Crore, 2021-22: H Nil Crore) has been de-recognized in the books of account.

12. The process of capitalization in respect of Property, Plant and Equipment including accounting of Capital Work-in-Progress is under continuous review and updation, wherever required, and is being carried out on a regular basis.

13. In the nature of business carried out by the Corporation, there are certain leasehold immovable properties, which are under its continuous possession, control and use over the period, the lease agreement of which have expired. Pending renewal of such leases, these have not been recognised as Right of Use Assets.

14. Title deeds of Immovable Properties not held in name of the Corporation (Other than properties where the Corporation is the lessee and the lease agreements are duly executed in favour of the Corporation).

1. Includes Gross Block of H 75.73 Crore (31.03.2022: H 79.48 Crore) towards Right of Way representing Corporation's share of Assets, jointly owned with other Companies.

2. The Corporation has entered into service concession arrangements with entities that supply electricity (referred to as "The Regulator") in order to construct, own, operate, and maintain a wind energy-based electric power generating station (referred to as the "Plant"). Pursuant to the agreement, the Corporation will operate and maintain the Plant, and will sell the electricity generated to the Regulator for a period covering the substantial useful life of the Plant, which may be renewed for a further period upon mutual agreement between the parties. During the concession period, the Corporation is responsible for providing any maintenance services required. In turn, the Corporation has the right to charge an agreed rate as set forth in the service concession arrangement. The value of the Plant's construction has been recognized as an Asset, which is amortized over the useful life of the asset.

6.1. Increase of H 0.90 Crore (2021-22: H 0.90 Crore) in the carrying amount is pursuant to accounting of corporate guarantee commission, which is in accordance with Ind AS 109.

6.2. As per the guidelines issued by Department of Public Enterprises (DPE), Ministry of Finance, in February 2010, the Board of Directors of Maharatna Central Public Sector Enterprises (CPSEs) can invest in joint ventures and wholly owned subsidiaries subject to an overall ceiling of 30% of the net worth of the CPSE. The Corporation has requested Ministry of Petroleum & Natural Gas (MOP&NG) to confirm its understanding that for calculating this ceiling limit, the amount of investments specifically approved by Government of India [viz. investment in HPCL Mittal Energy Limited (HMEL) and HPCL Rajasthan Refinery Limited (HRRL)] are to be excluded. The Corporation has calculated the limit of 30% investment in joint ventures and wholly owned subsidiaries, by excluding these investments. As per financial position as on March 31, 2023, the investments in joint ventures and wholly owned subsidiaries are well within the said 30% limit.

7.1. The Corporation intends to hold these Investments for long term strategic purposes, and accordingly, designated them at fair value through Other Comprehensive Income. No strategic investments were disposed off during the financial year.

7.2. The value of investment in certain start-ups have been fair valued with corresponding recognition of fair value gain of H 18.87 Crore (2021-22: H Nil Crore), considering the information available about deals/funding that have taken place subsequent to our investment in such start-ups. In other cases, considering that the start-ups are in the stage of their development and are mostly in traction and refinement stages, the carrying value of such start-ups is considered as a reasonable approximation of their fair value. Further, during the year, preference shares issued by one of the start-ups, M/s Voltrez Tech Private Limited, have been converted into equity shares.

F. Rights and Restrictions on Equity / preference Shares

The Corporation has only one class of Equity Shares having a face value of H 10/- per share which are issued and subscribed. Each Shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of the winding up, the holders of equity shares will be entitled to receive the remaining assets in proportion to the number of equity shares held by the shareholders and the amount paid up thereon. The Corporation also has 75,000 6% cumulative Redeemable Non-convertible Preference Shares of H 100 /- each as a part of the Authorised Capital, which were issued earlier by the erstwhile ESSO Standard Refining Co. of India Limited (ESRC) . Presently the said Preference Shares stand redeemed.

H. In the period of five years immediately preceding 31st March, 2023

The Board, at its meeting held on November 04, 2020 approved the buyback of fully paid-up equity shares of the face value of H 10/- from the open market through stock exchange mechanism for an aggregate amount not exceeding H 2,500 Crore ("Maximum Buyback Size") and at a price not exceeding H 250 per Equity Share, payable in cash. The shares buy-back program, which commenced on November 17, 2020 had concluded on May 14, 2021. During the buy-back period, a total of 10,52,74,280/- shares, representing 6.91% of paid up Share Capital (prior to commencement of buy-back) having a face value of H 105,27,42,800/- had been bought back and extinguished.

24.1. a. Includes H 37.12 Crore (31.03.2022: H Nil Crore) towards non-current portion of unamortised Capital Grant, out of total Grant of H 37.50 Crore received from GOI, on completion of first milestone against approved financial assistance for viability gap funding (VGF) of H 150 Crore for setting up commercial scale 2G Ethanol refinery at Bhatinda, Punjab under PM-JIVAN Yojna. Of the total unamortised Capital Grant, H 0.38 Crore (31.03.2022: H Nil Crore) towards current portion is included in Note 28.

b. Includes H 124.06 Crore (31.03.2022: H Nil Crore) towards non-current portion of unamortised Capital Grant, out of total Grant of H 127.40 Crore received from GOI (out of approved grant of H 182 Crore) towards FAME India Scheme phase II for installation and commissioning of 1660 EV charging stations across India. Of the total unamortised Capital Grant, H 3.34 Crore (31.03.2022: H Nil Crore) towards current portion is included in Note 28.

c. Includes non-current unamortised portion of H 66.40 Crore (31.03.2022: H Nil Crore) towards the impact of duty deferment under Manufacturing and Other Operations in Warehouse Regulations, 2019 scheme, which is treated as Capital Grant from GOI in accordance with Ind AS-20 "Accounting for Government Grants and Disclosure of Government Assistance". Of the total unamortised Capital Grant, H 0.33 Crore (31.03.2022: H Nil Crore) towards current portion is included in Note 28.

31.1. Net of discount of H 3,260.92 Crore (2021-22: H 2,757.47 Crore).

31.2. Subsidy on PDS Kerosene from State Governments amounting to H 85.01 Crore (2021-22: H 65.58 Crore).

31.3. One-time grant of H 5,617 Crore received from Government of India (GoI) to compensate under-recoveries incurred on sale of domestic LPG during financial year 2021-22 and current period (2021-22: H Nil Crore).

31.4. The MoPNG, vide letter dated 30.04.2020 had conveyed to Oil Marketing Companies (OMCs) that a) In case, the Market Determined Price (MDP) is higher than the Effective Cost to Consumer (ECC), the difference shall be transferred to consumers account via Direct Benefit Transfer of LPG (DBTL) Scheme and b) In case, MDP is less than the ECC, the OMCs will retain the difference in a separate buffer account for future adjustment. However, as on March 31, 2023, the Corporation has a negative buffer of H 989.73 Crore (after adjustment of uncompensated cost of H 2,759.03 Crore and after netting-off one-time grant of H 5,617 Crore) as the retail selling price was less than MDP. In absence of authorisation from GOI, receivable and revenue to the extent of negative buffer has not been recognised. As on March 31,2022, the Corporation had reported a negative buffer of H 2,642.33 Crore.

39.B. Fair value hierarchy

This section explains the judgements and estimates made in determining the fair value of the Financial Assets and Financial Liabilities that are recognised and measured at fair value and amortised cost. To provide an indication about the reliability of the inputs used in determining fair value, Corporation has classified its Financial Assets and Financial Liabilities into the three levels prescribed under the Indian accounting standard. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. An explanation of each level is provided under Significant Accounting Policies.

40. Financial risk management:40.A. Risk management framework

The Corporation has established an Enterprise Risk Management (ERM) framework under the Corporation's Risk Management Charter and Policy 2007, which is embedded at the forefront of business strategies and focuses on the stronger, deeper and trust-based relationship with the stakeholders. It provides necessary support to the business to steer through the continuously evolving risk terrain through dynamic risk management approach that embraces disruption and enhances resiliency and trust.

The Corporation is regularly reviewing the identified and emerging risks and taking appropriate risk mitigation measures.

The Risk Management Steering Committee (RMSC) receives regular insights on risk exposures faced by the Corporation, thereby enabling it to provide inputs on prompt actions to be taken as well as monitor the actions taken. The Board is also updated regularly on the risk assessment and mitigation procedures.

Technology has been enabled to support the Enterprise Risk Management processes with a focus on optimizing risk exposures and automating risk reporting across the organization.

40.B. Corporation has identified financial risk and categorised them in three parts Viz. (i) Credit Risk, (ii) Liquidity Risk & (iii) Market Risk. Details regarding sources of risk in each such category and how Corporation manages the risk is explained in following notes:40.B.1. Credit risk

Credit risk is the risk of financial loss to the Corporation if a customer or counterparty to a financial instrument fails to meet their contractual obligations. The risk arises principally from the Corporation's Receivables from Customers and so also from Investment Securities. The risk is managed through credit approval, establishing credit limits and continuous monitoring of the creditworthiness of Customers to whom the Corporation extends credit terms in the normal course of business.

The maximum exposure to credit risk in case of all the financial instruments covered below is restricted to their respective carrying amount.

Note: Refer Note 61 regarding loans given to consumers under Pradhan Mantri Ujjwala Yojna (PMUY).

Trade receivables

The Corporation's exposure to credit risk is influenced mainly by the individual characteristics of each customer.

The Corporation assesses impairment of Trade Receivable/Other Receivables both individually &/or grouping large numbers of Customers, homogenously and recognizes a loss allowance towards doubtful debts by estimating its expected losses. In this regard, an allowance matrix is used to measure the expected credit losses on trade receivables that are considered good. The following table provides information about the exposure to credit risk and loss allowance (including expected credit loss provision) on such trade receivables:

The amounts written off relates to customers who have defaulted payments and are not expected to pay their outstanding balances, mainly due to economic circumstances.

Cash and Cash Equivalents:

The Corporation held cash and cash equivalents of H 384.93 Crore as on 31.03.2023 (31.03.2022 : H 107.22 Crore). The cash and cash equivalents (other than cash on hand) are held with scheduled banks. The Corporation invests its surplus funds for short duration in fixed deposit with banks, Government of India T-bills, Tri Party Repo System (TREPS), Clearcorp Repo Order Matching System (CROMS) and debt schemes of Mutual Funds, all of which carry no mark to market risks as the Corporation is exposed only to low credit risk.

Derivatives:

The forex and interest rate derivatives are entered into with banks having an investment grade rating. Commodity derivatives are entered with reputed Counterparties in the OTC (Over-the-Counter) Market. The exposure to counterparties are closely monitored and kept within the approved limits.

Investment in Debt Securities:

Investment are made in government securities or bonds which do not carry any credit risk, being sovereign in nature. 40.B.2. Liquidity risk

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they become due. Corporation has a strong focus on effective management of its liquidity to ensure that all business and financial commitments are met on time. The Corporation has adequate borrowing limits in place duly approved by its Shareholders and Board. Corporation's sources of liquidity includes operating cash flows, cash and cash equivalents, fund and non-fund based credit lines from banks and liquid investment portfolio. Corporation ensures that there is minimal concentration risk by diversifying its portfolio across instruments and counterparties. Cash and fund flow management is monitored daily in order to have smooth and continuous business operations.

(i) Financing arrangements

The Corporation has adequate fund and non-fund based lines from various banks. The Corporation has sufficient borrowing limits in place duly approved by its Shareholders and Board. Domestic and international credit rating from reputed credit rating agencies enables access of funds both from domestic as well as international market. Corporation's diversified source of funds and cash flow enables it to maintain requisite capital structure discipline. Corporation diversifies its capital structure with a mix of instruments and financing products across varying maturities and currencies. The financing products include syndicated loans, foreign currency bonds, bank term loans, TREPS loan, CROMS loan, commercial paper, non-convertible debentures, buyer's credit loan, clean loan etc. Corporation taps domestic as well as foreign debt markets from time to time to ensure appropriate funding mix and diversification across geographies.

40.B.3. Market Risk - Market Risk is further categorised in (i) Currency risk , (ii) Interest rate risk , (iii) Commodity risk & (iv) Price risk

40.B.3.1. Currency risk

The Corporation is exposed to currency risk, primarily on account of its repayment obligations of loans taken in foreign currency and imports, to be paid in foreign currency. The exposure is mainly denominated in U.S.Dollar. The Corporation has a Forex Risk Management Cell (FRMC) which actively review the forex and interest rate exposures. The Corporation uses generic derivative contracts to mitigate the risk of changes in foreign currency exchange rates in line with Corporation's forex risk management policy. The Corporation does not use derivative financial instruments for trading or speculative purposes.

40.B.3.2. Interest rate risk

The Corporation has long-term foreign currency syndicated loans with floating rate of interest, which exposes the Corporation to cash flow interest rate risk. The borrowings at floating rate are denominated in USD. The Corporation manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Under this, the Corporation agrees with other Parties to exchange at specified intervals (i.e. quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts. The Corporation monitors the interest rate movement and manages the interest rate risk, based on the Corporation's Forex Risk Management Policy. The Corporation also has a Forex Risk Management Cell (FRMC) that actively reviews the forex and interest rate exposures. The Corporation does not use derivative financial instruments for trading or speculative purposes.

In March 2021, the Financial Conduct Authority (FCA), UK has confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be a representative in the following manner:

• Immediately after December 31, 2021, in the case of all sterling, Euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and

• Immediately after June 30, 2023, in the case of the remaining US dollar settings.

The Corporation has exposure in the form of External Commercial Borrowings aggregating to USD 750 Million linked to 3-Month LIBOR as at 31.03.2023 (31.03.2022: USD 1,250 Million). Of the total loan outstanding as on March 31, 2022, loan aggregating to USD 500 Million have been refinanced and migrated to 3-month Term SOFR i.e., Alternative Reference Rate at a favourable spread during the current financial year.

The balance aforementioned exposure shall be migrated from 3-Month LIBOR to an Alternative Reference Rate (ARR) before the cessation date. The impact of such migration is not expected to be material.

The Corporation's borrowings which are contracted at fixed rate are carried at amortised cost. These are not affected due to interest rate risk as defined in Ind AS 107 as neither the carrying amount nor the future cash flows will fluctuate in the event of a change in market interest rates.

40.B.3.3. Commodity Risk

The Corporation's Profitability is exposed to the risk of fluctuation in prices of Crude Oil and Petroleum products in international markets. The Corporation monitors and reduces the impact of the volatility in International Oil prices based on approved Oil Price Risk Management Policy by entering into derivative contracts in the OTC market. The Corporation also has Oil Price Risk Management Committee (OPRMC) which actively reviews and monitors risk management principles, policies and risk management activities.

40.B.3.5. Derivatives & Hedging

The Corporation enters into derivative contracts for hedging purpose, to mitigate the commodity price risk on Highly probable forecast transactions and Currency Risk. The Corporation has applied Hedge Accounting on commodity derivative transactions and foreign exchange forward derivatives entered subsequent to 01st January 2020 as per Ind AS 109 (Financial Instruments). Consequent to this a Mark to Market Debit / (Credit) amounting to H (4.01) Crore (2021-22: H 185.31 Crore) has been accounted in Other Comprehensive Income which will be recycled to Statement of Profit and Loss in subsequent period on settlement of respective contracts.

All these hedges are accounted for as Cash Flow Hedges.

Hedge Effectiveness

The Corporation has established a hedge ratio of 1:1 for the hedging relationship as the underlying risk of the commodity and foreign exchange forward contracts are identical to the hedged risk component. Hedge item and the hedging instruments have economic relationship as the terms of the commodity and foreign exchange forward contracts match with the terms of hedge items. Considering the economic relationship and characteristics of the hedging instrument being aligned to the hedged item, the fair value changes in the hedging instrument reasonably approximates the fair value changes in the hedged Item (in absolute amounts).

Source of Hedge Ineffectiveness

The Corporation has identified the following sources of hedge ineffectiveness w.r.t commodity forward contracts which are not expected to be material as at date:

a. Counterparty Credit Risk impacting the fair value of the hedge instrument and hedge item.

b. Difference in the timing of the cash flows of the hedged items and the hedge instruments.

c. Different indexes used to hedge risk of the hedged item.

d. Changes to forecasted amounts of cash flows of hedged items and hedging instruments.

In case of foreign currency risk, the main source of hedge ineffectiveness is the effect of the counterparty and the Corporation's own credit risk on the fair value of the hedge contracts, which is not reflected in the fair value of the hedged items. The effect of this is not expected to be material.

During the financial year, the Corporation recognized revenue of H 1,708.91 Crore (2021-22: H 856.32 Crore) arising from opening unearned revenue.

42. Lease

The Corporation enters into lease arrangements for underlying assets such as land, office premises, staff quarters. Upon 151 time adoption of Ind AS 116 in financial year 2019-20, the Corporation had chosen modified retrospective approach with exercising of options to use certain practical expedients. 'Lease Liability' and 'Right-of-use Assets', wherever the term of lease is in excess of 12 months have been appropriately disclosed, unless the underlying Asset is of low value.

C. Transactions with other Government-Controlled Entities

The Corporation is a Government related entity, engaged in the business of refining of crude oil and marketing of petroleum products. The Corporation also deals on regular basis with entities directly or indirectly controlled by the Central / State Governments through its Government authorities, agencies, affiliations and other organizations (collectively referred as "Government related entities").

Apart from transactions with Corporation's group Companies, the Corporation has transactions with other Government related entities, including but not limited to the followings:

• sale and purchase of products; • rendering and receiving services;

• leasing of assets; • depositing and borrowing money; and

• use of public utilities

These transactions are conducted in the ordinary course of the Corporation's business on terms comparable to those with other entities that are not Government related.

(e) Short or (excess) provision for tax of earlier years,for the year ended includes H Nil Crore [2021-22: H(180.18) Crore] reversed during the year, pursuant to the decision for non-participation under Direct Tax Vivad se Vishwas Act, 2020, in respect of few assessment years.

(f) The Corporation has recognised deferred tax assets on the current year losses which are attributable to significant higher input cost and suppressed marketing margins on certain petroleum products. Based on the business plans and future market outlook, the corporation is reasonably certain to generate taxable income from financial year 2023-24 onwards which will enable setting off such carried forward losses.

*As of 31st March 2014, Bhagyanagar Gas Limited (BGL) had a paid up equity capital of H 5 lakhs, in which HPCL and GAIL were holding 24.99% each and the balance 50.02% of shares were held by Kakinada Seaports Ltd (KSPL) on warehousing basis. In addition, HPCL and GAIL had paid H 22.49 Crore each as Advance against Equity / Share application money (totaling to H 44.98 Crore). On 20th August 2014, BGL allotted 2,24,87,500 shares on preferential basis to each of HPCL and GAIL towards the money paid earlier. Accordingly, the Corporation's shareholding in BGL had increased to 48.73%. KSPL challenged this in the Company Law Board (CLB), Chennai Bench which dismissed it on 14th September 2014. Against this, KSPL moved the High Court, Telangana, which did not stay the dismissal order of CLB. Pending adjudication of the appeal by KSPL before the High Court, the shareholding was considered at 24.99% till 31st March 2020. However, taking all the facts into consideration, including receipt of dividend on the entire stake of 48.73% during financial year 2020-21 and the Articles of Associations of BGL, the shareholding is being considered as at 48.73%, effective financial year 2020-21.

Ujjwala Plus Foundation, a joint venture of Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) was incorporated on 21st July 2017 as a not for profit Private Company, Limited by Guarantee (Without Share Capital) under Section 8 of the Companies Act, 2013.

(i) The block CB-ONN-2002/3 was awarded under NELP IV bidding round and the production sharing contract was signed on 06.02.2004. The exploration Minimum Work Program has been completed. Production from SE#3/4 wells of the Block is in progress, which had started during FY 2017-18. The share of the assets, liabilities, income and expenditure is considered based on the Management certified financials for the FY 2022-23.

(ii) In respect of Cluster - 7, which is terminated and the matter is under litigation (refer Note 53.1). The remaining blocks are in the process of relinquishment/ under relinquishment and the share of the assets, liabilities, income and expenditure, if any, is considered based on information received towards these blocks.

53.

Contingent Liabilities and Commitments*

(H / Crore)

I.

Contingent Liabilities

31.03.2023

31.03.2022

A

Disputed demands / claims subject to appeals / representations filed by the Corporation

i. Sales Tax/Octroi

1,529.04

1,684.67

ii. Excise/Customs

171.21

192.75

iii. Land Rentals & License Fees

299.82

293.96

iv. Employee Benefits/Demands (to the extent quantifiable)

70.39

57.28

v. Others

186.44

100.39

2,256.90

2,329.05

B

Disputed demands / claims subject to appeals / representations filed against the Corporation

i. Sales Tax/Octroi

0.77

0.77

ii. Excise / Customs

2.83

2.83

iii. Employee Benefits/Demands (to the extent quantifiable)

106.08

93.94

iv. Claims against the Corporation not acknowledged as Debts(refer note 53.1)

548.16

522.61

v. Others

215.44

210.42

873.28

830.57

* Contingent Liabilities considered as 'remote' as per Ind AS 37 are not included.

(H / Crore)

31.03.2023

31.03.2022

II.

Guarantees given to Others

986.79

1,236.59

53.1.The Corporation with a Participating Interest(PI) of 60% along with Prize Petroleum Company Limited (PPCL), having a PI of 10% and M3nergy Sdn. Bhd (M/s M3nergy) having a PI of 30% were awarded service contract in March, 2006 for development of ONGC's offshore marginal oilfields of cluster-7. PPCL was the executing contractor. Parties provided necessary Bank Guarantees to ONGC. Since M/s M3nergy could not meet their contractual obligations, the contract was terminated by ONGC and Bank guarantees were forfeited. HPCL and PPCL demanded the refund of monies forfeited towards encashment of Bank Guarantee along with other claims from M/s M3nergy. A counter claim of USD 36.51 Million was made by M3nergy on termination of such service contract. The matter was referred to Arbitration.

The Arbitral Tribunal passed 3 Awards (09.01.2014, 27.09.2017, 15.06.2018 respectively), all were in favour of the Corporation and PPCL. These Orders were to the effect that M3nergy had committed breach of the contract and hence their counter claims were disallowed and that the Corporation and PPCL are entitled for damages with interest and costs of arbitration to be borne by M3nergy. All the 3 Awards were challenged by M/s M3nergy before the Bombay High Court. However, there was no stay granted by Bombay High Court, hence, HPCL/ PPCL filed applications for (a) Mareva Injunction and (b) Enforcement of the Award before the Courts in Malaysia since M/s M3nergy is located in Malaysia.

By Orders dated 10.01.2019 the Hon'ble Bombay High Court set aside all three Arbitration Awards. As the Awards were set aside (on the basis of which the enforcement application was filed by HPCL), on 28.02.2019 the Malaysian High Court at Kuala Lumpur allowed the application of M/s M3nergy to set aside the enforcement order with liberty to file fresh proceedings, if HPCL/ PPCL succeed later. Meanwhile, HPCL and PPCL have filed Appeals against the setting aside order (of Single Judge Bombay High Court) before the Division Bench of the Bombay High Court. After hearing arguments of parties, on 16.10.2019, the Hon'ble Bombay High Court set aside the Single Judge's Order and remanded all the 3 matters back to the Single Judge of the High Court, to decide the matter afresh on merits. This Order was challenged by M/s M3nergy before the Supreme Court by filing Special Leave Petition (SLP) which, after brief arguments, was dismissed as withdrawn (by M/s M3nergy) on 31.01.2020. As a result, the Single Judge of Bombay High Court will hear the matter afresh on merits. The matter was lastly listed on 17.04.2023, but could not be taken up, and is awaiting hearing.

As a result, the Corporation's share of the awarded amount which is approximately H 420.74 Crore towards loss of profit /damages /costs and interest thereon has not been recognized on a conservative basis. Further, the claim raised by M/s M3nergy to the extent of Corporation's share i.e. approximately H 257.15 Crore @ Exchange rate of 1 USD = H 82.1750 (31.03.2022: 237.20 Crore @ Exchange rate of 1 USD = H 75.7975), being considered remote is also not recognized.

53.2. Corporation has entered into a long term product off take agreement with M/s HPCL- Mittal Energy Limited (HMEL), its joint venture company, for purchase of petroleum products produced by the refinery. This agreement has a take or pay clause and the Corporation is committed to purchase the said petroleum products over the tenure of the agreement.

53.3. I n respect of certain Joint Venture/Associate Companies, the Corporation and other joint venture partners have committed among others, that they would jointly hold at least 51% of share capital of such Joint Venture/Associate till the repayment of certain bank loans / bonds for which letters of comfort have been issued in certain cases. Expected future outflow of resources emanating out of approved plans on investment in Subsidiaries/Joint Ventures/Associates are not part of 'Capital Commitments' unless investment calls are made as at period end.

55. (a) Inter-Oil Company transactions are reconciled on a continuous basis. However, year end balances (including trade

payables / trade receivables) are subject to confirmation/reconciliation which is not likely to have a material impact.

(b) Customer's accounts are reconciled on an ongoing basis and such reconciliation is not likely to have a material impact on the outstanding or classification of the accounts.

56. Impairment assessment as per the requirements of Ind AS 36 'Impairment of Assets' has been carried out at period end for all Cash-Generating Units (CGUs) by comparing their value-in-use (calculated based on certain assumptions, on which auditors have relied upon) with the carrying value of assets under respective CGUs. Based on such assessment, no impairment loss for CGUs is warranted except in case of windmills assets situated at Akal (Rajasthan) for which an impairment loss of H 44.28 Crore (2021-2022: H Nil Crore) has been recognized.

57. On the reporting date, the Corporation has an equity investment of H 984.61 Crore (31.03.2022: H 756.72 Crore) in its wholly owned subsidiary, HPCL Biofuels Limited (HBL) after conversion of loan amounting H 225 Crore (2021-22: H Nil Crore) into equity during the year. Of this, an amount of H 572.16 Crore has been impaired as on March 31,2023 (March 31,2022: H 572.16 Crore). Considering the Government policy in promoting ethanol blended petrol (subsidiary is engaged in production of ethanol) and business plans for the subsidiary, the current level of impairment is appropriate in the opinion of the Management.

58. The Corporation has an equity investment of H 250.76 Crore in its 100% subsidiary, Prize Petroleum Company Limited. During the current financial year, an impairment assessment is carried out and H 27 Crore (2021-22: H 14 Crore) is provided for. The total amount of impairment towards the carrying value of the investment stands at H 203.98 Crore (31.03.2022: H 176.98 Crore). The said impairment is in line with the requirement of Ind AS 36 and is based on the estimated future cash flow projections from continuing use of its Assets in the entity. In the opinion of the Management, the current level of impairment is appropriate.

59. The Corporation has an equity investment of H 66.77 Crore in its Associate, GSPC India Transco Limited. Upon impairment assessment, an amount of H Nil Crore (2021-22: H 14 Crore) is provided for during the year. The total amount of impairment towards the carrying value of the investment stands at H 14 Crore (31.03.2022: H 14 Crore). The said impairment is in line with the requirement of Ind AS 36 and is based on the financial performance of the entity. In the opinion of the Management, the current level of impairment is appropriate.

60. The Corporation's 100% step-down subsidiary, Prize Petroleum International Pte Ltd. (a wholly owned subsidiary of Prize Petroleum Company Limited), incorporated in Singapore is engaged in the business of exploration & production of hydrocarbons. On a loan of $86 Million taken during the financial year 2016-17 by the step-down subsidiary towards which a corporate guarantee was provided, the carrying value of the obligation was re-measured under the provisions of Ind AS 109 during the current financial year and a loss allowance of H 300.18 Crore (2021-22: H 31 Crore) is provided for during the year and accounted under 'Sundry Expenses and Charges'. The total amount of loss allowance thus made towards the carrying value of the Corporate Guarantee stands at H 649.18 Crore (31.03.2022: H 349 Crore).

61. The Pradhan Mantri Ujjwala Yojana (PMUY) was launched in 2016 to provide LPG connections to women from below-poverty-line (BPL) households. The beneficiary is given an option to avail loan from the respective OMCs to meet the cost of the stove and first fill. This loan is to be recovered from the subsidy payable to the consumer on purchase of the refill cylinders. The loan has been provided to 1.76 Crore PMUY consumers for an amount aggregating to H 2,960.48 Crore (31.03.2022: H 2,962.33 Crore), and of this, H 1,565.39 Crore (31.03.2022: H 1,705.32 Crore) is outstanding at period end. The Loan is classified as 'subsequently measured at amortized cost' in the financial statements. The carrying value of loan outstanding as at Balance Sheet date is re-measured based on revised estimates of future cash flows. Such re-measurement has resulted in change in gross carrying amount of outstanding loan, net of interest unwinding, by H -81.57 Crore (2021-22: H 251.85 Crore) during the year. Considering the cumulative re-measurement loss, net of interest unwinding, amounting to H 443.39 Crore (31.03.2022: H 524.96 Crore) and accounting of Deferred Expense amounting to H 528.29 Crore (net balance after amortisation as of 31.03.2023 is H 334.89 Crore), the outstanding loan at period end is carried in the books at H 593.71 Crore (31.3.2022: H 652.07 Crore). Further, considering the consumption pattern of refills, level of subsidies and consequential impact on repayment of the loan, by following the principles of prudence and conservatism, a cumulative provision of H 25.01 Crore (31.03.2022: H 118.70 Crore) net of reversal, if any, is estimated and recognized in books. The reversal of provision during the year amounted to H 93.69 Crore (2021-22: H 499.37 Crore) that arose primarily due to inactive consumer turning active, pursuant to focused initiatives taken in this regard. The expected credit loss estimate is reasonable.

62. The Corporation implements various schemes of Government of India, such as PMUY, Direct Benefit Transfer scheme, wherein the amount is either received in advance or reimbursed subsequently. As of 31.03.2023, reimbursements amounting to H 189.88 Crore (31.03.2022: H 152.11 Crore) are pending for a period beyond 6 months for which provision of H 159.12 Crore (31.03.2022: H Nil Crore) is carried in the books.

63. Till 26-12-2022, the Company was having sufficient number of Independent Directors to comply with the relevant provisions of Companies Act, 2013 and SEBI LODR, 2015. Effective 27-12-2022 till 14-03-2023, the Company was short of one Independent Director to comply with SEBI (LODR) 2015. With the appointment of one Independent Director on 15-03-2023, Company was having sufficient number of Independent Directors till April 30, 2023 to comply with SEBI (LODR), 2015. Effective May 01,2023, the Company was once again short of one Independent Director. The Company has approached Administrative Ministry for appointment of requisite number of Independent Director on its Board from time to time.

65. The Corporation has presented segment information in its Consolidated Financial Statements. Accordingly, in terms of provisions of Indian Accounting Standard on Segment Reporting (Ind AS 108) no disclosure related to the segment are presented in the Standalone Financial Statements.

67. Employee benefit obligationsA. Defined Contribution Plan Superannuation Fund

The Corporation has Superannuation - Defined Contribution Scheme (DCS) maintained by 'Superannuation Benefit Fund Scheme (SBFS) Trust' wherein Employer makes a monthly contribution of a certain percentage of 'Basic Salary & Dearness Allowance(DA)', out of 30%, earmarked for various Superannuation benefits. This is in accordance with Department of Public Enterprises (DPE) guidelines. These contributions are credited to individual Employee's Account maintained either with Life Insurance Corporation of India (LIC) or an optional National Pension Scheme (NPS) Account. For the financial year 2022-23, the Corporation has made an overall contribution of H 207.91 Crore (2021-22 : H 194.39 Crore) towards Superannuation - DCS [including H 84.65 Crore (2021-22 : H 78.73 Crore) to NPS] by charging it to the statement of Profit and Loss.

Employee Pension Scheme(EPS-95)

During the year, Corporation has recognised H 8.19 Crore (2021-22: H 8.95 Crore) as contribution to Employee Pension Scheme (EPS-95) in the Statement of Profit and Loss.

B. Defined Benefit Plan Provident Fund

The long term employee benefit of Provident Fund is administered through a separate Trust, established for this purpose in accordance with The Employee Provident Fund and Miscellaneous Provisions Act, 1952. The Corporation's contribution to the Provident Fund is remitted to this trust based on a fixed percentage of the eligible employee's salary and charged to Statement of Profit and Loss. During the year, the Corporation has recognized H 166.71 Crore (2021-22: H 161.93 Crore) as Employer's contribution to Provident Fund in the Statement of Profit and Loss.

Shortfall, if any, in matching the Government specified minimum rate of return, will be made good by the Corporation and charged to Statement of Profit and Loss. During the year, the actual return earned by the fund has been higher than the Government specified minimum rate of return. There did not arise a shortfall in the fund as on 31st March 2023 and 31st March 2022. The present value of benefit obligation at period end is H 5,041.42 Crore (31.03.2022: H 4,897.34 Crore). The fair value of the assets of Provident Fund Trust as of Balance Sheet date is greater than the present value of benefit obligation.

During the year a provision of H 0.42 Crore has been reversed (created in FY 2019-20) being excess provision no longer required, and a provision of H 82.41 crore has been off-set (created in FY 2019-20) against liability towards losses on defaulted investments.

Pursuant to paragraph 57 of Ind AS 19, accounting by an entity for defined benefit plans, inter-alia, involves determining the amount of the net defined benefit liability (asset) which shall be adjusted for any effect of limiting a net defined benefit asset to the asset ceiling prescribed in paragraph 64. As per Para 64 of Ind AS 19, in case of surplus in a defined benefit plan, an entity shall measure the net defined benefit asset at the lower of actual surplus or the value of the assets ceiling determined using the discount rate. The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. Further, paragraph 65 provides that a net defined benefit asset may arise where a defined benefit plan has been overfunded or where actuarial gains have arisen.

As per the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, the Company has no right to the benefits either in the form of refund from the plan or lower future contribution to the plan towards the net surplus of H 44.59 Crore (31.03.2022: H 72.26 Crore) determined through actuarial valuation. Accordingly, Company has not recognised the surplus as an asset, and the remeasurement loss /gains in 'Other Comprehensive Income', as these pertain to the Provident Fund Trust and not to the Company.

H: Notes

I. Gratuity: Each employee rendering continuous service of 5 Years or more is entitled to receive gratuity amount equal to 15/26 of the eligible salary for every completed years of service subject to maximum of H 0.20 Crore at the time of separation from the Corporation. Besides the ceiling, gratuity increases by 25% whenever IDA rises by 50%. The long term employee benefit of Gratuity is administered through a Trust, established under The Payment of Gratuity Act, 1972. The Board of Trustees comprises of representatives from the Employer who are also plan participants in accordance with the plans regulation. The liability towards gratuity is funded with Life Insurance Companies.

II. Pension : The employees covered by the Pension Plan of the Corporation are entitled to receive monthly pension for life. However, none of the current serving employees are covered under Pension Plan of the Corporation.

III. Post Retirement Medical Benefit (PRMBS): Post Retirement Benefit medical scheme provides medical benefit to retired employees and eligible dependent family members. This long term employee benefit is administered through a Trust. The liability towards Post-Retirement Medical Benefit for employees is ascertained, yearly, based on the actuarial valuation and funded to the Trust.

IV. Ex-gratia: The ex-employees of Corporation are covered under the Scheme, entitling to get ex-gratia, determined based on their salary grade at the time of their superannuation. The benefit is paid to eligible employees till their survival, and thereafter till the survival of their spouse. However, none of the current serving employees are covered under this Plan.

V. Resettlement Allowance : Upon superannuation from the services of the Corporation, there are employees who permanently settle down at a place other than the location of the last posting. Such employees are provided with resettlement allowance as per policy of the Corporation.

VI. Others: The expected return on plan assets is based on market expectation over the entire life of the related obligation. The actuarial assumption with regard to future salary escalation takes into consideration, the factors such as inflation, seniority, promotion, demand & supply in the employment market.

VII. Figures in italics represent last year figures.

68. As on 31.03.2023, the Corporation has an inventory of Non-Solar Renewable Energy Certificates (RECs) numbering 3,275 Units (31.03.2022: 16,830 Units), available for sale after earmarking a requisite quantity already for captive consumption. Traded in Indian Energy Exchange Ltd., the revenue from RECs is recognized as and when the same are sold. At period end, these RECs are traded in a price band of H 1,000/- to H 3,000/- per REC. Delhi High Court has suspended online trading in certificates issued before 31-10-2022 and case is sub-judice.

72. Other Disclosures

72.1. The Quarterly returns / statements of the first 3 quarters of the current financial year with respect to current assets (Inventories) filed with banks / financial institutions for the financial year 2022-23 are in agreement with the books of accounts. The return for the 4th quarter, being price sensitive information, will be filed after declaration of annual results.

72.2. Compliance with number of layers of companies as per Clause 87 of Section 2 of the Companies Act, 2013 read with Companies (Restriction on number of Layers) Rules, 2017 is not applicable for Government Companies.

72.3. There have not been any revaluation of Property, Plant & Equipment and Intangible Assets.

72.4. The borrowings from banks and financial institutions were used for the purpose for which it was taken.

72.5. There are no proceedings initiated or pending for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

72.6. No Bank or financial institution or other lender has declared the Corporation as willful defaulter.

72.7. There are no Charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory / stipulated period.

72.8. There are no pending applications with any authority for a scheme of arrangement in terms of sections 230 to 237 of the Companies Act, 2013.

72.9. To the best of knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Corporation (Ultimate Beneficiaries) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

To the best of knowledge and belief, no funds have been received from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, to directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiary") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

72.10. There are no unrecorded transactions, which have been surrendered or disclosed as Income during the year in the tax assessments under the Income tax act, 1961.

72.11. There are no trading entered into or investments made in Crypto Currency or Virtual Currency during the year.

73. Previous periods figures are regrouped / reclassified wherever necessary.