Contingent liabilities, contingent assets and commitments
A. Commitments
a. Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for Rs. 770.14 crore (as on 31st March 2022 - Rs. 1,259.17 crore).
b. "The Company has entered into following long term LNG purchase agreements:
a. 7.5 MMTPA with Ras Laffan Liquified Natural Gas Company Limited (2), Qatar for a period upto April 2028.
b. 1.44 MMTPA with Mobil Australia Resources Company PTY Ltd, Australia for a period upto 2035.
Since the Company has entered into materially back to back sale agreements against the above purchase agreements, there is no foreseeable loss on these agreements as on the balance sheet date. The Company has issued Standby Letter of Credit of Rs. 6749.80 crore (Rs. 3908.84 crore as on 31st March 2022) to Ras Laffan Liquified Natural Gas
Company Limited (2) and Rs.968.08 crore (Rs 555.18 crore as on 31st March 2022) to Mobil Australia Resource Company PTY Ltd against the Long Term Purchase Agreements."
B. Contingent Liabilities
In the ordinary course of business, the Company faces claims and assertions by various parties. The Company assesses such claims and assertions and monitors the legal environment on an ongoing basis with the assistance of internal legal team. The Company records a liability for any claims where a potential loss is probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the Company provides disclosure in the financial statements but does not record a liability in its accounts unless the loss becomes probable.
The following is a description of claims and assertions where a potential loss is possible, but not probable. The Company believes that none of the contingencies described below would have a material adverse effect on the Company's financial condition, results of operations or cash flows.
a. The Collector of Electricity Duty, Gandhinagar (Gujarat) had issued notices classifying the business activities of the Company as "Storage (HTP-IIA)" instead of "Industrial Undertaking (HTP I)" and hence levied Electricity Duty @ 45% (revised rates @20%) instead of 20% (Revised rate @15%) of the consumption charges. The Company has challenged the legality and validity of the notices by way of writ petitions before the Hon'ble High Court of Gujarat who had quashed the supplementary bill / demand notice and remanded the case back to the Collector of Electricity Duty vide order dated 1 July 2014. The Company has made its submissions before the Collector of Electricity Duty, Gandhinagar and same has been resubmitted during the year in fresh hearing. The order is awaited. The total demand for the period 2005-06 to 2022-23 is Rs. 86.20 crore (Rs. 80.99 crore as on 31st March 2022).
b. The Collector of Stamps, Bharuch had issued notice to the Company to pay stamp duty @ Re.1 per Rs.1000/ or part thereof of the value mentioned in the Delivery Order of the goods imported through ports in Gujarat pursuant to the amendment to Section 24 of the Bombay Stamp Act, 1958. The Hon'ble High Court of Gujarat has quashed the notice. Stamp authorities have filed Special Leave Petition (SLP) in Hon'ble Supreme Court against the same and the case is pending as on date. The potential liability from the effective date of amendment i.e. 1 April 2006 till 31st March 2023 on the CIF value would be Rs. 374.17 crore (Rs. 327.19 crore as on 31st March 2022).
c. The Company has received refund of Rs. 1.12 crore, Rs.2.84 crore and Rs.3.46 crore from Customs department vide CESTAT order dated 7 November 2013, 9 September 2011 and 31 May 2010 respectively mainly pertaining to custom duty on short landing of LNG. The Custom Authorities have filed appeal against the order of the CESTAT with the Hon'ble High court of Gujarat and the outcome of the case is pending as on 31st March 2023
d. Company has paid custom duty of Rs.9.59 crore (in relation to short landing of LNG under spot purchase agreement) against the demand order by the tax department. The Company has received favourable order in respect of the above issue from Commissioner (Appeals) and CESTAT. However, the refund of the custom duty has been denied by department and Commissioner (Appeals) on the ground of time barred refund application. The Company has preferred an appeal against the above order with CESTAT and received a negative order. Company filed a WRIT Petition with Hon'ble Gujarat High Court against the CESTAT order, and got favourable ruling. The Company has got refund of the above amount (Rs. 9.59 crore) in June 2020. The department has preferred an appeal with Hon'ble Supreme Court against the order of Hon'ble High court of Gujarat, the outcome of which is pending as on 31st March 2023
e. The Company had received demand for service tax on vessel hire charges for the period 16 May 2008 to 30 September 2009 amounting to Rs.40.05 crore (including Interest). The Company had paid the demand under protest and preferred an appeal before CESTAT against the above demand and received favourable order on 24 October 2013. The Company had received the refund (including interest), however the department had preferred an appeal against the CESTAT order before the Hon'ble Supreme Court, the outcome of which is pending as on 31st March 2023.
f. Kochi terminal of the Company is having Co-developer status in Puthuypeen SEZ (PSEZ). As a Co-developer, it is entitled for the tax and duty benefits on the materials/ services received for authorized operation of its Kochi terminal. After exit of only unit (viz GAIL) from this SEZ, PSEZ officials have denied endorsement of certain service
invoices on which tax benefits were availed. Total amount of tax benefits availed on such invoices is Rs. 47.76 crore during the period from April 2019 to February 2020. In case invoices are not endorsed, refund of GST/ input credit may be denied to the vendors which may be claimed by some of the vendors from the Company.
g. The Company has filed service tax refund application for services availed in the Special Economic Zone for the LNG Terminal at Kochi, amounting to Rs. 15.26 crore (as on 31st March 2022 Rs.15.26 crore). The Company has received the favourable order from CESTAT for Rs. 7.74 crore, refund of which is pending as on 31st March 2023. For balance Rs.7.52 crore, the application is pending at Assistant Commissioner level as on 31st March 2023.
h. Contractor filed claim of Rs. 106.66 crore plus interest and cost of arbitration against the Company in arbitration proceedings (w.r.t. capital works done by it at Kochi) against which the Company has also made certain counter claims. The Arbitral Tribunal has passed an Award in favour of the Contractor on 26.09.2022 for an amount of Rs. 65.40 crore and has been provided for. The Company has challenged the Award before Hon'ble Delhi High Court under Section 34 of the Arbitration & Conciliation Act, 1996. Also, the Contractor has filed the petition with Hon'ble Delhi High Court under Section 34 & 36 of the Arbitration & Conciliation Act, 1996. The case is pending as on 31st March 2023.
i. The Company has got favourable award for sum of Rs 79.28 crore (including interest) in arbitration against the claim raised by Dahej Standby Jetty Project Undertaking ("DSJPU") (for capital works done by it in Dahej) . The Contractor has challenged the award before the Hon'ble Delhi High Court under Section 34 of the Arbitration & Conciliation Act, 1996, PLL has also filed its reply to the same. The Case is pending as on 31st March 2023. The Company has encashed bank guarantee furnished by the DSJPU in September 2021 for an aggregate amount of Rs.79.28 crore and have recognised this amount as income during the current year.
j. There are some income tax related matters which are pending at various forum. The potential liability in these case, as on 31st March 2023 would be Rs 61.30 crore (Rs. 18.51 crore as on 31st March 2022).
C. Contingent Assets
The Company has no contingent assets as at 31st March 2023 (Rs Nil as on 31st March 2022).
41. Segment information Operating Segments
The Company's Board of Directors have been identified as the Chief Operating Decision Maker ('CODM'), since they are responsible for all major decision w.r.t. the preparation and execution of business plan, preparation of budget, planning, expansion, alliance, joint venture, merger and acquisition, and expansion of any new facility. The Company has a single operating segment "Natural Gas Business". Accordingly, there is only one Reportable Segment for the Company which is "Natural Gas Business", hence no specific disclosures have been made.
Entity wide disclosures
A. Information about products and services
Company primarily operates in one product line, therefore product wise revenue disclosure is not applicable.
B. Information about geographical areas
The major sales of the Company are made to customers which are domiciled in India. Also, all the assets other than non-current financial assets (investment and loan) of the Company are located in India.
II. Defined Benefit Plan:
(a) Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to Group Gratuity cum Life Assurance Schemes administered by the LIC of India.
The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31st March 2023. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.
(b) Post-retirement medical scheme plan (PRMS)
The Company provides Post-Retirement Medical Benefit to its employees .Under the scheme, eligible retired employees of the Company, their dependants and dependants of deceased employees are allowed to claim reimbursement of hospitalisation expenses on actuals and limited OPD expenses.
(c) Benevolent Fund
Under this scheme, in the event of unfortunate event of death or in case of permanent disablement of an employee while on service, the dependent/s shall be entitled a relief assistance under the scheme of 'Tatkal Sahayata Yojana'. The notified beneficiary under the scheme shall be paid an amount of Rs 0.50 crore from the Tatkal Sahayata Yojana Fund. For the above scheme, employees also make non returnable contribution of their one day basic salary every year.
(d) Long service Award
Under this scheme, any employee who completes the prescribed number of years service (i.e. 15 year,20 year, 25 year, 30 year and 35 years) in the Company shall be awarded with a prepaid card (with value @ Rs 2,500 * No of years service)
(e) Resettlement Allowance on Retirement
All employees who superannuates from the Company on completion of regular service shall be allowed Resettlement allowance which subject to cap of the last drawn one month basic pay of the employee. This is to facilitate employees to settle at a place of their choice & cover expenses viz. transportations charges, loading / unloading of household goods, packing charges, insurance for household effects, octroi charges, traveling expenses of employees and dependent family members, etc.
A. Based on the actuarial valuation obtained in this respect, the following table sets out the status of the Gratuity plan, PRMS,Benevolent fund, Long service award and Resettlement allowance on Retirement and amounts recognised in the Company's financial statements as at balance sheet date:
On an annual basis, an asset-liability matching study is done by the Company whereby the Company contributes the net increase in the actuarial liability to the plan manager in order to manage the liability risk.
2) Actuarial assumptions-Gratuity
i) Economic assumptions
The principal assumptions are the discount rate and salary growth rate. The discount rate is based upon the market yields available on government bonds at the accounting date with a term that matches that of liabilities. Salary increase rate takes into account of inflation, seniority, promotion and other relevant factors on long term basis. Valuation assumptions are per following details:
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.
There are no transfers between level 1 and level 2 during the year.
Valuation technique used to determine fair value
"Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 2 except for unlisted equity securities and preference shares, where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk."
The carrying amounts of trade receivables, trade payables, capital creditors, cash and cash equivalents, current maturities of long term debt, unpaid dividend, and other payable for capital goods are considered to be the same as their fair values, due to their short-term nature.
The fair values for loans were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit
The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
II. Financial risk management
"The Company has exposure to the following risks arising from financial instruments:
- credit risk;
- liquidity risk; and
- market risk"
Risk management framework
The Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company's risk management policies. The committee reports regularly to the board of directors on its activities.
The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Company's Audit Committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
i. Credit risk
"The Company has made investments in Debt based Mutual Funds. These Mutual funds invests in NCD / Bonds / CP / CD of various companies and banks. In case, the investee company defaults on repayment, such losses may have to be borne by the investors of Mutual funds."
"Company generally takes Standby Letter of Credit (SBLC) from its customers, the exceptions being its Promoters namely BPCL, GAIL, IOCL and ONGC. Option to take SBLC from Promoter is also being explored by the Company.
The Company establishes an allowance for impairment that represents its estimate of expected credit losses in respect of trade and other receivables. Basis the evaluation, the management has determined that there are credit impairment loss on the trade and other receivables."
The gross carrying amount of trade receivables is Rs. 3961.00 crore (31st March 2022 - Rs. 2714.79 crore).
During the current year, provision amounting to Rs. 91.95 crore for doubtful debts (31st March 2022 - Rs.30.14 crore), has been made by the Company based on past ageing of trade receivables. The Company management also pursue all options for recovery of dues wherever necessary based on its internal assessment. A default on a financial asset is generally when counterparty fails to make payments within 365 days when they fall due.
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Company's liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. This is generally carried out at local level in accordance with practice and limits set by the Company. These limits vary by location to take into account the liquidity of the market in which the entity operates. In addition, the Company's liquidity management policy involves projecting cash flows in major currencies, considering the level of liquid assets necessary, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and have an average maturity of 1 year (as at 31 March 2022 - 1 year ).
(b) Maturities of financial liabilities
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and excluding contractual interest payments and exclude the impact of netting agreements.
Market risk is the risk that changes in market prices - such as commodity prices (LNG), foreign exchange rates and interest rates - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
a) Price risk
To protect the Company from fluctuation of commodity prices, same are passed through to the off-takers in long term contract. In spot or short term contract, they are generally pass through to the customers except in few cases, up to 2 cargo load, where the Company keeps the commodity price risk with themselves to take benefit from market fluctuation.
b) Currency risk
PLL imports LNG mainly from Qatar and Australia through long term chartered vessels. The foreign exchange involved in making payment to LNG suppliers, loading port charges and shipper is recovered from off-takers / customers under sale contract, both long term and short term. Company does not take any exposure on account of currency in Foreign Currency Loans by parallelly taking derivatives to hedge against the foreign exchange fluctuation on loan, if any. In respect of other payments on account of repair and capex of plant, operating expenses of plant and corporate offices etc. same are monitored on a regular basis to keep the open position at an acceptable level.
Fair value sensitivity analysis for fixed-rate instruments
The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss, and the Company does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
47. Capital management
"The Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital on a yearly basis as well as the level of dividends to ordinary shareholders which is given based on approved dividend policy."
The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.
48. Additional Disclosure / Regulatory Information as required by Notification no. GSR 207(E) dated 24.03.2021
a) Disclosure in respect of Revaluation of Property, Plant & Equipment (including Right to Use Assets)
The Company has not revalued its Property, Plant and Equipment (including Right to Use Assets).
b) Disclosure in respect of Revaluation of Intangible Asset The Company has not revalued its intangible assets.
c) Loan or advances granted to the promoters, directors and KMPs and the related parties:
No loan or advances in the nature of loans granted to the promoters, directors, key managerial persons and the related parties (as defined under the Companies Act, 2013), either severally or jointly with any other person that are:
(a) repayable on demand or
(b) without specifying any terms or period of repayment
d) Disclosure in respect of Benami Property Held
No proceedings have been initiated or pending against the company for holding any benami property under benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder.
e) Disclosure in case the Company has borrowings from banks or financial institutions on the basis of security of current assets
The quarterly statement filled by the company with such banks are in agreement with the books of the accounts of the company.
f) Disclosure in case the Company is declared as Willful Defaulter No bank has declared the company as "willful defaulter".
g) Disclosure in case the Company is having any relationship and balances with Struck off Companies:
There is no balances with the Companies whose name is struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956 during the year ended 31st March 2023 and the year ended 31st March 2022.
h) Disclosure in case of pending Registration of charges or satisfaction with Registrar of Companies:
All applicable cases where registration of charges or satisfaction is required with Registrar of Companies have been done.
i) Disclosure in case compliance is not done with number of layers of Companies
No layers of companies has been established beyond the limit prescribed as per above said section / rules.
j) Financial Ratios
49. Information on Covid- 19 Impact
The continuance of COVID 19 pandemic is causing economic impact globally. However, as the Company operates in natural gas, an essential commodity, its operations were not materially impacted during the year ended 31st March 2023. Further, no adverse impact on the operations of Company is envisaged due to COVID 19 in foreseeable future.
50. Previous year figures have been regrouped / reclassified wherever considered necessary to conform to current year figures.
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