Mobile Nav

Market

NOTES TO ACCOUNTS

Indian Oil Corporation Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 134999.04 Cr. P/BV 1.20 Book Value (₹) 119.72
52 Week High/Low (₹) 171/116 FV/ML 10/1 P/E(X) 7.77
Bookclosure 28/08/2019 EPS (₹) 18.46 Div Yield (%) 6.45
Year End :2019-03 

NOTE - 1B : SIGNIFICANT ACCOUNTING ESTIMATES & JUDGEMENTS

mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. The management considers the interest rates of government securities based on expected settlement period of various plans.

Further details about various employee benefit obligations are given in Note 35.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (DCF) model based on level-2 and level-3 inputs. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgments is required in establishing fair values. Judgments include considerations of inputs such as price estimates, volume estimates, rate estimates etc. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Also refer note 39 for further disclosures of estimates and assumptions.

Impairment of Financial Assets

The impairment provisions for trade receivables are based on assumptions about risk of default and expected loss rates. The Company uses judgments in making these assumptions and selecting the inputs to the impairment calculation based on the company’s past history and other factors at the end of each reporting period. Also refer Note-40 for impairment analsysis and provision.

A. i) Freehold Land includes Rs,22.13 crore (2018: Rs,21.26 crore) lying vacant due to title disputes/litigation.

ii) Out of the Freehold land measuring 1,364.01 acres at Mathura and Agra regions, land measuring 50 acres (approx) has been acquired by NHAI as a part of the NH2 widening project for which the determination of value of compensation is pending. Accordingly, the value of land amounting to Rs,1.18 crore is continued to be included in Freehold land.

B. i) Buildings include Rs,0.01 crore (2018: Rs,0.01 crore) towards value of 1605 (2018: 1605) Shares in Co-operative Housing Societies

towards membership of such societies for purchase of flats.

ii) Includes Roads, Bridges etc. (i.e. Assets other than Building) of Gross block amounting to Rs,2,945.52 crore (2018: Rs,2,040.91 crore) and net block amounting to Rs,1,809.3 crore (2018: Rs,1,271.68 crore).

C. During the year Rs,1,758.66 crore (2018: Rs,942.39 crore) has been availed as VAT CREDIT/CENVAT/GST ITC out of capital expenditure on CWIP/assets. The cost of assets are net of VAT CREDIT/CENVAT/GST ITC, wherever applicable.

D. Depreciation and amortization for the year includes Rs,8.22 crore (2018: Rs,2.34 crore) relating to construction period expenses shown in Note-2.2

E. Railways have claimed transfer of ownership in respect of certain assets provided by the Company at railway premises which has not been accepted by the Company and continue to be part of Axed assets of the Company, WDV of such assets is Rs,70.1 crores (2018: Rs,70.63 crores). This includes WDV of assets worth Rs,7.09 crore (2018: Rs,8.21 crore) which are not in operation at present. However, considering the right on the assets and future commercial interest of the company, these assets are continued to be reflected as PPE.

F. Land and Buildings include Rs,199.83 crore (2018: Rs,211.94 crore) in respect of which Title/Lease Deeds are pending for execution or renewal.

G. For details regarding hypothecation/pledge of assets, refer Note-16.

A. The Company has surplus land at various locations such as LPG Plant, Depots and RO’s etc. which is under the process of disposal. The management intends to sell the land. No impairment was recognized on reclassification of land as held for sale as the Company expects that the fair value (estimated based on the recent market prices of similar properties in similar locations) less costs to sell is higher than the carrying amount.

B. Includes non current assets retired from active use earlier used in various segments and held for disposal through tendering process within a year.

C. During the year, the company has recognized impairment loss of Rs,150.36 crore (2018: Rs,97.91 crore) on write-down of the asset to fair value less costs to sell and the same has been shown in Provision/loss on Other Assets sold written off under ‘Other Expenses’ in the Statement of Profit and Loss.

B. Terms/Rights attached to Equity Shares

The Company has only one class of equity shares having par value of Rs,10 each and is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the corporation, the holders of equity shares will be entitled to receive the remaining assets of the Company in proportion to the number of equity shares held.

*The Board of Directors of the Company, at its meeting held on December 13, 2018 had approved a proposal to buyback upto 297651006 (Twenty Nine Crores Seventy Six Lakhs Fifty One Thousand and Six) equity shares of the Company for an aggregate amount not exceeding Rs,4,435.00 crores (Rupees Four Thousand Four Hundred Thirty Five Crore only) representing 3.06% of the total paid up equity share capital of the Company at a price of Rs,149 (Rupees One Hundred and Forty Nine Only) per equity share. The process of buyback was duly completed on February 14, 2019.

Nature and Purpose of Reserves

A. Retained Earnings

The retained earnings comprises of general reserve and surplus which is used from time to time to transfer profits by appropriations. Retained earnings is free reserve of the company and is used for purposes like issuing bonus shares, buy back of shares and other purposes (like declaring Dividend etc.) as per the approval of BOD. It includes the re-measurement of defined benefit plan as per actuarial valuations which will not be re-classified to statement of profit and loss in subsequent periods.

B. Bond Redemption Reserve

As per Companies Act 2013, a Bond Redemption Reserve is required to be created for all bonds/debentures issued by the company at a specified percentage. This reserve is created out of appropriation of profits over the tenure of bonds and will be transferred back to general reserve on repayment of bonds for which it is created.

C. Capital Redemption Reserve

As per Companies Act, 2013, capital redemption reserve is created when company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. Utilization of this reserve is governed by the provisions of Companies Act 2013.

D. Capital Reserve

Capital Reserve was created thru business combinations and shall be utilized as per the provisions of Companies Act 2013.

E. Insurance Reserve

Insurance Reserve is created by the company with the approval of BOD to mitigate risk of loss of assets not insured with external insurance agencies. Rs,20.00 crore is appropriated by the company every year to this reserve. The reserve is utilized to mitigate actual losses by way of net appropriation in case any uninsured loss is incurred.

F. Export Profit Reserve

Amount set aside out of profits from exports for availing income tax benefits u/s 80HHC of Income Tax Act, 1961 for the assessments years 1986-87 to 1988-89. Creation of reserve for claiming deduction u/s 80HHC was dispensed from AY 1989-90 onwards. This amount shall be transferred to general reserve on completion of assessment/disposal of case.

G. Corporate Social Responsibility Reserve

Corporate Social Responsibility (CSR) Reserve is created for meeting expenses relating to CSR activities in line with CSR policy of the Company. During the year, an amount of Rs,490.60 crore (2018: Rs,327.94 crore) has been appropriated as per provisions of the Companies Act 2013. Out of total available fund for CSR (including unspent amount carried forward from previous year), an amount of Rs,490.60 crore (2018: Rs,331.05 crore) has been spent during the year.

H. Foreign Currency Monetary Item Translation Difference Account

This reserve is created to accumulate and amortize exchange fluctuations on Long-Term Monetary Items (other than those related to depreciable PP&E) over the remaining life of these items. This is as per the transition exemption taken by the company at the time of implementation of Ind AS wherein the company has chosen to continue the old GAAP practice for items up to March, 31 2016.

I. Fair value of Equity Instruments

This reserve represents the cumulative effect of fair value fluctuations of investments made by the company in equity instruments of other entities. The cumulative gain or loss arising on such changes are recognized thru Other Comprehensive Income (OCI) and accumulated under this reserve. This will not be re-classified to the statement of profit and loss in subsequent periods.

J. Fair value of Debt Instruments

This reserve represents the cumulative effect of fair value fluctuations in debt investments made by the company which are classified as available for sale investments. The cumulative gain or loss arising on such changes are recognized thru Other Comprehensive Income (OCI) and accumulated under this reserve. This amount will be re-classified to the statement of profit and loss in subsequent periods on disposal of respective instruments.

K. Cash Flow Hedge Reserve

The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on such changes are recognized thru Other Comprehensive Income (OCI) and accumulated under this reserve. Such gains or losses will be reclassified to statement of profit and loss in the period in which the hedged item occurs/affects the statement of profit and loss.

NOTE - 2 : LONG TERM BORROWINGS (At Amortized Cost) (Contd...)

C. Secured Term Loans

1. Security Details for OIDB Loans:

a) First Charge on the facilities at Paradip Refinery, Orissa.

b) First charge on the facilities at Butadiene Extraction Unit, Panipat, Haryana.

c) First charge on the facilities at FCC Unit at Mathura Refinery, Uttar Pradesh.

d) First charge on the facilities at Paradip-Raipur-Ranchi Pipeline

e) First charge on the facilities at SMPL System

f) First charge on the facilities at Paradip-Haldia-Durgapur LPG Pipeline

H. Repayment Schedule of Unsecured Interest Free Loans from Govt of Odisha

1 Interest free loan given by Odisha Government for 15 years is to be disbursed in quarterly installment of Rs,175 crore started from April 1, 2016 repayble after 15 years. The first installment of loan for the period April to December 2017 of Rs,1,225 crore has been received on January 15, 2018 and thereafter Rs,175 crore will be received every quarter. Total loan disbursed till now is Rs,2,100 crore which is repayable after 15 years from the quarter for which the same is given i.e. in quarterly installments starting from last week of June 2031 onwards. This loan being interest free loan is accounted at fair value and accordingly accounting for government grant is done.

A. Includes Rs,11.62 crore (2018: Rs,16.74 crore) towards compensation to executives for working in shift duty in the plant/operation area on which the Company has taken up the matter with MOP&NG/DPE. This allowance has been discontinued w.e.f. November 1, 2018.

B. Excludes Rs,372.88 crore (2018: Rs,310.43 crore) included in capital work in progress (Note - 2.2)/intangible assets under development (Note - 3.1) and Rs,21.92 crore (2018: Rs,13.94 crore) included in CSR expenses (Note - 29.1). The amount included in capital work in progress also includes Rs,0.28 crore (2018: Rs,0.54 crore) paid to executives as Project Allowance working in grass root projects till commercial production, where the company has taken up the matter with MOP&NG. The Project allowance has been discontinued w.e.f. March 1, 2019.

C. Includes Rs,1,266.52 crore towards SABF defined benefit contribution for the transition phase arising as on January 1, 2007 (refer Note - 35).

D. IncludesRs,555.18 crore (2018: NIL) [Including acturial liability ofRs,475.90 (2018: NIL)] for felicitation award to retired employees (refer Note - 35)

E. Disclosure in compliance with Indian Accounting Standard-19 on -Employee Benefits- is given in Note - 35.

1. Proposed dividend on equity shares are subject to approval at the annual general meeting and are not recognized as a liability (including DDT thereon) as at March 31, 2019.

2. Shares held under IOC Share Trust of face value Rs,233.12 crore (2018: Rs,233.12 crore) has been netted off from paid up capital.

3. The Company has also incurred expenses on distribution of Anal dividend amounting to Rs,0.14 crore (2018: Rs,0.13 crore) and on distribution of interim dividend amounting to Rs,0.34 crore (2018: Rs,0.14 crore) which has been debited to equity.

4. The Board of Directors of the Company, at its meeting held on December 13, 2018 had approved a proposal to buyback upto 297651006 (Twenty Nine Crores Seventy Six Lakhs Fifty One Thousand and Six) equity shares of the Company. The Company bought back 297651006 (Twenty Nine Crores Seventy Six Lakh Fifty One Thousand and Six) equity shares out of the shares that were tendered by eligible shareholders and the shares bought back were cancelled and extinguished on February 14, 2019.

Basic and Diluted EPS amounts are calculated by dividing the profit for the year attributable to equity holders by the weighted average number of Equity Shares outstanding during the year.

The following reflects the profit and number of shares used in the basic and diluted EPS computations:

Notes

1. Equity Shares held under IOC Share Trust of face value Rs,233.12 crore has been netted off from weighted average number of Equity Shares and EPS is worked out accordingly.

2. The Board of Directors of the Company, at its meeting held on December 13, 2018 had approved a proposal to buyback up to 297651006 (Twenty Nine Crores Seventy Six Lakhs Fifty One Thousand and Six) Equity Shares of the Company. The Company bought back 297651006 (Twenty Nine Crores Seventy Six Lakh Fifty One Thousand and Six) Equity Shares out of the shares that were tendered by eligible shareholders and the shares bought back were cancelled and extinguished on February 14, 2019. Accordingly, earnings per share (EPS) (basic and diluted) for FY 2018-19 have been adjusted on account of buy back.

NOTE - 3 : EMPLOYEE BENEFITS

Disclosures in compliance with Ind AS 19 on -Employee Benefits- is as under:

A. Defined Contribution Plans- General Description Provident Fund (EPS-95)

During the year, the company has recognized Rs,37.32 crore (2018 : Rs,39.66 crore) as contribution to EPS-95 in the Statement of Profit and Loss/CWIP (included in Contribution to Provident and Other Funds in Note - 27/Construction period expenses in Note-2.2). Pension Scheme

During the year, the company has recognized Rs,474.20 crore (2018 : Rs,516.68 crore) towards Defined Contributory Employees Pension Scheme in the Statment of Profit and Loss/CWIP (included in Contribution to Provident and Other Funds in Note - 27/ Construction period expenses in Note-2.2).

Further, during the year an amount of Rs,1,266.52 crore has been contributed on one time basis towards Defined Benefit contribution for the transition phase arising as on January 1, 2007 i.e. at the time of commencement of Defined Contribution pension scheme.

B. Defined Benefit Plans- General Description

Provident Fund:

The Company’s contribution to the Provident Fund is remitted to separate provident fund trusts established for this purpose based on a fixed percentage of the eligible employee’s salary and charged to Statement of Profit and Loss. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company. The Company has three Provident Funds maintained by respective PF Trusts in respect of which actuarial valuation is carried out and all three trusts do not have any deficit as on March 31, 2019.

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 year of service subject to maximum of Rs,0.20 crore at the time of separation from the company. Besides, the ceiling of gratuity increases by 25% whenever IDA rises by 50%.

Post Retirement Medical Scheme (PRMS):

PRMS provides medical benefit to retired employees and eligible dependant family members.

Resettlement Allowance:

Resettlement allowance is paid to employees to permanently settle down at a place other than the location of last posting at the time of retirement.

Ex gratia:

Ex-gratia is payable to those employees who have retired before November 1, 1987 and not covered under the pension scheme. Further, for employees who have retired on or after November 1, 1987 and their entitlement under the pension scheme is less than applicable amount under Ex- Gratia Scheme, such employees are also eligible to the extent of shortfall or difference under Ex-gratia scheme. The scheme of ex-gratia has been restricted to cover only those eligible employees who have retired up to December 31, 2006, and not thereafter.

Staff Pension fund at AOD:

The Fund is maintained for disbursement of pension to Officers who have joined erstwhile Assam Oil Company before October 14, 1981 and opted to continue the benefit of pension as existing prior to takeover. The company is managing the fund after takeover of the erstwhile Assam Oil Company in the name of IOCL (AOD) Staff Pension Fund.

Workmen Compensation:

The Company pays an equivalent amount of 100 months’ salary to the family member of the employee if employee dies while he is on duty. This scheme is not funded by the company. The liability originates out of the Workmen compensation Act and Factory Act. Felicitation of Retired Employees:

The Company has introduced a scheme to pay specified amount as felicitation award to retired employees on achieving specific age milestones. Rs,555.18 crore has been recognized as expenses (including actuarial liability of Rs,475.90 crore) during the year on this account.

NOTE - 4 : EMPLOYEE BENEFITS (Contd...)

C. Other Long-Term Employee Benefits - General Description Leave Encashment:

Each employee is entitled to get 8 earned leaves for each completed quarter of service. Encashment of earned leaves is allowed during service leaving a minimum balance of 15 days subject to maximum accumulation of 300 days. In addition, each employee is entitled to get 5 sick leaves (in lieu of 10 HPL) at the end of every six months. The entire accumulation is permitted for encashment only at the time of retirement. DPE had clarified that sick leave cannot be encashed, though Earned Leave (EL) and Half Pay Leave (HPL) could be considered for encashment on retirement subject to the overall limit of 300 days. MOP&NG has advised the company to comply with the DPE Guidelines. However, keeping in view operational complications and service agreements the company has continued with the present practice and requested concerned authorities to reconsider the matter.

Long Service Award:

On completion of specified period of service with the company and also at the time of retirement, employees are rewarded with amounts based on the duration of service completed. MOP&NG vide its letter dated December 12, 2018 has intimated that the scheme is not forming part of DPE guidelines as of now and thus is irregular and has advised to make recovery of payments made. IOCL has clarified its position to MOP&NG vide its letter dated March 27, 2019 and April 25, 2019 stating that award based on length of meritorious and faithful service of employees (Long Service Award) was specifically allowed by DPE (formerly BPE) thru its letter dated February 14, 1983. The matter is being pursued with MOP&NG for resolution. Pending this the provision is in line with Board approved policy. The amount provided during 2018-19 on this account is Rs,21.08 crores (2018: Rs,20.47 Crore) and the payments made to employees during 2018-19 is Rs,30.66 Crores (2018: Rs,34.98 Crores). The actuarial liability of Rs,187.07 Crores in this respect as on March 31, 2019 is included under -Provision for Employees Benefit- in -Note 18 - Provisions-.

Leave Fare Allowance (LFA)/Leave Travel Concession (LTC):

LTC is allowed once in a period of two calendar years (viz. two yearly block). An employee has, in any given block period of two years, an option of availing LTC or encasing the entitlements of LFA.

D. The summarized position of various Defined Benefit Plans recognized in the Statement of Profit & Loss, Balance Sheet and Other Comprehensive Income areas under:

(Figures given in Unbold & Italic Font in the table are for previous year)

These relate to storage tankage facilities for petroleum products, BOO contract for Nitrogen and Hydrogen Plant, QC lab rotary at Para dip Refinery and various other leases in substance as mentioned in (iv) below.

(ii) The Company has paid advance of Rs,215.90 Crore for acquisition of leasehold buildings for which offer of possession is issued by the contractor during the year. Company has not taken the physical possession of property as stay is imposed by Hon’ble Delhi High Court for handing over of the office premises. Pending taking over of possession, amount paid to contractor is continued as advances under Note 8 and no amortization of lease rental is being done.

(iii) The Company has taken certain assets (including lands, office/residential premises) on Operating Lease which are cancellable by giving appropriate notice as per the respective agreements incl. applicable cases as per (iv) below. During the current year, Rs,995.68 crore (2018: Rs,1,038.21 crore) has been paid towards cancellable Operating Lease. Also refer Note IB for more details on judgments made for lease classification in case of lands.

(iv) Leases in substance (Operating lease: Company as lessee)

The Company has entered into some contracts which are in substance operating lease contracts. Currently, the Company has booked payment made under these contracts as expenses in the statement of profit and loss. The details in respect of material operating lease arrangements are as under:

(a) IOCL has entered into various agreements with transporters for the movement of petroleum products for different tenures. Under these agreements, specific trucks are identified that are used exclusively for the transport operations of IOCL only.

(b) IOCL has entered into agreements with vessel owners for hiring of vessels for different tenures. Specified vessels are identified in the agreement with reference to the name and description of vessel, which can only be used. Such vessels are dedicated for lOCL’s use only for the entire period of arrangement. Further, during the lease period, the owner can let out the specific vessel to any third party only after obtaining lOCL’s permission. Hence this arrangement is classified as lease as per Appendix C to Ind AS 17.

(c) BOO agreement with Air Liquide Industries is for supply of oxygen and nitrogen at Panipat Refinery for a period of 18 years. The land is owned by IOCL and the plant is being operated by contractor for supply of oxygen and nitrogen to IOCL. There is a commitment to pay monthly minimum amount as per the agreement. IOCL shall always have first right of use of Nitrogen & Oxygen manufactured at the plant. Nitrogen gas manufactured by the contractor is mainly supplied to IOCL. Hence this arrangement is classified as lease as per Appendix C to Ind AS 17.

These relate to storage tank age facilities for petroleum products and buildings given on lease.

(c) Finance Lease — As Lessee

The Company has entered into the following material finance lease arrangements:

(i) BOOT Agreement with IOT Utkal Energy Services Ltd. in respect of Tankages facility for a period of 15 years. Less or will transfer ownership to IOCL after 15 Years at NIL value.

(ii) BOOT Agreement with IL&FS in respect of Water Intake facility for a period of 25 years. Less or will transfer ownership to IOCL after 25 Years at Rs,0.01 crore.

(iii) The Company has entered into finance lease arrangements with Gujarat Adani Port Limited related to Port facilities at Gujarat for a period of 25 years and 11 months.

(iv) The Company has obtained various lands from the governments for purpose of plants, facilities and offices. Lease cases where at the inception of the lease, the present value of minimum lease payments is substantially equal to the fair value of leased assets are considered under finance leases. Also refer Note IB for more details on judgments made for lease classification.

(d) Finance Lease — as Lessor

The Company has entered into following material finance lease arrangements:

(i) Company has entered into Lease Agreement with Indian Railways in respect of BTPN Tank Wagons for a minimum period of 20 years. The lease rentals from the date of formation of rake are @ 16% for the first 10 years and thereafter at the nominal rate of 1% of the cost.

(ii) Company has entered into a lease agreement with Indian Synthetic Rubber Private Limited in which the Company has leased out land for one time upfront payment of Rs,16.65 crores

B. Contingent Liabilities

B.1 Claims against the Company not acknowledged as debt

Claims against the Company not acknowledged as debt amounting to Rs,10,095.39 crore (2018: Rs,8,025.58 crore) are as under:

B.1.1 Rs,568.18 crore (2018: Rs,373.35 crore;) being the demands raised by the Central Excise/Customs/Service Tax Authorities including interest of Rs,171.74 crore (2018: Rs,113.24 crore.)

B.1.2 Rs,52.39 crore (2018: Rs,31.23 crore) in respect of demands for Entry Tax from State Governments including interest of Rs,11.69 crore (2018: Rs,3.07 crore).

B.1.3 Rs,2,623.21 crore (2018: Rs,2,773.87 crore) being the demands raised by the VAT/Sales Tax Authorities including interest of Rs,1,195.85 crore (2018: Rs,1,332.72 crore).

B.1.4 Rs,3,263.12 crore (2018: Rs,1,834.36 crore;) in respect of Income Tax demands including interest of Rs,419.74 crore (2018: Rs,614.06 crore).

B.1.5 Rs,2,402.98 crore (2018: Rs,2,005.42 crore) including Rs,1,689.87 crore (2018: Rs,1,616.36 crore) on account of Projects for which suits have been filed in the Courts or cases are lying with Arbitrator. This includes interest of Rs,187.48 crore (2018: Rs,155.86 crore).

B.1.6 Rs,1,185.51 crore (2018: Rs,1,007.35 crore) in respect of other claims including interest of Rs,513.66 crore (2018: Rs,405.84 crore).

The Company has not considered those disputed demands/claims as contingent liabilities, for which, the outflow of resources has been considered as remote. Contingent liabilities in respect of joint operations are disclosed in Note 33 B.

B.2 Guarantees excluding Financial Guarantees

B.2.1 The Company has issued Corporate Guarantee in favour of three beneficiaries i.e. Bolivarian Republic of Venezuela (Republic), The Corporation Venezuelan del Petroleo S.A. and PeTroCarabobo S.A., on behalf of Indoil Netherlands

B.V., Netherlands (an associate company) to fulfill the associate company’s future obligations of payment of signature bonus/equity contribution/loan to the beneficiaries. The total amount sanctioned by the Board of Directors is USD 424 million. The estimated amount of such obligation (net of amount paid) is Rs,2,533.81 crore - USD 366.37 million (2018: Rs,2,387.99 crore - USD 366.37 million).

B.2.2 The Company has entered into Master Guarantee Agreement, on behalf of its subsidiaries viz. Indoil Global B.V. and Indoil Montney Ltd. for all of its payments and performance obligations under the various Project Agreements entered by the subsidiaries with PETRONAS Carigali Canada B.V. and Progress Energy Canada Ltd. The total amount sanctioned by the Board of Directors is CAD 3,924.76 million. The estimated amount of such obligation (net of amount paid) is Rs,4,558.93 crore - CAD 884.39 million (2018: 4,588.28 crore - CAD 905.65 million). The sanctioned amount was reduced by CAD 1,462 million due to winding down of LNG Plant during 2017.

B.2.3 The Company has issued Corporate Guarantee, on behalf of Indian Oil Adani Gas Private Limited (IOAGPL), to the extent of obligations of later company under Performance Bank Guarantee Facility provided to IOAGPL by ‘State Bank of India, Syndicate Bank, Canara Bank, Bank of Baroda, Allahabad Bank, Induslnd Bank, Jammu and Kashmir Bank, Axis Bank and ICICI Bank’. The Company’s share of such obligation is estimated at Rs,3,533.46 crore (2018: Rs,3,280.94 crore).

B.2.4The Company has issued Corporate Guarantee, on behalf of Indian Oil LNG Private Limited (I0LPL), to the extent of obligations of I0LPL under Performance Bank Guarantee Facility provided to I0LPL by State Bank of India. The estimated amount of such obligation is at Rs,11.40 crore (2018: Rs,11.40 crore).

B.2.5The Company has issued Parent Company Guarantee in favour of Abu Dabhi National Oil Company, on behalf of Urja Bharat Pte. Ltd., Singapore (a joint venture company of Company’s subsidiary i.e IOCL Singapore Pte Ltd) to fulfill the joint venture company’s future obligations of payment and performance of Minimum Work Programme. The total amount sanctioned by the Board of Directors is USD 89.7 Million. The estimated amount of such obligation (net of amount paid) is Rs,581.98 crore - USD 84.15 million (2018: 'NIL - USD NIL).

B.3 Other money for which the Company is Contingently Liable

Pending decision of the Government, no liability could be determined and provided for in respect of additional compensation, if any,

payable to the land owners and the Government for certain lands acquired.

C. Commitments

C.1 Capital Commitments

Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs,23,638.90 crore (2018:

Rs,14,748.60 crore). Capital Commitments in respect of Joint Operations are disclosed in Note 33B.

C.2 Other Commitments

C.2.1 The Company has an export obligation to the extent of Rs,785.17 crore (2018: Rs,2,822.44 crore) on account of concessional rate of duty availed under EPCG license scheme on procurement of capital goods and the same is expected to be fulfilled by way of exports.

C.2.2 To meet the direction of Honourable High Court of Orissa, the Company has a commitment to pay Rs,280.10 crore (2018: Rs,280.10 crore) towards providing high tech ambulances, removal of old anicut and construction of water treatment plant in the State of Orissa. In addition the Company has to incur cost towards dredging through Orissa Construction Co, a state government agency estimate for which yet to be finalized.

C.2.3 Indian Oil LNG Private Limited (I0LPL), the JV Company, has entered into Debenture Subscription Agreement with ICICI Bank (ICICI), in which, the Company (IOCL), as promoter of I0LPL, has provided put option under which ICICI has option to sell Compulsory Convertible Debenture (CCD) to the Company (IOCL) before the expiry date. In addition to this, the Company, at the sole discretion, has right to acquire CCD from ICICI on or before the expiry date. The Company’s (IOCL) share of such obligation is Rs,808.44 Crore (2018: Rs,949.05 Crore).

1) Transactions in excess of 10% of the total related party transactions for each type has been disclosed above.

2) In case of Subsidiary Companies constituted/acquired during the year, transactions w.e.f. date of constitution/acquisition are disclosed.

3) In case of S ubsidiary C ompanies w hich have been closed/divested during the year, transactions up to the date of closure/disinvestment only are disclosed.

# The Company is under process of closure

2. Relationship with Entities

A) Details of Joint Ventures (JV)/Associate Entities to IOCL & its subsidiaries

1) Indian Oiltanking Limited 18) GSPL India Transco Limited (Formerly known as IOT Infrastructure & Energy Services Ltd.)

2) Lubrizol India Private Limited 19) GSPL India Gasnet Limited

3) Petronet VK Limited 20) Indian Oil - Adani Gas Private Limited

4) Indian Oil Petronas Private Limited 21) Mumbai Aviation Fuel Farm Facility Private Limited

5) Avi-Oil India Private Limited 22) Kochi Salem Pipeline Private Limited

6) Petronet India Limited * 23) Hindustan Urvarak & Rasayan Limited

7) Petronet LNG Limited 24) Ratnagiri Refinery & Petrochemicals Limited

8) Green Gas Limited 25) Indradhanush Gas Grid Limited (Incorporated on 10.08.18)

9) Indian Oil Panipat Power Consortium Limited @ 26) Indian Additives Limited

10) Petronet Cl Limited @ 27) National Aromatics & Petrochemicals Corporation Limited

11) Indian Oil LNG Private Limited 28) INDOIL Netherlands B.V.

12) Indian Oil SkyTanking Private Limited 29) Taas India PTE Limited

13) Suntera Nigeria 205 Limited 30) Vankor India PTE Limited

14) Delhi Aviation Fuel Facility Private Limited 31) Ceylon Petroleum Storage Terminals Limited

15) Indian Synthetic Rubber Private Limited 32) Falcon Oil & Gas B.V.

16) Indian Oil Ruchi Biofuels LLP # 33) Urja Bharat PTE Ltd (Incorporated on 12.02.19)

17) NPCIL- Indian Oil Nuclear Energy Corporation Limited

B) Details of Subsidiaries to JV's of IOCL

1) IOT Engineering & Construction Services Ltd. 7) Indian Oiltanking Engineering & Construction Services LLC Oman

2) Stewarts and Lloyds of India Limited 8) JSC KazakhstanCaspishelf

3) IOT Infrastructures Private Limited 9) IOT VITO MUHENDISLIK INSAAT VE TAAHUT A.S.

4) IOT Utkal Energy Services Limited 10) Indian Oil Skytanking Delhi Pvt. Limited

5) PT IOT EPC Indonesia 11) IOT Biogas Private Limited

6) IOT Engineering Projects Limited_(Formerly known as IOT Mabagas Private Limited)_

1) Transactions in excess of 10% of the total related party transactions for each type has been disclosed above.

2) In case of Joint Venture/Subsidiary Companies constituted/acquired during the period, transactions w.e.f. date of constitution/ acquisition is disclosed.

3) In case of Joint Venture/Subsidiary Companies which have been closed/divested during the period, transactions up to the date of closure/disinvestment only are disclosed.

3. Relatives of Key Managerial Personnel and nature of relation with whom transactions are undertaken during the year:

Shri B V Raghav Raju (Manager, Indian Oil Corporation Limited): Son of Key Managerial Personnel

4. Government related entities where significant transactions carried out

Apart from transactions reported above, the company has transactions with other Government related entities, which includes but not limited to the following:

Name of Government: Government of India (Central and State Government)

Nature of Transactions:

- Sale of Products and Services

- Purchase of Products

- Purchase of Raw Materials

- Handling and Freight Charges, etc.

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

- Liquidator has been appointed for winding up of company w.e.f. August 30, 2018

@ The JVC has not been closed/wound up as yet, however the company is not carrying out any operations.

- Indian Oil has decided to exit the Joint Venture and has given notice of its exit from the LLP to the other JV partner viz. Ruchi Soya Industries as well as to the LLP on December 26, 2018 stating that it will exit the LLP w.e.f. January 25, 2019.

1) This does not include the impact of provision made on actuarial valuation of retirement benefit/long term Schemes and provision made during the period towards Post Retirement Benefits as the same are not separately ascertainable for individual directors.

2) In addition, whole-time Directors are also allowed the use of Corporation’s car for private purposes up to 12,000 kms. per annum on a payment of Rs,2,000/- per mensem.

1. The management assessed that fair value of Trade Receivables, Cash and Cash Equivalents, Bank Balances, Recoverable from Employee Benefits Trusts, Other Non-derivative Current Financial Assets, Finance Lease Receivable, Security Deposits paid and received, Short-term Borrowings (including Current Maturities of Long term Borrowings), Trade Payables, Floating Rate Borrowings/ Receivables, Other Non-derivative Current Financial Liabilities and Liabilities towards financial guarantees approximate their carrying amounts.

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

Methods and assumptions

The following methods and assumptions were used to estimate the fair values at the reporting date:

A. Level 1 Hierarchy:

(i) Quoted Equity Shares: Closing quoted price (unadjusted) in National Stock Exchange of India Limited

(ii) Quoted Government Securities: Closing published price (unadjusted) in Clearing Corporation of India Limited

(iii) Foreign Currency Bonds - US Dollars: Closing price for the specific bond collected from Bank

B. Level 2 Hierarchy:

(i) Derivative instruments at fair value through profit or loss: Replacement cost quoted by institutions for similar instruments by employing use of market observable inputs.

(ii) Hedging Derivatives at fair value through OCI : Replacement cost quoted by institutions for similar instruments by employing use of market observable inputs.

(iii) Loans to employees/PMUY Loan: Discounting future cash flows using rates currently available for items on similar terms, credit risk and remaining maturities.

(iv) Finance Lease Obligation: For obligation arrived based on IRR, implicit rate applicable on the reporting date and for obligation arrived based on incremental borrowing rate, applicable rate for remaining maturity.

(v) Non-Convertible Redeemable Bonds, Foreign Currency Bonds - Singapore Dollars, Senior Notes (Bank of America) and Loan from Odisha Government: Discounting future cash flows using rates currently available for items on similar terms, credit risk and remaining maturities (Excluding floating rate borrowings).

(vi) Term Loans from Oil Industry Development Board (OIDB): Discounting future cash flows using rates currently available for similar type of borrowings (OIDB Borrowing Rate) using exit model as per Ind AS 113.

C. Level 3 Hierarchy:

(i) Unquoted Equity Instruments: Fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.

(ii) Non Convertible Redeemable Preference Shares, Compulsorily Convertible Debentures and Loan to Related parties - Suntera: Fair value of Preference shares, Debentures and Loan to Suntera is estimated with the help of external valuer by discounting future cash flows. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in the tables below. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.

Financial Risk Factors

The Company’s principal financial liabilities, other than derivatives, comprise Borrowings, trade and other payables, security deposits, employee liabilities and finance lease obligation. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include loans & advances, trade and other receivables, short-term deposits and cash/cash equivalents that derive directly from its operations. The Company also holds FVTOCI investments and enters into derivative transactions.

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

The Risk Management Committee comprised of senior management oversees the management of these risks. The Company’s senior management is supported by a Risk Management Compliance Board that advises on financial risks and the appropriate financial risk governance framework for the Company. The Risk Management Committee provides assurance to the Company’s senior management that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies, risk objectives and risk appetite.

The Company’s requirement of crude oil are managed through integrated function handled through its international trade and optimization department. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. As per Company’s policy, derivatives contracts are taken only to hedge the various risks that the Company is exposed to and not for speculation purpose.

The Board of Directors oversee the risk management activities for managing each of these risks, which are summarised below:

A. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.

The major components of market risk are interest rate risk, foreign currency risk, commodity price risk and other price risk viz. equity shares etc. Financial instruments affected by market risk include Borrowings, Deposits, FVTOCI investments and derivative financial instruments.

The sensitivity analysis in the following sections relate to the position as at March 31, 2019 and March 31, 2018.

The analysis excludes the impact of movements in market variables on the carrying values of gratuity and other post-retirement obligations, provisions, and other non-financial assets and liabilities of foreign operations.

1. Interest Rate Risk

The Company is exposed to interest rate risk from the possibility that changes in interest rates will affect future cash flows of a financial instrument, principally financial debt. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company manages to maintain a mix between fixed and floating rates for rupee and foreign currency loans, based on liquidity, availability of cost effective instruments and considering the market/regulatory constraints etc. As at March 31, 2019, approximately 59% of the Company’s borrowings are at a fixed rate of interest (March 31, 2018: 49%).

2. Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency) and Borrowings.

The Company manages its foreign currency risk through combination of natural hedge, mandatory hedging and hedging undertaken on occurrence of pre-determined triggers. The hedging is mostly undertaken through forward contracts.

The Company has outstanding forward contract of Rs,2,873.43 crore as at March 31, 2019 (March 31, 2018: Rs,4,210.75 crore) which has been undertaken to hedge its exposure to borrowings and other financial liabilities.

The sensitivity to a reasonably possible change in USD/INR exchange rates, with all other variables held constant, the impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives. The Company’s exposure to foreign currency changes for all other currencies other than below is not material.

The effects of most exchange rate fluctuations are absorbed in business operating results which are offset by changing cost competitiveness, lags in market adjustments to movements in rates to its other non-financial assets like inventory etc. For this reason, the total effect of exchange rate fluctuations is not identifiable separately in the Company’s reported results.

3. Commodity Price Risk

The Company is exposed to various commodity price related risk such as Refinery Margins i.e. Differential between the prices of petroleum products & crude oil, Crude Oil Price fluctuation on accounts of inventoty valuation fluctuation and crude oil imports etc. As per approved risk management policy, the Company can undertake refinery margin hedging, inventory hedging and crude oil price hedging through swaps, options and futures in the OTC market as well as domestic exchanges to mitigate the risk within the approved limits.

Due to variation in prices, the Company incurred inventory gain/(Loss) of Rs,4,172.26 crores during the current year (Previous Year: Rs,6,794.64 crores)

4. Equity Price Risk

The Company’s investment in listed and non-listed equity securities, other than its investment in Joint Ventures/Associates and Subsidiaries, are susceptible to market price risk arising from uncertainties about future values of the investment securities.

At the reporting date, the exposure to unlisted equity securities at fair value was Rs,651.87 crore. Sensitivity analysis of these investments have been provided in Note 39.

The exposure to listed equity securities valued at fair value was Rs,18,650.71 crore. An increase/decrease of 5% on the NSE market index could have an impact of approximately Rs,932.54 crore on the OCI and equity attributable to the Company. These changes would not have an effect on profit or loss.

5. Derivatives and Hedging

(i) Classification of derivatives

The Company is exposed to certain market risks relating to its ongoing business operations as explained above. The Company has applied hedge accounting for designated derivative contracts w.e.f April 1, 2018 as per Ind AS 109 -Financial Instruments-. Due to this, gain amounting to Rs,22.04 crore (net of tax) has been accounted in Other Comprehensive income which will be recycled to Statement of Profit and Loss in subsequent periods on settlement of respective contracts.

(ii) Hedging activities

The primary risks managed using derivative instruments are foreign currency risk and commodity price risk.

Commodity Price Risk

Indian Oil buys crude and sells petroleum products linked to international benchmark prices and these benchmark prices do not move in tandem. This exposes Indian Oil to the risk of variation in crack spreads i.e. decrease in the difference between the price of a refined product and the price of crude.

The risk of fall in crack spreads of certain petroleum products in highly probable forecast sale transactions is hedged by undertaking crack spread forward contracts. The Company wants to protect the realization of margins and therefore to mitigate this risk, the Company is taking the crack spread forward contracts to hedge the margin on highly probable forecast sale in future. Risk management activities are undertaken in OTC market i.e. these are the bilateral contracts with registered counterparties.

All these hedges are accounted for as cash flow hedges.

Foreign Currency Risk

The Company is exposed to various foreign currency risks as explained in A.2 above. As per Company’s Foreign Currency & Interest Rate Risk Management Policy, the Company is required to fully hedge the short term foreign currency loans (other than revolving lines and PCFC loans) and at least 50% of the long term foreign currency loans based on market conditions.

Apart from mandatory hedging of loans, the Company also undertakes foreign currency forward contracts for the management of currency purchase for repayment of crude/product liabilities based on market conditions and requirements. The above hedgings are undertaken through delivery based forward contracts.

All these hedges are accounted for as cash flow hedges.

Hedge Effectiveness

There is an economic relationship between the hedged items and the hedging instruments as the terms of the foreign exchange and commodity forward contracts match the terms of hedge items. The Company has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange and commodity forward contracts are identical to the hedged risk components. To test the hedge effectiveness, the Company compares the changes in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the hedged risks.

Source of Hedge ineffectiveness

In case of commodity price risk, the Company has identified the following sources of ineffectiveness, which are not expected to be material:

- Differences in the timing of the cash flows of the hedged items and the hedging instruments

- Different indexes linked to the hedged risk of the hedged items and hedging instrument

- The counterparties’ credit risk differently impacting the fair value movements of the hedging instruments and hedged items

- Changes to the forecasted amount of cash flows of hedged items and hedging instruments Disclosures of effects of Cash Flow Hedge Accounting

The Company has applied the hedge accounting prospectively from the April 1, 2018. The related disclosures are made for the current year only.

Hedging instruments

The Company is holding the following foreign exchange and commodity forward contracts:

B. Credit risk Trade Receivables

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by Letters of Credit, Bank Guarantees or other forms of credit insurance, wherever required.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 10. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are approved by the Company’s Board of Directors. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

The Company’s maximum exposure to credit risk for the components of the Balance Sheet at March 31, 2019 and March 31, 2018 is the carrying amounts as provided in Note 4,5,6, 11& 12.

C. Liquidity risk

The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company seeks to manage its liquidity requirement by maintaining access to both short term and long term debt markets. In addition, Company has committed credit facilities from banks.

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, commercial papers, bank loans, debentures, and finance leases. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding.

* Based on the maximum amount that can be called for under the financial guarantee contract.

D. Excessive risk concentration

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry.

In order to avoid excessive concentrations of risk, the Company’s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.

E. Collateral

As Company has been rated investment grade by various domestic and international rating agencies, there has been no requirement of submitting any collateral for booking of derivative contracts. Company undertakes derivatives contract only with those counterparties that have credit rating above the internally approved threshold rating. Accordingly, Company does not seek any collaterals from its counterparties.

NOTE - 5 : CAPITAL MANAGEMENT

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using debt equity ratio, which is borrowings divided by Equity. The Company’s endeavour is to keep the debt equity ratio around 1:1.

1. As per the applicable provisions of Indian Accounting Standards, the loan given to Suntera Nigeria 205 Ltd. is measured at fair value through Statement of Profit and Loss in the financial statements and fair value of the loan is Rs,147.29 crore as on March 31, 2019 (2018: Rs,120.56 crore). Refer Note -39 for further details regarding fair valuation.

*Amount of Rs,51.67 crore (2018: Rs,29.85 crore) included in Note 17: Other Financial Liabilities.

NOTE - 6 : DISCLOSURE ON GOVERNMENT GRANTS

A. Revenue Grants

1 Subsidies on sales of SKO (PDS) and LPG (Domestic)

Subsidies on sales of SKO (PDS) and LPG (Domestic) in India amounting to Rs,128.21 crore (2018: Rs,63.65 crore) and subsidies on sales of SKO and LPG to customers in Bhutan amounting to Rs,21.79 crore (2018: Rs,17.46 crore) have been reckoned as per the schemes notified by Governments.

2 Compensation against under recoveries

The company has accounted for Budgetary Support of Rs,4,110.18 crore (2018: Rs,3,196.34 crore) towards under-recovery on sale of SKO (PDS) in the Statement of Profit and Loss as Revenue Grant.

3 Export of Notified Goods under MEIS Claims

The company has recognized Rs,6.32 crore (2018: NIL) on export of notified goods under Merchandise Exports from India Scheme (MEIS) in the Statement of Profit and Loss as Revenue Grant.

4 Stidend to apprentices under NATS scheme

The company has received grant of Rs,8.57 crore (2018: NIL) in respect of stipend paid to apprentices registered under National Apprenticeship Training Scheme (NATS) and the same has been accounted on net basis against training expenses.

5 Grant in respect of revenue expenditure for research projects

During the year, the company has received revenue grant of Rs,0.95 crore (2018: Rs,1.53 crore) in respect of meeting out revenue expenditure such as Manpower, Consumables, Travel & Contingency etc for research projects undertaken with various agencies.

6 Incentive on sale of power

Company is getting incentive from Department of Renewable Energy, GOI for wind power generation of Electricity at the rate of Rs,0.50 paise for per unit of power generated. The Company has received grant of Rs,3.08 crore during the current year (2018: Rs,2.51 crore).

7 EPCG Grant

Grant recognized in respect of duty waiver on procurement of capital goods under EPCG scheme of Central Govt, which allows procurement of capital goods including spares for pre production and post production at zero duty subject to an export obligation of 6 times of the duty saved on capital goods procured. The unamortized grant amount as on March 31, 2019 is Rs,57.56 crore (2018: Rs,241.42 crore). During the year, the company has recognized Rs,200.43 crore (2018: Rs,232.16 crore) in the statement of profit and loss as amortization of revenue grant. The company expects to meet the export obligations and therefore equivalent deferred grant has not been treated as liability.

8 Excise duty benefit in North East

Excise duty exemption of 50% of goods manufactured and cleared from north east refineries has been reckoned at full value in revenue and on net basis in expenses under ‘Excise Duty’ (to the extent of duty paid). Financial impact for the current year is Rs,2,831.40 crore (2018: Rs,3,050.90 crore).

9 Entry Tax exemption

The company has recognized grant on net basis in respect of entry tax exemption of crude/Naptha purchased in Panipat Refinery, Panipat Naptha Cracker Complex and Paradip Refinery in cost of materials consumed/Purchase of Stock-in Trade. Entry tax exemption on crude/Naptha procured in the state of Haryana and Odisha has been received amounting to NIL (2018: Rs,162.32 crore).

B. Capital Grants

1 OIDB Government Grant for strengthening distribution of SKO (PDS)

The company has received government grant from OIDB (Oil Industry Directorate Board) for strengthening distribution of PDS Kerosene as per the directions of MoP&NG to be used in construction of 20KL underground Tank, Mechanical Dispensing Units and Barrel Shed. The unamortized capital grant amount as on March 31, 2019 is Rs,1.28 crore (2018: Rs,1.56 crore). During the year, the company has recognized Rs,0.28 crore (2018: Rs,0.27 crore) in statement of profit and loss as amortization of capital grants.

2 DBTL Capital Grant

The company has received Government grant for roil out of DBTL scheme launched by MOPNG towards development, acquisition of software/licenses & data processing equipment for effective implementation of platform for dispesning of subsidy to customers purchasing LPG under DBTL scheme. The unamortized capital grant amount as on March 31, 2019 is NIL (2018: NIL). During the year, the company has recognized NIL (2018: Rs,0.47 crore) in the statement of profit and loss as amortization of capital grants.

3 Capital Grant in respect of Excise duty, Custom duty and GST waiver

The company has received grant in respect of Custom duty waiver on import on capital goods,Excise duty waiver and GST waiver on purchase of goods from local manufacturer in India under the certificate issued by Department of Scientific and Industrial Research (DSIR). The unamortized capital grant amount as on March 31, 2019 is Rs,52.52 crore (2018: Rs,44.75 crore) The goods so imported or procured from local manufacturer shall not be transferred or sold for a period of five years from date of installation. During the year, the company has recognized Rs,7.41 crore (2018: Rs,5.20 crore) in the statement of profit and loss as amortization of capital grants.

4 Capital Grant in respect of Research projects

The company has received capital grant from various agencies in respect of procurement/setting up of Capital assets for research projects undertaken. The unamortized capital grant amount as on March 31, 2019 is Rs,13.61 crore (2018: Rs,15.33 crore). During the year, the company has recognized Rs,3.64 crore (2018: Rs,2.82 crore) in the statement of profit and loss as amortization of capital grants.

5 Capital Grant in respect of Entry Tax Exemption from Odisha Govt.

Entry Tax exemption received from Odisha Government for Paradip Refinery Project has been recognized as Capital Grant and grossed up with the concerned Assets. The unamortized capital grant amount as on March 31, 2019 is Rs,116.31 crore (2018: Rs,121.62 crore). During the year, the company has recognized Rs,5.29 crore (2018: Rs,5.28 crore) in the statement of profit and loss as amortization of capital grants.

6 Capital Grant in respect of demonstration unit

Grant received from OIDB for setting up of demonstration unit at Guwahati refinery w ith the company’s R&D developed IndaDeptG technology. The unamortized capital grant amount as on March 31, 2019 is Rs,78.65 crore (2018: Rs,83.04 crore). During the year, the company has recognized Rs,4.38 crore (2018: Rs,4.38 crore) in the statement of profit and loss as amortization of capital grants.

7 Capital Grant in respect of interest subsidy

The company has received capital grant in respect of interest subsidy on loans taken from OIDB. The unamortized capital grant amount as on March 31, 2019 is Rs,6.21 crore (2018: Rs,6.40 crore). During the year, the company has recognized Rs,0.27 crore (2018: Rs,0.27 crore) in the statement of profit and loss as amortization of capital grants.

8 Capital Grant in form of Interest Free Loan

The company has received capital grant in the form of interest free loans from Orissa Government for a period of 15 years. The unamortized capital grant amount as on March 31, 2019 is Rs,1,352.98 crore (2018: Rs,915.94 crore). During the year, the company has recognized Rs,78.56 crore (2018: Rs,11.96 crore) in the statement of profit and loss account as amortization of capital grants.

9 Capital Grant in respect of Solar Power Generation

The company has received capital financial assistance from Ministry of New and Renewable Energy in respect of procurement and installation of Solar Panels for Power Generation. The unamortized capital grant amount as on March 31, 2019 is Rs,4.34 crore (2018: Rs,3.51 crore). During the year, the company has recognized Rs,0.16 crore (2018: Rs,0.21 crore) in the statement of profit and loss as amortization of capital grants.

10 Capital Grant in respect of Hydrogen blended Natural Gas project at Rajghat DTC

The company has received capital grant of Rs,6.00 crore (2018: NIL) to carry out its study & pilot project of hydrogen blended CNG (H-CNG) from Ministry of Transport Corporation (NCT-DELHI) as per the direction of Hon’ble Supreme Court. The Company has not amortized any amount in statement of Profit & Loss account as the project is under execution.

NOTE - 7 : REVENUE FROM CONTRACTS WITH CUSTOMERS

The Copany is in the business of oil and gas and it earns revenue primarily from sale of petroleum products, petrochemicals and others comprising of Gas, E&P and Others. Revenue are recognized when control of the goods and services are transferred to the customer at an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. In determining the transaction price for the sale of products, the company considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any).

Generally, Company enters into contract with customers;

a. On delivered basis in case of Retail Sales, LPG and Aviation.

b. On EX-MI as well as delivered basis in case of Lubes and Consumers.

c. On FOB or CIF basis depending on terms of contract in case of Export sales.

Majority of Company’s sales are to retail category which are mostly on cash and carry basis. Company also execute supply to Institutional Businesses(IB), Lubes, Aviation on credit, which are for less than a year.

For maintaining uninterrupted supply of products, customers generally deposit amount in advance with the Company against which orders for purchase of products are placed by the customers. Based on these orders, supply is maintained by the Company and revenue is recognized when the goods are delivered to the customer by adjusting the advance from customers.

Company also extend volume/slab based discounts to its customers on contract to contract basis for upliftment of products and it is adjusted in revenue as per the terms of the contract. Company also runs loyalty programmes and incentive schemes for its retail and bulk customers. Loyalty points are generated and accumulated by the customers on doing transactions at Company’s outlet which can be redeemed subsequently for fuel purchases from Company outlets. Revenue is recognized net of these loyalty points and incentive schemes.

Beside this, though not significant, Company also undertakes construction contracts on deposit basis. Revenue is recognized for these contracts on input based on cost incurred. Similarly non-refundable deposits received from Retail Outlets (ROs) are recognized as revenue over time.

An amount of Rs,58.67 crore (2018: Rs,25.30 crore) on account of impairment losses on receivables is recognized under Provision for Doubtful Debts, Advances, Claims, CWIP, Stores etc. (Refer Note 29.1)

The Company disclose information on reportable segment as per Ind AS 108 under Note 38 - Segmental Information. An amount of Rs,108.82 crore is recognized over time under Revenue from contract with customers.

The performance obligation is part of the contract and the original expected duration is one year or less in case of delivered sales, advance from customers. In case of construction contracts/deposit works, the company has a right to consideration from customer that correspond directly with the value of the entity’s performance completed for the customer.

Revenue in cases of performance obligation related to delivered sales and advance from customers are recognized in time based on delivery of identified and actual goods and no significant judgement is involved. Revenue in case of construction contracts/deposit works are recognized over time using input based on cost incurred. Revenue in case of Non Refundable RO Deposit is recognized on time proportion basis.

Indian Accounting Standard (Ind AS)-115 -Revenue from Contracts with Customers- became effective from April 1, 2018 and the company has adopted the same using cumulative catch-up transition method. This adoption has reduced Revenue from Operation for the current year by Rs,25.37 crore.

NOTE - 8 : OTHER DISCLOSURES

1 In the matter of U.P Entry Tax, consequent upon Hon’ble Allahabad High Court order dated May 4, 2018, IOCL has paid total outstanding principal amount of entry tax and challenged the interest amount. As per the latest status in the matter, Hon’ble Supreme Court under its order dated April 22, 2019 remamded the matter back to Hon’ble Allahabad High Court to decide the interest afresh on merit. Accordingly, IOCL filed stay application in Hon’ble Allahabad High Court on April 24, 2019 for stay of interest demand raised by commercial tax department. The interest liability in this regard has been fully provided for in the books of account.

2 During the year, company has settled its liability for entry tax in the State of Bihar consequent to the order of Commercial Tax Tribunal, Patna (on direction by Hon’ble Supreme Court) and accordingly, an amount of Rs,1,155.02 crore, being provision no more required, has been written back and included in provision for contingencies written back in Other Operating Revenue.

3 The revision of Employees Pay and Allowances was due w.e.f January 1, 2017. Based on presidential directive issued on October 13, 2017 dues in respect of executives have been settled. However, the revision of pay and allowances for workmen is under finalisation where liabilities have been ascertained on similar lines. An amount of Rs,1,650.00 Crore has been carried as liability as on March 31, 2019 towards dues on this account.

4 During the year, the Company has considered the deposits against its liability for leave encashment fund as qualifying insurance policy as per Ind AS 19. Accordingly, it has netted off liability for leave encashment against deposits for leave encashment fund and the amount deposited in excess of leave encashment liability is shown under Advance to Employee Benefit Trust/Fund. (Refer Note 8)

5 During the year, the Company has reviewed its impairment policy for Property, Plant and Equipment (PPE) and has changed its estimate for cash flow projections to 15 years as against 10 years earlier. This being the first year of change, the Company also tested for impairment considering cash flow projection of 10 years, where the recoverable amount exceeded the carrying value as on March 31, 2019. Accordingly there was no impact of this change in the value of impairment and PPE during the year.

6 Goods and Services Tax (GST) has been implemented w.e.f July 1, 2017 wherein some of the petroleum products are still outside its ambit. Accordingly, GST is being levied on some products as against Excise Duty applicable hitherto. Since, excise duty is included in revenue and GST is not included in revenue. Thus to ensure comparability on applicable products, sales excluding excise duty is Rs,5,96,219.96 Crore and Rs,4,95,613.83 Crore for the year ended March 31, 2019 and March 31, 2018 respectively.

7 In order to provide clean cooking fuel to BPL families, Government has approved -Pradhan Mantri Ujjwala Yojana (PMUY)- scheme where free LPG connections are issued by Oil Marketing Companies (OMCs) to the women belonging to the Below Poverty Line (BPL) households as per SECC -2011 (Rural) database. The scheme was launched on May 1, 2016. During the year, the scheme was also extended for males where there is no women in the family. As per the scheme, the initial cost towards connection charges (Refundable deposit) would be borne by the Central Government for each card holder. Few State Govts has also extended this scheme to other beneficiaries. As per the scheme, OMCs would provide an option for EMI/Loans towards cost of burner and 1st refill to the PMUY consumers. The loan amount is to be recovered from the subsidy amount payable by the government to the customers on each refill sale. During the year, discounting of the loan has been done based on assumption of 4 refills in a year and average subsidy of Rs,180 per cylinder as loan recovery.

The amount of outstanding as on March 31, 2019 towards PMUY claim from Central Government is Rs,1,495.63 Crore (Rs,446.35 Crore as on March 31, 2018) and loan from PMUY consumers is Rs,3,111.32 Crore (Rs,1,099.70 Crore as on March 31, 2018) (net of recovery through subsidy). Against the above loan, a provision for doubtful amounting to Rs,1,141.71 Crore (2018: Rs,162.06 Crore) has been created as on March 31, 2019 against the beneficiaries who have not taken any refill during past six months.

8 Pursuant to the Board approval for formation of a Joint Venture company between Indian Oil Corporation Ltd and Coal India Ltd for transfer of explosives business to the said venture company on slump sale basis at a value of Rs,311.00 crore (Net Assets WDV of Rs,62.43 Crore), consent of Niti Ayog was initially received for formation of the JV by letter dated April 27, 2018. However, the formation of the JV is still pending in view of deliberations at NITI Ayog in the matter. Accordingly, the explosive business continues to be in operation as on March 31, 2019.

NOTE - 9 : OTHER DISCLOSURES (Contd...)

9 Indian Oil has decided to exit the Joint Venture with Indian Oil Ruchi Biofuels LLP and has given notice of its exit from the Limited Liability Partnership (LLP) to the other JV partner viz. Ruchi Soya Industries as well as to the LLP on December 26, 2018 stating that it will exit the LLP w.e.f. January 25, 2019. The entire investment of Rs,1.60 Crore has been written off. Accordingly, provision made for diminution in value of investment in past of Rs,1.60 Crore in earlier year is written back in other income. (Refer Note 24)

10 Purchase of crude oil from Oil India Limited and some other oilfields has been accounted for provisionally, pending finalization of agreements with respective parties. Adjustments, if any, will be made on finalization of agreements.

11 Transactions with other Oil Marketing Companies are jointly reconciled on an ongoing basis.

12 There are no significant subsequent events that would require adjustments or disclosures in the Financial Statements as on the Balance Sheet date.

13 Previous year’s comparative figures have been regrouped wherever necessary. Figures in brackets indicate deductions.

Attention Investors :
Prevent Unauthorised transactions in your account --> Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile / email at the end of the day .......... Issued in the interest of investors
Attention Investors :
Prevent Unauthorized Transactions in your demat account --> Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from NSDL on the same day......................issued in the interest of investors.
Attention Investors :
KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
Attention Investors :
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account.
“Investment in securities market are subject to market risks, read all the related documents carefully before investing”.