SUMMER TRAINING PROJECT REPORT

ON
FINANCIAL ACCOUNTING,MIS/BUDGETING/ COSTING SYSTEM

GAIL (India) Ltd., VIJAIPUR

SUBMITTED BY:
AVINASH KUMAR ASTYA MBA (2011-12) PIMR INDORE

Certificate
This is to certify that Mr. Avinash Kumar Astya has completed her training on the topic Financial Accounting, MIS, Budgeting, Costing in GAIL Vijaipur as per the curriculum in the Finance department at GAIL India Limited, Vijaipur (MP)

Rajesh Agarwal Sr.Manager (F&A)

S.Sampath Chief Manager (F&A)

Acknowledgement
With great pleasure and sense of obligation express my heartfelt gratitude to Mr. Rajesh Agrawal, my mentor, Sr.Manager (F&A), GAIL India Limited, Vijaipur, for his encouragement throughout the training. I am highly indebted to him for his valuable guidance and ever ready support. His persistent encouragement, perpetual motivation, everlasting patience and excellent expertise in discussion have benefited me to an extent which is beyond the scope of acknowledgement. I would like to give warm expressions of thanks to Mr. S.Sampath, Chief Manager (F&A), GAIL India Limited, Vijaipur, for providing all the facilities and for his enlightening guidance throughout the training. My sincere thanks to all the members of staff in Finance department of GAIL India Limited, Vijaipur for direct or indirect help in the training. I sincerely thank my family, all my friends and well wishers for directly or indirectly helping me during the course of training.

Avinash kumar Astya

CONTENTS

1) 2) 3) 4) 15 5) 6) 21 7) 22 8) 9) 10) 44 11) 48

GAIL India Ltd ( Introduction) Vision And Mission Business description in brief. Ongoing projects of GAIL. Existing Project Corporate strategy adopted by GAIL Business segment performance GAILs Subsidiaries & Joint Ventures Events Implementation Enterprise in resource

6 10 11

19

29 38 technology planning

12) Financial performance of GAIL India Ltd for F.Y 2010-2011 50 13) 51 14) 15) 16) 17) About GAIL Vijaipur Milestone of GAIL Vijaipur LPG plant working LPG & Other Liquid Hydrocarbon Accounting Policy for 2010-2011 53 55 56 Business segment wise performance

18) Company 61

19)

Financial Accounting system at GAIL Vijaipur with SAP procedure. (a) Purchase Accounting of natural GAS

68

(b) Debtor Accounting (c) Contract Payments. (d) Purchase Payment for HVJ Pipeline (e) Purchase Payment for LPG Pipeline (f) Staff Payment/Off cycle Payment (g) Transaction codes for T.A/TransferAdvance. (h) Statutory Payments like Direct, Indirect Taxes (i) Project Payment & Accounting (j) E- banking and bank reconciliation 20) Management 105 21) 22) Budget Audit information system (MIS) 109 119 values

23) Core 122 24) 25) 26) Reward and recognition Conclusion Bibliography

INTRODUCTION TO GAIL

GAIL (INDIA) LTD.

GAIL IS A NAVRATNA COMPANY OF GOVT.OF INDIA. The setting up of GAIL (India) LTD., formerly known as GAS AUTHORITY OF INDIA LTD. In August 1984, heralded a new era of natural GAS in the country. GAIL is now completing 25 glorious years of service to the nation. Since 1984, GAIL has made significant contribution to the nations economy by supplying natural GAS through its pipeline network for Generation of over 87,000 MW of power Production of over 145million tones of urea Production of LPG for over 7 cr. Households in the country Over 5.7 lakes vehicles in the country today running on CNG supplied by GAIL and over 7 lacs households on piped natural GAS (PNG) in the country. Production of petrochemicals of around 4 lacs MTs which is used in the plastic industry. The natural GAS infrastructure of around 7,000 km. accounting for over 82% of total pipeline infrastructure in India, set up so far by GAIL has contributed enormously to the economically and socially critical sectors such as fertilizers and power. GAIL has the distinction of pioneering the clean fuel revolution for transport sector in the country with the introduction of CNG in Delhi and Mumbai which has significantly helped in reducing pollution levels in these two cities.

It provides ready market access to the domestic GAS producers, making GAS available to the customers including those remotely located and devoid of market access. It has provided cheaper, environment friendly alternative fuel and has reduced import-dependency as natural GAS has substituted liquid fuel such as Naphtha, fuel oil, etc.

GAILs pipeline network to the GAS consumers in the states of GUJRAT, MAHARASHTRA, RAJASTHAN, MADHYA PRADESH DELHI HARYANA, UTTAR PRADESH ANDHRA PRADESH, TAMILNADU ASSAM AND TRIPURA. In addition to supplying natural GAS to various consumers, GAIL has also setup 7 LPG plants and a petrochemical plant to extract value added products from GAS. GAIL produces around 1.35 MMTPA of liquid Hydrocarbon including LPG fro domestic consumption. In the area of corporate of corporate social responsibility, one of the major projects of GAIL has been setting up of AIR POLLUTION RELATED DISEASE DIAGNOSTIC CENTRES (APRDCs) in over 20 cities in various parts of the

country, at a cost of about Rs. 4 cr. APRDC also works as R&D for development of facilities for diagnosing suspended particles, which are known to cause acute heart diseases. Ujjain, 28th July 2006. Dr U D Choubey, Director (Marketing), GAIL (India) Limited today inaugurated the Air Pollution Research and Disease Diagnostic Centre (APRDC) at Ujjain Charitable Trust Hospital and Research Center, Ujjain. The senior officials of GAIL were present on the occasion. With the APRDC going functional, the hospital has acquired a system for pulmonary lung function testing and other base line investigation of air pollution related diseases. The APRDC at Ujjain is nineteenth of the 23 such centres to become operational. All these APRDCs have been sponsored by GAIL in 23 cities in India. To Combat the Pollution, GAIL is set to supply Natural GAS in 23 cities under Blue Sky Project in Mumbai, Pune, Sholapur, Agra, Allahabad, Kanpur, Lucknow, Mathura, Ahmedabad, Hyderabad, Vijaywada, Gwalior, Indore, Jhansi, Bareily, Delhi, Ujjain, Kota, Kochi, Rajahmundry, Chennai, Banglore. Air Pollution is said to be reduced as a consequence to supply of CNG to transport sector and piped Natural GAS for domestic and commercial usage in these cities. GAIL has initiated steam conversion project based on waste heat recovery system from GAILs GAS turbines. This rare, multi-benefit project would not only utilize clean development mechanism (CDM) for power generation, but also lead to conversion of GAS as well as increased energy efficiency. GAIL has consistent track record of dividend payment. So far GAIL has disbursed dividend of Rs. 6,230 cr. to the shareholders including Govt. of India, which is more than seven times the original investment of rs.845.65 cr. by the Government in its equity capital. The Government has been disinvesting its shareholding in GAIL from time to time, bringing down its equity holding to 57.345 % and there by contributing to the exchequer and additional amount of Rs. 3400 cr. The history of GAIL (India) Ltd., erstwhile GAS Authority of India Ltd., is closely aligned to the growth of the Petroleum Industry in India. Till the mid eighties, state owned public sector undertaking in the upstream and downstream segments were concentrating on effective sourcing and utilization of the oil resources of the country.

ONGC have already made important guest discoveries in the western offshore south bassein fields which could not be utilized in the absence of GAS piping infrastructure. The government embarked upon a planned and focused development of the natural GAS sector in the country.

VISION AND MISSION

Vision
Be the leading company in natural GAS and beyond with global focus, committed to customer care, value creation for all stakeholders and environmental responsibility.

10

Mission
To accelerate and optimize the effective and economic use of natural GAS and its fractions to the benefit of national economy

Business description in brief

Currently the business set up is as such Asias No.1 GAS utility company as ranked by Platts. 7 LPG GAS Processing Units to produce 1.2 MMTPA of LPG and other liquid Hydrocarbons. 1,922 km of LPG Transmission pipeline network with a capacity to transport 3.8 MMTPA of LPG. 13,000 km of OFC network offering highly dependable bandwidth for telecom service providers. 6,700 km of Natural GAS high pressure trunk pipeline with a capacity to carry 148 MMSCMD of natural GAS across the country. North India's only GAS based integrated Petrochemical complex at Pata with a capacity of producing 4,10,000 TPA of Polymers. 27 oil and GAS Exploration blocks and 3 Coal Bed Methane Blocks. 13,000 km of OFC network offering highly dependable bandwidth for telecom service providers. Joint venture companies in Delhi, Mumbai, Hyderabad, Kanpur, Agra, Lucknow, Bhopal, Agartals and Pune, for supplying Piped Natural GAS

11

(PNG) to households and commercial users, and Compressed Natural GAS (CNG) to the transport sector. Participating stake in the Dahej LNG Terminal and the upcoming Kochi LNG Terminal in Kerala. GAIL has been entrusted with the responsibility of reviving the LNG terminal at Dabhol as well as sourcing LNG. Established presence in the CNG and City GAS sectors in Egypt through equity participation in three Egyptian companies: Fayum GAS Company SAE, Shell CNG SAE and National GAS Company SAE. Stake in China GAS Holding to explore opportunities in the CNG sector in mainland China.

GROWTH
1990-91 2800Kms Hazira-Vijaipur Jagdishpur (HVJ) pipeline becomes operational in 1991. LPG phase-I plant at Vijaipur commissioned in February 1991. 1991-92 Phase-2 at LPG Vijaipur plant commissioned in Feb 1992. 1992-93 LPG project at Vaghodia commissioned in Feb 1993. 1994-95 Joint venture Agreement signed with British GAS on December 6, 1994.Mahanagar GAS Limited Incorporated to implement Bombay City GAS Distribution project. 1997-98 Government of India grants Navratna status to GAIL, herby entrusting greater autonomy to GAIL after restructuring of the Board. GAS processing units (GPU), offsite utilities of the petrochemical plant at Pata, commissioned.

12

1999-00 GAIL participates in NELP bidding by submitting offer for 7 blocks in association with ONGC & IOC and Russian company Gazprom. Government of India approved award of 2 blocks to GAIL, One with ONGC in Orissa offshore and another with Gazprom in Bengal Offshore. LPG plant at Pata with a designed capacity of 2.58 lacs TPA of LPG commissioned for commercial production in March 2000.

2000-01 GAIL conceptualizes a National GAS Grid to connect the supply and demand centers in the country with high pressure cross country pipelines networks. The GAS processing complex, Gandhar begins production in March 2001.The process LPG, 0.43 Lacs MT of Pentane and SBP solvent. Jamnagar-Loni LPG Pipeline project, the worlds longest and Indias first cross country LPG 1296 Km long pipeline, which passes through Gujrat, Rajasthan, Haryana and Delhi is completed.

2001-02 GAIL picks up 12% equity in GSEGs 156 MW power project in Gujarat as a strategic investment. Marketing functions is restructured and decentralize at zonal levels. GAILTEL phase-I commissioned, creating an OFC based DWDM network connecting Delhi-Mumbai, Delhi-Jaipur, Delhi-Ahemdabad, Delhi-Vijaipur, Meerut-Agra.

2003-04 GAIL has an initial success in the form of significant GAS find in the block A-1 in Myanmar and discovery of oil and GAS in the Cambay block. GAIL successfully secures participation in 2 retail GAS companies in Egypt, Fayum GAS Company and Shell CNG. Vizag Secundrabad LPG pipeline. the 580 km pipeline with the maximum throughput of 1.16 MMPTPA completed in June 2003 Bhagyanagar GAS Limited, a joint venture of GAIL and HPCL, incorporated in August 2003, in the field of distribution and marketing of auto LPG, CNG for vehicles and retailing of natural GAS in the cities of Andhra Pradesh.

13

Phase I and II of 8000 km network GAILTEL projects connecting Delhi, Mumbai and 71 other cities, completed. This network provides a national communication backbone. 2004-05 Incorporation of GAIL Global Singapore PVT.LTD Acquisition of 15 % equity stake in Natural GAS, Egypt. Agreement signed for acquisition of 9 % equity stake in China GAS Holding LTD, a joint venture for city GAS projects in 42 cities of China. Tripura Natural GAS Co.Ltd, a joint venture for city GAS project in Tripura, incorporated UP central GAS Ltd, a joint venture for city GAS project with BPCL in Kanpur, incorporated De-bottlenecking of LLDPE swing unit from 150000 MT to 210000 MT at GAIL Pata. GAS management system commissioned for HVJ, DVPL and SGPL. Commissioning of South Gujarat pipeline network Commissioning of Vizag-Secundrabad LPG pipeline. Blocks 2005-06 GAIL, ilex Australia, Videocon, HPCL and BPCL consortium awarded no 56 in Oman. GAIL was ranked 11th among top 15 of the worlds largest listed GAS utilities firms in the oil and GAS industry ,in terms of market capitalization ,for the year 2005. GAIL gets Golden Icon award for e-governance Inauguration of the National GAS management centre (NGMC) of GAIL at NOIDA. GAIL bagged two awards for excellence in cost management from the Institute of Cost and Works Accounts of India (ICWAI). 2006-07 Mechanical completion of new HDPE (High Density Polyethylene) plant with a capacity of 100,000 TPA at Petrochemical complex at PATA Commissioning of Dahaj-Panvel pipeline Brahmaputra cracker and polymer Limited-Joint Venture Company led by GAIL, formed for implementing Assam GAS cracker projects GAIL acquires stake in A7 Myanmar block

14

GAILs Vijaipur- Kota pipeline commissioned. GAILs Kailaras- Malanpur pipeline commissioned GAILs consortium wins 3 CBM blocks in 3rd round of bidding GAIL HPCL joint venture-Avantika GAS limited incorporated GAIL ONGC ink GAS supply agreement GAIL brings Indias first spot LNG cargo at Dahej.

Ongoing projects of GAIL 1. Dahej-Vijaipur (DVPL)

GAIL laid down 610 km. Dahej-vijaipur pipeline to supply re-GASified LNG from Indias first LNG terminal to Dahej to consumers in western and northern India. This pipeline with a capacity of 23.9 MMSCMD was commissioned in March 2004,6 months ahead of schedule. International Project Management Association (IPMA) adjudged DVPL project as winner of Silver Medal in Mega Projects category ub IPMA world Congress Meet-2006 in China. The DVPL pipeline will lift GAS from R-LNG terminal at Dahej to Vijaipur. Its first section Dahej-Vemar is 82.5 km. The second section 527.5-km Vemar-Vijaipur will run parallel to the existing HVJ pipeline. The total section of this pipeline is 42" in diameter and 610 km with 30-MMSCMD capacity.

2. HVJ Expansion Phase-III

15

HVJ (Hazira-vijaipur-Jagdishpur) being the first Natural GAS pipeline being made by GAIL in 1984-87 is 1800 km long across the country at a cost of Rs. 1700 cr. Its implementation included many formalities to be completed before its commencement. Like obtaining clearance, design parameters, documentation, finalizing global bids, setting up of basic infrastructure, along isolated stretches, 92 river crossing, 50 km. of forest,221 land crossings, 450 km, of rocky terrain and 350 road crossings, across difficult terrains. The HVJ pipeline was laid with the objective of transporting GAS to Fertilizer, power, LPG, Petrochemical plants, and other industrial consumers in Gujarat, M.P., rajasthan, U.P., Haryana, and Delhi. India used to fulfill 40% of its requirement for Natural GAS from overseas which became self sufficient after the establishment of HVJ pipeline.

Benefits:
fuel economy reduced cost saving currency The 920-km HVJ Expansion Phase-III project extends to Punjab, Haryana, Rajasthan and Uttar Pradesh. This pipeline system with three new compressor stations and 12 terminals is proposed for countrywide transportation and distribution of RLNG to the existing and future consumers. The pipeline will be extended from Dadri to Sonipat, Panipat, Sangrur, Doraha (Ludhiana) to Nangal and Bhatinda in Punjab and Haryana sectors. The pipeline will also be extended from Vijaipur to Kota to Mathania and from Ibrahimpur to Dhaulpur in the Rajasthan sector and the HVJ Auraiya-Jagdishpur line will be extended to IFFCO Phulpur in the Uttar Pradesh sector.

16

3. Dahej - Hazira-Uran - Dabhol

The 1166-km Dahej-Hazira-Uran-Dabhol pipeline has a capacity of 24 MMSCMD, 12 MMSCMD from Dahej and 12 MMSCMD from Dabhol. The trunk pipeline route passes from Dahej to Hazira to Gavlpada to Bhoirpada to Chindhran to Panvel to Dahivli to Ambewadi to Dabhol. In addition, there are lines from Gavlpada to Nasik, Chindhran to Trombay, Sanpada & Thana, Panvel to Uran, Dahivili to Pune, Ambewadi to Usar and Dabhol to Kolhapur. The Hazira-Uran section will be implemented in Phase-I.

4. Dabhol-Bangalore-Chennai
The Dabhol-Bangalore-Chennai project consists of 850-km Dabhol-Bangalore pipeline and around 300-km Bangalore-Chennai pipeline. The trunk pipeline passes from Dabhol through Kinjalkarvadi, Kasari river bank, Kharaklat, Tappalkatti Harva forest, Gadag, Gannaikanahalli, Gullur, Sarajapur, Palmaner, Chittoor, Kattivakkam to Chennai. The capacity of this pipeline is 10 MMSCMD from Dahej.

5. Kakinada-Hyderabad-Pune-Panvel
The 1035-km Kakinada-Hyderabad-Pune-Panvel pipeline passes from Kakinada, Peddapuram, Samalkot, Rajahmundry, Khammam, Hyderabad, Barsi, Pune, Lonavala, Khandala and Panvel. The pipeline capacity is around 20 MMSCMD from Peddapuram.

6. Kakinada-Kolkata
The 1000-km Kakinada-Kolkata project pipeline passes through Peddapuram to Srikakulam, Ganjam, Khorda, Bhubaneshwar, Cuttack, Jajpur, Baleshwar, Bhadrake, Kharagpur, Medinipore, Hugli and Naida to Pandua near Kolkata in West Bengal. The pipeline capacity is 10 MMSCMD.

7. Kakinada-Chennai

17

The 580-km Kakinada-Chennai pipeline project passes from Peddapuram to Vijaywada to Machilipatnam to Guntur to Ongole to Nellore to Gammudipudi to Ponneri to Chennai. The pipeline capacity is 10 MMSCMD.

8. Kolkata - Jagdishpur
The 853-km Kolkata-Jagdishpur pipeline extends from Pandua, Katoya, Bardhman, Chittranjan, Giridih, Navada, Gaya, Daudnagar, Haziaribag, Buxar, Ballia to Jagdishpur. The pipeline capacity is 10 MMSCMD.

9. Kochi-Coimbatore-Bangalore
This pipeline project consists of 100 km offshore Kochi-Kayamkulam designed for a capacity of 1.4 MMSCMD and 860 km onshore portion designed for a capacity of 11 MMSCMD. The onshore portion of the pipeline passes from Kochi to Alwaye to Kanjirkod to Mangalore and Bangalore.

10. Myanmar-India Pipeline Project

This project planned to lay a pipeline from Myanmar-India Border at Tripura to Pandua-Krishnanagar in West-Bengal through Northeast states or to lay offshore pipeline directly from Myanmar to Haldia in West-Bengal, India. The approximate length of this pipeline for onshore alternative through the Northeast states is about 800 km and for direct offshore alternative route is about 550 km.

11. Pata Petrochemical Project

GAIL's Petrochemical Complex at Pata in Auraiya District of Uttar Pradesh, with a production capacity of 260,000 TPA of Polyethylenes (LLDPE and HDPE) and 10,000 TPA of Butene-1, consists of a GAS Sweetening Unit, GAS Cracker and two downstream polyethylene plants: Dedicated HDPE plant of 100,000-TPA capacity

18

licensed by Mitsui, Japan and LLDPE/HDPE (Swing plant) of 160,000 TPA capacity licensed by Nova Chemicals, Canada.

Existing Projects GAS Rehabilitation and Expansion Project (GREP)

In 1998-99, the capacity of HVJ pipeline was expanded to 33.4 MMSCMD under the GAS rehabilitation and expansion project. By construction of a loopline of 505km. from Vijaipur to Dadri and increasing compression capacity of existing compressor stations and adding 2 more compressor stations Vaghodia and Khera.

Pipeline in North-eastern Regions

GAIL is also operating in 69 km. regional pipeline in Assam and Tripura. The pipelines existing in Assam supply GAS to GAIL LPG plant and ASEB. In Tripura

19

the pipelines are connecting ONGC GAS fields at Agartala dome, Rokhia and Konaban. GAIL is also supplying natural GAS to Tripura natural GAS co. ltd.

Pipeline in Rajasthan
GAIL laid the first pipeline in the country in desert area from Gamnewala upto Ramgarh (66km.) to supply GAS to RSEBs power plant.

Pipeline in Gujarat
Gujarat has huge resources of natural GAS. GAIL has laid Pipeline in north Gujarat and south Gujarat regions to supply GAS to consumers which include power plants, fertilizers and other industrial units.

Pipeline in Maharashtra
Around 125 km Pipeline network from Ex-Uran terminal in Maharashtra is being operated by GAIL to supply GAS from Uran GAS fields to consumers in Mumbai region. Major consumers include RCF Thal, RCF Trombay, MGL, IPCL, Ispat Industries, etc.

Growth
The company has completed nearly two and half decades of an eventful journey. Starting with a natural GAS transmission co., it is today and integrated energy company along the natural GAS value chain with global footprints. Having started as a GAS transmission company in the year 1984, it grew organically over the years by building a large network of natural GAS trunk pipelines covering a length of around 7000 km. and over 1900 LPG Pipeline Transmission network. The Company is adding another 5000 km. of new pipelines by the year 2011 at the estimated cost of Rs. 14,500 cr. Which have been approved by the Board of the Company under Navratna Powers. Today the company has interest in the business of natural GAS, LPG, liquid Hydrocarbons and Petrochemicals, Exploration and Production, City GAS Distribution and is steadily developing its overseas presence.

20

The major focus of the company is to maintain its dominant position in the GAS business, specially the transmission segment. The thrust is to continue the These new relationship with existing customers as well as add new customers.

Pipeline would include large trunk Pipelines along with smaller Pipelines which would connectivity along trunk lines so that prospective sources and consumers are connected.

Corporate strategy adopted by GAIL

The company has develop a long term strategic plan which has been reoriented during the year, keeping in view the unfolding demand and supply scenario, entry of new competitors, and changing dynamics in the market place. The goal set by the company includes doubling of top and bottom lines in the near future. The strategy developed to realize the set goals is as under: 1. Tying up with producers and suppliers for marketing and transmission of natural GAS on long term and sustainable basis. This is likely to be realized by security more GAS from new GAS finds and pursuing early finalization of contract with customers and suppliers. 2. Expanding of the pipeline structure from 7000 km. to 12000 km. with the laying of new pipelines by 2011-12. 3. Pursuing of city GAS distribution opportunities in the country. This requires the introduction of Compressed Natural GAS for the automotive sector and Piped Natural GAS for commercial and domestic use in 230 cities in a phased manner. The company also plans to strengthen E&P capability and resources by participating as major partner/operator in domestic E&P biddiing. This would help in developing E&P as a self sustainable business for augmenting additional supplies of natural GAS. This would involve investment both domestic on-land

21

and offshore fields, with a balance portfolio of developmental and exploratory projects. The natural GAS demand in India is at an inflection point and increase forces are at work that could dramatically increase the natural GAS demand. The present sources of natural GAS are projected to deplete in the coming years and therefore, there is a need to look at new sources that are coming up. The company is aggressively pursuing GAS sourcing options both from the new domestic sources as well through international sources by way of Pipelines and LNG routes. Collectively, such a rapid rise in expected demand and realignment of sources of GAS supply will interact to determine the robust future GAS structure. In the area of Petrochemical business, the company is examining the possibility of expansion of petrochemical complex and exploring Greenfield opportunities in the sector in India and abroad. On the globalization front, the company is stepping areas having synergy with existing businesses by entering into new and emerging GAS rich countries with focus on sourcing of GAS and participating in downstream activities.

Business segment performance

The company has been achieving an all round excellent rating by government of India since a MOU signing. During the year under review, the segment wise business performance of the company is as under. 1) Natural GAS The company owns and operates a network of 7850km. of natural GAS high pressure trunk Pipeline. It supplies over 81.43 million cubic meter of natural GAS per day as fuel to power plants, feedstock for GAS based fertilizers plants to over 500 small, medium and large industrial units to meet their energy and process

22

requirements. The companys share of GAS transmission business is 79% and it holds 70% market share in GAS marketing in India. Natural GAS continues to constitute the core business of the company. During the year 2010-11, a GAS sale has increased marginally 14 percent to 79.06 MMSCMD from 69.10 MMSCMD in the previous financial year. The company continues to have focus on securing GAS supplies from international markets. LNG and transnational Pipelines are the two prevalent modes of cross border GAS trade and the company has been making all efforts to bring Natural GAS in the country.

2) Petrochemicals
Company owns & operates a gas based integrated petrochemical plant at Pata, Uttar Pradesh with a capacity of producing 4,10,000 TPA of Polymers i.e. HDPE & LLDPE, which has been enhanced by 1,00,000 TPA, company is currently in the process of setting up a 2,80,000 TPA Assam Petrochemical Complex at an investment of Rs 5,460 Cores. During2010-11, the production of polymers has increased by 9 percent to 4.20 lakh MT as against 3.86 lakh MT in the previous year. The polymer sales increased by 8 percent to 4.23 lakh MT from 3.91 lakh MT in the last financial year.

3) LPG Transmission and other Liquid Hydrocarbons

Company has 7 LPG plants in the country. In 2010-11, total Liquid Hydrocarbon production including LPG was 1.401 million MT as compared to previous years production of 1.401 million MT. Production of LPG was 1.088 million MT during the year against a production of 1.043 million MT in the last fiscal. The Propane production was 1,52,671 MT against the previous years production of 155,873 MT. The Pentane production was 58,932 MT during the year 2010-11 as against 73,505 MT produced in the year 2009-2010. The LPG and other Liquid Hydrocarbons sales during FY 2010-11 were 1.405 million MT as against 1.343 million MT in the previous year. The Propane sales were 1,

23

53,153 MT against 155,292 MT in the previous year, whereas the Pentane sales were 58,528 MT against 73,749 MT in the previous year.

4) Exploration and Production

In line with Companys strategy & towards integration along the energy chain, E&P activities have gathered momentum during the year. The gas discovery in blocks A-1 & A-2 in Myanmar is maturing to development stage & various studies preliminary to finalization of the development plan & its implementation are underway. Presently, Company is involved in oil & gas exploration activities over acreage of 1.7 Lac sq.km. Company now holds a participating interest between 10 to 80 per cent in 27 oil & gas exploration blocks. Of these, 9 are on-land blocks 7 18 are off-shore blocks. In India there are 24 blocks which are in Basins such as Mahanadi, Bengal, GujaratSaurashtra, Mumbai, and Cambay, Assam-Arakan & Cauvery. Company has got stake in the A-1 & A-2 blocks in Myanmar & Block No. 56 in Omen. A beginning has been made by Company in earning revenue from E&P activities. One of the on-land block in Cambay basin started commercial production from February 2010 & Rs. 6.90 Crores has been generated as revenue during Feb-Mar10

5) Coal Bed Methane

The company has been participating interest in 3 coal bed methane blocks within the area of 1561 sq.km. Two of which are in Chattisgarh and one in Jharkhand. These blocks were awarded to GAIL consortium in CBM-III bidding round.

6) Telecommunication
Leveraging on its Pipeline network, the company has build up an OFC network for leasing of bandwidth as a carriers carrier. The companys telecom business

24

unit-GAILTEL has approximately 13,000 km. network. During the year under review, GAILTEL achieved profit before tax of Rs.3 cr.

GAS Supply Projections

Sources ONGC + OIL Pvt./JVs Sub-Total LNG Total 2008-09 59 61 120 34 154 2009-10 56 60 116 53 169 2010-11 55 58 113 70 183 2011-12 51 57 108 83 191

Gas Supply Projections

ONGC+OIL 90 80 70 60 50 40 30 20 10 0 Projections(MMSCMD) Pvt./JVs 70 59 61 34 56 60 53 55 58 51 57 LNG 83

2008-09

2009-10 Year

2010-11

2011-12

Business Initiatives
With changes taking place in the GAS market GAIL is continuously evolving strategies to prepare itself for the regulatory scenario. With enactment of petroleum and Natural GAS Regulatory Board Act 2006, by parliament and announcement of GAS Pipeline policy by Government of India for business of Natural GAS transmission, Refining, Processing, Storage, Transport, Distribution and marketing, the regulator will over see and promote the development of Natural GAS sector and

25

also envisages an arms length relationship between transmission activity and marketing/exploration activity.

Domestic Initiative
In its efforts to reduce Green House GAS (GHG) emissions, the company has assigned an agreement with Apollo Tyres for sale of steam through waste heat recovery at its Vaghodia Processing plant. This project will save substantial energy by utilizing the waste heat and will lead to emission control by avoiding CO2 generations. With a view to assist the national capital in increasing power generation, the company has signed GAS Sales Agreement with Pragati Power for GAS supply to Bawana Power Plant. The company has also executed GAS Supply Agreements with major suppliers like ONGC, PMT, etc. for augmentation of GAS supplies. The company has entered into GAS Transmission Agreement (GTA) with Reliance GAS Transportation Infrastructure Ltd. (RGTIL) for Transmission of Natural GAS from the Krishna-Godavari (KG) basin. The transmission agreement provides fro transportation of Natural GAS from the exploration block located in the Krishna Godavari basin in the east coast of India through GAILs network and for booking of capacity by GAIL in RGTILs east- west Pipeline. In order to strengthen the business activities in the area of petrochemicals, the company has signed a MoU with Reliance Industries Ltd. (RIL) for exploring opportunities for setting up mega petrochemical complex outside India in one of the GAS rich countries. Further a petrochemical plant at Vizag is envisaged with HPCL, TOTAL, OIL and MITTAL Energy. The Company has signed an MoU with ONGCL to work jointly for transportation, distribution, marketing of Natural GAS from its new GAS finds KG basin and Mahanadi basin.

26

The company has signed a GAS Co-operation Agreement with Govt.of Puducherry envisaging setting up of a coordination group to study the demand potential of the union territory of Puducherry for R-LNG/CNG/PNG. The company has signed an agreement with the consortium of Reliance Industries, BG Group and ONGC, partner of PMT field for buying the entire quantity of 17.3 MMSCMD and the same had been effective from 01-04-08.

Global presence
The company is continuing its efforts to build strategic alliance with international companies to gain entry in the international market. Apart from its equity participation in three retail GAS companies in Egypt and China GAS Holding Ltd., participating interest in off shore E&P blocks in Myanmar and one on land E&P block in Oman, the company is pursuing business opportunity in other regions of the world in its core area of operations. The company has set up a wholly owned subsidiary company namely GAIL GLOBAL (Singapore) Pte. Ltd. In Singapore to facilitate overseas investment. The company has recently formed a joint venture with China GAS Holding Ltd. For taking up the projects in various cities of China. The Company and China GAS Holding Ltd. Are equal partners in the JV. This is the first JV Company of this company abroad. During the year under review the company has signed a MoU with IETRA Oil & GAS Company of Russia for cooperation in projects such as CNG; GAS based petrochemicals and E&P.

PIPELINE PROJECTS
During the financial year 2007-08 the company has completed a major Pipeline project from Dahej to Dabhol via Panvel to supply GAS to RGPPL which started supplying much needed power to the state of Maharashtra. Branch and spur lines to consumers like Deepak Fertilizers, MSEB Uran, BPCL and other consumers in the state of Maharashtra have also been completed.

27

The works for providing the connectivity to Pune city and the consumers of Thal/Usar region is under progress. Connectivity to RELs east west Pipeline which will transport GAS from Kakinada to Gujarat is being provided at Oduru in Andhra Pradesh, Mhaskal in Maharashtra and Ankot in Gujarat to enable the flow of GAS to consumers in various regions enabling optimum utilization of networks on national basis. The company has received grant of authorization for laying new Pipeline viz. Dadri-Bawana-Nangal Pipeline; Chainsa-Jhajjar-Hissar Pipeline; Dabhol-Banglore Pipeline; Jagdishpur-Haldiya Pipeline and Kochi-Kanjirkodd-Manglore/Banglore Pipeline In addition to the above, the company would also augment the GREP (VIjaipurDadri) Pipeline in Dahej-Vijaipur Pipeline (DVPL). These projects are at various stages of implementation. The foremost among them is the Pipeline from Vijaipur to Bawana which envisages supply of GAS to Pragati Power at Bawana targeted to supply Power to NCR before commcement of Common Wealth Games 2010. These projects will also enable company to maintain its dominant position in the GAS transmission and distribution business.

GAILS SUBSIDIARIES & JOINT VENTURES:The company has been the pioneer for City GAS Projects in India. With natural GAS emerging as the fuel of choice in the country, company believes that the next decade will belong to the city GAS. Company was the first Company to introduce City GAS Projects in India for supplies to households, commercial users & for the transport sector by forming Joint Venture Companies.

28

Subsidiaries GAIL GAS Ltd.

The company has formed a wholly owned subsidiary named GAIL GAS LTD. for implementing and CNG corridors in the country. The subsidiary company will act as a vehicle for bidding for laying of Pipeline infrastructure in the country.

GAIL Global (Singapore) Pte. Ltd.

The company has wholly owned subsidiary, namely, GAIL Global (Singapore) Pte.Ltd. to manage investments in abroad. The company is looking for further business opportunities through this subsidiary company.

Brahmaputra Cracker and Polymer Ltd.

The company has 70% equity share with Oil India Ltd. (OIL) Numaligarh Refinery Ltd. (NRL), Govt. of Assam, each having 10% equity share. The authorized capital of the company is Rs. 1200 cr. A Feedstock Supply Agreement has been signed between Brahmaputra Cracker and Polymer Ltd. (BCPL), and all the three supplierely ONGC, OIL and NRL.

GAILTEL
GAILTEL, the GAILTEL services arm of GAIL, is engaged in providing GAILTEL services to mission critical in-house SCADA and ERP services apart form commercially leasing services to GAILTEL Operators and ISPs across India. GAILTEL has been operating commercially in the Indian GAILTEL sector since june 2001. it is also responsible for meeting the captive communication requirements of

29

GAILs pipeline installation. GAILTEL, today serves most of the GAILTEL operators of the country, which include HUTCH, VSNL, Airtel, idea cellular, Reliance Infocom, Tata Tele services, to name a few. Its high speed optic-fibre network extends to well over 13,000 km connecting around 200 cities across various states like: Rajasthan, Gujarat, Madhya Pradesh, Maharastra, Uttar Pradesh, Andhra Pradesh, Haryana, Chandihgarh, Delhi, Karnatka, Tamil Nadu and Kerela. With SDH &DWDM as the core layer the network is built largely along the highly secured GAILs cross country pipeline corridor ad also configured in slef- healing rings to ensure highly relibal and error free services to its esteemed customer. The netwok is managed centrally on round the clock basis from a state-of-art Network Management Center.

SERVICE PROFILE:Low bandwidth leasing services- E1, E3, DS-3 and STM-1 High bandwidth leasing services- STM-4 Lamda leasing- STM-16 and STM-64 Managed bandwidth n x 64 k to n x e1 Ethernet based services- Virtual LAN, Transparent LAN, Corporate Ethernet, Broadband Internet Access, VPN.

SERVICE FEATURES
End-to-End bandwidth through Service Level Agreement (SLA). High availability levels through redundant network. Stringent rebate structure on non-availability of the service. 24 x 7 NOCC and Customer Service Centre

30

GAILs USP
Highly safe OFC routes mostly being along Pipeline at 99.97% availability. First competitive service provider in market. Solutions to meet specific individual needs. Minimum MTTR, skilled maintenance teams at every 150 kms. Discounts offered on TRAI rates for highly competitive tariffs. Varied product feature. Quick service commencement and upgradable capacities. High quality, cost effective service.
QUALITY POLICY

Expanding telecom infrastructure in synergy with expansion of GAILs cross-country pipeline network while significantly contributing to realization of goals and objectives of National Telecom Policy, 1999. To be a dominant and preferred telecom service provider in the area of operation. To provide and maintain state-of-art communication facilities for smooth operation, control and safety of GAILs cross-country pipeline infrastructure.

REFORMS AND GAILS ENTRY INTO TELECOM SECTOR

GAIL as part of its captive communication requirement created OFC and Microwave based Telecommunication network. GAIL has substantial spare capacity in the network which is being sold in the market. New Telecom Policy 1999 identified GAIL as long distance Infrastructure Service Provider for Telecom sector. Liberalization of National Long Distance sector in 2000. GAIL draws up its phased infrastructure expansion plan- June 2000. GAIL took Infrastructure Provider Category II license in line with New Telecom Policy 1999 in January 2001. Under the license GAIL can provide services to various Telecom Operators
31

FUTURE PLANS
With the formation of Triveni, a consortium of GAILTEL, POWERTEL (telecom wing of Powergrid) and RailTel, for cooperation in telecom sector and jointly addressing the telecom market, offer better benefits to the customers in terms of higher reliability and reach. Acquiring NLD license shortly for addressing the NLD as well as Enterprise segment. LOI for NLD received from DOT. Creating highly reliable OFC based city access network (FTTC, FTTH etc) in association with GAILs JV partners like IGL/BGL/MGL/CUGL along the city GAS pipeline network.

Joint Ventures Avantika GAS Ltd (AGL)

AGL is a JV of a company and Hindustan Petroleum Corporation Ltd. (HPCL) for implementation of city GAS projects in the cities of MP.

32

AGL has started projects implementation activities in the city of Indore. company has 22.5% stake in the company along with HPCL as equal partner. Bhagyanagar GAS Ltd.

The

BGL is currently operating three auto LPG stations in Hyderabad and one auto LPG station in Tirupathi. It is currently operating six CNG stations in Vijayawada and three LPG stations in Hyderabad. The company has 22.5% stake in the company along with HPCL as equal partner. Central U.P. GAS Ltd. CUGL is currently operating five CNG stations in Kanpur, one CNG station in Bareily And one CNG station in Kanpur is under commissioning. CNGL is building MDPE network for supply of PNG to domestic, commercial and industrial sector in the city of Kanpur. The company has 22.5% stake in the company along with BPCL as equal partner.

Green GAS Ltd. (GGL)

GGL is currently operating four CNG stations in Lucknow and three CNG stations in Agra. GGL will also take up project implementation in other cities of Western UP on the basis of GAS availability and project viability. The company has 22.5% stake in the company along with IOC as equal partner.

Indraprastha GAS Ltd. (IGL)

IGL is supplying piped GAS to around one lakh domestic, 276 commercial, 16 small industrial consumers and CNG to our 1.35 lakhs vehicles through 153 CNG Stations. IGL is catering to worlds largest CNG bus fleet of over 11,000 buses in Delhi. The company has 22.5% stake in the company along with BPCL as equal partner.

33

Mahanagar GAS Ltd.

MGL has set up 128 CNG stations catering to over 1.85 lacs vehicles spread over Mumbai, Thane, Mira-Bhayandar and Navi-Mumbai areas besides supplying PNG to over 3.40 lacs domestic, 907 commercial and 36 small industrial consumers. The company has 49.7% stake in the company along with British GAS as equal partner.

Maharashtra Natural GAS Ltd (MNGL)

MNGL is a JV of the company and Bharat Petroleum Corp. Ltd. (BPCL) for implementation of city GAS project in Pune city. The company has 22.5% stake in the company along with BPCL as equal partner.

Petronet LNG Ltd. (PLL)

PLL was formed for setting up of LNG import and reGASification facilities. PLL has a long turn LNG supply contract with Ras GAS, Qatar for import of 7.5 MMTPA. PLL along with BPCL, IOCL and ONGL as equal partner. Dahej terminal is being expanded to 10MMTPA capacity. The company has 12.5% stake in the company

Ratnagiri GAS & Power Pvt. Ltd. (RGPPL)

RGPPL is a JV company between this company, NTPC, Financial Institution and MSEB. The company has 28.33% stake in the company along with NTPC as equal partner. The capacity of Ratnagiri GAS and Power Station is 2150MW. The company has made an investment of Rs. 500 crores and has approved additional equaity of Rs. 475 crores to RGPPL, out of the Rs. 475 crores, an amount of Rs. 92.9 crores has been paid during in the month of May 2008.

34

Tripura Natural GAS Company Ltd. (TNGCL)

TNGCL is presently supplying GAS to 6600 domestic, 104 commercial, 21 industrial consumer and has set up one CNG Station in Agartala city. The company has 29% stake in the company. The company has approved formation of City GAS project in Vadodara with Vadodara Mahanagar Sewa Sadan (VMSS) with 26% equity, while VMSS have 24% equity. The balance of 50% equity will be held by strategic investor and public. And JV agreement has also been sign with HPCL for City GAS analysis in Rajasthan. The company is IT savvy organization and has been continuously adopting state-ofthe-art IT solutions keeping pace with fast changing industry. These solutioins are not only helping in continuous improvement in efficiency and productivity but also ensuring right information to right person by use of latest security solutions. Continuing with IT initiatives, your company has launched e-tendering portal in 2007 and a large number of domestic and international tenders are being processed through this transparent and secured system across all offices. There have been a number of e-initiatives for increasing business process efficiency and development of manpower. Your company has introduced several other web based online applications like online Recruitment, e-Performance Management System (e-PMS), Grievance Redressal system, Online Vigilance Complaint Registration system, e-Budgeting System which has led to enhancing transparency, ready and structured availability of information, enhancing speed of operation and facilitating efficient decision making. Another major initiative towards IT risk management was to set up the state-of-the art 3 way Disaster Recovery (DR) Centre at Jaipur. This will ensure resumption of business operations in the eventuality of any disaster like Fire, Flood, Earthquake, Cyber Attack etc. in the primary data centre at Noida. The DR setup will ensure uninterrupted IT operation and business continuity of your company.

35

GAIL and UJVNL join hands to setup GAS based power generation in Uttarakhand:GAIL (India) Limited and UJVN Limited today signed a Memorandum of Understanding (MoU) on June 20, 2011 for evaluating the potential of setting up of GAS based combined cycle power plants in Haridwar and Kashipur in Uttarakhand under Joint Venture route. Shri S Venkatraman, Director (Business Development) GAIL and Shri G P Patel, Managing Director, UJVNL inked the pact in presence of Shri B C Tripathi, Chairman and Managing Director, GAIL (India) Limited, Dr. Umakant Panwar, Secretary (Energy) and Chairman, UJVNL, Shri Jagmohan Lal, Chairman, Uttarakhand Electricity Regulatory Commission, Shri Prabhat Singh, Director (Marketing) GAIL (India) Limited, Shri A K Jain, M D, Uttarakhand Power Corporation Limited and other senior officials of GAIL and UJVNL. Shri S Venkatraman, Director (Business Development) GAIL and Shri G P Patel, Managing Director, UJVNL exchanging the documents after signing of MoU evaluating the potential of setting up of GAS based combined cycle power plants in Haridwar and Kashipur in Uttarakhand under Joint Venture route. The MoU was signed inpresence of Shri B C Tripathi, Chairman and Managing Director, GAIL (India) Limited, Dr. Umakant Panwar, Secretary (Energy) and Chairman, UJVNL, Shri Jagmohan Lal, Chairman, Uttarakhand Electricity Regulatory Commission, Shri Prabhat Singh, Director (Marketing) GAIL (India) Limited, Shri A K Jain, M D, Uttarakhand Power Corporation Limited. Shri B C Tripathi, Chairman and Managing Director, GAIL (India) Limited speakiing on the occasion of signing of MoU evaluating the potential of setting up of GAS based combined cycle power plants in Haridwar and Kashipur in Uttarakhand under Joint Venture route
36

GAIL IN ADVANCE STAGE OF TECHNOLOGY:E-BUSINESS GAIL made significant investments in

IMPLEMENTATION

OF

IT

infrastructure and software over the last five years in view of the current developments in the industry and GAIL's growth plans. In the last two years, GAIL has taken significant steps to leverage its strength of existing robust IT infrastructure. An IT Policy and an IT Strategy have been put in place. GAILs IT strategy is an Integrated Approach. In todays competitive world, IT strategy can provide the real competitive edge to companies. The company's IT initiatives are spread across all its functional areas and the objective is to use IT to the best possible extent. IT contributes directly to work efficiency and transactional efficiency, leading to cost reduction and increased customer satisfaction. Thus, GAIL has undertaken a number of IT initiatives which have significantly contributed to cost reduction and operational efficiency. Rather than relying on reams of papers and files

37

and loads of unclassified information, one must develop a system of electronic exchange of classified and appropriate information. GAILs IT strategy borders on these principles in an effort to become a techno savvy and efficient company.

Personal E-Banking E-Banking at GAIL is an attempt to enable safe and easy handling of employees salary accounts and miscellaneous claims. Personal e-Banking has been introduced in the corporate office and Noida wherein the salary and other payments get credited to employees account by electronic transfer. ATM facilities have been provided at corporate office and Noida office for facilitating transactions.

Organisational E-Banking (E-Receivables and E-Payments) GAIL has also introduced organizational E-Banking covering E-Receivables and EPayments, for all the customers and vendors. An integrated system has been developed to enable efficient and speedy transactions involving GAIL, banks, customers and vendors. Besides better operational efficiency, lesser paper work and better utilization of manpower, there has helped reduction in transaction cycle time leading to financial advantages.

E-Investment of Surplus funds An online system for investing surplus funds has been developed, wherein the banks are able to quote their rates online, the transactions are compared and processed electronically before the final investment is made. This E-investment system has resulted in process cycle time reduction and cost effectiveness for both GAIL and the banks, besides better returns.

Paperless FAX GAIL has made a shift from the traditional FAX rooms to Paperless FAX System based on Fax servers, which is an e-mail-based system through which employees can conveniently send and/or receive fax messages through their messaging system

38

mailbox internally or by accessing the messaging system from anywhere in India and abroad with the help of the Internet. The IT department has estimates that by adopting this practice on a company-wide basis, a saving of around Rs 25 lakh per annum can be achieved, excluding the STD charges, which register a higher amount when a fax message is sent through an ordinary fax machine, the fax server.

Bill Watch System Processing of the suppliers bills has been a major area of concern for business organizations and their suppliers. GAIL has made a sincere effort to overcome delay in processing of bills by introducing an online Bill Watch System, by which suppliers, vendors and contractors are enabled through GAIL website to track the status of their pending bills. All they have to do is enter the receipt number given at the time of submission of the bills and the system informs them instantly about the detailed status of their bills and at which level the bills are pending, if applicable. This is an important step towards strengthening our partnership with our suppliers, vendors and contractors, and creates the needed supply chain efficiency. There are significant results achieved at all the locations wherein more than 90% of bills are cleared within 15 days after introduction of the Bill Watch System.

Video Conferencing GAIL has one of the best Video Conferencing facilities connecting 23 major work centers and sites so far, which will be extended to other locations as well. This facility is being used for conference inaugurations, key presentations and quick business reviews, internally. It also helps in cost-efficient conferencing with foreign vendors and suppliers to discuss key commercial issues.

File Watch System One of the key factors of success of a progressive organization is fast and transparent decision making. To enable this GAIL has introduced File Watch System which is a web based centralized system, wherein brief information, about all the files,

39

including dates of entry and exit, are necessarily being entered at initiation level as well at all the transaction levels where the file moves. File watch system helps users, track the movement and status of the files, as well as the time taken by the individual officers to clear the files and the total time taken for approvals. The inbuilt aspect of accountability in this system, cuts down the decision making time, which is a major cause of concern, especially in PSUs. Reshaping our organization entails a fresh perspective of things which is why we have the File Movement System and the Bill Watch System in place. Reaching Employees (Corporate Intranet /100 % e-Mail Access / Internet Access to Executives) In todays era of knowledge workers, it is of paramount importance to be well informed about all the happenings in the micro and macro business environment, on time. To facilitate this, GAIL has achieved milestone of providing e-mail access to each and every employee of company and further to enhance external orientation, all executives of the company have Internet access. Banking upon this extensive reach of computers and e-mail facility to all the employees, company has developed a Corporate Intranet, which is a dedicated and a powerful medium of information sharing between all the employees and the different business functions of GAIL. The intranet is constantly updated and this sharing of information is on a continuous basis.

Enterprise Resource PlanningGAIL is in the process of implementing the Enterprise Resource Planning (ERP) system. ERP implementation would improve the operational efficiency, productivity and customer satisfaction levels, besides optimization of cost, inventory and manpower utilization. This will also lead to efficient Supply Chain Management. ERP implementation would also lead to Integrated business & process control systems, Standardized processes by adopting best industry practices across locations and functions, Efficient and timely provision of Management Information for better decision support and operational control, and Enabling internal performance measurement and Improved responsiveness to changing market conditions,

40

The major benefits of GAIL's IT initiatives include cost reduction, operational efficiency, faster decision making, better service to customers, better vendor management, seamless and faster information sharing, quick response time with better and faster communication.

OBJECTIVES

Enable GAIL to leverage information for competitive advantage in a deregulated and highly competitive market scenario Move up the value chain Achieve higher customer service and satisfaction Improve operational efficiency and productivity Optimization of cost

ERP SOLUTION FOR GAIL

GAIL decided to implement SAP - ERP solution after due diligence SAP commands over 70 % market share SAP has been implemented in over 3,50,000 organizations worldwide including most oil & GAS majors SAP is built on Global Best Business Practices

41

FINANCIAL PERFORMANCE OF GAIL FOR THE YEAR 2010-11

GAIL (India) Limited has recorded sustained performance in all key physical as well as financial parameters in the Financial Year 2010-11. GAIL (India) Limited has recorded sustained performance in key physical as well as financial parameters in the Financial Year 2010-11. According to the audited figures, Turnover (net of excise duty) in the year 2010-11 increased by 30 per cent to Rs. 32,459 crore from Rs. 24,996 crore in FY 2009-10. The Profit Before Tax during the year 2010-11 increased by 14 percent to Rs. 5,240 crore from Rs. 4,578 crore in the previous year. The Profit After Tax during the year 2010-11 increased by 13% to Rs. 3,561 crore from Rs. 3,140 crore in the previous year. The Gross Margin during the

42

year 2010-11 increased by 15 percent to Rs. 5,973 crore from Rs. 5,210 crore. The Board of Directors has recommended payment of total dividend at the rate of 75 percent on the paid-up share capital of the Company for FY 2010-11 inclusive of 20 percent interim dividend already paid. During the year 2010-11, as per consolidated financial statements, the total group sales (net of Excise Duty) were Rs. 35,107 crore. The consolidated Gross Margin was Rs. 7,065 crore, the Profit before Tax was Rs. 5,799 crore and Group Profit after Tax was Rs. 4,021 crore.The Earning Per Share (EPS) was Rs. 28.07 per share in the year 2010-11 as against Rs. 24.75 per share in the year 2009-10. The EPS as per consolidated statement was Rs. 31.70 per share as against Rs. 26.23 per share in the previous year. The decrease in net profit during the fourth quarter of the current financial year was mainly due higher LPG Subsidy contribution by the Company.

Financial Performance of 2010-11 Segment-wise Revenue

During the Current financial year, revenues from Natural GAS Transmission business have increased by 20 percent to Rs. 3790 crore as against Rs.3168 crore in last year. The revenues from LPG transmission during the current financial year have increased by 6 percent to Rs. 475 crore as against Rs. 447 crore in last year. The sales from Natural GAS Trading during current financial year increased by 37 percent to Rs. 25,667 crore as against Rs.18,803 crore in last year. The net sales from Petrochemicals business have increased by 2 percent to Rs. 2,960 crore as against Rs.2, 912 crore in last year. The net sales from LPG and Liquid Hydrocarbons business during the current financial was Rs. 2,786 crore as against Rs. 2833 crore in last year.The increase in net profit during the current financial year was mainly due to the increase in Natural GAS Trading and Transmission and increase in petrochemicals sales.

Physical Performance
During the current financial year, the Natural GAS transmission was 117.91 MMSCMD, increased by 10 percent from 106.74 MMSCMD in the last year. The LPG transmission during the current financial year was 3,337 TMT, up by 6 percent from 3,161 TMT in the last financial year. The Natural GAS sales during the current

43

financial year were 83.23 MMSCMD, up 2 percent from 81.43 MMSCMD in the last year. The LPG and Other Liquid Hydrocarbon production during the current financial year was 1,369 TMT, as against 1440 TMT in the last year. The LPG and Other Liquid Hydrocarbon sales during the current financial year were 1373 TMT, as against 1443 TMT in the last year. During FY 2010-11, the petrochemical production was 416 TMT as against 417 TMT in the last year. The polymer sales during current financial year were 420 TMT as against 410 TMT in the last year.

Q4 Results of 2010-11
GAIL (India) Limited registered a turnover (net of Excise Duty) of Rs. 8,894 crore in the fourth quarter of FY 2010-11 as against Rs.6,522 Crore, a 36 percent increase over the turnover in the corresponding quarter during the last financial year. GAILs Net Profit for the fourth quarter of the FY 2010-11 decreased by 14 percent to Rs. 783 crore against Rs. 911 crore in the corresponding quarter of previous year due to higher LPG Subsidy. The Gross Margin decreased by 9 percent to Rs. 1,340 crore in the fourth quarter of the current financial year as against Rs.1,465 crore in the corresponding period last year. The Profit Before Tax decreased by 13 percent to Rs. 1,139 crore in the fourth quarter of the current financial year against Rs.1,306 crore in the corresponding period of last year.

Physical Performance
During the fourth quarter of the current financial year, the Natural GAS sales were 85.73 MMSCMD, up 3 percent from 83.59 MMSCMD during the corresponding quarter of last year. During the fourth quarter of FY 2010-11, the petrochemical production was 122 TMT, up 9 percent from 112 TMT in the corresponding quarter last year. The polymer sales during the fourth quarter of the current financial year have increased by 32 percent to 144 TMT as against 109 TMT in the corresponding quarter in the previous year. The LPG transmission during the fourth quarter of the current financial year was 857 TMT as against 871 TMT during the corresponding quarter in the previous financial year. The LPG and Other Liquid Hydrocarbon production during the fourth quarter of the current financial year was 339 TMT as
44

against 357 TMT in the corresponding quarter of last year. The LPG and Other Liquid Hydrocarbon sales during the fourth quarter of the current financial year were 339 TMT as against 356 TMT in the corresponding period last year. The Natural GAS transmission during the fourth quarter of the current financial year was 120.43 MMSCMD, increased by 5 percent from 114.76 MMSCMD in the corresponding period last year

ABOUT GAIL VIJAIPUR:

GAIL Vijaipur having two plants (1)LPG plant (2)HVJ plant

45

There are following departments at GAIL Vijaipur

GAIL (India) Limited is having its most valued installation at Vijaipur Distt Guna of Madhya Pradesh Vijaipur. GAIL Vijaipur is the O&M Head Quarter of HVJ Natural GAS Transmission Pipeline (includes 6 compressor stations at different Locations, MCR station for monitoring pipeline health & hydraulics of natural GAS), 2 GAS processing units for Liquid Hydrocarbon production. Journey of GAIL Vijaipur has observed various milestones, GAS Processing Unit of Vijaipur complexes started operations in the early nineties.

46

GAIL (India) Limited is also having its first LPG Plant at Vijaipur. In this plant, LPG is extracted from Natural GAS by following latest Turbo-expander process. The design GAS processing capacity of the plant (both trains combined) is 15 million standard cubic meters of GAS per day (MMSCMD) with annual production installed capacity of LPG as well as the other allied products, Propane, Pentane and Naphtha being as following: PRODUCT LPG PROPANE PENTANE NAPHTHA INSTALLED 406000 MT 130000 MT 42000 MT 24000 MT ACHIEVED 455562 MT 85599 MT 25360 MT 41052 MT

Plant is now operated at 120 % of design GAS processing capacity on continuous Basis. The present annual production of all the products achieved is as following:

47

LPG PLANT WORKING

GAS Compressor Stations:The HVJ pipeline system consists of six compressor stations Hazira, Vaghodia, Jhabua, Kheda, Vijaipur, and Auraiya. These compressor stations boost the pressure of natural GAS for efficient transmission and for meeting the contractual pressure requirements of different consumers. The compressor stations are main consumers of Energy, their scheduling of operation is of utmost importance from energy efficiency point of view. These compressors are GAS turbine driven equipments. Due care has been taken at the time of selection of these machines from the energy consumption point of view & suitable capitalization clause has been applied during evaluation of technology. Details of Compressor Stations along the HVJ Pipeline are depicted in Exhibit BO.4.

48

Sr. No 1 2 3 4

Station Name Hazira Vaghodia Jhabua Khera

Compressor Details Comp. Make 7+3 2+0 2+1 5+2 2+1 2+1 RR-Allison KC5 RR-RB211 KB5 RR-RB211 RR-Allison KC5 NP RR-RB211

Centralized Pipeline Maintenance Base

The Centralized pipeline group monitors the health of pipeline. This centralized group collates the data collected by other maintenance bases, analyzes the data & directs corrective action to be taken for mitigating the adverse impact of the issue. The pipeline integrity is ensured by analyzing the various parameters e.g. PSP, healthiness of cathodic protection. Pipeline maintenance is very technology driven & it is being planned without hampering the customer supply. The aerial surveys are also planned to verify the site reports. The pipeline integrity is ensured by analyzing the various parameters e.g. PSP, healthiness of cathodic protection. Pipeline maintenance is very technology driven & it is being planned without hampering the customer supply. The aerial surveys are also carried out to verify the site reports.

GAS Processing Unit:

The Capacity of GAS Processing complex at Vijaipur is 15MMSCMD (Million Metric Standard Cubic Meter Per day) of natural GAS with two trains of 7.5 MMSCMD each. The total plant capacity is 6 Lakh MT of Liquid Hydro Carbons (LHC). The entire process consists of: 1) GAS receiving, drying and regeneration, 2) Pre-cooling & Chill down in Expander, 3) Distill

GAS receiving, drying & regeneration:

Natural GAS is received from HVJ ( Hazira Vijaipur Jagdishpur ) pipeline at a pressure of around 54.2 Kg/cm2g and temperature of around 30 degree C. The GAS
49

flows to a Knock Out Drum (KOD) where any liquid present in the GAS is knocked off. After this the GAS is dried in Molecular Sieve Dryers to remove the moisture to below 1 ppm level. A two bed dryer system is used one for drying & another for regeneration.

Pre-cooling & Chill-down Section:

The dried GAS is cooled to approx (-) 69 degree C in two stages. In the first stage it is pre-cooled to approx (-) 39 degree C in chiller by heat exchange with various cold streams generated later in the process in the chill down system and external Propane refrigeration. Propane refrigeration system is provided to supply additional refrigeration required in chiller and LEF condenser for Propane recovery. The condensed liquid is separated out in Separator-I and vapor is expanded through a single stage Turbo-expander. The vapor-liquid mixture from Turbo-expander is fed to Separator-II. The hydrocarbon liquid from the two separators, after heat exchange, is fed to the fractionation section to recover the products i.e. LPG, Propane, Pentane and SBP Solvent. Vapors (Lean Natural GAS) from the second separator are taken through the chiller to recover refrigeration. Then it is compressed to about 30 Kg/cm2g by the expander compressor. The quantity of lean GAS required for NFL Plant & branch line of HVJ pipeline is compressed in a GT driven two stage Lean GAS Compressor to 45 Kg/cm2g (Medium Pressure Lean GAS) and the rest of GAS is compressed to 55.2 Kg/cm2g (High Pressure Lean GAS) and sent to Vijaipur compressor station of HVJ pipeline for further transmission.

Distillation Section:
The distillation section consists of four columns namely LEF, Propane, LPG and Naphtha columns. (a) LEF Column Liquid from the two separators flows to chiller to supply

cold & is then routed to Light Ends Fractionation (LEF) column. This column removes all Methane, Ethane and most of Carbon dioxide as overhead vapors. Bottom stream consists of part of Propane, Butane, Pentane & heavier hydrocarbons. Condensing a part of overhead vapors generates reflux. The refrigerant duty is supplied by vapors from second separator and external Propane refrigeration. (b)Propane Column Liquid from LEF column bottom is fed to column where Propane is produced as top product. Propane

50

(c) LPG Column Liquid from Propane column bottom is fed to LPG for separation of LPG & heavier hydrocarbons. This top product.

column

column separates LPG as

(d)NAPHTHA Column Liquid from the LPG column bottom is fed to NAPHTHA column where Pentane is produced as the top product as bottom product. and Naphtha

Storage facility:
Following facilities exist for storage of the products: (a) LPG (b) Propane (c) Pentane (d) Naphtha Eight Spheres of 2575 M3 water capacity each. Three Spheres of 2575 M3 water capacity each. Five Bullets of 198 M3 water capacity each. Two Tanks of 1300 M3 water capacity each.

Loading facility:
Following facilities exist for loading & dispatch of the products: (a) LPG (b) Propane (c) Pentane (d) Naphtha (i) Rail Loading Gantry with Eighty loading points. (ii) Road Loading Gantry with Eight loading bays. Road Loading Gantry with Four loading bays. Road Loading Gantry with Two loading bays. Road Loading Gantry with Three loading bays.

Employee Profile: The core of the organization:

GAIL, Vijaipur team consists of 327 employees, which includes both executives and non-executives. The average age of employees is 36 years. Technically Vijaipur executive team is highly capable with strong professional qualification base .Most of the core functions like O&M of Plant, HR, Procurement, and Finance are carried out by dedicated and trained employees. Some of the non-core activities like Housekeeping & Township Security have been out-sourced through agencies who are expert in their own areas. CISF has been kept for plant security.

COMPANY ACCOUNTING POLICY FOR 2010-11 (A) BALANCE SHEET

1) Fixed Assets 51

Fixed Assets are valued at historical cost on consistent basis. In the case of commissioned assets where final payment to the supplier/contractors is pending, capitalization is made on provisional basis, including provisional liability pending approval of Competent Authority, subject to necessary adjustment in cost and depreciation in the year of settlement. 2) Intangible Assets Intangible assets like software, licenses and right-of-use of land including sharing of ROU with other entities which are expected to provide future enduring Economic benefits are capitalized as Intangible Assets. 3) Capital Work in Progress (a) Crop compensation is accounted for under Capital Work-inbasis of actual payments/estimated liability, as ROU is acquired. (b) The capital work in progress includes advance for capital goods/ Transit/ value of materials / equipment etc. received 4) Borrowing Cost Borrowing cost of the funds specifically borrowed for the purpose of obtaining qualifying assets and eligible for capitalization along with the cost of the assets, is capitalized up to the date when the asset is ready for use after netting off any income earned on temporary investment of such funds. Expenses Incurred During Construction Period. All revenue expenditure incurred during the year, which is exclusively attributable to acquisition / construction of fixed assets, is capitalized at the time of commissioning of such assets. 6) Depreciation/Amortization Depreciation on Fixed Assets other than those mentioned below is provided in accordance with the rates as specified in Schedule XIV of the Companies Act, 1956, on straight line method (SLM) on pro-rata basis (monthly pro-rata for bought out assets). Assets costing upto Rs.5,000/- are depreciated fully in the year of capitalization. Bunk Houses are amortized on assumption of five years life. Oil and GAS Pipelines including other related facilities are depreciated @ 3.17% per annum on SLM basis based on useful life of 30 years. material in at site for use in the projects Progress on the and when work commences where

52

Computers at the residence of the employees are depreciated @ 23.75% per annum on SLM basis. Furniture, Electric Equipments and Mobiles provided for the use of employees are depreciated @ 15% per annum on SLM basis. Cost of the leasehold land not exceeding 99 years is amortized over the lease period. Depreciation due to price adjustment in the original cost of fixed assets is charged prospectively. Capital expenditure on the assets (enabling facilities), the ownership of which is not with the Company, is charged off to Revenue. Software / Licenses are amortized in 5 years on straight line method. No depreciation is being charged on ROU being perpetual in nature. After impairment of assets, if any, depreciation is provided on the revised carrying amount of the assets over its remaining useful life. Capital assets installed at the consumers premises on the land whose ownership is not with the company, has been depreciated on SLM basis in accordance with the rates as specified in Schedule XIV of the Company's Act, 1956 7) Foreign Currency Translation (a) Transactions in foreign currency are accounted at the exchange on the transaction date. (b) Monetary items (such as Cash, Receivables, Loans, Payables, etc.) Denominated in foreign currencies, outstanding at the year end, exchange rates (BC Selling Rate for Payables and Receivables) prevailing at year end. (c) Non monetary items (such as Investments, Fixed Assets, etc), foreign currencies are accounted at the exchange transaction(s). (d) Any gains or loss arising on account of exchange difference either settlement or on translation is accounted for in the Profit & Loss account. on denominated in are translated at TT Buying Rate for rate prevailing

rate prevailing on the date of

8) Investments Investments are classified into current and long term investments. Current investments are stated at lower of cost or market value. Long term investments are

53

stated at cost and provision for diminution in value is made only if such decline is other than temporary in the opinion of management. 9) Inventories Raw materials and finished products are valued at cost or net realizable value, whichever is lower. Stock in process is valued at cost or net realizable value, whichever is lower. It is valued at cost where the finished products in which these are to be incorporated are expected to be sold at or above cost. Stores and spares and other material for use in production of inventories are valued at weighted average cost or net realizable value, whichever is lower. It is valued at weighted average cost where the finished products in which they will be incorporated are expected to be sold at/or above cost. Surplus / Obsolete Stores and Spares are valued at cost or net realizable value, which ever is lower. Surplus / Obsolete Capital Stores, other than held for use in construction of a capital asset, are valued at lower of cost or net realizable value.

10) Machinery spares, which can be used only in connection with an item of fixed asset and their use is expected to be irregular, are capitalized with the cost of that fixed asset and are depreciated fully over the remaining useful life of that asset. 11) Grants In case of depreciable assets, the cost of the assets is shown at gross value and grant thereon is taken to Capital Reserve which is recognized as income in the Profit and Loss Account over the useful life period of the asset.

(B) PROFIT & LOSS ACCOUNT:12) Sale proceeds are accounted for based on the consumer price inclusive of Statutory Levies and charges up to the place where ownership of goods is transferred. 13) Income from Consultancy/Contact Services, if any, is recognized based on Proportionate Completion Method. 14) The interest allocable to operations in respect of assets the year is worked out by adopting the commissioned during average of debt equity ratios at the

54

beginning and closing of that thus worked out to

year and applying the average ratio of debt unviable /

the capitalized cost. declaration/closure.

15) Pre-project expenditure relating to Projects which are considered closed is charged off to Revenue in the year of 16) Employees Benefits -

All short term employee benefits are recognized at there undiscounted amount in the accounting period in which they are incurred. Employee Benefits under Defined Contribution Plan in respect of provident fund is recognized based on the undiscounted obligation of the company towards contribution to the fund. The same is paid to the provident fund which is administered through a separate trust. Employee Benefits under Defined Benefit Plans in respect of leave encashment, compensated absence, post retirement medical scheme, long service award and other terminal benefits are recognized based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation using the Projected Unit Credit method. with a separate trust. 17) Taxes on Income Provision for current tax is made as per the provisions of the Income Tax Act, 1961. Deferred Tax Liability / Asset resulting from timing difference between book and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Asset, if any, is recognized and carried forward only to the extent that there is virtual certainty that the asset will be realized in future. 18) R&D Expenditure All expenditure, other than on capital account, on research and development are charged to Profit and Loss Account. Actuarial liability in excess of respective plan assets is recognized during the year. Provision for gratuity as per actuarial valuation is funded

19) Exploration and Development Costs:-

55

i) The Company follows Successful Efforts Method for accounting of Oil & GAS exploration and production activities, which includes:Survey Costs are expensed in the year in which these are incurred. Cost of exploratory wells is carried as Exploratory wells in progresses. Such exploratory wells in progress are capitalized in the year in which the Producing Property is created or is expensed in the year when determined to be dry / abandoned. All wells appearing as exploratory wells in progress which are more than two years old from the date of completion of drilling are charged to Profits and Loss Account except those wells which have proved reserves and the development of the fields in which the wells are located has been planned. ii) Capitalization of Producing Properties Producing Properties are capitalized when the wells in the area / field are ready to commence commercial production having proved developed oil and GAS reserves. Cost of Producing Properties includes cost of successful exploratory wells, development wells, initial depreciation of support equipments & facilities and estimated future abandonment cost. iii) Depletion of Producing Properties Producing Properties are depleted using the Unit of Production Method (UOP). The depletion or unit of production charged for all the capitalized cost is calculated in the ratio of production during the year to the proved developed reserves at the year end. Companys share of production costs as indicated by Operator consists of pre well head and post well head expenses including depreciation and applicable operating costs of support equipment and facilities. 20. Contingent Liabilities and Capital Commitments:a. Contingent Liabilities are disclosed in each case above Rs5 lakhs. b. on Lacs. Estimated amount of contracts remaining to be executed capital accounts are disclosed in each case above Rs. 5

21. Impairment
56

The Carrying amounts of assets are reviewed at each Balance Sheet date. In case there is any indication of impairment based on Internal / External factors, an Impairm-ent loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. GENERAL 22. Prepaid expenses and prior period expenses/income upto Rs.1,00,000/- in each case are charged to relevant heads of account of the current year. 23. Liquidated Damages, if any, are accounted for as and when recovery is affected and the matter is considered settled by the Management. Liquidated damages, if s ettled, after capitalization on of assets are charged to revenue if below Rs. 50 lakhs in each case, otherwise adjusted in the cost of relevant assets. 24. Insurance claims are accounted for on the basis of claims admitted by the insurers. 25 a) Custom duty & other claims (including interest on delayed payments) are accounted for when there is significant certainity that the claims are realizable. b) Liability in respect of MGO of Natural GAS is not provided for where the same is secured by MGO recoverable from customers. Payments/receipts during the year on account of MGO are adjusted on receipt basis.

57

FINANCIAL ACCOUNTING SYSTEM AT GAIL- VIJAIPUR

Finance Department at GAIL Vijaipur is handling all accounting matters of HVJ Pipe Line and LPG Plant at Vijaipur. The Finance Department is headed by DGM (F&A). For proper accounting, the Business Area code for HVJ Transactions is 3000 and 6000 for LPG. The following activities are handled by Finance Department in GAIL Vijaipur:

Following activities related to Financial Accounting are being handled by the Finance Department- Vijaipur:-

Purchase Accounting of Natural GAS. Sales Invoicing and Debtors Accounting. Contracts Payments. HVJ Purchase Payments. LPG Purchase Payments. Misc. Payments. Pay Roll Accounting, Staff Payments. Statutory Payments like Direct & Indirect Taxes. Projects Payments. E. Banking and Bank Reconciliation. Depreciation Accounting. Central Accounting MIS, Budgeting, Costing & Cost Accounting Records.

Internal Audit, Statutory, Cost Audit, Tax Audit

58

Purchase Accounting of Natural GAS:GAIL purchase Natural GAS from ONGC, Panna Mukta Tapti Projects and Petronet LNG. The Natural GAS is transmitted from Hazira and Dahej thru Pipe Lines called HVJ and DVPL. The purchase accounting of Natural GAS drawn from ONGC is done by Hazira Unit. However, in respect of Natural GAS drawn by Vijaipur Plant from HVJ line for supply to customers under Vijaipur Control and for extraction of LPG and Hydrocarbons, the purchase adjustment entry is passed by the Vijaipur Plant in books of Accounts.

Sales Invoicing and Debtors Accounting :Sales Invoicing:GAIL Vijaipur cater the requirement of various Gases to following customer PRODUCTS Natural GAS MAJOR CUSTOMER IN ORGANIZED SECTOR National fertilizers ltd, Chambal fertilizer ltd, NTPC Anta, Samatal India, Samcore glass ltd, DCM (Shriram) Godrej Malanpur, Cadbury India, Surya Roshni ltd, Jamna auto ltd, Malanpur captive power plant To OMC i.e. IOCL, HPCL and BPCL, BORL (Bharat Oman Refinary Ltd) To NTPC C.L Gupta, SAIL, TATA Steel. Etc Reliable industries, J.C Enterprises pvt. Ltd., AMKAP Marketing Pvt ltd. Etc

RLNG(ReGASsified liquid Natural GAS) LPG Naphtha Propane Pentane

59

Trading of Natural GAS 1) An agreement is made with customer for annual quantity & price agreed upon. 2) GAS Joint Ticket is raised by the Terminal incharge which is certified by the customer & confirmed by NGMC. (Natural GAS Management Centre). 3) Invoice is raised on Fortnightly basis as per the terms of Agreement by Finance department Vijaipur after confirmation of quantity by NGMC. 4) The payment from Customers is received centrally at Delhi Corporate office. 5) The accounting entries of Sales are made by Vijaipur Plant. Sale of LPG: LPG is sold to OMCs i.e IOCL, HPCL and BPCL. LPG to IOCL is supplied thru pipe Line and to HPCL and BPCL, thru Tankers and Railway Wagons. The LPG supplied for domestic purpose is Non-Excisable and LPG for Industrial purposeis Excisable. The Prices are charged as per the Sales Agreement signed by GAIL with OMCs as per APM Rates. The Invoicing is made on weekly basis. Sales of Hydrocarbons i.e Naptha, Propane and Pentane :These products are supplied to NTPC, Malanpur Captive, Surya Roshni, etc. as per the agreement signed by GAIL with these customers. The supply is made after receipt of advance payment. 1) Despatch documents/Excise Invoice Despatch Deptt in the inside the plant issues the requisite documents on products, requisite Excise loading section

daily basis. For the Excisable

Documents are also issued at loading point. weekly

(2)Commercial Invoice Commercial Invoice is prepared for LPG on basis and for other products on fortnightly basis as per the conditions. This is prepared on the basis of loading control room.

customer terms and

despatch report and joint ticket from the

60

(3) Invoicing against Transmission Cost:Against the GAS Transmission thru HVJ Pipe Line to customers i.e Anta, Chambal Fertilizers, Samcore, Samtal and thru IOCL pipe line to NFL, the Invoicing to these as per the agreed rates and terms and conditions. NTPC Pipe Line to IOCL and

customers is made for Transmission Cost

SAP Procedure for Sales Invoicing: Tcode : F-28 Enter the Document Date Document type : default DZ Enter the Company Code Enter the Posting Date Enter the Bank Account : bank Incoming g/I Enter the amount Enter the Cheque date and bank name Enter the business area Enter the customer code Click process open item Choose your relevant amount those should be in blue Go to document and simulate than save.

61

DEBTORS ACCOUNTING:Debtors Accounting of Sales related transactions is made by Vijaipur Finance. (1) Natural GAS Natural GAS invoicing is done by finance department & it include the following accounting entries1) At the time of raising invoice to Customers: Customer A/c To Sales A/c To Service Tax payable A/c To VAT payable A/c To Entry tax payable A/c Note- Here Sales include following: Basic Price + Royalty 10% + Purchase tax 10% + Transmission charges = Selling Price 2) At the time of receipt of payment from customer: Bank A/c To Customer A/c 3) At the time of regularization of payment in which income tax is deducted: Bank A/c TDS A/c To Customer A/c Note- In case if the customer deducts the income tax from the payment. Dr ( Actual amount received ) Dr (TDS amount) Dr Dr

62

(2) Liquefied Petroleum GAS (LPG):It includes Excise & Commercial invoicing. Excise Invoicing: The accounting entry is: Excise Duty Expense A/c To Excise duty payable A/c Commercial Invoicing: The accounting entry is: Customer A/c To Sales A/c To VAT payable A/c Liquid Hydro Carbons (LHC): In case of Liquid Hydro Carbons (LHC) the finance department passes the following entries in the books of accounts1) At the time of receipt of advance from customer Bank A/c To Customer Advance A/c 2) At the time of raising invoice of LHC Customer A/c To Sales A/c To Sales tax payable A/c 3) At the time of regularization of payments Customer Advance A/c To Customer A/c Dr Dr Dr Dr Dr

63

(3) Transportation invoicing: In this following entries are passed by finance department in the books of account 1) At the time of raising invoice Customer A/c To Transmission Charges A/c To Service tax payable A/c 2) At the time of receipt of payment Bank A/c To Customer A/c 3) At the time of regularization of payment in case of TDS deducted Bank A/c TDS receivable A/c To Customer A/c Dr Dr Dr Dr

SAP Procedure for Natural GAS Invoicing:In Standard Accounting Package (SAP) each transaction is given a particular code & for Natural GAS transactions there are 2 different codes available: (1) YRVI 001- This code is applicable for single invoicing. Firstly the duration is set i.e. start & end date. Then the Customer date is mentioned. Cal. Value of Natural GAS is inserted which is given in GAS ticket. Billing date is given for which date bill has to prepare. Material number is selected from various types of GAS. Plant is selected among Madhya Pradesh & Rajasthan. Volume is set according to 1000/SCM unit. Quantity is mentioned by using MMBTU unit.
64

 Then from the list of all type of Gases & transmission, selection of natural GAS is made. Then we execute the transaction, then a number is generated & for getting the print out we use VF02 code. Then click the issue option from the filing document option, printing command is given & we have our invoice in our hand. (2) YRVI 010 This code is applicable for mass invoicing. The SAP procedure is same as for the code YEVI 001, only the is of the code. basic difference

SAP Procedure of LPG Invoicing: The Transaction code is VF04. Duration of billing date i.e. to & from has to be mentioned Shipping point has to be given. Click to options & select the billing date. Display the bill list. Collective Billing is done in case of LPG Invoicing. Print command VF02 for printing of invoice

SAP Procedure of Transportation Invoicing: The transaction code is 3015. Firstly the duration is set i.e. start & end date. Then the Customer date is mentioned. Cal. Value of Natural GAS is inserted which is given in GAS ticket. Billing date is given for which date bill has to prepare. Material number is selected from various types of GAS.

65

 Plant is selected among Madhya Pradesh & Rajasthan. Volume is set according to 1000/SCM unit. Quantity is mentioned by using MMBTU unit.

CONTRACT PAYMENTS:Indigenous Contracts:GAIL Vijaipur is also responsible to process the payments against various contracts related to O&M for LPG Plant and for HVJ. The Contracts are processed by C&P Department Vijaipur as per Company guidelines laid under C&P procedures and DOP. For each contract, the concerned head of the department, nominate one EIC, to ensure the monitoring and execution of contracts. The EIC generate monthly Service Entry Sheet for the quantity of works executed, verify the bills as per the terms of contracts and sent to concerned officer in F&A Department- Vijaipur through BWS (Bill Watch System) followed with hard copy. The Concerned Officer receives the Bills from BWS as soon as the Bills are received in hard copy. F&A Department process the bills verifying all the documents and terms and conditions. Penalty as applicable as mentioned in the contract and other deductions as advised by EIC are also deducted by F&A Department. TDS at applicable rates is deducted as per the nature of contract and provision given under Income Tax Rules. Foreign Contracts/Purchase Payments:GAIL Vijaipur Finance Department is also dealing with processing of payments against Foreign Contracts, awarded for maintenance etc Plant & Machinery and also for the spares purchased from these parties, in most of the case from Original Equipment Manufacturer. The Contracts/PO to these is awarded by C&P Department as per the company policy and procedure. There are also two types of forms submitted to Reserve Bank of India through applicants bank in case of foreign payments Forms 1 Form regarding Import of machinery & spare parts. Form 2- Form regarding Repair & services. These forms are to be submitted to the RBI by the Applicant bank regarding the clarification of the transaction. The Foreign payments are regulated in following ways (the mode of payment is specifically mentioned in PO/WO) Through L.C

66

Through Wire Transfer.

A) Payment through LC :- For making any foreign payment through Letter of Credit (LC), GAIL submit application to its concerned bank in the format prescribed for it along with following important documents. 1) Application & Guarantee for LC Form no. 2 2) Copy of Purchase order/Letter of Acceptance as the case may be. The Letter of Credit (LC) are of two types:Revocable Letter of Credit - in this type of LC continous payment is made until the final date of payment comes. Irrevocable Letter of Credit in this type of LC one time payment is made on the final date of payment. B) Payment through Wire Transfer: - This mode of payment is followed when the Letter of Credit is not opened. As per this mode Bank is authorized to debit GAIL Account by equivalent amount in INR of Foreign Money of P.O. This authorization is given accompanied with following documents: Bill/Invoice Bill of Lading Copy of Work Order/P.O A1 / A2

SAP Procedure for Contract Payments:In SAP, for each payment liability is created by preparing JV. Following steps are followed from preparation of JV to release of Payments. Step 1 MIGO is to be done in SAP, it include the following entry: GL A/c To GR/IR A/c Step 2 MIRO is to be done after the first step, & following entry is passed: GR/IR A/c To Vendor A/c
67

Dr

Dr

Entry of Service tax Credit Accountable receivable Service tax credit A/c To GL A/c Dr

SAP Procedure for Foreign Payments:Step 1 MIGO is to be done in SAP, it include the following entry: GL A/c To GR/IR A/c Step 2 MIRO is to be done after the first step, & following entry is passed: GR/IR A/c To Vendor A/c Step 3 In last step bank payment has to be made, entry is: Vendor A/c To Bank A/c Entry of Service tax Credit Accountable receivable Service tax credit A/c To GL A/c In Invoice verification, we compare Purchase order & Goods receipt and vendor invoices and checked on 3 parameters i.e. Price, Quantity, and Content. For Invoice Verification we require Purchase Order (Material) / Work Order (Services) and MIGO/Service Entry sheet. In SAP, we can do MIRO before Goods Receipt (MIGO) Enter the Currency Rate Go to T.Code MIRO Enter the Purchase Order number and press enter Enter the Section code Enter the Text field Take the printout of the accounting document through T.Code YRFS001 Enter the payment baseline date which is calculated the due date Dr Dr Dr Dr

68

 Enter the Business area Enter the House bank from which the payment is to be made Enter the payment method of the relevant House bank

PURCHASE PAYMENTS FOR HVJ PIPELINE:GAIL Vijaipur Finance also deals with the payments against various purchases made for maintenance and others for HVJ pipelines. For HVJ purchases payments the company Code is 3000 and business area code for Vijaipur Unit is 3010. There are separate Business Area codes for each unit from where the Hazira-VijaipurJagdishpur pipeline goes. The Departments responsible to ensure the proper upkeep and maintenance of HVJ Pipe lines at Vijaipur, raises their Purchase Requisition to Vijaipur C&P Department. The Receipt and Issues of HVJ stores items are maintained by HVJ Stores at Vijaipur. The HVJ Stores prepare the GRV of the spares received, through SAP and then run MIGO. This result to creat Debit Inventory and credit GR/IR. The GRV along with the bills are entered in BWS and send to finance depts. for processing of payments. Finance runs MIRO in the SAP, this result to creation of vendor liability. In this process the GR/IR has been debited and vendor liability is credited. This liability voucher is send to E-Banking section for release of payment to the vendor. E Banking Section prepares the ZP Voucher and debit the liability and credit to bank. ACCOUNTING ENTRIES : Inventory A/c To GR/IR GR/IR To Vendor Vendor Dr Dr Dr

To Bank A/c Special GL regarding HVJ Purchase payments Security Deposit L Earnest money deposit N Retention money K

69

PURCHASE PAYMENTS FOR LPG PLANT VIJAIPUR:The payments against various spares procured for the Operation and Maintenance of the LPG Plant Vijaipur are also released by local finance. These payments included procurement of various spares, consumables both indigenous and imported in nature. The procurement of the same is made by local C&P Department based on Purchase Requisition raised by the concerned department. The spares are received and issued by LPG Stores. The procedure to release the payment is same as in the case of HVJ Purchase payments.

PAYMENT AGAINST TRANSPORTATION :GAIL Vijaipur is also handling the Payment against Transportation as per the Contracts awarded for Transportation of various products like Naptha, Propane, Pentane etc. The TDS is deducted at the applicable rates under the Income Tax Provisions. MISCELLANEOUS PAYMENTS:Vijapur is the head quarter of HVJ Pipe line and other satellites RR Stations at Anta, Malanpur, Gwalior, NFL and Narsingarh. Following Miscellaneous payments against the Misc. contracts are fall under this category: Payment against Pest Control Contractual Doctors Electricity Bills of MPEB RR Station Telephone and mobile bills of establishment and officers posted at these stations. CISF Security payment deployed at Plant and at these RR Stations Payment against Guest House maintenance Courier AMC of Computers

70

 Xerox Machine Other Equipments Other Social activities payments Payments against Financial Aid to Schools run by GAIL Crop Compensation Payments Auditor Expenses etc. The Bills are sent by the concerned officer/department through BWS.

PAY ROLL ACCOUNTING:Salary of the employees is prepared by Corporate HR Department based on the inputs provided by HR Department. The Off Cycle Payments i.e Medical, which are part of the Salary are being considered in SAP, while preparing salary. The Salary is credited directly to the employees account and entry is passed in the books of accounts according to Business Area given to the employees while giving them Number (i.e. employee code).

STAFF PAYMENTS /OFF CYCLE PAYMENTS:Vijaipur Finance Department is responsible to release Off Cycle payments like Medical, Telephone/Mobiles, Lease Maintenance, CPF Loans Refundable and Non Refundable, HBA, Vehicle Advance, Furniture Advance, Computer advance and Special Advance. Finance Department is also responsible to release the payments against various recoveries made from the salary i.e. LIC, Professional Tax to the concerned authority. The Finance Department is also responsible to pass needful entries in the books of accounts in case of outgoing and incoming employees in respect of their advances according to Business Area. Payments against Business Trips, Leave Travel Assistance and Transfer Expenses are also handled by Finance Department. The employees wish to take the advance against Business Trips and Transfer Expenses have to apply in the SAP Programmer and to submit through their concerned HOD. The Claims against Business Trip and Transfer Expenses are also to be claimed in the SAP and to be submitted to finance department duly recommended by their HOD.

71

Transaction Codes for T.A./TransferAdvance:In SAP the following procedure is followed for preparation of T.A / Transfer Advance T Code PR05 is entered CPF number of the employee is to be entered See for trip number & double click Click R & save Click the ( Approve ( Settle LPG : 70 HVJ : 30 Click the ( ) Button ) Click this Button ) Button

After settling come out of the session. T Code PRF9 is entered Enter Payroll _ _ _ _ _ _ Other period _ _ _ _ _ _ [ Only the number of months m which you are working is taken in this step] Personnel number Trip number

72

 Execute After executing get out of PRF9 code. T Code PRRW is entered Click Execute Double Click Document Create Get Back Once Post Post Immediately Get Back Once Double Click Document Created Click FI / CO document Entries passed

Statutory Payments like Direct, Indirect Taxes:Finance Department is handling following Direct and Indirect Tax related matters. In Direct Taxes, TDS on payment to Contractors and against foreign purchases is deducted as per applicable rates under section given under Income Tax Act. Presently TDS is deducted on following payments under the applicable sections. HEADS Contractors Professionals Rent Commission Foreign payment SECTIONS 194 C 194 J 194 I 194 H 195 C TYPE OF PAYMENTS Maintenance & civil work Visiting doctors Rent payments Commission agent Import payment to the exporter in their foreign currency Sales of scrap

Tax collected at source 206 (TCS)

73

The TDS is deducted as per the Rates given in the SAP under various sections of TDS. While releasing the payment, the TDS is deducted from the payments and liability is created in relevant GL Code. The liability stands in the books at the end of month is deposited by 7th of following month thru on line payment. The Quarterly Return of TDS is filed by 15th of following month ending the quarter. TDS Certificates to the concerned parties against the TDS deducted are issued by 10th of following month. These TDS Certificates are generated from SAP. Following are the Steps in SAP for issuance of TDS Certificate against Contracts/Foreign Payments:Step 1 - The subsequent steps required from remitting the TDS to certificate generation are as follows: 1) T code J1INCHLN 2) Company code, 3) Section code 4) Vendor recipient type (i.e. corporate, on corporate of government) etc. 5) Document Date : Current Date 6) Bank A/c : put 2013299 7) Execute 8) The system will show the screen same as it shows while processing open items. 9) Assign the relevant amount and stimulate the transaction and save, the system will give an internal challan number and the clearing document will get generated Step 2 The next step is to enter the bank challan in the system 1) Tcode J1INBANK 2) Company Code 3) Fiscal year 4) internal challan clearing no. put the one generated in J1INCHLN 5) bank challan number 6) bank challan date

74

7) bank key : key bank from which payment made 8) Finally after updation screen will be like this Step 3 Now the final step is to print the certificate 1) T Code J1INCERT 2) Company code 3) fiscal year 4) Business place/section code 5) section 6) posting dates 7) bank challan dates 8) rest fill the details according to he relevance

MIS Report on TDS in SAP:Step 1 Use T-code J1INMIS is or go through SAP Menu> Accounting> Financial Accounting> Account Payable> Withholding Tax> India> Extended Withholding Tax> Information System> Withholding Tax. Step 2 The above screen will come, enter the following: 1) Company code 2) Fiscal Year 3) Posting Date ( From To) 4) for refined search use Document number, Vendor, customer, Section code and official withholding tax code is available 5) Select Consolidated report to view complete report of TDS or If User wants to see Bank Challan Status select bank challan status option or If User wants to see Certificate status select Certificate status. 6) Execute after filling in the details through clock icon or pressing F8 key. Step 3 1) After execution the above report will come which shows the status of the TDS.

75

2) To save this report on to the hard drive uses the circled icon above. This will pop up a window with the options to save the report in different file format as shown below, choose the desired format and save the file. 3) Thus, the final report is generated with items of the vendors along with the TDS status and the same can be saved. The report can be drilled down on the line items to look at the document.

INDIRECT TAXES:EXCISE DUTY PAYMENTS:Excise duty is levied on non domestic LPG, Naptha, Propane, Pentane. Excise duty is paid on the clearance basis i.e. on sales basis at the following rates of excise duty for the products given under:-

PRODUCTS
LPG- Domestic LPG-Commercial Naphtha Propane Pentane

BASIC EXCISE RATES

0% 8% 14% 8% 14%

Following Statutory Records for Excise are maintained at GAIL Vijaipur:-

RG 1 This is maintained for day to day production and clearance of the Products.
Following information are recorded in RG-1. Date Description of Goods Product Tariff Heading Number Opening Qty Quantity Manufactured Total Quantity

76

Removal of Qty from the factory Amount of duty payable Qty Removed without payment of duty Qty consumed for other purpose Total amount of excise duty payable Basic duty Special duty Cess payable Secondary & Higher education Cess Internal Consumption Closing stock qty. Physical stock qty. Gain / Loss Percentage of gain / loss (qty)

ER 6 (Excise Return) In ER 6, Consumption & Production of Raw materials

are recorded on monthly basis. Consumption of LPG for Domestic use and Production of Naptha, Propane, Pentane, LPG from natural GAS regarding this all the transactions is recorded.

PLA (Personal Ledger Account) In Personal Ledger Account, the record of

Amount Deposited in Government account for payment of Excise duty vis a vis amount utilized by debiting in PLA, for discharge of Excise duty liability is recorded on monthly basis.

TR 6 (Treasury Receipt) This is a document in the form of challan for

deposition of amount in PLA in Government Account for payment of Excise Duty.

ER 1 (Excise Return) ER-1 is monthly Return to be submitted to the Excise

Department, giving the summarized status of all Excise documents i.e. RG-1, PLA, RG-23A Part II (Cenvat Account).

SERVICE TAX PAYMENT: - Service tax is a tax levied on services providers

in India, except the State of Jammu and Kashmir. The tax is levied on service

77

providers. The service receiver also pays the service tax. Service tax paid on accrued basis, by 5th of next month the service tax is to be deposited by the service providers to the deptt and then it is to be reimbursed by the service receiver. The return is filed on half yearly basis. (1) April September (2) October March

Main Services of GAIL Vijaipur Transport of goods through pipeline. Transport of goods through road (service receiver) Business Auxiliary services. Foreign Consultancy services (service receiver) Renting of immovable property GAIL reimburses the service tax to the parties/service providers and avail credit of this in Excise Records. This Credit is utilized for payment of service tax liability on finished product. GAIL raises Bills for Transmission Charges on various customers against supply of Natural GAS through HVJ Pipeline. The Service Tax is charged on this Transmission Cost as per the Central Excise Rules. The requisite records of Service Tax are maintained as per the provision of Service Tax Rules under Central Excise Rules.

VALUE ADDED TAX Value Added Tax is a multi point tax with set off for
tax paid on purchases. The tax is collected in installments at each transaction in the production distribution process. There is no cascading because of the system of deduction or credit mechanism for taxes paid. The tax is levied on consumption. The final and total burden of the tax is fully and exclusively borne by the domestic consumer. No VAT is charged on goods exported. This is the tax system of the future. The Products being supplied by GAIL Vijaipur with in MP State are levied with VAT. In GAIL Vijaipur unit M.P.VAT rate is 13%.

CENTRAL SALES TAX (CST) Central Sales Tax is levied under this act by
the Central Government but, it is collected by that state government from where the

78

goods are sold. The tax thus collected is given to the same state government which collected the tax. The prevailing CST rates are 2% against form C and 5% without Form C. Interstate procurement for HVJ are made on full rate of CST without issuance of concessional declaration forms. In LPG, inter-state purchases are made at concessional rate of tax with declaration forms.

WCT: - Works Contract Tax is being deducted at source on Civil and other Works
Contracts, as per the applicable rates in Madhya Pradesh. The same is deposited with the Authority and requisite WCT Certificates are issued to the concerned parties.

Sales Tax/VAT/Entry Tax Returns: - Filing of Returns and finalization of

Assessment: - The activity involved timely filing of Sales Tax/VAT/Entry Tax Return to the Sales Tax Authority and get finalized the Assessment.

PROJECT PAYMENTS & ACCOUNTING:GAIL- Finance Vijaipur is also handling the payments and accounting of various new pipeline projects and expansion projects of HVJ Pipe Line, Dahej -Vijaipur pipe line, Vijaipur Dadri pipe line etc and new Compressor Stations. The Project Consultant is appointed by Project Department New Delhi through inviting Global Tenders. The Project Consultant designs the whole project and makes the estimate of the project. Based on this estimate the project is put up for the Board of Directors Approvals under the guidelines of Ministry of Petroleum. Vijaipur Finance & Accounts Department plays a key role in various teams made for Crop Compensation, Land Acquisition for laying proposed pipe line in MP State. For Crop Compensation and Land Acquisition, GAIL has appointed various state level officials on deputation called Competent Authority. Following Payments are handled by GAIL Vijaipur Finance. Payment against enabling work for Compressor Payment against Camp office facility Payment against Vehicle hired for Projects/Sites. Payment regarding Compensation for Land Acquisition , Crop Compensation Payment for Support Services on Contract basis.

79

The major payments related to all the projects are released by the Project Finance Department at Corporate Office in Delhi.

SAP Procedure for Project Accounting:Following is the summary of the SAP Procedure of the Project Accounting Transaction Code MIR6 is given Bios number is entered Basic data is mentioned Payment method is selected Assignment- whether work order or purchase order Business area code is given Withholding tax i.e. TDS is deducted Service Entry sheet is prepared Print out command is given for invoice generation BWS Misc. Bills :Steps to be followed for Transaction FBV0 1) Click on Document list TAB 2) Enter the Company code, Fiscal year and the 25 digit BWS number 3) Execute the transaction. Double click on the line item 1) Enter the Section Code

80

2) Enter Narration in the text field 3) Enter the Business area 4) Enter the House Bank 5) Enter the baseline date 6) Check the Withholding Tax data if the vendor is applicable 7) Enter the Expense GL Account and the relevant cost center 8) Simulate the Document and if the document is correct 9) Post the document

Accounting Entries: Expenses A/c To Vendor Vendor A/c To Bank Outgoing A/c The above entries will update the Vendor balances in FBLN Dr Dr

E-BANKING AND BANK RECONCILIATION:NET BANKING

INTRA BANK BANKING GAIL deals with three banks

INTER

Reserve bank of India

81

SBI

ICICI

HDFC

All bank s are there

E-BANKING:GAIL Vijaipur has Bank Accounts with State Bank of India- GAIL Township, ICICI and HDFC Bank. As per the Company policy, all payments to the employees, vendors, contractors and statutory bodies are released only through E-banking Company has the policy not to release any payment through manual cheques or Demand Drafts, except statutory payments to Govt Authority. The vendors dealing with the Company regularly are compulsorily to have their account in any of the above three Banks. In case, any party do not have their account in any of these banks, can be facilitated by Cheques to be issued by ICICI or HDFC, based on our advice through E-banking to these Banks. In case of new party/contractors/employees, the moping of bank account is made with these Banks to facilitate the E-banking Payments. In E-banking payment system, as mentioned above, for all type of payments, a liability voucher is prepared by doing MIRO. Based on this liability voucher a ZP voucher is prepared and uploaded in the system. Two authorized officers, authorize to release the payment through E-banking.

SAP Procedure for E-Banking: Transaction code : YRFR030 E-Banking text file generated in SAP. One executive upload this text file on respective bank site portal.
82

 Later on two executives authorize the transaction & send text file for release payment through e-banking.

BANK RECONCILIATION:For Bank Reconciliation, Bank statements are downloading from the bank site for the month. Transaction code: YRAR003, bank settlement if for upload in SAP for automatic matching of transaction for BRS purpose. Unmatched transactions are clear with Transaction code: FEBA manually. payment on BRS statement. After matching transaction BRS statement generated with Transaction code: YRFU 003 Efforts are made for clear outstanding

DEPRECIATION ACCOUNTING:The Assets are procured after taking I.O. Number (i.e. Capex No) for the assets required for Plant and Establishment thru C&P Deptt. The Capitalization of these Assets is made based on GRV issued by the Stores. The Depreciation is calculated on single shift basis under SLM.

SAP Procedure for Depreciation Accounting: T Code is given Company code is entered Business Area is defined Balance Sheet account is mentioned Asset class is defined Personnel number is given Assert code is mentioned Purchasing date is mentioned Acquisition Value is inserted Accumulated Depreciation is automatically calculated through SAP Present Book Value is received

83

CENTRAL ACCOUNTING:Central Accounting Cell in GAIL Vijaipur Finance is responsible to ensure correct and accurate accounting in all areas and correct provisioning in the books of accounts. This cell is also to ensure that Company Accounting Policy and Accounting Standards laid as per the Institute of Chartered Accountants are being strictly followed. The Central accounting cell is also responsible to prepare the Books of Accounts so as to ensure the smooth consolidation with Corporate Office and to get audited by the Internal, Statutory and CAG Auditors. This Cell ensures timely completion of Quarterly, Half yearly, Nine month and Annual Closing of Books of Accounts. GAIL Vijaipur Finance prepares complete accounts for LPG Recovery Plant and computes the profitability at the unit level. The same is audited by the Branch Auditors. The Profit & Loss, Balance Sheet and Schedule of Accounts and Note on Accounts are prepared as per the Company Law. The Books of Accounts of HVJ activities are finalized at Corporate Office, after consolidation all the entries of all Business Areas are audited by the Statutory Auditors at HO level. The profitability of HVJ is derived as a whole for GAIL. Balance Sheet of LPG Plant Vijaipur is prepared at Unit level and audited by the Branch Auditors. Sources of Funds: 1. Shareholders Funds

84

Capital (IUT/BA) Reserve & Surplus 2. Loans Funds Secured Loans Unsecured Loans 3. Deferred tax liability (Net) Application of Funds: 1. Fixed Assets Gross Block Less-Depreciation Net Block Capital work in Progress 2. Investments Current assets, Loans and Advances a) Inventories b) Sundry Debtors c) Cash & Bank Balances d) Other Current Asset Current liabilities provision Net Current Assets Miscellaneous Expenditure Deferred revenue expenditure Profit & Loss (debit balance) NOTES ON ACCOUNTS -

(As per Schedule I) (As per Schedule II) (As per Schedule III)

(As per Schedule IV)

(As per Schedule V) (As per Schedule VI) (As per Schedule VII)

(As per Schedule VIII)

Following Schedules are the prepared as part of Notes on Accounts for LPG Accounts comparing with last financial year on Annual Basis:Schedule 1A IUT/BA Adjustment balances Schedule 2 Schedule 3 - Reserves & Surplus - Loan funds

Schedule 4A Fixed Assets: Showing Gross Block, Depreciation and Net Block with Break up of Tangible and Intangible Assets.

85

Tangible Assets: - are Land, Building, Bunk House, Plant & Machinery, Railway Lines & Siding, Electrical Equipments, Furniture, Fixtures and other Equipments and Transport Equipment. Intangible Assets:- are Software/Licenses. The Depreciation is charged on single shift rate under SLM. Schedule 5 - Capital work-in-Progress (including Capital Goods in Stock/Transit) Schedule 6 - Investments Schedule 7 Current Assets, Loans & Advances: Showing the Inventory, Construction Surplus (net of Provision for losses/obsolescence), Debtors showing Secured and unsecured (net of provision for doubtful debts), Cash Bank Balance, Loans and Advances, Claim Receivables, Deposits with Customs, Port Trust and Others. Schedule 8-Current Liabilities & Provisions Sundry Creditors, Provisions for Taxation etc. Schedule 9-Other Income: i.e. Income from Dividend, interest, Export Incentives, Masc. Income etc. Schedule10- Manufacturing, Transmission, Administration, Selling & Distribution & Other Expenses: This includes details of Raw Material Consumed, Personnel Expenses, Establishment Expenses, R&M Expenses, Other Expenses. Schedule 11 Incidental expenditure during Construction Schedule 12 Interest & finance charges Schedule 13 Prior period adjustments. Schedule 14-Notes to Accounts:- It comprises of details on Capital Commitment, Contingent liabilities not provided for, Free hold/lease hold land capitalized on provisional basis, Freehold/leasehold land/flats, title deed pending execution, impact of exchange rates variation, notes on LPG subsidy burden, segment disclosures, related party disclosures, details of joint ventures as per AS-27, total outstanding dues of micro & small enterprises, total outstanding dues other than micro & small enterprises, disclosure of amount lying in CWIP, Quantitative information on Products i.e LPG, Naptha, Pentane, Propane, showing details of Opening Stock, Purchases, Sales, Internal Consumption and Closing Stocks. CIF Value of Imports, Expenditures in Foreign Currency, Earning in Foreign Currency, Licensed, installed and actual capacity achieved in production product wise, Details of Consumption in RM, Stores & Spares, Stock Adjustment and other declarations

MANAGEMENT INFORMATION SYSTEM (MIS):-

86

GAIL Vijaipur Finance has to provide various reports and informations to Head Office as part of MIS. These reports include Monthly Profitability Reports for LPG and HVJ showing the Sales Value and Expenditures segment vise, Cost Sheets etc. Profitability Report Profitability Report is prepared on monthly basis, it includes the followings:1) Quantity Sold 2) Quantity Produced 3) GAS Consumption by Plants 4) Prices 5) Income 6) Expenditure 7) Gross Margin 8) Profit Before Tax Common Expenses are apportioned in LPG and HVJ in the following ratio:HVJ 196 employees LPG - 131 employees categories Captive Power Generation: that includes GTG-A GTG-B DEG GTG Consumption: it includes LPG HVJ DVPL MPSEB Consumption: it includes Plant LPG Township 60% 40%

Energy Expenses The energy expenses are divided in following

87

 DVPL Common Expenses: Purchase of Medicine Staff Welfare Sport Expenses Dispensary Expenses Welfare School Electricity Township Property Tax R & M General Building Repairs & Maintenance Township Communication Expenses- P & T Telephone Expenses Telephone Residence Public Relation Expenses- Other Vehicle Hiring Charges Bus Hiring Charges Social Other All these expenses are divided among1) HVJ Expenses 2) LPG Expenses GTG Power Transfer Expenses:-In GAIL Vijaipur Plant GTG are installed. As and when power requires for performing operations, GTG is used & its calculation statement is prepared on monthly basis segments. GTG in LPG GTG in HVJ GTG in DVPL

88

 DEG in HVJ

Cost Sheets and Maintenance of Costing Records:After the preparation of expenditure statements, the cost sheet is prepared .The Cost sheet is prepared for the following products. GAIL is preparing the records as per the requirement of Institute of Cost & Works Accountants of India, specified for LPG Industries. The same are being audited by the Cost Accountant Firm. Manufacturing LPG Naphtha Pentane Propane Blended LPG.

The Cost Sheet comprises of followings: Variable Cost Fixed Cost Cost of Production Total Cost of Sales Closing Stock Shrinkage Value of Closing Stock (Including Excise Duty) Value of Closing Stock (Excluding Excise Duty) Difference in Closing Stock

BUDGETING: - As per company policy, all units are to submit to Corporate

Finance, their Revised Estimates for the financial year and Original Estimates for the
89

next financial year in the month of July & August. The Vijaipur Finance Department also prepares the RE and BE in respect of Revenue and Capital Expenditures called non planned expenditure. In the exercise of preparation of estimates, the head wise proposed expenditures are taken from each department for HVJ and LPG segment with their justification in the breakup of month-wise. The same is scrutinized, discussed on its justification and complied. The complied Budgets are submitted to Corporate Office for approval by Board of Directors. The Approved Budget Estimates for Revenue and Capital (Non Planned) expenditures can be spend with in the financial year and can not be carry forwarded to next financial year. The Department concerned has made the provision in budget can only utilize these approved budgets on the heads for the company business. In case, there is no provision in the budget estimates against a specific head, the expropriation of budget can be made with the approval of Competent Authority. Similarly, in case of Non Planned/Capital Expenditures Budget, the amount can be spending to procure the assets/equipment to be capitalized by raising I.O Number (Capex Sanctioned Number).

Budget Allocation & Expenditure

Budgeting is the companys formal short term planning process for the acquisition and investment of capita. In the preparation of the Budgets, the principle of Zero Base Budgeting is followed according to which expenditure is required to be justified after evaluation of various alternatives and ranking them in order of importance by systematic analysis. Two main budgets are prepared annually in GAIL: Revenue Budgets and Capital Budgets. The revenue budget is the operating budget for income and expenditure. The objective of revenue budget is to fix a target in respect of physical parameters viz GAS sales, Production and sale of LPG & other value added products, Petrochemical production, internal consumption of GAS, shrinkage of GAS for production of LPG, Liquid Hydrocarbons and petrochemicals, power, water and also that of operating expenses which then become the basis from monitoring and controlling. Based on the targeted physical parameters/ operating expenses, the likely profit/ internal resource generation are estimated which will form the basis for funds management. The capital
90

budget comprises of capital expenditure on projects. The same is approved by the MoP&NG and Planning Commission. Actual performance vis--vis MOU targets are monitored by Management Accounting Cell and periodic reports are submitted to top management. Following Budget Estimates are prepared: Revenue Expenditure Budget for LPG and HVJ Non-Plan Expenditure Budget (Capital Budget) for LPG and HVJ Procurement Budget ( O&M ) Depreciation Budget Employee Advances Budget Repairs & Maintenance Budget Stores & Spares Expenditure Budget

REVENUE EXPENDITURE BUDGET It includes followings: Raw material consumption Employees remuneration Power, Fuel & Water charges Consumption of stores & spares Rent Rates & Taxes License fees Bandwidth Consumption Repair & Maintenance Insurance Communication Expenses Printing & Stationery Traveling Expense
91

Books & Periodicals Advertisement & Publicity Entertainment Expense Recruitment & Training Expense Vehicle hire & Running Expense Exploration & Production Expense Consultancy charges Donations Loss on sale of assets R & D Expenses Bad debts, Claims, Advance , Written off Obsolescence of stores Expense on enabling facilities Selling & Distribution Expense Security Expense Other Expenses

NON-PLAN EXPENDITURE BUDGET

The Non-plan expenditure budget/Capital Budget consist of amount to be spent on equipments/assets capital in nature the various departments of Vijaipur unit prepare this type of budget Pipeline Human Resource Fire & Safety Civil Department Contracts & Procurement GAILTEL Information Technology Mechanical

92

 Electrical Instrumentation HBJ PROCUREMENT BUDGET (O&M)It includes expenses like: Spares, consumable & chemicals Fuel & Oil Others

DEPRECIATION BUDGET Depreciation budget includes the following heads Depreciation for previous year Less: a) Depreciation not provided for assets reaching 95 % b) Depreciation for assets (if known) Net total Depreciation on additions Total expenditure EMPLOYEE ADVANCES BUDGET There are several type of advances which the GAIL Company gives it to their employees & each unit of GAIL prepares budget for their advances, same is the case with Vijaipur unit. Car Advance Scooter Advance HBA Advance Furniture Advance PC Advance Other Advance REPAIRS & MAINTENANCE BUDGET There are several expenses which come under the heads of Repairs & Maintenance. Vijaipur unit is having an LPG Plant therefore it has much more expenses in

93

comparison with the other units of GAIL. Following are the departments which give their financial requirement regarding the repairs & maintenance Pipeline department Human Resource department Civil department Mechanical department Contracts & Procurement department GAILTEL Information Technology department HBJ-Operations & Terminal Electrical department Electrical Township Instrumentation department Fire & Safety department

HVJ BUDGET
HVJ budget is prepared department wise in GAIL Vijaipur unit. The departments preparing the HVJ budget are as follows Human Resource Department Pipeline & Terminal Contracts & Procurement Electrical HBJ Electrical Township Civil department Finance department GAILTEL

94

 Fire & Safety HVJ Operations STORES & SPARES EXPENDITURE BUDGET The stores & spares budget is prepared for the expenses incurred in the stores of various departments & spares used in the operational activities. The areas for which stores & spares expenditure budget is prepared are Electrical Electrical Township Instrumentation Mechanical Telecom Pipeline Contracts & Procurement Information Technology Fire & Safety

How to Create a Budget

Creating a budget may not sound like the most exciting thing in the world to do, but it is vital in keeping your financial house in order. Before you begin to create your budget it is important to realize that in order to be successful you have to provide as much detailed information as possible. Ultimately, the end result will be able to show where your money is coming from, how much is there and where it is all going

Here's How
1.

Gather every financial statement you can:- This includes

bank statements, investment accounts, recent utility bills and any information regarding a source of income or expense. The key for this process is to create a monthly average so the more information you can dig up the better.

95

2.

Record all of your sources of income:- If you are self-

employed or have any outside sources of income be sure to record these as well. If your income is in the form of a regular paycheck where taxes are automatically deducted then using the net income, or take home pay, amount is fine. Record this total income as a monthly amount. 3.

Create a list of monthly expenses:- Write down a list of all the

expected expenses you plan on incurring over the course of a month. This includes a mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings and essentially everything you spend money on.

4.
(a)

Break expenses into two categories: fixed and variable:Fixed expenses are those that stay relatively the same each month and are required parts of your way of living. They included expenses such as your mortgage or rent, car payments, cable and/or internet service, trash pickup, credit card payments and so on. These expenses for the most part are essential yet not likely to change in the budget. (b) Variable expenses are the type that will change from month to month and include items such as groceries, Gasoline, entertainment, eating out and gifts to name a few. This category will be important when making adjustments.

5.

Total your monthly income and monthly expenses:-If your

end result shows more income than expenses you are off to a good start. This means you can prioritize this excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate that debt faster. If you are showing a higher expense column than income it means some changes will have to be made.

96

6.

Make adjustments to expenses:- If you have accurately

identified and listed all of your expenses the ultimate goal would be to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for a specific expense. If you are in a situation where expenses are higher than income you should look at your variable expenses to find areas to cut. Since these expenses are typically essential it should be easy to shave a few dollars in a few areas to bring you closer to your income. 7.

Review your budget monthly:- It is important to review your

budget on a regular basis to make sure you are staying on track. After the first month take a minute to sit down and compare the actual expenses versus what you had created in the budget. This will show you where you did well and where you may need to improve.

AUDIT
There are five types of audit in the Organization, viz. a) Internal Audit b) Statutory Audit c) Government Audit d) Technical Audit e) Tax Audit

Internal Audit

97

Internal Audit is a statutory requirement for all the Companies having paid up capital of over Rs. 25.00 lakhs. Under the Manufacturing and other Companies (Auditor's Report) order, 1988 (MAOCARO), the Companies are required to have an organized Internal Audit Wing Commensurate with the size and nature of their business. The function of Internal Audit may be expressed as an independent appraisal activity within an organization for the review of operations as a service to Management. It is a managerial control which functions by re assuring and evaluating effectiveness of other internal controls. The Internal Audit is functioning under the Director (Finance) through Head of Internal Audit. The functions, duties, responsibilities and powers of Internal Audit department have been detailed separately in the Internal Audit Manual. Internal Audit should also examine independently the final accounts and attached Schedules to the Balance Sheet and Profit & Loss Account. Any point or observation make by the Internal Audit, which the Head of Finance Department considers acceptable for modification of the accounts, may be accepted and changes made in the Accounts. However, comments by Internal Audit, if any, should be offered will before the Finalization of the accounts. Statutory Audit Under Section 619(2) of Companies Act, 1956, the statutory Auditors (Chartered Accountants) are appointed by the Central Govt. on the advice of the Comptroller and Auditor General of India for conducting the audit in accordance with the provisions of the said Act. The Comptroller and Auditor General also has the power to direct the manner in which the Company's accounts shall be audited by the auditor and to give such auditor instructions in regard to any matter relating to the performance of his functions as such. The Officer Incharge of the Central Accounts Section shall co ordinate the audit work and supplies the relevant information / records / documents as required by the auditors. With a view to finalize the final accounts well within the prescribed time, it is necessary that all such information, documents are provided expeditiously by the concerned Section / Departments to the Auditors.

Government Audit
Powers of the Comptroller and Auditor General

98

As mentioned earlier, the accounts of the Company are audited by the Statutory Auditors appointed by the Central Government on the advice of the Comptroller & Auditor General of India. The Comptroller & Auditor General of India conducts only a supplementary or test audit of these accounts and gives his comments upon or supplements the reports submitted by the Statutory Auditors. In terms of Section 619 (3) of the Companies Act, the Comptroller & Auditor General is empowered: The Government audit conducts audit of the following three types: a) Phase Audit under Section 619 (3) (b) of the Companies Act;

b) Periodical Comprehensive Reviews; c) Balance sheet audit under Section 619 (4) of the Companies Act.

Technical Audit
Technical Audit normally functions directly under the Head of Technical Services or the GM / Director (Projects). In the discharge of its functions and duties, any information required by Technical Audit, if available with the Finance Department should be furnished. Any expert advice sought by the Technical Audit from time to time on financial matters should also be provided by the Finance Department

Tax Audit U / S 44 of the Income Tax

Finance Act, 1984 inserted a new Section 44 AB in the Income Tax Act, 1961 w.e.f. 1.4.1985 which requires that all persons carrying on business of profession and having total sales, turnover or gross receipts exceeding the limits specified therein in any previous year should get their accounts audited by a chartered accountant before the date specified therein and obtain the report of such audit in the prescribed form duly signed and verified by such account and setting forth such particulars as may be prescribed. "Specified date" in relation to the accounts of the previous year relevant to an assessment year (as per Income Tax Act / Rules amended up to 1995-96) means.

99

a) Where the assessed is a Company, the 30th day of November of the assessment year, and b) in any other case, the 31st day of October of the assessment year.

A Core Organization Values:

GAIL takes pride in its core organizational values: Ethics We are transparent, fair and consistent in dealing with all people. We insist on honest, integrity and trustworthiness in all our activities. People We believe that our success is driven by the commitment and excellence of our people. We attract and retain result oriented people who are proud of their work and are satisfied with nothing less than the very best in everything that they do. We encourage individual initiative by creating opportunities for our people to learn and grow. We respect the individual rights and dignity of all people. Safety, Health and Environment We promote highest levels of safety in our operation, health of our employees and a clean environment. We strive for continuous development of the communities in which we operate.

Customer We strive relentlessly to exceed the expectations of our customer, both internal and external. Our customers prefer us Shareholders We meet the objectives of our share holders by providing them superior returns and value through their investments in us. Technology

100

We believe technology is a key to the future success of our organization. We advocate best in-class technologies.

Rewards and Recognition:

GAIL has been selected as the top Indian company in the GAS Processing, Transmission and Marketing sector for the Dun & Bradstreet - American Express Corporate Awards 2006. GAILs Dahej Vijaipur Pipeline Project has won the Silver Medal in Mega Projects Category at the International Project Management
101

Association Awards, 2006 The company has received the Platts Global Industry Leadership Award 2005 in recognition of its commitment, continuous good work and collective efforts over a period of two decades for the hydrocarbon industry at a global level.. Other awards include Certification of Merit from Honble President of India in recognition of systematic and serious attempts for efficient utilization and conservation of energy during the last three years, the Golden Icon Award for exemplary initiatives in e-Governance. The Company was rated as one of the Best Employers in India by Hewitt Associates in 2004 and was adjudged as an Organization with Innovative HR Practices by HT Power Jobs. GAIL has recently won the Quality Excellence Award by the Quality Council of India. The Award was presented by His Excellency Hon'ble President of India, Dr. A.P.J Abdul Kalam.

AWARDS
Sr. No.
1 2

Date
31/05/2010 13:02:11 31/01/2011 16:53:38 31/01/2011 16:18:57 27/12/2010 13:06:08 26/05/2010 16:44:49

Location
MUMBAI MUMBAI

Subject
GAIL MAHARASHTRA RECEIVED GREENTECH SAFETY GOLD AWARD 2010 GAIL MUMBAI RECEIVED SAFETY INNOVATION AWARD-2010 GAIL MUMBAI RECEIVED SAFETY INNOVATION AWARD-2010 FROM INSTITUTION OF ENGINEERS SAFETY INNOVATION AWARD-2010 FOR GAIL ABUROAD & MANSARAMPURA GREENTECH SAFETY AWARD 2010 FOR JHABUA

MUMBAI

4 5

NOIDA JHABUA

102

23/10/2010 14:38:33 21/08/2010 12:20:17

NOIDA

SAFETY INNOVATION AWARD-2010 FOR GAIL AGRA (UP REGION) GPU-Gandhar bagged CMDs Rolling Trophy for Best Performing Unit for the year 09-10 GAIL MAHARASHTRA REGION PIPELINE SYSTEM RECEIVED CERTIFICATION FOR ISO-14001 & OHSAS-18001 GREENTECH AWARD 2010 FOR AGARTALA INTERNATIONAL SAFETY AWARD FOR GPU GANDHAR GAIL MUMBAI DECLARED WINNER OF GREENTECH SAFETY GOLD AWARD-2011 GAIL MUMBAI DECLARED WINNER OF GREENTECH GOLD AWARD-2011 GREENTECH SAFETY AWARD 2010 GOLD AWARD FOR GAIL LAKWA GAIL, JHABUA WON THE GOLD AWARD FROM GREENTECH TOWARDS ENVIRONMENT EXCELLENCE JLPL selected for "Special Commendation" Certificate for GOLDEN PEACOCK AWARD GREENTECH Environment Excellence Award 2010 GOLD Award for GAIL Lakwa

GANDHAR

8 9 10

19/04/2011 16:29:22 15/07/2010 12:09:43 11/05/2010 17:32:43 06/04/2011 12:20:50 06/04/2011 12:14:37 03/06/2010 10:23:15 03/01/2011 15:26:38 02/07/2010 17:18:49 01/01/2011 13:23:59

MUMBAI AGARTALA NOIDA

11 12 13 14

MUMBAI MUMBAI LAKWA JHABUA

15 16

JAIPUR LAKWA

Conclusion
In the light of the developments that have happened in the past year the company has shown that not only it has creating value for its shareholders but also creating value for other stakeholders as well. The initiatives taken by this company focuses on competitiveness both internally and externally Internal capabilities building to outperform competitors in the near and long terms is being gradually enhanced through several initiatives such as the e-initiatives for increasing employed competencies. On the external front your company is now poised to strengthen its base in the international markets via its global businessman in the coming years.

103

The challenges in the Oil & GAS industry are many. Increase in crude oil prices threaten competitiveness and pose marketing challenges. Besides, the Indian natural GAS market is maturing and is expected to grow rapidly, bringing newer opportunities. New regulations would govern new paradigm of domestic industry. Being the market leader, the company is better prepared financially and intellectually to drive on the growing Indian GAS economy. During my training period I have noticed some of the following key areas which has really helped company to bring efficiency in its working style. Being a public sector company it is working like a full fledged MNCs. Through well established SAP System the company has: Improve operational efficiency and productivity within and beyond your enterprise. Extend transactions, information, and collaboration functions to a broad business community. Increase profitability, improve financial control, and manage risk. Integrate and optimize business processes. GAIL has fulfilled its corporate social responsibilities and followed its business ethics in every stage of its existence. The company has maintained transparency in its business through E-Banking, in its contract and bidding process which has helped in gaining the confidence of clients. Considering all the above points I can say that the company has well organized their operational activity which has one hand benefited to company itself and all its stakeholders.

104

BIBLIOGRAPHY:
www.GAILonline.com. www.google.com http://www.moneycontrol.com/financials/GAILindia/ba

lance-sheet/GAI
http://money.rediff.com/companies/GAIL-india-

ltd/15120010/balance-sheet
https://GAILcorintra.GAIL.co.in/ Published annual report of GAIL India Ltd 2010-2011.

105

 Project Interconnect- SAP and User Manual- GAIL

India Ltd Financial management by I.M. Pandey

106