OUR VISION - domain-b.com · ONGC VIDESH LIMITED ... To consider, and if thought fit, to pass, the following resolution, with or without modification(s) as special resolution:-

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OUR VISION

To be a World-Class Oil and Gas Company

integrated in Energy business

with dominant Indian leadership

and Global presence.

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BOARD OF DIRECTORSShri Subir Raha

Chairman & Managing Director

Shri R.C.GourhDirector (Onshore)(upto 31.12.2003)

Shri Y.B.SinhaDirector (Exploration)

Shri V.K.SharmaDirector (Offshore)(upto 31.5.2004)

Shri Nathu LalDirector (Technology & Field Services)

Shri R.S.SharmaDirector (Finance)

Dr.A.K.BalyanDirector (Human Resource)

(from 23.08.2003)

Shri Atul Chandra(upto 30.4.2004)

Shri Badal K.Das(from 02.09.2003upto 30.06.2004)

Shri P.K.Deb(from 16.7.2003)

Shri J.M.Mauskar(upto 22.4.2004)

Shri Sunjoy Joshi(from 28.5.2004)

Shri M.M.Chitale(from 11.9.2003)

Shri Rajesh V.Shah(from 11.9.2003)

Shri U.Sundararajan(from 11.9.2003)

Shri N.K.Nayyar

Smt. R.D.Barkataki(upto 11.9.2003)

Shri J.Jayaraman(upto 11.9.2003)

Dr.K.R.S.Murthy(upto 11.9.2003)

Shri Jawahar Vadivelu(upto 11.9.2003)

CONTENTS

❏ Board of Directors..................................................................................................................................................................................... .

❏ Notice............................................................................................................................................................................................................ .

❏ Performance at a Glance...........................................................................................................................................................................

❏ Directors’ Report.........................................................................................................................................................................................

❏ Comments & Review by C&AG ..............................................................................................................................................................

❏ Human Resource ......................................................................................................................................................................................

❏ Auditors’ Report ........................................................................................................................................................................................

❏ Balance Sheet, Profit and Loss Account and Schedules ...................................................................................................................

❏ Cash Flow Statement ...............................................................................................................................................................................

❏ Balance Sheet abstract and Company’s General Business Profile ....................................................................................................

❏ Statement Pursuant to Section 212 of the Companies Act, 1956 ......................................................................................................

❏ Management Discussion & Analysis Report .....................................................................................................................................

❏ Corporate Governance Report ...................................................................................................................................................................

❏ Auditors Cerfificate on Corporate Governance ................................................................................................................................

❏ Secretarial Compliance Report ...............................................................................................................................................................

❏ ONGC VIDESH LIMITED

(wholly-owned subsidiary)

Board of Directors ..........................................................................................................................................................................................

Directors’ Report .......................................................................................................................................................................................

Comments & Review by C&AG ...............................................................................................................................................................

Auditors’ Report ..........................................................................................................................................................................................

Balance Sheet, Profit and Loss Account and Schedules ......................................................................................................................

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

Balance Sheet abstract and Company’s General Business Profile ....................................................................................................

Statement pursuant to Section 212 of the Companies Act, 1956 .......................................................................................................

❏ CONSOLIDATED FINANCIAL STATEMENTS OF ONGC VIDESH LIMITED

Auditors’ Report ..............................................................................................................................................................................................

Balance Sheet, Profit and Loss Account and Schedules ....................................................................................................................

Consolidated Cash Flow Statement .....................................................................................................................................................

Details of Subsidiary Companies ........................................................................................................................................................

❏ MANGALORE REFINERY AND PETROCHEMICALS LIMITED(subsidiary company)

Board of Directors ..........................................................................................................................................................................................

Directors’ Report ........................................................................................................................................................................................

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

Report on Corporate Governance ........................................................................................................................................................

Auditors’ Report .........................................................................................................................................................................................

Balance Sheet, Profit and Loss Account and Schedules ...............................................................................................................

Comments & Review by C&AG ...........................................................................................................................................................

Balance Sheet abstract and Company’s General Business Profile .....................................................................................................

❏ CONSOLIDATED FINANCIAL STATEMENTS OF ONGC GROUP

Auditors’ Report ......................................................................................................................................................................................

Balance Sheet, Profit and Loss Account and Schedules ...............................................................................................................

Consolidated Cash Flow Statement ....................................................................................................................................................

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NOTICE

Notice is hereby given that the 11th Annual General Meeting of the Members of OIL AND NATURAL GAS CORPORATIONLIMITED will be held on Wednesday the 29th September, 2004 at 11:00 hrs. at Hotel Ashok, 50-B, Chanakyapuri,New Delhi-110 021 to transact the following Business:

Ordinary Business:

1. To receive, consider and adopt the Audited Balance Sheet as at March 31, 2004 and Profit & Loss Account for theyear ended on March 31, 2004 and the reports of the Board of Directors and Auditors thereon alongwith review ofComptroller & Auditor General of India.

2. To confirm interim dividend and declare final dividend.

3. To appoint a Director in place of Shri U.Sundararajan, who retires by rotation and being eligible , offers himself forre-appointment.

4. To appoint a Director in place of Shri Rajesh V. Shah, who retires by rotation and being eligible , offers himself forre-appointment.

5. To appoint a Director in place of Shri M.M.Chitale, who retires by rotation and being eligible, offers himself forre-appointment.

6. To appoint a Director in place of Shri Y.B.Sinha, who retires by rotation and being eligible, offers himself forre-appointment.

7. To appoint a Director in place of Dr. A.K.Balyan, who retires by rotation and being eligible, offers himself forre-appointment.

8. To fix remuneration of the Auditors.

Special Business:ITEM No. 9To consider, and if thought fit, to pass, the following resolution, with or without modification(s) as special resolution:-“RESOLVED THAT pursuant to the provisions of the Companies Act, 1956 (including any statutorymodification(s) or re-enactment thereof for the time being in force and as may be enacted hereinafter) and theSecurities and Exchange Board of India (Delisting of Securities) Guidelines, 2003 and subject to such approvals,permissions and sanctions of Securities and Exchange Board of India/Stock exchange as may be necessaryand subject to such conditions and modifications as may be prescribed or imposed while granting suchapprovals, permissions and sanctions, which may be agreed to, by the Board of Directors of the Company(hereinafter referred to as “the Board” which shall include any committee thereof for the time being exercisingthe powers conferred upon the Board by this resolution), consent of the Company be and is hereby accordedto delist its equity shares from the Delhi Stock Exchange Association Ltd.RESOLVED FURTHER THAT the Board of Directors or any committee thereof/person(s) authorized by theBoard, be and is/are hereby authorised to settle all questions, difficulties or doubts that may arise in thisregard and to do all such acts, deeds and things as may be necessary, expedient and desirable for thepurpose of giving effect to this Resolution.”

ITEM NO. 10To consider, and if thought fit, to pass, the following resolution, with or without modification(s) as special resolution:“RESOLVED THAT pursuant to the provisions of Section 31 and other applicable provisions of the CompaniesAct, 1956, the existing Articles of Association of the Company be and is/are hereby amended and/or alteredin the manner and to the extent as set out below :-

1. Article 1: Interpretation Clause:

After existing interpretation clause “The Act”, the following clause be inserted:

(1) “Abridged prospectus” means a memorandum containing such salient features of a prospectus as may beprescribed.

REFERENCE INFORMATION

Registered OfficeJeevan Bharti Bldg., Tower II,

124, Indira Chowk,New Delhi – 110 001

Corporate OfficeTel Bhavan,

Dehradun – 248003Uttaranchal

Statutory AuditorsM/s Thakur Vidyanath Aiyar & Co.

M/s S.Bhandari & Co.M/s Brahmayya & Co.

M/s Lodha & Co.M/s RSM & Co.

BankersState Bank of India

SubsidiariesONGC Videsh Limited (OVL)

Mangalore Refinery & Petrochemicals Ltd. (MRPL)ONGC Nile Ganga B.V

Registrar & Share Transfer AgentM/s MCS Ltd.

Srivenkatesh BhavanW-40, Okhla Industrial Area

Phase-IINEW DELHI 110 020.

Tel No. 26384776 & 26384909

Listed atDelhi Stock Exchange

Mumbai Stock ExchangeNational Stock Exchange

DepositoriesNational Securities Depositories Ltd.

Central Depositories Services (India ) Ltd.

Company SecretaryShri H.C.Shah

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subject to the Rules and Regulations prescribed there under, the Company may from time to time sub-divide orconsolidate its un-issued authorised equity capital into ordinary equity capital with voting rights and equity capitalwith differential rights divided into shares of different class with one or more differential rights and privileges whetherdeferred, guaranteed, qualified or otherwise with respect to dividend, voting or any other matter, as may be permittedby the Act from time to time. The Company may vary, modify, amalgamate or abrogate any such rights and privilegeson such conditions and to such an extent, as may be permitted by the Act and the Rules prescribed at the relevanttime on optional basis or otherwise.

4. After existing Article 60, the following new Article be inserted as Article 60A and be read as follows:

60-A: Buy -back of Shares

“Notwithstanding anything contained in these Articles, subject to the provisions of Section 77A, 77AA and 77B ofthe Act and Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 as may be in forceat any time and from time to time, the Company by special resolution or the Board of Directors of the Company as thecase may be, subject to limits, restrictions, terms and conditions, approvals as may be required under the provisionsof the Act in order to acquire, purchase and own for extinguishing and physically destroying any of its fully paidshares and/or any other securities as may be specified under the Act, Rules and Regulations from time to time andmay make payment thereof out of its free reserves, securities premium account or the proceeds of any otherspecified securities issued specially for the purpose of buy-back or any other modes as may be permitted from timeto time. The Company or the Board as the case may be, may also decide other terms and conditions including thatof payments in one or more installments for such purchase or acquisition, as may be permitted under the Act or theRegulations in force at the relevant time.


62A: Issue of further paripassu shares

“The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not,unless otherwise expressly provided by the terms of issue of the shares of that class deemed to be varied by thecreation or issue of further shares ranking paripassu therewith.”

6. Alteration to the Article 87(1)

In view of the insertion of new Articles related to equity shares with differential rights in the Articles of Association,the first para of Article 87 be substituted by the following lines:

“Subject to the provisions of the Act and particularly of Section 87, and 92 (2) and of these Articles”


87A: POSTAL BALLOT

“Notwithstanding anything contained elsewhere in these Articles, but subject to the provisions of Section 192A of theAct and the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 the Company, being a listedCompany, may and in the case of resolutions relating to such business, as the Central Government may by theRules and/or notifications, declare to be conducted only by Postal Ballot, shall get such resolutions passed bymeans of Postal Ballot instead of transacting the business in a general meeting of the Company personally. Whereit is decided to pass any resolution by Postal Ballot, the Company shall adhere the procedure prescribed by Section192A of the Act and such other applicable provisions of the Act and the Rules framed by the Government in respectthereof. It is clarified that the term Postal Ballot shall include voting by electronic mode.”

8. Following explanation be inserted after existing Article 123 - ‘Expenses incurred by the Director on Company’sbusiness”, for the purpose of clarity:

Directors attending the adjourned meeting of the Board /Committee(s) of the Board, shall also be entitled to sittingfee, traveling and other expenses as applicable to them for attending the original Board/Committee(s) meeting.Directors may also be compensated for attending the general meeting of the shareholders.

9. Following line be inserted at the end of existing Article 124- “Adjournment of meeting for want of quorum”

“At such meeting the directors present (not below two) shall form the quorum.”


Article 144A: “Unpaid/unclaimed dividend”

Any money transferred to the Unpaid Dividend Account of the Company which remains unpaid or unclaimed for a

After existing interpretation clause “Govt. Corporation”, the following clause be inserted:

(2) “Information Memorandum” means a process undertaken prior to the filing of a prospectus by which a demandfor the securities proposed to be issued by the company is elicited, and the price and the terms of issue forsuch securities are assessed by means of a notice, circular, advertisement or document.

After interpretation clause “Information Memorandum”, the following clause be inserted:

(3) “Listed Public Company” means a public company, which has any of its securities listed on any recognizedstock exchange.

Existing definition of “Member”, be substituted with the following definition for clarity:

(4) “Member” means the duly registered holder from time to time of the shares of Company of any class andincludes the subscribers of the Memorandum of the Company and also every person whose name is entered asthe beneficial owner of any shares in the records of Depository.

After existing interpretation clause “Office”, the following clause be inserted:

(5) “Officer” includes any director, manager or secretary or any person in accordance with whose directions orinstructions the Board of Directors or any one or more of the directors is or are accustomed to act.

After existing interpretation clause “Person”, the following clause be inserted:

( 6 ) “Postal Ballot” has the same meaning as defined under Section 192A of the Act.

After existing interpretation clause “Plural Number”, the following clause be inserted:

( 7) “Prospectus” means any document described or issued as a prospectus and includes any notice, circular,advertisement or other document inviting deposits from the public or inviting offers from the public for thesubscription or purchase of any shares in, or debentures of, a body corporate.

After existing interpretation clause “The President”, the following clause be inserted :(8) “Recognized stock exchange” means, in relation to any provision of this Act in which it occurs, a stock

exchange, whether in or outside India, which is notified by the Central Government in the official Gazette asa recognized stock exchange for the purposes of that provision.

After existing interpretation clause “Seal”, the following clause be inserted:

(9) “SEBI” means the Securities and Exchange Board of India, established under Section 3 of the Securities andExchange Board of India Act, 1992.

After interpretation “Secretary”, the following clause be inserted:

(10) “Securities” means securities as defined in Clause (h) of Section 2 of the Securities Contract (Regulation) Act,1956 and includes hybrids.

After interpretation “Securities”, the following clause be inserted:

(11) “Shares with differential rights” means a share that is issued with differential rights in accordance with theprovisions of Section 86.

2. Article 17A: Issue of Sweat Equity Shares:

The Company may exercise the powers of issuing sweat equity shares conferred by Section 79A of the Act ofa class of shares already issued, subject to the following conditions:

(i) the issue of sweat equity shares is authorised by a special resolution passed by the company in the generalmeeting;

(ii) the resolution specifies the number of shares, their value and the class or classes or directors or employees towhom such equity shares to be issued;

(iii) not less than one year has at the date of issue, elapsed since the date on which the company was entitled tocommence business;

(iv) the sweat equity shares are issued in accordance with the regulations made by the Securities and ExchangeBoard of India (SEBI) in this behalf.


57A: Issue of Equity Shares with Differential Rights

“Notwithstanding anything contained in these Articles and in pursuance of provisions of Section 86 of the Act and

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NOTES :

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TOATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY.PROXY FORM DULY COMPLETED SHOULD BE DEPOSITED AT THE REGISTERED OFFICE OF THE COMPANYNOT LATER THAN FORTY-EIGHT HOURS (48 HRS.) BEFORE THE COMMENCEMENT OF THE ANNUALGENERAL MEETING. BLANK PROXY FORM IS ATTACHED.

2. Brief resume of Directors seeking re-election is annexed herewith.

3. The Register of Members and Share Transfer Books of the Company will remain closed from Monday, the 6th September,2004 to Monday, the 20th September, 2004 (both days inclusive ).

4. The Final Dividend as recommended by the Board of Directors, if declared at the Meeting will, subject to the provisionsof Section 206 A of the Companies Act, 1956 be paid to those Members, whose names appear on the Register ofMembers of the Company as on 20th September,2004 to their registered addresses and the respective BeneficialOwners as at 6th September, 2004. The Dividend Warrants will be posted to them by 28th October, 2004.

5. Members desirous of obtaining any information/clarification (s) concerning the accounts and operations of the Companyor intending to raise any query are requested to forward the same at least 10 days before the date of the meeting toCompany Secretary at the Registered Office of the Company, so that the same may be attended to appropriately.

6. In order to provide protection against fraudulent encashment of dividend warrants, Members are requested to providetheir Bank Account Number, Name and Address of the Bank/Branch to M/S MCS Limited, Registrar & ShareTransfer Agent of the Company, quoting Folio Number at Srivenkatesh Bhavan, W-40, Okhla Industrial Area,Phase- II, New Delhi- 110020 in respect of shares held in physical mode and to their respective DPs for demat modeto enable them to incorporate the same in the dividend warrant.

7. Members holding shares in different folios are requested to apply to the Company for consolidation and send relevantShare Certificates for consolidation.

8. Annual listing fee for the year 2004-2005 has been paid to all the Stock Exchanges wherein shares are listed.

9. In terms of Section 109A of the Companies Act, 1956, nomination facility is available to individual shareholders. Theshareholders who are desirous of availing this facility may kindly write to M/s MCS Limited, Registrar & ShareTransfer Agent of the Company, quoting Folio Number, at the above address for nomination form, quoting their folionumber. Members holding shares in Demat form may contact their respective DPs for registration of nomination.

10. Shareholders may avail the facility of Electronic Clearing Service (ECS) for receiving direct credit of Dividend to theiraccounts with Banks.This will enable expeditious credit of dividend amount and protect from loss, theft and postaldelay of dividend warrants.

11. Members who have not encashed their dividend warrants may approach the Company at its Registered Office orM/s MCS Limited, Registrar & Share Transfer Agent of the Company, for revalidating the warrants or for obtainingduplicate warrants.

12. The balance lying in the unpaid dividend account of the Company in respect of dividend declared on 30.09.1997 forthe financial year 1996-97 will be transferred to the Investor Education and Protection Fund (IEPF) of the CentralGovernment by 18.11.2004 (tentative date, actual date may vary). Members who have not encashed their dividendwarrants pertaining to the said year may approach the Company or its Registrar & Share Transfer Agent for obtainingpayments thereof.

13. All documents referred to in the accompanying notice and explanatory statements are open for inspection atthe registered office of the Company on all working days between 11.00 a.m. to 1.00 p.m. prior to the AnnualGeneral Meeting.

14. Members are requested

i) to bring their copies of Annual Report, Notice and Attendance Slip duly completed and signed at the meeting.No brief case or bag will be allowed to be taken inside the meeting hall for security reasons.

period of seven years from the date of such transfer shall be transferred by the company to the “Investor Educationand Protection Fund”.

11. The heading “Nomination of Shares” be inserted in Margin of Article 49A of Articles of Association.

12. The sub-heading of Article 104(l) as shown in the margin be substituted

as “Additional Director/Director in Casual Vacancy.”

RESOLVED FURTHER THAT Board of Directors or any committee thereof/person(s) authorized by the Board,be and is/are hereby authorized to do all such acts, deeds and things as may be necessary, expedient anddesirable for the purpose of giving effect to this Resolution.”ITEM No.11To consider, and if thought fit, to pass, the following resolution, with or without modification(s) as specialresolution:-

“RESOLVED THAT pursuant to the provisions of Section 163 and other applicable provisions, if any, of theCompanies Act, 1956, the Register of Members and Index of Members, in respect of Shares/Securities issuedby the Company and the copies of all Annual Returns, prepared under Section 159 and 160, together with thecopies of the certificates and documents required to be annexed thereto under Section 160 and 161, be keptat the office of Registrar & Share Transfer Agent of the Company viz. MCS Limited, Srivenkatesh Bhawan, W-40, Okhla Industrial Area, Phase II, New Delhi-110020 or at any other place of office, of the existing Registrar& Share Transfer Agent, or of any other Registrar and Share Transfer Agent, as may be appointed by the Boardof Directors from time to time, in New Delhi.”

Regd.Office: Jeevan Bharati, By Order of the Board of DirectorsTower-II,124,Indira Chowk,

New Delhi-110001

Dated: August 26, 2004 (H.C.Shah) Company Secretary

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ii) to quote their Folio/Identification Nos. in all correspondence.

iii) to notify immediately for change of their address and bank particulars to the Company or its Share TransferAgent, in case shares are held in physical form.

AND

In case their shares are held in dematerialized form, information should be passed on directly to their respectiveDepository Participant and not to the Company/Share Transfer Agent, without any delay.

iv) to note that no gift will be distributed at the meeting.

ANNEXURE TO NOTICEEXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956:

ITEM NO. 9:The Company is presently listed with (i) The Stock Exchange, Mumbai, (BSE) (ii) the National Stock Exchange ofIndia Ltd, (NSE) and (iii) the Delhi Stock Exchange Association Ltd. (DSE)

With the networking of the BSE and the NSE, the members of the Company have access to online dealing in theCompany’s shares across the country. There is no trading on the DSE during the last 2 years. Moreover, theCompany’s equity share is one of the scrips which Securities and Exchange Board of India (SEBI) has specified forsettlement only in demat form by all investors. The proposed delisting of the Company’s equity shares from the DelhiStock Exchange Association Ltd. will not adversely affect any investor/member.

The SEBI (Delisting) Guidelines 2003 permit voluntary delisting from any stock exchange including the regionalstock exchange without providing exit opportunity. The Company’s equity shares will continue to be listed on theother two nation-wide stock exchanges viz. BSE & NSE.

None of the Directors is, in any way, concerned or interested in this resolution.

The Board of Directors recommend the resolution for approval of the members.

ITEM NO. 10:The Board of Directors have approved the amendments/alteration in the Articles of Association of the Companysubject to approval of the members in the General Meeting.

The Articles of Associaton, which are primarily the rules for conducting the business of the Company in an orderlymanner have to be in consonance with the provisons of Companies Act, 1956 as amended from time to time. Sinceseveral amendments have been made to the Companies Act, 1956 in recent past, it has become necessary toincorporate some such amendments in the Company’s Articles of Association at appropriate places.

The amendments are in respect of inclusion of various definitions in interpretation clause, insertions/alterations ofvarious clauses in respect of Sweat Equity Shares, Equity Shares with differential rights, Buy-back its own shares,Issue of further paripassu shares, passing of resolution(s) through postal ballots, Transfer of unpaid/unclaimeddividend amount to Investor Education and Protection Fund etc.

After these amendments are carried out, the Company’s Articles of Association will be more comprehensive containingnecessary provisions within the parameters of the existing statute and therefore will assist in the smooth functioningof the Company in accordance with the law of the land on the subject.

None of the Directors is,in any way, concerned or interested in this resolution.


ITEM NO. 11.M/s. MCS Limited is presently acting as the Registrar & Share Transfer Agent for the Company. The Company hadobtained approval of members at its 2nd Annual General Meeting held on 27th September,1995, for keeping theRegister of Members, Index of Members and copies of Annual Return etc. at the office of Registrar & ShareTransfer Agent of the Company viz. M/s. MCS Limited, 212-A, Srivenkatesh Bhawan, Shahpur Jat,New Delhi-110049. Now the Registrar and Share Transfer Agent of the Company has changed its office from212-A, Srivenkatesh Bhawan, Shahpur Jat, New Delhi-110049 to Srivenkatesh Bhawan, W-40, Okhla IndustrialArea, Phase II, New Delhi-110020.

In view of this, fresh approval of the member is required for maintaining the Register of Members, Index of Membersand copies of Annual Return etc. at the new address of Registrar & Share Transfer Agent of the Company viz.M/s. MCS Limited, Srivenkatesh Bhawan, W-40, Okhla Industrial Area, Phase II, New Delhi-110020.

Approval of the member is also sought for keeping Register of Members, Index of Members and copies of AnnualReturn etc. or any other place of office, of existing Registrar & Share Transfer Agent or of any other Registrar &Share Transfer Agent, as may be appointed by the Board of Directors, from time to time in New Delhi, if there is anychange in future.

None of the Directors is, in any way, concerned or interested in this resolution.


Regd.Office: Jeevan Bharti, By Order of the Board of DirectorsTower-II,124,Indira Chowk,New Delhi-110001

Dated: August 26, 2004 (H.C.Shah)Company Secretary

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Shri Rajesh V Shah1st October,1951 : 52Years11th September,2003MBA (University of California, Berkeley)

Shri Rajesh. V. Shah, Managing Director ofMukand Limited, served on various businesscouncils and is a past president and has beena member of National Council of the apexIndian business body, the Confederation ofIndian Industry (CII) since1986.

• Mukand Limited• Mukand Engineers Ltd.• India Thermal Power Limited• Kalyani Mukand Limited• Hindustan Petroleum Corporation

Limited• Jeewan Limited• Bengal Port Limited• Fusion Investments & Financial

Services Limited• Catalyst Finance Limited• Conquest Investments & Finance

Limited.

COMMITTEESONGCChairman• Human Resources Management• Shareholders’/Investors’ GrievanceMember• Audit & Ethics• Project Appraisal• Mumbai High- Redevelopment Project• Health, Safety & Environment• Policy & Planning

Hindustan Petroleum Corporation LimitedMember• Audit• Shareholders’/Investors’ Grievance

Shri Y.B.Sinha25th April,1946 : 57 Years5th May, 2000Master’s degree in Geology

Shri Sinha has experience of 37 years inONGC. He has been involved ininstallation of reservoir simulationfacilities and in development of theCompany’s exploration and exploitationstrategy. He played a major role inevolving the exploration strategy for theCompany and was instrumental in thetransformation of the operational entitiesthrough planning of acreage specific andareas requisite exploration programme,when the NELP regime was introducedby the Government of India. He also hasevaluated oil and gas fields in Russia,Sudan, and Kazakhistan.

• ONGC Videsh Ltd.• Petronet LNG Ltd.• Petro Technical Open Standard

Consortium (POSC), Houston

COMMITTEESONGCMember• Human Resource Management• Project Appraisal• Health, Safety & Environment• Policy & Planning• Mumbai High Redevelopment

ProjectONGC Videsh LtdMember• AuditPetronet LNG LtdMember• EPC• Shipping• Solid Cargo• Human Resource Management

Shri M.M.Chitale16th November,1949 : 54 Years11th September,2003B.Com, FCA

Shri Chitale, a practicing CharteredAccountant since 1973, has wide andvaried experience of thirty years inFinance, Accounting, Banking,Insurance and General Management.He held the position of President of theInstitute of Chartered Accountants ofIndia during 1997-98 and had been amember of the Committee forCollective Investment Scheme,Working Group on Restructuring ofWeak Public Sector Banks andCompany Law Advisory Committee ofthe Central Government.

• IDBI Bank Ltd.• E-Serve International Ltd.• Deposit Insurance and Credit

Guarantee Corporation• ASREC (India) Ltd.• Larsen & Toubro Ltd.

COMMITTEESONGCChairman• Audit & EthicsMember• Project Appraisal• Human Resources Management• Health, Safety & EnvironmentIDBI Bank Ltd.Chairman• AuditMember• Remuneratione-Serve International Ltd.Chairman• AuditDeposit Insurance and CreditGuarantee Corporation.Chairman• Audit

BRIEF RESUME OF THE DIRECTORS SEEKING RE-ELECTION AT THE 11TH AGM

NameDate of Birth & AgeDate of AppointmentQualifications

Expertise in specific functionalareas

Directorship held in otherPublic companies

Memberships/Chairmanshipsof Committees across allPublic Companies

Shri U. Sundararajan14th June,1942 : 62 years11th September, 2003FICWA

Shri U. Sundararajan, former Chairmanand Managing Director of BharatPetroleum Corporation Limited, hasexperience of thirty years in petroleumindustry.

• Thirumalai Chemicals Ltd.• Cochin Shipyard Ltd

COMMITTEESONGCChairman• Project Appraisal• Policy & Planning• Health, Safety & Environment

Member• Audit & Ethics• Mumbai High- Re development Project• Human Resources Management• Remuneration

Dr. A.K.Balyan2nd July, 1951 : 52 Years23rd August, 2003Doctorate degree in Chemistry from TechnischeHochshule fur Chemie, Merseburg, Germany; analumnus of IIT, Delhi.

Dr. A.K.Balyan has thirty years of experience andhad held several field and staff assignments invarious disciplines including Analytical Geo-Chemistry Lab, Mud Engineering, Planning,Monitoring of Exploration activities, ProjectManagement and Basin Manager and Head ofExploration.

• ONGC Videsh Ltd.• Mangalore Refinery and

Petrochemicals Ltd. (MRPL).

COMMITTEESONGC Member• Human Resources Management• Project Appraisal• Mumbai High Re-development project• Policy & Planning• Health, Safety & Environment• Remuneration• Share Transfer

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PERFORMANCE AT A GLANCE

April 1, April 1, April 1, April 1, April 1, April 1, April 1, April 1, April 1, Feb. 1,2003 to 2002 to 2001 to 2000 to 1999 to 1998 to 1997 to 1996 to 1995 to 1994 to

31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 1995(Rupees in million unless otherwise stated) 2004 2003 2002 2001 2000 1999 1998 1997 1996 (14 months)

PHYSICALQuantity Sold-Crude Oil (MMT) 23.94 23.90 22.86 23.38 23.39 24.45 26.27 26.11 28.38 30.01-Natural Gas (MMM3) 21,103 21,110 20,446 20,501 20,064 19,386 19,228 17,225 17,016 15,908-LPG (000’Tonnes) 1,161 1,198 1,157 1,211 1,208 1,180 1,144 1,126 1,111 1,144-NGL/Naphtha (000’Tonnes) 445 365 314 223 139 545 1,503 1,404 1,401 1,381-Ethane/Propane (000’Tonnes) 534 619 528 570 557 506 557 510 489 480-Aromatic Rich Naphtha (000’Tonnes) 1,211 1,277 1,367 1,291 1,254 906 32 0 0 0-Superior Kerosene Oil (000’Tonnes) 218 234 231 221 228 177 7 0 0 0FINANCIALIncome from Operations (Gross) 329,270 353,872 238,574 242,704 203,236 151,029 153,462 133,361 135,304 136,282Statutory Levies 89,156 92,334 59,742 55,515 51,592 46,676 49,529 47,624 49,687 52,311Operating Expenses 59,010 71,017 49,331 54,455 48,025 30,946 28,540 21,606 21,267 17,621Exchange Loss 36 191 469 1,269 3,542 5,912 2,914 3,858 2,901 11,210Recouped Costs 55,719 41,277 38,152 44,533 42,523 31,912 38,374 31,621 33,088 26,459Operating Income (PBIT) 125,349 149,053 90,880 86,932 57,554 35,583 34,105 28,652 28,361 28,681Interest (Net) (10,741) (12,185) (7,672) (4,636) (1,751) (163) 987 3,324 4,818 5,825Corporate Tax 49,446 55,945 36,573 39,280 23,010 8,201 6,340 4,992 4,089 (597)Net Profit 86,644 105,293 61,979 52,288 36,295 27,545 26,778 20,336 19,454 23,453Dividend 34,222 42,778 19,963 15,685 9,268 7,842 3,565 2,852 2,016 687Tax on Dividend 4,385 2,375 0 1,600 1,412 863 356 285 0 0Share Capital 14,259 14,259 14,259 14,259 14,259 14,259 14,259 14,259 14,259 3,459Net Worth (Equity) 400,024 356,081 295,119 301,478 267,368 241,712 223,228 200,349 176,010 154,480Borrowings (Long Term) 2,118 3,627 30,381 41,911 68,501 79,560 92,734 99,348 120,703 128,117Working Capital 191,535 127,132 109,249 91,386 68,485 43,189 32,684 44,205 45,280 40,787Capital Employed 395,299 352,170 329,061 310,331 293,185 267,256 253,820 254,678 252,275 216,088Internal Resources Generation 93,069 81,735 68,448 50,020 44,747 41,942 79,264 30,324 37,772 49,950Plan Expenditure 68,520 50,890 40,403 36,072 40,687 44,679 40,053 39,730 42,450 80,680Contribution to Exchequer 168,582 191,016 108,799 111,428 87,032 64,173 61,644 57,469 57,483 55,520Expenditure on Employees 25,619 25,921 21,847 23,184 23,678 13,431 12,631 8,631 12,421 9,020Number of Employees 38,033 39,352 40,280 40,226 40,021 41,040 42,158 43,267 44,548 45,736FINANCIAL PERFORMANCE RATIOSPBIDT to Turnover (%) 55.0 53.8 54.1 54.2 49.2 44.7 47.2 45.2 45.4 40.5PBDT to Turnover (%) 58.3 57.2 57.3 56.1 50.1 44.8 46.6 42.7 41.9 36.2Profit Margin (%) 26.3 29.8 26.0 21.5 17.9 18.2 17.5 15.3 14.4 17.2Contribution to Exchequer to Turnover (%) 51.2 54.0 45.6 45.9 42.8 42.5 40.2 43.1 42.5 40.7ROCE (PBIDT to Capital Employed) (%) 45.8 54.0 39.2 42.4 34.1 25.3 28.6 23.7 24.4 21.9#Net Profit to Equity (%) 21.7 29.6 21.0 17.3 13.6 11.4 12.0 10.2 11.1 13.0#BALANCE SHEET RATIOSCurrent Ratio 2.79:1 2.45:1 2.62:1 2.89:1 2.36:1 1.82:1 1.77:1 2.35:1 2.88:1 2.92:1Debt Equity Ratio 0.01:1 0.01:1 0.10:1 0.14:1 0.26:1 0.33:1 0.42:1 0.50:1 0.69:1 0.83:1Debtors Turnover Ratio (Days) 26 41 34 26 31 27 31 94 31 32SHARE DATAFace Value (Rs.) 10 10 10 10 10 10 10 10 10 10Earning Per Share (Rs.) 60.8 73.8 43.5 36.7 25.5 19.3 18.8 14.3 13.6 58.1#Dividend Per Share (Rs.) 24 30 14 11 6.5 5.5 2.5 2 2 2Book Value Per Share (Rs.) 281 250 207 211 188 170 157 141 123 446# Annualised

1716

STATEMENT OF INCOME AND RETAINED EARNINGS


31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 1995(Rupees in million) 2004 2003 2002 2001 2000 1999 1998 1997 1996 (14 months)

REVENUESSalesCrude Oil 222,124 244,131 137,115 141,538 115,614 88,610 96,351 95,501 94,295 99,496Natural Gas 52,039 49,986 49,446 49,756 47,147 37,319 36,561 28,361 28,430 26,886LPG 16,352 19,087 11,473 14,161 9,279 7,581 3,334 2,606 2,495 2,592NGL/Naphtha 5,785 4,906 3,546 2,377 921 1,885 3,933 2,974 2,784 2,577Ethane/Propane 4,779 5,837 4,082 4,359 3,844 2,077 2,285 2,084 1,970 1,909Aromatic Rich Naphtha 16,753 17,129 15,236 16,177 13,142 5,795 80 0 0 0Superior Kerosene Oil 2,658 3,188 1,731 1,616 1,028 580 18 0 0 0Others 1,145 1,075 766 522 451 236 100 21 53 49Price Revision Arrears 3,461 1,568 5,017 1,355 8,400 3,409 8,311 0 0 0

Sub- Total 325,096 346,907 228,412 231,861 199,826 147,492 150,973 131,547 130,027 133,509Write Back of Excess Liability 0 0 0 0 0 20 121 0 2,911 0Pipeline Revenue 24 478 3,966 4,612 1,110 2,136 1,271 871 998 1,128Other Receipts 4,262 6,276 6,194 5,784 2,148 1,379 1,052 818 1,288 1,684Accretion / (Decretion) in stock (112) 211 2 447 152 2 45 125 80 (39)

Total Revenues 329,270 353,872 238,574 242,704 203,236 151,029 153,462 133,361 135,304 136,282

COST & EXPENSESOperating, Selling & General(a) Royalties 28,451 30,002 25,142 23,024 21,018 17,699 19,058 17,811 17,708 18,417(b) Cess/ Excise Duty 46,302 46,994 25,660 23,833 23,499 23,745 24,976 24,372 26,124 27,461(c) Natural Calamity Contingent Duty - Crude Oil 1,117 98 0 0 0 0 0 0 0 0(d) Sales Tax 11,050 12,561 7,713 7,439 6,453 4,671 4,895 4,860 5,268 5,831(e) Octroi & Port Trust Charges 2,236 2,679 1,227 1,219 622 561 600 581 587 602

Sub-total (a to e) 89,156 92,334 59,742 55,515 51,592 46,676 49,529 47,624 49,687 52,311Pipeline Operations (Excluding Depreciation) 5,717 5,452 4,951 4,965 5,727 3,654 3,070 2,785 3,391 2,895Other Operational Costs 53,293 65,565 44,380 49,490 42,298 27,292 25,470 18,821 17,876 14,726Exchange Loss 36 191 469 1,269 3,542 5,912 2,914 3,858 2,901 11,210Recouped Costs(a) Depletion 23,323 17,497 15,638 15,759 14,099 15,254 15,724 10,620 11,485 11,361(b) Depreciation 6,057 7,599 8,286 10,602 16,224 6,955 7,751 8,359 5,937 5,397(c) Amortisation 26,339 16,181 14,228 18,172 12,200 9,703 14,899 12,642 15,666 9,701

Sub-Total (a to c) 55,719 41,277 38,152 44,533 42,523 31,912 38,374 31,621 33,088 26,459

Total Cost & Expenses 203,921 204,819 147,694 155,772 145,682 115,446 119,357 104,709 106,943 107,601Operating Income Before Interest &Tax 125,349 149,053 90,880 86,932 57,554 35,583 34,105 28,652 28,361 28,681Interest- Payments 468 1,132 2,469 3,984 6,003 8,342 7,185 8,607 9,655 11,362- Receipts 11,209 13,317 10,141 8,620 7,754 8,505 6,198 5,283 4,837 5,537- Net (10,741) (12,185) (7,672) (4,636) (1,751) (163) 987 3,324 4,818 5,825Income After Interest 136,090 161,238 98,552 91,568 59,305 35,746 33,118 25,328 23,543 22,856Corporate Tax (Net) 49,446 55,945 36,573 39,280 23,010 8,201 6,340 4,992 4,089 (597)

Net Profit 86,644 105,293 61,979 52,288 36,295 27,545 26,778 20,336 19,454 23,453Dividend 34,222 42,778 19,963 15,685 9,268 7,842 3,565 2,852 2,016 687Tax on Dividend 4,385 2,375 0 1,600 1,412 863 356 285 0 0

Retained Earnings For The Year 48,037 60,140 42,016 35,003 25,615 18,840 22,857 17,199 17,438 22,766

1918

STATEMENT OF FINANCIAL POSITION

As at As at As at As at As at As at As at As at As at As at(Rupees in million) March 31, 2004 March 31, 2003 March 31, 2002 March 31, 2001 March 31, 2000 March 31, 1999 March 31, 1998 March 31, 1997 March 31,1996 March 31, 1995

RESOURCESA. Own1. Net Worth

(a) Equityi) Share Capital 14,259 14,259 14,259 14,259 14,259 14,259 14,259 14,259 14,259 3,459ii) Reserves & Surplus 391,172 343,130 282,963 288,854 253,843 228,229 209,389 186,532 169,329 161,730

Sub -Total 405,431 357,389 297,222 303,113 268,102 242,488 223,648 200,791 183,588 165,189

(b) Less: Intangible Assets 5,407 1,308 2,103 1,635 734 776 420 442 7,578 10,709

Net Worth 400,024 356,081 295,119 301,478 267,368 241,712 223,228 200,349 176,010 154,4802. Long Term Liabilities

Deferred Tax Liability 58,420 52,348 53,471Provision For Gratuity & Abandonment * 0 0 7,181 4,183 2,167 1,865 1,279 1,131 899Total Own Funds (1 + 2) 458,444 408,429 348,590 308,659 271,551 243,879 225,093 201,628 177,141 155,379

B. Outside1. Unsecured Loans

a) Indian Loans 809 1,011 1,213 1,415 2,263 2,809 6,028 6,111 7,847 10,040b) Foreign Loans 1,309 2,616 29,168 38,411 62,557 71,808 80,840 82,850 88,448 91,628

Total Unsecured Loans 2,118 3,627 30,381 39,826 64,820 74,617 86,868 88,961 96,295 101,668

2. Deferred Credits (Principal Only) 0 0 0 2,085 3,681 4,943 5,866 10,387 24,408 26,449

Total Outside Resources 2,118 3,627 30,381 41,911 68,501 79,560 92,734 99,348 120,703 128,117

TOTAL RESOURCES (A+ B) 460,562 412,056 378,971 350,570 340,052 323,439 317,827 300,976 297,844 283,496

DISPOSITION OF RESOURCES

A. Block Capital1. Fixed Assets 56,684 53,928 56,008 58,893 64,001 74,114 82,202 85,537 97,671 92,4312. Producing Properties (Gross) 230,804 174,380 166,912 162,913 160,699 149,953 138,934 124,936 109,324 82,870

Less : Provision for Impairment 3,432 3,270 3,108 2,861Producing Properties (Net) 227,372 171,110 163,804 160,052 160,699 149,953 138,934 124,936 109,324 82,870Less: Liability for Abandonment Cost 80,292

Total Block Capital 203,764 225,038 219,812 218,945 224,700 224,067 221,136 210,473 206,995 175,301

B. Working Capitala) Current Assets

i) Inventories 24,057 15,710 14,526 15,369 15,649 15,718 18,786 19,475 17,324 15,232ii) Debtors (Net of Provision) 23,178 39,359 22,514 17,338 17,245 11,086 13,093 34,495 11,348 12,109iii) Cash & Bank Balances ** 87,417 61,090 55,455 20,545 33,554 18,960 21,785 1,399 22,197 9,775iv) Loans & Advances and Others 145,963 98,811 84,164 86,463 52,471 50,422 21,679 21,511 18,496 24,933

Sub-Total 280,615 214,970 176,659 139,715 118,919 96,186 75,343 76,880 69,365 62,049

Less(b) Current Liabilities and Provisions

and Short Term Loans(excl. Prov. for Gratuity, Abandonment & Impairment)* 89,080 87,838 67,410 48,329 50,434 52,997 42,659 32,675 24,085 21,262

Total Working Capital 191,535 127,132 109,249 91,386 68,485 43,189 32,684 44,205 45,280 40,787

C. CAPITAL EMPLOYED 395,299 352,170 329,061 310,331 293,185 267,256 253,820 254,678 252,275 216,088D. INVESTMENTS 44,217 39,826 33,232 23,607 22,857 27,115 44,224 17,718 17,836 16,975E. CAPITAL WORKS IN PROGRESS 9,826 9,329 6,903 7,283 9,757 16,684 9,915 11,715 10,054 25,463F. EXPLORATORY/DEVELOPMENT WELLS IN PROGRESS 11,220 10,731 9,775 9,349 14,253 12,384 9,868 16,865 17,679 24,970

TOTAL DISPOSITION 460,562 412,056 378,971 350,570 340,052 323,439 317,827 300,976 297,844 283,496

*For the Year 2002-03 & 2001-02, Provision for Gratuity & Abandonment are included in Current Liabilities.For the Year 2003-04, Provision for Gratuity is included in Current Liabilities and Liability for Abandonment has been deducted from Producing Properties.**Includes Rs. 31682 million towards Deposit with Bank under Site Restoration Fund Scheme excluded for Current Ratio.

2120


31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 1995(Rupees in million) 2004 2003 2002 2001 2000 1999 1998 1997 1996 (14 months)

DETAILS OF DEPRECIATION ALLOCATED TO:Survey 760 712 370 463 376 347 288 118 94 178Exploratory Drilling 1,517 1,590 1,748 1,680 1,708 1,598 1,471 2,083 1,526 2,309Development 9,322 9,587 9,725 9,000 15,933 14,597 15,662 16,970 21,625 20,518Production /Profit & Loss Account 6,056 7,594 7,865 10,602 16,224 6,955 7,752 8,359 5,936 5,397Others 25 55 0 8 31 57 6 40 46 9

Total 17,680 19,538 19,708 21,753 34,272 23,554 25,179 27,570 29,227 28,411

CONTRIBUTION TO EXCHEQUERCENTRAL

1. Cess/Excise Duty 46,314 47,008 25,662 23,862 23,501 23,746 24,979 24,374 26,126 27,9602. Natural Calamity Contingent Duty - Crude Oil 1,117 983. Royalties 16,202 17,380 16,602 15,615 14,586 12,446 13,643 12,548 12,673 12,0494. Corporate Tax

a) On ONGC’s Account 43,516 58,850 31,012 39,280 23,010 8,202 6,340 4,992 4,089 (597)b) For Foreign Contractors 20 24 32 76 126 142 82 37 87 (236)

5. Dividend 27,364 35,981 16,791 13,193 7,796 6,596 3,427 2,741 1,939 6726. Tax on Dividend 4,385 2,375 0 1,600 1,412 863 356 285 0 07. Customs Duties 4,114 1,432 1,213 1,741 2,984 1,695 1,899 1,796 1,679 3,330

Sub Total 143,032 163,148 91,312 95,367 73,415 53,690 50,726 46,773 46,593 43,178

STATE

1. Sales Tax 11,060 12,561 7,719 7,430 6,472 4,673 4,897 4,860 5,267 5,9932. Royalties 12,249 12,623 8,541 7,412 6,524 5,257 5,419 5,265 5,036 5,7473. Octroi Duties etc. 2,241 2,684 1,227 1,219 621 553 602 571 587 602

Sub Total 25,550 27,868 17,487 16,061 13,617 10,483 10,918 10,696 10,890 12,342

Grand Total 168,582 191,016 108,799 111,428 87,032 64,173 61,644 57,469 57,483 55,520

2322

DEVELOPMENT:Following discovery, drilling and related activities necessary to begin production of oil or natural gas.

ENHANCED RECOVERY:Techniques used to increase or prolong production from oil and natural gas fields.

EXPLORATION:Searching for oil and/or natural gas, including topographical surveys, geologic studies, geophysical surveys, seismicsurveys and drilling wells.

INTEGRATED PETROLEUM COMPANY:A company engaged in all aspects of the industry from exploration and production of crude oil and natural gas (upstream)to refining, marketing and transporting products (downstream).

LIQUEFIED NATURAL GAS (LNG):Gas that is liquefied under extremely cold temperatures and high pressure to facilitate storage or transportation in speciallydesigned vessels.

LIQUEFIED PETROLEUM GAS (LPG):Light gases, such as butane and propane that can be maintained as liquids while under pressure.

NATURAL GAS LIQUIDS (NGL):Separated from natural gas, these include ethane, propane, butane and natural gasoline.

HEAVY CUT:These are heavier hydrocarbons obtained in fractionation unit of Kerosene Recovery Process, where NGL is processed toyield Aromatic Rich Naphtha and Superior Kerosene Oil.

OIL EQUIVALENT GAS (OEG):The volume of natural gas that can be burned to give the same amount of heat as a barrel of oil (6,000 cubic feet of gasequals one barrel of oil).

RESERVES:Oil and Natural Gas contained in underground rock formations called reservoirs. Proved reserves are the estimated quantitiesthat geologic and engineering data demonstrate can be produced with reasonable certainty from known reservoirs underexisting economic and operating conditions. Reserve estimates change as additional information becomes available.Recoverable reserves are those that can be produced using all known primary and enhanced recovery methods.

GLOSSARY OF ENERGY & FINANCIAL TERMS

RECOUPED COSTS:It refers to Depreciation, Depletion and Amortisation charged in accounts. These are non-cash costs.

a) DEPRECIATION:A measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, efflux oftime or obsolescence through technology and market changes. It is provided for and allocated as mentioned in para7 of the Significant Accounting Policies.

b) DEPLETION:A measure of exhaustion of a wasting asset (Producing Properties) represented by periodic write off of cost. It iscomputed with reference to the amortisation base by taking the related capital cost incurred divided by hydrocarbonreserves and multiplied by production.

c) AMORTISATION:It refers to the Dry wells and Survey expenditure expensed in the accounts in line with para 2.1 and 2.2.1 of theSignificant Accounting Policies.

ROYALTY:It is a levy imposed under The Petroleum and Natural Gas Rules, 1959 payable to the respective State or Central Govern-ment granting the lease (Central Government in case of offshore) on crude oil and natural gas obtained.

CESS:It is a levy imposed under The Oil Industry (Development) Act, 1974 on crude oil produced and payable to the CentralGovernment.

EXPLORATION COSTS:Costs incurred in exploring property. Exploration involves identifying areas that may warrant examination and examiningspecific areas, including drilling exploratory wells.

DEVELOPMENT COSTS:Costs incurred in preparing proved reserves for production i.e. costs incurred to obtain access to proved reserves and toprovide facilities for extracting, treating, gathering and storing oil and gas.

PRODUCTION COSTS:Costs incurred in lifting the oil and gas to the surface and in gathering, treating and storing the oil and gas.

DEVELOPMENT WELL:A well drilled within the proved area of an Oil and Gas reservoir to the depth of a horizon known to be productive.

EXPLORATORY WELL:A well that is not a development well, a service well, or a stratigraphic test well i.e. a well drilled in an unproved area for thepurpose of finding and producing Oil or Gas.

PRODUCING PROPERTY:These may be defined as the value assigned to crude oil or gas reserves which can be produced from existing facilities.

CONDENSATES:Liquid hydrocarbons produced with natural gas, separated by cooling and other means.

2524

Global Ranking

★ Your Company was ranked overall as the2nd biggest E&P Company and first in termsof profits globally, in the 2nd Platts EnergyBusiness Technology (EBT) Survey 2003,(February, 2004).

★ Your Company has been ranked at 326th inthe Financial Times Global 500 list (June 2003)with a market capitalisation of $ 21 billion.ONGC ranks amongst Top Ten Oil & GasCompanies in the world in terms of marketcapitalisation.

★ Your Company has been ranked 273rd in theForbes 2000- world’s biggest & most powerfulcompanies as measured by a compositeranking for sales, profits, assets and marketvalue.

1. FINANCIAL RESULTS

The intrinsically sound financial performance of your Companysuffered a downtrend because of the subsidy paid out to PublicSector Oil Marketing Companies by way of discounts in theprices of crude oil, LPG and SKO amounting to Rs. 26904million on administrative instructions of the Government ofIndia; the appreciation of the Rupee vis-à-vis US Dollar alsocaused reduction in Rupee revenues on sale of crude.

Your Company, nevertheless, registered in highest net profitamong all Indian Companies, Public and Private Sectorscombined. On your approval, the dividend pay-out ofyour Company will also be the highest among all IndianCompanies.

★ Turnover Rs. 321,775 million

★ Profit after Tax (PAT) Rs. 86,644 million

★ Contribution to Exchequer Rs. 168,582 million(Rs. 143,032 million to CentralGovernment by way of Cess,Royalty, Excise Duty,Corporate Tax, Dividend andCustoms Duties, and Rs.25,550million to State Governmentsby way of Royalty, SalesTax and Octroi Duties)

★ Dividend @ 240% Rs. 34,222 million

(Exclusive of Dividend Tax)

★ Debt-Equity Ratio 0.01:1

ONGC was recognized for excellence in Finance Management, for the third time in a row, by the NationalPetroleum Management Programme. Mr. Mani Shankar Aiyar, Minister (Petroleum & Natural Gas) handingover the Trophy to Mr. R.S. Sharma, Director (Finance). Others (from left) Mr. B.K. Chaturvedi, Secretary(Petroleum & Natural Gas) GoI and Mr. Subir Raha, C&MD, ONGC.

ONGCians work 24 x 7

DIRECTORS’ REPORT

DEAR MEMBERS,

On behalf of the Board of Directors of your Company, it is my privilege to present the 11th Annual Report and AuditedStatement of Accounts for the financial year ended 31st March, 2004 together with the Auditors’ Report and the Review ofthe Accounts by the Comptroller and Auditor General of India.

You will be happy to know that your Company continues to maintain its position as India’s Most Valuable Company. YourCompany is also India’s largest Oil & Gas Corporate, and through your wholly-owned subsidiary, ONGC Videsh Ltd. India’stop MNC.

★ Your Company was ranked at the top of Economic Times 500 (June, 2004) on the basis of Market Capitalisationfor the fourth time in a row.

★ Your Company was recognised as India’s biggest wealth creator during 1998-2003, as per the 5th BT-Stern Stewartsurvey (April, 2004).

★ The market capitalisation of your Company crossed the Trillion Rupee milestone for the first time at the BSE on 12th

December, 2003.

★ Your Company received the “ICSI National Award for Excellence in Corporate Governance, 2003” from theInstitute of Company Secretaries of India.

★ Your Chairman & Managing Director has been selected as the Best Chief Executive of the year 2002-03 by theStanding Conference of Public Sector Enterprises (SCOPE).

The Institute of Company Secretaries of India, recognized ONGC for best Corporate Governance practice among all State Enterprises. Mr. L.K. Advani (then) Deputy PrimeMinister handed over the trophy to Mr. Subir Raha, C&MD, ONGC in December, 2003.

2726

Product-wise Performance

4. OIL & GAS RESERVESYour Company has added 49.06 Million Metric Tonnes (MMT) of ultimate reserves of oil plus oil-equivalent gas(O+OEG) during the year under review (including overseas acquisition through OVL), maintaining the trend of positiveaccretion for the third consecutive year.

The accretion of Inplace hydrocarbons from domestic acreages of your Company during 2003-04 was 104.78 MMTof O+OEG, and the accretion to Ultimate reserve is 33.67 MMT of O+OEG.

Ultimate Reserves accretion O+OEG in MMTYear Domestic Foreign Assets Domestic Total

Assets (OVL’s Share) JV Assets (ONGC’s Share)2001-02 66.48 121.99 2.47 190.94

2002-03 40.72 65.04 1.09 106.85

2003-04 33.67 15.22 0.17 49.06

Total 140.87 202.25 3.73 346.85

A rare sight for our stake-holders: a drilling rig mast being raised

Summary :(Rs. in million)

2003-04 2002-03Gross Revenue 329,270 353,872

Gross Profit 193,655 225,189

Less :

Interest 468 1,132

Exchange variation 36 191

Depreciation 6,057 7,599

Amortisation 26,339 16,181

Depletion 23,323 17,497

Provision/write offs 1,342 21,351

Provision for Taxation (Net) 49,446 107,011 55,945 119,896

Net Profit after tax 86,644 105,293

Appropriations

Interim Dividend 19,963 24,241

Proposed Final Dividend 14,259 18,537

Tax on Dividend 4,385 2,375

Transfer to General Reserve 48,037 60,140

Total 86,644 105,293

2. DIVIDEND

Your Company had paid an interim dividend of Rs. 14/- per share (140%) in February, 2004. The Board of Directorshas now recommended a final dividend of Rs. 10/- per share (100%), making the aggregate dividend at Rs.24/- pershare (240%), against previous year’s Rs. 30/- per share. The total dividend will absorb Rs. 34222.42 million,excluding Rs. 4384.75 million as tax on dividend.

3. PHYSICAL PERFORMANCE

Highlights of production and sales of Crude Oil, Natural Gas and Value-added Products:

Unit Production Sales Value(Rs. in million)

2003-04 2002-03 2003-04 2002-03 2003-04 2002-03

CRUDE OIL (MMT) 27.72 27.57 23.94 23.90 222,124 244,131

NATURAL GAS (BCM) 25.70 26.00 21.10 21.11 52,184 49,986

C2-C3 FEED STOCK 000 MT 533 619 534 619 4,779 5,837

LPG 000 MT 1172 1204 1161 1198 16,352 19,087

NAPHTHA 000 MT 1637 1661 1657 1642 22,538 22,035

S K O 000 MT 213 233 218 234 2,658 3,189

OTHERS 1,140 1,075

TOTAL 321,775 345,340

2928

5. SALE OF EQUITY SHARES OF ONGC BY GOVERNMENT OF INDIA

Government of India (GOI) disinvested 10% equity shares of ONGC during the financial year under review. The offer forsale, in a price band of Rs.680-750 per share, was opened on 5th March, 2004 and closed on 13th March, 2004. The offerfor sale received an overwhelming response. The response received under various categories was as under:

Category Percentage Subscriptionof Shares Offered ( times)

Qualified Institutional Buyers 40 12.9*

Non-Institutional Bidders 20 1.58**

Retail Individual Bidders 20 1.00**

Permanent Employees/ Whole-time Directors 10 1.00**

Shareholders of ONGC and MRPL 10 1.48**

* As per electronic book data of NSE and BSE.

** After spill-over of shares from the undersubscribed category of Employees/Directors to other categories as per the termsof the final sale document.

GOI fixed price of Rs.750 per share on 15th March,2004 allowing 5% discount to small investors investing uptoRs.50,000.

This was the largest-ever equity offer in India, and one of the largest on global scale. Government of India received

Rs.105,424 million through this offer for sale.

With this, the family of shareholders has expanded to about 0.6 Million in India and abroad.

6. SUBSIDIARIES

(i) ONGC Videsh Limited (OVL)

ONGC Videsh Ltd. (OVL) the wholly owned subsidiary of your Company took remarkable strides in 2003-04.OVL acquired participating interest in Exploration Blocks in Libya and Syria, and declared a discovery of

Sale of 10% of ONGC’s equity created history on the Indian bourse. Present at the first Road-show in Mumbai (from left) Mr. Dhirendra Singh, Secretary (Disinvestment),GoI, Mr. Subir Raha, C&MD, Mr. B.K. Chaturvedi, Secretary (Petroleum & Natural Gas), GoI, Mr. Uday Kotak of Kotak Mahindra, one of the Book-runner Lead Managers,Mr. R.S. Sharma, Director (Finance) and Mr. Y.B. Sinha, Director (Exploration).

Your Company had adoptedReserves Categorisationprocedure as per Society ofPetroleum Engineers (SPE)classification in 1994, changingover from the Russian systemfollowed earlier. Your Companyfollows the criteria of US FinancialAccounting Standards Board(FASB) statement No.69 fordisclosure of annual estimates ofproven Oil & Gas reserves.

As a measure of good CorporateGovernance, the Board of yourCompany has adopted a policy forindependent audit of hydrocarbonreserves in all the major fields.Accordingly, M/s. DeGolyer &MacNaughton (D&M), a globally-reputed E&P Consultant, was engaged on the basis of a competitive selection procedure; they have completed theaudit of the reserve estimates, and the findings were communicated to you as a Supplementary AGM Statement on26th February, 2004.

Statement of Reserve Recognition Accounting

In conventional accounting, income and expenditure are recognised at the point of production and sale of hydrocarbonswhereas the Reserve Recognition Accounting (RRA) concept recognises future income at a given point of timeconsidering the proved reserves of oil and gas. It seeks to demonstrate the intrinsic strength of the organisation withreference to its future earning capacity, in terms of current prices, both for income and expenditure.

The Statement of Financial Accounting Standards Board (FASB) No. 69 of USA establishes a comprehensive set ofdisclosures for oil and gas producing activities. Publicly traded enterprises with significant oil and gas activities,when presenting a complete set of annual financial statements, are to disclose the following as supplementaryinformation, but not as a part of the financial statements:

a. Proved oil and gas reserve quantities

b. Capitalized costs relating to oil and gas producing activities

c. Costs incurred in oil and gas property acquisition, exploration, and development activities

d. Results of operations for oil and gas producing activities

e. A standardized measure of discounted future net cash flows relating to proved oil and gas reserve quantities

Your Company has been following the Successful Efforts Method of accounting for its oil and gas exploration andproduction activities as disclosed in the section on Significant Accounting Policies in the Annual Financial Statements.Information in respect of capitalized costs relating to oil and gas producing activities have been disclosed under thehead Producing Properties (Schedule-5) and costs incurred in oil and gas property acquisition, exploration, anddevelopment activities have been disclosed under the head Exploratory/Development Wells in Progress(Schedule -7).

To reinforce the commitment to good Corporate Governance, standardized measure of discounted future net cashflows relating to proved oil and gas reserves of your Company have been disclosed at Annexure - B.

Three decades of discovery of the super-giant Mumbai High Oil & Gas field was celebrated on 18th February, 2004.From left, Col. S.P. Wahi, Chairman (1981 - 1989), Mr. S.K. Manglik, C&MD (1993 -1995 ), Mr. Subir Raha, C&MD(2001 onwards), Dr. N.B. Prasad, Chairman (1974 - 1978) and Mr. B.C. Bora, C&MD (1995 - 2001).

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the Auditors of the SubsidiaryCompanies have not beenattached with the Balance Sheetof the Company. The Companywill make available thesedocuments/details upon requestby any member of the Companyinterested in obtaining thesame. However, pursuant toAccounting Standard AS-21issued by the Institute ofChartered Accountants ofIndia, Consolidated FinancialStatements presented by theCompany includes the financialinformation of its subsidiaries.

8. JOINT VENTURES

i) Petronet LNG Ltd. ( PLL )

Petronet LNG Limited, ajoint venture co-promotedby your Companycompleted the constructionof India’s first LNG terminal at Dahej on time, and the facility was dedicated to the Nation on 9th February, 2004.Commercial Sales of regasified LNG from Dahej terminal has already commenced. PLL also achievedFinancial Closure.

ii) Petronet MHB LimitedYour Company has acquired 23% equity in Petronet MHB Ltd. which is successfully operating the 362.3 kmproduct pipeline from Mangalore (MRPL) to Bangalore via Hassan.

iii) ONGIO International Private Limited (ONGIO)This 50:50 JV with Indian Oil Corporation Ltd (IOCL), incorporated on 8th June, 2001 has incurred cumulativeloss of Rs. 30.1 million till 31st March, 2004. Given lukewarm co-promoter support, it has been decided by yourBoard of Directors to withdraw from the JV which is to be dissolved. However, the Department of CompanyAffairs has not accepted application to wind up the ONGIO under Section 560 of the Companies Act, 1956, onthe ground that it had carried on business during the year 2003-04. Hence, it will continue to exist without anyactivities till it is finally wound up.

iv) Pawan Hans Helicopters Ltd. (PHHL)Your Company invested in 21.5% of equity capital of PHHL which provides helicopter services primarily to yourCompany.

9. EMPLOYEE WELFARE

9.1 Your Company continues to extend several generous welfare benefits to the employees and their dependantsby way of comprehensive medical care, education, housing, and social security.

9.2 A Voluntary Retirement Scheme, in conformity to the Govt. guidelines was opened from 1st July, 2003 to30th September, 2003. The scheme evoked lukewarm response with only 712 employees opting for voluntaryretirement.

9.3 The Unnati Prayas initiative of “endeavour to improve” to acquire professional academic qualification of degree/diploma in engineering disciplines was introduced in collaboration with the Punjab Technical University, Jalandhar.The first batch (148 executives) selected through rigorous entrance examination from amongst 936 applicants willpass out from ONGC Academy in 2005.

ONGC and Schlumberger created a Knowledge Alliance in May, 2004. Mr. Andrew Gould, CEO and Mr. Subir Raha,C&MD, ONGC signing the Memorandum of Understanding. Also seen (from left) Dr. D.M. Kale, Executive Director,R&D, Mr. R.N. Chakravorty, Group General Manager(Alliances).

Prosperity continues to flow from NA1, the discovery well ofMumbai High.

natural gas in Block A-I in offshore Myanmar, where it holds 20% participatinginterest (PI). OVL’s production of oil plus oil-equivalent gas (O+ OEG), togetherwith its wholly owned subsidiary ONGC Nile Ganga B.V., increased from0.252 MMT in 2002-03 to 3.868 MMT during 2003-04. OVL earned consolidatedgross revenue of Rs.35022.82 million (up 1404% from Rs. 2328.39 million)and registered net profit of Rs. 4284.49 million (up 626% from to Rs. 589.95million).

(ii) Mangalore Refinery and Petrochemicals Limited (MRPL)

Your Company’s shareholding was increased from 51% to 71.62% inJune-July 2003 through buy-back of lenders’ equity at par, under themutually-agreed Debt Restructuring Package.

During the year 2003-04, MRPL, for the first time has achieved its annualrated crude processing capacity of 9.69 million metric tonnes (MMT). Therefinery has processed 10.046 MMT crude oil achieving 104 % capacityutilization (up 38.45% from 7.256MMT), produced 9.352 MMT of finishedproducts (up 39.60% from 6.699 MMT) and dispatched 9.243 MMT of finishedproducts (up 36.55% from 6.769MMT). The refinery has recorded its highest-ever monthly throughput at 1.04 MMT (equivalent to 12.48 MMT on annualizedbasis) in March, 2004.

MRPL has achieved turnaround performance in the very first year of itsoperation as a subsidiary of your Company. The performance in 2003-04

under all parameters was better than the projections made at the time of the acquisition. It earned net profit ofRs. 4594.15 million as against net loss of Rs. 4118.06 million in previous year. MRPL is no longer a potentially sickCompany as its accumulated losses have gone down below 50% of the net worth on 31st March, 2004. MRPL wasawarded the highest ‘Five Star’ rating by British Safety Council. MRPLis the third refinery in India to get this prestigious certification.

Equity shares of MRPL are now traded under ‘A’ category at MumbaiStock Exchange (BSE) from 1st March, 2004. The market capitalisationof MRPL on the BSE touched Rs.100 billion mark on 7th January, 2004.

Your Company had extended a term loan facility of Rs. 24000 million(Rs. 22000 million on 7th January, 2004 and Rs. 2000 million on19th January, 2004) at Bank Rate (presently 6% p.a) to enable MRPLprepay its high-cost term loans carrying average interest of 9.15%per annum. The refinancing of these loans has resulted into annualsavings of Rs.756 million. MRPL has already repaid the loan to theextent of Rs.4500 million from their internal accrual of funds.

MRPL exported products (Motor Spirit, Naphtha, Reformate, HSD,ATF, FO, LSHS) worth Rs. 44720 million during the year (up 133.77%from Rs. 19130 million) and has emerged as the second-largestexporter of Petroleum Products.

MRPL has entered into MOU with your Company for purchase ofMumbai High Crude at arms length price.

7. In terms of approval granted by the Central Government under Section212(8) of the Companies Act, 1956, copy of the Balance Sheet, Profitand Loss Account, Report of the Board of Directors and the Report of

ONGC Videsh brings joy overseas.

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Company has been making significant contributions towards Socio-Economic Development Programmes (SEDP),both in the areas of its operations, and the country at large.

New Corporate Citizenship Policy was formulated which states that ONGC Group of Companies, as responsibleCorporate Citizens, shall promote education, healthcare and entrepreneurship in the community and supportwater management and disaster relief, to operationalise the Corporate Citizenship Policy, ONGC Group Companiesshall promote community projects selected on the following parameters in the focus areas:

• Shared contribution by the Company and the Community;

• Sustainable impact of the project on the well-being of the community;

• Process credibility to enhance the corporate image;

• Support national causes in the focus areas, and

• Create enduring values, satisfactions and recognitions.

13.2 ONGC has undertaken various programmes for the community covering areas of education and training,community development, medical and health care. Every year scholarships were offered to 75 SC & ST students,pursuing Engineering, MBA and Post Graduation courses in Geo-Sciences.

13.3 Your Company has always considered theimplementation of Disability Act, 1995 as itssocial responsibility. Your Company’s endeavourin this regard is reflected in the increase innumber of physically challenged employeesfrom 77 in 1994 to 201 in 2003.

14. SPORTSYour Company is known to be one of the largestCorporate for supporting and promoting sports. Ourteams have been participating in various sports andathletic events both in domestic and internationalcompetitions. Your Company bagged the PetroleumMinister’s Trophy for the 2nd year running with thehighest points tally ever. ONGC was also awardedthe “Excellence” trophy for all-round promotion ofsports during 2002-03. Shri Virender Sehwag (Cricket)and Shri K. Sasikiran (Chess-Grand Master) receivedthe Arjuna Award from His Excellency the Presidentof India. Shri B. Chetan Anand became the NationalBadminton Champion during the year. ONGCiansbagged 19 medals for the country in the South AsianFederation (SAF) Games 2004.

15. AWARDSYour Company and its employees have earned manyawards, accreditations and citation. Highlights ofthe long list are provided in Annexure-F.

16. DIRECTORS’ RESPONSIBILITY STATEMENTPursuant to the requirement under section 217(2AA)of the Companies Act, 1956, with respect toDirectors’ Responsibility Statement, it is herebyconfirmed that :

Ace Cricketer Mr. Virender Sehwag (first batsman in Indian cricketing history to scorea triple century) joins colleagues offshore

Accuracy for Safety – a mantra for ONGCians

ONGC Academy conducted 212 training programs during the financial year, training 5427 executives. Your Companyalso launched Executive Management Program in collaboration with Indian Institute of Foreign Trade (IIFT), Delhi andManagement Development Institute, Gurgaon. Each program has 20 participants selected through a rigorousentrance test. The Academy is championing Six Sigma Campaign in the organization. Your company has taken a

unique HR initiative to develop business leader bylaunching 15-month Senior Management program withIndian School of Business, Hyderabad, christened“Sangasapthak-2004”.

10. INDUSTRIAL RELATIONS

During the period, harmonious industrial relations weremaintained in the organization except for certain instancesof indiscipline and disruptive action in the wake of theunfortunate helicopter tragedy in Mumbai Offshore;production, however, was maintained

11. OFFICIAL LANGUAGE

A series of training progrmmes on use of Hindi softwareswere organized. Special workshops were conducted toencourage scientific and technical employees to preparetechnical reports in Hindi.

12. ACCOUNTING OF HUMAN RESOURCEWe are not in the knowledge business; our business is knowledge. The organisational knowledge in your Company isthe sum-total of information and experience in the minds of our people, as well as the cumulative knowledge in theorganisational systems. This is a priceless asset and beyond the mechanics of accounting.

An attempt has been made to measure the potential ability of all employees across the ranks, to arrive at a summationof their knowledge and skills by using the “Lev and Schwartz” model, taking the anticipated future earnings as thesurrogate “value” of the employees.

This model has been used in your Company with the following assumptions:

i) the employee continues at the same position till superannuation;

ii) all direct and indirect employee costsare considered with escalations limitedto Corporate compensation practiceand general economic conditions, and

iii) a discounting factor of 8%.

Based on the above assumptions, YourCompany’s Human Resource has beenvalued at Rs. 247782 million as on31st March, 2004. Details are atAnnexure-E. These are unauditedfigures.

13. CORPORATE SOCIAL RESPONSIBILITY

Your company understands itsresponsibilities towards society andenvironment in which it functions.

13.1 As a responsible corporate citizen, your

ONGC donated Rs. 20.00 Million to create a “ONGC Molecular Biology and Genetics Project” at theworld-renowned Opthalmological hospital, Shankar Nethralaya. Seen from left, Mr. Subir Raha,C&MD, His Excellency Mr. P.Ramamohan, Governor of Tamil Nadu. His Excellency Mr. APJ AbdulKalam, President of India, Dr. S.S. Badrinath, Founder Chairman of Shankar Nethralaya and others.

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Corporate Communications, ONGC conceptualized and created the India Pavilion which was selected as theBest Exhibit at the 2nd World Petroleum and Petrochemical Exhibition in Doha in December, 2003. Mr. M.S.Srinivasan, Addl. Secretary in the Ministry of Petroleum & Natural Gas is holding the certificate, with Mr. SubirRaha, C&MD to his left; also seen is Mr. R.S. Butola, MD, ONGC Videsh Ltd. (4th from right).

20. AUDITORS

The Statutory Auditors of yourCompany are appointed by theComptroller & Auditor General ofIndia (C&AG). M/s Brahmayya &Co., M/s Lodha & Co., M/sS.Bhandari & Co., M/s ThakurVaidyanath Aiyar & Co. and M/SRSM & Co. Chartered Accountantswere appointed as the joint StatutoryAuditors for the financial year 2003-04. Their Report with correspondingreplies from the Board of Directors,is attached as an addendum atAnnexure ‘C’, forming part of thisReport.

The review and comments of theC&AG at Annexure ‘D’, forms partof this Report.

21. DIRECTORS

After the date of last Directors’Report i.e. 30th August, 2003, theconstitution of the Board of yourCompany has undergone changeas under:

Shri B.K.Das, Additional Secretary & Financial Adviser, MOP&NG, was nominated by the Government to the Boardon 2nd September, 2003 in place of Dr. Surajit Mitra, Joint Secretary & Financial Advisor, MOP&NG. Shri B.K.Das,AS&FA resigned from the Board on 30th June, 2004 on relinquishing the position of AS&FA, MOP&NG.Shri J.M.Mauskar, Joint Secretary (M), MOP&NG resigned from the Board on 22nd April, 2004 on relinquishing theposition of Joint Secretary (M), MOP&NG. Shri Sunjoy Joshi, Joint Secretary, MOP&NG has been appointed aspart-time official Director in place of Shri J.M.Mauskar.

Three part-time non-official Independent Directors namely S/Shri U.Sundararajan, Rajesh V.Shah and M.M.Chitalewere appointed on the Board of the Company on 11th September, 2003 for a period of three years, liable to retire byrotation. Simultaneously, Smt.R.D.Barkataki, Dr.K.R.S.Murthy, Shri Jawahar Vadivelu and Shri J. Jayaraman ceasedto be Directors of the Company.

Shri R.C.Gourh, Director (Onshore), superannuated on 31st December,2003. Shri Atul Chandra, Director, who wasalso the Managing Director of OVL, superannuated on 30th April, 2004. Shri V.K.Sharma, Director (Offshore)superannuated on 31st May, 2004.

Your Directors place on record the appreciation of the valuable contributions made by S/Shri B.K.Das, J.M.Mauskar,Smt R.D.Barkataki, Dr. K.R.S.Murthy, S/Shri Jawahar Vadivelu, J.Jayaraman, R.C.Gourh, Atul Chandra and V.K.Sharmaduring their tenure.

In accordance with provisions of Articles of Association of your Company, S/Shri, U.Sundararajan, Rajesh V.Shah,M.M.Chitale, Y.B.Sinha and Dr. A.K.Balyan retire by rotation, at the ensuing Annual General Meeting, and beingeligible, offer themselves for reappointment.ONGC jointly with Reliance hosted the first World Oil & Gas Assembly in Goa, India in December, 2003. Mr. B.K.

Chaturvedi, Secretary(Petroelum & Natural Gas) GoI is seen lighting the inaugural lamp. Others (from left) Mr. MukeshAmbani, Chairman, Reliance Industries Ltd., Mr. Rajiv Sikri, Secretary (Economic Relations), GoI , Mr. Rex W Tillerson,Senior Vice President (World wide) Exxon-Mobil, Mr. Abdallah S. Jum’ah, President and CEO, Saudi Aramco andMr. Subir Raha, C&MD, ONGC.

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as at 31 March, 2004 and of the profit of the Company for the year ended on that date;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities; and

(iv) the Directors have prepared the annual accounts of the Company on a “going concern” basis.

17. CORPORATE GOVERNANCE

As per Clause 49 of the Listing Agreement, a report on Corporate Governance, together with Management Discussionand Analysis and a certificate from the Company’s Auditors is annexed to this report.

In recognition of your Company’s remarkable efforts and achievements in the area of Corporate Governance theInstitute of Company Secretaries of India, New Delhi has conferred, the ‘ICSI National Award for Excellence inCorporate Governance, for the year 2003 to your Company.

Your Company, acknowledging its corporate responsibility, has voluntarily obtained a ‘Secretarial Compliance Report’from M/s A.N. Kukreja & Co., Company Secretaries in whole-time practice, which is annexed to this Report.

18. STATUTORY DISCLOSURES

None of the Directors of your Company is disqualified as per provision of section 274(1) (g) of the Companies Act,1956. Your Directors have made necessary disclosures, as required under various provisions of the Act and Clause49 of the Listing Agreement.

The information required under section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure ofParticulars in the Report of Board of Directors) Rules, 1988, as amended is annexed as Annexure ‘A’.

None of the employees of your Company is drawing remuneration exceeding the limits laid downunder provisions of section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees)Rules, 1975 as amended.

19. CONSOLIDATED FINANCIALSTATEMENTSIn accordance with theAccounting Standard AS-21 onConsolidated FinancialStatements read with AccountingStandard AS - 23 on Accountingfor Investments in Associates andwith Accounting Standard AS-27on Financial Reporting ofInterests in Joint Ventures,Audited Consolidated FinancialStatements for the year ended 31March, 2004 of the Company andits subsidiaries form part of theAnnual Report and Accounts.

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ANNEXURE ‘A’

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGNEXCHANGE EARNINGS AND OUTGO

A. ENERGY CONSERVATION

1. Energy conservation Measures taken:- Use of waste heat recovery equipment at Offshore platform, Offshore rigs, LPG Plants at Hazira & Uran.

- Use of energy efficient equipment, devices and turbo expanders at Hazira & Uran.

- Harnessed solar energy by using solar water heaters and use of photovoltaic panels at various locations.

- Conducting energy audits on regular basis.

- In house training programmes on energy conservation conducted through various training institutes.

- Use of vapour absorption chilling units for centralize Air Conditioning.

- Inter fuel substitution and proper capacity utilization of equipments.

- Thermal Energy cost reduction achieved by maintenance of Steam Traps at processing plant.

- Use of gas engines for power generation.

- Using natural gas geysers at Mehsana Asset.

- Reduction of contract demand & improvement of P.F.

- In addition to above various programmes conducted to increase awareness for conservation of petroleumproducts in an around ONGC work centers. ONGC was also presented in the year – 2004 with “Oil ConservationAward” by MOP&NG in recognition of efforts made in promoting Oil Conservation during “Oil ConservationFortnight” (2003) for best performance improvement over previous year in the Up Stream Sector.

2. Impact of measures at above for reduction of energy consumption and consequent impact on the cost of theproduction of goods:

Above measures have resulted in reduction of significant quantity of fuel consumption (HSD, Natural gas andelectricity) valuing Rs. 207.1 crore during the financial year 2003-04.

B. RESEARCH & DEVELOPMENT

1. Specific areas in which R&D was carried out

• Strategy for compliance of environmental regulations on drilling fluids.

• Feasibility of using Expandable Casing in ONGC.

• Slurry design for conductor / surface casing near mud line temperature for deep water application and creationof testing facility.

• Verti-track straight hole drilling device.

• Comparative analysis of the performance of indigenous Xanthan gum vis-à-vis international standards andprobable development for effective formulation of drilling fluid.

• Drilling fluid policy for soft clay of Nandasan area, Mehsana asset.

• Refinement in drilling fluid policy for horizontal/ high angle wells in Ahmedabad asset.

• Alternate mud system for ultra deep water wells.

• Compatibility of salt upto saturation vis-à-vis pay zones of Ankleshwar asset.

• Scouting and optimizing technologies for gas hydrate coring in Indian deep waters.

• Conceptual study of development drilling in deep water environment beyond 2000 m water depth.

• Means and methods of faster drilling in trouble prone shale sections of Cachar.

• Drilling and completion of super high pressure and temperature in deep wells of Tapti-Daman area.

Brief resume of the Directors seeking re-appointment, together with the nature of their expertise in specific functionalareas and names of the companies in which they hold the directorship and the membership/chairmanship of committeesof the Board, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges are given in theCorporate Governance Report.

22. ACKNOWLEDGEMENT

Your Directors take this opportunity to gratefully acknowledge the overwhelming response from investors to the Offerfor Sale of upto 10% equity shares of ONGC by Govt. of India, support and guidance received from the Governmentof India in the Ministry of Petroleum & Natural Gas, the Ministry of Finance and other Authorities in the Central andState Governments.

The Directors recognize all share-owners, business partners, and members of the ONGC Family for their sustainedco-operation in Making Tomorrow Brighter.

Your Directors wish to place on record their sincere appreciation for the dedicated contribution made by all ONGCians,leading to the remarkable performance and impressive results of your Company.

On behalf of the Board of Directors

New Delhi (Subir Raha)August 26, 2004 Chairman & Managing Director

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• Laboratory evaluation for the application of Alkaline Surfactant Polymer (ASP) process in Limbodra field.(Chhatral Pay), Wadu-Paliyad (K-IX), Lakwa (TS-6), Naharkatia (BMS).

• Monitoring of ASP pilots in Viraj, Lakwa (TS-1 & TS-2).

• Integrated study of Nawagam field for IOR (generation of geological models for upper and lower pays).

• Development of fine scale geological model for Bechraji and Lanwa field.

• Interpretation of 3-D seismic data of Lakwa field for Tipam (TS-1) and northern part of North Kadi field.

• Wavelet processing and seismic inversion carried out on 2D seismic data of Patan, Linch, Jotana, Sobhasanand on 3D seismic data of Gandhar and G-1 area.

• Field trial of S-2 consortium in Kalol and Sobhasan fields.

• Microbial surveillance for Viraj ASP and Sanand Polymer flood carried out.

• Design and execution plan prepared for the monitoring of fluid movement in Simultaneous Injection of Waterand Gas (SWAG) injection pilot of Mumbai High (South) field.

• Laboratory studies for designing compatible injection water for Lingala field of Rajahmundry Asset and D-1field Bassein & Satellite Asset.

2. Benefits derived as a result of the above R&D

• Application of environment friendly drilling fluids/additives in oil well drilling as per new Central PollutionControl Board (CPCB) guidelines.

• Expandable casing shall result in larger production casing size. Achieving Target Depth (TD) safely by installingadditional liners in complicated wells prone to well bore instability and minor losses. Viable option in deepwater and deep onshore wells requiring multiple intermediate casings. The technology has been successfullyimplemented in two wells at Mumbai that facilitated reaching to deeper pay zones from existing wells withoutreduction in well diameter that would not have been possible with conventional technology.

• Cementation of conductor casing in deep water having problem of Weak unconsolidated formations, Narrowmargin between pore and fracture pressure, Low bottom hole temperature.

• Feasibility of using the automated steering system for drilling vertical hole in crooked hole country suchas in Silchar.

• Replace international product with indigenously developed product. Substantial reduction in drilling fluidformulation costs.

• Trouble free drilling of soft clay and Saving rig days.

• Smooth drilling operations & saving rig days.

• Smooth drilling operations. Substitute of “Polyglycol-KCl-PHPA-Xanthan Gum Mud System” for deep waterwells of more than 1800 m. Minimize deep water complications. Developing expertise in deep water drillingfluid technology.

• Minimize formation damage. Smooth drilling operations.

• Scouting technology in Gas Hydrate benefited ONGC as well as counting for future energy sources.

• Facilitate well planning of development drilling in deep water.

• Complication free and faster drilling in troublesome shales.

• Well planning and construction through optimum bit, casing, mud and cementation policy. Complication freedrilling and completion at the fastest possible rate. Induction of new technology that have been assuredlyused in global wells of such importance and criticality.

• Reduced down hole complications. Higher Rate of Penetration (ROP). Lower drilling cost. Enhanced productivityof wells.

• Compliance of CPCB and ISM regulations during disposal.

• Mitigating the problems of stuck-pipe during drilling operation and compliance of CPCB and ISM environmentalregulations during disposal.

• Alternate mud system for High Temperature High Pressure (HTHP) wells.

• Alternate lubricant for drilling fluid.

• Environmentally acceptable spotting fluid.

• Field implementation of high performance light weight slurry at Mumbai offshore and CBM-BPM basin.

• Feasibility study for construction of Trichna Gas Collecting Station (GCS), Tripura Asset.

• Feasibility study for construction of Gojalia (GCS), Tripura Asset.

• Feasibility of organic Hydro Fracturing (HF) for Matrix acid stimulation of Geleki field.

• Study on recovery of value added products from gas and condensate from fields of Karaikal Asset.

• Feasibility study for LPG recovery from gas and condensate of Kuthalam field, Karaikal Asset.

• Conceptual study for Development of B-46.

• Conceptualization of a new Gas Gathering Station (GGS) on full automation, Ahmedabad Asset.

• De-bottlenecking of Ethane Propane Recovery Unit (EPRU) for processing 10.68 MMSCMD of gas.

• Conceptual study for development of B-192 as oil and gas producing field alongwith completion with artificiallift, Western Offshore Basin.

• To boost gas production from intermittent low pressure wells from high pressure wells of Mandapeta using gasejectors.

• Risk and Reliability Analysis and HAZOP Studies of offshore & onshore installations.

• Geotechnical Engineering including soil investigations, laboratory testing of soil samples and analysis &design of foundations.

• Structural Engineering including analysis & basic design of offshore platforms, submarine pipelines and designof RCC structures.

• Materials & Corrosion Engineering including corrosion audit, failure analysis, electro-chemical and stresscorrosion studies, materials selection, design of cathodic protection system and coating evaluation.

• Studies pertaining to natural gas hydrates in the areas of hydrate characterization, technologies for methanerecovery from hydrates, techno-economic analysis of hydrate exploitation, sea floor instability caused due togas hydrates.

• Studies pertaining to application of Advanced Composite Materials in E&P industry.

• Project for Rock Physics Characterization of Basement Fractures in Bombay High: at Stanford Rock Physicsand Borehole Geophysics Project (SRB), Stanford University, USA. Development of 2-D model-based seismicwaveform inversion algorithms and software for estimating elastic properties of the earth in collaboration withC-DAC, Pune.

• Evolution of CBM prospects in low rank coals in Gondwana basins.

• Microbial studies for gas hydrate.

• To address various issues related to basic data generation, development schemes, well productivityenhancement & conceptualization of EOR/ IOR plan.

• Feasibility study of air injection process in Limbodra & Kalol sand.

• Feasibility study of exploitation of marginal fields B-28, B-28A.

• To prepare development scheme for the exploitation of B-22-5, B-134, B-37, B-59, B-172.

• Monitoring the performance of EOR scheme of Sanand field.

• Technological scheme for Akholjuni and Padra field.

• Monitoring of Tripura gas fields and CBM wells.

• Performance analysis of MU-I, MU-II and MU-III sands of Jotana.

• Performance review of Kalol sands of North Kadi field for Phase-II development.

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3. Future Plan of Action

I. Offshore activities

A. New Initiatives for Offshore :

• Intelligent offshore platform with minimum facility.

• Digitization of all offshore pipeline data.

• Pilot Air Injection Project for Mumbai High.

• Intelligent well completion.

• Installation of through tubing inflatable bridge plug.

• Memory Production Logging on slick line.

• Utilisation of exhaust gas for HVAC to optimise energy conservation.

• Use of composite materials for platform decks, railings, gratings.

• Multiphase Metering for unmanned platform.

• Condensate recovery from gas for better revenue.

• Down hole electrical submersible pump for offshore wells.

• Drag reducer for enhancing flow efficiency of Mumbai High crude.

B. Future Plans/Policies :

• Intelligent pigging of water injection lines.

• Annual turn around shutdown of offshore process & unmanned platforms for revamping.

• Survey of critical wells carried by Cudd Control, USA.

• Energy exchange pump in Dehydration units.

• Intelligent digitised P&ID’s for offshore Process complexes.

• Equipment revamping policy for offshore platform.

• Integrated Power Grid for offshore installations.

• Rolling pipe line replacement plan.

II. Technology & Field Services

• Study and analysis of casing drilling system and its use in ONGC.

• Study of drilling fluid behaviour under variable temperature regimes in deep / ultra deep water.

• Permeability and gas migration studies of light / ultra light weight cement slurry formulations to ascertain itsability to prevent annular communication problem in shallow / deepwater wells.

• Eco-friendly substitute of diesel in spotting fluid.

• Return permeability studies.

• Toxicity and effluent disposal.

• Drilling fluid policy for gas hydrate.

• Software development for rheology and hydraulics.

• Borehole instability analysis & remedial measures thereof.

• Best drilling fluid practices for cement drilling side tracked holes with PHPA-Glycol system.

• Indigenous resourcing for SBM.

• Formulations of thermal cement as an alternative to calcium Alumina cement for In-Situ-Combustion wells.

• Formulation of cement slurry for high temperature / high pressure wells.

• Designing of high specific gravity spacer system.

• To achieve desired rise in cementation of depleted reservoirs or low fracture gradient formations. Replacementof two stage-cementing operations with single stage cementing.

• Due to the consultancy work and applied R&D undertaken by Institutes, substantial cost savings are accrueddirectly due to saving in consultancy cost and indirectly by improvement in operational efficiency & safety.

• Improved knowledge in core areas of specialization like, damage assessment of existing jackets includingre-qualification, marine growth aspects, scour analysis, foundation concepts for deep water structures andnearshore structures, analysis of deep water risers, risk assessment of offshore and onshore facilities, innovativematerial selection & corrosion mitigation schemes for life- cycle cost optimization, and technologies for gashydrates exploitation etc.

• The methods/technology of Rock Physics Characterization being developed and applied on the Bombay Highdata are proposed to be utilized in other similar fractured reservoirs.

• The project “2d model based seismic waveform inversion”, on completion, will provide an important means forextracting shear wave velocity and density, which together with P-wave velocity would make a powerful toolfor narrowing down uncertainty in the identification of lithology and estimation of petro-physical parameters.Also, development of an indigenous technology of seismic waveform inversion will be of paramount importancefrom the point of view of local oil industry, particularly because such a software package is not yet commerciallyavailable from any vendor.

• Evolved a comprehensive understanding of the CBM potential of low rank Gondwana coals of Wardha andKamptee coalfields.

• Microbial studies were carried out as a part of international science programme for drilling of Mallik 5 L gashydrate production well in Mackenzie delta Canada. The main objective to get geomicrobial evidences relatedto gas hydrate and their relationship with other proxies. The participation of scientist during drilling and productionof this well helped to draw protocols for core handling during drilling and in studies of various proxyindicators.

• Major 14 producing fields have been analysed, inputs identified and being identified for improved oil recovery(IOR).

• Identification of wells for horizontal/multilateral/sidetracking in the fields of Ahmedabad Asset.

• Technical viability of Air Injection as an EOR process in KS-XII sand of Kalol field.

• Commercial application of in-situ combustion in Balol and Santhal field resulted in additional EOR oil of theorder of 1.71 MMt during the year 2003-04.

• Geological maps for upper and lower pays of Nawagam field generated for integrated study for IOR. The finescale model effectively defined the heterogeneity in sand-shale-coal intercalated litho-assemblage. The modelestimated an OIIP of 23.46 MMt against REC OIIP 22.88 MMt as on 1.4.2003. The model thus generated willbe used as an input for subsequent reservoir simulation work for Nawagam upper pay.

• Setting up of fine scale geocellular model for pay sands of Lanwa field. The 3D geocellular model generated forthe first time in any field of North Cambay Basin integrating all well-logs and geological data.

• Wavelet processing and inversion carried out on 3D seismic data of Gandhar for enhancement of seismicresolution and estimation of GS-3 sand.

• Insitu Micro flora, useful for MEOR has been isolated from Kalol field and a specialized nutrient medium hasbeen developed. The core flood studies carried out on Berea core using isolated microbes and developednutrient medium showed 12% incremental oil gain.

• Biocide treatment suggested for proposed ASP/ AS pilots in Ankleshwar and Kalol fields.

• High temperature gel system using polymer AF-935 and organic cross linkers viz. Hexamine and Hydroquinonewas developed at IRS for profile modification treatment in injection wells of sand GS-5C of Gandhar field. Thefirst field trials carried out in 2 injection wells. The treatment has shown excellent result in terms of reductionin water cut and additional oil gain.

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properties, technologies for methane recovery from hydrates, techno-economic analysis of hydrate exploitationand sea floor instability caused due to gas hydrates.

III. Exploration activities

• To develop appropriate graphic user interface to make the software user friendly.

• To conduct the model based seismic waveform inversion on real data.

• In Offshore where data is less noisy and both Vp and Vs are more likely to be available from full waveformsonic, and

• On Land data

- Imaging in hilly terrain

Logistic problems combined with highly weathered near-surface and tight layers in the hilly terrain of Himalayanfoothills and part of Cachar area of Assam have always been challenging. In these areas, quality of acquireddata and subsurface imaging has been a concern due to inherent variety of noise content in the basic data.

A project “Seismic imaging in thrust fold belts” has been identified as an E&P value-adding technology tobe taken up in the hilly areas of Himachal Pradesh and Assam. Model-based interactive data acquisition,processing and interpretation have been planned for improved imaging in thrust fold area. The plan is envisagedto be of medium term (2 to 3 years).

• Multi-component Seismic API Technology is planned to be introduced in ONGC through contractual Surveys.Parallely, equipment for deployment of one crew for multi-component surveys are planned to be procured.Thereafter, this technology will be deployed in other basins like K.G, Cauvery and Assam & Assam Arakan.

• Indigenously developed Hydro-phones for Seismic Vessel MV Sagar Sandhani will be used as substitute ofImported Hydro-phones being restricted items.

• Following are additional technologies planned for induction.

• Virtual Reality Centre.

• PC Cluster Technology.

• PC based interpretation.

• Seismic based pore pressure prediction.

• Multi-mineral log processing.

• Petro-acoustic modeling.

• One license of Multi Attribute Seisfacies Analysis software of M/S Paradigm.

• 11 nos. of Sun Blade workstations along with visualization server V-880Z.

• One suite of Basin modeling software of IES-GMBH.

• E15k Server which is being installed to be added with one Sun Blade 2000 workstation and 30 nos. of SunBlade 150 terms.

• 3D move section balancing S/W.

• Evaluation of CBM prospects in low rank Gondwana basins to priorities and evaluate the CBM potential of Lowrank Gondwana coals.

• Thermal inertia mapping over known oil fields in India using satellite thermal IR data.

� To detect thermal anomalies and generate oil field signatures over known oil field areas using satelliteborne remotely sensed thermal IR data.

� To establish logical correlation / relationship between thermal anomalies and oil field occurrence andaffirm efficacy of the technique for generating oil field signature from remote sensing data.

• Generation of synthetic shot gathers and seismic section.

� To generate pre – stack shot gathers & synthetic stacked section for a geological model subjecting thedata to conventional processing.

• Well design for high pressure wells of Agartala dome.

• Review of casing policy of Mandapetta and Raghavpuram area of KG basin.

• Bit optimization for improved drilling performance by analyzing the rock matrix of Barail / Kopili shale sectionof Upper Assam.

• To suggest suitable profile, casing policy in KG basin in shallow water fields that is to be drilled from onlandlocations.

• Measures to side track wells below 4000 m in Upper Assam.

• Drilling fluid policy for Girujan clay for high angle wells.

• HTHP fluid design.

• Measures to reduce differential sticking in BMS.

• Clay mineralogy study of Mumbai region shales.

• Upgradation of non-damaging system for sub hydrostatic zones.

• To develop area specific polyol fluids and framing of specification.

• Drilling fluid design for Mandapetta and Raghavpuram shales.

• LCMs for intermediate casing phase and payzones of KG project.

• Solutions for mud loss at shallow depths in Cauvery area.

• Sealing of long perforation intervals in effluent disposable wells of Jhalora field, Ahmedabad asset.

• Design of suitable cement slurry for horizontal wells of Ankleshwar asset.

• To recommend biocide for XCP-PHPA, Glycol systems.

• Heavy Sp. Gr. Brines.

• Field implementation of high performance light weight slurry at CBM-BPM basin.

• Field implementation of light weight cement slurry in Sobhasan oil field of Mehsana asset.

• Field implementation of developed thermal slurry for In-Situ-Combustion wells of Balol and Santhal oil field.

• Field implementation of sub hydrostatic drilling fluid consisting of speciality additive.

• Application of molasses based mud systems in Cauvery asset.

• Drilling fluid system for Bhuvanigiri, Cauvery.

• National Gas Hydrate Programme (NGHP) project for gas hydrate coring.

• Development of improved Gas Lift Valve technology.

• Development and field trial of Compact Separator technology for enhancing & de-bottlenecking separator fluidhandling capacities.

• Development of technique for flow assurance against organic solid deposition and its technological applicationin enhancement of crude oil production.

• Development and application of Downhole oil water separation system technology for enhancing oil and gasrecovery.

• Production from Deepwater prospects.

• Technology up gradation in following frontier technology areas:

� Non-linear Dynamic Analysis of Deep water structures

� Studies on Advanced Composite Materials (ACM) for hydrocarbon E&P application in Indian offshore

• Integrated Corrosion Management of offshore pipelines.

• Jack-up pugmark interaction.

• Studies pertaining to natural gas hydrates in the areas of hydrate characterization, physical and petrophysical

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KJ -3 which encountered approx. 60 m of rich gas column. In the post multiple attenuation, the seismic signature ofthe gas water contact is very clear in the PSTM section, where parabolic Radon filter was used, in comparison to thePSTM section where conventional multiple attenuation was attempted. Parabolic Radon filter is a compute intensiveprocess which had limited use prior to the Hardware upgradation in 2003-04. This exercise has also been done on old3D data near well PP-1 with similar improvements in imaging, bringing out DHI for possible Gas accumulations.

4. Field Processing Systems with Modeling Facility are introduced in Field Parties during the year for Optimum SurveyDesign, Modeling and QC Monitoring.

5. Acquisition and Processing of Base line surveys for 4D Project of Balol area has been completed and repeat surveywill be carried out during Sept’/Oct’ 2004.

B. Technology acquired and inducted (ongoing) Application area1. Virtual Reality Centre All projects2. Volume visualization and interpretation All projects3. Seismic facies analysis All projects4. Spectral decomposition All Landmark projects5. Multi attribute seisfacies classification in block and map mode has been attempted in WB-OSN-2000/1 block

and GS-15/23 area on demo license in consultation with Paradigm’s expert for value addition.6. Procurement of a new Dual Source- 6 streamer seismic vessel with onboard processing facility with state-of-

art technology is in process for carrying out 3D Surveys with enhanced productivity.

7. Replacement of high distortion geophones with low distortion geophones will be done during 2004-05, resultingin improved data quality.

8. Real time DGPS are to be inducted in field parties during 2004-05.

9. Mobile Processing Units for field parties are planned to be deployed during 2004-05.

10. Shallow Refraction Units will be deployed in Seismic Field Parties during 2004-05.

11. 3D VSP is planned departmentally during 2004-05.

Adopted new technology to measure relative permeability at simulated reservoir conditions of high temperatureand pressure using RCCFA (Reservoir Condition Core Flow Apparatus)

Collaborative projects with Foreign Institutes :

• Agreement on “Petrophysical studies, Reservoir characterization and Simulation of Coal Bed MethaneReservoirs” has been signed between UNSW, Sydney, Australia and IRS, ONGC. The work-program is dividedin two phases and the work under Phase-I has already been started. The entire work is to be completed in 36months time at a cost of AU$ 11,73,300.00

• Consultancy service with IFP&BF, France on “Reservoir Characterization and Simulation study for Kalol field”has been approved by EC and the work likely to be finalised during early 2004-05

Consultancy works :

• Two consultancy works for Oil India Limited concerning “Development plan of Nagajan area of Jorajan Oil field”and “Reservoir Simulation for Makum-North Hapjan fields of Oil India Limited and Feasibility of Horizontal Wellcompletion to optimize production” have been completed.

• The consultancy work for Oil India Limited concerning “ASP flood study for EOR”and “Application of MEORProcess In Wells of Oil India Limited” are in progress.

• For FDP In-Depth study of four fields of GNPOC, Sudan, bid documents were prepared and submitted. Thestudy for one of the fields (Greater Bamboo) has been awarded to IRS at a cost of US$ 5,20,000.00. The workwould be completed in 6 months time (September, 2004).

• Being a nodal agency for development strategy, EOR schemes, the various technologies are being adopted toachieve the following:

• Optimizing the recovery for the life cycle of the field.

• Lowering the R/P ratio.

• Reduction in field development costs.

• Development of Reservoir management strategies.

• Adopting technically efficient and cost effective IOR processes.

• Indigenisation of EOR chemicals.

• Developing systems and processes for enhancing well productivity.

• Creating center of excellence for reservoir engineering solutions.

• The major R&D project being under taken during the year are:

• Development of a biosystem producing microbial metabolites such as biosurfactants/biopolymers as feedstockfor microbial enhanced oil recovery. (Collaborative research project with MS University, Baroda).

4. Technology absorption, adoption and innovation

I Drilling Technology

• “Long Term Durable Cement” for formulating cement slurry especially for deep water wells that is durable andlong lasting so as to avoid annular gas recharging problems as faced in several parts of the globe. It is anongoing JIP with CSI Inc, USA where ONGC represented by IDT is a member associate.

• Induction of Slim Hole drilling technology.

• Induction of under balance drilling technology in CBM wells.

II Exploration Technology

A. Technology acquired and inducted :

1. M/s Jason Geoscience Work Bench

3D integrated quantitative inversion and modeling technology transfer with different work flows by M/S Jason as aconsultant on Geoscience Work Bench package, for advanced reservoir characterization on 3D seismic data ofKG-OS-DW-III block in Eastern Offshore, KG Basin with following objectives:

• To map reservoirs and their properties to bring out potential oil sands / gas sands including sand/shale ratioand porosity.

• To map the location of gas/oil/water contacts which have not been identified in the wells.

2. Pre-stack migration

From the seismic data processing point of view, the industry-standard technology of pre-stack time and depthmigration leading to improved imaging of complex subsurface geology, has been fully adopted.

The significant innovation has been inclusion of the effect of anisotropic properties of the earth in the pre-stack depthmigrated imaging. This leads to enhanced seismic image with better match of seismic markers with formationboundaries. It has been successfully carried out in processing the offshore data of Heera field. Also, the effect ofoffshore tidal variations has been effectively implemented for the first time in ONGC setup in pre-processing of thesame data.

3. Pre-stack multiple suppression

Amongst the several vital steps in seismic data processing, multiple attenuation is very essential step for thedetection of seismic anomalies and AVO. This has been successfully seen in Ramnad area near an exploration well

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B Has the technology been fully absorbed? Yes

C If not fully absorbed, areas where this has not taken place, reasons thereof, Not applicableand future plans of action

6. Expenditure on Research & Development (Rupees in million)

2003-04 2002-03

1 Capital 143.50 74.61

2 Recurring 794.83 854.68

3 Total 938.33 929.29

4 Total R&D expenditure as a percentage of Total turnover 0.28% 0.26%

7. Information on Foreign Exchange Earnings and Outgo

2003-04 2002-03

1 Foreign Exchange Earnings 3744.13 1592.01

2 Foreign Exchange Outgo 34629.06 55728.48

5. Information Regarding Imported Technology (Imported during the last five years from the beginning of the Financial Year):

A. Import of Technology Year of Import

(i) • Gravity magnetic processing and interpretation workstation. 1999-2000• Reservoir Characterisation (Landmark) Ultra 60 work station.• Reservoir Characterisation (Geoquest) Octane work station.• Ar-Ar clock for Radiometric Dating.• Deep water Soil Testing and Foundation Analysis.• DO / PH conductivity meter• DSC-TGA.

(ii) • Shimadzu High Performance Liquid Chromatograph. 2000-2001• High Temperature GC (HT-GC - Chemito 1000.• Varian 3800 GC for Finnigan 1020B GC-MC.• GEO-FINA Hydrocarbon Meter.• Cathodoluminescence Microscopy.• ORIGIN-2000 computer system.• Depth team solution (landmark).• Earth imaging solution (AVO) Hampson Russel.• Gas Porosimeter & Gas Permeameter.• EPINET Server and other workstations.• Elan Plus Model based Log Analysis Software.

(iii) • GM SYS Professional of GEOSOFT, U.K. 2001-02• NGS System from Canberra, Australia• KEYPHI and CAPRI for determining petrophysical parameters• Liquid scintillation system for low level counting of radioactive tracers.• RISC based computer system, Robotic tape library.

(iv) • Seismic Survey vessel M/V Sagar Sandhani upgraded to Dual Source, 2002-032 streamer vessel and on – board processing system.

• Scanning electron microscope with energy dispersive spectrometer (SEM – EDX).• Accoustic Velocity (Compressional & Shear Wave velocity) measurement system.• Existing VOXELGEO was upgraded to VOXELGEO-XV alongwith procurement of additional

software with features like attribute calculater, 3D Propogater and Reservoir Navigator enablingus to handle larger data volumes and resolve geological complexities.

• Additional licences for ELAN Plus• Emerge Seismic reservoir characterization software from Hampson Russel

(v) • 3D Integrated Quantitative Inversion & Modelling 2003-04(“My Bench software from M/S Jason Geosystems)

• Network Enhancement Gigabit• Additional Licenses (2 suite Landmark)• 18 TB RAID 5 Storage system, N/W & RAM Upgradation of Origin 2000 server,

Hard disk for octane workstations for processing and & 5 TB RAID 1 Disk for INTEG• RCCFA (Reservoir Condition Core Flow Apparatus)• Fully automated capillary pressure and resistivity system• Mercury free PVT package• SEM with EDX system, model 6460 LV• SGI Origin 300 – 4 CPU Machine• SGI Octane 2 machines• Network Access System (NAS)• Automated LTO Backup System• New – Layer 3 Switch for Network Upgradation to 1 Giga Bit Backbone• Forgas Software• PAL/ RAVE/ FZAP/ RFB/ Openvision and EMERGE – Software for Enhancing 2D/ 3D

Interpretation and Reservoir Characterisation• 3 Additional License for Open Works• 1 Additional License for ZMAP• Acquired latest drilling application software on well planning and under

balanced drilling technology.

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ADDENDUM TO THE DIRECTORS’ REPORT(MANAGEMENT REPLIES TO THE COMMENTS IN AUDITORS’ REPORT)

ANNEXURE ‘C’

MANAGEMENT’S REPLIES

The audited accounts were not available in respectof 5 Joint ventures/NELP Blocks out of 29 JointVentures/NELP Blocks, until the date of approval ofCompany Accounts by the Board. Such unauditedfigures have been adopted as was done in theprevious years, and adjustments carried-outsubsequently, wherever required.

Reconciliation of physical inventory of stores, sparesand fixed assets with general ledger is carried out onregular basis. Adjustments required in the books ofaccounts, if any, the amount of which is currentlyunascertainable, will be carried out in due course.However, the management does not envisage anysignificant impact of these adjustments.

AUDITORS’ REPORT PARA Nos

7.1. Note 8 (c) regarding including unaudited figures relatingto joint venture projects and NELP blocks as under:

i. total assets of Rs.8791.04 million and total liabilitiesof Rs.2122.84 million and

ii. total revenues of Rs.12338.54 million and totalexpenditure of Rs 5752.49 million

7.2. Note ‘10‘ regarding accounts pending reconciliations.We are unable to comment on the adjustments/provisions, if any, required to be made in this respect.

STATEMENT OF RESERVE RECOGNITION ACCOUNTING

Standardised measure of discounted future net cash flows relating to proved oil and gas reserve quantities as on31st March, 2004:-

(Rs. In Million)

Particulars Gross Value as at Present value31st March 2004 (Discounted at 10%)

as at 31st March 2004REVENUES

OIL 4,441,220.46 2,081,261.50

GAS 868,083.45 414,705.80

Total Revenues 5,309,303.91 2,495,967.30COSTS

Operating, Selling & General 2,325,733.10 1,093,513.16

Corporate Tax 820,519.30 390,710.51

Sub Total 3,146,252.40 1,484,223.67Evaluated Cost of Acquisition ofAssets and Development

a) Assets 81,301.78 72,789.75

b) Development 72,800.70 60,885.88

Sub Total 154,102.48 133,675.63Total Cost 3,300,354.88 1,617,899.30Net future earnings from Proved Reserves 2,008,949.03 878,068.00

Notes:-

1. The Revenues on account of crude oil and gas have been worked out on the basis of average price as on 31st March,2004. Subsidy discount has not been considered since the same may not continue in the long run as per Governmentpolicy.

2. Expenditure on Production (Operating), Development and Acquisition of capital assets related to future productionhas been considered on year-end basis without any escalation factor. Taxes and Levies have been considered atprevailing rates.

3. The reserves have been estimated by ONGC’s Reserve Estimates Committee following the standard internationalreservoir engineering practices.

4. Only Proved reserves as on 31st March, 2004 have been considered. Probable or Possible reserves have not beenconsidered. These reserves excludes ONGC’s share of foreign JV Assets.

5. Both revenues and costs have been discounted to present value using 10% discounting factor. The Net future earnings,therefore, represent the net expected future cash inflows from production of recoverable reserves of crude oil and gas.

6. However, neither the estimated net reserves nor the related present value should be taken as a forecast of future cashflows or value of these reserves because (a) future estimated production schedules used in the valuation process aresubject to uncertainties, (b) up-gradation of Probable and Possible reserves would significantly affect the gross andnet present value of the expected future cash inflows, (c) future crude oil and natural gas prices and (d) futureexpenditure on production (operating), development and acquisition cost of capital assets and rates of taxes andlevies, which may be at variance from those assumed herein.

ANNEXURE ‘B’

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COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIA U/S 619(4) OF THECOMPANIES ACT, 1956 ON THE ACCOUNTS OF OIL AND NATURAL GAS CORPORATIONLIMITED FOR THE YEAR ENDED 31ST MARCH, 2004.

I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditors’Report under Section 619(4) of the Companies Act, 1956 on the accounts of Oil and Natural Gas Corporation Limited forthe year ended 31st March, 2004.

Bharat Bhushan PanditMumbai Principal Director of Commercial Audit6 August, 2004 & ex-officio Member, Audit Board – II, Mumbai

ANNEXURE ‘D’CLARIFICATION TO THE POINTS RAISED IN ANNEXURETO THE AUDITORS’ REPORT (CARO)

MANAGEMENT’S REPLIES

The reconciliation of physically verified assets withthe book records is an ongoing process andadjustments are carried out on reconciliation ofdiscrepancies from time to time. Adjustments requiredin the books of accounts, if any, the amount of whichis currently unascertainable, will be carried out indue course. However, the management does notenvisage any significant impact of these adjustments.

The incidence of theft is under investigation by theState Government of Assam. Patrolling of the pipelinehas already been strengthened by deploying statearmed police.

PARA NOS.

1. (b) We are informed that the fixed assets other thanthose which are underground / submerged/under jointventure, having substantial value have been physicallyverified by the management during the year. Thereconciliation of physically verified assets with the bookrecords is in progress at some of the units. Pendingcompletion of reconciliation, we are unable to comment onthe materiality of the discrepancies, if any, and theconsequent adjustments to be made in the books of account.

21. According to the information and explanations given tous, there was fraud on the Company by way of theft ofcrude oil reported during the year. The same is underinvestigation by investigating agencies. The amount involvedon account of theft has not been ascertained by theCompany.

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2. Reserves and Surplus

The free reserves and surplus of the Corporation were 27.30 times of its paid up capital as on 31st March 2004 asagainst 23.93 times of its paid up capital, as on 31

st March 2003 and 19.71 times as on 31

st March 2002.

3. Producing Properties

Producing properties valuing Rs. 2319.96 million (net) as on 31.3.2004 did not produce any oil/gas during the year dueto various technical/administrative reasons.

4. Investments

During the year the Corporation invested funds aggregating Rs. 108,380 million in short term deposits/certificates ofdeposit with public sector banks/financial institutions and earned an income of Rs. 2,893 million on these investments.

5. Sources and utilization of funds

Funds amounting to Rs. 155,685.77 million from internal and external sources were generated and utilized during theyear as given below:

(Rs. in million)

Sources of FundsProfit after tax 86644.29Add: Recouped costs 46238.45Capital Reserve 4.15Receipt of Share Premium 0.07Increase in Deferred tax Liability 22706.68Deletion of Assets 92.13

Total 155685.77

Application of FundsCapital expenditure 51868.84Repayment of borrowings 1509.27Increase in Investments 4390.75Increase in Misc. Expenditure 4099.12Increase in Working Capital$ 33749.77Increase in Current Assets Loans and Advances 65643.78Less: Increase in Current Liabilities 31894.01Dividend paid including tax on dividend 43433.06Increase in Deferred Tax Assets 16634.96

Total 155685.77

6. Working results of the Corporation for the last three years are given below:

(Rs. in million)

2001-02 2002-03 2003-04i) Sales, including Pipeline Transportation Receipts 229335.01 347384.94 325263.69*ii) Profit before Tax 98552.21 163021.09 136232.01iii) Profit after tax 61978.71 105293.22 86644.29

*Sales for the year 2003-04 includes arrears of Rs. 3460.65 million on account of price revision of CrudeOil/LPG/NGL/SKO.

7. Working Capital

a) The working capital of the Corporation as on 31st March 2002, 31st March 2003 and 31st March 2004 wasRs.116299.34 million, Rs. 131531.26 million and Rs. 223121.60 million respectively.

b) The percentage of working capital to sales as on 31st March 2002, 31st March 2003 and 31st March 2004 was50.71, 37.86 and 68.60 respectively.

REVIEW OF ACCOUNTS OF OIL AND NATURAL GAS CORPORATION LIMITED FOR THE YEARENDED 31ST MARCH 2004 BY THE COMPTROLLER & AUDITOR GENERAL OF INDIA

Note: Review of Accounts has been prepared without taking into account the qualifications contained in theStatutory Auditor’s Report.

1. Financial PositionThe table below summarizes the financial position of the Corporation under broad headings for the last three years:

(Rs. in million)

As at As at As at31st March 2002 31st March 2003 31st March 2004

Liabilities(a) Paid up Capital

i) Government 11993.39 11993.39 10573.67 1

ii) Others 2265.88 2265.88 3685.6014259.27 14259.27 14259.27

(b) Reserves & Surplusi) Free Reserves & Surplus 281068.43 341208.56 389245.68ii) Share Premium Account 1724.50 1724.50 1724.57iii) Capital Reserve 169.55 197.26 201.41

(c) Borrowingsi) From Govt. of India 0.00 0.00 0.00ii) From Financial Institutions/ Banks/ OIDB 1213.05 1010.88 808.70iii) Foreign Currency Loans & Deferred Credits 27294.59 1171.49 1308.94iv) Cash credit 4727.14 4375.38 7018.27v) Short term loan 0.00 0.00 24650.00vi) Others 1873.64 1444.54 0.00

(d) Liabilities & Provisionsi) Current liabilities & Provisions 60359.64 83439.50 57492.94ii) Provision for Gratuity & Leave encashment 5432.09 3293.43 3350.50

(e) Deferred tax liability 53470.58 61627.21 84333.89(f) Liability for abandonment cost 0.00 0.00 80292.03

Total 451592.48 513752.02 664686.20

Assetsf) Gross Block 373647.47 390336.63 410076.23g) Less: Depreciation 317639.54 336408.36 353391.61h) Net block 56007.93 53928.27 56684.62i) Producing Properties 166912.57 174380.26 230803.82j) Exploratory and development wells in progress 9774.65 10730.94 11220.44k) Capital works in progress 6903.15 9329.45 9825.61l) Investments 33231.77 39825.91 44216.66m) Current Assets, Loans and Advances$ 176658.99 214970.76 280614.54n) Deferred Tax Assets * 9278.76 25913.72o) Misc.-expenditure not written off 2103.42 1307.67 5406.79

Total 451592.48 513752.02 664686.20p) Working Capital [m-d (i)] 116299.34 131531.26 223121.60q) Capital Employed (h+i+p) 339219.84 359839.79 510610.04

#

r) Net Worth [a+b (i)+b (ii)-o] 294948.78 355884.66 399822.73s) Net Worth per Rupee of paid up capital (in Rs.) 20.68 24.96 28.04

1 During the year President of India divested 10% of the total paid up capital of the company out of its equity share holdingin the company.$ This includes an amount of Rs. 6350.00 million (2001-02), Rs. 24780.97 million (2002-03) & Rs. 31681.97 million(2003- 04) pertaining to deposit with bank under Site Restoration Fund Scheme which could be withdrawn only for thepurpose specified in the scheme U/s 33ABA of Income Tax Act, 1961.* Deferred Tax Liability as on 31st March 2002 represents net deferred tax liability whereas as on 31st March 2003 and2004 the same has been exhibited separately as deferred tax liability and deferred tax asset.#This includes estimated cost of abandonment (Rs. 80292.03 million) as included in the producing properties.

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10. Inventory

The inventory position as at the end of the last three years was as follows:

(Rs. in million)

2001-02 2002-03 2003-04

i) Stores and Spares (including in transit) 11754.51 12837.79 20944.06ii) Capital stores (including in transit) 1284.54 1234.28 1539.91iii) Stock in trade 1318.54 1529.87 1418.41iv) Others 168.50 108.22 154.51

(a) The Stores and Spares at the close of each year were equivalent to about 13.22 months’ consumption in 2003-04 asagainst 10.24 months’ consumption in 2002-03 and 9.31 months’ in 2001-02.

(b) Inventory as on 31st March 2004 include stores and spares valuing Rs. 1,434.20 million and of capital stores valuingRs. 515.04 million which have not moved for over two years. An aggregate provision of Rs. 1851.78 million has beenmade in respect of non-moving stores and spares and capital stores.

(c) As on 31st March 2004 Stores and Spares valuing Rs 14.37 million were in transit for over three years.

11. Dividend

The dividend payout ratio calculated as a percentage of total dividend paid/proposed (excluding tax on dividend) toprofit after tax for the last three years ending 31

st March 2002, 31

st March 2003 and 31

st March 2004 was

32.21, 40.63 and 39.50 respectively.

B.B. PanditMumbai Principal Director of Commercial Audit6 August, 2004 & ex-officio Member, Audit Board-II, Mumbai

8. Ratio analysisSome important financial ratios on the financial health and working of the Corporation at the end of last three yearsare as under:

(In percentages)

2001-02 2002-03 2003-04

A. Liquidity RatioCurrent Ratio: Current assets to current liabilities & provisions 292.68 257.64 488.09and interest accrued & due but excluding provisions forgratuity/leave encashment [m/d (i)]

B. Debt Equity Ratio 10.30 1.02 0.53Long term debt to equity[c (i+ii+iii+vi)/r]

C. Profitability Ratiosa) Profit before tax to:

i) Capital Employed 29.05 45.30 26.68

ii) Net Worth 33.41 45.81 34.07

iii) Sales 42.97 46.93 41.88

b) Profit after tax to Equity 21.01 29.59 21.67

c) Earning per share (in Rs.) 43.47 73.84 60.76

9. Sundry DebtorsThe position of debtors vis-a-vis sales in the last three years is given below:

(Rs. in million)

Year Debts Provision Total Sales Percentageconsidered for doubtful debtors of debtors

good debts to sales

2001-02 22513.84 534.19 23048.03 229335.01 10.05

2002-03 39359.34 663.31 40022.65 347384.94 11.52

2003-04 23177.99 1102.69 24280.68 325263.69 7.46

5756

ANNEXURE-‘F’

AWARDS, RECOGNITION AND ACCREDITATIONSA. Awards to ONGC

1. ONGC received “ICSI National Award for Excellence in Corporate Governance, 2003”. The award has beengiven to ONGC in recognition of its remarkable efforts and achievements in the area of Corporate Governance.Hon’ble Deputy Prime Minister Mr. L K Advani presented the award to C&MD and Company Secretary.

2. ONGC received, the ‘Excellence Award for 2002-03’, adjudged by a committee of leading sports journalists, forits contribution to sports at international and national levels from the Petroleum Sports Promotion Board (PSPB).

3. ONGC received two awards for excellence in Oil Conservation for 2003, viz. the “Exemplary Work in EnergyConservation” and the “Best Performance Improvement in the Upstream Sector” from Petroleum Conser-vation research Association.

4. Gas Processing Complex at Hazira received the “National Safety Award” for its outstanding performance inindustrial safety, as the runners-up in achieving the longest accident-free period during 2000-01.

5. ONGC received a Certificate of Appreciation for designing Indian Pavilion at the second World Petroleum andPetrochemical Exhibition, Doha, Qatar, from the organisers.

6. The Institute for Petroleum Safety, Health and Environment Management (IPSHEM), Goa has been accreditatedby the International Risk Control Academy (IRCA) for conducting training courses on Offshore Survival,Coxswain Boat Handling and Survival Craft Education.

7 & 8 ‘Golden Peacock National Training Awards’ for 2003 conferred by the Institute of Directors to :

• Institute of Drilling Technology (IDT), Dehradun;

• Institute of Petroleum Safety, Health & Environment Management (IPSHEM).

9. ONGC received the ‘Golden Peacock Award for Environmental Management’ from the World EnvironmentFoundation.

10. ONGC received the “Environmental Excellence Gold Award 2002-03” from the Greentech Foundation.

11. ONGC received the award for ‘Excellence in Finance Management’ for 2002-03, for the 3rd consecutive year,from the National Petroleum Management Programme (NPMP). The award was presented by Shri Mani ShankarAiyar, Hon’ble Minister for Petroleum & Natural Gas and Panchayati Raj to C&MD and Director (Finance).

12. Uran Plant won the NPMP innovation award in the non-R&D category for ‘Advanced Fire & Hydrogen GasDetection System’; the Team Leader was Shri B.R.K.Verma, Dy.Gen.Manager(C&M).

13. Shri C.M.N.Nair, Superintending Engineer (Production) Cambay Forward Base received a Certificate of Recog-nition for innovation in ‘Establishing a Receiving – cum- Despatch Tank with Heating Facility’.

14. ONGC’s Rajahmundry Asset recived the ‘Best Overall Safety Performance’ award in ‘Oil and Gas Assets’category for 2002-03 from the Oil Industry Safety Directorate (OISD). The award was presented by Shri ManiShankar Aiyar, Hon’ble Minister for Petroleum & Natural Gas and Panchayati Raj.

B. Recognition to Individuals

B.I Shri Subir Raha, C&MD of your Company

1. ‘SCOPE Award for Excellence and Outstanding Contribution to the Public Sector Management – IndividualCategory’, as best PSU Chief Executive for the year 2002-03 from the Standing Conference of Public SectorEnterprises (SCOPE). The award is to be presented by the Hon’ble Prime Minister, Dr.Manmohan Singhon 4th September, 2004.

2. Honorary Fellowship of the All India Management Association (AIMA) conferred for outstanding strategicvision and professional management of the ONGC Group of Companies. The fellowship was conferred by theHon’ble Deputy Prime Minister Mr. L K Advani on September 15, 2003.

3. ‘Super Achiever Award’ from the Indira Group of Institutes, Pune for making a difference in the sphere ofprofessional management, by his passion for creativity, urge for excellence and desire for success.

ANNEXURE ‘E’

HUMAN RESOURCE

Employees as on 31st March, 2004

(Numbers)

Employee Group Age Distribution

<31 31-40 41-50 51-60 Total

(A) Technical

Executive 484 3413 10703 4180 18780

Non - Executive 407 2684 3494 550 7135

Total (A) 891 6097 14197 4730 25915

(B) Non - Technical

Executive 232 470 2442 1382 4526

Non - Executive 399 1743 3519 1931 7592

Total (B) 631 2213 5961 3313 12118

Grand Total (A+B) 1522 8310 20158 8043 38033

Note: Whole – time Directors excluded.

Valuation as on 31st March, 2004(Rs. in million)

Employee Age Distribution Value perGroup employee

<31 31-40 41-50 51-60 Total

(A) Technical

Executive 5912.6 36826.7 85787.4 14621.1 143147.8 7.6

Non - Executive 2990.2 17537.4 19035.5 1301.8 40864.9 5.7

Total (A) 8902.8 54364.1 104822.9 15922.9 184012.7 7.1

(B) Non - Technical

Executive 2755.5 4967.3 17712.7 4689.9 30125.4 6.7

Non - Executive 2747.3 10514.3 16605.6 3776.8 33644.0 4.4

Total (B) 5502.8 15481.6 34318.3 8466.7 63769.4 5.3

Grand Total (A+B) 14405.6 69845.7 139141.2 24389.6 247782.1 6.5

• Valuation based on most widely used “Lev & Schwartz” model.• Aggregate future earnings during remaining employment period of employees, discounted @ 8% p.a, provides

present valuation.

• Future earnings based on current emoluments with normal incremental profile.

5958

11 Water Treatment Plant Kathore Ankleshwar12 Main Pump House, Ankleshwar13 DSA Gandhar Ankleshwar14 DSA Dabka Ankleshwar15 BHEL-III (Workover Rig) Ankleshwar16 BHEL-VI(Workover Rig) Ankleshwar17 BHEL-IX(Workover Rig) Ankleshwar18 CW-100-IV(Workover Rig) Ankleshwar19 CW-100-VI(Workover Rig) Ankleshwar20 CW-100-VII(Workover Rig) Ankleshwar21 A-50-II(Workover Rig) Ankleshwar22 A-50-IX(Workover Rig) Ankleshwar23 A-50-XII(W/O Rig) Ankleshwar24 CW-50-III(Workover Rig) Ankleshwar25 CW-50-VII(Workover Rig) Ankleshwar26 CW-50-VIII(Workover Rig) Ankleshwar27 BHEL-V(Workover Rig) Ankleshwar28 M-450-I(W/O Rig) Ankleshwar29 GGS-II kalol (Workover Rig) Mehsana30 GGS-III kalol Mehsana31 CTF Kalol Mehsana32 GCS Kalol Mehsana33 GCP Kalol Mehsana34 GGS Wadu Ahemadabad35 GGS-II Nawagam Ahemadabad36 GCP Nawagam Ahemadabad37 Desalter Nawagam Ahemadabad38 GGS Nandej Ahemadabad39 Artificial Lift, Jhalora Ahemadabad40 GGS-II Sanand Ahemadabad41 GCP Sanand Ahemadabad42 GGSViraj Ahemadabad43 GGS-1 Limbodra Ahemadabad44 GGS-II Limbodra Ahemadabad45 NK-GGS-I Mehsana46 NK-GGS-II Mehsana47 NK-GGS-III Mehsana48 GGS-II Sobhasan Mehsana49 GGS-III Lanwa Mehsana50 GGS Nandasan Mehsana51 Balol Main Mehsana52 Balol PH-I Mehsana53 Becharji Insitu Mehsana54 ETP Lanwa Mehsana55 ETP North Santhal Mehsana56 KDM Bhavan-Office Complex Mehsana57 GGS-II Becharji Mehsana58 GCS Ramanadu, Mehsana59 GCS Kuthalam Mehsana60 ONGC Colony Assam & Assam Arakan basin, Jorhat61 A&B Type Colony Assam & Assam Arakan basin

4. Fellowship of the Institution of Engineers (India) for outstanding contribution as an Engineer.

5. ‘Corporate Role Model’ and ‘Lifetime Achievement’ awards by the Center of International Business of theAmity Business School, NOIDA for his dynamic leadership, remarkable business acumen and exceptionalforesight and vision. The award was presented by Dr.Balram Jakhar, H.E. the Governor of Madhya Pradeshand former Speaker, Lok Sabha.

6. ‘Chairman of the Year’ award and ‘Global CEO of the Year’ award from the Business Barons Magazine. Theawards were presented by H.E. the Governor of Maharastra, Mr. Mohammed Fazal on 6th March 2004.

7. ‘Golden Peacock Award for Quality in Corporate Governance’ by the Institute of Directors.

8. “Man of the Year” Award from the ChemTech Foundation at Oceantex – 2004.

9. ‘V.Krishnamurthy Award for Excellence – 2004’, by the Centre for Organisation Development, Hyderabad.

10. Re-nominated by the Council of Scientific & Industrial Research (CSIR) Government of India, as the Chairmanof the Research Council of the Indian Institute of Petroleum, Dehradun.

11. Elected as the President of the Indian Geological Society.

12. Elected as the founder – President of the Global Compact Society, India, an initiative of the United Nationsfocussed on Corporate Social Responsibility.

13. Elected as President of the International Federation of Training & Development Organization (IFTDO), anetwork of National Training & Development Institutions in 51 countries.

14. Elected as President of the Indian Society for Training & Development (ISTD).

15. Re-elected as Chairman of the Petrotech Society.

B. II Shri Y.B.Sinha, Director (Exploration):

Appointed as Director of Petro-technical open Standard Consortium (POSC), Houston, USA for a period of 3years from November 2002 to November 2005.

B. III Shri H.C.Shah, Company Secretary:

Received ‘ICSI National Award for Excellence in Corporate Governance for the year 2003’ instituted by theInstitute of Company Secretaries of India (ICSI), New Delhi.

B. IV National Mineral Awards for the year 2003 were conferred on:

1. Shri J.L. Narsimhan, GGM (Reservoir) - Asset Manager (N&H)

2. Shri Shyamal Bhattacharya, DGM (Reservoir) - IRS

3. Shri P.B. Pandey, DGM (Geophy-S), Baroda

4. Team of Shri Ashesh Siawal, C.G., Shri Anil Kumar Kaul, Dy. S.G. and Shri Sanjay Baveja, Dy. S.G. ofKDMIPE, Dehradun.

C. New Accreditations

a. ISO 14001 Certification

Sl. No. Installations Asset1 GGS-II, Gandhar Ankleshwar2 GGS-III, Gandhar Ankleshwar3 GGS-IV, Gandhar Ankleshwar4 GGS-V, Gandhar Ankleshwar5 GGS Dahej, Ankleshwar6 EPS, Jambusar Ankleshwar7 Water Treatment Plant, Zanore Ankleshwar8 GGS-III Ankleshwar9 GGS-IV Ankleshwar10 GGS-VI, Ankleshwar

6160

f. International Safety Rating System Level-4

Sl.No. Installation Asset/Location

1 BHN Process Complex Mumbai High

2 SHP Process Complex Mumbai High

3 E-760-17 Drilling rig Ankleshwar

4 Sagar Kiran Drilling rig MR, Mumbai High

g. QMS:ISO 9001 Certified establishments

Sl.No. Year 2003-04

1 Institute of Biotechnology and Geotectonic Studies (INBIGS), Jorhat

2 Regional Equipment Workshop (REW) Assam & Assam-Arakan basin, Jorhat

3 Regional Computer Centre (RCC), Vadodra

4 E-760-XVII D/ Rig, Ankleshwar

5 CW-X D/ Rig, Ankleshwar

6 Electrical + Diesel shop Ankleshwar

7 E-1400-19, Drilling rig, Karaikal Asset

8 E-1400-9, Drilling rig, Karaikal Asset

9 CW-I Drilling rig, Ahmedabad Asset

10 CW-IV Drilling rig, Ahmedabad Asset

11 E-760-17, Drilling rig, Ankleshwar Asset

12 F-6100-II, Drilling rig, Ankleshwar Asset

13 CW-10, Workover rig, Ankleshwar Asset

14 CW-III, Drilling rig, Ahmedabad

15 CW-5, Workover rig, Mehsana

16 CW-7, Workover rig, Mehsana

17 Helibase at Mumbai

18 F&A Section of Ahmedabad Asset

D. Sports

1. ONGCian Grandmaster, Krishnan Sasikiran, created a record in the 25-year history of the Politiken CupInternational Open Chess tournament, Copenhagen, by scoring 9 out of a possible 11, and winning the cup.

2. ONGCian Grandmaster K Sasikiran and ace-batsman Virender Sehwag received the prestigious Arjuna awardson August 29, 2003 from H.E. the President of India.

3. ONGCian Virender Sehwag became the highest Indian scorer in a Test match, and the third to score a triplecentury in Pakistan with his record score of 309; he also became the 17th player in the world to score 300 runsin Test cricket.

4. ONGCian Anil Kumar won a gold medal in ‘Discus Throw’ on October 29, 2003 in the first Afro-AsianGames, 2003.

5. ONGC brought home the Minister’s Trophy as the over-all champion for 2002-03 in Petroleum Sports PromotionBoard (PSPB) events.

62 D Type Colony Assam & Assam Arakan basin63 Institute of Petroleum Safety, Health & (IPSHEM), Goa

Environment Management64 BHN Process platform Mumbai high65 NQO Process platform Mumbai high66 WIN (Water injection) Mumbai high67 BHS Process platform Mumbai high68 SHP Process platform Mumbai high

69 Samudra Nidhi ( Well stimulation ship) Mumbai high

b. International Safety Rating System Level-8

Sl. No. Installation Asset/Location1 Uran Plant Uran Plant

c. International Safety Rating System Level-7

Sl.No. Installation Asset/Location1 Neelam Process Complex Neelam & Heera Asset

2 GCS Konaban Tripura

3 CW-I Workover rig Mehsana

d. International Safety Rating System Level-6

Sl.No. Installation Asset/Location1 NQO Process Complex Mumbai High

2 ICP Process Complex Mumbai High

e. International Safety Rating System Level-5

Sl.No. Installation Asset/Location

1 BPA Process Complex Bassein & Satellite Asset

2 BPB Process Complex Bassein & Satellite Asset3 F-6100-II Drilling rig Ankleshwar

4 CW-10 Workover rig Ankleshwar

5 Becharji GGS-II Mehsana

6 Becharji GGS-IV Mehsana

7 CW-II Workover rig Mehsana

8 M 750-II Drilling rig Mehsana

9 IPS-700-VI Drilling rig Mehsana

10 BHEL-III Workover rig Ankleshwar

11 BHEL-VI Workover rig Ankleshwar

12 CW-100-VII Workover rig Ankleshwar

13 CW-50-VIII Workover rig Ankleshwar

14 CPF Gandhar Ankleshwar

15 E-760-VIII Drilling rig Ankleshwar

16 E-760-XVIII Drilling rig Ankleshwar

17 CW-II Drilling rig Ahmedabad

18 CW-IV Drilling rig Ahmedabad

19 Sagar Vijay Drilling rig MR, Mumbai High

6362

AUDITORS’ REPORT

TO THE MEMBERS OF OIL AND NATURAL GAS CORPORATION LIMITED

1. We have audited the attached Balance Sheet of OIL AND NATURAL GAS CORPORATION LIMITED (the Company)as at 31 March, 2004 the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date,annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with auditing standards generally accepted in India. These standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount anddisclosures in the financial statements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.

3. As required by the Statement on the Companies (Auditor’s Report) Order, 2003 issued by the Central Government ofIndia in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Order.

4. In our opinion, the Profit and Loss Account, the Balance Sheet and the Cash Flow Statement comply with theaccounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

5. Based on the written representation made by all the Directors of the Company which was taken on record by theboard of Directors of the Company and the information and explanations as made available, none of the Directors ofthe Company is disqualified as on 31st March, 2004 from being appointed as a director in terms of Clause (g) of subsection (1) of Section 274 of the Companies Act, 1956.

6. Categorisation of wells as exploratory and producing, allocation of cost incurred, depletion of producing properties onthe basis of the proved developed hydrocarbon reserves, provision for abandonment costs and impairment, allocationof depreciation on process platforms to transportation and facilities, are made according to evaluation by themanagement, technical and / or otherwise on which we have placed reliance.

7. Attention is invited to the following notes in Schedule ‘29’:

7.1 Note 8 (c) regarding including unaudited figures relating to joint venture projects and NELP blocks as under:

i. total assets of Rs.8791.04 million and total liabilities of Rs. 2122.84 million and

ii. total revenues of Rs.12338.54 million and total expenditure of Rs. 5752.49 million

7.2 Note ‘10’ regarding accounts pending reconciliations. We are unable to comment on the adjustments/provisions,if any, required to be made in this respect.

8. Further to our comments referred to in paragraph 3 above and subject to our comments in Paragraph 7 above, withconsequential aggregate effects on the profit for the year, reserves and surplus and net assets, the quantification ofwhich could not be determined, we report as follows:

8.1 We have obtained all the information and explanations which to the best of our knowledge and belief werenecessary for the purposes of our audit;

8.2 In our opinion, proper books of account as required by law have been kept by the Company so far as it appearsfrom our examination of those books;

6. ONGC created a record by winning all the Gold Medals in Athletics in PSPB 2003-04 sports.

7. ONGC Volleyball Team won the Premier National League Championship, 2003.

8. ONGC Kabaddi Team retained the prestigious Petroleum Minister Trophy for 2003-04.

9. ONGC Table Tennis Team won all the events in All-India Public Sector Table Tennis Tournament held, 2004,except the women’s doubles.

10. ONGC clinched the PSPB Bridge tournament championship for the 2nd consecutive year.

11. ONGC retained the PSPB Football championship.

12. ONGC Basketball team retained the championship for the 7th time in PSPB Basketball. This is ONGC’s seventhwin in a row.

13. ONGC’s Volleyball Team become the champion in the All India Public Sector Volleyball Tournament, 2004.

E. C&MD’s Innovation Award

1. The first C&MD’s Innovation Award was given to Mr. V M Suthar, Asst. Engineer (Production), AhmedabadAsset for his professional initiatives epitomizing the best in Own Oil Recovery (OOR) concept and proactivelysolving problems in his workplace overcoming the handicap of lack of a professional education.

2. Neelam & Heera Asset Team bagged the C&MD’s ‘Innovative Team of the Year’ award for achieving Zero GasFlaring on July 5, 2003 at Heera Platform the first Offshore platform in the world to do so, with innovativetechnology, resulting in savings to the order of Rs.3000 Million per annum.

6564

ANNEXURE TO THE AUDITORS’ REPORT(Referred to in paragraph 3 of our report of even date)

1. a) The Company has generally maintained proper records showing full particulars including quantitative details andsituation of fixed assets.

b) We are informed that the fixed assets other than those which are underground / submerged/under joint venture,having substantial value have been physically verified by the management during the year. The reconciliation ofphysically verified assets with the book records is in progress at some of the units. Pending completion ofreconciliation, we are unable to comment on the materiality of the discrepancies, if any, and the consequentadjustments to be made in the books of account.

c) The Company has not disposed off substantial parts of fixed assets during the year.

2. a) The inventory has been physically verified (excluding inventory lying with third parties at some of the site-locations, inventory with joint ventures and material in transit) during the year by the management. In ouropinion, the frequency of verification is reasonable.

b) The procedure of physical verification of inventory followed by the management to the extent verified weregenerally reasonable and adequate in relation to the size of the Company and nature of its business.

c) The Company has generally maintained proper records of inventory except for recording of consumption at someof its site-locations. The discrepancies noticed on verification between the physical stock and book records werenot material having regard to the size of the operations of the Company. In case where discrepancies noticed onphysical verification have been identified with inventory records, necessary adjustments have been carried out inthe books. In respect of those cases where the reconciliation is not complete, the management has stated thatthe same would be adjusted in due course.

3. a) The Company has not taken any loans, secured or unsecured from companies, firms or other parties coveredin the register maintained under section 301 of the Companies Act, 1956. There are two companies covered in theregister maintained under section 301 of the Companies Act, 1956 to which the Company has granted loans. Themaximum amount involved during the year was Rs. 110,348.30 million and the year end balance of loans grantedto such parties was Rs. 110,348.30 million.

b) In our opinion, the rate of interest, wherever applicable, and other terms and conditions on which the loans havebeen granted to companies listed in the register maintained under section 301 of the Companies Act, 1956 arenot prima facie, prejudicial to the interest of the Company.

c) The parties have repaid the principal amount as stipulated and have been regular in the payment of interest.

d) There is no overdue amount of loan granted to companies listed in the register maintained under Section 301 ofthe Companies Act, 1956.

4. In our opinion, and according to the information and explanations given to us, there are adequate internal controlprocedures commensurate with the size of the Company and the nature of its business with regard to purchases ofinventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed anycontinuing failure to correct major weaknesses in internal controls.

5. a) According to the information and explanations given to us there are no transactions during the year, which arerequired to be entered in the register maintained in pursuance of section 301 of the Companies Act, 1956.

b) Accordingly, the provision of the clauses v(b) of the Companies (Auditor’s Report) Order, 2003 are not applicableto the Company.

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

8.4 In our opinion and to the best of our information and according to the explanations given to us, the saidaccounts read with notes to account in Schedule 29 and in particular Note 5 regarding change in the AccountingPolicy give the information required by the Companies Act, 1956 in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2004;

b) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date: and

c) in the case of the Cash Flow Statement, of the Cash Flow of the Company for the year ended on that date.

For Thakur, Vaidyanath Aiyar & Co. For S. Bhandari & Co. For RSM & Co.Chartered Accountants Chartered Accountants Chartered Accountants

V. Rajaraman P.D. Baid Vijay N. BhattPartner (Mem. No. F-2705) Partner (Mem. No. F - 72625) Partner (Mem. No. F-36647)

For Brahmayya & Co. For Lodha & Co.Chartered Accountants Chartered Accountants

V.Seetaramaiah H.K. VermaPartner (Mem. No. F-003848) Partner (Mem. No. F-55104)

New DelhiJune 22,2004

6766

10. The Company has no accumulated losses at the end of the current financial year and has not incurred cash losseseither during the year or during the immediately preceding year.

11. The Company has not issued any debentures and not defaulted in repayment of dues to financial institutionsor banks.

12. In our opinion, the Company has not granted loans and advances on the basis of security by way of pledge of shares,debentures and other securities other than to its employees. In our opinion, the Company has maintained adequaterecords in respect of such loans.

13. In our opinion, the Company is not a chit fund or a nidhi mutual benefit fund/ society. Accordingly, the provision ofclause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company.

14. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments.

15. In our opinion, the terms and conditions on which the Company has given guarantees for loans taken by others frombanks or financial institutions are not prejudicial to the interest of the Company, since these guarantees are given forthe subsidiary/ company promoted by the Company.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. On an overall examination of the balance sheet of the Company, we report that no funds raised on short terms basishave been used for long term investment or vice versa.

18. The Company has not issued any preferential allotment of shares during the year.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by way of public issue during the year.

21. According to the information and explanations given to us, there was fraud on the Company by way of theft of crudeoil reported during the year. The same is under investigation by investigating agencies. The amount involved onaccount of theft has not been ascertained by the Company.


V. Rajaraman P.D. Baid Vijay N. BhattPartner (Mem. No. F-2705) Partner (Mem. No. F-72625) Partner (Mem. No. F-36647)


V. Seetaramaiah H.K. VermaPartner (Mem. No. F-003848) Partner (Mem. No. F-55104)

New DelhiJune 22,2004

6. The Company has not accepted any deposits from the public.

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

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained bythe Company pursuant to the Rule made by the Central Government for the maintenance of cost records undersection 209 (1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained.

9. a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including ProvidentFund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax,Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it. There are no outstanding duesas of the last date of the financial year concerned for a period of more than six months from the date they becamepayable.

b) According to the information and explanations given to us, the disputed statutory dues are as under:

Forum where disputeis pending

ITAT/ CCIT/ CIT(A)

CEGAT/Director ofCental Excise/Commisioner/Asst.Comm. of central excise

Supreme Court/HighCourt/CBEC/Comm.Customs

Director, Mines &Geology/Dept. ofGeology and Mining

CEGAT/Supdt./Comm(A)

Supreme Court/HighCourt/Tribunal/Asst.Comm/ Dy. Comm./Suptd. of Taxes/Commercial Tax Officer

Supreme Court

Period to whichthe amountrelates(financial year)

1993-2003

1981-2003

2000-02

1996-2003

1993-2003

1987-2001

1978-93

Name of the statute

Income tax Act, 1961

Central Excise Act, 1944

The Customs Act, 1962

Oilfields (Regulation &Development Act, 1948)/APMines and Geology Act

Oil Industries(Development) Act,1974

Central Sales Tax Act, 1956and respective States’Sales Tax Act

Municipal Corporationof Greater Mumbai Act(Octroi Rules, 1965)

Nature of the dues

Income tax

Central excise duty/Interest/Penalty

Customs duty/Penalty/Interest

Royalty/Surface rent/Interest/Penalty

Cess/Interest

Sales tax/TurnoverTax/Penalty/Interest

Octroi Duty

Amount(Rs. InMillion)

5893.76

2846.92

3393.13

420.77

750.14

2489.59

336.69

6968

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2004(Rupees in million)

Schedule 2003-04 2002-03INCOMEGross Sales 18 325,240.08 346,907.37Less Excise Duty 4,479.92 4,612.08

Net Sales 320,760.16 342,295.29Pipeline Transportation 19 23.61 477.57Other Income 20 15,300.91 19,898.51

336,084.68 362,671.37Increase/ (Decrease) in stocks 21 (111.46) 211.33

335,973.22 362,882.70EXPENDITUREProduction, Transportation, Sellingand Distribution Expenditure 22 142,159.15 137,961.51Recouped Costs 23 55,608.64 41,272.56Financing Costs 24 479.64 1,465.90Provisions and Write-offs (Net) 25 1,341.73 21,350.82

199,589.16 202,050.79

Profit before Tax and Prior Period Adjustments 136,384.06 160,831.91Adjustments relating to Prior Period (Net) 26 293.60 (406.46)Provision for Taxation- Current Tax (including Wealth Tax Rs. 16.00 million,

Previous Year Rs. 15.00 million) 43,516.00 58,850.00- For Earlier years (141.55) (1,782.72)- Deferred Tax 6,071.72 (1,122.13)

Profit after Taxation 86,644.29 105,293.22Surplus at the beginning 0.19 0.06

BALANCE AVAILABLE FOR APPROPRIATION 86,644.48 105,293.28APPROPRIATIONSProposed Dividend 14,259.34 18,537.14Tax on Proposed Dividend 1,826.98 2,375.07Interim Dividend 19,963.08 24,240.88Tax on Interim Dividend 2,557.77 0.00Transfer to General Reserve 48,037.00 60,140.00Balance carried to Balance Sheet 0.31 0.19

86,644.48 105,293.28EARNINGS PER EQUITY SHARE 27(Face Value Rs. 10/-Per Share)Basic & Diluted (Amount in Rs.) 60.76 73.84SIGNIFICANT ACCOUNTING POLICIES 28NOTES TO THE ACCOUNTS 29

Schedules referred to above form an integral part of the Accounts

H.C. Shah R.S. Sharma Subir RahaCompany Secretary Director (Finance) Chairman & Managing Director

In terms of our report of even date attached

For Thakur, Vaidyanath Aiyar & Co. For S. Bhandari & Co. For RSM & CoChartered Accountants Chartered Accountants Chartered Accountants

V. Rajaraman P.D. Baid Vijay N. BhattPartner Partner Partner


V. Seetaramaiah H.K. VermaPartner Partner

New DelhiJune 22, 2004

BALANCE SHEET AS AT 31ST MARCH, 2004(Rupees in million)

Schedule As at As at31st March, 31st March,

2004 2003SOURCES OF FUNDSSHAREHOLDERS’ FUNDSShare Capital 1 14,259.27 14,259.27Reserves and Surplus 2 391,171.66 343,130.32

405,430.93 357,389.59LOAN FUNDSUnsecured Loans 3 33,785.91 8,002.29DEFERRED TAX LIABILITY (NET) 58,420.17 52,348.45LIABILITY FOR ABANDONMENT COST 80,292.03 0.00

TOTAL 577,929.04 417,740.33

APPLICATION OF FUNDSFIXED ASSETS 4Gross Block 410,076.23 390,336.63Less: Depreciation 353,391.61 336,408.36

NET BLOCK 56,684.62 53,928.27PRODUCING PROPERTIES 5Gross Cost 457,046.17 351,662.76Less: Depletion 226,242.35 177,282.50

NET PRODUCING PROPERTIES 230,803.82 174,380.26CAPITAL WORKS-IN-PROGRESS 6 9,825.61 9,329.45EXPLORATORY/DEVELOPMENT WELLS IN-PROGRESS 7 11,220.44 10,730.94INVESTMENTS 8 44,216.66 39,825.91CURRENT ASSETS, LOANS AND ADVANCESInterest Accrued 9 5,321.17 3,721.23Inventories 10 24,056.89 15,710.16Sundry Debtors 11 23,177.99 39,359.34Cash and Bank Balances 12A 55,734.48 36,309.20Deposit with Bank Under Site Restoration Fund Scheme 12B 31,681.97 24,780.97Loans and Advances 13 140,542.20 94,906.24Other Current Assets 14 99.84 183.62

280,614.54 214,970.76LESS: CURRENT LIABILITIES AND PROVISIONSCurrent Liabilities 15 35,740.64 31,180.39Provisions 16 25,102.80 55,552.54

60,843.44 86,732.93

NET CURRENT ASSETS 219,771.10 128,237.83MISCELLANEOUS EXPENDITURE 17 5,406.79 1,307.67(To the extent not written off or adjusted)TOTAL 577,929.04 417,740.33SIGNIFICANT ACCOUNTING POLICIES 28NOTES TO THE ACCOUNTS 29


H.C. Shah R.S. Sharma Subir RahaCompany Secretary Director(Finance) Chairman & Managing Director





V. Seetaramaiah H.K.VermaPartner Partner


7170

(Rupees in million)

As at As at31st March, 31st March,

2004 2003

SCHEDULE-2

RESERVES AND SURPLUS

Capital Reserve* 159.44 159.44

(As per last year Balance Sheet)

Deferred Government Grant

a) Opening Balance 37.82 10.11

b) Addition during the year 13.62 42.21

c) Deduction during the year** 9.47 14.50

41.97 37.82

Share Premium Account ***

a) Opening Balance 1,724.50

b) Addition during the year 0.07

1,724.57 1,724.50

Premium on Foreign Currency Bonds 168.12 168.12


Insurance Reserve 2,500.00 2,500.00


General Reserve

a) Opening Balance 338,540.25 278,400.25

b) Add: Transferred from Profit and Loss Account 48,037.00 60,140.00

386,577.25 338,540.25

Profit and Loss Account 0.31 0.19

TOTAL 391,171.66 343,130.32

* Represents assessed value of assets received as gift.

** Represents the amount equivalent to Depreciation transferred to Profit and Loss Account.

*** Share premium account is credited only on receipt basis.

(Rupees in million)


2004 2003

SCHEDULE-1

SHARE CAPITAL

Authorised:15000,000,000 Equity Shares of Rs. 10 each 150,000.00 150,000.00

Issued and Subscribed:1425,933,992 Equity Shares of Rs. 10 each 14,259.34 14,259.34

Paid up:

1425,933,992 Equity Shares of Rs. 10 each 14,259.34 14,259.34

Less : Calls in Arrears 0.07 0.07

(Other than Directors) 14,259.27 14,259.27

TOTAL 14,259.27 14,259.27

Note : The above includes:

(i) 342,853,716 Equity Shares issued as fully paid up to the President of India without payment being received in cashin terms of Oil and Natural Gas Commission (Transfer of Undertaking and Repeal) Act,1993.

(ii) 1,076,440,366 Equity Shares issued as fully paid up by way of bonus shares by capitalisation of General Reserve.

7372

(Rupees in million)


2004 2003

SCHEDULE-5

PRODUCING PROPERTIES

Gross Cost

Opening Balance 351,662.76 326,697.73

Expenditure during the year 7,525.36 22,175.06

Transfer from Exploratory Wells-in-Progress 1,547.90 2,789.94

Transfer from Development Wells-in-Progress 16,990.76 0.00

Estimated Abandonment costs 80,292.03 0.00

Transfer to Development Wells-in-Progress (944.62) 0.00

Other Adjustments (28.02) 0.03

Total 457,046.17 351,662.76

Less: Depletion

Opening Balance 177,282.50 159,785.16

Depletion for the year 23,323.31 17,497.34

Provision for Abandonment (transfer from Schedule-16) 25,664.72 0.00

Other Adjustments (28.18) 0.00

Total 226,242.35 177,282.50

NET PRODUCING PROPERTIES 230,803.82 174,380.26

SCHEDULE-6

CAPITAL WORKS-IN-PROGRESS

Buildings 680.39 320.62

Plant and Machinery 6,810.06 8,389.50

Advances for Capital Works and Progress Payments 2,335.16 619.33

TOTAL 9,825.61 9,329.45

(Rupees in million)


2004 2003

SCHEDULE-3UNSECURED LOANS(a) Long Term

From Oil Industry Development Board 808.70 1,010.88

Foreign Currency Loans:

- From Banks/Financial Institutions 1,308.94 2,616.03

(b) Short Term- Term Loans From Banks 24,650.00 0.00

(c) Cash Credit- From a Bank 7,018.27 4,375.38

TOTAL 33,785.91 8,002.29

Long term includes Repayable within one year 601.42 1,349.54

SCHEDULE-4

FIXED ASSETS (Rupees in million)

GROSS BLOCK D E P R E C I A T I O N NET BLOCK

As at Additions Deletions/ As at Up to For the Deletions/ Upto As at As at1st April, during the adjustments 31st 31st March, Year Adjustments 31st 31st 31st

2003 year during the March, 2003 during the March, March, March,year 2004 year 2004 2004 2003

Land i) Freehold 1,092.36 80.65 34.42 1,138.59 0.00 0.00 0.00 0.00 1,138.59 1,092.36

ii) Leasehold 833.82 34.80 0.00 868.62 155.01 11.61 0.00 166.62 702.00 678.81

Buildings and

Bunk Houses 9,046.35 274.06 5.80 9,314.61 4,582.03 304.07 5.60 4,880.50 4,434.11 4,464.32

Railway Sidings 89.95 0.00 0.00 89.95 70.56 2.70 0.00 73.26 16.69 19.39

Plant and Machinery 371,982.73 19,661.61 616.56 391,027.78 325,495.23 17,083.08 567.29 342,011.02 49,016.76 46,487.50

Furniture and Fittings 3,048.90 350.25 55.50 3,343.65 2,168.77 201.76 50.06 2,320.47 1,023.18 880.13

Vehicles,Survey Ships,Crew Boats,Aircraftsand Helicopters 4,242.52 127.28 76.77 4,293.03 3,936.76 76.95 73.97 3,939.74 353.29 305.76

TOTAL 390,336.63 20,528.65 789.05 410,076.23 336,408.36 17,680.17 696.92 353,391.61 56,684.62 53,928.27

Previous year 373,647.47 17,472.60 783.44 390,336.63 317,639.54 19,537.80 768.98 336,408.36 53,928.27

The above includes the 15,550.65 13.70 143.71 15,420.64 11,531.10 862.13 98.96 12,294.27 3,126.37Corporation’s share inJoint Venture Assets

Previous year 13,465.85 2,089.66 4.86 15,550.65 10,716.67 818.32 3.89 11,531.10 4,019.55

Notes:

1. Additions to Plant and Machinery are net of Rs. 13.89 million on account of net exchange gain during the year (Previous Year Rs. 334.48 million exchange loss).2. Leasehold land includes lands in respect of certain projects for which execution of lease deeds are pending.3. Registration of title deeds in respect of certain Buildings is pending execution.

7574

(Rupees in million)

No. of Face Value As at As atShares/ per Share/ 31st March, 31st March,

Bonds/Units Bond/Unit 2004 2003(in Rupees)

SCHEDULE-8

INVESTMENTSLONG-TERM INVESTMENTS (FULLY PAID UP)

A TRADE INVESTMENTS

1 Equity Shares (Quoted)

i) Indian Oil Corporation Limited 106,453,095 10 13,720.49 13,720.49

(70,968,730)

ii) GAIL (India) Limited 40,839,549 10 2,451.06 2,451.06

iii) Mangalore Refinery and Petrochemicals Ltd.(Subsidiary) 1,255,354,097 10 10,405.73 6,594.30

(897,153,518)

iv) Petronet LNG Limited 93,750,000 10 987.50 #

(45)

2 Equity Shares (Unquoted)

i) Pawan Hans Helicopter Limited 24,500 10,000 245.00 245.00

ii) ONGIO International Private Ltd. 1,505,000 10 15.05 15.05

iii) Oil Spill Response Ltd. 100 * 0.01 0.01

iv) In wholly owned subsidiary

ONGC-Videsh Ltd. 30,000,000 100 3,000.00 3,000.00

3 Oil Companies Govt. of India Special Bonds (Unquoted)

i) 10.5% Government of India Special Bonds 2005 1 3,850,000,000 3,850.00 3,850.00

ii) 6.96% Government of India transferable Special Bonds 2009 698,037 10,000 6,980.37 9,610.00

(961,000)

iii) 5% Oil companies’ Government of India Special Bonds 2009 257,600 10,000 2,576.00 0.00

44,231.21 39,485.91

Less: Provision for Diminution 15.05 -

TOTAL TRADE INVESTMENTS 44,216.16 39,485.91

B NON-TRADE INVESTMENTS (Unquoted)1 12% UP State Development Loan-2011 1 500,000 0.50 0.50

2 9% Tax free bonds ICICI Ltd. 0 10,000 0.00 339.50

(33,950)TOTAL NON TRADE INVESTMENTS 0.50 340.00

TOTAL 44,216.66 39,825.91

Total Quoted Investments 27,564.78 22,766.35

Total Unquoted Investments 16,651.88 17,059.56

44,216.66 39,825.91

Total Market value of Quoted Investments 131,376.06 26,986.74

* Pound one each, total value Rs. 6,885/-Figures in the ( ) relate to previous year.# Rs. 450/-

(Rupees in million)


2004 2003

SCHEDULE-7

A) EXPLORATORY WELLS-IN-PROGRESS

Gross Cost

Opening Balance 10,730.94 9,774.65


Less : Sale proceeds of Oil and Gas 1.42 17,242.18 13.78 13,391.75

(Refer Schedule-18)

Dry wells written back 22.00 900.29

27,995.12 24,066.69

Less :

Transfer to Producing Properties 1,547.90 2,789.94

Wells written off during the year 16,880.55 10,375.71

Other adjustments 9.89 170.10

EXPLORATORY WELLS-IN-PROGRESS 9,556.78 10,730.94

B) DEVELOPMENT WELLS-IN-PROGRESS

Opening Balance Transfer from Producing Properties 944.62 0.00

Expenditure during the year 17,709.80 0.00

Transfer to Producing Properties (16,990.76) 0.00

DEVELOPMENT WELLS-IN-PROGRESS 1,663.66 0.00

EXPLORATORY/DEVELOPMENT WELLS-IN-PROGRESS (A+B) 11,220.44 10,730.94

7776

(Rupees in million)


2004 2003

SCHEDULE-11

SUNDRY DEBTORSDebts - Outstanding for a period

exceeding six months :

- Considered Good 1,379.21 2,109.40

- Considered Doubtful 1,082.49 663.31

Other debts :

- Considered Good 21,798.78 37,249.94

- Considered Doubtful 20.20 0.00

24,280.68 40,022.65

Less: Provision for Doubtful Debts 1,102.69 663.31

TOTAL 23,177.99 39,359.34

SCHEDULE-12A) CASH AND BANK BALANCESCash balance on Hand 17.26 24.38

Remittances in Transit 0.00 40.00

Balances with Scheduled Banks in:Current Accounts 133.40 664.41

Fixed Deposits 55,580.61 35,491.06

Margin Money Deposit Account 0.43 0.12

Balances with Non-Scheduled Banks in:Current Account with J.P Morgan Chase Bank- Texas 0.02 86.60

(Maximum balance during the year Rs. 86.60

million. Previous year Rs. 86.60 million)

Current Account with Commerz Bank - Frankfurt 2.76 2.63(Maximum balance during the year Rs. 2.76 million.

Previous year Rs. 2.63 million)

Total 55,734.48 36,309.20

B) DEPOSIT WITH BANK UNDER SITE RESTORATION FUND SCHEME* 31,681.97 24,780.97

*Deposited u/s 33ABA of the Income Tax Act, 1961 and could be withdrawn only for the purposes specified in the scheme.

(Rupees in million)


2004 2003

SCHEDULE-9

INTEREST ACCRUED

Unsecured, Considered Good unless otherwise stated

Interest Accrued On

- Investments 36.94 42.55

- Deposits with Banks/Financial Institutions 2,390.87 1,116.04

- Others



5,580.29 3,980.35Less: Provision 259.12 259.12

TOTAL 5,321.17 3,721.23

SCHEDULE-10

INVENTORIES

(As verified and valued by the Management)

Finished Goods 1,418.41 1,529.87

Stores and spare parts

- on hand 13,801.30 10,190.77

- in transit (including inter-project transfers) 7,142.76 2,647.02

Capital Stores

- on hand 718.50 1,169.18

- in transit 821.41 65.10

Unserviceable scrap 154.51 108.22

TOTAL 24,056.89 15,710.16

7978

(Rupees in million)


2004 2003

SCHEDULE-14

OTHER CURRENT ASSETS

(Unsecured, Considered Good unless otherwise stated)

Repair Jobs-in-progress-at Cost 72.94 164.21Other Accounts

- Considered Good 26.90 19.41


969.23 1046.91

Less: Provision for Doubtful Accounts 942.33 1027.50

26.90 19.41

TOTAL 99.84 183.62

SCHEDULE-15

CURRENT LIABILITIESSundry Creditors for Supplies / Works

- Small Scale Industries 9.11 4.88

- Other than Small Scale Industries 16,214.53 3,448.37

Liability for Royalty/Cess/Sales tax etc. 5,693.65 9,158.06

On Account Payments from PPAC 100.69 100.69

Deposits from Suppliers, Contractors 3,609.56 2,355.26

Other Liabilities 9,900.83 16,043.79

Unclaimed Dividend* 47.74 50.10

Interest Accrued but not due on loans 164.53 19.24

TOTAL 35,740.64 31,180.39

* This does not include any amount due for payment to Investor Education and Protection Fund.

(Rupees in million)


2004 2003

SCHEDULE-13

LOANS AND ADVANCES

Loans to Public Sector Undertakings 409.50 409.50

Loans and Advances to Subsidiaries 110,466.49 72,075.06

Advance for Petronet LNG Ltd.-Shares 12.50 275.00

Advance for Petronet MHB Limited-Shares 383.41 0.00

Loans and Advances to Employees 7,711.39 8,115.89

Advances Recoverable in Cash or

in Kind or for Value to be received 5,421.57 4,238.04

Recoverable from Petroleum Planning & Analysis Cell (PPAC) 8,344.55 6,465.99

Insurance Claims 965.59 1,097.67

Deposits:

a) With Customs/Port Trusts etc. 621.43 221.09 b) Others 2,514.20 1,125.55

136,850.63 94,023.79

Less: Provision for Doubtful Claims/advances 2,792.15 2,606.77

134,058.48 91,417.02

Income Tax :

Advance payment of Income Tax 142,323.71 177,387.28

(Including Advance payment of Wealth Tax Rs. 12.39 million

Previous Year Rs.17.18 million)

Less: Provision 135,839.99 6,483.72 173,898.06 3,489.22

(Including provision for Wealth Tax Rs. 31.00 million

Previous Year Rs. 35.00 million)

TOTAL 140,542.20 94,906.24

Particulars of loans and advances:

Secured 7,031.46 7,208.81

Unsecured

- Considered Good 133,510.74 87,697.43

- Considered Doubtful 2,792.15 2,606.77

143,334.35 97,513.01

Less : Considered Doubtful and provided for 2,792.15 2,606.77

TOTAL 140,542.20 94,906.24

1. Loans to employees include an amount of Rs. 0.50 million (Previous Year Rs. 0.14 million) outstanding from whole timeDirectors. Maximum amount outstanding during the year Rs. 0.57 million (Previous Year Rs. 0.19 million).

8180

(Rupees in million)

2003-04 2002-03

SCHEDULE-19

PIPELINE TRANSPORTATIONPipeline Transportation 23.61 23.89Rate Revision Arrears 0.00 453.68

TOTAL 23.61 477.57

SCHEDULE-20

OTHER INCOMEContractual Short Lifted Gas Receipts 42.90 54.70Reimbursement from Govt. of India towards :Pour Point Depressant (PPD) Charges 0.00 1,822.76Recovery of Production Cost etc. 0.00 182.76

0.00 2,005.52Other Contractual Receipts 1,192.74 1,149.41Income from Trade Investments :Dividend on Long term Investments 2,572.03 1,537.96(Tax deducted at Source Nil (Previous yearRs. 171.54 million)Interest on Long Term Investments 964.89 1,073.10Profit on sale of Long term Investments 194.60 0.00

3,731.52 2,611.06Income from Non Trade Investments :Interest on Long Term Investments 23.42 30.62Interest Income on :Deposits with Banks/Financial Institutions 4,422.72 5,902.45(Tax deducted at source Rs.506.79 million. Previous yearRs.1050.22 million)Loans and Advances to Subsidiaries (Tax deducted atsource Rs.98.53 million. Previous year Nil) 480.39 0.93Loans and Advances to Employees 461.55 438.90Income Tax Refund 772.03 3,604.89Site Restoration Fund Deposit 1,301.00 431.07Others 14.59 179.21

7,452.28 10,557.45Excess Provisions written back 491.72 367.28Liabilities no longer required written back 686.01 71.20Miscellaneous Receipts 1,680.32 3,051.27

TOTAL 15,300.91 19,898.51

(Rupees in million)


2004 2003

SCHEDULE-16

PROVISIONSGratuity 508.76 811.97Leave Encashment 2,841.74 2,481.46Provision for Abandonment * 25,664.72Provision for Impairment 3,432.11 3,270.40Provision against Non-Moving Inventories and Others 2,233.87 2,411.78Proposed Dividend 14,259.34 18,537.14Tax on Proposed Dividend 1,826.98 2,375.07

TOTAL 25,102.80 55,552.54

* Since transferred to Depletion (Schedule-5)

SCHEDULE-17

MISCELLANEOUS EXPENDITURE

(to the extent not written off or adjusted)

Deferred ExpenditureDry Docking Charges 2,310.61 1,194.32

Other Expenditure 3,096.18 113.35

TOTAL 5,406.79 1,307.67

2003-04 2002-03

SCHEDULE-18

SALES

Sales 326,179.97 349,640.26

Less :Transfer to Exploratory Wells in Progress 1.42 13.78

(Refer Schedule-7)

Government of India’s share in Profit Petroleum 4,403.75 4,405.17 4,286.92 4,300.70

321,774.80 345,339.56

Adventitious Gain 4.63 0.00

Price Revision Arrears 3,460.65 1,567.81

TOTAL 325,240.08 346,907.37

8382

(Rupees in million)

2003-04 2002-03

SCHEDULE-23

RECOUPED COSTSSurvey 9,479.82 6,705.34

Dry Wells

Written off during the year 16,880.55 10,375.71

Less: Written Back 22.00 16,858.55 900.29 9,475.42

Depletion (Refer Note No. 5) 23,213.68 17,497.34

Depreciation 17,680.17 19,537.80

Less : Allocated to :

Survey 759.94 712.05

Exploratory Drilling 1,517.09 1,590.01

Development 9,321.64 9,586.56

Others 24.91 54.72

11,623.58 6,056.59 11,943.34 7,594.46

TOTAL 55,608.64 41,272.56

(Rupees in million)

2003-04 2002-03

SCHEDULE-21

INCREASE/ (DECREASE) IN STOCKS (FINISHED GOODS)

Closing Stock 1,418.41 1,529.87

Opening Stock 1,529.87 1,318.54

NET INCREASE/ (DECREASE) IN STOCK (111.46) 211.33

SCHEDULE-22

PRODUCTION, TRANSPORTATION, SELLINGAND DISTRIBUTION EXPENDITURERoyalty 28,460.59 30,001.51

Cess 41,938.08 42,090.32

Natural Calamity Contingent Duty 1,116.68 98.17

Excise Duty on stocks (Net) (116.31) 291.80

Sales Tax 11,071.03 12,560.67

Octroi and Port Trust Charges 2,233.85 2,678.60

Staff Expenditure 9,550.42 9,876.19

Workover Operations 8,742.68 6,041.93

Water Injection, Desalting and Demulsification 2,073.28 2,035.74

Consumption of Stores and Spares 1,350.72 1,846.47

Pollution Control 3,703.32 2,750.70

Transport Expenses 2,071.33 1,668.95

Insurance 1,105.08 1,209.08

Power and Fuel 1,229.72 1,220.62

Repairs and Maintenance 3,691.40 1,995.11

Contractual payments including Hire charges etc. 3,116.80 2,348.55

Other Production Expenditure 1,877.48 2,469.60

Transportation and Freight 5,716.66 5,451.54

Research and Development 794.83 854.68

Other Expenditure including General Administrative Overheads 12,431.51 10,471.28

TOTAL 142,159.15 137,961.51

Note: The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act, 1956and exhibited in note 18 of Schedule 29.

8584

(Rupees in million)

2003-04 2002-03

SCHEDULE-26

ADJUSTMENTS RELATING TO PRIOR PERIOD (NET)Statutory levies* (27.97) 0.19

Other production expenditure* 213.26 (135.72)

Interest-Others 6.86 (0.03)

Exchange Fluctuation 16.88 (143.02)

Depletion 109.62 0.00

Depreciation 0.38 4.62

Total Debit 319.03 (273.96)

Sales (144.50) 0.00

Interest -Others 1.47 117.63

Other Income 168.46 14.87

Total Credit 25.43 132.50

Net Debit/(Credit) 293.60 (406.46)

*The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act, 1956 andexhibited in note 18 of Schedule 29.

(Amount in rupees)

2003-04 2002-03

SCHEDULE-27

EARNINGS PER EQUITY SHAREBasic & Diluted earnings per equity share 60.76 73.84

Earnings per equity share has been computed by dividing the net profit after taxation of Rs. 86,644.29 million (PreviousYear Rs. 105,293.22 million) by number of equity shares of 1,425,933,992 (Previous Year 1,425,933,992).

(Rupees in million)

2003-04 2002-03

SCHEDULE-24

FINANCING COSTSA. INTEREST

i) On Fixed LoansFrom Oil Industry Development Board 44.97 55.60

Foreign Currency Loans 67.91 367.52

ii) On Short Term Loans from Banks 252.53 0.00

iii) On Cash Credit 13.65 43.49

iv) Others 81.51 75.22

Sub-Total 460.57 541.83

B. GUARANTEE AND COMMITMENT FEES 0.05 590.13

C. EXCHANGE FLUCTUATION

Exchange variation for the year (Net) 5.13 668.42

Less : Capitalised (13.89) 334.48

Sub-Total 19.02 333.94

TOTAL 479.64 1,465.90

SCHEDULE-25

PROVISIONS AND WRITE-OFFSPROVISIONSProvision for Doubtful Debts 474.90 138.32Provision for Doubtful Claims/Advances 321.35 1,763.14Provision for Abandonment * 19,125.81Provision for Impairment 161.71 161.98Provision against Non-Moving Inventories and Others 145.09 56.43

Sub-Total 1,103.05 21,245.68

WRITE-OFFSLoss on Disposal/Condemnation of Fixed Assets (Net) 85.18 25.08Claims / Advances Written Off 7.16 0.17Inventories Written Off 128.29 74.10Bad debts Written Off 0.33 0.00Other Write Offs 17.72 5.79

Sub-Total 238.68 105.14

TOTAL 1,341.73 21,350.82

*This is included in Depletion (refer Note No. 5 of Schedule 29).

8786

3. Impairment

(i) Impairment loss is determined on a global basis and adjusted for in the carrying cost of producing properties.

(ii) Provision for impairment to producing properties is made with reference to shortfall in the market value ofproved developed reserves at the year end /average prices for the year and attributable future estimated costsat current levels over its book value on individual lease/license/amortization base. The proved developed reservesare as estimated by the Reserve Estimates Committee of the Company. However, provision for impairmentbeing carried forward, will be reviewed for write back, if any, after three years from the year of provision inrespect of individual lease/ license / amortization base.

4. Abandonment Costs

(i) The full eventual liability towards costs relating to dismantling, abandoning and restoring offshore well sites andallied facilities is recognized at the initial stage as cost of producing property and liability for abandonment cost,based on the latest technical assessment available at current costs with the Company.

(ii) Cost relating to dismantling, abandoning and restoring onshore well sites and allied facilities are accounted forin the year in which such costs are incurred as the salvage value is expected to take care of the abandonmentcosts.

5. Joint Ventures

The Company has entered into Joint Ventures in the nature of Production Sharing Agreements with the Governmentof India and various bodies corporate for development and production activities.

(i) The financial statements reflect the share of the Company’s assets and liabilities as well as income andexpenditure of Joint Venture Operations which are accounted for according to the participating interest of theCompany as per the various Joint Venture Agreements on a line by line basis alongwith similar items in theCompany’s financial statements, except in cases of abandonment, impairment, depletion and depreciationwhich are accounted based on accounting policies of the Company.

(ii) Past cost compensation and consideration for the right to commence operations received from other JointVenture Partners are reduced from capitalised costs. The uncompensated cost continues in the Company’sbooks as producing property/exploratory wells in progress. Adjustment is made to the uncompensated cost forimpairment, if any, on the basis of annual ceiling test (without discounting).

(iii) The reserves of hydrocarbons in such areas are taken in proportion to the participating interest of the Company.

6. Fixed Assets

(i) Fixed assets (including support equipment and facilities) are stated at historical cost. Fixed assets received asdonations/gifts are capitalised at assessed values with corresponding credit taken to Capital Reserve.

(ii) All costs relating to acquisition of fixed assets till the time of commissioning of such assets are capitalised.

7. Depreciation

(i) Depreciation on fixed assets is provided for under the written down value method in accordance with the ratesspecified in Schedule XIV to the Companies Act, 1956 except on fixed assets with 100% rate of depreciationwhich are fully depreciated in the year of addition.

(ii) Leasehold land is amortised over the lease period.

(iii) Depreciation on adjustments to fixed assets on account of exchange differences and price variation is providedfor prospectively over the remaining useful life of such asset.

(iv) Depreciation on fixed assets (including support equipment and facilities) used for exploration and drilling activitiesand on facilities is initially capitalised as part of exploration or development costs and expensed/depleted asstated in policy 2 above.

SCHEDULE-28

SIGNIFICANT ACCOUNTING POLICIES

1. Accounting Conventions

The financial statements are prepared under the historical cost conventions in accordance with generally acceptedaccounting principles (GAAP), under the Successful Efforts Method as per the Guidance Note on Accounting for Oiland Gas Producing Activities issued by the Institute of Chartered Accountants of India, and provisions of theCompanies Act, 1956. Generally, revenues are recognized on accrual basis with provision made for known lossesand expenses.

2. Exploration, Development and Production Costs

2.1 Survey Costs

Cost of Surveys and prospecting activities conducted in the search of oil and gas are expensed in the year inwhich these are incurred.

2.2 Exploratory/ Development Wells in Progress

2.2.1 All acquisition costs, exploration costs involved in drilling and equipping exploratory and appraisal wells, cost ofdrilling exploratory type stratagraphic test wells are initially capitalised as exploratory wells in progress till thetime these are either transferred to producing properties on completion or expensed in the year when determinedto be dry or of no further use, as the case may be.

2.2.2 All wells appearing as “exploratory wells in progress” which are more than two years old from the date ofcompletion of drilling are charged to Profit and Loss Account except those wells which have proved reservesand the development of the fields in which the wells are located has been planned. Such wells, if any, are writtenback on commencement of commercial production.

2.2.3 All costs relating to development wells are initially capitalized as development wells in progress and transferredto producing properties on completion.

2.3 Producing Properties

2.3.1 Producing properties are created in respect of an area/field having proved developed oil and gas reserves whenthe well in the area/field is ready to commence commercial production.

2.3.2 Cost of temporary occupation of land, successful exploratory wells, all development wells and all relateddevelopment costs including depreciation on support equipment and facilities and estimated future abandonmentcosts are capitalised and reflected as Producing Properties.

2.3.3 Depletion of Producing Properties

Producing properties are depleted using the “Unit of Production Method”. The rate of depletion is computed withreference to the area covered by individual lease/licence/amortization base by considering the proved developedreserves and related capital costs incurred including estimated future abandonment costs. These reserves areestimated annually by the Reserve Estimates Committee of the Company, which follows the InternationalReservoir Engineering Procedures.

2.4 General Administrative Overheads

General Administrative Overheads at Assets/Basins/services, regions and Headquarters are charged to Profitand Loss Account.

2.5 Production Costs

Production costs include pre-well head and post well head expenses including depreciation and applicableoperating costs of support equipment and facilities.

8988

13. Voluntary Retirement Scheme

Expenditure on Voluntary Retirement Scheme (VRS) is charged to Profit and Loss Account.

14. Insurance claims

Insurance claims in respect of total loss of assets are accounted for on intimation to the Insurer. In respect of otherclaims, expenditure incurred to put an asset back to use, less policy deductibles, if any, is accounted for as recoverablefrom the Insurer. Such policy deductibles are expensed in the year, these are incurred.

15. Research and Development

Capital expenditure on Research and Development is capitalised under various fixed assets. Revenue expenses arecharged when incurred.

16. Rig Days Costs

Rig movement costs are normally booked to the next location planned for drilling. Abnormal idle rig days costs arecharged to Profit and Loss Account.

17. Deferred Revenue Expenditure

Dry docking charges of MSVs (Multipurpose Supply Vessels), rig mobilization expenses and other expenditure areconsidered as deferred expenditure to be amortised over a period of three to five years.

18. Borrowing Costs

Borrowing Costs specifically identified to the acquisition or construction of qualifying assets are capitalised as partof such asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for intendeduse. All other borrowing costs are charged to Profit and Loss Account.

8. Inventories

(i) Crude oil in saleable condition, Liquified Petroleum Gas, Natural Gasoline, Ethane - Propane, Aromatic RichNaphtha, Superior Kerosene Oil and Heavy Cut, High Speed Diesel, stocks in pipelines/tanks are valued at costor net realisable value whichever is lower. Sulphur is valued at net realisable value. The value of inventoriesincludes excise duty wherever applicable.

(ii) Natural gas in pipeline and crude stock in flow lines and Group Gathering Station is not valued.

(iii) Inventory of stores and spare parts is valued at Weighted Average Cost.

(iv) Capital items are valued at cost of their acquisition.

(v) Unserviceable items, when determined are valued at estimated net realisable value.

9. Investments

(i) Long-term investments (except PSU Bonds) are valued at cost. Provision is made for any diminution, other thantemporary, in the value of such investments.

(ii) PSU Bonds are carried at lower of face value or cost. Diminution in their carrying value with reference to themarket value is not recognised since these are intended to be held till maturity.

10. Foreign Currency Transactions

(i) Foreign exchange transactions relating to purchase of fixed assets, goods and services are accounted for atthe exchange rates ruling on the date of transaction.

(ii) Foreign Currency loans/deferred credits outstanding at the end of the year and bank balances held abroad aretranslated at the mean exchange rate prevailing on the last day of the financial year. Losses or gains relating tothe loans/deferred credits utilised for acquisition of fixed assets are adjusted to the carrying cost of the relevantassets. Losses or gains due to exchange fluctuations relating to other loans/deferred credits are considered inthe Profit and Loss Account.

11. Revenue Recognition

(i) Revenue from sale of products is recognised on transfer of custody to customers.

(ii) Sale of crude oil and gas produced from exploratory wells in progress in exploratory areas is deducted fromexpenditure on such wells.

(iii) Sales are inclusive of all statutory levies. Any retrospective revision in prices is accounted for in the year ofsuch revision.

(iv) Revenue in respect of the following is recognized when there is reasonable certainty regarding ultimate collection.

(a) Short lifted quantity of gas.

(b) Gas pipeline transportation charges and statutory duties thereon.

(c) Reimbursable subsidies and grants.

(d) Interest on delayed realizations from customers.

12. Retirement Benefits

(i) Contribution to Provident Fund is made as per the rules of the Company. The same is paid to a fund administeredthrough a separate Trust.

(ii) Provision for gratuity is made as per actuarial valuation at the end of the financial year. The same is paid to afund administered through a separate Trust.

(iii) Provision towards leave encashment is made on the basis of actuarial valuation at the end of the financial year.

9190

The item-wise details of Deferred Tax Asset and Liability are as under: -

(Rs. in million)

As on As on31.03.2004 31.03.2003

(i) LiabilitiesDepletion of Producing Properties 81,167.15 60,641.29Depreciation Allocated to Wells in Progress 458.21 519.42Deferred Revenue Expenditure written off 1,938.56 466.50Development Wells-in-Progress 596.84 0Others 173.13 0

Total (i) 84,333.89 61,627.21

(ii) AssetsDepreciation 125.72 1,439.34Dry wells written off 4,658.95 4,453.59Provision for Non Moving Inventories 801.40 832.62Provision for Doubtful Claims/Advances 1,587.04 1,256.11Provision for Abandonment 17,438.86 317.04Provision for Leave Encashment 1,019.47 837.39Others 282.28 142.67

Total (ii) 25,913.72 9,278.76

Deferred Tax Liability (Net) ( i - ii) 58,420.17 52,348.45

5. Changes in Accounting Policies:

The Company has adopted the Guidance Note on Accounting for Oil and Gas Producing Activities issued by theInstitute of Chartered Accountants of India w.e.f. 1.4.2003 and has changed its accounting policies in line with therequirements of the Guidance Note as under.

i) The full estimated abandonment cost has been recognised as an asset (producing property) with a correspondingcredit to liability for abandonment. As a result of this, the quantum of Producing Property on the asset side, aswell as the liability for Abandonment on the liability side has gone up by Rs. 80292.03 million. This has, however,no impact on profits for the year. The provision for abandonment costs on the basis of Unit of Production Methodhas been included under the head Depletion instead of Provision for Abandonment in Schedule – 25.

ii) The time limit of carry over of exploratory wells in progress has been changed to two years from three years forcharging the same to Profit and Loss Account. As a result of this change, the dry well expenditure for the yearhas gone up by Rs 768.87 million (net) with corresponding decrease in profit before tax and decrease (net) inexploratory wells in progress.

iii) The Capital work in progress related to facilities and development wells in progress have been excluded fromthe cost base for computing depletion. As a result of this change, depletion for the year is lower by Rs. 814.96million with corresponding increase in profit before tax and increase in producing properties.

6. As stated above in Note No. 5, the company has followed the Guidance Note on accounting on Oil & Gas ProducingActivities issued by the Institute of Chartered Accountants of India, which prescribes the treatment of depreciationon fixed assets and depletion of Producing Properties. Since the company has followed the said prescribed account-ing treatment, the management is of the view that the provisions of section 205 of the Companies Act, 1956 for thepurpose of declaration of dividend are duly complied with.

SCHEDULE-29

NOTES TO THE ACCOUNTS

1. In terms of the decision of the Government of India conveyed by Ministry of Petroleum and Natural Gas vide letterdated 30th October, 2003 and further communication by Petroleum Planning & Analysis Cell (PPAC) vide their letterdated 24th April, 2004, ONGC was to share the under recoveries of Oil Marketing Companies (OMCs) on PDSKerosene and domestic LPG for the year 2003-04 by allowing discount in the prices of crude oil, PDS kerosene anddomestic LPG. Accordingly, Sales Revenue in respect of Crude oil, LPG and SKO is net of Rs. 26903.92 million onthis account.

2. a) During the year, Petroleum Planning & Analysis Cell (PPAC) conveyed approval of the Ministry of Petroleumand Natural Gas (MoP&NG) to ONGC’s proposals pertaining to APM period (upto 31st March 2002). The samehave been accounted for in Schedule -18 under the head “Price Revision Arrears” as follows: -

Sl. No. Description Rupees in million

i) Revision of provisional basic price of crude oil for the period 1996-98. 1310.58

ii) Reimbursement of Statutory levies i.e. Sales Tax and Octroi consequent upon 53.90revision of provisional crude oil price for the period 1996-98.

iii) Revision of retention prices of LPG/NGL extraction plant ex-ONGC Hazira and 130.47Uran for the period 1996-98

iv) Revision of retention prices of LPG/NGL extraction plant ex-ONGC Ankleshwar -72.14for the period 1993-98

v) Others 1.66

Total – Price Revision Arrears 1424.47

b) Indian Oil Corporation (IOC) did not revise the Refinery Transfer Price (RTP) for LPG during November 2002 toMarch 2003 and SKO during January 2003 to March 2003. During the year 2003-04, MoP&NG, vide letter dated18 March 2004, conveyed its decision to OMCs that they should pay to ONGC RTP of Kerosene and LPG onimport parity basis for the year 2002-03. As a result of this, ONGC’s revenue from sale of LPG and SKOincreased by Rs. 1939.31 million. The same has been shown in Schedule 18 under the head “Price RevisionArrears”.

c) Price revision arrears amounting to Rs. 96.87 million in respect of crude oil for the year 2002-03 were receivedfrom refineries.

3. During the Financial Year 2002-03, the Government of India, Ministry of Petroleum and Natural Gas (MoP&NG) videresolution dated 17th March, 2003 had introduced a new scheme of royalty on crude oil w.e.f. 1st April, 1998. As perthis Resolution, the additional amount of royalty for the period from 1st April, 1998 to 31st March, 2002 accrued to theStates was not to be borne by National Oil Companies (NOCs) and was to be paid to the States under the liability ofOil Pool Account. As per the directives of Government of India vide, MoP&NG’s letter dated 23rd March, 2004,ONGC released the payment of Rs. 2576.02 million to the concerned State Governments. Government of Indiasimultaneously issued 5% Oil Companies Government of India Special Bonds, 2009 for Rs. 2576.00 million toONGC, which has been shown under Investments (Schedule – 8).

4. In compliance of Accounting Standard – 22 on “Accounting for Taxes on Income” issued by the Institute of CharteredAccountants of India, the Company has provided accumulated net deferred tax liability in respect of timing differencesas on 31st March, 2004 amounting to Rs 58420.17 million (previous year Rs. 52348.45 million). Net Deferred TaxExpense for the year of Rs. 6071.72 million (previous year Rs. 1122.13 million deferred tax income).

9392

xviii) WB-OSN-2000/1 85%xix) WB-ONN-2000/1 85%xx) GV-ONN-2000/1 85%xxi) CY-DWN-2001/1 80%xxii) KG-DWN-98/4 85%xxiii) NK-CBM-2000/1/1 80%xxiv) BK-CBM-2000/1/1 80%xxv) JHARIA 90%xxvi) RANIGANJ 74%xxvii) AA-ONN-2001/2 80%xxviii) AA-ONN-2001/3 85%xxix) MN-DWN-2002/1 70%

(b) In the year 2002-03, where unaudited figures were incorporated, necessary adjustments have been carried outwith reference to the audited figures of 2002-03 in the current period.

(c) The company has entered into 29 joint ventures for exploration and production. As at the end of the year, thetotal value of assets, liabilities, income, expenditure and net profit before tax of these joint ventures amounts toRs. 24179.6 million, Rs. 6132.4 million, Rs. 23555.3 million, Rs. 12579.7 million and Rs. 10975.6 millionrespectively.

Of the above financial figures relating to 5 joint ventures having assets, liabilities, income, expenditure and netprofit before tax amounting to Rs. 8791.1 million, Rs. 2122.9 million, Rs. 12338.5 million, Rs. 5752.5 million andRs. 6586.0 million respectively have been accounted on the basis of unaudited returns received from therespective joint venture.

8.2 Jointly Controlled Entity :

(a) Name Country of Incorporation Ownership Interest (%) 31.03.2004

Petronet LNG Ltd. India 12.5

(b) ONGC’s share in assets, liabilities, income, expenses, contingent liabilities and capital commitments of JointlyControlled Entity

(Rs. in million)Description 31.03.2004i) Assets- Long Term assets 2,195.28

- Current assets 720.51

ii) Liabilities

- Current liabilities and provisions 204.10

- Other liabilities 1,573.61

iii) Income -

iv) Expenses -

v) Contingent liabilities 180.41

vi) Capital commitments 440.01

9. Producing Properties (Schedule–5) include an amount of Rs. 1416.76 million (previous year Rs. 832.80 million) inrespect of an offshore field, which has been offered for Production Sharing Contract (PSC) to a consortium whereCompany holds 40% interest. PSC for the same is yet to be signed. Pending finalization of PSC, no adjustment hasbeen made in the books of account.

7. Loans and Advances (Schedule-13) include:

(Rs. in million)

Particulars Loans & Advances in theNature of Loans

Outstanding as Maximum Amounton 31.03.2004 Outstanding

during the year

Subsidiaries

ONGC Videsh Limited (OVL) – Wholly 86348.29 86348.29owned subsidiary (68925.06) (68925.06)

Mangalore Refinery & Petrochemicals 24000.00 24000.00Ltd.(MRPL) (3150.00) (3150.00)

Loans to employees having repayment 7031.46 7208.81schedule of more than seven years (7208.81) (7208.81)

Notes1. Loans to OVL – fully owned subsidiary are interest free and repayable within a notice period of minimum one year.

2. Loan to MRPL carries interest at the Bank rate payable at quarterly intervals which is presently 6% p.a. The loan isrepayable in 8 years on quarterly basis. Repayment will commence on 30.06.2006.

3. *Working capital advance to MRPL in the previous year carried interest at State Bank of India Prime Lending Rateand was repayable on demand.

4. The Company has not advanced any money to the employees for the purposes of investment in the securities ofthe Company.

8. Joint Venture Accounting:

8.1. Jointly Controlled Operations

(a) The Company has entered into production sharing contracts in respect of certain properties with the Governmentof India and some bodies corporate. These joint ventures are:

Joint Ventures Participating Interest of ONGCi) Ravva 40%ii) Mukta/Panna 40%iii) Mid/South Tapti 40%iv) Pondicherry Offshore (PY-3) 40%v) Cambay (CB-OS-1) 10%vi) Cambay (CB-OS-2) 40%vii) Gulf of Kutch (GK-OSJ-1) and GK-OSJ-3 25%viii) Mumbai Offshore MB-OSN-97/4 70%ix) Mahanadi Offshore MN-OSN-97/3 85%x) Ganga Valley Onshore GV-ONN-97/1 70%xi) GS-DWN-2000/2 85%xii) KK-DWN-2000/2 85%xiii) MB-DWN-2000/1 85%xiv) MB-DWN-2000/2 50%xv) MB-OSN-2000/1 75%xvi) MN-OSN-2000/2 40%xvii) MN-ONN-2000/1 20%

**

9594

15. Capital commitments (net of advances) not provided for

a) in respect of Joint Ventures - Nil

b) in respect of others Rs. 52411.86 million. (Previous year Rs. 12373.26 million).

16. Contingent Liabilities:

a) Claims against the Company not acknowledged as debts

(Rs. in million)

As at 31st As at 31st

March, 2004 March, 2003

i) in respect of Joint Ventures 13708.69 10591.96

ii) in respect of others:i. Disputed Income tax demands 5893.76 3808.15ii. Disputed Excise Duty demands 2846.92 2346.03iii. Disputed Custom Duty demands 1934.27 1437.47iv. Royalty 253.64 -v. Cess 749.54 1471.60vi. Claims of contractors in Arbitration/Court 15714.35 14510.98vii. Disputed Municipal Corporation demands 336.68 336.68viii. in respect of other disputes 3366.42 9696.33

Sub Total 31095.58 33607.24

Total 44804.27 44199.20

b) Guarantees executed by the company on behalf of its wholly owned subsidiary –

ONGC Videsh Limited in favour of:-

(Rs. in million)

S.No. Details Guarantee AmountAmount Outstanding

1 Oil Industry Development Board. 877.00 253.00(877.00) (348.88)

2 National Iranian Oil Company, USD 10.80 million. 475.63 475.63(513.54) (513.54)

3 National Oil Company of Tripoli, Libya, USD 15.974 million. 703.49 703.49(759.56) (759.56)

4 Certain Banks towards loan facility granted, aggregating USD 114.46 5040.82 2479.45million to part finance development of gas fields at Len Do and Lan Tay, (5442.57) (2872.02)Vietnam (out of this ONGC Videsh Limited has drawn USD 60.40million and balance outstanding as on 31.3.2004 is USD 56.30 million)

5 M/s Roseneft-S, R N Astra, SMNG-S and Exxon-N to the extent of USD 76673.64 29636.981741 million in terms of Assignment and Carry Finance Agreements in (82784.55) (50789.11)respect of Sakhalin-I Project (out of this ONGC Videsh Ltd has alreadymade remittances aggregating USD 1068.044 million and balanceoutstanding is USD 672.956 million (Previous year USD 1068.12 million)

10. The Company has perpetual physical verification system of Inventory, Fixed Assets and Capital Stores at regularintervals with general ledger balances. Adjustment of differences in books of accounts, if any, is carried out afterexamination of these differences, some of which are in progress.

11. Balance confirmation in respect of some of the debtors and creditors is awaited.

12. Based on the information available with the company, the names of the Small Scale Industrial Undertakings to whomthe company has outstanding for more than 30 days are M/s Technostrength, M/s Allwyn Rubber, M/s Carpet Indus-tries Pvt. Ltd., M/s Emcon Industries, M/s Mahalaxmi Ind. and M/s Marine Supply.

13. Since the Company has prepared the Consolidated Financial Statements as per Accounting Standard (AS 21),segment information has been presented in the Consolidated Financial Statements.

14. Information as per Accounting Standard (AS-18) on Related Party Disclosures is given below:

a) Name of Joint ventures with whom the company has entered into the transactions during the year (excludingwith state controlled entities) :-

i. Ravva Joint Venture v. CB-OS-2ii. PY-3 Joint Venture vi. GK-OSJ-3iii. Panna, Mukta & Tapti Joint Venture vii. GK-OSJ-1iv. CB-OS-1 viii. Petronet LNG Ltd.

b) Key Management Personnel:-

Functional Directors:

i) Shri Subir Raha, C&MDii) Shri Jauhari Lal (up to 30.04.03)iii) Shri R.C. Gourh (up to 31.12.03)iv) Shri Y.B. Sinhav) Shri V.K. Sharmavi) Shri Nathu Lalvii) Shri R.S. Sharmaviii) Dr. A. K. Balyan (From 23.08.03)

c) Details of Transactions(Rs. in million)

Joint Ventures Key Management TotalPersonnel

Payment towards Helicopter 0.52 0.52charges (PY-3) (Nil) (Nil)

Receipt on Account of Lab Nil NilTesting (0.15) (0.15)

Amount paid /payable for Oil 41.86 41.86Transfer Services (Ravva) (16.01) (16.01)

Amount received for use of 11.51 11.51Drill Site Accommodation (Ravva) (12.18) (12.18)

Receipt towards 668.69 668.69Transportation and Processing (708.41) (708.41)Charges (Panna Mukta)

Remuneration to Directors Nil 7.30 7.30(As per b above) (5.18) (5.18)

Amount Outstanding (Ravva) 3.78 0.62 4.40(59.58) (0.27) (59.85)

9796

17. Details of Oil and Gas Reserves (as determined by Reserve Estimates Committee)

17.1 Company’s share of Proved Reserves on the geographical basis as on 31st March,2004 is as under:-

DETAILS CRUDE GAS (BILLION TOTAL (MMT)**OIL(MMT)* CUBIC METER)

OFFSHORE OPENING 251.640 218.204 469.844ADDITION 5.650 -5.543 0.107DEDUCTIONSALE/TRANSFERPRODUCTION 19.370 19.936 39.306CLOSING 237.920 192.724 430.644

ONSHORE OPENING 189.220 147.748 336.968ADDITION 5.020 12.146 17.166DEDUCTIONSALE/TRANSFER 0.050 0.042 0.092PRODUCTION 8.360 5.720 14.080CLOSING 185.830 154.132 339.962

17.2 Company’s share of Proved and Developed Reserves on the geographical basis as on 31st March,2004 is as under:-

DETAILS CRUDE GAS (BILLION TOTAL OILOIL(MMT)* CUBIC METER) EQUIVALENT

(MMT)**



*Crude includes oil condensate

**For calculating OEG 1000M3 of Gas has been taken to be equal to 1 MT of Crude Oil.

Variation in totals, if any, are due to internal summation and rounding off.

6 Talisman Energy Inc to the extent of USD 720.00 million (previous year 31708.80 376.32USD 720.00 million) in terms of the Purchase and Sale Agreement in (34236.00) (915.62)respect of acquisition of 25% participating interest in Greater Nile OilProject, Sudan. Balance outstanding as on 31.3.2004 is USD 8.545 million(Previous year USD 19.256 million).

Total 115479.38 33924.87(124613.22) (56198.73)

c) Guarantees executed by the company on behalf of its subsidiary- MRPL in favour of:-

1 Bank of America for giving buyers’ credit facility up to USD 90 million. 3963.60 3963.60Balance outstanding as on 31.03.2004 was USD 90 million. ( - ) ( - )

2 Saudi Aramco for supply of crude oil up to USD 100 million.Balance 4404.00 2422.20 outstanding as on 31.03.2004 was USD 55 million. ( - ) ( - )

Total 8367.60 6385.80

( - ) ( - )

d) Guarantees executed by the company on behalf of Petronet LNG Limited in favour of:

1 Certain banks towards short term loan granted to Petronet LNG Limited 3500.00 2560.10(a company which is promoted by the Company together with three other (3500.00) (2548.75)co-promoters) to the extent of Rs. 14000 million out of which Company’sshare is Rs. 3500 million.

9998

19. INFORMATION UNDER SCHEDULE VI TO THE COMPANIES ACT,1956

i) SALES TURNOVER

2003-04 2002-03

UNIT Quantity Value Rs. in million Quantity Value Rs. in million

Crude Oil MT 23942784 225362.50 23904591 247658.82

Less: From Exploratory fields 152 1.42 1331 13.78

Less: Government of India’s share 3236.91 222,124.17 3514.10 244,130.94in Profit Petroleum

Natural Gas 000M3 21103000 53350.39 21109575 50759.33

Less: From Exploratory fields 0.00 0.00

Less: Government of India’s share 1166.84 52,183.55 772.82 49,986.51in Profit Petroleum

Liquefied Petroleum Gas MT 1160987 16,351.68 1197878 19,087.34

Natural Gasoline/Naphtha MT 445384 5,784.97 364868 4,905.79

Ethane/Propane MT 533623 4,779.09 619091 5,836.83

Aromatic Rich Naphtha MT 1211318 16,752.70 1276839 17,128.83

Superior Kerosene Oil MT 217753 2,658.12 233716 3,188.57

Heavy Cut MT 37034 683.17 35764 511.39

LSHS MT 28112 319.02 27470 325.00

HSD MT 5100 84.52 5027 80.33

Others 53.81 158.03

321,774.80 345,339.56

Price Revision Arrears 3,460.65 1,567.81

Add: Adventitious Gain 4.63 0.00

325,240.08 346,907.37

18. DETAILS OF EXPENDITURE(Details of expenditure incurred during the year on Production, Selling and Distribution, Operation and Maintenanceof Pipelines, Exploration, Drilling and Development)

(Rupees in million)

2003-04 2002-03(a) Salaries, Wages, Ex-gratia etc. 20,570.41 20,852.85

(b) Contribution to Provident and other funds 1,337.70 1,285.42

(c) Provision for gratuity 507.74 811.97

(d) Provision for leave encashment 1,206.16 1,245.73

(e) Staff welfare expenses 1,996.82 25,618.83 1,724.65

Stores and spares consumed 12,523.36 11,943.05

Cess 41,938.66 42,092.71

Natural Calamity Contingent Duty - Crude Oil 1,116.70 98.17

Excise Duty 4,363.61 4,914.92

Royalty 28,448.81 30,003.50

Sales Tax 11,065.13 12,561.40

Octroi/BPT 2,237.63 2,683.99

Rent, rates and taxes 1,205.60 699.85

Hire charges of equipments and vehicles 27,069.67 14,257.54

Power, fuel and water charges 2,092.20 2,234.71

Contractual drilling, logging, workover etc. 18,104.02 11,572.75

Contractual security 1,101.01 1,021.69

Repairs to building 296.07 363.22

Repairs to plant and machinery 2,687.98 1,466.23

Other repairs 5,252.29 4,352.59

Insurance 2,163.32 2,245.59

Miscellaneous expenditure 5,677.02 6,613.44

192,961.91 175,045.97

Less:Allocated to exploration, development drilling, capital 46,137.55 32,596.87jobs recoverables etc.

Excise duty 4,479.92 4,623.12

Prior Period Adjustment 185.29 (135.53)

Production, Transportation, Selling and 142,159.15 137,961.51Distribution Expenditure etc.

101100

iii) LICENSED CAPACITY, INSTALLED CAPACITY AND ACTUAL PRODUCTION

(CAPACITY AS CERTIFIED BY THE MANAGEMENT)

2003-04 2002-03

Unit Installed Capacity Actual Production Installed Capacity Actual ProductionPer annum Quantity Per annum Quantity

Crude Oil MT Not applicable 27716609 Not applicable 27573872

Natural Gas 000M3 Not applicable 25700919 Not applicable 26000034

Liquefied Petroleum Gas MT 1158000 1171764 1111000 1203667

Natural Gasoline/Naphtha MT 2127000 388365 2040000 366668

Ethane/Propane MT 570000 533305 570000 618953

Aromatic Rich Naphtha MT 773495 1248266 771715 1294264

Superior Kerosene Oil MT 297200 212959 302320 232922

Heavy Cut MT 32965 37439 32965 35598

LSHS MT 19800 27816 20000 27595

HSD MT 12540 16459 12000 17279

1. Licensed Capacity is not applicable for the above products.

2. Production includes internal consumption and intermediary losses.

3. Crude Oil includes condensate 2.064 MMT (Previous year 2.246 MMT).

4. NGL production of 1.476 MMT (Previous year 1.546 MMT) used for fractionation for producing SKO, ARN andHeavy Cut.

iv) RAW MATERIALS CONSUMED

(Out of Own Production)2003-04 2002-03

UNIT QUANTITY VALUE QUANTITY VALUEAT COST AT COST

Rs. in million Rs. in million

(For production of Liquefied Petroleum

Gas, Natural Gasoline, Ethane/Propane,

Naphtha, ARN, SKO, LSHS, HSD and Heavy Cut)

Crude Oil MT 91193 38.61 92414 44.54

Natural Gas 000M3 953227 1,765.43 822066 1,143.40

Gas Equivalent Condensate 000M3 596147 493.39 648698 488.00

ii) OPENING AND CLOSING STOCK OF GOODS PRODUCED

As at As at31st March,2004 31st March,2003

UNIT QUANTITY VALUE QUANTITY VALUERs. in million Rs. in million

Opening Stock

Crude Oil* MT 802015 1127.27 762624 1096.22

Liquefied Petroleum Gas MT 13842 48.76 9159 17.75

Natural Gasoline/Naphtha MT 25685 113.82 25138 85.45

Ethane/Propane MT 850 3.02 988 3.63

Aromatic Rich Naphtha MT 58468 199.60 41061 93.20

Superior Kerosene Oil MT 10165 25.71 10959 13.95

Heavy Cut MT 565 1.81 746 1.53

LSHS MT 468 3.43 343 2.68

HSD MT 900 6.19 357 3.33

Others MT 146 0.26 995 0.80

1529.87 1318.54

Closing Stock

Crude Oil* MT 681134 1130.77 802015 1127.27

Liquefied Petroleum Gas MT 22678 112.75 13842 48.76

Natural Gasoline/Naphtha MT 25660 52.23 25685 113.82

Ethane/Propane MT 532 2.30 850 3.02

Aromatic Rich Naphtha MT 30450 94.88 58468 199.60

Superior Kerosene Oil MT 5371 16.65 10165 25.71

Heavy Cut MT 510 1.63 565 1.81

LSHS MT 172 1.18 468 3.43

HSD MT 462 4.01 900 6.19

others MT 508 2.01 146 0.26

1418.41 1529.87

*Includes Corporation’s share in Stock of Joint Venture Projects.

103102

ix) MANAGERIAL REMUNERATION (included in 18 above)

2003-04 2002-03Amount Amount

Rs. in million Rs.in million

REMUNERATION PAID OR PAYABLE TO DIRECTORS

Salaries and Allowances 3.95 3.77

Contribution to Provident & Other Funds 0.45 0.43

Sitting Fees 0.86 0.59

Other Benefits and Perquisites 1.96 0.98

(do not include cost of medical treatment availed from theCorporation’s own medical facilities as the amount is not determinable)

Leave Encashment and Gratuity of retired directors 0.94 0.00

8.16 5.77

Notes:

(1)The remuneration does not include provision for gratuity/leave encashment since the same is not available for individualemployees except for directors retired during the year.

x) AUDITORS’ REMUNERATION (included in 18 above)



Audit Fees 3.24 3.24

For Certification work etc. 3.08 3.38

Travelling and Out of Pocket Expenses 5.26 3.54

11.58 10.16

20. Previous year’s figures have been regrouped/reclassified wherever necessary to conform to current year’s classification.

21. Figures in bracket as given in Notes to Accounts relate to previous year.

22. Figures in the accounts are stated in Rs. million except those in paranthesis which would otherwise have become Nilon account of rounding off.

v) CONSUMPTION OF STORES AND SPARE PARTS

2003-04 2002-03

Amount % Amount %Rs. in million Rs. in million

Imported 1,661.42 13 3,187.69 27

Indigenous 10,861.94 87 8,755.36 73

12,523.36 100 11,943.05 100

vi) VALUE OF IMPORTS ON CIF BASIS


Rs. in million Rs. in millionCapital items* 3,605.36 5,459.71

Stores and Spare Parts 3,171.38 3,721.66

6,776.74 9,181.37

*Includes stage payments made against capital works.

vii) EXPENDITURE IN FOREIGN CURRENCY



Interest 67.91 367.52

Services 27,771.39 14,779.20

Others 6,549.18 6,283.88

34,388.48 21,430.60

viii) EARNINGS IN FOREIGN CURRENCY



Interest 0.00 0.08

Services 3.38 3.06

FOB value of Sales 3,725.99 1,208.89

Others 14.77 379.98

3,744.14 1,592.01

105104

(Rupees in million)

Year ended Year Ended31st March, 2004 31st March, 2003

B. CASH FLOW FROM INVESTING ACTIVITIES:Purchase of Fixed Assets (Net) (20,992.95) (19,869.40)Exploratory and Development Drilling (21,333.25) (17,979.79)Purchase of Investment (3,563.50) 0.00Investment in Subsidiary (3,811.43) (6,594.30)Loans and advances to Subsidiary (38,391.43) (50,864.07)Maturity with PSU’s 0.00 2,330.00Advance for Share Capital (120.91) 0.00Sale of Investment 3,163.73 0.01Dividend Received from Trade Investments 2,562.23 1,441.80Dividend Received from Associates 9.80 96.16Interest Received 6,840.63 14,179.86

Net Cash Flow from Investing Activities ‘B’ (75,637.08) (77,259.73)C. CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds from issue of Share Capital 0.07 0.00Proceeds from Government Grants 13.62 42.21Proceeds from Short Term Borrowings 24,650.00 0.00Repayment of Long Term Borrowings (1,509.27) (26,841.31)Cash Credit Advance 2,642.89 (351.76)

Dividend Paid (38,502.58) (44,173.52)

Tax on Dividend (4,932.84) 0.00

Interest Paid (315.28) (791.58)

Net Cash Flow from Financing Activities ‘C’ (17,953.39) (72,115.96)Net increase/(decrease) in Cash and 26,326.28 (19,865.15)Cash Equivalents (A+B+C)

Cash and Cash Equivalents as at 1st April, 2003 61,090.17 80,955.32(Opening Balance)

Cash and Cash Equivalents as at 31st March, 2004 87,416.45 61,090.17(Closing Balance)

Notes:

1. The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in the Accounting Stan-dard-3 on Cash Flow Statements issued by The Institute of Chartered Accountants of India.

2. Adjustments have not been made to “Purchase of Fixed Assets” (Investing Activities), on account of increase/decrease in Capital Creditors. The impact of the above is not readily ascertainable.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2004

(Rupees in million)

Year ended Year Ended31st March, 2004 31st March, 2003

A. CASH FLOW FROM OPERATING ACTIVITIES: Net profit before tax and prior period items 136,384.06 160,831.91

Adjustments For:

Recouped Costs

(Represented by Depreciation, Depletion

and Amortisation)

Gross Amount 55,608.64 41,272.56Cash Outflows (19,025.24) (12,233.65)

36,583.40 29,038.91

- Interest on Borrowings 460.57 541.83

- Foreign Exchange Loss 0.00 101.54

- Provision for Gratuity 508.76 811.97

- Provision for Leave Encashment 360.28 676.62

- Provision for Abandonment 0.00 19,125.81

- Provision for Impairment 161.71 161.99

- Provision for Investment 15.05 0.00

- Other Provision and Write offs 673.25 1,624.55

- Interest Income (8,440.57) (11,661.17)

- Deffered Government Grant (9.47) (14.50)

- Dividend Received (2,572.03) (1,537.96)

- Profit on sale of investment (194.60) 27,546.35 0.00 38,869.59

Operating Profit before Working Capital Changes 163,930.41 199,701.50Adjustments for:-- Debtors 15,741.64 (16,974.62)

- Loans and Advances (4,321.66) (4,380.15)

- Other Current Assets 168.95 (207.05)

- Defferred Revenue Expenditure (4,116.84) 789.96

- Inventories (8,475.02) (1,258.17)

- Trade Payable and Other Liabilities 3,541.82 2,538.89 (245.40) (22,275.43)

Cash generated from Operations 166,469.30 177,426.07

Direct Taxes Paid (Net of tax refund) (46,510.50) (46,539.27)

Cash Flow before prior period 119,958.80 130,886.80

Prior period items (42.05) (1,376.26)

Net Cash Flow from Operating Activities ‘A’ 119,916.75 129,510.54

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BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. Registration Details

Registration No. 55-54155 State Code 55

Balance Sheet Date 31-03-2004

II. Capital Raised during the year (Amount in Rs. Thousands)

Public Issue Right Issue

- -

Bonus Issue Private Placement

(Issued to employees only)

- -

III. Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands)

Total Liabilities Total Assets

577929040 577929040

Source of Funds Paid-up Capital Reserves & Surplus

14259271 391171664

Secured Loans Unsecured Loans

- 33785911

Deferred Tax Liability Liability For Abandonment Cost

58420166 80292028

Application of Funds Net fixed Assets Investments

308534500 44216658

Net Current Assets Misc. Expenditure

219771099 5406783

Accumulated Losses

-

3. Cash and Cash equivalents represent:-

(Rupees in million)

2003-04 2002-03

a) Cash and Bank Balances (Schedule 12A) 55,734.48 36,309.20

b) Deposits with Bank under Site Restoration 31,681.97 24,780.97Fund Scheme (Schedule 12B)

Total 87,416.45 61,090.17

4. Brackets indicate cash outflow/ deduction.

for and on behalf of the Board

H.C. Shah R. S. Sharma Subir RahaCompany Secretary Director(Finance) Chairman & Managing Director





V. Seetaramaiah H.K.VermaPartner Partner


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STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956RELATING TO COMPANY’S INTEREST IN THE SUBSIDIARY COMPANIES

Name of the Subsidiary Company ONGC Videsh Limited Mangalore Refinery and

Petrochemicals Limited

1. The Financial Year of the Subsidiary Company ended on 31st March, 2004 31st March, 2004

2. Date from which it became Subsidiary Companies Ist February, 1994 30th March, 2003

3. a) Number of shares held by Oil and Natural Gas 3,00,00,000 Equity 1,25,53,54,097 Equity

Corporation Limited alongwith its nominees in the Shares of Rs. 100/- each Shares of Rs. 10/- each

Subsidiary at the end of the financial year of the

Subsidiary Companies.

b) Extent of interest of Holding Company at the end of 100% 71.62%

the financial year of the Subsidiary Companies.

4. The net aggregate amount of the Subsidiary

Company’s Profit/(Loss) so far as it concerns the

members of the Holding Company.

a) Not dealt with in the Holding Company’s accounts:

i) For the financial year ended 31st March, 2004 Rs. 4284.49 million Rs. 3359.67 million

ii) For the previous financial year(s) of the Subsidiary Rs. 377.67 million Rs. (272.31) million

Companies since it became the Holding Company’s

Subsidiaries.

b) Dealt with in the Holding Company’s accounts:

i) For the financial year ended 31st March, 2004 - -

ii) For the previous financial year(s) of the Subsidiary - -

Companies since it became the Holding Company’s

Subsidiaries.


Place: New DelhiDated: June 22, 2004

IV. Performance of Company (Amount In Rs. Thousands)

Turnover (Gross Revenue) Total Expenditure

335973221 199882771

Profit/(Loss) Before Tax Profit/(Loss) After Tax

136090450 86644292

Earning per Share in Rs. Dividend Rate %

60.76 240

V. Generic Name of Three Principal Products/Services of Company (as per monetary terms)

Item Code No. 27090000

Product Description Crude Oil


Product Description Natural Gas


Product Description Liquified Petroleum Gas


Place: New DelhiDated: June 22, 2004

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3. In a major initiative, your Company has taken up development of 3 new fields including one in deep waters. Anothermajor initiative is to monetize the idle marginal fields through Service Contracts, retaining ownership of the field aswell as the output. Such contracts have been awarded for 6 onshore fields, and the process of international competitivebidding for 19 offshore fields is to be completed in this financial year.

Drilling

1. With accelerated induction of technology, tools and skills, more and more high-technology wells are being drilledoffshore, yielding significant upsides in production; equally important, by-passed Oil is being accessed, resulting inhigher recovery factor. Your Company has recently drilled the second deepest-water well in Western Offshore, atwater depth of 3008 meters, against global record of 3051 meters.

2. Rig utilization has improved significantly, due to intensified monitoring and control, and better logistics. Import ofmodern onshore work-over figs has begun, and a modular rig has been brought in, for the first time, for offshore work-overs. Modernization of onshore drilling rigs is in progress.

3. Advanced drilling techniques are now being introduced in onshore operations. For CBM development, a turnkeycontract for built-to-purpose drilling rigs is being finalized through international competitive bidding.

Human Resource

1. Development of professional skills is a priority for your Company. The in-house graduate and diploma programs intechnology - Unnati Prayas (‘Endeavour to Improve’) - is in progress; this is the first such program in corporate India.A ‘School of Maintenance Practice’ was set up this year, to train officers and workers in maintenance techniques andspecializations.

2. Management development is an equally important priority. Two customized MBA programs were launched, oneexclusively for ONGC at the Indian Institute of Foreign Trade, New Delhi and the other, along with a sister PSU,NTPC, at the Management Development Institute, Gurgaon. An innovative program-Sangasapthak (from the epicMahabharata- the seven warriors who were pledged to win or die) was launched at the Indian School of Business,Hyderabad, to train senior managers for Board-level assignments.

3. The pay-roll strength as on 31st March 2004 was 38,033.

Health, Safety & Environment

1. Your Company has set a challenging target for itself-to obtain QHSE (Quality, Health, Safety, and Environment)accreditations for 100% of its operational facilities by 31st March, 2005. During the year, 69 installations obtainedISO14001 (33 in previous year), and 28 installations received ISRS accreditation in levels 5 to 8 (11 in previous year).

2. The Safety Mission statement was reviewed and revised. Independent audit on compliance of earlier (2001-02)independent safety audit were undertaken, showing overall compliance of 78%, along with discernible improvementin upkeep of mission–critical systems and safety awareness. In Underwriters’ audit, ONGC ‘risk’ was rated as‘acceptable’; this, coupled with the no-claim record for three consecutive years, led to substantial reduction in theinsurance premium. The resources of the Crisis management Team (for blow-out control) are being augmented withmodern equipment, regional centers including the first offshore base and tie-up for collaboration with a reputedinternational firm.

3. Independent audit of all Effluent Treatment Plants has been completed. Two projects for bio-remediation of sludge arein progress.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Industry

1. Over the 10 year period ending on 31st March 2003, the demand for petroleum products as well as GDP increased atcompounded annual rate of 6%. For the 3 year period ending on 31st March 2003, the CARG for petroleum productshad dropped to 2.4%; the reason appears to be the focus on services rather than manufacturing. The demand is nowpicking up, especially for Motor Spirit (gasoline), an indicator of increasing disposable income. As the demandincreases, the rate of growth will diminish, and fall below the rate of growth in GDP.

2. Remarkably, the consumption of Natural Gas nearly doubled from 16.41 Billion Cubic Meters (BCM) to 30 BCM overthe same decade, a CARG of 6.9%. The supply came from fields discovered by your Company, including thediscovered fields which had been privatized. There has been a step increase in Gas availability after commissioningof the first LNG Terminal in India in February 2004 by Petronet LNG Ltd., with your Company being a founder-promoter. Increasing availability of Gas is causing further surplus in Naphtha, a major output of your Company fromthe Plants at Hazira and Uran, and from the subsidiary , MRPL. Conversion of naphtha to petrochemicals, rather thanexports at low realization for value addition by overseas producers, therefore, is a priority for your Company.

3. International Oil prices increased sharply in the aftermath of the Iraq invasion. Given the risks and the uncertaintiesin global geo-politics and the seasonal increase in demand in the winter, it is reasonable to assume that the prices willremain firm. It is essential that the problem of high energy intensity in India, a legacy of the protection offered byAdministered Pricing to the Indian consumer , is tackled in a comprehensive and sustained basis. Inefficient conversionand inadequate conservation are causing continuing wastage of high priced energy. A series of actions have beeninitiated by your company to improve energy utilization: minimizing gas flaring, improved maintenance, real-timemonitoring and control of operations, use of wind energy and fuel & loss audit.

Exploration

1. The ongoing exploration effort of your Company is the highest-ever in its chequered history, in terms of technologyas well as scale. State-of-the-art technology, hardware & software, tools and equipment have been inducted for dataacquisition, processing and interpretation (API), and in Logging and Drilling services. As many as 10 offshore surveyvessels and 32 onland Filed Parties are now deployed. Total 101 drilling rigs are in operation for exploration anddevelopment – 29 offshore including 3 for deep waters drilling under Project Sagar sammriddhi (‘Prosperity from theOceans’), and 72 rigs are deployed onland.

2. The exploratory effort seeks new discoveries as well as additional reserves in producing fields. Over the past threeyears, your Company has achieved positive Reserve Accretion, reversing the trend in the Nineties.

3. Your Company has been awarded more than half of the exploratory blocks in all the NELP rounds taken together, ininternational competitive bidding. In all cases (except where statutory approvals are awaited), your Company is ontarget on the committed work programme.

Production

1. Your Company produces 1 million barrels of Oil & Gas every day from 3857 flowing wells (1st January, 2004). As inExploration, state-of-the-art inputs are being increasingly deployed to improve production and reduce costs. Inductionof modern work-over rigs and well stimulation equipment deserves particular mention. Out of 15 ongoing schemes forImproved Oil Recovery (IOR) and Enhanced Oil Recovery (EOR), 13 are progressing satisfactorily; in two cases, theschemes are being reviewed. Ongoing redevelopment of Mumbai High field has already yielded net Oil gain of 50,000barrels per day (2.5 million tones per year) compared to the decline if the project was not taken up.

2. Ageing and obsolescence of production facilities and equipment are major concerns to your Company. Onshorefacilities and equipment have been commissioned since 1960, and offshore, since 1976. A number of projects havebeen taken up to replace / revamp / upgrade these facilities and equipment to secure safety, reliability and efficiency.With progressive implementation of these projects, production will be de-bottlenecked from 2005-06.

113112

5. A dual-feed cracker is being proposed at Dahej using naphtha from the Hazira Plant and C2C3 feed stock from theproposed extraction plant in Dahej Special Economic Zone.

6. Project ICE (Information Consolidation for Efficiency), the corporate ERP project launched in October 2002, isalready operational in most areas, and complete roll-out is targeted during the current year.

7. Your Company is engaged in the National Gas Hydrate Programme.

Internal Control Systems

The Company has the required internal control systems and procedures. These ensure optimal use of Company’s re-sources. The Company’s internal audit department conducts regular audits of various operational and financial matters.The audit observations are periodically reviewed by the Audit Committee of the Board of Directors.

Risks & Concerns

1. The intensive exploration campaign involves high technology, high investment and high risks.

2. Crude as well as gas pricing continues to be controlled by the Government, formally or otherwise. Your Company isrequired, under the prevailing Government directives, to subsidize all Oil & Gas companies operating in India,whether in public or private sector, whether incorporated in India or abroad, on regular as well as adhoc basis, directlyor indirectly, with adverse impact on revenues and profits.

3. Security of personnel and property especially crude oil continues to be a cause of concern in certain areas.

4. There are inherent HSE risks in the Oil & Gas business.

5. Regulatory frame-work for Gas and Downstream business is yet to be instituted.

Cautionary Statement

These discussions are “forward looking statements” within the meaning of the applicable Laws and Regulations. Actualperformance may deviate from the explicit or implicit expectations.

Financials

Salient Features of financial performance are as under : (Rs. in Million)

2003-04 2002-03

★ Turnover 321,775 345,340

★★★★★ Profit after Tax (PAT) 86,644 105,293

★★★★★ Contribution to Exchequer 168,582 191,016

★★★★★ Dividend 34,222 42,778

(Exclusive of Dividend Tax)

Financial Ratios

★★★★★ Profit margin 26.3% 29.8%

★★★★★ Current Ratio 2.79:1 2.45:1

★★★★★ Debt-Equity Ratio 0.01:1 0.01:1★★★★★ Earning per share (Rs.) 60.76 73.84

★★★★★ Book value (Rs.) 281 250

★★★★★ Dividend rate (%) 240 300

1. The financials of your Company continued to suffer due to administered pricing of gas resulting in sales below cost.The amount of subsidization to private sector JV partners from India and abroad increased corresponding to productionof Oil & Gas. Losses on account of supply of feedstock components of Natural Gas at Methane (C1) price to a sisterPSU, GAIL, also continued. Given that cost plus protection was withdrawn from Natural Gas effective 1st October1997, your Company continued to represent to the Government for appropriate corrections.

2. Your company was directed by the Government to pay a subsidy of Rs. 26,904 million to sister PSUs, IOC, BPC andHPC for 2003-04 as share of the subsidy on LPG and SKO. This resulted in decline in revenues and profits for yourCompany.

3. Crude Oil price is benchmarked in Dollars (Bonny Light FOB); appreciation of the Rupee against the Dollar causedloss of revenue in Rupees.

Projects

1. A series of projects for new field development, capacity expansion, modernization, replacement and revamping arein different stages of execution, with investment of the order of Rs. 100,000 million.

2. To augment value addition, it is proposed to expand the mini-refinery at Tatipaka in Andhra Pradesh, and set up acondensate processing plant at Kuthalam in TamilNadu. HSD production has started at the Hazira Plant. It isproposed to take up ATF(jet fuel) production at Hazira, and Motor Spirit production at Uran.

3. Given the abundance of coal and lignite reserves in India, Underground Coal Gasification (UCG) has been identifiedas a priority project by your Company. It is possible to exploit left-over coal in the mines as well as unmineable coalthrough UCG, in an economic and environment-friendly manner. Work on the first pilot project is scheduled to beginin the current financial year.

4. Power projects are being taken up to monetize idle gas as well as to maximize utilization of installed generatingcapacity. All the offshore platforms are going to be connected on a sub-sea cable grid, releasing more than 250MW power for merchant sale. A 750 MW project is being planned in Tripura, utilizing gas idling for years for want ofcustomers.

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(ii) Where it is not practicable to attach any document or the agenda is of confidential nature, the same isplaced on the table at the meeting with the approval of the C&MD. In special and exceptionalcircumstances, additional or supplemental item(s) on the agenda are permitted. Sensitive subjectmatters are discussed at the meeting without written material being circulated.

(iii) The agenda papers are prepared by the concerned officials and submitted to concerned functionalDirectors for obtaining approval of the Chairman and Managing Director. Duly approved agenda papersare circulated amongst the Board members by the Company Secretary.

(iv) The meetings are usually held at the Company’s Registered Office in New Delhi.

(v) Presentations are made at the Board/ Committees covering Finance, Operations & Business Segments,Human Resources, Marketing and Joint Venture Operations etc. of the Company before taking onrecord quarterly/annual financial results at the pre-scheduled Board/Committee Meetings.

(vi) The members of the Board have complete access to all information of the Company. The Board is alsofree to recommend inclusion of any matter in agenda for discussion. Senior management officials arecalled to provide additional inputs to the items being discussed by the Board, as and when necessary.

(C) Recording minutes of proceedings at the Board Meeting

Minutes of the proceedings of each Board/Committee meeting are recorded. Draft minutes are circulatedamongst all members of the Board/ Committee for their comments. The minutes of the proceedings ofmeetings are entered in the Minutes Book.

(D) Follow-up mechanism

The guidelines for the Board and Committee Meetings facilitate an effective post meeting follow-up, reviewand reporting process for the action taken on decisions of the Board and Committee. Every functionalDirector submits follow-up Action Taken Report (ATR) on the areas of his responsibilities, once in a quarter,on the decisions/instructions of the Board.

(E) Compliance

Every functional Director while preparing the agenda notes is responsible for and is required to ensureadherence to all the applicable provisions of law, rules, guidelines etc. The Company Secretary has toensure compliance to all the applicable provisions of the Companies Act, 1956, SEBI Guidelines, ListingAgreement, and other statutory requirements pertaining to capital market. A Quarterly Compliance Reportconfirming adherence to the applicable laws, rules, guidelines and on Corporate Governance is submittedto the Board of Directors for their review.

2.4 BOARD MEETINGS

During the year under review, the Board met seventeen times on April 22, May 9, June 10 & 23, July 26,August 16, September 11 & 24, October 28, November 21, December 16, & 29, 2003, January 30, February7 & 27, March, 10 & 26, 2004. The minimum and maximum interval between any two Board meetings was 7 and33 days, respectively.

CORPORATE GOVERNANCE REPORT

ONGC is committed to provide the best standards of Corporate Governance to all the stake-holders. The CorporateGovernance process in ONGC is focussed on the key business objectives:

1. Creating Value,

2. Strengthening Oil Security,

3. Maximizing Return to Investors,

4. Ensuring best feasible HSE practices, and

5. Blending prudence of a State Enterprise with agility of a Trans-national.

The management must have the operational freedom to pursue the Business Goals within a definitive framework ofaccountability. The practice of Corporate Governance, therefore, is based on these principles:

1. Independent verification of financial reporting and reserves accounting,

2. Protection of shareholders’ rights and proactive investor relations, and

3. Transparent and timely disclosure of all material aspects of the Company’s operations and performance.

In recognition of excellence in Corporate Governance, the Institute of Company Secretaries of India conferred the‘ICSI National Award for Excellence in Corporate Governance’, in the public sector, for the year 2003 to ONGC.

2. BOARD OF DIRECTORS

2.1 COMPOSITION, MEETINGS AND ATTENDANCE

The Company is managed by the Board of Directors, which formulates strategies, policies and reviews itsperformance periodically. The Chairman & Managing Director and six Whole-time Directors manage thebusiness of the Company under the overall supervision and guidance of the Board. The Functional Directors,Statutory Auditors, were also invited to attend the Audit & Ethics Committee Meetings, as and when required.

2.2 COMPOSITION

The Board has 16 members, comprising of 7 Functional Directors (two vacant), including theChairman & Managing Director, 1 Director from ONGC Videsh Ltd. (vacant), and 8 non-executive Directorscomprising of: 3 part-time official Directors (one vacant) and 5 part-time non-official Directors (one vacant), allnominated by Government of India. The Board of Directors thus, has an adequate combination of executive andnon-executive Directors.

2.3 BOARD /COMMITTEE MEETINGS AND PROCEDURES:

(A) Institutionalised decision making process:

With a view to institutionalize all corporate affairs and setting up systems and procedures for advanceplanning for matters requiring discussion/decisions by the Board , the Company has defined guidelines forthe meetings of the Board of Directors and Committees thereof. These Guidelines seek to systematizethe decision making process at the meetings of Board/Committees, in an informed and efficient manner.

(B) Scheduling and selection of Agenda items for Board /Committee Meetings:

(i) The meetings are being convened by giving appropriate notice after obtaining the approval of theChairman of the Board/Committee. Detailed agenda, management reports and other explanatorystatements are circulated in advance amongst the members for facilitating meaningful, informed andfocused decisions at the meetings. To address specific urgent need, meetings are also being called atshort notice. The Board is also authorized to pass Resolution by Circulation for all such matters whichare of utmost urgent nature.

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b) Non-Executive Directors

Names & Designation Financial Year 2003-04 As on dateAttendance at

No. of Board Board Last No. of Directorships No. of CommitteeMeetings Meeting AGM in other Public positions held inheld during (29.9.03) Companies Public Companiesthe tenure including ONGC*

Listed Others Chairman Member

(i) Part-time officialDirectors-Govt. nomineesShri Badal K. DasAddl. Secretary & FinancialAdvisor, MOP&NG(from 02.09.2003 upto 30.06.2004) 11 10 No 2 1 0 2Dr. Surajit MitraJoint Secretary & Financial Advisor,MOP&NG (upto16.7.2003) 4 4 N.A. 2 1 0 1Shri G.S. DuttJoint Secretary (FT&I), MOF(upto 10.06.2003) 2 1 N.A. 0 2 0 0Shri P.K. Deb Joint Secretary (FT&I), MOF (from 16.7.2003) 13 7 No 0 3 0 0Shri J.M. MauskarJoint Secretary, MOP&NG(up to 22.4.2004) 17 14 No 0 2 2 0Shri Sunjoy JoshiJoint Secretary, MOP&NG(from 28.5.2004) N.A. N.A. N.A. 0 3 1 0(ii) Shri Atul Chandra(upto 30. 4. 2004) 17 11 Yes 0 1 0 0(iii) Part-time non-officialindependent DirectorsShri M.M.Chitale(from 11.9.2003) 10 9 Yes 3 2 4 2Shri Rajesh V. Shah(from 11.09.2003) 10 9 Yes 2 8 1 4Shri U. Sundararajan(from 11.09.2003) 10 9 Yes 1 1 0 2Shri N.K. Nayyar 17 8 No 3 2 0 2Smt. R.D. Barkataki(upto 11.9.2003) 7 6 N.A. 0 0 0 1

Shri J. Jayaraman(upto 11.09.2003) 7 7 N.A. 2 2 1 6Dr. K.R.S. Murthy(upto 11.09.2003) 7 6 N.A. 1 1 2 0Shri Jawahar Vadivelu(upto 11.09.2003) 7 5 N.A. 1 2 1 1

* Reflects Chairman/Member of only Statutory Committees, namely Audit & Ethics, Shareholders’/Investors’ Grievanceand Remuneration Committees.

** Excluding Foreign Company.

Composition and Attendance:

a) Executive Directors

Names & Designation Financial Year 2003-04 As on dateAttendance at

No. of Board Board Last No. of Directorships No. of CommitteeMeetings Meeting AGM in other Public positions held inheld during (29.9.03) Companies Public Companiesthe tenure including ONGC*

Listed Others Chairman Member

Shri Subir RahaChairman & Managing Director 17 17 Yes 1 1 0 0

Shri Jauhari LalDirector (Human Resources)(upto 30.4.2003) 1 1 N.A. 0 1 0 1

Shri R.C. GourhDirector (Onshore)(upto 31.12. 2003 ) 12 12 Yes 1 2 0 0

Shri Y.B. SinhaDirector (Exploration) 17 15 Yes 1 1** 0 1

Shri V. K. SharmaDirector (Offshore)(upto 31.5.2004) 17 16 Yes 1 3 0 0

Shri Nathu LalDirector (Technology & Field Services) 17 15 Yes 0 1 0 1

Shri R.S. SharmaDirector (Finance) 17 15 Yes 2 1 0 5

Dr. A.K. BalyanDirector (Human Resources)(from 23.8.2003) 11 11 Yes 0 1 0 0

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Dr. Balyan is on the Boards of Mangalore Refinery and Petrochemicals Ltd., and ONGC Videsh Ltd., both subsidiaries.He is member of Human Resources, Remuneration, Project Appraisal, Health, Safety & Environment, Policy &Planning and Mumbai High Re-development Project Committees.

Shri M.M.Chitale, a fellow member of the Institute of Chartered Accountants of India. Shri Chitale joined ONGCboard on September 11, 2003. Sh. Chitale is a practicing Chartered Accountant since 1973 and has wide and variedexperience of thirty years in Finance, Accounting, Banking, Insurance and General Management. He held the positionof President of the Institute of Chartered Accountants of India during 1997-98 and had been a member of theCommittee for Collective Investment Scheme, Working Group on Restructuring of Weak Public Sector Banks andCompany Law Advisory Committee of the Central Government.

Shri Chitale is on the Boards of IDBI Bank Ltd., E-Serve International Ltd., Deposit Insurance and Credit GuaranteeCorporation, SBI Mutual Fund Trustee Company Pvt. Ltd., ASREC (India) Ltd., and Larsen & Toubro Ltd.

He is Chairman of Audit & Ethics Committee and Member of Project Appraisal, Human Resource Management andHealth, Safety & Environment Committees.

He also holds the position of Chairman of Audit Committee of IDBI Bank, E-Serve International Ltd. & DepositInsurance & Credit Guarantee Corporation and Member of Remuneration Committee of IDBI Bank Ltd.

Shri Rajesh V. Shah, Master in Business Administration from University of California, Berkeley and has attendedprogramme for Management Development from Harvard Business school in 1983. Sh. Shah joined ONGC Board onSeptember 11, 2003. Currently, he is Managing Director of Mukund Limited. Sh. Shah has served on various businesscouncils and is a past president and has been a member of National Council of the apex Indian business body, theConfederation of Indian Industry (CII) since1986.

Shri Shah is Chairman of Human Resource Management & Shareholders’/Investors Grievance Committees andMember of Audit & Ethics, Project Appraisal, Policy & Planning and Mumbai High- Re-development Project andHealth, Safety & Environment Committees.

He is also Member of Shareholders’/Investors Grievance Committees of Hindustan Petroleum Corpn. Ltd. (HPCL)and Mukund Engineers Ltd.

Shri U Sundararajan, former Chairman and Managing Director of Bharat Petroleum Corporation Limited, joined theBoard of ONGC on September 11, 2003. He is a Fellow member of the Institute of Cost and Works Accountants ofIndia and has experience of thirty years in petroleum industry.

He is Chairman of Project Appraisal, Policy & Planning and Health, Safety & Environment Committees of theCompany and is Member of Audit & Ethics, Mumbai High- Re-development Project, Human Resource Managementand Remuneration Committees.

He is also on the Boards of Thirumalai Chemicals Ltd. and Cochin Shipyard Ltd.

7. BOARD COMMITTEES

The Company has the following Committees of the Board:

7.1 AUDIT & ETHICS COMMITTEE

Pursuant to the provisions of the Listing Agreement and Section 292 A of the Companies Act,1956, an Audit &Ethics Committee of the Board with defined terms of reference, is functioning under the stewardship of Shri M.M.Chitale,an Independent Non-executive Director. Shri Chitale is a fellow member of the Institute of Chartered Accountants ofIndia, and has vast experience in financial and accounting matters. Shri U. Sundararajan and Shri Rajesh V Shah,both Independent Non-executive Directors, having multifarious experience, are the other members of the Committee.The Company continued to derive immense benefits from the deliberation.

The Scope of the Committee includes:

a. Overseeing the Company’s financial reporting process and the disclosure of financial information to ensure thatthe financial statement is correct, sufficient and credible;

Notes:

(i) ONGC being a PSU, all Directors are appointed/ nominated by the President of India;

(ii) Directors are not related to each other;

(iii) Directors do not have any pecuniary relationship with the Company.

(iv) The Directorship/Committee Memberships are based on the latest disclosure received from Directors.

3. STRATEGY MEETS

The Company has a practice of periodic retreats where all members of the Board, and high officials of the Ministry ofPetroleum & Natural Gas discuss issues of Corporate Strategy and Policy. The 4th Strategy Meet was held duringFebruary 27-29, 2004.

4. CONCLAVES

To benefit from the cumulative knowledge and experience of the elders of the ONGC family, an assembly of the pastand present members of Oil & Natural Gas Commission and Board is organized every year. The 3rd Conclave washeld on August 9-10, 2003.

5. VICHAR VISHLESHAN

The Key Executives in charge of Assets, Basins, Services and Institutes meet periodically with the ExecutiveCommittee of the C&MD and the whole time Directors to review performance and to formulate plans. 2nd, 3rd & 4th KeyExecutives’ Meets were held at the ONGC Academy, from November 2-4, 2003, April 25-27, 2004 and May 30-31,2004 respectively.

6. BRIEF RESUME OF DIRECTORS PROPOSED TO BE RE-APPOINTED

S/Shri Y.B. Sinha, Dr. A.K.Balyan, M.M. Chitale, Rajesh .V. Shah and U. Sundararajan, Directors, retire by rotationand seek re-appointment. Their brief resumes are as under:

Shri Y.B. Sinha, joined the Board of ONGC as Director (Exploration) on May 5, 2000. Sh.Sinha holds a Master’sdegree in Geology from Lucknow University. He has experience of 37 years in ONGC. He has been involved ininstallation of reservoir simulation facilities and in development of the Company’s exploration and exploitation strategy.He played a major role in evolving the exploration strategy for the Company and was instrumental in the transformationof the operational entities through planning of acreage specific and areas requisite exploration programme, when theNELP regime was introduced by the Government of India. He also has evaluated oil and gas fields in Russia, Sudan,and Kazakhistan. Shri Sinha joined our Company as a field geologist and has been with us since 1966.

Shri Sinha is on the Boards of ONGC Videsh Ltd, Petronet LNG Ltd. and Petro Technical Open Software Corporation,Houston. He is member of Human Resource, Project Appraisal, Health, Safety & Environment and Policy & Planningand Mumbai High Re-development Project Committees.

Also member of EPC, Shipping, Solid Cargo and Human Resource Committees of Petronet LNG Ltd. and member ofAudit Committee of ONGC Videsh Ltd.

Dr. A.K. Balyan, joined the Board of ONGC as Director (Human Resources) on August, 23, 2003. He holds aDoctorate degree in Chemistry from Technische Hochshule fur Chemie, Merseburg, Germany; an alumnus of IIT,Delhi. He has thirty years of experience and had held several field and staff assignments in various disciplinesincluding Analytical Geo-Chemistry Lab, Mud Engineering, Planning, Monitoring of Exploration activities, ProjectManagement and Basin Manager and Head of Exploration. He has been with ONGC since 1976 and prior to that waswith Shriram Institute for Industrial Research.

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7.2 REMUNERATION COMMITTEE

ONGC being a Government Company, appointment and terms and conditions of remuneration of Executive(whole-time functional) Directors are determined by the Government through the Ministry of Petroleum & Natural Gas.Non-executive Part-time official Directors (ex-officio) do not draw any remuneration. The Part-time non-official Directorsreceive sitting fees of Rs. 10,000/- (from 28.10.2003) and Rs.5000/- (up to 27.10.2003) for each Board/Committeemeeting attended by them.

During the year, in view of increase in the cost of living and the changed economic scenario, reimbursement ofexpenses towards entertainment of official guests at the residence of Chairman & Managing Director and whole-timeDirectors were revised from Rs. 2500/- per month to Rs. 3750/- per month for Chairman & Managing Director and fromRs. 2000/- per month to Rs. 3000/- per month for other whole-time functional Directors.

Special Personal Pay and Special Pay were resorted from the respective date of appointment to the Board Level, incase of officials inducted to the Board from below Board level positions.

The Committee is headed by Shri Sunjoy Joshi (from 28th May,2004),Joint Secretary, MOP&NG, a part-time officialDirector. Prior to Shri Joshi, Shri J.M. Mauskar, Joint Secretary, MOP&NG, was heading the Committee up toApril 22,2004. S/Shri U.Sundararajan (from 24.9. 2003), Jawahar Vadivelu (up to 11.9.2003), independent Directors,Shri R.S.Sharma, Director (Finance), Dr. A.K. Balyan, Director(Human Resources) (from 23.8.2003) and Shri JauhariLal, Director (Human Resources) (upto 30.4.2003) are/were the others members.

7.2.1 DIRECTORS’ REMUNERATION:

Remuneration of Directors for the year ended 31st March, 2004 was as follows:

(a) Executive Directors

(Rs. in lac)

Sl.No. Names Salary & Other Contribution to Total Term

allowances benefits PF & other upto& perks Funds

1. Shri Subir Raha 5.95 1.71 0.66 8.32 24.05.2006

2. Shri Jauhari Lal(upto 30.04.2003) 0.56 1.06 0.06 1.68 Not Applicable

3 Shri R.C.Gourh(upto 31.12.2003) 5.35 1.67 0.61 7.63 Not Applicable

4 Shri Y.B.Sinha 6.10 1.54 0.65 8.29 04.05.2005

5 Shri V.K. Sharma(up to 31.5.2004) 6.42 1.55 0.79 8.76 Not Applicable

6 Shri Nathu Lal 5.43 1.67 0.65 7.75 30.04.2005

7 Shri R.S. Sharma 6.07 1.57 0.70 8.34 28.02.2007

8 Dr.A.K.Balyan(from 23.8.2003) 3.61 0.89 0.34 4.84 22.08.2008

Notes:1. The remuneration does not include cost of medical treatment availed from the Company’s own medical facili-

ties, provision for gratuity and leave encashment.

2. Notice period of 3 months or salary in lieu thereof is required for severance of service.

b. Recommending audit fees payable to Statutory Auditors appointed by C&AG and approving payments for anyother services;

c. Reviewing with management the periodical financial statements before submission to the Board, focusingprimarily on (i) changes in accounting policies and practices, (ii) major accounting adjustment based onmanagement judgment, (iii) qualifications in draft audit report, (iv) significant adjustments arising out of theaudit, (v) the going concern assumption, (vi) compliance with accounting standards, (vii) compliance with stockexchanges and legal requirements concerning financial statements, (viii) any related party transactions i.e.transactions of the company of material nature, with promoters or the management, their subsidiaries or relativesetc that may have potential conflict with the interest of the company at large;

d. Reviewing with the management, Reports of Internal, Statutory and the Government auditors, the adequacy ofinternal control systems and recommending improvements to the management;

e. Reviewing the adequacy of internal audit functions, including the structure of the internal audit department,staffing, reporting structure, coverage and frequency of internal audit;

f. Discussion with internal auditors any significant findings and follow-up thereon;g. Reviewing the findings of any internal investigations by the internal auditors into the matters where there is

suspected irregularity or a failure of internal control systems of a material nature and reporting the matter to theBoard;

h. Discussion with the Statutory Auditors before the audit commences, the nature and scope of audit, as well ashave post-audit discussion to ascertain any area of concern;

i. Reviewing the Company’s financial and risk management policies; andj. Review Ethical adherence and Corporate Governance principles.

Composition, Meetings and Attendance

During the year, the Committee met nine times, as against minimum requirement of three times on June 4 & 23,July 26, September 10, October 28, December 29, 2003, January 30, February 7 and March 26, 2004. Director(Finance) and ED-Chief, Internal Audit are the permanent invitees. The Operational Heads (Executive Directors),Statutory Auditors were also invited to attend the Audit & Ethics Committee meetings. The Company Secretary actsas Secretary to the Committee. The Chairman of the Audit & Ethics Committee was also present at the last AGM ofthe Company.

Attendance Particulars:Total No. of meetings held: 9

Members No. of Meetings held during the tenure Meetings AttendedShri M.M.Chitale – Chairman(from 24.09.2003) 5 5

Dr.K.R.S. Murthy - Chairman(upto 11.09.2003) 4 3

Shri Rajesh V Shah(from 24.09.2003) 5 3

Shri U.Sundararajan(from 24.09.2003) 5 5

Smt. R.D. Barkataki(upto 11.09.2003) 4 4

Shri J. Jayaraman(upto 11.09.2003) 4 4

Permanent Invitees:Shri R.S.Sharma, Director( Finance) 9 7

Shri B.Chaudhari, ED-Chief-Internal Audit 9 7

Shri B.L. Ghasolia, ED-Chief-Internal Audit(from 10.3. 2004) N.A. N.A.

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The Committee is headed by Shri Rajesh V. Shah, an independent non-official Director effective from 24.9.2003. ShriJawahar Vadivelu, an independent non-official Director was heading the Committee up to 11.9.2003. Dy. CompanySecretary acts as Secretary to the Committee.


During the year under review, four meetings of the Committee were held on June 23, September 10, December 15,2003 and March 26, 2004. These meetings were attended by the members of the Committee, as under:

Members Meetings held during the tenure Meetings attended

Shri Rajesh. V Shah -Chairman(from 24.09.2003) 2 2

Shri Jawahar Vadivelu-Chairman(upto 11.09.2003) 2 2

Shri Nathu Lal 4 3

Shri R.S. Sharma 4 3

7.3.1 DIVESTMENT BY GOVERNMENT OF INDIA

Govt. of India offered for sale of up to 142,593,300 equity shares through Book Building Process. The issue wasopened on 5th March and closed on 13th March, 2004. Due to up- loading of wrong file, erroneous credits were given incertain investors’ accounts maintained with their respective depository participants or certain genuine applicantswere denied credit by M/S MCS Ltd., Registrar to the offer. Although, corrective steps were initiated immediately, butit delayed the process of crediting respective allottees account to some extent. Credit to allottees’ Demat account isbeing/was given after concurrent audit and reconciliation. To avoid investor’s hardships, Help lines were set up acrossthe country to attend and settle complaints arised out of the offer for sale. Advertisements were published in leadingnewspapers having wide circulation, giving contact addresses including e-mail, phone & fax numbers etc and othergeneral clarifications, for the convenience of the investors. Since the above sale was made by Govt. of India from itsholding, through Ministry of Petroleum & Natural Gas in co-ordination with Department of Disinvestment (MODI),therefore, for settling issues arising out of the Offer for Sale, close co-ordination is being maintained with all theintermediaries.

7.3.2 INVESTOR RELATIONS CELL

Due to tremendous interest shown by public at large and huge investment made by FIIs, OCBs, NRIs and otherInstitutional investors in the shares of the Company, offered for sale by Govt. of India, highest market capitalization,higher weightage in BSE Sensex, S&P CNX Nifty and the MSCI Index and continued increasing interest of investorcommunity in ONGC shares, a Core Team has been constituted comprising of senior, seasoned and experiencedofficials chosen from various segments of the Company , headed by Director (Finance) to maintain close liaison andto share the information with investment bankers, research analysts the media, institutional investors etc.

Periodic Investors Meets were also held to share the information on performance, latest development and futurecourse of action.

7.3.3 GRIEVANCE SETTLEMENT

Members’ complaints/ queries/ correspondence were expeditiously attended to and the replies sent generally withina period of 15 days of receipt, except in the cases that were constrained by incomplete documentation and /or bylegal impediments. Similarly, no share transfer beyond 30 days was pending as on 31.3.2004, where the documentslodged were in order in all respects. All requests for de-materialization of shares are likewise processed and confirmationcommunicated to investors and Depository Participants within 10 working days.

(b) Non-Executive Directors (Part-time non-official)

Non-Executive part-time Non-official Directors are paid sitting fee at the rate of Rs.10000/- [@ Rs.5000/- up to 27.9.03] forattending each meeting of the Board and/or Committees thereof. Details of sitting fees paid during the year under review aregiven below:

Names Sitting fees (Rs. in lac)Shri M.M.Chitale 2.00

Shri U Sundararajan 2.10

Shri R V Shah 1.80

Smt.R.D. Barkataki (upto 11.09.2003) 0.60

Shri J. Jayaraman (upto 11.09.2003) 0.85

Dr.K.R.S.Murthy (upto 11.09.2003) 0.70

Shri Jawahar Vadivelu (upto 11.09.2003) 0.50

7.2.2 STOCK OPTIONS

The Company has not issued any Stock Options to its Directors/Employees.

7.2.3 EQUITY SHARES HELD BY DIRECTORS (As on 1st June,2004)

Except as stated hereunder, none of the Directors, hold any Equity Shares in the Company:

Names of Directors No. of Shares held

Shri Subir Raha 1101

Shri Y.B.Sinha 482

Shri Nathu Lal 476

Shri R.S.Sharma 717

Dr.A.K.Balyan 567

Shri V.K. Sharma(up to 31.5.2004) 200

Shri U. Sundararajan 70

Shri Atul Chandra(up to 30.4.2004) 612

Shri Jauhari Lal(upto 30.4.2003) 612

Shri R.C.Gourh( up to 31.12.2003) 612

7.3 SHAREHOLDERS’/INVESTORS’ GRIEVANCE COMMITTEE

The Shareholders’/Investors’ Grievance Committee of the Board is empowered to oversee the redressal of Shareholders’/Investors’ complaints/grievances pertaining to share transfers, non receipt of annual reports, dividend payments,issue of duplicate certificates, transmission(with or without legal representation) of shares and other miscellaneouscomplaints. The Committee also oversees the performance of the Registrar and Share Transfer Agent and recommendsmeasures for overall improvement in the quality of investor services. It also supervises adherence to ONGC Code ofConduct for Prevention of Insider Trading in Securities.

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7.4 HUMAN RESOURCE MANAGEMENT COMMITTEE

The terms of reference include consideration of HR policies & issues and proposals for promotions to below - Boardlevels. Shri Rajesh V. Shah, an independent non-executive Director is the Chairman of the Committee effective24.9.2003. Smt. R. D. Barkataki was Chairperson up to 11.9.2003. Director (HR) is the convenor of the Committee.


The Committee met four times during the year under report on April 29, September 10, November 21, 2003 andMarch 26, 2004. These meetings were attended by the members of the Committee, as under:

Members Meetings held during the tenure Meetings attended

Shri Rajesh V. Shah- Chairman( from 24.09.2003) 2 2

Smt. R.D. Barkataki - Chairperson(upto11.09.2003) 2 2

Shri Subir Raha 4 4

Shri Jauhari Lal(up to 30.4.2003) 1 1

Shri R.C. Gourh(up to 31.12.2003) 3 3

Shri Y.B. Sinha 4 4

Shri V. K. Sharma(up to 31.5.2004) 4 4

Shri Nathu Lal 4 4


Dr. A.K. Balyan(from 23.8.2003) 3 3

Shri M.M. Chitale(from 24.09.2003 ) 2 2

Shri U. Sundararajan( from 24.09.2003) 2 2

Shri Sunjoy Joshi(from 28.5. 2004) N.A. N.A.

Shri J. M. Mauskar(up to 22.4.2004) 4 3

Shri J. Jayaramanan(up to 11.09.2003) 2 1

Dr. K.R.S. Murthy( upto11.09.2003) 2 2

7.5 PROJECT APPRAISAL COMMITTEE

The Project Appraisal Committee examines and makes recommendations to the Board on projects/capital investmentexceeding Rs.150 Crore. Proposals exceeding Rs.150 Crore are appraised in-house, while the proposals exceedingRs.250 Crore are first appraised by outside technical and financial consultants. Effective from 24.9. 2003,Shri U. Sundararajan, an independent non-executive Director is the Chairman. Prior to him the Committee washeaded by Shri J.Jayaraman upto 11.9.2003. Director (T&FS) acts as a Convenor of the Committee on superannuationof Shri R.C.Gourh, Director (Onshore).

During the year, the Company received 104 complaints from the stock exchanges and SEBI. All these complaintswere resolved immediately. The total number of complaints/queries /correspondence received and replied/attended tothe satisfaction of the shareholders was 6143. Outstanding complaints as on 31st March, 2004 were nil.

Excepting complaints relating to allocation of shares in the offer for sale 2004, 435 complaints/ queries / correspondencewas received from 1st April to 25th August, 2004. 33 complaints/ queries are under process of settlement and willstand resolved / attended by 10th September, 2004.

7.3.4 STEPS REQUIRED FOR FAST SETTLEMENT OF GRIEVANCES:

Sl.No. Nature of Complaint Contact Office Action to be taken

1. Complaint regarding allocation ofShares, Refund under Offer for Saleby Govt. of India.

2. Dividend from financial years 1996-97to 2003-04(Interim) and all matterspertaining to Shares;For Physical Shares-Change of address, status, Bankaccount, mandate, ECS mandate etc.

3. For Dematted Shares-Change of address, status, Bankaccount, mandate, ECS mandate etc.

4. All complaints except of Sl.no.3

MCS LimitedSri Padmavathi BhavanPlot No. 93, Road No. 16,MIDC Area, Andheri (East)Mumbai-400093.Phone Nos.022-28313729,28313734,28313754 &28312984.Fax Nos. 022-28201783 &28260962.

MCS LimitedSri Venkatesh BhavanW-40, Okhla Industrial AreaPhase-II, New Delhi - 110020.Phone Nos. 011-26384909-11,14, 17-20 Fax No: 011-26384907

Concerned DepositoryParticipant (DP) where theshareholder is maintaining hisaccount.

Company SecretaryOil and Natural Gas Corpn. Ltd.;124, Indira Chowk,New Delhi-110001

Application in the prescribedformat as advertised by M/s MCSgiving details of Application No,No. of shares applied, No. ofShares allotted, DP ID, Client ID,Nature of complaint, ApplicantName(s) & complete postaladdress.

Letter on plain paper stating thenature of complaint, Folio / DPID/Client ID No; lodging of originalshares and other documents /instruments as the case may be.

Members are requested toapply for renewal or issue ofduplicate dividend warrants forthe Dividend 1996-97 before 30th

September, 2004. After 30th

September, 2004, any unpaiddividend amount for the year1996-97 will be transferred bythe Company to the InvestorEducation & Protection Fund(IEPF) set up by Govt. of Indiaand no claim will lie neitheragainst IEPF nor against theCompany.

As per instructions of DP

On plain paper stating nature ofcomplaint, folio/DPID/Client IDNo., Name and address.

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During the year, twenty seven meetings of the Share Transfer Committee were held on April 5 & 23, May 9, 20 & 26,June 10&23, July 11 & 26, August 6,18 & 27, September 8 & 26, October 21, November 13 & 27, December 16 & 29,2003, January 14 & 30, February 7,9,21 & 26, March 15 & 26, 2004. These meetings were attended by the membersof the Committee, as under:

Members Meetings attended

Shri R. S. Sharma, Chairman(from 09.05.2003) 27

Shri Jauhari Lal, Chairman(upto30.04.2003) 2*

Dr. A.K.Balyan(from 23.08.2003) 12#

Shri N.K. Nayyar 20

Meetings held during the tenure * 2, # 16

7.7 HEALTH, SAFETY & ENVIRONMENT COMMITTEEThe Health, Safety & Environment Committee set forth policies on all aspects of Occupational Health, Safety &Environment Protection. Shri U.Sundararajan, an independent non-executive Director (effective from 24.9.2003) isthe Chairman of the Committee. Shri Jawahar Vadivelu was Chairman up to 11.9.2003. Director (Onshore) acts as theConvenor.

S/Shri Subir Raha, Jauhari Lal (upto 30.4.2003), R.C. Gourh (upto 31.12.2003), Y.B. Sinha¸ V.K. Sharma (up to31.5.2004), Nathu Lal, R.S. Sharma and Dr.A.K.Balyan( from 23.8.2003), S/Shri Sunjoy Joshi (from 28.5.2004),J.M. Mauskar (up to 22.4.2004), Smt. R.D. Barkataki (up to 11.9.2003), Dr. K.R.S. Murthy (upto 11.9.2003),S/Shri M.M. Chitale (from 24.9.2003) and Rajesh V Shah (from 24.9.2003) are the members.

7.8 POLICY & PLANNING COMMITTEEThe Policy & Planning Committee has a mandate to look into the matters pertaining to new areas of business,proposals for collaborations, Joint Ventures, amalgamation, mergers and acquisitions; commercial matters includingmarketing; periodic performance review of ONGC Videsh Ltd. and MRPL, both subsidiaries. The Committee isheaded by Shri U. Sundararajan, an independent non-executive Director from 24.9.2003 and by Shri J.Jayaramanup to 11.9.2003. Shri Y.B. Sinha, Director (Exploration) is the Convenor.

S/Shri Subir Raha (up to 28.5.2004), Jauhari Lal (upto 30.04.2003), R.C.Gourh (upto31.12.2003),V.K.Sharma (up to31.5.2004), Nathu Lal, R.S.Sharma, Dr. A.K. Balyan (from 23.8.2003), S/Shri Atul Chandra, B.K. Das (from 24.9.2003),Dr.Surajit Mitra (upto16.7.2003), S/Shri J.M.Mauskar (upto 22.4.2004), Jawahar Vaidvelu (upto 11.9.2003),Rajesh V Shah (from 24.9.2003), Sunjoy Joshi (from 28.5.2004) are the members.

7.9 OTHER FUNCTIONAL COMMITTEESApart from the above, the Board may from time to time, constitute Functional Committees with specific terms ofreference as it may deem fit. Meetings of such Committees will be held as and when the need for discussing thematter concerning the purpose arises. Time schedule for holding the meetings of such functional committee(s) arefinalized in consultation with the Committee Members.

7.10 PROCEDURES AT COMMITTEE MEETINGSCompany’s guidelines relating to Board Meetings are applicable to Committee Meetings as far as may be practicable.Each Committee has the authority to engage outside experts, advisers and counsels to the extent it considersappropriate to assist the Committee in its work. Minutes of the proceedings of each of the committee meeting areplaced before the Board for its perusal, noting, ratification and approval, as the case may be. Minutes of thesub-committee meetings are circulated to the members of the Committee and the same are noted, ratified andapproved by the Board of Directors.


During the year, seven meetings of Project Appraisal Committee were held on April 22, June 09, October 16,November 24, December 15,2003 17th and 25th March ,2004. These meetings were attended by the members of theCommittee, as under:

Members Meetings held during the tenure Meetings Attended

Shri U.Sundararajan- Chairman(from 24.09.2003) 5 5

Shri J.Jayaraman- Chairman(up to 11.09.2003) 2 2

Shri B.K.Das(from 24.09.2003 to 28.05.2004 ) 5 2

Shri Sunjoy Joshi(from 28.05.2004) N.A. N.A.

Shri M.M.Chitale(from 24.09.2003) 5 3

Shri Rajesh V Shah(from 24.09.2003) 5 3

Dr. Surajit Mitra(up to 16.07.2003) 2 2

Shri P.K..Deb(from 24.09.2003 to 28.5.2004) 5 0

Dr. K.R.S. Murthy(upto11.09.2003 ) 2 2

Shri Jawahar Vadivelu(upto11.09.2003 ) 2 2


Shri Y.B.Sinha 7 3

Shri V.K.Sharma(up to 31.5.2004) 7 7

Shri R.C. Gourh – Convenor(upto 31.12.2003) 5 4

Shri Nathu Lal- Convenor(from 01.01.2004) 7 6

7.6 SHARE TRANSFER COMMITTEE

In order to expedite the process of share transfers and other related activities, the Share Transfer Committee hasbeen empowered to approve the requests received for share transfer/ transmission/ transposition, issue of duplicateshare certificates, sub-division, consolidation, re-materialization, change of status etc. These requests are processedthrough the Registrar & Share Transfer Agent, M/s MCS Limited, generally once in a fortnight. The details of transfersare reported to the Board of Directors at the ensuing meeting. The Committee is headed by the Director (Finance)and the Dy. Company Secretary acts as a Convenor to the Committee.

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Transactions with related parties are disclosed in Note No.14 of Schedule 29 to the Accounts in the Annual Report.Being a State enterprise, no disclosure has been made in respect of the transactions with subsidiary companies inline with Accounting Standard-18 on Related Party Transactions.

12.2 COMPLIANCES

The Company has complied with applicable rules and regulations prescribed by stock exchanges, SEBI or any otherstatutory authority relating to the capital markets during the last three years.

No penalties or strictures have been imposed by them on the Company. All Returns/Reports were filed with instipulated time with stock exchanges.

13. MEANS OF COMMUNICATION

14. AUDITOR’S CERTIFICATE ON CORPORATE GOVERNANCE

The Auditors’ certificate on Corporate Governance is annexed.

15. SECRETARIAL COMPLIANCE REPORT

Secretarial Compliance Report confirming Compliance to the applicable provisions of Companies Act, 1956, ListingAgreement, SEBI guidelines and all other related rules and regulations relating to capital market, though notmandatory, obtained from a practicing Company Secretary, forms part of the Directors’ Report.

16. GENERAL SHAREHOLDER INFORMATION (As on March 31, 2004)

16.1 ANNUAL GENERAL MEETING:

Day, date and time : Wednesday, the 29th September, 2004 at 11.00 A.M.Venue : Hotel Ashok, 50-B Chankya Puri,

New Delhi- 110021.

Published in Times of India, Indian Express, BusinessStandard (English), Navbharat Times and Jansatta (Hindi)and other dailies having wide circulation across the country

Yes

www.ongcindia.com and simultaneously posted on theElectronic Data Information Filing and Retrieval websitenamely www.sebiedifar.nic.in. The website is alsoaccessible through a hyperlink ‘edifar’ from SEBI’s officialwebsite, www.sebi.gov.in.

Yes

Periodic Investors Meets & Conferences; Road shows inIndia and abroad.

Yes

Quarterly and Half yearly Results

Half–yearly Inplace and Ultimate Reserves report sentto each household of shareholders

Displayed on website

Whether it displays official news releases andpresentations made to media, analysis, institutionalinvestors etc.

Any other means

Whether MD&A is a part of Annual Report

Quarterly and Half yearly Results

Half–yearly Inplace and Ultimate Reserves report sentto each household of shareholders

Displayed on website

Whether it displays official news releases andpresentations made to media, analysis, institutionalinvestors etc.

Any other means

Whether MD&A is a part of Annual Report

8. COMPLIANCE OFFICER

The Company Secretary has been nominated as the Compliance Officer.

9. ANNUAL GENERAL MEETINGS

Location and time for last 3 Annual General Meetings were as follows:

Year Date Location Time

2001 27th September Convention Hall, Hotel Ashok,50-B Chankya Puri,New Delhi-110 021 11.30 A.M.

2002 20th September Same as above 11.30 A.M.

2003 29th September Same as above 11.00 A.M.

During the year ended 31st March, 2004, there have been no resolutions passed by the Company’s shareholders throughpostal ballot. At the ensuing Annual General Meeting, there is no resolution proposed to be passed through postal ballot.

10. DIVIDEND HISTORY

Years Rate (%) Per share (Rs.) Amount(Rs. in million)

1999-00- Interim 40 4.50 5,703.74- Final 25 2.50 3,564.83

2000-01 110 11.00 15,685.272001-02 140 14.00 19,963.082002-03- Interim 170 17.00 24,240.88- Final 130 13.00 18,537.142003-04 - Interim 140 14.00 19,963.08 - Final 100 10.00 14,259.34( Proposed)

11. ONGC CODE ON INSIDER TRADING

In pursuance of the Securities and Exchange Board of India ((Prohibition of Insider Trading) Regulations, 1992 (dulyamended), the Board has approved the “Code of Conduct for Prevention of Insider Trading”. The objective of theCode is to prevent purchase and/or sale of shares of the Company by an Insider on the basis of unpublished pricesensitive information. Under this Code, Insiders (Directors, Advisors, Officers, Designated Employees and otherconcerned persons) are prevented to deal in the Company’s shares during the closure of Trading Window. To dealsecurities, beyond specified limit permission of Compliance Officer is also required. All Directors/Officers/designatedemployees are also required to disclose related information periodically as defined in the code, which in turn is beingforwarded to the stock exchanges. Company Secretary has been designated as the Compliance Officer.

12. DISCLOSURES

12.1 MATERIAL CONTRACTS/RELATED PARTY TRANSACTIONS

The Company has not entered into any material financial or commercial transactions with the Directors or theManagement or their relatives or the companies and firms, etc., in which they are either directly or through theirrelatives interested as Directors and/or Partners except with certain PSUs, where the Directors are Directors withoutthe required shareholdings. The Company has obtained declarations from all concerned in this regard, which werenoted by the Board.

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17. STOCK MARKET INFORMATION

17.1 PERFORMANCE IN COMPARISON TO S&P CNX NIFTY INDEX

17.2 STOCK MARKET DATA:

Month Mumbai Stock Exchange National Stock Exchange

High (Rs.) Low (Rs.) Volume High (Rs.) Low (Rs.) Volume

Apr’03 369.90 350.00 19380 369.45 350.15 49442

May’03 482.00 352.55 159794 482.00 352.60 360467

Jun’03 516.00 455.95 307462 514.90 455.60 866381

Jul’03 501.90 440.10 172790 501.90 440.20 504410

Aug’03 625.00 453.00 353323 670.00 452.10 1008874

Sep’03 695.00 511.05 525043 693.80 512.10 1398142

Oct’03 647.80 568.00 404916 648.00 568.00 861714

Nov’03 674.50 590.70 300417 674.80 591.25 672486

Dec’03 812.10 610.25 354774 812.90 608.00 799280

Jan’04 995.00 725.00 819219 1000.00 713.50 1727891

Feb’04 786.00 665.30 608920 786.70 665.00 1237708

Mar’04 878.00 722.80 1290637 879.65 725.00 2865062

Stock Price Performance: ONGC Vs S&P CNX Nifty

2.,514

2,414

2,314

2,114

2,014

1,914

1,814

1,714

1,614

1,514

1,414

1,314

1,214

1,214

1,114

1,014

914

814

900

800

700

600

500

400

300

ONGC Share Price (Rs.) S&P CNX Nifty

Apr

-03

May

-03

Jun-

03

Jul-0

3

Aug

-03

Sep

-03

Oct

-03

Nov

-03

Dec

-03

Jan-

04

Feb-

04

Mar

-04

S&

P C

NX

Nift

y

Sha

re P

rice

16.2 FINANCIAL CALENDAR (Tentative):

Approval of quarterly results for the period ending:

• June 30, 2004 End July, 2004• September 30, 2004 End October, 2004• December 31, 2004 End January, 2005• March 31, 2005 (audited) End June, 2005• Annual General Meeting September, 2005

16.3 BOOK CLOSURE DATES: 6th to 20th September, 2004(both days inclusive)for payment of dividend.

16.4 DIVIDEND PAYMENT DATE: On or after 29th September,2004

16.5 LISTING DETAILS

The equity shares of the Company are part of the S&P CNX Nifty Index and are listed on the following StockExchanges:

Name & Address Telephone/Fax/E-mail ID/Website ID Trading SymbolThe Delhi Stock Exchange Telephone: 011-23379590, 23379951 115055Association Ltd. (DSE) Fax: 011-23292181DSE House, 3/1, Asaf Ali Road Email: [email protected] Delhi- 110002 Website: www.dseindia.org.in

The Stock Exchange, Telephone:022-2655860/61 500312 ONGMumbai (BSE) Facsimile: 022-22722037/39/41 CORP. LTDP.J.Towers, Dalal Street, E-mail: [email protected], Mumbai – 400001 Website :www.bseindia.com

National Stock Exchange of India Telephone: 022-2659 8100 ONGCLtd.(NSE) Facsimile: 022-2659 8237/38Exchange Plaza, Bandra - Kurla Complex, E-mail: [email protected] (East), Mumbai – 400051 Website:www.nseindia.com

Listing Fees

Annual listing fees for the year 2004-05, as applicable have been paid to the above Stock Exchanges.

16.6 DEMAT ISIN NO:

In NSDL and CDSL INE213A01011

16.7 REGISTRAR AND SHARE TRANSFER AGENT (RTA)

M/s MCS Ltd.Sri Venkatesh BhavanW-40 Okhla Industrial Area, Phase-IINew Delhi-110020Telephone : 011- 26384909-11,14,17-20Fax : 011-26384907e-mail: mcsdel@ vsnl.com

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18.4 SHAREHOLDING PATTERN AS ON 31st MARCH, 2004

Category No. of Shares held Percentage of Shareholding

President of India* 1,05,73,73,747 74.15

Banks, Financial Institutions

and Insurance Companies 2,30,04,600 1.61

Foreign Institutional Investors 8,68,39,907 6.09

Mutual Funds & UTI 1,39,74,668 0.98

NRIs & OCBs 12,33,470 0.09

Bodies Corporate:-Government 17,13,34,226 12.02

-Others 2,16,99,173 1.52

Public 5,04,74,201 3.54

Total 1,42,59,33,992 100.00

Note: *Consequent upon disinvestment of up to 14,25,93,300 equity shares by Govt. of India, the allocation to certainaccounts is under process of reconciliation.

18.5 OUTSTANDING GDRs /ADRs/ WARRANTS OR CONVERTIBLE BONDS

No GDR/ADR/ Warrant or Convertible Bond has been issued by the Company.

19. UNCLAIMED DIVIDEND

As per provision of the Section 205A read with Section 205C of the Companies Act, 1956 the Company is requiredto transfer unpaid dividends remaining unclaimed and unpaid for a period of 7 years from the due date(s) to theInvestor Education and Protection Fund (IEPF) set up by the Central Government.

Unclaimed dividend for the year 1996-97 is due for transfer to Investors’ Education & Protection Fund (IEPF)established by Govt. of India on or before 18.11.2004. All Shareholders, whose dividend is unpaid, arerequested to lodge their claim with RTA by submitting an application before 30th September, 2004. Kindlynote no claims will lie against the Company or the IEPF once the dividend amount is deposited in IEPF.

18.1 DISTRIBUTION OF SHAREHOLDING AS ON MARCH 31, 2004

NUMBER OF NUMBER OF % OF SHARE TOTAL PERCENTAGESHARES SHARE- HOLDERS NUMBER OF

HOLDERS SHARES1 - 500 580956 97.06 30083102 2.11

501 - 1000 14405 2.41 9272513 0.65

1001- 2000 1458 0.24 1975830 0.14

2001 - 3000 390 0.07 942311 0.07

3001 - 4000 199 0.03 682213 0.05

4001- 5000 151 0.03 676528 0.05

5001 -10000 363 0.06 2632970 0.18

10001-above 657 0.10 1379668525 96.75

Total 598579 100.00 1425933992 100.00

18.2 SHARE TRANSFER SYSTEM

The Registrar and Share Transfer Agent, M/s MCS Limited deals with physical share transfers. Physical shareslodged for transfer are normally processed within a fortnight provided the documents are complete in all respects.All requests for dematerialization of securities are processed and the confirmation is given to the depositories within10 days. As per SEBI guidelines facility of simultaneous transfer-cum-dematerialization is being extended. Underthe said system, after the transfer is effected, an option letter is sent to the transferee indicating the details of thetransferred shares and requesting him in case he wishes to demat the shares, to approach a Depository Participant(DP) with the option letter. The DP, based on the option letter, generates a demat request and sends the same to RTAalong with option letter.

Pursuant to the Clause 47-C of the Listing Agreement with the Stock Exchanges, Certificates on quarterly basisconfirming due compliance of share transfer formalities by the Company, Certificate for timely dematerialization ofthe shares as per SEBI (Depositories and Participants) Regulations, 1996 and a Secretarial Audit Report for re-conciliation of the share capital of the Company obtained from practicing Company Secretary have been submittedto stock exchanges with in stipulated time.

The total number of transfer deeds processed and shares transferred during the last three years are as under:

Years No. of Transfer Deeds processed No. of Shares Transferred

2003-04 2057 3,04,932

2002-03 2955 4,54,336

2001-02 1183 2,65,933

18.3 DEMATERIALISATION OF SHARES

The shares of the Company are in compulsory dematerialised segment and are available for trading in depositorysystem of both National Securities Depository Limited and Central Depository Services (India) Limited. As on31st March, 2004, 36,39,79,041 equity shares, forming 98.76% of divested shareholding in the hands of the public,stood dematerialised. Small shareholders can approach separate window at stock exchanges to sellupto 500 shares in physical form.

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B. BASINS:

1. Western Offshore Basin, Mumbai2. Western Onshore Basin, Baroda3. KG Basin, Rajamundry4. Cauvery Basin, Chennai5. Assam & Assam-Arakan Basin, Jorhat6. CBM- BPM Basin, Kolkata7. Frontier Basin, Dehradun

C. REGIONS:

1. Mumbai Region, Mumbai2. Western Region, Baroda3. Eastern Region, Nazira4. Southern Region, Chennai5. Central Region, Kolkata

D. INSTITUTES:

1. Keshava Deva Malaviya Institute ofPetroleum Exploration (KDMIPE),Dehradun

2. Institute of Drilling Technology (IDT),Dehradun

3. Institute of Reservoir Studies, Ahmedabad4. Institute of Oil & Gas Production

Technology, Navi Mumbai5. Institute of Engineering & Ocean

Technology, Navi Mumbai6. Geo- data Processing & Interpretation

Center (GEOPIC), Dehradun7. ONGC Academy, Dehradun8. Institute of Petroleum Safety, Health &

Environment Management, Goa.9. Institute of Biotechnology & Geotectonics

Studies, Jorhat

10. School of Maintenance Practices,Vadodara

11. Regional Training Institutes, Navi Mumbai,Chennai, Sivasagar & Vadodara.

E. SERVICES:

1. Chief Drilling Services, Mumbai2. Chief Well Services, Mumbai3. Chief Geo-Physical Services, Dehradun4. Chief Logging Services, Baroda5. Chief Engineering Services, Mumbai6. Chief Offshore Logistics, Mumbai7. Chief Technical Services, Mumbai8. Chief Info-com Services, New Delhi9. Chief Corporate Planning, New Delhi10. Chief Human Resource Development,

Dehradun.11. Chief Employee Relations, Dehradun12. Chief Security, Dehradun13. Company Secretary, New Delhi14. Chief Marketing, New Delhi15. Chief Corporate Affairs & Co-ordination,

New Delhi16. Chief Corporate Communication,

New Delhi17. Chief Material Management, Dehradun18. Chief Technical Services, Dehradun19. Chief Health, Safety & Environment,

Mumbai20. Chief Legal, New Delhi21. Chief Medical, Dehradun22. Chief Internal Audit, New Delhi23. Chief Commercials, New Delhi24. Chief Exploration and Development,

Dehradun

22. INVESTOR SERVICES:The Company serves its investors through its own Investors’ Service Cell and Registrar & Share Transfer Agent,M/s. MCS Ltd. who have adequate computer hardware & software and VSAT connectivity with both the depositories,which facilitate better and faster service to the investors.

Other facilities, such as remittance of dividend through Electronic Clearing Services (ECS), Bank mandate,Incorporation of Bank details on dividend warrants, direct deposit of dividends, simultaneoustransfer-cum-dematerialization of shares, reminders for unclaimed dividends, nomination facility, issue ofPublic Notice for lost share certificate, issue of duplicate share certificate, etc. are also extended.

The following may be contacted for any Investors’ Services:

Asstt. Vice-President Company SecretaryM/s MCS Ltd ., Oil and Natural Gas Corporation Ltd.Sri Venkatesh Bhavan Jeevan Bharati , Tower-IIW-40 Okhla Industrial Area, Phase-II 124, Indira Chowk,New Delhi-110020 New Delhi-110001Telephone: 011- 26384909-11, 14, 17-20 Telephone: 011-23323201Fax: 011-26384907 Fax: 011-23311326e-mail: mcsdel@ vsnl.com e-mail: [email protected]

Given below are the proposed dates for transfer of the unclaimed dividend to IEPF by the Company:

Financial Year Date of Declaration Proposed Date forTransfer to IEPF*

1996 – 97 30.9.97 18.11.2004

1997 – 98 30.9.98 18.11.2005

1998 – 99 21.9.99 09.11.2006

1999 – 00-Interim 10.5.00 28.06.2007-Final 27.9.00 15.11.2007

2000 – 01 27.9.01 15.11.2008

2001 – 02 20.9.02 19.10.2009

2002 – 03-Interim 31.1.03 30.02.2010-Final 29.09.03 28.10.20102003-04-Interim 04.2.04 03.03.2011

* indicative dates, actual dates may vary.

During the year under report, an amount of Rs 8,96,690/- pertaining to unpaid dividend for the financial year 1995-96has been transferred to IEPF of the Central Government.

19.1 DIRECT DEPOSIT OF DIVIDEND (ELECTRONIC CLEARNING SERVICE)

Members desirous of receiving dividend by direct electronic deposit to their Bank Accounts may intimate theirECS mandate by writing to the RTA/DP and /or the Company providing their Bank account details along withnine digit code number mentioned on the cheque book.

19.2 BANK DETAILS

Those shareholders who have not opted for ECS payment are advised to provide (if not already provided) theirBank account details, such as Bank name, Branch, Account Number, Type of Account, quoting Folio numbersto M/S MCS Limited, RTA to enable them to incorporate the same on the dividend warrants, to avoid anyfraudulent encashment.

19.3 BANK DETAILS FOR DEMATTED SHARES

While opening Accounts with Depository Participants (DPs), shareholders are required to give details of theirBank account, which is being used by the Company for printing on dividend warrants for remittance of dividendto ensure safety. Members who wish to receive dividend in an Account other than the one specified whileopening the Depository Account may notify their DPs about any change in their Bank Account Details. Membersare requested to furnish complete details of their bank accounts including nine digit MICR codes of their Bankbranch to their DPs.

20. LEGAL PROCEEDINGS

No case and/or suit of any material or substantial nature have been pending against the Company.

21. PLANT / ASSETS /BASINS/ REGIONS/INSTITUTES/ MAJOR PROJECTS:

A. ASSETS/ PLANTS:

1. Mumbai High Asset, Mumbai2. Neelam & Heera Asset, Mumbai3. Bassein & Satellite Asset, Mumbai4. Uran Plant, Uran5. Hazira Plant, Hazira6. Ahmedabad Asset, Ahmedabad

7. Ankleshwar Asset, Ankleshwar8. Mehsana Asset, Mehsana9. Rajamundry Asset, Rajamundry10. Karaikal Asset, Karaikal11. Assam Asset, Nazira12. Tripura Asset, Agartala

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SECRETARIAL COMPLIANCE REPORT

TO THE BOARD OF DIRECTORS, OIL AND NATURAL GAS CORPORATION LIMITIED

We have examined the registers, records, books and papers of Oil and Natural Gas Corporation Ltd. (the Company) asrequired to be maintained under the Companies Act, 1956 (the Act) and the rules made thereunder and also the provisionscontained in the Memorandum and Articles of Association of the Company for the financial year ended on 31st March, 2004(financial year). In our opinion and to the best of our information and according to the examinations carried out by us andexplanations furnished to us by the Company, its officers and agents, we certify that in respect of the aforesaidfinancial year:

1. The Company has kept and maintained all registers, records, books and papers as per provisions of the Act and therules made thereunder and all entries therein have been duly recorded.

2. The Company has duly filed the requisite forms and returns with the Registrar of Companies, NCT of Delhi andHaryana as laid down under the Act and the rules made thereunder, except in case of a director, Form No.32 wasfiled on payment of additional fee on 30.4.2004.

3. The Company is a ‘Government Company’ as defined in section 617 of the Act and being a ‘listed public company’has its equity shares listed with the Stock Exchange, Mumbai, the National Stock Exchange and the Delhi StockExchange.

4. The Board of Directors of the Company duly met 17 times, during the financial year, in respect of which propernotices were given and the proceedings were properly recorded and signed in the minutes book maintained for thepurpose.

The Audit and Ethics Committee constituted as per requirement of Listing agreement and Section 292A of the Actduly met 9 times duringthe financial year. Proceedings of the meetings have been properly recorded and signed in theminutes book maintained for the purpose.

The meetings of other committees of the Board were duly and properly convened and minutes of such meetingshave been properly recorded and signed in the minutes book maintained for the purpose.

5. The company closed its Register of Members from 15.9.2003 to 25.9.2003 (both days inclusive) and necessarycompliance of section 154 of the Act has been made.

6. The annual general meeting for the financial year ended on 31st March, 2003 was held on 29th September, 2003 aftergiving due notice to the members of the Company and the resolutions passed thereat were duly recorded in MinutesBook maintained for the purpose. No extra-ordinary general meeting was held during the financial year 2003-2004.

7. The Company is keeping its books of account at Dehradun and for this purpose Board of Directors of the Companyhad passed a resolution on 24.3.1994, a copy of which was filed with the Registrar of Companies, NCT of Delhi andHaryana as required under proviso to sub-section (1) of section 209 of the Act.

8. The Company being a ‘Government Company’ is exempt from the provisions of section 295 of the Act. However, anamount of Rs.0.50 million on account of house building and car advances was outstanding from the whole timedirectors at the end of financial year.

9. The Company has not entered into any contracts falling within the purview of section 297 of the Act.

10. The Company has kept the register required to be maintained under Section 301 of the Act and necessary particularshave been entered therein.

11. As there were no instances falling within the purview of section 314 of the Act, the Company has not obtained anyapprovals from the Board of Directors, members or Central Government.

AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE

ToThe MembersOil and Natural Gas Corporation Ltd.,

We have examined the Compliance of conditions of Corporate Governance by Oil and Natural Gas Corporation Limited,(“the Company”) for the year ended 31st March, 2004, as stipulated in Clause 49 of the Listing Agreement of the saidCompany with the stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination has beenlimited to review of the procedures and implementation thereof, adopted by the Company, for ensuring the compliance withthe conditions of Corporate Governance. It is neither an audit nor an expression of opinion on financial statements of theCompany.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Companyhas complied with the conditions of Corporate Governance as stipulated in Clause 49 of the above-mentioned ListingAgreement.

As required by the Guidance Note issued by the Institute of Chartered Accountants of India, we have to state that noinvestor grievances were pending for a period exceeding one month, except the grievances relating to offer for sale of upto10% equity shares and/or constrained by incomplete documentation and/or legal impediments, as per the records maintainedby the Shareholders’/Investors’ Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiencyor effectiveness with which the management has conducted the affairs of the Company.

for RSM & Co for Thakur, VaidyaNath Aiyar &Co.,Chartered Accountants Chartered Accountants

(Vijay N. Bhatt) (V. Rajaraman)Partner Partner

for S.Bhandari & Co. for Brahmayya & Co.Chartered Accountants Chartered Accountants

(P.D. Baid) (V.Seetaramaiah)Partner Partner

for Lodha & Co.Chartered Accountants

(H.K.Verma)Partner

New DelhiAugust 26, 2004

139138

23. The Company has made inter-corporate loans and investments in other bodies corporate and provided guaranteeswithin the limits stipulated in Section 372A of the Act. Particulars of loans and investments made and guarantee orsecurity provided have been entered in the register maintained under the aforesaid Section. The said register is keptat the Registered Office of the Company.

24. The Company has not bought back any shares during the financial year.

25. The Company has not altered any provisions of its Memorandum of Association or Articles of Association during thefinancial year.

26. There was no prosecution initiated against or show cause notice received by the Company and no fines or penaltiesor any other punishment was imposed on the Company during the financial year for offences under the Act.

27. The Company has not received any money as security from any of its employees during the financial year asenvisaged under Section 417 of the Act.

28. The Company has created a trust, namely, the ONGC Employees Contributory Provident Fund Trust for its employees.The Company has deposited both employees’ and employer’s contribution with the above Trust within the prescribedtime pursuant to section 418 of the Act.

For A.N.Kukreja & Co.

(A.N.Kukreja)Proprietor

Place: New DelhiDate: July 26, 2004

12. The Company has appointed M/s MCS Ltd, New Delhi as its Registrar and Transfer Agents and is keeping theRegister of Members at the office of Registrar and Share Transfer Agents after obtaining approval, by special resolution,in accordance with section 163 of the Act,

13. A Share Transfer Committee has been constituted by the Board. This committee held 27 meetings during the periodunder report. The above committee has approved the issue of duplicate share certificates, transfer and transmission,sub-division/consolidation/rematerialisation of shares of the Company. The proceedings of the above committeehave been properly recorded, signed in the minutes book maintained for the purpose.

14. The Company has:

(i) delivered all the certificates on lodgment thereof for transfer/transmission/sub-division/consolidation of shareswithin the stipulated time during the financial year;

(ii) The Company has deposited the amount of dividend declared at the Annual General Meeting held on 29.9.2003,in a separate bank account, on 1.10.2003 with ICICI Bank Ltd. within 5 days from the date of declaration of suchdividend in accordance with the provisions of Section 205 of the Act;

(iii) Paid/posted warrants for dividend declared on 29th September, 2003 to the members within a period of 30 daysfrom the date of declaration and that all unclaimed/unpaid dividend has been transferred to Unpaid DividendAccount of the Company with ICICI Bank Ltd. on 3.11.2003 within the prescribed time limit.

(iv) The Board of Directors of the Company declared interim dividend on 30.1.2004 which was deposited in separatebank account within the stipulated period of 5 days i.e. on 3.2.2004 with ICICI Bank Ltd.

(v) Paid/posted warrants for interim dividend declared on 30.1.2004 within a period of 30 days from the date ofdeclaration and that all unclaimed/unpaid interim dividend has been transferred to Unpaid Interim DividendAccount of the Company with ICICI Bank Ltd. on 6.3.2004 within the prescribed time limit.

(vi) Duly complied with the requirements of Section 217 of the Act.

(vii) The Company under Section 212(8) of the Act has made application to Central Government seeking exemptionfrom provisions of Section 212 of the Act in relation to all its subsidiaries. The directions of the Government onthe Company’s application are awaited.

15. The Board of Directors of the Company is duly constituted and the appointments of directors, additional directors anddirectors to fill casual vacancies have been duly made.

16. The appointments of Chairman & Managing Director, Functional Directors on whole time basis and other Directors ofthe Company have been made in accordance with the Articles of Association of the Company read with the relevantprovisions of the Act.

17. The directors disclosed their interest in other firms/companies to the Board of Directors pursuant to the provisions ofthe Act and the rules made thereunder and their disclosures have been noted and recorded by the Board..

18. The Company has not issued any shares or other securities during the financial year.

19. The Government of India divested up to 10% of equity in the Company in March 2004. The discrepancy in allocationof shares to certain accounts consequent to divestment has since been reconciled.

20. The Company, wherever necessary, has kept in abeyance rights to dividend declared at the Annual General Meetingheld on 29.9.2003 and interim dividend declared on 30.1.2004, pending registration of transfer of shares in compliancewith provisions of the Act.

21. The Company has not invited/accepted any deposits falling within the purview of section 58A of the Act during thefinancial year.

22. The Company has not made any secured borrowings during the financial year ended 31st March 2004.

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BOARD OF DIRECTORS

Shri Subir RahaChairman

Shri R. S. ButolaManaging Director

(from 13.05.2004, till 12.05.2004 Director (Finance), OVL)

Shri Atul ChandraManaging Director

(till 30.04.2004)

Shri Badal K. DasDirector

(till 30.06.2004)

Shri J. M. MauskarDirector

(till 22.04.2004)

Shri Sunjoy JoshiDirector

(from 20.05.2004)

Dr. Avinash ChandraDirector

(till 30.09.2003)

Shri R. C. Gourh Director

(till 31.12.2003)

Shri Y. B. SinhaDirector

Shri V. K. SharmaDirector

(till 31.05.2004)

Shri Nathu LalDirector

Shri R. S. SharmaDirector

Dr. A. K. BalyanDirector

COMPANY SECRETARY

Shri Jagdish Prasad

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3.2 Consolidated: ONGC Videsh Ltd. and ONGC Nile Ganga B.V.

(Rupees in million)

Particulars 2003 - 04 2002 - 03Total Income 35,022.82 2,328.39

Expenditure 27,455.65 1,601.59

Profit before Tax 7,567.17 726.80

Provision for Tax 3,282.68 136.85

Net Profit after Tax 4,284.49 589.95Paid – up Equity Share Capital 3,000.00 3,000.00

Notes:

The Consolidated Accounts incorporate audited accounts of ONGC Nile Ganga B.V. for the period 1st April, 2003 to 31st

March, 2004, and form part of the Annual Report and Accounts.

4. PROJECTS

4.1 Block 06.1, VietnamYour Company with 45% Participating Interest (PI) along with British Petroleum as the Operator with 35% PI andPetroVietnam, a Vietnamese Government-owned entity with 20% PI, have developed two large offshore gas fields,Lan Tay and Lan Do in Block 06.1, Vietnam. The fields began commercial production in January, 2003. Your Company’sshare of the development expenditure is estimated at USD 228 million, against which cumulatively aboutUSD 162 million has been invested till 31st March, 2004. During 2003-04, OVL’s share of production amounted to523 million cubic meters. During the year, revenue from 0.022 MMT of condensate also accrued to OVL.

4.2 Sakhalin-I, RussiaSakhalin-1 is a large oil & gas field in offshore Sakhalin, Russia. Your Company holds 20% PI in the field; Exxon-NefteGas Ltd., a subsidiary of Exxon-Mobil as the operator holds 30% PI; Sodeco, a consortium of Japanesecompanies holds 30% PI and balance 11.5% and 8.5% PI are held by SMNG-S and RN Astra respectively, twoRussian Government controlled entities. As per the terms of the farm-in, your Company is required to carry (loan)SMNG-S and RN-ASTRA for their share of investment. Company’s share of investment upto 2004-05, including carry,is currently estimated at about USD 1,741 million, against which cumulatively about USD 1,068 million has beeninvested till 31st March, 2004. Two development wells have already been drilled. Production from the project is expectedfrom 2005-06.

4.3 Exploration Block-8, IraqBlock-8 is a large onland exploration Block in Iraq spread over 10,500 square kilometers. Your Company is the solelicencee of the Block. The Exploration and Development was signed with the Ministry of Oil, Iraq effective from15th May, 2001. The minimum expenditure obligation for the first phase of exploration for three years isUSD 15 million, against which an investment of about USD 1 million has been made till 31st March, 2004. Workrelating to archival, reprocessing and interpretation of the existing seismic data has been completed. Due to prevailingconditions in Iraq, in April 2003, OVL requested and obtained a force majeure declaration.

4.4 Exploration Block A-1, MyanmarBlock A-1 is a large exploration Block in offshore, Myanmar. Your Company holds 20% PI in the Block; DaewooInternational Corporation (DIC) as the Operator holds 60% PI; KOGAS, Korea holds 10% PI and balance 10% PI isheld by GAIL (India) Ltd.. Your Company’s share of investment upto 30th June, 2005 is currently estimated at aboutUSD 26.67 million against which about USD 7 million has been cumulatively invested till 31st March, 2004. In the firstexploratory well completed in January 2004, Daewoo has announced a discovery of natural gas.

4.5 Farsi Offshore Exploration Block, IranFarsi is a large offshore exploration Block in Iran spread over 3,500 square kilometres. An Exploration & Developmentwas signed in December, 2002. Your Company holds 40% PI as Operator and remaining PI has been allocated toIndian Oil Corporation Ltd. (40%) and Oil India Ltd. (20%). Against currently estimated proportionate investment ofabout USD 15.3 million in the exploration phase, actual expenditure of about USD 1 million has been made till

DIRECTORS’ REPORTDear Members,

On behalf of your Board of Directors, I have the privilege to present to you the 39th Annual Report of your Company for thefinancial year ended 31st March, 2004, together with the Audited Statements of Accounts, the Auditors’ Report and theReview of the Accounts by the Comptroller and Auditor General of India.

1. HIGHLIGHTS• Your Company’s share in production of Oil plus Oil-Equivalent Gas (O+OEG), together with its wholly-owned subsidiary

ONGC Nile Ganga B.V., during 2003-04 increased from 0.252 MMT to 3.868 MMT, up 1435%.

• The first exploratory well drilled in the concession area of Block A-1 in offshore Myanmar in which your Companyholds 20% participating interest, resulted in discovery of Natural Gas.

• Your Company earned consolidated gross revenue of Rs. 35,022.82 million during 2003-04, up 1404% fromRs. 2,328.39 million in 2002-03.

• Your Company earned consolidated net profit of Rs. 4,284.49 million during 2003-04, up 626% from Rs. 589.95 millionin 2002-03.

2. NEW ACQUISITIONS2.1 A contract for acquiring 49% participating interest in Blocks NC - 188 and NC - 189 in Libya was concluded in June,

2003 with Turkish Petroleum Overseas Company (TPOC), a subsidiary of National Oil Company of Turkey. TPOC, asthe operator holds the remaining 51% participating interest in the Blocks. OVL’s share of investment in the explorationphase is currently estimated at about USD 30 million, out of which about USD 12 million has been invested till31st March, 2004.

2.2 A contract for 60% participating interest in Exploration Block #24 in Syria was signed in January, 2004 with IPRInternational Ltd. and the Syrian Petroleum Company. IPR, as the operator holds the remaining 40% stake in theBlock. OVL share of investment in the exploration phase is estimated at about USD 6 million.

3. RESULTS

3.1 ONGC Videsh Ltd.

(Rupees in million)

Particulars 2003 – 04 2002 - 03

Total Income 7,323.74 630.46

Expenditure 5,083.28 598.12

Profit before Tax 2,240.46 32.34

Provision for Tax 849.83 6.36

Net Profit after Tax 1,390.63 25.98

Transfer to General Reserve 69.53 4.19

Paid – up Equity Share Capital 3,000.00 3,000.00

Notes:(i) Total income increased due to the first dividend of Rs. 3,279.68 million from the wholly-owned subsidiary, ONGC Nile

Ganga B.V., and higher Gas sales from Vietnam project of Rs. 1,468.89 million, up 1391% from Rs. 98.50 millionduring 2002-03.

(ii) Interest income on carry-finance to RN-ASTRA & SMNG-S for Sakhalin-1 project, went up by Rs. 296.63 millionbecause of increased carry-finance provided during the year.

(iii) Expenditure for the year includes exchange loss of Rs. 1,157.23 million on carry finance/other loans due to appreciationof the Indian rupee against USD by 7.38%. Operating expenditure on Vietnam project increased from Rs. 180.79million in 2002-03 to Rs. 1,174.27 million in 2003-04.

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Your Directors place on record their sincere appreciation for the excellent contribution made by Dr. Avinash Chandra,Shri R. C. Gourh, Shri J. M. Mauskar, Shri Atul Chandra, Shri V. K. Sharma and Shri Badal K. Das as Director on theBoard. Your Directors acknowledge the role of Shri Atul Chandra as Managing Director of OVL in taking the Companyto new heights during his tenure of more than eight years. Your Directors extend a warm welcome to Shri R. S. Butolaand Shri Sunjoy Joshi.

12. AUDITORSM/s Ashok Parveen & Co., Chartered Accountants, New Delhi were appointed as the Statutory Auditors of yourCompany by the Comptroller & Auditor General of India for the financial year 2003-04.

13. FOREIGN EXCHANGE EARNINGS AND OUTGOThe information on foreign exchange earnings and outgo during the financial year 2003-04, as required under theCompanies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1968, is given below:

(Rs. in million)

(i) Foreign Exchange earned 6,887.24

(ii) Foreign Exchange outgo 20,653.91

14. STATUTORY DISCLOSURES

(i) None of the employees of your Company is drawing remuneration exceeding limits laid down under the provisionof Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

(ii) As required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure ofParticulars in the Report of Board of Directors) Rules, 1988 regarding Energy Conservation and TechnologyAbsorption, the Board hereby discloses as follows:

a) That the sources of energy used by the Company are Electricity and Motor Spirit (petrol);

b) that the Board, as part of its existing internal control measures, is striving for the conservation of electricity andpetrol under the supervision of Managing Director on a continuous basis and is satisfied that the utilisation ofenergy is optimum for the operations of the Company; and

c) the provisions of the Companies Act, 1956, in regard to technology absorption are not applicable to the Company.

15. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to provision of Section 217(2AA) of the Companies Act, 1956 the following statement relating to AnnualAccounts for the financial year ended 31st March, 2004 is made:

(i) The applicable Accounting Standards have been followed in the preparation of the Annual Accounts for thefinancial year 2003-04. The Company has not taken any material departure from those applicable AccountingStandards;

(ii) the Directors have selected such accounting policies as described in schedule-27 to the accounts and appliedthem consistently as stated in the accounts and made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial yearand of the profit of the Company for that period;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; and

(iv) the Directors have prepared the Annual Accounts on a going concern basis.

16. MEETING OF THE BOARD OF DIRECTORSDuring the year ended 31st March, 2004, 13 Board Meetings were held on 26th April, 7th May, 9th June, 19th July, 18th

August, 15th September, 8th October, 17th October, 25th November, 16th December, 29th December, 2003, 4th February,

31st March, 2004. Reprocessing and interpretation of historical seismic data has been completed, and new 3-Dseismic data has been acquired.

5. RESERVESThe balance proven Oil and Gas reserves held by your Company, including that of the wholly-owned subsidiary,ONGC Nile Ganga B.V. are as follows:

As on 31st, March, 2004

Oil (in MMT) 82.56

Gas (in BCM) 116.47

6. INVESTMENTSCumulatively till 31st March, 2004, your Company has committed investments amounting to about USD 2.8 Billion inoverseas Oil and Gas projects, against which about USD 2.0 Billion have been incurred. The investments have beenalmost entirely funded by the parent, ONGC Ltd., by way of equity and zero-interest loans.

7. ONGC Nile Ganga B.V.ONGC Nile Ganga B.V., a wholly-owned subsidiary of OVL, holds 25% PI in Greater Nile Oil Project, Sudan; the otherpartners in this project are China National Petroleum Company with 40% PI, Petronas Carigali Overseas Sdn Berhad,a subsidiary of the Malaysian National Oil Company Petronas with 30% PI and Sudan National Oil Company (Sudapet),with a 5% PI. ONG B.V.’s share in oil production was 3.323 MMT during 2003-04, and the Company earned a profitafter tax of Rs. 6,173.54 million.

8. OVERSEAS OFFICESYour Company has representative offices located in Ho Chi Minh City (Vietnam), Yuzhno Sakhalinsk (Russia), Baghdad(Iraq) and Tehran (Iran). The wholly-owned subsidiary, ONGC Nile Ganga B.V., has its registered office at Amsterdam(Netherlands), and its representative office in Khartoum (Sudan).

9. INFORMATION TECHNOLOGYDuring the year 2003-04, the Head Office in New Delhi was linked with Khartoum, Tehran and Amsterdam offices withvideo conferencing facility. Further, a project to provide comprehensive MIS is being implemented as part of the SAPR/3 ERP project of the parent, ONGC Ltd. It is also proposed to provide high-powered work stations in your Companyfor review of Geological and Geophysical (G&G) data.

10. HRDYour Company has been operating with optimally required manpower seconded from the parent, ONGC. The totalmanpower was 63 as on 31st March, 2004 as compared to 51 as on 31st March. 2003; besides this, ONGC executivesare seconded to various overseas projects for short-term assignments.

11. BOARD OF DIRECTORS

(i) Dr. Avinash Chandra, on superannuation from the office of Director General of Hydrocarbons, vacated the officeof Director of your Company on September 30, 2003.

(ii) Shri R. C. Gourh, on superannuation from ONGC vacated the office of Director of your Company on December 31, 2003.

(iii) Shri J. M. Mauskar, consequent to his relinquishing the charge of the post of Joint Secretary, MOP&NG,vacated the office of Director w.e.f. April 22, 2004.

(iv) Shri Atul Chandra, on superannuation, vacated the office of Managing Director, of your Company on April 30, 2004.

(v) Shri R. S. Butola, took over as the Managing Director of your Company on May 13, 2004; earlier to this he wasthe Director (Finance) of the Company.

(vi) Shri Sunjoy Joshi, Joint Secretary, MOP&NG joined as Director of your Company on May 20, 2004.

(vii) Shri V. K. Sharma, on superannuation from ONGC vacated the office of Director of your Company on May 31, 2004.

(viii) Shri Badal K. Das, consequent to his relinquishing the charge of the post of AS & FA, MOP&NG, vacated theoffice of Director w.e.f. June 30, 2004.

(ix) Under the provisions of Section 255 and 256 of the Companies Act, 1956, Shri R. S. Sharma, Director and ShriY. B. Sinha, Director retire by rotation at this Annual General Meeting, and being eligible, offer themselves forreappointment.

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COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDERSECTION 619 (4) OF THE COMANIES ACT, 1956 ON THE ACCOUNTS OF

ONGC VIDESH LIMITED FOR THE YEAR ENDED 31ST MARCH, 2004.

I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditor’sReport under Section 619 (4) of the Companies Act, 1956 on the accounts of the ONGC Videsh Limited for the year ended31st March 2004.

(Vijaya Moorthy)Principal Director of Commercial Audit

& Ex-officio member, Audit Board-IINew Delhi

Place: New DelhiDate: 02.09.2004

and 19th March, 2004. These meetings were attended by the members of the Board, as under:

Members Meeting held during tenure of each member Meeting Attended

Shri Subir Raha, Chairman 13 13

Shri Atul Chandra, Managing Director 13 13

Shri R. S. Butola, Director (Finance) 13 11

Shri Badal K. Das, Director 8 8

Dr. Avinash Chandra, Director 6 4

Shri J. M. Mauskar, Director 13 11

Dr. Surajit Mitra, Director 1 1

Shri Jauhari Lal, Director 1 -

Shri R. C. Gourh, Director 11 7

Shri Y. B. Sinha, Director 13 9

Shri V. K. Sharma, Director 13 10

Shri N. Lal, Director 13 12

Shri R. S. Sharma, Director 13 13

Dr. A. K. Balyan, Director 8 7

17. AUDIT COMMITTEEComplying with the requirement of Section 292A of the Companies Act, 1956, as on 31st March, 2004, the compositionof the Audit Committee was as follows:

Shri J. M. Mauskar – Chairman, Audit Committee

Shri Y. B. Sinha – Member, Audit Committee

Shri R. S. Sharma - Member, Audit Committee

Shri J. M. Mauskar was appointed as Chairman of the Audit Committee in place of Dr. Avinash Chandra on 8th October, 2003.During the year ended 31st March, 2004, four meetings of the Audit Committee were held on 10th April, 31st May,26th September and 13th November, 2003. These meetings were attended by the members of the Committee, as under:

Members Meeting held during tenure of each member Meeting Attended

Dr. Avinash Chandra 3 2

Shri J. M. Mauskar 1 1

Shri Y. B. Sinha 4 3

Shri R. S. Sharma 4 3

18. ACKNOWLEDGEMENT

Your Directors acknowledge with thanks the continued help, support and guidance received from the Government of India,especially the Ministry of Petroleum & Natural Gas, Ministry of Finance, Ministry of External Affairs, the Reserve Bank ofIndia and the Indian Embassies/High Commissions abroad. Your Directors take this opportunity to place on record theirsincere appreciation for the valuable contribution made by the employees and the unstinted support from theParent, Oil and Natural Gas Corporation Ltd.

for and on behalf of the Board of Directors

New Delhi (Subir Raha)Sept. 3, 2004 Chairman

151150

As at 31st March, As at 31st March, As at 31st March,2002 2003 2004

Assetsf) Gross Block 0.80 537.00 623.01

Less: Depreciation 0.34 84.01 309.49g) Net Block 0.46 452.99 313.52h) Capital work in progress 2,377.47 2,390.97 3,233.50i) i) Producing properties: - 452.57 631.50

ii) Less: Depletion - 3.32 116.68iii) Net Amount - 449.25 514.82

j) Pre-producing properties - - -k) Investment - 2,992.80 2,987.08l) Deferred Tax Asset - 11.06 -m) Current Assets, Loans & Advances 410.25 1,709.91 2,857.53n) Misc. Expenditure not written off

(accumulated project expenditure) 8.76 7.44 -o) Accumulated loss - - -

Total 2,796.94 8,014.42 9,906.45p) Working capital (m-d(i)) 236.06 1,202.81 2,228.48q) Capital employed (g+i+k+p) 236.52 5,097.85 6,043.90r) Net worth (a+b(i)+b(ii)-n-o) 297.02 313.21 459.71s) Net worth per rupee of

Paid up Capital (in Rs.) 0.99 1.04 1.53

1) Decrease in Capital Reserve is due to transfer of Cpital Reserve to Profit & Loss Account.

2) Increase in Borrowing from others is due to loan raised from Parent Company (ONGC Limited)

3) Increase in Current Liabilities is mainly due to incorporation on a line by line basis of joint venture creditors anddeferred credit on gas sales in Vietnam project.

4) Increase in Capital work-in progress is due to Development expenditure of Sakhalin project.

5) Investment represents investment in the wholly owned subsidiary ONGC NILE GANGA BV.

2. WORKING RESULTS

Working results of the company during the last three years are given below:

(Rs. in Crore)

2001-02 2002-03 2003-04i) Sales - 9.85 156.62ii) Less: Excise Duty - - -iii) Net Sales - 9.85 156.62iv) Other or Misc. Income 39.17 52.42 571.52v) Profit/Loss before tax and prior period

adjustment 26.1 3.44 223.75vi) Prior period adjustment 0.46 0.21 (0.29)vii) Profit/Loss before tax and after prior period

adjustment 25.64 3.23 224.04viii) Tax provisions 1.96 0.63 84.98ix) Profit after tax 23.68 2.60 139.06x) Prepaid dividend - - -

REVIEW OF THE ACCOUNTS OF ONGC VIDESH LTD. FOR THE YEAR ENDED31ST MARCH 2004 BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA

Note: The Review of Accounts has been prepared without taking into account the qualifications contained in the StatutoryAuditor’s Report.

1. FINANCIAL POSITIONS

The table below summarises the financial position of the company under broad headings for the last three years:

(Rs. in Crore)

As at 31st March, As at 31st March, As at 31st March,2002 2003 2004

Liabilities

a) Paid up Capital

i) Government - - -

ii) Other 300.00 300.00 300.00

b) Reserves & Surplus

i) Free Reserves & Surplus 5.78 20.65 159.71

ii) Share Premium Account - - -

iii) Capital Reserve 126.88 132.59 17.41

c) Borrowings from

i) Govt. of India - - -

ii) OIDB 44.48 34.89 25.30

iii) Foreign Currency Loans 181.73 287.19 247.93

iv) Cash Credit - - -

v) Others 1,963.40 6,731.33 8,484.83

d) i) Current Liabilities & Provisions 174.19 507.10 629.05

ii) Provision for Gratuity 0.48 0.67 0.88

e) Deferred tax Liability - - 41.34

Total 2,796.94 8,014.42 9,906.45

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5. SUNDRY DEBTORS

(Rs. In Crores)

Year Debts Provision for Total Sales PercentageConsidered Doubtful Debtors of Debtors

Good Debts to Sales

2001-02 - - - - -

2002-03 8.71 - 8.71 9.85 88.4

2003-04 42.1 - 42.1 156.62 26.88

6. INVENTORY

Inventory position as at the end of last three years was as follows :(Rs. in Crore)

2001-02 2002-03 2003-04

i) Stores and Spares - 17.42 20.26ii) Capital Stores - - -iii) Stock in trade - 0.77 5iv) Others - - -

(Vijaya Moorthy)Principal Director of Commercial Audit &

Place : New Delhi Ex-offcio Member, Audit Board - IIDated : 02.09.2004 New Delhi

3. RATIO ANALYSIS

Some important ratios on the financial health and working of the Company at the end of last three years are given below :

(In Percentage)

2001-02 2002-03 2003-04A) LIQUIDITY RATIO

Current Ratio : (Current Assets to Current 235.52 337.19 454.26Liabilities & Provisions and Interest Accrued& due but excluding Provision for Gratuity)

B) DEBT EQUITY RATIOLong Term Debt to Net Worth 737.19 2,252.00 1,905.12[c(i) to c(v) but excludingthe Short-Term Loans/r]

C) PROFITABILITY RATIOSProfit before tax toa) i) Capital Employed 10.84 0.06 3.71

ii) Net Worth 8.63 1.03 48.74iii) Sales - 32.79 143.05

b) Profit after tax to equity capital 7.89 0.87 46.35c) Earnings per share (in Rs.) of Rs. 100 each 7.89 0.87 46.35

(i) Liquidity ratio of the Company has increased from 235.52 during 2001-02 to 337.19 during 2002-03 and furtherincreased to and 454.26 during 2003-04 due to increase in Carry Finance Loan to Russian Partners and DividendReceived from Subsidiary.

(ii) The percentage of profit before tax to sales was 32.79 in 2002-03 which has increased to 143.05 due to increase insales of Gas & condensate in Vietnam project.

4. SOURCES AND USES OF FUNDS (Rs. in crore)

Sources of FundsFunds from operations-Profit after tax 139.06-Depreciation 225.49Decrease in Investments 5.72Increase in deferred Tax Liability 41.34Decrease in Deferred tax asset 11.06Increase in Borrowings 1,704.65Decrease in Project expenditure 7.44

Total 2,134.76Utilization of fundsDecrease in Capital Reserve 115.18Increase in Fixed Assets 86.01Increase in Working Capital 1,025.46Increase in Producing Properties 65.57Increase in Capital Works-in-Progress 14.35Increase in wells in progress 156.52Increase in expenditure on project in progress 671.67

Total 2,134.76

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Statement read together with significant accounting policies and notes to accounts give the information re-quired by the Companies Act, 1956 in the manner so required give a true and fair view in conformity with theaccounting principles generally accepted in India:

(a) In the case of Balance Sheet, of the state of affairs of the Company as at 31st March 2004; and(b) In the case of Profit and Loss Account, of the Profit for the year ended on that date; and(c) In the case of Cash Flow Statement for the cash flow of the company for the year ended on that date.

For ASHOK PRAVEEN & CO.Chartered Accountants

Praveen GuptaNew Delhi Partner4th June, 2004 M. No. 82599

AUDITORS’ REPORT

TO THE MEMBERS OF ONGC VIDESH LIMITED

We have audited the attached Balance Sheet of ONGC VIDESH LIMITED, NEW DELHI as at 31st March 2004 andthe Profit and Loss Account and also Cash Flow Statement for the year ended on that date, annexed thereto. Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government in terms of Section227 (4A) of the Companies Act, 1956, a statement on the matters specified in paragraph 4 of the said Order to theextent applicable to the Company, is annexed.

2. Categorization of expenditure on project in Development and Exploratory Wells in Progress, Producing Properties,and Project in Progress, allocation of cost incurred on them, depletion of producing properties on the basis of proveddeveloped hydrocarbon reserve, provision for abandonment cost and impairment, allocation of depreciation on fixedassets (including support equipment and facilities) are made according to evaluation by the management, technicaland/or otherwise on which, we have placed reliance.

3. The Accounts have been drawn up in accordance with the statement of Significant AccountingPolicies – ‘Schedule 27’.

4. Further to our comments in the Annexure referred to in paragraph 1 above, we report that the incorporationof Company’s share of Assets, Liabilities, Income and Expenses in the Joint Ventures is based on un-auditedfinancial statements as provided by the respective operators of Joint Ventures. (Refer Note No.4 of theSchedule-28).

5. Subject to our comments in para 4 above, we report as follows:

5.1 We have obtained all the information and explanations, which to the best of our knowledge and belief werenecessary, for the purposes of our audit.

5.2 In our opinion, proper books of account as required by law have been kept by the Company so far as appearsfrom our examination of the books.

5.3 The Balance Sheet and the Profit and Loss Account and Cash Flow Statement dealt with by this report are inagreement with the books of account.

5.4 In our opinion and based on the information given to us, the Profit and Loss Account and Balance Sheet andCash Flow Statement referred to in this report comply with the Accounting Standards referred to in sub-section(3C) of Section 211 of the Companies Act, 1956.

5.5 The clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 is not applicable to the Companybeing a Government Company.

5.6 Subject to above and other comment in para-4, in our opinion and to the best of our information and accord-ing to the explanations given to us, the said Balance Sheet and Profit and Loss Account and Cash Flow

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(viii) As regards to maintenance of cost records as prescribed by the Central Government under Section 209(1)(d) of theCompanies Act, 1956, the Company has not maintained the cost records. We are informed that the Company hasalready applied for exemption from applicability of the relevant provision to the Department of Company Affairs,since most of the operation of the company are in joint ventures overseas, the operators of which are not required tomaintain and provide to the company, the records that are required to be maintained under the aforesaid provisionsof the Companies Act 1956 as per respective agreements governing such joint ventures.

(ix) According to the information and explanations given to us in respect of statutory and other dues:

(a) The Provident Fund dues have been transferred by the Company to its parent company, ONGC, and accordingto the management, ONGC is responsible for depositing the same with the appropriate authority. We areinformed that the Employees’ State Insurance Scheme is not applicable to the Company. The Company hasbeen regular in depositing the undisputed applicable statutory dues, including Income Tax, Sales Tax, WealthTax, Customs Duty, Excise Duty, Cess, investor education & protection fund and other statutory dues with theappropriate authorities during the year. There are no undisputed statutory dues as mentioned above which areoutstanding for payment for a period exceeding six months on the date of the Balance Sheet of the company.

(b) According to information and explanation given to us, there is no disputed dues of Sales Tax/Income Tax/Customs Tax/Wealth Tax/Excise Duty/Cess payable by the Company as on date of the balance sheet.

(x) The Company neither have accumulated losses at the end of the year, nor incurred cash losses during the currentand the immediately preceding financial year.

(xi) Based on our audit procedures and on the information and explanations given by the management, we are of theopinion that the company has not defaulted in the repayment of dues to financial institutions and banks.

(xii) According to the information and explanations given to us, the Company has not given any loans and advances onthe basis of security by way of pledge of shares, debentures and other securities.

(xiii) The nature of the Company’s business/ activities during the year is such that clause (xiii) of paragraph 4 of theCompanies (Auditor’s Report) Order, 2003 is not applicable to the Company for the year ended on 31st March, 2004.

(xiv) The nature of the Company’s business/ activities during the year is such that clause (xiv) of paragraph 4 of theCompanies (Auditor’s Report) Order, 2003 is not applicable to the Company for the year ended on 31st March, 2004

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loan takenby others from banks and financial institutions.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, term loansavailed by the Company were, prime facie, broadly applied by the Company during the year for the purposes forwhich the loans were obtained.

(xvii) According to information and explanations given to us and on an overall examination of books of accounts and otherrecords, funds raised on short term basis have, prima facie, broadly not been used during the year for long terminvestment (fixed assets, etc) and vice versa.

(xviii) The Company has not made any preferential allotment during the year.

(xix) The Company has not issued debentures during the year.

(xx) The Company has not raised any money by public issue during the year.

(xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud onor by the Company was noticed or reported during the year.

For Ashok Praveen & Co.Chartered Accountants

Praveen GuptaNew Delhi Partner4th June, 2004 M. No. 82599

ANNEXURE TO THE AUDITORS’ REPORT

(Referred to in paragraph 1 of our report of even date of ONGC Videsh Limited,New Delhi as at 31st March, 2004)

(i) In respect of its fixed assets:

(a) The Company has generally maintained proper records showing full particulars, including quantitative detailsand situation of fixed assets, except fixed assets of Joint Ventures situated outside India.

(b) The fixed assets situated in India, have been physically verified by the management during the year. Howeverfixed assets in which Company has interest through joint ventures, which are situated outside India, have notbeen physically verified by the management. According to the information and explanations given to us nomaterial discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanations given to us, the Company has not made anysubstantial disposal of fixed assets during the year.

(ii) In respect of its inventories:

(a) The company does not have any inventory in India. The company has interest in inventories held outside Indiaby Operators of Joint Ventures where company has participating interest. No physical verification of suchinventories has been conducted by the Management during the current year.

(b) Since the company has not carried out physical verification of inventories during the current year, the questionof the reasonableness and adequacy of physical verification does not arise.

(c) The inventories represents Company’s share of participating interest in inventories held in overseas jointventures. The Company’s participating interest in inventories in joint ventures is incorporated in the books ofaccounts on the basis of information provided by the respective operator of the joint ventures and no inventoryrecords are maintained by the Company in India. Therefore, we are unable to comment on the maintenance ofthe proper records of inventories. Since the company has not carried out physical verification of inventoriesduring the current year, the question of the extent and materiality of discrepancies does not arise.

(iii) According to the information and explanations given to us, the company has neither granted nor taken any loansecured or unsecured, to/from companies, firms or other parties covered in the register maintained under Section301 of the Companies Act, 1956.

(iv) In our opinion and according to information and explanations given to us, the Company has an adequate internalcontrol procedure commensurate with the size of the Company and the nature of its business for the purchase offixed assets in India during the current year. We are informed that the purchase of inventory and sale of goods arenot made by the company within India. We are further informed that purchase of inventory and fixed assets andsales of goods are made through Operators in Joint Ventures outside India in terms of respective Joint OperatingAgreement. Therefore, we are unable to comment on internal control procedures in respect of such matters.

(v) In respect of transactions entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956:

(a) To the best of our knowledge and belief and according to the information and explanations given to us, there areno transactions that needed to be entered in the register maintained in pursuance of Section 301 of theCompanies Act, 1956.

(b) In view of the status reported under point no v(a) above the question with respect to transaction in excess ofRs.5.00 lacs in respect of any party and the question of reasonable prices in respect of such transactionsregards to the prevailing market prices is not applicable to the company.

(vi) The Company has not accepted any deposit from the public during the current year.

(vii) In our opinion, the Company has maintained a system of internal audit for the Corporate Office commensuratewith its size and the nature of its business.

159158

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2004

(Rupees in million)

SCHEDULE 2003-04 2002-03

INCOMESales 17 1,566.19 98.50Other Income 18 5,715.19 524.23Increase in Stock 19 42.36 7.73

7,323.74 630.46

EXPENDITUREOperating Expenditure 20 1,174.27 180.79Establishment Expenditure 21 508.81 121.94Recouped Costs 22 2,185.37 83.14Interest and Exchange Fluctuation 23 1,217.72 210.25Provisions and Write-Offs (Net) 24 0.00 (0.05)

5,086.17 596.07

PROFIT BEFORE TAX AND PRIOR PERIOD ADJUSTMENTS 2,237.57 34.39

Prior Period Adjustments (Net) 25 (2.89) 2.05Provision for TaxationWealth Tax 0.01 0.00Current Year Tax 325.90 2.55Deferred Tax 523.92 12.10Excess Provision of Income Tax Written Back 0.00 (8.29)

PROFIT AFTER TAXATION 1,390.63 25.98Add: Profit/(Loss) brought forward from last year 79.63 57.84Balance Available for Appropriation 1,470.26 83.82Transfer to General Reserve 69.53 4.19Balance Carried to Balance Sheet 1,400.73 79.63

1,470.26 83.82STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 27NOTES TO THE ACCOUNTS 28


Jagdish Prasad R. S. Butola Subir RahaCompany Secretary Director (Finance)/Managing Director Chairman

As per our report of even date attachedFor ASHOK PRAVEEN & CO.

Chartered Accountants

Place: New Delhi Praveen GuptaDate : 4th June, 2004 Partner

BALANCE SHEET AS AT 31ST MARCH, 2004 (Rupees in million)

SCHEDULE As at As at31st March, 31st March,

2004 2003

SOURCES OF FUNDS

SHAREHOLDERS’ FUNDSShare Capital 1 3,000.00 3,000.00Reserves and Surplus 2 1,771.19 1,532.34

4,771.19 4,532.34

LOAN FUNDSUnsecured Loans 3 87,580.56 70,534.08

DEFERRED TAX LIABILITY (Refer Note 8 of Schedule 28) 413.36 0.00TOTAL 92,765.11 75,066.42

APPLICATION OF FUNDS

FIXED ASSETS 4Gross Block 6,230.14 5,369.99Less: Depreciation 3,094.96 840.05

Net Block 3,135.18 4,529.94

CAPITAL WORK IN PROGRESS 208.28 64.82PRODUCING PROPERTIES 5 5,148.15 4,492.49EXPLORATORY AND DEVELOPMENT WELLS IN PROGRESS 6 1,565.19 -EXPENDITURE ON PROJECTS IN PROGRESS 7 30,561.53 23,844.86INVESTMENT 8 29,870.78 29,927.95DEFERRED TAX ASSET (Refer Note 8 of Schedule 28) 0.00 110.56CURRENT ASSETS, LOANS AND ADVANCES

Interest Accrued 9 164.49 116.18Inventories 10 252.70 181.92Sundry Debtors 11 421.02 87.07Cash and Bank Balances 12 3802.98 2,685.75Loans and Advances 13 23,934.13 14,028.20

28,575.32 17,099.12

LESS: CURRENT LIABILITIES AND PROVISIONSCurrent Liabilities 14 6,282.22 5,064.82Provisions 15 17.10 12.91

6,299.32 5,077.73

NET CURRENT ASSETS 22,276.00 12,021.39

MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)Project Expenditure 16 0.00 74.41

TOTAL 92,765.11 75,066.42

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 27NOTES TO THE ACCOUNTS 28Schedules referred to above form an integral part of the Accounts

Jagdish Prasad R.S. Butola Subir RahaCompany Secretary Director (Finance)/Managing Director Chairman



Place: New Delhi Praveen GuptaDate: 4th June 2004 Partner

161160

PARTICULARS G R O S S B L O C K D E P R E C I A T I O N N E T B L O C K

As at Additions Deletions/ As at Up to For the Deletions/ Up to As at As at1st April, during the Adjustments 31st March, 31st March, year Adjustments 31st March, 31st March, 31st March,

2003 Year during the year 2004 2003 during the year 2004 2004 2003

1. Building 29.28 58.93 0.00 88.21 0.36 9.47 0.00 9.83 78.38 28.92

2. Plant and Machinery 5,320.34 818.82 54.25 6,084.91 832.95 2,218.00 0.00 3,050.95 3,033.96 4,487.39

3. Computers 11.74 24.94 0.00 36.68 4.34 19.88 0.00 24.22 12.46 7.40

4. Vehicles 6.56 9.32 0.00 15.88 1.28 6.57 0.00 7.85 8.03 5.28

5. Furniture and Fittings 2.07 2.39 0.00 4.46 1.12 0.99 0.00 2.11 2.35 0.95

TOTAL 5,369.99 914.40 54.25 6,230.14 840.05 2,254.91 0.00 3,094.96 3,135.18 4,529.94

Previous year 8.07 5,362.43 0.51 5,369.99 3.41 837.01 0.37 840.05 4,529.94 4.66

The above includesthe company’s 5,357.10 905.96 54.25 6,208.80 834.91 2,251.02 0.00 3,085.92 3,122.88 4,522.19share in Joint VentureAssets

(Rupees in million)


2004 2003

SCHEDULE-3

UNSECURED LOANS

Long Term

Indian Rupee Loans

From Oil Industry Development Board 253.00 348.88(Guaranteed by Oil and Natural Gas Corporation Ltd.)

From Oil and Natural Gas Corporation Ltd. 84,848.29 67,313.29Foreign Currency Loans

From Scheduled Banks 2,479.27 2,871.91(Guaranteed by Oil and Natural Gas Corporation Ltd.)

TOTAL 87,580.56 70,534.08

Repayable within one year 2,575.15 95.87

SCHEDULE-4

FIXED ASSETS (Rupees in million)

(Rupees in million)


2004 2003

SCHEDULE-1

SHARE CAPITAL

Authorised

50,000,000 Equity Shares of Rs.100 each 5,000.00 5,000.00

Issued, Subscribed, Called & Paid Up 3,000.00 3,000.00

30,000,000 Equity Shares of Rs.100 each fully paid up in cash

(The entire share capital is held by Oil and Natural Gas Corporation Ltd. and its nominees.)

TOTAL 3,000.00 3,000.00

SCHEDULE-2


Capital Reserve


Add: Addition/Deduction during the year (1,151.78) 174.08 57.03 1,325.86

General Reserve

Opening balance 126.85 0.00

Add: Addition for Deferred Tax Assets 0.00 122.66

Transfer from Profit and Loss Account 69.53 196.38 4.19 126.85

Profit and Loss Account

Opening Balance 79.63 57.84

Add: Addition during the year 1,321.10 1,400.73 21.79 79.63

TOTAL 1,771.19 1,532.34

163162

(Rupees in million)


2004 2003

SCHEDULE-8

INVESTMENTS

Long Term Investments (Fully Paid up)

Trade Investments in Shares Unquoted

In wholly owned subsidiary - ONGC Nile Ganga B.V.

40 Class ‘A’ & 100 Class ‘B’ Shares of Euro 453.78 Each 29,870.78 29,927.95

TOTAL 29,870.78 29,927.95

SCHEDULE-7

EXPENDITURE ON PROJECTS IN PROGRESS (Rupees in million)

EXPENDITURE TRANSFER OUT / WRITEOFF NET ROJECTEXPENDITURE

As at Addition Transferred Total Up to Transfer to Transfer to Survey & Project Up to As at As at

1st April, During from *As At 31st 31st Producing Exploratory G&G Exp. Expenditure 31st 31st March, 31st March,

2003 the Year Project March, March, Property & Dev. Wells Written Off March, 2004 2003

Expenditure 2004 2003 In Progress 2004

(Schedule-16) (Schedule-5) (Schedule-6) (Schedule 22) (Schedule 22)

Sakhalin-1 Project, 23,717.50* 8,424.99 0.00 32,142.49 0.00 0.00 1387.06 0.00 569.19 1956.25 30,186.24 23,717.50

Block-8 Project, Iraq 49.32 0.00 0.00 49.32 0.00 0.00 0.00 0.00 49.32 49.32 0.00 49.32

Myanmar Project 73.47 212.12 0.00 285.59 0.00 0.00 178.13 33.99 73.47 285.59 0.00 73.47

Farsi Block,Iran 4.57 86.82 0.00 91.39 0.00 0.00 0.00 86.82 4.57 91.39 0.00 4.57

Block 188,189, Libya 0.00 0.00 500.39 500.39 0.00 0.00 105.65 41.32 2.40 149.37 351.02 0.00

Syria Project 0.00 0.00 22.89 22.89 0.00 0.00 0.00 0.00 3.08 3.08 19.81 0.00

Sudan 5A & 5B 0.00 4.46 0.00 4.46 0.00 0.00 0.00 0.00 0.00 0.00 4.46 0.00

TOTAL 23,844.86 8,728.39 523.28 33,096.53 0.00 0.00 1,670.84 162.13 702.03 2,535.00 30,561.53 23,844.86

Previous year 23,774.69 4,656.08 4.57 28,435.34 0.00 4,525.66 0.00 0.00 0.00 4,525.66 23,844.86 23,774.69

*Opening balance of Sakhalin Project has been reduced by opening capital WIP Rs. 64.82 million for the purpose of regrouping

(Rupees in million)As at As at

31st March, 31st March,2004 2003

SCHEDULE-5

PRODUCING PROPERTIES

Gross

Opening Balance 4,525.66 0.00Add: Addition during the year 1,789.36 4,525.66Total Gross (A) 6,315.02 4,525.66

Less: DepletionOpening Balance 33.17 0.00Depletion for the year 240.95 33.17Total Depletion(B) 274.12 33.17

Written Off due to Change In Accounting Policy (C) 892.75 0.00

Net Producing Properties (A-B-C) 5,148.15 4,492.49

SCHEDULE-6

EXPLORATORY AND DEVELOPMENT WELLS IN PROGRESS

Sakhalin-1 Project, Russia Federation 1,387.06 0.00

Myanmar Project 178.13 0.00

Lybia project 105.65 0.00

Sub Total 1,670.84 0.00

Less: Transfer to Producing Properties 0.00 0.00(Ref Sechedule-5)

Less: Transfer to Dry Wells 105.65 0.00(Ref Schedule 22)

Sub Total 105.65 0.00

TOTAL 1,565.19 0.00

165164

(Rupees in million)


2004 2003

SCHEDULE-12CASH AND BANK BALANCES

A. Cash Balancesa) At New Delhi 0.01 0.06b) At HCMC,Vietnam 0.04 0.05

B. Balances with Scheduled banksa) On Current Account 0.00 0.00b) On Deposit Accounts 2,661.32 1,970.82

C. Balances with Non-Scheduled banksa) On SB Account (USD) with Bank for Foreign Trade of Vietnam, HCMC,Vietnam 0.02 0.02

(Maximum balance during the year Rs.0.03 million, Previous year Rs. 0.02 million)

b) On SB Account (VND) with Bank for Foreign Trade of Vietnam, HCMC,Vietnam 0.03 0.02(Maximum balance during the year Rs.612.83 million, Previous year Rs. 0.02 million)

c) On Current Account (USD), CITI Bank,HCMC,Vietnam 0.01 2.58(Maximum balance during the year Rs. 4.33 million, Previous year Rs. 3.23 million)

d) On Current Account (VND) with CITI Bank,HCMC,Vietnam 0.09 0.00(Maximum balance during the year Rs.10.41 million, Previous year Rs. Nil )

e) On Current Account with Bank of Moscow,Sakhalin 0.14 0.11(Maximum balance during the year Rs. 0.47 million, Previous year Rs. 0.43 million)

D. Bank Balance 1,141.32 712.09(In respect of joint venture through operator)

TOTAL 3,802.98 2,685.75

(Rupees in million)


2004 2003

SCHEDULE-9

INTEREST ACCRUED(Unsecured, Considered Good unless otherwise stated)

Interest Accrued On

Deposits with Banks 47.38 51.88

Carry Finance 112.06 56.32

On Loan to ONGC Nile Ganga B.V. 0.00 4.45

Others 5.05 3.53

TOTAL 164.49 116.18

SCHEDULE-10

INVENTORIES

Finished Goods 50.09 7.73

Stores & Spares 202.61 174.19(In respect of joint venture through operator)

TOTAL 252.70 181.92

SCHEDULE-11

SUNDRY DEBTORS(Unsecured)

Debts Outstanding for a period exceeding 6 monthsConsidered Good 0.10 0.00Considered Doubtful 0.00 0.00

Other Debts:Considered Good 420.92 87.07Considered Doubtful 0.00 0.00

TOTAL 421.02 87.07

167166

(Rupees in million)


2004 2003

SCHEDULE-14

CURRENT LIABILITIES

Sundry Creditors for Supplies / Works

Small Scale Undertakings 0.00 0.00

Other than Small Scale Undertakings 73.90 144.00

Overdraft Balance in Current A/C with SBI, IFB New Delhi 8.59 191.01

Deposits 0.60 0.44

Interest Free Advance from Oil and Natural Gas Corporation Ltd. 1,500.00 1,500.00

Payable to Oil and Natural Gas Corporation Ltd. 118.20 111.77

Payable to Talisman Energy Resource Inc 372.17 915.64

Amount Payable To Operator

Daewoo Inernational for Myanmar Project 0.00 39.43

BPEOC (Vietnam Project) 46.40 0.00

Exxon Mobil for Sakhalin Project. 0.00 46.40 18.62 58.05

Other Liabilities 198.41 59.20

Deferred Credit on Gas Sales 981.70 0.00

Sundry Creditors for Supplies / Works 2,982.25 2,084.71(In respect of joint venture through operator)

TOTAL 6,282.22 5,064.82

SCHEDULE-15

PROVISIONS

Gratuity 8.78 6.70

Leave Encashment 8.32 6.21

TOTAL 17.10 12.91

(Rupees in million)


2004 2003

SCHEDULE-13LOANS AND ADVANCESCarry Finance to SMNG-S, Russian Federation 9,750.04 4,926.41

Carry Finance to RN ASTRA, Russian Federation 7,206.48 3,641.19

Loans and Advances to Employees 21.95 14.29

Loan to Oil India Limited 354.44 337.56

Advances recoverable in cash or in kind or for value to be received 89.89 288.09

Loan to ONGC Nile Ganga B.V. 0.00 3,546.84

Receivable from ONGC NILE GANGA BV 204.42 86.30

Dividend Receivable from ONGC NILE GANGA BV 2,933.06 0.00

Advance to DDA against Land 1,266.01 0.00

Other Deposits 1.65 1.06

Income Tax:

Advance Payment of Income Tax 178.25 138.02

Less: Provision 100.39 77.86 100.37 37.65

Deferred Debit on transportation Cost 305.67 0.00Advance recoverable in cash or in kind or for value to be received 1,722.66 1,148.81(In respect of joint venture through operator)

TOTAL 23,934.13 14,028.20

Particulars of Loans and Advances

Secured - Considered Good 17.70 8.75

Unsecured-Considered Good 23,916.43 14,019.45

TOTAL 23,934.13 14,028.20

169168

(Rupees in million)

2003-04 2002-03

SCHEDULE-18

OTHER INCOME

Income from Dividend from Subsidiary 3,279.68 0.00

Gain on transfer of participating interest inVietnam Project in the earlier years (Written back due to 1,151.78 0.00change in accounting method from FCM to SEM)

Interest Income on:Short Term Deposits with Banks 187.69 117.62(Tax deducted at source Rs. 24.94 million.previous year Rs. 24.09 million)Carry Finance 536.56 239.93Loans & Advances to Employees 1.04 0.84Others 45.52 12.73

Miscellaneous ReceiptsManpower Deployment 470.81 152.33Other Receipts 42.11 512.92 0.78 153.11

TOTAL 5,715.19 524.23

SCHEDULE-19

INCREASE IN STOCK (FINISHED GOODS)

Closing Stock 50.09 7.73

Less: Opening Stock 7.73 0.00

Net Increase in Stock 42.36 7.73

SCHEDULE-20

OPERATING EXPENDITURETransportation Expenditure 378.42 47.98Production Expenditure 560.68 123.86Value Added Tax 235.17 8.95

TOTAL 1,174.27 180.79

Note: The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act,1956and exhibited in Note -13 of Schedule ‘28’

(Rupees in million)

2003-04 2002-03

SCHEDULE-17

SALES

Gas 1468.89 98.50

Condensate 97.30 0.00

TOTAL 1566.19 98.50

SCHEDULE-16

PROJECT EXPENDITURE (Rupees in million)

PROJECT EXPENDITURE WRITE OFF/TRANSFER BALANCE

Upto During Total upto Transferred to Amt. written Total As at As at31st March, 2003-04 31st March, Proj in progress Off during 31st March, 31st March,

2003 2004 (Schedule 07) 2003-04 2004 2003

BOARD APPROVED PROJECTS

1 Tuba project, Iraq 8.50 0.00 8.50 0.00 8.50 8.50 0.00 8.50

2 Caspian Sea Project, Kazakhstan 10.47 0.00 10.47 0.00 10.47 10.47 0.00 10.47

3 Block 188,189, Libya 2.39 498.00 500.39 500.39 0.00 500.39 0.00 2.39

4 Nelson,Kazakhstan 14.82 0.00 14.82 0.00 14.82 14.82 0.00 14.82

5 Syria 3.08 19.81 22.89 22.89 0.00 22.89 0.00 3.08

6 Bangladesh 27.67 0.00 27.67 0.00 27.67 27.67 0.00 27.67

7 Venezuela 0.38 0.00 0.38 0.00 0.38 0.38 0.00 0.38

8 Exploration Blocks( 3&7), Sudan 1.93 0.00 1.93 0.00 1.93 1.93 0.00 1.93

9 Sakhalin Exploration blocks 1.94 0.00 1.94 0.00 1.94 1.94 0.00 1.94

10 Qatar 3.23 0.00 3.23 0.00 3.23 3.23 0.00 3.23

11 North Kuwait 0.00 8.39 8.39 0.00 8.39 8.39 0.00 0.00

TOTAL 74.41 526.20 600.61 523.28 77.33 600.61 0.00 74.41

171170

(Rupees in million)

2003-04 2002-03

SCHEDULE-22

RECOUPED COSTS

Project Expenditure Written Off due to changein accounting policy 1,663.71 48.47

Depreciation 2,254.91 837.01

Less: Allocated to Project Expenditure &Producing Properties 2,248.24 834.85

Transferred to survey expenditure 2.13 0.00

Transferred to prior period expenditure 0.00 0.66

2,250.37 4.54 835.51 1.50

Depletion 240.95 33.17

Survey Expenditure 162.13 0.00

Dry Wells 105.65 0.00

Pre Acquisition Expenses 8.39 0.00

TOTAL 2,185.37 83.14

SCHEDULE-23

INTEREST AND EXCHANGE FLUCTUATION

A. Interest On

Loan from Oil Industry Development Board 14.27 19.07

Foreign Currency Loans 46.22 61.27

Less: Capitalised 0.00 46.22 50.79 10.48

Others 0.00 0.06

Sub-Total 60.49 29.61

B.Exchange Fluctuation

Net Exchange Variation for the Year 866.50 100.55

Less: Capitalised (290.73) 1,157.23 (80.09) 180.64

TOTAL 1,217.72 210.25

(Rupees in million)

2003-04 2002-03

SCHEDULE-21

ESTABLISHMENT EXPENDITUREStaff ExpenditureSalaries, Wages and Bonus 73.13 24.77Contribution to Provident and other Funds 2.81 2.16Provision for Gratuity 2.08 2.29Provision for Leave Encashment 3.66 2.72Staff Welfare Expenses 5.92 2.82Sub-Total 87.60 34.76Office and Administrative ExpensesRent 11.15 4.24Electricity and Water 1.84 1.56Repair and Maintenance 4.81 4.53Vehicle Hire Charges 1.39 0.50Professional Charges 65.92 0.59Telephone and Telex 6.50 3.72Printing and Stationary 2.40 1.81Training and Seminar 0.48 0.69Business Meeting Expenses 3.96 1.04Travelling Expenses (Including Foreign Travel Rs. 54.59 million 57.08 54.33Previous Year Rs. 52.93 million)Insurance 225.98 0.62Advertisement and Exhibition Expenses 1.99 8.27Others 37.71 5.28Sub-Total 421.21 87.18TOTAL 508.81 121.94

Note: The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act, 1956and exhibited in Note -13 of Schedule ‘28’

173172

SCHEDULE-27


1. Accounting Conventions:

The financial statements are prepared under the historical cost conventions in accordance with Generally AcceptedAccounting Principles (GAAP) in India. Generally, revenues are recognized on accrual basis with provision made forknown losses and expenses.

2. Acquisition, Exploration, Development and Production Costs:

The Company follows Successful Efforts Method (SEM) of Accounting for its Oil and Gas Exploration, Developmentand Production activities.

2.1 Acquisition Cost:

All costs relating to the acquisition of an oil and gas property in exploration/development stage is capitalized aswork in progress. Such costs are capitalised by transferring to Producing Property when it is ready to commencecommercial production . In case of abandonment of the property such costs are expensed. All costs relating tothe acquisition of a producing oil and gas property are capitalized as Producing Property.

2.2 Survey Costs:

Cost of Surveys and prospecting activities conducted in the search of oil and gas are expensed in the year inwhich these are incurred.

2.3 Exploratory/Development Wells in Progress:

2.3.1 All exploration costs involved in drilling and equipping exploratory and appraisal wells, cost of drilling exploratorytype stratagraphic test wells are initially capitalized as exploratory wells in progress till the time these are eithertransferred to producing properties when ready to commence commercial production or expensed in the yearwhen determined to be dry or of no further use, as the case may be.

2.3.2 All costs relating to development wells, development type stratagraphic test wells, service wells, are initiallycapitalized as development wells in progress and transferred to producing properties when ready to commencecommercial production.

2.3.3 Exploratory wells in progress which are more than two years old from the date of completion of drilling arecharged to Profit and Loss Account except those wells which have proved reserve and the development of thefields in which the wells are located has been planned.

2.4 Producing Properties:

2.4.1 Producing properties are created in respect of a field/project having proved developed oil and gas reserve whenthe well in the field/project is ready to commence commercial production. Development wells are transferred toproducing properties when ready to commence commercial production.

2.4.2 All acquisition Cost and cost of successful exploratory wells, all development wells and all related developmentcosts including depreciation on support equipment and facilities and estimated future abandonment costs arecapitalized and reflected as Producing Properties.

2.5 Production Costs:Production costs include pre-wellhead and post-wellhead expenses including depreciation and applicable operatingcosts of support equipment and facilities.

3. Depletion of Producing Properties:

Producing properties are depleted using the “Unit of Production Method”. The rate of depletion for all capitalized costsis computed with reference to the field/project/amortization base by considering the related proved and developedreserves excepting for acquisition costs which are depleted by considering the proved reserves. These reserves areestimated annually.

(Rupees in million)

2003-04 2002-03

SCHEDULE-24

PROVISIONS AND WRITE-OFFS (NET)

Excess Provisions Written Back 0.00 (0.05)

TOTAL (NET) 0.00 (0.05)

Note: The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act, 1956and exhibited in Note -13 of Schedule ‘28’

SCHEDULE-25

PRIOR PERIOD ADJUSTMENTS (NET)

A. Expense


Other Expenses 2.19 1.41

Sub-Total 2.19 2.07

B. Income

Miscellaneous Items 5.08 0.02

Sub-Total 5.08 0.02

TOTAL (NET) (2.89) 2.05

(Amount in Rupees)


2004 2003

SCHEDULE-26

EARNINGS PER EQUITY SHAREBasic & Diluted Earnings Per Equity Share 46.35 0.87(Per Share of Rs. 100 each)

Earnings Per Equity Share has been computed by dividing the net profit after taxation of Rs.1,390.63 million (Previousyear Rs.25.98 million) by number of equity shares 30000000 (Previous year 30000000).

175174

11. Foreign Currency Transactions:

11.1 Foreign exchange transactions relating to purchase of fixed assets, goods and services are accounted for atthe exchange rates ruling on the date of transaction.

11.2 Foreign Currency loans/deferred credits outstanding at the end of the year and bank balances are translated atthe mean exchange rate prevailing on the last day of the financial year. Losses or gains relating to the loans/deferred credits utilized for acquisition of fixed assets are adjusted to the carrying cost of the relevant assets.Losses or gains due to exchange fluctuations relating to other loans/deferred credits are considered in theProfit and Loss Account.

12. Revenue Recognition:

12.1 Revenue from sale of products is recognized on transfer of custody to customers.12.2 Sales are inclusive of all statutory levies.12.3 Revenue in respect of short lifted quantity of gas and interest on delayed realizations from customers, are

recognized when there is reasonable certainty regarding ultimate collection.

13. Retirement Benefits:

13.1 Contribution to Provident Fund and Composite Social Security Scheme is made as per the rules of the parentcompany. The same is paid to funds administered through trusts.

13.2 Provisions for gratuity and leave encashment are made as per actuarial valuation at the end of the financialyear. The same are not funded.

14. Borrowing Costs:

Borrowing Costs that are specifically identified to the acquisition or construction of qualifying assets are capitalizedas part of such asset. A qualifying asset is one that necessarily takes substantial period of time to get ready forintended use. All other borrowing costs are charged to Profit and Loss Account.

4. Impairment:

4.1 Impairment loss is determined for each field/project and adjusted for in the carrying cost.4.2 At each balance sheet date an assessment of the recoverable amount based on the value in use method is

carried out in respect of each individual field/project and compared with the carrying amount and if a permanentdiminution in value is identified, the asset is impaired to the net recoverable amount. However, provision forimpairment being carried forward, is reviewed for write back, if any.

5. Abandonment Costs:

The liability towards cost relating to dismantling, abandoning and restoring well sites and allied facilities is recognizedbased on the provisions under respective agreements production sharing and/ or contracts governing company’sactivities in the field / projects.

6. Joint Ventures:

The Company has entered into overseas joint ventures with others. In such joint ventures as per the contractualarrangement, the Company shares control with other venturers.

6.1 The financial statements reflect the share of the Company’s assets and liabilities as well as income andexpenditure of Joint Venture Operations which are accounted for according to the participating interest of theCompany as per various joint venture agreements on a line by line basis along with similar items in theCompany’s financial statements, except in cases of abandonment, impairment, depletion and depreciationwhich are accounted based on accounting policies of the Company.

6.2 The reserves of hydrocarbons in the joint ventures are taken in proportion to the participating interest of theCompany.

7. Fixed Assets:

7.1 Fixed assets (including support equipment and facilities) are stated at historical cost.7.2 All costs relating to acquisition of fixed assets till the time of commissioning of such assets are capitalized.

8. Depreciation:

8.1 Depreciation on fixed assets is provided for under the written down value method in accordance with ScheduleXIV to the Companies Act, 1956.

8.2 Leasehold land is amortized over the lease period.8.3 Depreciation on adjustments to fixed assets on account of exchange differences and price variation is provided

for prospectively over the remaining useful life of such assets.8.4 Depreciation on fixed assets (including support equipment and facilities) used for exploration and drilling activities

and on facilities is initially capitalized as part of exploration or development costs and expensed/depleted asstated in policy 2 & 3 above.

9. Inventories:

9.1 Crude oil and condensate are valued at cost or net realizable value whichever is lower.9.2 Natural gas in pipeline and crude oil/condensate stock in flow lines/Gathering Stations are not valued.

10. Investments:

10.1 Long-term investments are valued at cost. Provision is made for any diminution, other than temporary, in thevalue of such investments.

10.2 Current investments are valued at lower of cost and fair value.

177176

3. Details of Joint Ventures:The activities of the Company are being carried out through Joint Ventures. The details of the significant joint venturesare as under:

Name of Country of OVL Other Partners Project Statusthe Project operation participating

and Block share (%)

Vietnam Project Vietnam Block 06.1 45% BP Exploration Production commencedOffshore Operating Co. Ltd. – 35% from 21st January, 2003

Petrovietnam – 20%

Sakhalin Project Russia Sakhalin 1 20% Exxon Neftgas Ltd – 30% The project is underOffshore SODECO - 30% development

SMNG - 11.5%R N Astra - 8.5%

Myanmar Project Myanmar 20% Daewoo International The project is underBlock A-1 Offshore Corpn. - 60% exploration

KOGAS - 10%GAIL ( India ) Ltd. – 10%

Iran Project Iran Farsi 40% Indian Oil Corp. Ltd. – 40% The project is underBlock Offshore Oil India Ltd. - 20% exploration.

Libya Project Libya Blocks NC- 49% TPOC – 51% Assignment Agreement188 and 189 Onshore was signed on 5th

June, 2003.The project isunder exploration.

Syria Project Syria Block -24 60% IPR International – 40% Agreement signed onOnshore 15th January, 2004.

The Project is underexploration.

4. The Company’s share of assets, liabilities, income and expenses in the Joint Ventures as furnished by the operator

has been incorporated in the financial statement as given below:

(Rupees in million)

Vietnam Sakhalin Myanmar Iran Libya

Fixed Assets 4882.71 1320.86 1.29 0.19 3.75

Producing Property 3607.53 - - - -

Project WIP - 19383.94 - - 351.02

Exploratory and - 1387.06 178.13 - -Development Wells in progress

Current Assets 104.93 1782.03 0.08 16.19 22.04

Cash and Bank - 1038.95 50.96 7.71 43.70

Current Liabilities 197.55 2670.46 3.41 71.16 39.67

Expenses 560.68 - - - -

SCHEDULE-28


1. Change in Accounting Policy:

During the year the Company has changed its accounting policy with retrospective effect in respect of oil and gasexploration, development and production activities from the Full Cost Method (FCM) to Successful Efforts Method(SEM) of accounting. This has been done to align the Company’s accounting policy with that followed by its parentcompany and the wholly owned subsidiary of the Company.

The net impact of this change in the accounting policy is increase in profit by Rs 88.68 million till end of the previousyear 31st March 2003 with the following major break up:

(Rupees in million)

Reduction in Accumulated Depletion 6.16Reduction in Project Expenditure (770.96)Reduction in Producing Properties (Net) (892.75)Increase in Deferred Tax Asset 594.75Gain on assignment of participating interest in Vietnam project 1151.78Reduction in value of closing stock (0.30)Net Impact on Profit of the change in Policy up to 31.03.2003 88.68

Impact in the Current year Profit: The impact of changes is considered in the current year’s income statement asa change in accounting policy as per AS-5. Had the Company followed the Full Cost Method of accounting in respectof its oil and gas exploration, development and production activities, the profit for the year ending 31st March, .2004would have been higher by Rs 141.28 million as follows:

(Rupees in million)

Reduction in Depletion 57.05Increase in Survey Expenditure (162.13)Increase in Dry Hole Expense (105.65)Increase in Pre Acquisition Expense (8.39)Reduction in value of stock (1.19)Increase in Deferred Tax Asset 79.03Net Impact on Profit for the year due to change in Policy (141.28)

2. The General & Administrative overhead expenses of Delhi Head office has been charged off in the current year’sProfit and Loss Account instead of allocating to different activities as was followed till previous year .Due to thechange in allocation of General and Administrative expenses the profit for the year has been reduced by Rs. 107.13million.

179178

(b) Company’s share of Proved and Developed Reserves in respect of the different projects as on 31st March, 2004is as under:

Project Details Crude Oil Gas Total oil equivalent**(MM Tonne)* (Billion Cubic Meter) (MM Tonne)

Vietnam Opening 0.773 16.439 17.212

Addition - - -

Deductions - - -

Production 0.022 0.523 0.545

Closing 0.751 15.916 16.667

*Crude Oil includes condensate. **For calculating OEG 1000M3 of Gas has been taken to be equal to 1 MT of crude oil.

7. Segment Information:

(Rupees in million)

Particulars Asia Pacific FSU Countries Africa Unallocated Grand Total

REVENUE

External sales 1566.19 0.00 0.00 0.00 1566.19

Inter Segment sales 0.00 0.00 0.00 0.00 0.00

Total Revenue 1566.19 0.00 0.00 0.00 1566.19

Results

Segment results 231.51 0.00 0.00 0.00 231.51

Unallocated corporate Expenses (Net) 0.00 0.00 0.00 3603.61 3603.61

Operating profit or Loss 231.51 0.00 0.00 -3603.61 -3372.10

Interest expenses 46.22 0.00 0.00 14.27 60.49

Interest and other income 4.90 0.00 0.00 5668.15 5673.05

Income Tax 0.00 0.00 0.00 849.83 849.83

Profit / (loss) from ordinary activities 190.19 0.00 0.00 1200.44 1390.63

Extraordinary losses 0.00 0.00 0.00 0.00 0.00

Net profit / (Loss) 190.19 0.00 0.00 1200.44 1390.63

Other information

Segment Assets 8922.20 35246.66 423.27 19.81 44611.94

Unallocated Corporate Assets 0.00 0.00 0.00 54452.49 54452.49

Total Assets 8922.20 35246.66 423.27 54472.30 99064.43

Segment liabilities 1229.15 2666.12 39.67 0.00 3934.94

Unallocated Corporate liabilities 0.00 0.00 0.00 90358.30 90358.30

Total 1229.15 2666.12 39.67 90358.30 94293.24

Capital expenditure 213.16 9261.13 501.75 128.11 10104.15

Depreciation (Recouped cost) 240.95 0.00 0.00 1944.42 2185.37

Non cash Expenditure 0.00 0.00 0.00 0.00 0.00

The Company’s share of expenditure in respect of Joint Ventures has been incorporated in the Accounts based onthe un-audited financial statements provided by the operator for the period ended 31st March 2004. In respect ofVietnam Project the audited statement have been received till the period ended 31.12.2002 and no difference hasbeen observed between the un-audited financial statement and the audited Accounts till December 2002 therebyrequiring no further adjustment. In respect of Sakhalin Project, operator’s financial statement indicates excess capitalcontribution of US $ 29.734 million by the partners which has been incorporated in the books of the Company by wayof reduction from the project expenditure. The Company did not participate in sole risk operation carried out in respectof Myanmar project. The expenditure incurred by the sole risk participant was USD 2.09 million equivalent to Rs92.04 million.

5. Vietnam Project:

The delivery of Gas to the buyer commenced on 21st January, 2003 from Block 06.1 Vietnam Project. Under theterms of the Gas Sales and Purchase Agreement, the start date effective from which the Take or Pay obligation maybecome applicable was agreed by all the parties as 25th April, 2003. During the current year ended 31st March 2004,receipts on account of Gas Sales were Rs. 2501.33 million. Out of this, the Company received Rs. 1032.44 millionagainst take or pay provisions in the contract (revalued at Rs 981.70 million as on 31st March, 2004) owing to lessernomination of Gas by the buyer which has been shown as advance received from buyer. The correspondingtransportation charges of Rs 321.45 million (revalued at Rs 305.67 million as on 31st March, 2004) against the ship orpay obligation under the transportation agreement with the transporters have also accordingly been shown as advancepayment to transporter.

During the year under reporting, due to the dispute over interpretation of shortfall gas clause in the Gas Salesand Purchase Agreement, buyer has deposited revenue on account of Gas Sales of Rs. 0.10 million (USD 0.002million) in an escrow account which is reflected as debtors for Gas Sales.

An amount of Rs 20.03 million (USD 0.42 million) paid as transportation expenses during the previous year has beenrefunded by the transporter during the current year on settlement of the issue of start date which has been netted offfrom current year’s transportation expenses.

6. Details of Reserves:

(a) Company’s share of Proved Reserves in respect of the different projects as on 31st March, 2004 is as under:


Vietnam Opening 0.780 19.994 20.774Addition - - -Deductions - - -Production 0.022 0.523 0.545Closing 0.758 19.471 20.229

Sakhalin Opening 61.400 97.000 158.400Addition - - -Deductions - - -Production - - -Closing 61.400 97.000 158.400

*Crude Oil includes condensate.**For calculating OEG 1000M3 of Gas has been taken to be equal to 1 MT of crude oil.

181180

(b) Current Tax ProvisionThe Company is liable to pay tax on profits for the period ended 31st March, 2004 u/s 115 JB of Income Tax Act,1961 for Minimum Alternative Tax (MAT) However the net tax payable on the book profits is negative afterconsidering the tax withheld of Rs. 325.90 million (Previous year Nil) on the dividend remitted by the whollyowned foreign subsidiary.

(c) Tax AssessmentThe Company has gone in to appeal to Hon’ble High Court of Delhi against the decision of Income Tax AppellateTribunal for the Assessment Year 1981-82 to 1987-88 with regard to disallowance of its claim for Rs. 94.04 million(Previous year 94.04 million), on account of depreciation, development allowance, receipt of interest on delayedpayments in respect of Iran Project. However, pending decision the tax demand in this regard has already beendeposited by the Company. The case of the Company is listed for hearing.

9. Loans and Advances to Employees: Loans and advances to employees include an amount of Rs 0.23 million(Previous Year Rs. 0.25 million) outstanding from whole time Directors, Maximum outstanding during the year is Rs0.25 million (Previous year Rs.0.26 million).

10. Capital Commitment:

(i) In respect of Farsi Block, Iran Project, the Company in consortium with other partners has entered into anExploration Service Contract. The Exploration Service Contract provides for a minimum exploration expenditureobligation of USD 27 million equivalent to Rs. 1189.08 million (Previous year USD 27 million equivalent toRs. 1283.85 million). The Company’s proportionate share of the minimum exploration expenditure obligation isUSD 10.8 million equivalent to Rs. 475.63 million (Previous year USD 10.8 million equivalent to Rs. 513.54million) against which Company has issued Performance bank guarantee for USD 2.16 million (being its share)equivalent to Rs. 95.13 million ( Previous year NIL) under the provisions of the contract which is to be annuallyadjusted by the National Iranian Oil Company (NIOC). In case the actual dollar amount spent by Company inphase 1 after fulfilling the minimum work obligation is less than USD 27 million such unexpended balance shallbe paid by direct transfer to NIOC. The Company is confident of meeting the minimum work commitment.

(ii) In respect of Block-8, Iraq Project the Company has entered into an Exploration and Development Contract.The Exploration and Development Contract provides for a minimum work obligation of USD 15 million equivalentto Rs.660.60 million (Previous year USD 15 million equivalent to Rs.713.25 million) during phase 1 of theexploration period. In case the actual dollar amount spent during the first phase of exploration period is greateror smaller than the minimum work obligation of USD 15 million for that phase, such over or under expenditureshall be deducted or added to the minimum expenditure obligation of phase 2. The project is under first phaseof exploration and the Company has the option of electing to enter into the second phase of exploration. TheCompany is confident of meeting the minimum work obligation.

(iii) In respect of Block NC-188,189 Libya the Company has acquired 49% participating interest. The total capitalcommitment for the agreed work programme is USD 32.6 million equivalent to Rs.1435.70 million ( Previousyear Nil ). The 49% participating interest of the Company is USD 15.97 million equivalent to Rs. 703.32 million(Previous year Nil ). During the year, the Company has spent USD 11.15 million equivalent to Rs. 526.30 million(Previous year Nil). As such, the balance commitment of the Company is USD 4.82 million equivalemt toRs.212.27 million (Previous year Nil). The project is under exploration phase. The Company is confident ofmeeting the minimum work commitment.

(iv) In respect of Block 24, Syria, the Company has acquired 60% participating interest. The total capital commitmentfor the agreed work programme is USD 7.50 million equivalent to Rs. 330.30 million (Previous year Nil ). The60% participating interest of the Company is USD 4.50 million equivalent to Rs.198.18 million (Previous yearNil). The Company is confident of meeting the minimum work commitment.

11. Contingent Liability:

(i) Liability for payment to contractual workers for regularization of their services is pending with Labour Courtunder civil suit. The amount of liability is not ascertainable.

(ii) Company has issued the following Performance Bank Guarantees:(a) USD 2.16 million equivalent to Rs. 95.13 million (Previous year Nil) to the National Iranian Oil Company for its

share of 1/5th of the Minimum Expenditure Obligation in the Exploration Service Contract for Farsi OffshoreBlock and,

Information about Secondary Business Segments (Product-wise):

(Rupees in million)

Particulars 2003-04 2002-03

Natural Gas & Condensate 1,566.19 98.50

NOTES:

(i) Segments have been identified and reported taking into account, the organization and management structurefor internal reporting and significantly different risk and return perception in different geographical regions.These are organized into four segments viz. Asia Pacific, FSU Countries, Africa and Unallocated.

(ii) The segment revenue in the business segment (Product-wise) is gross revenue from sale of natural gas andcondensate.

(iii) Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of thesegments and amount allocated on a reasonable basis. Unallocated includes common expenditure incurred forall the segments and expenses incurred at corporate level.

8. Taxation

(a) Deferred Tax Provision(i) The Net Deferred Tax Liability of the Company as at 31st March, 2004 is Rs. 413.36 million against Net Deferred

Tax Asset of Rs. 110.56 million as on 31st March, 2003. The difference of Rs. 523.92 million has been chargedto the current year’s Profit and Loss Account.

(ii) The breakup of deferred tax Assets and Liabilities as on 31st March , 2004 is as under:

(Rupees in million)

As at As at31st March, 2004 31st March, 2003

Deferred Tax Assets :Carried Forward Expenditure U/S 42 of Income Tax Act, 1961 493.79 80.79

Carried Forward Fee U/S 35 D of Income Tax Act, 1961 0.78 1.04

Carried Forward Depreciation U/S 32 of Income Tax Act, 1961 3,177.34 2,868.59

Carried Forward Losses U/S 72 of Income Tax Act, 1961 234.47 238.17

Amount disallowable U/S 43B of Income Tax Act, 1961 5.07 3.04

Total Deferred Tax Assets 3,911.45 3,191.63

Deferred Tax Liability :

Revenue Expenditure Carried Forward as Project Expenditure - 26.70

Difference in Net Block of Fixed assets for Tax 4,324.81 2,920.13

Expenditure claimed U/S 42 but not charged in the Accounts - 134.24

Total Deferred Tax Liability 4,324.81 3,081.07

Net Deferred Tax Asset/(Liability) (413.36) 110.56

183182

14. Quantitative and other information pursuant to the provisions in Part II of Schedule VI to the Companies Act,1956:

(i) Sales turnover

2003-04 2002-03

Unit Quantity* Value (Rs. in million) Quantity* Value (Rs. in million)Gas 000 M3 222,002 1,468.89 17,292 98.5

Condensate MT 7,968 97.30 Nil Nil

*Company’s entitlement based on actual delivery.

(ii) Opening and Closing Stock of Goods Produced

As at 31st March, 2004 As at 31st March, 2003

Quantity MT Value (Rs. in million) Quantity MT Value (Rs. in million)Condensate*Opening Stock 3,528 7.73 Nil NilClosing Stock 11,412 50.09 3,528 7.73

*Company’s participating share of stock in Joint Venture.

(iii) Licensed Capacity, Installed Capacity and Actual Production

2003-04 2002-03

Unit Installed Capacity Actual Production Installed Capacity Actual Production

Gas* 000 M3 Not applicable 523,383 Not applicable 69,507

Condensate* MT Not applicable 21,822 Not applicable 3,528

*Company’s participating share of production in Joint Venture.

15. Expenditure in Foreign Exchange:

(Rupees in million)

Particulars 2003-04 2002-03Import Nil NilProfessional & Consultation Fee 65.54 102.42

Interest 3.66 Nil

Others 11,311.41 43,164.31

16. Earning In Foreign Exchange:

(Rupees in million)


Export/ Sales (including advance received) 2,598.63 98.50Royalty/Technical know-how Nil Nil

Interest & Dividend 3,844.32 254.66

Others (Misc. Income) 444.29 153.00

(b) USD 4.5 million equivalent to Rs 198.18 million (Previous year Nil) to Syrian Petroleum Corporation for its shareof Minimum Financial Commitment in Block 24,Syria.

12. Exchange Difference:

The total net exchange difference (loss) during the year was Rs. 866.50 million of which net exchange difference(loss) of Rs. 1157.23 million is expensed and net exchange gain of Rs. 290.73 million is adjusted to the carryingamount of fixed assets.

13. Details of Operating Expenditure (Schedule 20), Establishment Expenditure (Schedule 21) and Provi sion &Write Off (Schedule 24):

(Rupees in million)

2003-04 2002-03

(i) (a) Salaries, Wages, Ex-gratia, etc. 307.59 74.00(b) Contribution to Provident and other Funds 2.81 2.16(c) Provision for Gratuity 2.08 2.29(d) Provision for Leave Encashment 3.66 2.72(e) Staff Welfare Expenses 5.92 3.85

Sub-Total 322.06 85.02

Less: Allocation to Projects 0.00 13.78

(A) 322.06 71.24

(ii) Rent 11.15 4.25(iii) Electricity, Water and Power 1.84 4.00(iv) Repairs to Building 0.11 0.32(v) Repairs to Plant and Machinery 1.64 20.63(vi) Other Repairs 10.55 1.82(vii) Hire Charges of Vehicles 1.39 0.50(viii) Professional Charges 65.92 209.34(ix) Telephone and Telex 6.50 3.72(x) Printing and Stationary 2.40 1.81(xi) Training and Seminar 0.48 0.69(xii) Business Meeting Expenses 3.96 1.43(xiii) Traveling Expenses 57.08 85.57(xiv) Provision 0.00 (0.05)(xv) Insurance 225.98 9.23(xvi) Advertisement and Exhibition Expenditure 1.99 8.26(xvii) Value Added Tax 235.17 8.95(xviii) Contractual Transportation 378.42 47.98(xix) Miscellaneous Expenditure 37.71 540.76(xx) Other Operating Expenditure 318.73 52.79*

Sub-Total 1361.02 1002.00


(B) 1361.02 231.44

Total of Operating Expenditure, Establishment 1683.08 302.68Expenditure and Provision and Write off (A+B)

*Includes Rs. 4.40 million for stores & spares and Rs. 48.39 million for logistics.

185184

Note:

Name of related parties and description of relationship:

Holding Company Oil and Natural Gas Corporation Ltd

Subsidiary ONGC Nile Ganga B V, The Netherlands

Joint Ventures Vietnam Project

Sakhalin Project

Myanmar Project

Iran project

Libya Project

Syria Project

Fellow Subsidiary Mangalore Refinery and Petrochemicals Ltd

Key managerial personnel Shri Atul Chandra, Managing Director.

Shri R S Butola, Director (Finance)

21. Previous year figures have been re-grouped/re-arranged and nomenclature re-named wherever necessary to makethem comparable with current year classification.

Signature to Schedule – ‘1’ to ‘28’

Jagdish Prasad R.S. Butola Subir RahaCompany Secretary Director (Finance) /Managing Director Chairman

As per our report of even date attachedFor ASHOK PRAVEEN & CO


New Delhi Praveen Gupta4th June, 2004 Partner

17. Managerial Remuneration:

(Rupees in million)


Salary and Allowances 1.46 0.85

Contribution to Provident Fund 0.13 0.09

Other Benefits & Perquisites * 0.16 0.03

Total 1.75 0.97

*Excludes provision by the holding company

Note:a) In addition Whole-time Directors are also allowed the use of Company car for private purposes up to 1000 Km/

per month on payment of Rs.400 per month for air-conditioned cars below 16 H.P.b) The remuneration does not include provision for gratuity and leave encashment since the same is not available

for individual employee.

18. Auditor’s Remuneration:

(Rupees in million)


Audit Fee* 0.20** 0.08***

Tax Audit Fee* 0.01 0.01Total 0.21 0.09

*Excludes Service Tax

**Includes Rs. 0.06 million for audit of Consolidated Accounts for the year 2002-03 & 2003-04 and 0.08 million for special

purpose audit carried out for disinvestment of shares of holding company.

***Includes Rs. 0.02 million paid to previous Auditor as incremental Audit fee approved in AGM held in FY 2002-03

19. The Expenditure incurred by Oil and Natural Gas Corporation Limited (ONGC), on behalf of the Company are accountedfor on the basis of debits raised by them for which supporting documents are held by ONGC .

20. In compliance of Accounting Standard (AS-18) the details on ‘Related Party Disclosures’ are as under:

(Rupees in million)

Holding Subsidiaries Joint ventures Key Total TotalCompany Managerial 2003-04 2002-03

personnel

Income from rendering services - 376.53 94.28 - 470.81 152.33Expenses on receiving services 36.19 - - - 36.19 -

Interest Income - 27.82 - - 27.82 -Loans Acceptance 19784.45 - - - 19784.45 -Loans Repayment 2249.45 - - - 2249.45 -Remuneration - - - 1.75 1.75 0.97Guarantee 115479.38 - - - 115479.38 -

187186

C. CASH FLOW FROM FINANCING ACTIVITIES:Proceeds from Long Term Borrowings 17,353.50 48,812.71

(Including from Oil and Natural Gas Corporation Ltd.)

Repayment of Long Term Borrowings (95.88) (95.88)Cash Credit (182.42) 191.01Interest Paid (60.49) (80.40)

Net Cash Flow from Financing Activities ‘C’ 17,014.71 48,827.44

Net increase/(decrease) in Cash and 1,117.23 945.73Cash Equivalents (A+B+C)Cash and Cash Equivalents as at 1st April, 2003 2,685.75 1,740.02(Opening Balance)Cash and Cash Equivalents as at 31st March, 2004 3,802.98 2,685.75(Closing Balance)

Notes:

1 The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in the AccountingStandard-3 on Cash Flow Statements issued by The Institute of Chartered Accountants of India.

2 Bracket indicates cash outflow.

3 Previous year figures have been regrouped wherever necessary to confirm the current year’s classification.

4 Adjustment have not been made to purchase of fixed assets etc., ( investing activities ), on account of increase/ decrease in capital / creditors. The impact of the above is not readily available.


Jagdish Prasad R.S. Butola Subir RahaCompany Secretary Director (Finance) /Managing Director Chairman

As per our report of even date attached

For ASHOK PRAVEEN & CO.


Place: New Delhi Praveen Gupta

Date: 4th June, 2004 Partner

CASH FLOW STATEMENTFOR THE YEAR ENDED 31ST MARCH, 2004

(Rupees in million)

Year Ended Year Ended31st March, 2004 31st March, 2003

A. CASH FLOW FROM OPERATING ACTIVITIES:Net profit before tax and extraordinary items 2,237.57 34.39

Adjustments For:

-Recouped Costs 2,176.98 83.14

(Represented by Depreciation, Depletion and Amortisation)

Less : Cash Outflows 267.79 0.00

1,909.19 83.14- Interest on Borrowings 60.49 29.61

- Provision for Gratuity (Net) 2.08 1.94

- Provision for Leave Encashment 2.11 1.77

- Exchange (Gain)/Loss on Carry Finance 1,017.30 179.58

gain on transferring participating interest (1,151.78) 0.00

Income From Dividend from Subsidiary (3,279.68) 0.00

- Interest Income (770.81) (2,211.10) (371.12) (75.08)

Operating Profit before Working Capital Changes 26.47 (40.69)

Adjustments for:-

- Debtors (333.95) (87.07)

- Loans and Advances (668.83) (230.65)

- Inventories (70.77) (7.73)

- Trade Payable and Other Liabilities 1,399.82 326.27 195.32 (130.13)

Cash generated from Operations 352.74 (170.82)

Direct Taxes Paid (40.23) 43.44

Cash Flow before extraordinary items 312.51 (127.38)

Extra-ordinary Items Adjustments 2.89 (1.39)

Net Cash Flow from Operating Activities ‘A’ 315.40 (128.77)

B. CASH FLOW FROM INVESTING ACTIVITIES:Purchase of Fixed Assets (Net) (860.16) (5.19)

Expenditure on Projects (8,872.01) (8,572.26)

Investment in Subsidiary 57.17 (28,983.92)

Loan/Advance to Subsidiaries 3,428.72 (3,650.10)

Loan to Oil India Limited (16.88) (343.58)

Advance to DDA for Land (1,266.01) 0.00

Advanceto SMNG-S & RN ASTRA (8,925.40) (6,327.03)

Interest Received 241.69 129.14

Net Cash Flow from Investing Activities ‘B’ (16,212.88) (47,752.94)

189188

IV. PERFORMANCE OF COMPANY (AMOUNT IN RS. THOUSANDS)

Turnover (Gross Revenue) Total Expenditure

7323737 5083279

Profit/(Loss) Before Tax Profit/(Loss) After Tax

2240458 1390637

Earning per Share in Rs. Dividend Rate %

46.35 NIL

V. GENERIC NAME OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANY

(AS PER MONETARY TERMS)

1. Item Code No. 27090000

Product Description Crude Oil


Product Description Natural Gas


Product Description Natural Gasoline

Jagdish Prasad R.S. Butola) Subir Raha

Company Secretary Director (Finance)/Managing Director Chairman

Place: New Delhi

Date: 4th June, 2004

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. REGISTRATION DETAILS

Registration No. 55-04343 State Code 55

Balance Sheet Date 31.03.2004

II. CAPITAL RAISED DURING THE YEAR (AMOUNT IN RS. THOUSANDS)

Public Issue Right Issue

NIL NIL

Bonus Issue Private Placement

NIL NIL

III. POSITION OF MOBILIZATION AND DEPLOYMENT OF FUNDS (AMOUNT IN RS.THOUSANDS)


92765122 92765122

Source of Funds Paid -up Capital Reserves & Surplus

3000000 1771195

Secured Loans Unsecured Loans

NIL 87580568

Deferred Tax Liability

413359

Application of Funds Net Fixed Assets Investments

40618354 29870777

Net Current Assets Misc. Expenditure

22275991 Nil

Accumulated Losses

NIL

191190

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956RELATING TO COMPANY’S INTEREST IN THE SUBSIDIARY COMPANY

1. Name of the Subsidiary Company ONGC Nile Ganga B.V.

2. The Financial Year of the Subsidiary Company ends on 31st December, 2003

3. Date from which it became Subsidiary Company: 12th March, 2003

4. a) Number of shares held by ONGC Videsh Ltd. 40 Class “A” &in the Subsidiary at the end of the financial year 100 Class “B” sharesof the Subsidiary Company of Euro 453.78 Each

b) Extent of interest of Holding Company at the end 100%of the financial year of the Subsidiary Company

5. The net aggregate amount of the Subsidiary Company’sProfit/(Loss) so far as it concerns the members of theHolding Company:

a) Not dealt within the Holding Company’s accountsi) For the period 1st April,2003 to 31st March, 2004 Rs. 2,892.96 millionii) For the previous period (s) of the Rs. 563.97 million

Subsidiary Company since it became theHolding Company’s Subsidiary:

b) Dealt within the Holding Company’s accounts:i) For the period 1st April,2003 to 31st March, 2004 Rs. 3,279.68 millionii) For the previous period (s) of the -

Subsidiary Company since it became theHolding Company’s Subsidiary:

Jagdish Prasad R.S. Butola Subir RahaCompany Secretary Director (Finance)/ Managing Director Chairman

New Delhi 4

th June, 2004

193192

AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF ONGC VIDESHLIMITED ON THE CONSOLIDATED FINANCIAL STATEMENTS OF ONGCVIDESH LTD. AND ITS SUBSIDIARY

1. We have examined the attached Consolidated Balance Sheet of ONGC Videsh Limited and its subsidiary as atMarch 31, 2004, the Consolidated Profi t and Loss Account and Consolidated Cash Flow Statement for the yearended on that date. These Financial Statements are the responsibility of the ONGC Videsh Limited’s management.Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with generally accepted auditing standards in India. These standards requirethat we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, inall material respects, in accordance with an identified financial reporting framework and are free of materialmisstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statements. We believe that our audit provides areasonable basis for our opinion.

3. We did not audit the financial statements of ONGC Nile Ganga B.V., the subsidiary company, whose financialstatements reflect total assets of Rs. 28518.43 million as at March 31, 2004 and total revenues of Rs.30880.69million for the year ended on that date. The financial statements of the subsidiary, have been audited by the otherauditors, viz. Ernst & Young, Accountants, whose report has been furnished to us and our opinion in so far it relatesto the amounts included in respect of the subsidiary is based solely on the report of the other auditors.

4. We report that the Consolidated Financial Statements have been prepared by the Company in accordance with therequirements of Accounting Standard (AS) 21, “Consolidated Financial Statements”, issued by the Institute ofChartered Accountants of India and on the basis of the separate audited financial statements of ONGC Videsh Ltd.and audited financial statement of its subsidiary included in the Consolidated Financial Statements.

5. Categorization of expenditure on project in Development & Exploratory Well in Progress, Producing Properties, andProject in Progress, allocation of cost incurred on them, depletion of producing properties on the basis of proveddeveloped hydrocarbon reserve, provision for abandonment cost and impairment, allocation of depreciation on fixedassets (including support equipment and facilities) are made according to evaluation by the management, technicaland/or otherwise on which, we have placed reliance.

6. Attention is invited to Note No.1 of Schedule -27 regarding the accounts of subsidiary ONGC Nile Ganga B.V. whoseaccounts are consolidated here. The previous year figures in respect of the Profit and loss accounts include theresult for the period 12.03.2003 to 31.03.2003 in respect of the subsidiary. The figures as on 31.03.2003 wereunaudited. Based on the audited report for the year ended 31st March 2004, certain minor adjustments have beencarried out in the depreciation fund as a result of which the opening net fixed assets as on 01.04.2003 have beenadjusted for the variance in depreciation fund. The difference is of insignificant amount and not material. Theopening retained earnings as on 31.03.2003 was considered during the year 2002-03 at US$ 193.39 million based onthe unaudited results which was revised to US$ 200.60 million as per audited accounts and the difference of US$7.21 million (Rs.342.80 million) has been considered as an adjustment in the reserve during the year. The Corporatetax rate for income in respect of GNOP Sudan was reduced from 40% to 35% effective from year 2000 and theconsequent impact on the deferred tax asset of ONGC Nile Ganga BV upto 31.03.2003 Rs 190.34 million (US$ 4million) was taken to the reserve accounts. The exchange difference (loss) Rs.42.19 million arising out of conversionof the subsidiary accounts from US Dollars to Indian Rupees for consolidation has been carried to the revaluationreserve during the current year as against previous year’s gain of Rs.15.95 million taken to the Profit & LossAccount.

195194

CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH, 2004

(Rupees in million)

SCHEDULE As at As at31st March, 31st March,

2004 2003

SOURCES OF FUNDSSHAREHOLDERS’ FUNDS

Share Capital 1 3,000.00 3,000.00Reserves and Surplus 2 5,719.96 8,719.96 2,096.31 5,096.31

LOAN FUNDSUnsecured Loans 3 87,580.56 70,534.07Deferred Tax (Refer Note 10 of Schedule 27) 1,734.12 1,933.08

TOTAL 98,034.64 77,563.46APPLICATION OF FUNDSFIXED ASSETS 4

Gross Block 19,448.59 17,914.46Less: Depreciation 6,732.70 3,590.84Net Block 12,715.89 14,323.62

GOODWILL 11,660.63 11,660.63PRODUCING PROPERTIES 5 15,904.38 15,497.37CAPITAL WORK IN PROGRESS 208.28 64.82EXPLORATORY AND DEVELOPMENT WELLS IN PROGRESS 6 3,620.01 615.48EXPENDITURE ON PROJECTS IN PROGRESS 7 30,561.53 23,844.86DEFERRED TAX ASSET (Refer Note 10 of Schedule 27) 0.00 110.56CURRENT ASSETS, LOANS & ADVANCES

Interest Accrued 8 164.49 111.73Inventories 9 884.85 881.99Sundry Debtors 10 1,210.99 1,700.81Cash and Bank Balances 11 8,031.46 3,626.72Loans and Advances 12 21,272.71 10,757.57

31,564.50 17,078.82LESS: CURRENT LIABILITIES AND PROVISIONS

Current Liabilities 13 8,183.48 5,694.20Provisions 14 17.10 12.91

8,200.58 5,707.11NET CURRENT ASSETS 23,363.92 11,371.71MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)PROJECT EXPENDITURE 15 0.00 74.41TOTAL 98,034.64 77,563.46STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 26NOTES TO THE ACCOUNTS 27Schedules refered to above form an integral part of accounts

Jagdish Prasad R.S Butola Subir RahaCompany Secretary Director (Finance)/Managing Director Chairman



Place: New Delhi Praveen GuptaDate: 4th June, 2004 Partner

7. The incorporation of Company’s (i.e. ONGC Videsh Ltd.) share of Assets, Liabilities, Income and Expenses inthe Joint Ventures is based on unaudited financial statements as provided by the respective operators ofJoint Ventures. (Refer Note No.6 of Schedule – 27)

Subject to our comments in paragraphs 7 above, we report that on the basis of the information and explanationgiven to us and on the consideration of the separate audit report on audited financial statements of ONGC VideshLimited and its subsidiary, we are of the opinion that the Consolidated Financial Statements read together with thenotes in Schedule 27 give a true and fair view:

a) In the case of the Consolidated Balance Sheet, of the consolidated state of affairs of ONGC Videsh Limited andits subsidiary as at March 31, 2004; and

b) In the case of the Consolidated Profit and Loss Account, of the consolidated results of operations of ONGCVidesh Limited and its subsidiary for the year ended on that date and

c) In case of Consolidated Cash Flow Statement of the Consolidated Cash Flow of ONGC Videsh Limited and itssubsidiary for the year ended on that date.

For ASHOK PRAVEEN & CO.Chartered Accountants

New Delhi Praveen Gupta4th June, 2004 Partner

M.No. 82599

197196

(Rupees in million)


2004 2003

Schedule to the Consolidated Balance Sheet

SCHEDULE-1

SHARE CAPITALAuthorised50,000,000 Equity Shares of Rs.100 each 5,000.00 5,000.00

Issued, Subscribed, Called & Paid Up 3,000.00 3,000.0030,000,000 Equity Shares of Rs.100 each fully paid up in cash

(The entire share capital is held by Oil and Natural GasCorporation Ltd. and its nominees.)

TOTAL 3,000.00 3,000.00

SCHEDULE-2


Capital Reserve


Add: Addition during the year (1,151.78) 174.08 57.03 1,325.86

General Reserve

Opening balance 126.85 0.00

Add: Adjustment during the year* 533.14 0.00

Add: Addition for deferred Tax Assets 0.00 122.66

Transfer from Profit & Loss Account 69.53 729.52 4.19 126.85

Revaluation Reserve (42.19) 0.00

Profit and Loss Account

Tansfer from Profit & Loss Account 4,858.55 643.60

TOTAL 5,719.96 2,096.31

* The opening retained earning adjustment of the subsidiary based on audited accounts

CONSOLIDATED PROFIT & LOSS ACCOUNTS FORTHE YEAR ENDED 31ST MARCH, 2004

(Rupees in million)

SCHEDULE 2003-04 2002-03

INCOMESales 16 32,446.88 1,788.97Other Income 17 2,533.58 531.69Increase in Stock 18 42.36 7.73

35,022.82 2,328.39

EXPENDITUREOperating Expenditure 19 19,838.85 1,051.57Establishment Expenditure 20 508.81 122.34Recouped Costs 21 6,134.38 231.39Interest and Exchange Fluctuation 22 976.50 194.29Provisions and Write-Offs (Net) 23 0.00 (0.05)

27,458.54 1,599.54

PROFIT BEFORE TAX AND PRIOR PERIOD ADJUSTMENTS 7,564.28 728.85

Prior Period Adjustments (Net) 24 (2.89) 2.05Provision for Taxation

Wealth Tax 0.01 0.00Current Year Tax 2,726.23 133.05Deferred Tax 556.44 12.10Excess Provision of Income Tax Written Back 0.00 (8.30)

PROFIT AFTER TAXATION 4,284.49 589.95Add: Profit / (Loss) brought forward from Last year 643.60 57.84

Balance Available for Appropriation 4,928.09 647.79

Transfer to General Reserve 69.53 4.19Balance Carried to Balance Sheet 4,858.56 643.60

4,928.09 647.79SIGNIFICANT ACCOUNTING POLICIES 26NOTES TO THE ACCOUNTS 27

Schedules refered to above form an integral part of accounts

Jagdish Prasad R.S Butola Subir RahaCompany Secretary Director (Finance)/Managing Director Chairman



Place: New Delhi Praveen GuptaDate: 4th June, 2004 Partner

199198


SCHEDULE-4

FIXED ASSETS

(Rupees in million)

GROSS BLOCK DEPRECIATION NET BLOCK

PARTICULARS As at Additions Deletions/ As at Up to For the Deletions/ Up to As at As at1st April during the Adjustments 31st March, 31st March, Period Adjustments 31st March, 31st March, 31st March,

2003 Year during 2004 2003 during 2004 2004 2003the year the year

1. Building 82.01 58.93 0.00 140.94 30.29 27.04 (1.04) 56.29 84.65 51.72

2.Plant & Machinery 17,638.12 1,458.33 54.25 19,042.20 3,483.62 3,081.82 (24.69) 6,540.75 12,501.45 14,154.50

3. Computers 40.90 25.28 0.00 66.18 29.82 22.55 (0.31) 52.06 14.12 11.08

4. Vehicles 28.14 11.20 0.00 39.34 18.94 8.68 (0.93) 26.69 12.65 9.20

5. Furniture and Fittings 125.29 34.64 0.00 159.93 28.17 29.56 (0.82) 56.91 103.02 97.12

TOTAL 17,914.46 1,588.38 54.25 19,448.59 3,590.84 3,169.65 (27.79) 6,732.70 12,715.89 14,323.62

Previous year 8.07 5,391.93 (12,514.46) 17,914.46 3.41 876.48 (2,710.95) 3,590.84 14,323.62 4.66

The above includes the 5,357.10 905.96 54.25 6,208.80 834.91 2,251.01 0.00 3,085.92 2,882.11 4,522.19company’s share inJoint Venture Assets

(Rupees in million)


2004 2003


SCHEDULE-3

UNSECURED LOANS

Long Term

Indian Rupee Loans

From Oil Industry Development Board 253.00 348.87

(Guaranteed by Oil and Natural Gas Corporation Ltd.)

From Oil and Natural Gas Corporation Ltd. 84,848.29 67,313.29

Foreign Currency Loans

From Scheduled Banks 2,479.27 2,871.91

(Guaranteed by Oil and Natural Gas Corporation Ltd.)

TOTAL 87,580.56 70,534.07

Repayable within one year 2,575.15 95.87

201200

*Opening Balance of Sakhalin project has been reduced by the Opening Balance of capital WIP Rs. 64.82 million for the purpese of Regrouping.

Schedule to Consolidated Balance Sheet

SCHEDULE-7

EXPENDITURE ON PROJECTS IN PROGRESS (Rupees in million)

PARTICULARS EXPENDITURE TRANSFER OUT / WRITEOFF NET PROJECTEXPENDITURE

As at Additions Transferred As at Up to Transfer to Transfer to Survey Project Up to As at As at1st April, during the from 31st March, 31st March, Producing Exploratory & & G&G Expenditure 31st March, 31st March. 31st March,

2003 Year Project 2004 2003 Property Development Exp. Written off 2004 2004 2003Expenditure Schedule-5 Wells in Schedule 21 Schedule 21Schedule-15 progress

(Schedule-6)

Sakhalin-1 Project, 23,717.50* 8,424.99 0.00 32,142.49 0.00 0.00 1,387.06 0.00 569.19 1,956.25 30,186.24 23,717.50

Block-8 Project, Iraq 49.32 0.00 0.00 49.32 0.00 0.00 0.00 0.00 49.32 49.32 0.00 49.32

Myanmar Project 73.47 212.12 0.00 285.59 0.00 0.00 178.13 33.99 73.47 285.59 0.00 73.47

Farsi Block,Iran 4.57 86.82 0.00 91.39 0.00 0.00 0.00 86.82 4.57 91.39 0.00 4.57

Block 188,189, Libya 0.00 0.00 500.39 500.39 0.00 0.00 105.65 41.32 2.40 149.37 351.02 0.00

Syria Project 0.00 0.00 22.89 22.89 0.00 0.00 0.00 0.00 3.08 3.08 19.81 0 . 0 0

Sudan 5A & 5B 0.00 4.46 0.00 4.46 0.00 0.00 0.00 0.00 0.00 0.00 4.46 0.00

TOTAL 23,844.86 8,728.39 523.28 33,096.53 0.00 0.00 1,670.84 162.13 702.03 2,535.00 30,561.53 23,844.86

Previous year 23,774.69 4,656.08 4.57 28,435.34 0.00 4,525.66 0.00 0.00 0.00 4,525.66 23,844.86 23,774.69

(Rupees in million)


2004 2003


SCHEDULE-5

PRODUCING PROPERTIESGross

Opening Balance 21,177.00 0.00

Add: Addition during the year 3,739.13 4,765.99

Add: Acquired during the year* 0.00 17,189.17

Adjustments 0.00 (778.16)

Total Gross (A) 24,916.13 21,177.00

Less: Depletion

Opening Balance 5,679.62 0.00

Add: Acquired during the year 0.00 5,539.58

Depletion for the year 2,424.47 140.05

Adjustment of Opening balance 14.90 0.00

Total Depletion (B) 8,119.00 5,679.63

Written Off due to Change In Accounting Policy (C) 892.75 0.00

Net Producing Properties ( A-B-C) 15,904.38 15,497.37

SCHEDULE-6

DEVELOPMENT & EXPLORATORY WELLS IN PROGRESS

Sakhalin-1 Project, Russia Federation 1,387.06 0.00


Lybia project 105.65 0.00

Sudan Project 2,455.01 615.48

Sub total 4,125.85 615.48

Less: Transfer to Producing Properties 0.00 0.00

(Ref Sechedule - 5)

Less: Transfer to Dry Hole 505.84 0.00

Sub total 505.84 0.00

TOTAL 3,620.01 615.48

203202

(Rupees in million)


2004 2003


SCHEDULE-11

CASH AND BANK BALANCESA. Cash Balances

a) At New Delhi 0.01 0.06b) At HCMC,Vietnam 0.04 0.05c) Sudan 1.09 0.08

B. Balances with Scheduled banksa) On Current Account 0.00 0.00b) On Deposit Accounts 2,661.32 1,970.82

C. Balances with Non-Scheduled banksa) On SB Dollar Account with Bank for Foreign Trade of Vietnam, HCMC,Vietnam 0.02 0.02(Maximum balance during the year Rs. 03 million Previous year Rs. 0.02 million)b) On SB VND Account with Bank for Foreign Trade of Vietnam, HCMC,Vietnam 0.03 0.02(Maximum balance during the year Rs.612.83 million Previous year Rs. 0.02 million)c) On Current Accounts (USD), CITI Bank,HCMC,Vietnam 0.01 2.58(Maximum balance during the year Rs. 4.33 million Previous year Rs. 3.23 million)d) On Current Account (VND) with CITI Bank,HCMC,Vietnam 0.09 0.00(Maximum balance during the year Rs.10.41 million Previous year Rs. Nil )e) On Current Account with Bank of Moscow, Sakhalin 0.14 0.11(Maximum balance during the year Rs. 0.47 million Previous year Rs. 0.43 million)f) Mashreq Bank ,Khartoum, Sudan 1.90 12.34(Maximum balance during the year Rs. 16.69 million Previous year Rs. 17.74 million)g) Mashreq Bank ( Sudanees Dinar Account), Khartoum, Sudan 1.13 4.03(Maximum balance during the year Rs. 4.05 million Previous year Rs. 4.03 million)h) Deutche Bank AG (Multi currency), Amsterdam 1.10 0.22(Maximum balance during the year Rs. 1.88 million Previous year Rs. 0.20 million)i) Deutche Bank AG, Amsterdam(Maximum balance during the year Rs.05 million Previous year Rs. 0.04 million) 0.04 0.04j) Deutche Bank AG (GBP), Amsterdam 11.00 8.16(Maximum balance during the year Rs. 728.85 million Previous year Rs. 21.74 million)k) On Deposit Accout, Deutche Bank AG, Amsterdam 4,189.03 916.11(Maximum balance during the year Rs. 4222.48 million Previous year Rs. 916.10 million)l) ICICU bank London- GBP 15.11 0.00(Maximum balance during the year Rs. 5.29 million Previous year Rs. 0 million)m) Mashreq London- GBP 8.08 0.00(Maximum balance during the year Rs. 8.08 million Previous year Rs. 0 million)

D. Bank Balance 1,141.32 712.09(In respect of joint venture through operator)

TOTAL 8,031.46 3,626.72

(Rupees in million)


2004 2003


SCHEDULE-8

INTEREST ACCRUED(Unsecured, Considered Good unless otherwise stated)

Interest Accrued OnDeposits with Banks 47.38 51.88

Carry Finance to RN-ASTRA & SMNG-S. 112.06 56.32

Others 5.05 3.53

TOTAL 164.49 111.73

SCHEDULE-9

INVENTORIES

Finished Goods 50.09 7.73

Stores and Spares 834.76 874.26

(In respect of joint venture through operator)

TOTAL 884.85 881.99

SCHEDULE-10

SUNDRY DEBTORS

(Unsecured)

Debts- Outstanding for a period exceeding six months:

Considered Good 0.10 0.00

Considered Doubtful 0.00 0.00

Other Debts:

Considered Good 1,210.89 1,700.81

Considered Doubtful 0.00 0.00

TOTAL 1,210.99 1,700.81

205204

(Rupees in million)


2004 2003


SCHEDULE-14

PROVISIONSGratuity 8.78 6.70

Leave Encashment 8.32 6.21

TOTAL 17.10 12.91

SCHEDULE-15

PROJECT EXPENDITURE(Rupees in million)

PROJECT EXPENDITURE WRITE OFF/TRANSFER BALANCE

Upto During Total Transferred Amount Total As on As on31.03.2003 2003-04 to Project in Written 31.03.2004 31.03.2003

Progress off during Sch 7 2003-04

BOARD APPROVED PROJECTS

1 Tuba project, Iraq 8.50 0.00 8.50 0.00 8.50 8.50 0.00 8.50

2 Caspian Sea Project, Kazakhstan 10.47 0.00 10.47 0.00 10.47 10.47 0.00 10.47

3 Block 188,189, Libya 2.39 498.00 500.39 500.39 0.00 500.39 0.00 2.39

4 Nelson,Kazakhstan 14.82 0.00 14.82 0.00 14.82 14.82 0.00 14.82

5 Syria 3.08 19.81 22.89 22.89 0.00 22.89 0.00 3.08

6 Bangladesh 27.67 0.00 27.67 0.00 27.67 27.67 0.00 27.67

7 Venezuela 0.38 0.00 0.38 0.00 0.38 0.38 0.00 0.38

8 Exploration Blocks( 3&7), Sudan 1.93 0.00 1.93 0.00 1.93 1.93 0.00 1.93

9 Sakhalin Exploration blocks 1.94 0.00 1.94 0.00 1.94 1.94 0.00 1.94

10 Qatar 3.23 0.00 3.23 0.00 3.23 3.23 0.00 3.23

11 North Kuwait 0.00 8.39 8.39 0.00 8.39 8.39 0.00 0.00

Total 74.41 526.20 600.61 523.28 77.33 600.61 0.00 74.41

(Rupees in million)


2004 2003


SCHEDULE-12

LOANS AND ADVANCESCarry Finance to SMNG-S, Russian Federation 9,750.04 4,926.41Carry Finance to RN ASTRA, Russian Federation 7,206.48 3,641.19Loans and Advances to Employees 21.95 16.36Loan to Oil India Limited 354.44 337.56Advances recoverable in cash or in kind or for value to be received 89.89 648.54Advance to DDA against Land 1,266.01 0.00Other Deposits 1.65 1.06Income Tax :Advance Payment of Income Tax 178.25 138.02Less: Provision 100.39 77.86 100.38 37.64Deferred Debit on transportation Cost 305.67 0.00Advance recoverable in Cash or in kind or for value to be received 2,198.72 1,148.81(In respect of joint venture through operator)TOTAL 21,272.71 10,757.57Particulars of Loans & AdvancesSecured - Considered Good 17.70 8.75Unsecured-Considered good 21,255.01 10,748.82

TOTAL 21,272.71 10,757.57

SCHEDULE-13

CURRENT LIABILITIES

Sundry Creditors for Supplies / WorksSmall Scale Undertakings 0.00 0.00Other than Small Scale Undertakings 73.90 435.31Overdraft Balance in Current A/C with SBI, IFB New Delhi 8.59 191.01Deposits 0.60 0.44Interest Free Advance from Oil and Natural Gas Corporation Ltd. 1,500.00 1,500.00Payable to Oil and Natural Gas Corporation Ltd. 118.20 111.77Payable to Talisman Energy Resource Inc 372.17 915.64Payable To opertorDaewoo Inernational for Myanmar Project 0.00 39.43Exxon Mobil for Sakhalin Project. 0.00 18.62BPEOC (Vietnam Project) 46.40 46.40 0.00 58.05Other Liabilities 198.41 225.71Deferred Credit on Veitnam gas Sales 981.70 0.00Accounts Payable & Accrued Liabilities -Sudan 1,575.37 171.57Withholding tax on Dividend Payable 325.89 0.00Sundry Creditors for Supplies / Works 2,982.25 2,084.70(In respect of joint venture through operator)TOTAL 8,183.48 5,694.20

207206

(Rupees in million)

2003-04 2002-03

Schedule to the Consolidated Profit & Loss Account

SCHEDULE-19

OPERATING EXPENDITURETransportation Expenditure 378.42 47.98Production Expenditure 2,936.51 233.87Royalties 16,288.75 760.77Value Added Tax 235.17 8.95

TOTAL 19,838.85 1,051.57

Note: The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act, 1956and exhibited in note -15 of Schedule ‘27’

SCHEDULE-20

ESTABLISHMENT EXPENDITUREStaff ExpenditureSalaries, Wages and Bonus 73.13 24.77Contribution to Providend and other Funds 2.81 2.16

Provision for Gratuity 2.08 2.29Provision for Leave Encashment 3.66 2.72Staff Welfare Expenses 5.92 2.82

Sub-Total 87.60 34.76

Office and Administrative Expenses

Rent 11.15 4.25Electricity and Water 1.84 1.56Repair and Maintenance 4.81 4.53Vehicle Hire Charges 1.39 0.50Professional Charges 65.92 0.59Telephone and Telex 6.50 3.72Printing and Stationary 2.40 1.81Training and Seminar 0.48 0.69Business Meeting Expenses 3.96 1.04Travelling Expenses (Including Foreign Travel Rs 54.59 millions 57.08 54.33previous Year Rs 52.93 millions)Insurance 225.98 0.62Advertisement and Exhibition Expenses 1.99 8.27Others 37.71 5.67

Sub-Total 421.21 87.58

TOTAL 508.81 122.34

Note: The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act,1956 and exhibited in note -15 of Schedule ‘27’

(Rupees in million)

2003-04 2002-03


SCHEDULE-16

SALES

Crude oil 30,880.69 1,690.47Gas 1,468.89 98.50Condansate 97.30 0.00

TOTAL 32,446.88 1,788.97

SCHEDULE-17

OTHER INCOME

Interest Income on:

On Short Term Deposits with Banks 187.69 117.62

(Tax deducted at source Rs. 24.40 million.

previous year Rs. 24.09 million)

On Carry Finance to RN-ASTRA & SMNG-S 536.56 239.93

On Loans and Advances to Employees 1.03 0.84

Others 89.10 8.28Gain on transfer of Participating interest in VietnamProject in the earlier years 1,151.78 0.00Miscellaneous ReceiptsManpower Deployment 470.81 152.33Other Receipts 96.61 567.42 12.69 165.02

TOTAL 2,533.58 531.69

SCHEDULE-18

INCREASE IN STOCK (FINISHED GOODS)

Closing Stock 50.09 7.73Opening Stock 7.73 0.00Net Increase in Stock 42.36 7.73

209208

(Rupees in million)

2003-04 2002-03


SCHEDULE-23

PROVISIONS AND WRITE-OFFS (NET)Excess Provisions Written Back 0.00 (0.05)

TOTAL (NET) 0.00 (0.05)

Note:The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act, 1956and exhibited in note -15 of Schedule ‘27’

SCHEDULE-24

PRIOR PERIOD ADJUSTMENTS (NET)A. Expense


Other Expenses 2.19 1.41

Sub-Total 2.19 2.07

B. IncomeMiscellaneous Items 5.08 0.02

Sub-Total 5.08 0.02

TOTAL (NET) (2.89) 2.05

(Amount in Rupees)

As at As at31st March 31st March

2004 2003

SCHEDULE-25

EARNINGS PER EQUITY SHARE

Basic & Diluted Earnings Per Equity Share

(Per Share of RS.100 each) 142.82 19.66

Earnings Per Equity Share has been computed by dividing the net profit after taxation of Rs. 4,284.49 million (PreviousYear Rs.589.95 million) by number of equity shares of 30000000(Previous year 30000000).

(Rupees in million)

2003-04 2002-03


SCHEDULE-21

RECOUPED COSTS

Foreign Blocks Evaluation Expenditure 0.00 1.89

Project Expenditure Written Off 1,663.71 48.47

Depreciation 3,169.65 876.49

Less: Allocated to Project Expenditure and Producing Properties 2,248.24 834.85

Transferred to Survey Expenditure 2.13 0.00

Transferred to prior period Expenditure 0.00 0.66

2,250.37 919.28 835.51 40.98

Depletion 2,424.47 140.05

Survey Expenditure 612.69 0.00

Dry wells 505.84 0.00

Pre-acquisition Expenditure 8.39 0.00

TOTAL 6,134.38 231.39

SCHEDULE-22

INTEREST & EXCHANGE FLUCTUATIONA. Interest On

Loan from Oil Industry Development Board 14.27 19.06

Foreign Currency Loans 46.22 - 61.28 -

Less :Capitalised 0.00 46.22 50.79 10.49

Others 3.52 0.06

Sub-Total 64.01 29.61

B. Exchange Fluctuation

Net Exchange Variation for the Year 621.76 84.60

Less: Capitalised (290.73) 912.49 (80.08) 164.68

Sub-Total 912.49 164.68

TOTAL 976.50 194.29

211210

SCHEDULE-27


1. The Consolidated Financial Statements represent for the consolidation of Accounts of ONGC Videsh Ltd. (Company)and ONGC Nile Ganga B.V. (Subsidiary).The consolidated accounts incorporate audited financial statements of theSubsidiary for the year ended 31st March 2004. The previous year figures in respect of the Profit and Loss Accountsinclude the result for the period 12.03.2003 to 31.03.2003 in respect of the Subsidiary. The figures as on 31.03.2003were unaudited. Based on the audited report for the year ended 31st March 2004, certain minor adjustments havebeen carried out in the depreciation fund as a result of which the opening net fixed assets as on 01.04.2003 havebeen adjusted for the variance in depreciation fund. The difference is of insignificant amount and not material. Theopening retained earnings as on 31.03.2003 was considered during the year 2002-03 at USD 193.39 million based onthe unaudited results which was revised to USD 200.60 million as per audited accounts and the difference of USD7.21 million (Rs.342.80 million) has been considered as an adjustment in the reserve during the year. The corporatetax rate for income in respect of GNOP Sudan was reduced from 40% to 35% effective from year 2000 and theconsequent impact on the deferred tax asset of ONGC Nile Ganga B.V. up to 31.03.2003 Rs.190.34 million (USD 4million) was taken to the reserve accounts. The exchange difference (loss) Rs.42.19 million arising out of conversionof the subsidiary accounts from US Dollars to Indian Rupees for consolidation has been carried to the revaluationreserve during the current year as against previous year’s gain of Rs.15.95 million taken to the Profit and LossAccount.

Name of the Subsidiary Company : ONGC Nile Ganga B.V.Country of Incorporation : The NetherlandsProportion of ownership interest : 100%, (wholly owned subsidiary)

2. (a) The Subsidiary follows Straight Line Method of depreciation on fixed assets whereas the Company follows W.D.V.method. Such different policy has been adopted in respect of the following:

Rs.9580.71 million (previous year Rs.9739.70 million) shown as Net block of Fixed assets under Schedule 4.

(b) Revenue recognition:

The Subsidiary follows the entitlement method for revenue recognition associated with sale of crude oil and liquidsfor its share of petroleum production as specified in the EPSA and COPA. The amount involved is Rs.30880.69million (Previous Rs.1690.47 million) shown as sales under Schedule 16.

3. Change in Accounting Policy:

During the year the Company has changed its accounting policy with retrospective effect in respect of oil and gasexploration, development and production activities from the Full Cost Method (FCM) to Successful Efforts Method(SEM) of accounting. This has been done to align the Company’s accounting policy with that followed by its parentcompany and the wholly owned subsidiary of the Company.

The net impact of this change in the accounting policy is increase in profit by Rs.88.68 million till end of the previousyear 31st March 2003 with the following major break up:

(Rupees in million)

Reduction in Accumulated Depletion 6.16

Reduction in Project Expenditure (770.96)

Reduction in Producing Properties (Net) (892.75)

Increase in Deferred Tax Asset 594.75

Gain on assignment of participating interest in Vietnam project 1151.78

Reduction in value of closing stock (0.30)

Net Impact on Profit of the change in Policy up to 31.03.2003 88.68

SCHEDULE-26


1. Principles of Consolidation:

The Consolidated Financial Statements relate to ONGC Videsh Ltd. (Company) and ONGC Nile Ganga B.V., Netherlands(Subsidiary). The Financial Statements of the Company and its Subsidiary have been consolidated on a line-by-linebasis by adding together the book values of like items of assets, liabilities, income and expenses after fully eliminatingintra-group balances and intra-group transactions resulting in unrealised profits or losses.

The financial statements of the foreign subsidiary have been incorporated in the consolidated financial statementsby translating to Indian rupees following the principle for translation of the financial statements of foreign branchesas laid down in Accounting Standard 11, “Accounting for the effects of changes in foreign exchange rates”.

2. Other significant accounting policies:

These are set out under “Significant Accounting Policies” of the respective Financial Statements of the Companyand ONGC Nile Ganga B.V.

213212

6. The Company’s share of assets, liabilities, income and expenses in the Joint Ventures as furnished by the operatorhas been incorporated in the financial statement as given below:

Vietnam Sakhalin Myanmar Iran Libya

Fixed Assets 4882.71 1320.86 1.29 0.19 3.75

Producing Property 3607.53 - - - -

Project WIP - 19383.94 - - 351.02

Exploratory and Development Wells - 1387.06 178.13 - -

in progress

Current Assets 104.93 1782.03 0.08 16.19 22.04

Cash and Bank - 1038.95 50.96 7.71 43.70

Current Liabilities 197.55 2670.46 3.41 71.16 39.67

Expenses 560.68 - - - -

The Company’s share of expenditure in respect of Joint Ventures has been incorporated in the Accounts based onthe un-audited financial statements provided by the operator for the period ended 31st March 2004. In respect ofVietnam Project the audited statement have been received till the period ended 31.12.2002 and no difference hasbeen observed between the un-audited financial statement and the audited Accounts till December 2002 therebyrequiring no further adjustment. In respect of Sakhalin project, operator’s financial statement indicates excess capitalcontribution of USD 29.734 million by the partners which has been incorporated in the books of the Company by wayof reduction from the project expenditure. The Company did not participate in sole risk operation carried out in respectof Myanmar project. The expenditure incurred by the sole risk participant was USD 2.09 million equivalent to Rs.92.04million.

7. Vietnam Project:

The delivery of Gas to the buyer commenced on 21st January, 2003 from Block 06.1 Vietnam Project. Under theterms of the Gas Sales and Purchase Agreement, the start date effective from which the Take or Pay obligation maybecome applicable was agreed by all the parties as 25th April, 2003. During the current year ended 31st March 2004,receipts on account of Gas Sales were Rs. 2501.33 million. Out of this, the Company received Rs.1032.44 millionagainst take or pay provisions in the contract (revalued at Rs.981.70 million as on 31st March, .2004) owing to lessernomination of Gas by the buyer which has been shown as advance received from buyer. The correspondingtransportation charges of Rs.321.45 million (revalued at Rs.305.67 million as on 31st March, 2004) against the ship orpay obligation under the transportation agreement with the transporters have also accordingly been shown as advancepayment to transporter.

During the year under reporting, due to the dispute over interpretation of shortfall gas clause in the Gas Sales andPurchase Agreement, buyer has deposited revenue on account of Gas Sales of Rs. 0.10 million (USD 0.002 million)in an escrow account which is reflected as debtors for Gas Sales.

An amount of Rs.20.03 million (USD 0.42 million) paid as transportation expenses during the previous year has beenrefunded by the transporter during the current year on settlement of the issue of start date which has been netted offfrom current year’s transportation expenses.

Impact in the Current Year Profit: The impact of changes is considered in the current year’s income statement as achange in accounting policy as per AS-5. Had the Company followed the Full Cost Method of accounting in respect ofits oil and gas exploration, development and production activities, the profit for the year ending 31st March, 2004 wouldhave been higher by Rs.141.28 million as follows:

(Rupees in million)

Reduction Depletion 57.05Increase in Survey Expenditure (162.13)Increase in Dry Hole Expenses (105.65)Increase in Pre Acquisition Expenses (8.39)Reduction in value of stock (1.19)Increase in Deferred Tax Asset 79.03Net Impact on Profit for the year due to change in Policy (141.28)

4. The General and Administrative overhead expenses of Delhi Head office of the Company has been charged off in thecurrent year’s Profit and Loss Account instead of allocating to different activities as was followed till previous year.Due to the change in allocation of General and Administrative expenses the profit for the year has been reduced byRs. 107.13 million.

5. Details of Joint Ventures:

The activities of the Company are being carried out through Joint Ventures. The details of the significant joint venturesare as under:

Name of the Country of OVL Other Partners ProjectProject operation and participating Status

Block share (%)

Vietnam Vietnam 45% BP Exploration Production commencedProject Block 06.1 Operating Co. Ltd. from 21st January, 2003

Offshore –35%Petrovietnam– 20%

Sakhalin Russia 20% Exxon Neftgas Ltd The project is underProject Sakhalin 1 -30% development

Offshore SODECO -30%SMNG- 11.5%R N Astra -8.5%

Myanmar Myanmar 20% Daewoo The project is underProject Block A-1 International exploration

Offshore Corpn. - 60%KOGAS - 10%GAIL (India) Ltd. – 10%

Iran Project Iran 40% Indian Oil Corp. The project is underFarsi Block Ltd. – 40% exploration.Offshore Oil India Ltd. - 20%

Libya Project Libya 49% TPOC – 51% Assignment AgreementBlocks NC-188 was signed on 5th June,and 189 Onshore 2003. The project is under

exploration.

Syria Project Syria 60% IPR International Agreement signed on 15th

Block -24 – 40% January, 2004.The ProjectOnshore is under exploration.

215214

9. Segment Information:

(Rupees in million)

Particulars Asia Asia FSU FSU Africa Africa Unallocated Unallocated Total TotalPacific Pacific Countries Countries

2003-04 2002-03 2003-04 2002-03 2003-04 2002-03 2003-04 2002-03 2003-04 2002-03

REVENUE

External sales 1566.19 98.50 0.00 0.00 30880.69 1690.47 0.00 0.00 32446.88 1788.97

Inter 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Segment sales

Total 1566.19 98.50 0.00 0.00 30880.69 1690.47 0.00 0.00 32446.88 1788.97Revenue

Results

Segment results 231.51 -107.73 0.00 0.00 8566.34 671.04 0.00 0.00 8797.85 563.31

Unallocated 0.00 0.00 0.00 0.00 0.00 0.00 3658.11 173.91 3658.11 173.91corporateExpenses (Net)

Operating 231.51 -107.73 0.00 0.00 8566.34 671.04 -3658.11 -173.91 5139.74 389.40profit or Loss

Interest expenses 46.22 10.48 0.00 0.00 3.52 15.96 14.27 199.77 64.01 194.29

Interest and 4.90 0.21 0.00 0.00 43.57 11.92 2442.97 519.56 2491.44 531.69other income

Income Tax 0.00 0.00 0.00 0.00 2432.85 130.49 849.83 6.36 3282.68 136.85

Profit / (loss) 190.19 -118.00 0.00 0.00 0.00 568.43 4094.30 139.52 4284.49 589.95from ordinaryactivities

Extraordinary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00losses

Net profit /(Loss) 190.19 -118.00 0.00 0.00 0.00 568.43 4094.30 139.52 4284.49 589.95Other information

Segment 8922.20 9329.95 35246.66 25725.36 40602.33 25035.58 19.81 69.08 84791.00 60159.97Assets

Unallocated 0.00 0.00 0.00 0.00 0.00 0.00 21444.22 23110.60 21444.22 23110.60Corporate Assets

Total Assets 8922.20 9329.95 35246.66 25725.36 40602.33 25035.58 21464.03 23179.68 106235.22 83270.57

Segment 1229.15 439.00 2666.12 1703.75 3261.69 2562.47 0.00 0.00 7156.96 4705.22liabilities

Unallocated 0.00 0.00 0.00 0.00 0.00 0.00 90358.30 73469.04 90358.30 73469.04Corporate liabilities

Total 1229.15 439.00 2666.12 1703.75 3261.69 2562.47 90358.30 73469.04 97515.26 78174.26

Capital 213.16 3201.77 9261.13 6013.27 1175.73 21564.18 128.12 11693.66 10778.14 42472.88expenditure

Depreciation 240.95 33.35 0.00 0.00 3949.01 148.25 1944.42 49.79 6134.38 231.39(Recouped cost)

Non cash 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.05 0.00 -0.05Expenditure

8. Details of Reserves:

(a) Company’s share of Proved Reserves in respect of the different projects as on 31st March, 2004 is as under:



Addition - - -

Deductions - - -

Production 0.022 0.523 0.545

Closing 0.757 19.471 20.228

Sakhalin Opening 61.400 97.000 158.400

Addition - - -

Deductions - - -

Production - - -

Closing 61.400 97.000 158.400

GNOP Sudan Opening 21.332 - 21.332

Addition 2.389 - 2.389

Deductions - - -

Production 3.323 - 3.323

Closing 20.398 - 20.398

* Crude Oil includes condensate.** For calculating OEG 1000M3 of Gas has been taken to be equal to 1 MT of crude oil.

(b) Company’s share of Proved and Developed Reserves in respect of the different projects as on 31st March, .2004is as under:



Addition - - -

Deductions - - -

Production 0.022 0.523 0.545

Closing 0.751 15.916 16.667

GNOP Opening 16.572 - 16.572

Sudan Addition 2.137 - 2.137

Deductions - - -

Production 3.323 - 3.323

Closing 15.386 - 15.386

*Crude Oil includes condensate.**For calculating OEG 1000M3 of Gas has been taken to be equal to 1 MT of crude oil.

217216

(b) Current Tax provisionThe Company is liable to pay tax on profits for the period ended 31st March, 2004 u/s 115 JB of Income Tax Act, 1961for Minimum Alternative Tax (MAT). However the net tax payable on the book profits is negative after considering thetax withheld of Rs. 325.90 million (previous year Nil) on the dividend remitted by the wholly owned foreign subsidiary.

(c) Tax AssessmentThe Company has gone in to appeal to Hon’ble High Court of Delhi against the decision of Income Tax AppellateTribunal for the Assessment Year 1981-82 to 1987-88 with regard to disallowance of its claim for Rs. 94.04 million(previous year Rs. 94.04 million) , on account of depreciation, development allowance, receipt of interest on delayedpayments in respect of Iran Project. However, pending decision the tax demand in this regard has already beendeposited by the Company. The case of the Company is listed for hearing.

11. Loans and Advances to Employees:

Loans and advances to employees of the Company (OVL) include an amount of Rs.0.23 million (Previous Year Rs.0.25 million) outstanding from whole time Directors, Maximum outstanding during the year is Rs.0.25 million (PreviousYear Rs.0.26 million).

12. Capital Commitment:

(i) In respect of Farsi Block, Iran Project, the Company in consortium with other partners has entered into anExploration Service Contract. The Exploration Service Contract provides for a minimum exploration expenditureobligation of USD 27 million equivalent to Rs. 1189.08 million (previous year USD 27 million equivalent to Rs.1283.85 million). The Company’s proportionate share of the minimum exploration expenditure obligation is USD10.8 million equivalent to Rs. 475.63 million (previous year USD 10.8 million equivalent to Rs. 513.54 million)against which Company has issued Performance bank guarantee for USD 2.16 million (being its share) equivalentto Rs.95.13 million (Previous year NIL) under the provisions of the contract which is to be annually adjusted bythe National Iranian Oil Company (NIOC). In case the actual dollar amount spent by Company in phase 1 afterfulfilling the minimum work obligation is less than USD 27 million such unexpended balance shall be paid bydirect transfer to NIOC. The Company is confident of meeting the minimum work commitment.

(ii) In respect of Block -8, Iraq Project the Company has entered into an Exploration and Development Contract.The Exploration and Development Contract provides for a minimum work obligation of USD 15 million equivalentto Rs.660.60 million (previous year USD 15 million equivalent to Rs.713.25 million) during phase I of theexploration period. In case the actual dollar amount spent during the first phase of exploration period is greateror smaller than the minimum work obligation of USD 15 million for that phase, such over or under expenditureshall be deducted or added to the minimum expenditure obligation of phase 2. The project is under first phase ofexploration and the Company has the option of electing to enter into the second phase of exploration. TheCompany is confident of meeting the minimum work obligation.

(iii) In respect of Block NC-188,189 Libya the Company has acquired 49% participating interest. The total capitalcommitment for the agreed work programme is USD 32.6 million equivalent to Rs.1435.70 million (Previousyear Nil). The 49% participating interest of the Company is USD 15.97 million equivalent to Rs.703.32 million(Previous year Nil). During the year, the Company has spent USD 11.15 million equivalent to Rs. 526.30 million(Previous year Nil). As such, the balance commitment of the Company is USD 4.82 million equivalent toRs.212.27 million (Previous year Nil). The project is under exploration phase. The Company is confident ofmeeting the minimum work commitment.

(iv) In respect of Block 24, Syria, the Company has acquired 60% participating interest. The total capital commitmentfor the agreed work programme is USD 7.50 million equivalent to Rs.330.30 million (Previous year Nil). The 60%participating interest of the Company is USD 4.50 Million equivalent to Rs. 198.18 million (Previous year Nil).The Company is confident of meeting the minimum work commitment.

(v) Other Capital Commitments Rs.731.06 million (USD 16.60 million).

Information about Secondary Business Segments (Product-wise) :(Rupees in million)


Crude Oil 30880.69 1690.47Natural Gas and Condensate 1566.19 98.50

NOTES:

(i) Segments have been identified and reported taking into account, the organization and management structurefor internal reporting and significantly different risk and return perception in different geographical regions.These are organized into four segments viz. Asia Pacific, FSU Countries, Africa and Unallocated.

(ii) The segment revenue in the business segment (Product-wise) is gross revenue from sale of natural gas andcondensate.

(iii) Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of thesegments and amount allocated on a reasonable basis. Unallocated includes common expenditure incurred forall the segments and expenses incurred at corporate level.

10. Taxation

(a) Deferred Tax Provision(i) The Net Deferred Tax Liability of the Company as at 31st March, 2004 is Rs.1734.12 million against Net Deferred

Tax Liability of Rs.1822.52 million as on 31st March, 2003. Out of the difference Rs. 556.44 million has beencharged to the current year’s Profit and Loss Account and Rs.533.14 million has been adjusted against openingreserve and Rs 65.10 adjusted to revaluation reserve.

(ii) The breakup of deferred tax Assets and Liabilities as on 31st March, 2004 is as under:

(Rupees in million)

As at 31st As at 31st

March, 2004 March, 2003

Deferred Tax Assets :-

Carried Forward Expenditure U/S 42 of Income Tax Act, 1961 493.79 80.79

Carried Forward Fee U/S 35 D of Income Tax Act, 1961 0.78 1.04

Carried Forward Depreciation U/S 32 of Income Tax Act, 1961 3177.34 2868.59

Carried Forward Losses U/S 72 of Income Tax Act, 1961 234.47 238.17

Amount disallowable U/S 43B of Income Tax Act, 1961 5.07 3.04

Total Deferred Tax Assets 3911.45 3191.63

Deferred Tax Liability :-

Revenue Expenditure Carried Forward as Project Expenditure - 26.70

Difference in Net Block of Fixed assets for Tax 4324.81 2920.13

Expenditure claimed U/S 42 but not charged in the Accounts - 134.24

Total Deferred Tax Liability 4324.81 3081.07

Net Deferred Tax Asset/ (Liability) (413.36) 110.56

Deferred Tax Asset /(Liability) Of ONGC Nile Ganga B.V. (1320.76) (1933.08)

219218


(xv) Insurance 225.98 9.23

(xvi) Advertisement and Exhibition Expenditure 1.99 8.26

(xvii) Value Added Tax 235.17 8.95

(xviii) Contractual Transportation 378.42 47.98

(xix) Miscellaneous Expenditure 37.71 651.17

(xx) Other Operating Expenditure 2,694.56 52.79*

(XI) Royalty 16,288.75 760.77

Sub-Total 20,025.60 1,873.18


(B) 20,025.60 1,102.62

Total of Operating Expenditure,Establishment Expenditure and Provisionsand Write off (A+B) 20,347.66 1,173.86

*Includes Rs.4.40 million for stores and spares and Rs.48.39 million for logistics.

16. Managerial Remuneration:

(Rupees in million)


Salary and Allowances 3.64 0.85

Contribution to Provident Fund 0.13 0.09

Other Benefits and Perquisites* 0.16 0.03

TOTAL 3.93 0.97

*Excludes provision by the holding company

Note:a) In addition Whole-time Directors are also allowed the use of Company car for private purposes up to 1000 Km

per month on payment of Rs.400 per month for air-conditioned cars below 16 H.P.b) The remuneration does not include provision for gratuity and leave encashment since the same is not available

for individual employee.

17. Auditor’s Remuneration:

(Rupees in million)


Audit Fee* 0.20** 0.08***

Tax Audit Fee* 0.01 0.01

TOTAL 0.21 0.09

Auditor’s remuneration represent only in respect of the Company (OVL).

*Excludes Service Tax

**Includes Rs.0.06 million for audit of consolidated accounts for the year 2002-03 & 2003-04 and 0.08 million forspecial purpose audit carried out for disinvestment of shares of holding company.

***Includes Rs.0.02 million paid to previous Auditor as incremental Audit fee approved in AGM held in FY 2002-03

13. Contingent Liability:

(i) Liability for payment to contractual workers for regularization of their services is pending with Labour Courtunder civil suit. The amount of liability is not ascertainable.

(ii) Company has issued the following Performance Bank Guarantees:a. USD 2.16 million equivalent to Rs.95.13 million (Previous year Nil) to the National Iranian Oil Company for its

share of 1/5th of the Minimum Expenditure Obligation in the Exploration Service Contract for Farsi OffshoreBlock and,

b. USD 4.5 million equivalent to Rs.198.18 million (Previous year Nil) to Syrian Petroleum Corporation for its shareof Minimum Financial Commitment in Block 24,Syria.

(iii) Other Contingent Liabilities in respect of GNOP (Sudan Project) is Rs.14.53 million (USD 0.33 million).

14. Exchange Difference:

The total net exchange difference (loss) during the year was Rs.621.76 million of which net exchange difference(loss) of Rs.912.49 million is expensed and net exchange gain of Rs.290.73 million is adjusted to the carrying amountof fixed assets.

15. Details of Operating Expenditure (Schedule 19), Establishment Expenditure (Schedule 20) and Provision &Write Off (Schedule 23):

(Rupees in million)


(i) (a) Salaries, Wages, Ex-gratia, etc. 307.59 74.00

(b) Contribution to Provident and other Funds 2.81 2.16

(c) Provision for Gratuity 2.08 2.29

(d) Provision for Leave Encashment 3.66 2.72

(e) Staff Welfare Expenses 5.92 3.85

Sub-Total 322.06 85.02


(A) 322.06 71.24

(ii) Rent 11.15 4.25

(iii) Electricity, Water and Power 1.84 4.00

(iv) Repairs to Building 0.11 0.32

(v) Repairs to Plant and Machinery 1.64 20.63

(vi) Other Repairs 10.55 1.82

(vii) Hire Charges of Vehicles 1.39 0.50

(viii) Professional Charges 65.92 209.34

(ix) Telephone and Telex 6.50 3.72

(xi) Printing and Stationary 2.40 1.81

(xi) Training and Seminar 0.48 0.69

(xii) Business Meeting Expenses 3.96 1.43

(xiii) Traveling Expenses 57.08 85.57

(xiv) Provision 0.00 (0.05)

221220

ONGC VIDESH LTD. & ONGC NILE GANGA B.V. CONSOLIDATEDCASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2004

(Rupees in million)


A. CASH FLOW FROM OPERATING ACTIVITIES:

Net profit before tax and extraordinary items 7,564.28 728.85

Adjustments For:

-Recouped Costs 6,134.39 231.39

(Represented by Depreciation, Depletion and Amortisation)

Less : Cash Outflows 1,124.78 1.89

5,009.61 229.50

-Interest on Borrowings 64.00 29.61

-Provision for Gratuity (Net) 2.08 1.94

-Provision for Leave Encashment 2.11 1.77

-Exchange (Gain)/Loss on Carry Finance 1,017.30 162.63

Gain on transferring of Participating interest in earlier years (1,151.78) -

-Interest Income (814.37) 4,128.95 (366.67) 58.78

Operating Profit before Working Capital Changes 11,693.23 787.63

Adjustments for:-

-Debtors 489.82 (1,700.81)

-Loans and Advances (803.10) (593.17)

-Inventories (2.87) (707.79)

-Trade Payable and Other Liabilities 3,215.17 2,899.02 653.12 (2,348.65)

Cash generated from Operations 14,592.25 (1,561.02)

Direct Taxes Paid (2,766.46) (87.07)

Deferred Tax Liability (111.71) 0.00

Cash Flow before extraordinary items 11,714.08 (1,648.09)

Extra-ordinary Items 2.89 (1.39)

Net Cash Flow from Operating Activities ‘A’ 11,716.97 (1,649.48)

B. CASH FLOW FROM INVESTING ACTIVITIES:Purchase of Fixed Assets (Net) (1,561.93) (9,838.35)Expenditure on Projects (12,248.36) (20,127.93)Investment in Subsidiary (585.65) (10,716.60)Deferred Tax Liability 0.00 1,933.09Loan to Oil India Limited (16.88) (343.58)Advance to DDA for Land (1,266.01) 0.00Advance to SMNG-S & RN ASTRA (8,925.40) (6,327.03)Interest Received 280.80 129.14Net Cash Flow from Investing Activities ‘B’ (24,323.43) (45,291.26)

18. The Expenditure incurred by Oil and Natural Gas Corporation Limited (ONGC), on behalf of the Company areaccounted for on the basis of debits raised by them for which supporting documents are held by ONGC .

19. In compliance of Accounting Standard (AS-18) the details on ‘Related Party Disclosures’ are as under:

(Rupees in million)

Holding Joint Fellow Key Total TotalCompany ventures subsidiary Managerial 2003-04 2002-03

personnel

Income from sale - - 7768.47 - 7768.47 -of goodsIncome from - 94.28 - - 94.28 152.33rendering servicesExpenses on 36.19 - - - 36.19 -receiving servicesInterest Income - - - - - -Loans Acceptance 19784.45 - - - 19784.45 -Loans Repayment 2249.45 - - - 2249.45 -Remuneration - - - 1.75 1.75 0.97Guarantee 115479.38 - - - 115479.38 -

Note: Name of related parties and description of relationship:

Holding Company Oil and Natural Gas Corporation Ltd

Joint Ventures Vietnam ProjectSakhalin ProjectMyanmar ProjectIran ProjectLibya ProjectSyria Project

Fellow Subsidiary Mangalore Refinery and Petrochemicals Ltd.

Key Management personnel Shri Atul Chandra, Managing DirectorShri R S Butola, Director (Finance)

20 . The previous year figures include the results of the Subsidiary company ONGC Nile Ganga B.V. for the period from12th March 2003 to 31st March 2003 as the wholly owned subsidiary was acquired from 12th March 2003. Previous yearfigures have been re-grouped/re-arranged and nomenclature re-named wherever necessary to make them compa-rable with current year classification.

Signature to Schedule – ‘1’ to ‘27”




New Delhi Praveen Gupta 4th June,04 Partner

223222

C. CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds from Long Term Borrowings 17,353.50 48,812.71

(Including from Oil and Natural Gas Corporation Ltd.)

Repayment of Long Term Borrowings (95.88) (95.88)

Cash Credit (182.42) 191.01

Interest Paid (64.00) (80.40)

Net Cash Flow from Financing Activities ‘C’ 17,011.20 48,827.44

Net increase/(decrease) in Cash and 4,404.74 1,886.70

Cash Equivalents (A+B+C)

Cash and Cash Equivalents as at 1st April, 2003 3,626.72 1,740.02

(Opening Balance)

Cash and Cash Equivalents as at 31st March, 2004 8,031.46 3,626.72

(Closing Balance)

Notes:

1 The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in the AccountingStandard-3 on Cash Flow Statements issued by The Institute of Chartered Accountants of India.

2 Bracket indicates cash outflow.

3 Previous year figures have been regrouped wherever necessary to confirm the current year’s classification.

4 Adjustment have not been made to purchase of Fixed Assets (investing activities), on account of increase/decrease in Capital creditors. The impact of the above is not readily available.





New Delhi Praveen Gupta 4th June,04 Partner

DETAILS OF SUBSIDIARY COMPANY

Name of Subsidiary Company ONGC Nile Ganga B.V.

(Rs. in million) (US$ in million)

1. Capital 3.42 0.078

2. Reserves 22,155.50 467.500

3. Total Assets 28,518.43 610.725

4. Total Liabilities 28,518.43 610.725

5. Details of Investment 0.00 0.000

6. Turnover 30,880.69 671.819

7. Profit before Taxation 8,605.49 189.367

8. Provision for Taxation 2,432.85 52.927

9. Profit after Taxation 6,172.64 136.439

10. Proposed Dividend 3,258.96 74.000

Exchange Rate

As on 31.03.2004 1 US$ = Rs. 44.04

Average Rate for 2003-04 I US$ = Rs. 45.97

Note:-

In view of exemption granted by the Central Government under Section 212(8) of the Companies Act, 1956, copies of theBalance Sheet, Profit and Loss Account, Report of Directors and Auditors of the Subsidiary Company are not attached tothe Balance Sheet of the Company. The annual accounts of the subsidiary company and the related detailed informationwill be made available to the holding and subsidiary company investors, seeking such information at any point of time. Thesame are also available for inspection by any investor at the Registered Office of the Company as well as at the RegisteredOffice of the Subsidiary.

225224

226 227

BOARD OF DIRECTORS

Shri Subir RahaChairman

Shri R. S. Sharma

Dr. A. K. Balyan

Shri N. K. Mitra

Shri A. Balakrishnan

Shri C. N. Rao

Shri M.P.ModiNominee of ICICI Bank Ltd.

Shri G. M. RamamurthyNominee of IDBI

Shri Girish Dave

SENIOR EXECUTIVESDr. C. M. Lamba

President (Projects)

Shri J. M. GugnaniPresident (Marketing)

Shri P. K. AtreyaPresident (Operations)

Shri S. C. TandonAssociate President (Refinery)

Shri R. K. MadanAssociate President (Business Development)

Shri V. K. TalithayaSr. Vice President (HR)

VICE PRESIDENT (FINANCE) ANDCOMPANY SECRETARY

Shri L. K. Gupta

228 229

under the DRP. This refinancing resulted in savings of Rs. 820 million p.a. During 2004-05 your Company hasalready began prepayment of the loan from ONGC and Rs. 4500 million have been prepaid in April-July period.

3.3 Your Company has prepaid the central sales tax deferral loans granted by the Government of Karnataka underIncentive package aggregating to Rs. 5,160 million at its net present value amounting to Rs. 2,610 million on31st March, 2004.

4. MARKET CAPITALISATIONThe Market Capitalisation of your Company on BSE touched Rs.1,00,000 million on 7th January, 2004. Equityshares of your company are now traded under ‘A’ category at BSE effective 1st March, 2004.

5. TRANSACTION COST5.1 Pursuant to constitution of Empowered Standing Committee by the Ministry of Petroleum & Natural Gas, Govt.

of India for procurement of Crude Oil, Crude sourcing is now directly managed by your Company resulting inreduced transaction cost. Your Company has entered into term contract with Saudi Aramco (National OilCompany of the Kingdom of Saudi Arabia) for import of 60000 barrels per day of Arab Mix crude oil. The termcontract between Indian Oil Corporation (IOC) and National Iranian Oil Company for purchase of 5 MMTPAIranian Crude for MRPL has also been assigned to MRPL w.e.f. 1st February, 2004, which will help saving ofcanalizing charges to the tune of Rs. 25 Million per year, besides availability of low-cost international fundingfor import of Crude Oil.

5.2 Your Company has entered into MOU with (the parent company) ONGC, for purchase of Mumbai High Crudeat arms-length price with Most Favoured Customer status, which will ensure increasing availability of MumbaiHigh Crude to your refinery. The pricing formula for this crude for PSU refineries is advantageous as comparedto similar imported crude.

5.3 Your Company has finalised a Contract of Affreightment (COA) for transportation of Iranian, Saudi and NileBlend crude oil for a period of 12 months commencing from 1st April, 2004 at a competitive rate throughTranschart, Ministry of Shipping, Govt. of India.

6. EXPORTSYour Company exported products (Motor Spirit, Naphtha, Reformate, HSD, ATF, FO, LSHS worth Rs.44,775 millionduring the year (up 134.06% from Rs.19,130 million). Your Company is now eligible for the Super Star TradingHouse Status under Exim Policy of the Government of India.

7. MARKETING7.1 Your Company has signed Memorandum Of Understanding (MOU) with Shell India Pvt. Ltd. and Essar Oil Ltd.

for sale of Motor Spirit (MS), High Speed Diesel (HSD) and other products. MOUs are also in place with IOCL,BPCL & HPCL for product offtake ex-MRPL for 3 years commencing from 1st April, 2004. These arrangementswill increase domestic sale of the products resulting into better margins.

7.2 The Ministry of Petroleum and Natural Gas has authorised your Company to market automotive transportationfuels in the country under its own name and logo through 500 Retail Outlets. Your Company is the sixth newentity to be granted such marketing rights. This opens up the potential for capturing higher value on the productsof your refinery.

8. DISINVESTMENT OF ONGC’S EQUITY BY GOVT. OF INDIADuring the year, the Govt. of India disinvested 10% of its equity holding in ONGC. Govt. of India had reserved14259330 equity shares representing 10% of the equity offer for the shareholders of MRPL and ONGC. This largest-ever equity offer from India was subscribed 5.88 times with bids exceeding US $ 12 Billion.The overwhelmingresponse to this mega – offer demonstrates the confidence of domestic as well as global investors in the ONGCGroup.

9. DIRECTORS9.1 During the year, Shri R.C.Gourh, nominee Director of ONGC on MRPL Board retired on reaching the age of

superannuation.Shri V.K. Sharma, nominee Director of ONGC, also retired on reaching the age of Superannuationon 31st May, 2004. ONGC has nominated Dr. A.K. Balyan and Shri N.K. Mitra as Directors on the Board of the

DIRECTORS’ REPORT

Dear Members,

1. Your Directors are pleased to present the 16th Annual Report of your Company, together with the audited Accountsfor the Financial year ended 31st March, 2004.

1.1 Financial Performance

(Rs in million)

Year ended Year ended31st March, 2004 31st March, 2003

Turnover 126,122.24 85,807.77Profit beforeDepreciationInterest and Tax 13,572.23 4,026.10Interest and FinanceCharges 3,734.17 5,670.73Gross Profit /(Loss) afterinterest but beforeDepreciation and Tax 9,838.06 (1,644.63)Depreciation andAmortisations 4,093.02 4,048.46Provisions for earlieryears claims - 834.64Provision for wealth Tax 0.24 0.11Deferred Tax 1,150.65 (2,409.78)Profit/(Loss) after Tax 4,594.15 (4,118.06)

1.2 Operational PerformanceDuring the year 2003 - 2004, your Company, for the first time, has achieved its rated crude processing capacityof 9.69 million metric tonne (MMT) per annum. The refinery has processed 10.046 MMT crude oil achieving104% capacity utilization (up 38.45% from 7.256 MMT), produced 9.352 MMT of finished products (up 39.60%from 6.699 MMT) and despatched 9.243 MMT of finished products (up 36.55% from 6.769 MMT).

The refinery has recorded its highest ever monthly throughput at 1.04 MMT (equivalent to 12.48 MMT onannualized basis) during March 2004.

2. REVIVAL OF MRPLYour Company has earned net profit of Rs.4594.15 million as against net loss of Rs. 4,118.06 million in previousyear, thus achieving a turnaround in the very first year after becoming a subsidiary of ONGC. Your Company is nowno longer a potentially sick Company, as its accumulated losses have gone down below 50% of the net worth as on31st March, 2004. Your company entered the elite club of top 30 Companies by Market Cap at The Stock Exchange,Mumbai (BSE) on 17th August, 2003.

3 DEBT RESTRUCTURING PACKAGE

3.1 Debt Restructuring Package negotiated by ONGC was fully implemented during the year.

3.2 As you are aware, your Company had an option under the DRP to prepay the Rupee Term Loans at any timewithout any prepayment premium. In exercise of this option, your Company has fully prepaid Rupee term loanfacilities ‘A’ and ‘B’ and the existing outstanding of facility ‘C’ aggregating to Rs. 26,370 million, to the FinancialInstitutions and Banks during January 2004. For this purpose, ONGC had extended a term loan facility uptoRs. 26,000 million at Bank rate (presently 6% p.a.) as compared to the average interest rate of 9.15% p.a.

230 231

17. INDUSTRIAL RELATIONSThe industrial relations in your Company remained peaceful and harmonious, without any disruption in operations.The Agreement signed with MRPL Employee’s Union for a period of 3 years w.e.f. 1.04.2001 has expired on 31st

March, 2004; negotiations are under progress to reach fresh agreement.

18. COMMUNITY DEVELOPMENT18.1 As in earlier years, this year also your Company had undertaken Community Development work in connection

with up-gradation of rural schools, particularly in the Fishermen’s village of Panambur, assistance for ruralwater supply (Rajiv Gandhi Water Supply Scheme), providing a Teacher for the Special School at Surathkal,etc. The cumulative amount spent on Community Development works, so far, is Rs. 27 million.

18.2 The MRPL School, which is affiliated to CBSE, continues to get a grant of about Rs.1 million from the Companyand about 65% of the childrens studying in the school are from the neighboring areas. The Company incurs anamount of about Rs.880/- per child p.a. by way of education assistance irrespective of whether the childrensare from MRPL Employees family or from the neighboring areas.

18.3 MRPL Hospital continues to be open to the neighbouring areas at substantially concessional rates.

19. DELISTING OF SHARESThe Company had made application to Bangalore, Ahmedabad, Calcutta, Delhi and Madras Stock exchanges on28th March, 2003 to seek delisting from these exchanges. The Company has received approvals for delisting of itssecurities from Bangalore, Delhi, Madras and Ahmedabad Stock Exchanges and accordingly the Company’s Shareshave been delisted from these Exchanges. The approval from Calcutta Stock Exchange is expected shortly.

20. ACKNOWLEDGEMENT20.1 Your Directors wish to sincerely thank the Government of India (GoI), Ministry of Petroleum and Natural Gas

(MOP&NG), Ministry of Finance (MOF), and other Ministries and Departments of Central Government and theGovernment of Karnataka for their valuable support and co-operation.

20.2 Your Directors recognise the continuing co-operation from the New Mangalore Port Trust, your promoterCompanies and the Members of the Oil Industry.

20.3 Your Directors appreciate the support received from the Financial Institutions and Banks.

20.4 Your Directors recognise the support received from all other stakeholders viz. suppliers of crude oil and otherinputs, vendors, contractors, transporters and others.

20.5 Your Directors thank the Shareholders for the confidence reposed by them in the Company.

20.6 Your Directors wish to place on record their sincere appreciation for the sustained and dedicated efforts put inby all the employees.

20.7 Finally, the customers. Your Directors recognise the patronage extended by the ever increasing circle of valuedcustomers, and assure them the best satisfactions possible.

For and on behalf of the Board

Place: Mumbai (Subir Raha)Date: 20th August, 2004 Chairman

Company. HPCL has nominated Shri Arun Balakrishnan and Shri C. N. Rao as Directors in place ofShri N. K. Puri and Shri C. Ramulu respectively. The Board recognizes the contributions of Shri R. C. Gourh,Shri V.K. Sharma, Shri N. K. Puri and Shri C.Ramulu.

9.2 In accordance with the provision of the Companies Act, 1956 and Articles of Association of the CompanyShri C. N. Rao and Shri Girish Dave retire by rotation at the Sixteenth Annual General Meeting of the Companyand being eligible, offer themselves for re - appointment.

9.3 Brief resume of the Directors seeking re - appointment, together with the nature of their expertise in specificfunctional areas and names of the companies in which they hold the directorship and the membership/chairmanship of committees of the board, as stipulated under Clause 49 of the Listing Agreement with theStock Exchanges are given in the Annexure to the AGM notice.

10. DIRECTORS RESPONSIBILITY STATEMENTIn accordance with the provisions of section 217 (2AA) of the Companies Act,1956 your Directors state that :

(a) The Annual Accounts have been prepared in compliance of the applicable Accounting Standards together withproper explanations relating to material departures;

(b) The Directors had selected such accounting policies and applied them consistently and made reasonable andprudent judgements and estimates, so as to give a true and fair view of the state of affairs of the Company atthe end of the financial year, and of the Profit & Loss of the Company for that period;

(c) The Directors took proper and sufficient care for the maintenance of proper and adequate accounting recordsin accordance with the provisions of this Act for safeguarding the assets of the Company and for preventingand detecting fraud and other irregularities;

(d) The Annual Accounts are prepared on a “going concern” basis.

11. FIXED DEPOSITThe Company has not accepted any fixed deposit from the public.

12. AUDITORSThe Statutory Auditors of your Company are appointed by the Comptroller & Auditor General of India (C&AG).M/s Varma & Varma were appointed as Statutory Auditors of the Company for the Financial year 2003 - 2004.

13. AUDITORS’ REPORTThe notes on Accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for anyfurther comments.

14. CORPORATE GOVERNANCE14.1 The Company has implemented all the mandatory provisions of Clause 49 of the Listing Agreement relating to

the Corporate Governance requirements. The Annual Report contains a separate section on the same.

14.2 As required under the said provisions, the Company has obtained the Certificate from the auditors of theCompany which is annexed to and forms a part of the Annual Report.

14.3 The Management Discussion and Analysis Report forms a part of the Annual Report.

15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO15.1 The additional information required to be disclosed pursuant to the section 217(1)(e) of the Companies Act,

1956 read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988 is given in the‘Annexure I’ forming part of this Report.

16. PARTICULARS OF EMPLOYEESThere are no employees whose particulars are required to be shown in terms of the provisions of Section 217(2A)of the Companies Act,1956 read with the Companies (Particulars of Employees) Rules,1975 as amended.

232 233

e) Total Energy Consumption and Energy Consumption per unit of production.

2003-04 2002-03

a) Power and Fuel Consumption1. Electricity

a) PurchasedUnit ( Million KWH) 3.28 4.07Total Amount (Rs.Million) 28.44 29.96Rate / Unit (Rs. / KWH)** 8.67 7.36** Expenditure towards electricitytax for own generation introducedw.e.f. 1.10.2003 not included.** Include Demand Charges ofRs. 13.98 million (Rs. 14.46 millionfor 2002-2003).The unit cost per KWHexcluding Demand charges isRs.4.41 for 03-04 and Rs.3.81 for 02-03.

b. Own Generationi. Through Diesel Generator (at Sarpady)

Unit (Million KWH) 1.79 0.22Unit per ltr. of Diesel (KWH / ltr.) 3.37 3.41Cost / Unit (Rs. / KWH) 6.21 5.26

ii. Through Steam turbine/generatorUnit (Million KWH) 543.8 462.14Unit per ltr. of Fuel Oil (KWH / ltr.) 2.20 2.08Cost / Unit (Rs. / KWH)*** 3.80 4.36*** Cost/Unit includes Steam costused in Refinery operation.

2. Fuel OilQuantity (M.T.) (Oil + Gas) 621662 480356Total Amount (Rs.in million) 5433.33 4555.44Average Rate (Rs./M.T.) 8740.02 9483.46

3 Others / Internal GenerationDiesel (at Sarapady)Quantity (K.ltr.) 536.00 64.21Total Cost (Rs.in million) 10.23 1.15Rate (Rs. / K.ltr.) 19094 17941

b) Consumption per unit productionTotal Crude Processed (TPA) 10045554 7256478Total Fuel Oil Consumed (TPA) **** 693829 557197Total Electricity (KWH)(after deducting power toHGIL, BASF) 543660969 463095980Fuel Oil Consumption / MTof Crude processed 0.0691 0.0768Electricity ConsumptionKWH / MT of Crude processed 54.12 63.82

**** includes fuel and loss

ANNEXURE I TO THE DIRECTORS’ REPORT

Information under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in theReport of Board of Directors) Rules, 1988 forming part of the Directors’ Report for the year ended 31st March, 2004.

A. CONSERVATION OF ENERGY

Company continued its emphasis in energy conservation through operational optimisation and continuous monitoringand implementing number of energy conservation schemes.

a) Major energy conservation scheme implemented during the year.

i. Advanced Process Control in Crude Distillation Unit - 1 for yield and energy consumption improvement.

ii. Steam optimisation of ejectors in vacuum system of Crude Distillation Unit-2.

iii. Inter-connection of de-aerators resulting in saving of condensate and power.

iv. Installation of energy saving transformer for plant area, street lighting of CDU / VBU / Merox Units.

Estimated savings in energy consumption equivalent to fuel is 6100 MT/year of LSHS as a result of implementationof various improvement schemes.

b) Additional proposals related to energy conservation planned for implementation include -

i. Inter-connecting of Hydrocracker stabiliser to avoid LPG flaring.

ii. Hot feed to Gas Oil Hydrodesulphurisation Unit.

iii. Installation of variable speed drives for selective MV and LT motors.

iv. Advanced Process Control (APC) for Crude Distillation Unit No.2.

v. Rain water harvesting.

Anticipated savings in energy consumption due to the above schemes is 14,000 MT/year of LSHS.

c) Fuel and Loss in the refinery for the year 2003-04 was 6.89 % wt on crude as compared to 7.68% wt in 2002-03. Also,specific energy consumption was 88.8 MTBU/BBL/NRGF for the year 2003 – 04 (which is the best figure ever achievedin the industry) as compared to 97.3 MTBU/BBL/NRGF in 2002 – 03.

d) Energy Conservation Award.

MRPL received second prize in the 14th Oil and Gas Conservation fortnight awards for 2004, in Furnace / Boilerefficiency category-2 (total heat recovery duty more than 400 MMKcal/Hr).

234 235

1. INDUSTRY1.1 The resurgent trend in Indian economy is visible from the healthy growth in demand of petroleum products,

among other indicators. The decision of the Government of India to ban import of Kerosene (SKO) for parallelmarketing had a salutary effect in curbing adulteration of diesel (HSD), as seen from the spurt in demand.Unfortunately, the subsidies in retail prices of LPG for household use and Kerosene for Public DistributionSystem (PDS) continue to be mis-used; subsidized LPG continues to be diverted for commercial, industrialand automotive use, and significant quantities of subsidized SKO continues to be diverted for adulterationof HSD.

1.2 India suffers from exceptionally high energy intensity. Notwithstanding the steep rise in international crudeprices, there is no meaningful national effort in improving conversion efficiencies and conservation of petroleumproducts.

1.3 High Gross Refining margins in the Indian Refineries in the recent past are largely because of higher refiningmargins prevailing in the international market as well as the prevailing tariff and pricing frame-work of theindustry. Such refining margins being only transient, we at MRPL lay more focus on cost effective and valueadditions in operations and investments.

2. REVITALISED MRPL2.1 The speed, the quality and the impact of MRPL’s turn-around are unprecedented in Indian corporate history.

The refinery achieved 100% capacity utilization for the first time, and has been consistently operating wellabove the rated capacity. Against a loss of Rs.4,118.06 Million in previous years, MRPL registered net Profitafter tax of Rs.4,594.15 Million in 2003-04. Of equal significance is the fact that your Company, which wasabout to file for bankruptcy under a crushing high-cost debt burden in the very recent past, is now repayingeven low-interest loans extended by the parent Company, ONGC.

2.2 With better crude mix and higher efficiencies in operations and maintenance, the yield pattern has improved,resulting in improved profitability. Significant savings have been achieved on cost of crude. Better managementof exports in co-ordination with the parent Company has improved realizations.

2.3 Domestic offtake from MRPL was constrained in 2003-04 due to the unreasonable stand of the PSU OilMarketing Companies (OMCs) to restrict upliftment from MRPL to an adhoc norm of 6 MMT per annumrefining capacity. The OMCs have now recognized the rated capacity of your refinery (9.69 MMTpa) for theIndustry Logistics Plan, and correspondingly, domestic sales have increased with higher realizations.

2.4 Works on capital projects as well as on preventive maintenance have been accelerated. Your refinery hasrecorded better energy efficiency than all other PSU refineries. With sustained focus on Health, Safety andEnvironment (HSE), MRPL has received 5 Star safety rating from the British Safety Council.

2.5 The proposal for formal classification of MRPL as a schedule ‘B’ PSU as well as sanctions for the posts ofManaging Director and Director (Finance) remain under the consideration of the Government.

2.6 MRPL has received a licence from the Government to set up 500 Retail outlets. This programme is beingcoordinated with that of the parent company, ONGC.

2.7 The pay-roll employee strength was 932 as on March 31, 2004.

3. UNCERTAINTIES3.1 Like all other refineries, the fortunes of your Company are tied with the volatility in international prices of crude

and products.

3.2 Domestic sales contribute to the major part of the revenue of your Company. The state of the economy, therefore,influence the turnover and profitability.

MANAGEMENT DISCUSSION AND ANALYSIS REPORTB. TECHNOLOGY ABSORPTIONResearch & Development:1. Specific areas in which Research & Development (R&D) has been carried out by the company.

i) New value added products like LAB, ATF JP 5 & Diesel F-76 (US Mil grade) and Mixed Xylene.

ii) Evaluation of multi-functional additive for Motor Gasoline.

iii) Effect of Ethyl alcohol blending on vehicle Elastomer components.

iv) Acid Numbers and chloride of crudes.

2. Benefits derived as a result of the above Research & Development:

i) Study confirmed the possibility of producing new high value added products like LAB feed, ATF JP-5 andDiesel F-76 & putting up a Mixed Xylene unit.

ii) Based on the laboratory evaluation studies, effective additive was procured and being used in MS. Customersatisfaction in the use of MS product.

iii) Complaints were received from marketing oil companies regarding the failure of lip seals of petrol dispensingunits due to Ethanol blending only with MRPL MS due to higher aromatics content of MS. Laboratoryexperiments revealed that the failure was due to impure ethyl alcohol. High moisture content in Ethyl alcoholwas found responsible for the failure of lip seals of petrol dispensing units and not aromatic content. Thiswas informed to Ministry of Petroleum and Natural Gas and Oil marketing companies for corrective action.

iv) Crudes from various sources with treatment and without treatment chemicals were checked for Acid numbersand Chloride content. Chloride content findings were helpful in the selection of proper treatment chemicalsto reduce the chloride content in the crude to avoid refinery pipeline corrosion. Acid numbers were helpful indeciding the proper crude/ crude mix procurement suitable to available unit metallurgy.

3. Future Plan of action:

i) To monitor the lubricity characteristics of Low Sulphur Diesel (<0.05%) from different sources of productstreams and operating conditions. Also study with different Diesel Lubricity improver additives.

ii) Study on modified Bitumen to produce Bitumen as per IS 73-1992 BIS specification.

4. Expenditure on R & D:

Capital : Rs. 4.23 million for 2003-2004

Recurring : Rs. 1.2 million

Total R & D expenditure as percentage on total turnover:

Negligible

5. Technology Absorption, Adoption & Innovation:

i) Conversion of Kerosene Merox -1 unit to Light Naphtha Merox unit has been carried out in-house to satisfycustomer’s requirement of lower mercaptan content in MS product.

ii) Special products like Reformate with stringent quality specifications were made by proper adjustment ofcut-points.

iii) Innovative methods of load shedding (during power/steam failure) have helped in avoiding total blackout.

iv) Simultaneous production of different quality of products by innovative interconnections.

v) All licensed technologies have been fully absorbed, from operational point of view.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO(Rs. in million)

2003-2004 2002-2003

Foreign Exchange Earnings (includes Exports ofRs.1,829.92 million (previous year Rs.383.98 million)through IOCL) 44,774.51 19,129.55Foreign Exchange Outgo (excluding imports of crudeoil through IOCL) 35,479.44 22,445.87

236 237

REPORT ON CORPORATE GOVERNANCE

1. CODE OF CORPORATE GOVERNANCE :• Corporate Governance primarily involves transparency, full disclosure, independent monitoring of the state of

affairs and being fair to all stakeholders.

• Your Company has been emphasising on these basic corporate principles so as to continuously enhance thestakeholders value.

• Your Company has complied with all the requirements of the Corporate Governance Code.

2. BOARD OF DIRECTORS :A. Composition and Category of Directors

Executive Directors : Nil

Non Executive Directors : 9

Director Executive/ Category No.of other No.of outsideNon – Executive Directorship Committees

Public Private Member Chairman

Shri Subir Raha ChairmanNon-Executive Promoter Company’s Director 2 –– –– ––

Shri R.S. Sharma Non-Executive Promoter Company’s Director 3 –– 3 ––

Dr. A.K. Balyan Non-Executive Promoter Company’s Director 2 –– 1 ––

Shri N.K. Mitra Non-Executive Promoter Company’s Director 1* –– –– ––

Shri Arun Balakrishnan Non-Executive Promoter Company’s Director 2 –– 1 ––

Shri C. N. Rao Non-Executive Promoter Company’s Director –– –– –– ––

Shri M.P.Modi Non-Executive Independent Director,ICICI Nominee 3 –– 1 1

Shri G.M.Ramamurthy Non-Executive Independent Director,IDBI Nominee 2 –– 2 ––

Shri Girish Dave Non-Executive Independent Director 7 –– 4 ––

The Chairman of the Board is non-executive and hence 1/3rd of the Board comprises of independent directors.* officiating Director (offshore) of ONGC

4. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACYThe Company has the required internal control systems and procedures. These ensure optimal use of Company’sresources. The Company’s internal audit department conducts regular audits of various operational and financialmatters. The audit observations are periodically reviewed by the Audit Committee of the Board of Directors.

5. FINANCIAL PERFORMANCE

5.1 The refinery achieved crude thruput of 10.046 MMT during the year, up 38.45% from 7.256 MMT and pro-duced 9.352 MMT of finished products, up 39.60% from 6.699 MMT. Turnover during the year was Rs.126,122.24million (up 46.98% from Rs.85,807.77 million); this includes exports amounting to Rs.44,775 million (up 134.06%from Rs.19,130 million).

5.2 Excellent operating performance coupled with good refinery margins in second half of the year, availability ofadditional export benefits on incremental exports and one-time credit of Rs.2,560 million on prepayment ofdeferred sales tax to Govt. of Karnataka, substantially improved the financial performance of MRPL. Net profitwas Rs.4,594.15 million against net loss of Rs.4,118.06 million in 2002-03.

6. CAUTIONARY STATEMENTThese discussions are “forward looking statements” within the meaning of the applicable laws and Regulations.Actual performance may deviate from the explicit or implicit expectations.

238 239

ii) Details of the Audit Committee Meetings held:

Date of Meeting No. of Members Attended

3.06.2003 5

31.10.2003 4

30.01.2004 3

Attendance in Audit Committee Meetings :

Director No. of Meetings AttendedShri M.P. Modi 3Shri G.M.Ramamurthy* NilShri Girish Dave 3Shri R.S.Sharma 3Shri C.Ramulu ** 2Shri S.T. Bambawale*** 1

* appointed as a member w.e.f. 31.10.2003** ceased to be a director w.e.f. 14.05.2004*** ceased to be a director w.e.f. 30.09.2003

iii) Terms of Reference:The functioning and terms of reference of the Audit Committee are as prescribed under Section 292A of the CompaniesAct, 1956 and Clause 49 of the Listing Agreement with the Stock Exchanges.

4. REMUNERATION COMMITTEE :At present the Company has not constituted any remuneration committee. All the directors of the Company are non- executive directors. The Company does not have a policy to pay remuneration to its non-executive directors exceptsitting fees for the Committee and Board meetings. Sitting fees are only paid to the non - executive IndependentDirectors.Details of remuneration to Directors:

Directors Salary Other Benefits Stock Sitting fees Totalallowances options/Pension

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

Shri Subir Raha N.A. N.A. N.A. N.A. Nil NilShri R.S. Sharma N.A. N.A. N.A. N.A. Nil NilDr. A.K. Balyan N.A. N.A. N.A. N.A. Nil NilShri N.K. Mitra N.A. N.A. N.A. N.A. Nil NilShri Arun Balakrishnan N.A. N.A. N.A. N.A. Nil NilShri C. N. Rao N.A. N.A. N.A. N.A. Nil NilShri M.P.Modi N.A. N.A. N.A. N.A. 14,000 14,000Shri G.M.Ramamurthy N.A. N.A. N.A. N.A. 6,000 6,000Shri Girish Dave N.A. N.A. N.A. N.A. 12,000 12,000Shri R.C. Gourh N.A. N.A. N.A. N.A. Nil NilShri V.K. Sharma N.A. N.A. N.A. N.A. Nil NilShri N. K. Puri N.A. N.A. N.A. N.A. Nil NilShri C. Ramulu N.A. N.A. N.A. N.A. Nil NilShri S.T.Bambawale N.A. N.A. N.A. N.A. 4,000 4,000

Break up of fixed components and performance linked incentives with performance criteria : N.AService Contract –notice period, Severence fees : N.A.Stock Options details (if any) : N.A.Whether issued at discountPeriod over which it is accrued and is exercisable.

B. Attendance of Directors at the Board Meeting and last AGM

Director No. of Board Meetings No. of Board Attendedheld during the year Meetings attended Last AGM

Shri Subir Raha 5 5 Yes

Shri R.S. Sharma 5 5 Yes

Dr. A.K. Balyan* 5 Nil No

Shri N.K.Mitra ** 5 Nil No

Shri Arun Balakrishnan *** 5 Nil No

Shri C. N. Rao *** 5 Nil No

Shri M.P. Modi 5 4 Yes

Shri G.M. Ramamurthy 5 2 No

Shri Girish Dave 5 3 No

Shri R.C. Gourh (*) 5 4 Yes

Shri V.K. Sharma(**) 5 4 Yes

Shri N.K. Puri (***) 5 2 No

Shri C. Ramulu (***) 5 3 No

Shri S.T.Bambawale (****) 5 1 No

* Appointed as a director w.e.f. 22.06.2004

** Appointed as a director w.e.f. 30.07.2004

*** Appointed as director w.e.f. 14.05.2004

(*) Ceased to be a director w.e.f 01.01.2004

(**) Ceased to be a director w.e.f. 31.05.2004

(***)Ceased to be a director w.e.f. 14.05.2004

(****) Ceased to be a dir ector w.e.f. 30.09.2003

C. Details of Board Meetings held

Date of meeting Place

3rd June, 2003 New Delhi31st July, 2003 New Delhi30th Sept, 2003 Mangalore31st October, 2003 New Delhi30th January, 2004 New Delhi

3. AUDIT COMMITTEE :i) Composition of Audit Committee

The Audit Committee comprises of Non Executive Directors as follows:1. Shri M.P.Modi - Independent Director2. Shri G.M.Ramamurthy – Independent Director3. Shri Girish Dave – Independent Director4. Shri R.S.Sharma - Promoter Director5. Shri C.Ramulu – Promoter Director (ceased to be director w.e.f. 14.05.2004)6. Shri S.T.Bambawale (ceased to be a director w.e.f 30/09/2003)

Shri M.P.Modi, an independent director is the Chairman of the Committee. As per the provisions of Clause 49 ofListing Agreement atleast one director is required to have financial and accounting knowledge. Shri R.S. Sharmabeing a Cost Accountant is having financial and accounting knowledge.

240 241

8. MEANS OF COMMUNICATION :

i) Whether half yearly report sent : As the Company’sto each shareholders resident financial results are displayed on the website the

same are not sent to each Shareholder’s residenceii) Newspapers in which Quarterly : Indian Express, (English)

results were normally published Financial Express, (English): Business Standard, (English)Udayavani (Manipal), (Kannada)

iii) Website where the results are displayed : www.mrpl.co.iniv) Any presentation made to the institutional : No

investors or to the analysts.v) Whether Management Discussion and : Yes

Analysis is a part of Annual Report

9. GENERAL SHAREHOLDERS INFORMATION :16th Annual General Meetingi) Date and time : 27th September, 2004 at 2.30 p.m.ii) Venue : Registered Office Mudapadav, Kuthethoor.

P.O. Via Katipalla, Mangalore - 575 030.iii) Financial Year : 2003 – 2004iv) Book Closure Date : 13th September, 2004 to 20th September, 2004v) Dividend Payment Date : N.A.vi) Listing on Stock Exchange :

The Company has listed its shares at 3 stock exchanges as stated below :

1) The Stock Exchange, MumbaiPhiroze Jeejeebhoy Towers,Dalal Street,Mumbai - 400 001.

2) Mangalore Stock Exchange Limited, [Regional Stock Exchange4th Floor, Rambhavan Complex, for the Company]Kodialbail, Mangalore - 575 003.

3) The Calcutta Stock Exchange Assn. Ltd. *7 Lyons Range, Kolkata - 700 001.(* Application for delisting already made.)

The Company had applied to Bangalore, Ahmedabad, Calcutta, Delhi and Madras Stock exchanges on 28th

March, 2003 to seek delisting from these exchanges. The Company has received approvals for delisting of itssecurities from Bangalore, Delhi, Madras and Ahmedabad Stock Exchanges and accordingly, the Company’sShares have been delisted from these Exchanges. The approval from Calcutta Stock Exchange is expectedshortly.

vii) Stock code:Physical Segment- BSE : 500109Demat Segment - ISIN : INE103A01014

5. SHAREHOLDERS’/ INVESTORS’ GRIEVANCE COMMITTEES :i) (a) The Company has constituted Shareholders’/ Investors’ Grievance Committee to look into the redressal of

shareholders’ and investors’ complaints. The composition of the Committee is as follows :-1) Shri G.M.Ramamurthy – Chairman (Independent Director)2) Shri R.S. Sharma – (Director)3) Shri C. Ramulu – (Director) (ceased to be a director w.e.f. 14.05.2004)

(b) The Company also has a Share Transfer Committee comprising of the following:

1. Shri R.S.Sharma - Director

2. Dr. C.M.Lamba - President (Projects)

3. Shri Lalit Kumar Gupta - Vice President (Finance) and Company Secretary

ii) Name and designation of the Compliance officer : Shri Lalit Kumar Gupta, Vice President (Finance) and CompanySecretary.

iii) No. of Shareholder’s complaints received during the year 2003-2004 : 8228

iv) No. of complaints not solved to the satisfaction of the shareholders as on 31st March, 2004 : 219 *

v) No. of pending share transfers : 286 transfer requests * (44400 shares) (transferred in April, 2004)

* All the pending complaints have been subsequently resolved.

6. DETAILS OF GENERAL BODY MEETINGS :i) Location, place and time where last 3 AGMs were held

Year Location Date Time

2001 Registered OfficeMudapadav, 29.09.01 4.00 p.m.Kuthethoor P.O.Via Katipalla,Mangalore - 575 030.

2002 Registered OfficeMudapadav, 28.09.02 3.30 p.m.Kuthethoor P.O.Via Katipalla,Mangalore - 575 030

2003 Registered OfficeMudapadav, 30.09.03 4.00 p.m.Kuthethoor P.O.Via Katipalla,Mangalore - 575 030.

ii) Whether special resolutions were put through Postal ballot last year?There were no special resolutions which were put through postal ballot in the last AGM.

iii) Persons who conducted the Postal Ballot exerciseNot Applicable.

iv) Procedure for Postal BallotNot Applicable.

7. DISCLOSURES :i) Materially Significant related party transactions; Since the Company has been a state controlled enterprise

throughout the year, no disclosure is required as per the Accounting Standard 18 (AS - 18) of the Related PartyDisclosures issued by the Institute of Chartered Accountants of India.

ii) Details of non compliance by the company, penalties, strictures imposed by the Stock Exchange or SEBI or anyauthority on any matter related to capital markets during last 3 years. NIL

242 243

x) Distribution of Shareholding as on 31st March, 2004

No.of Equity No. of shareholders No.of shares % of EquityShares held holding shares in held in capital held in

Physical Demat Physical Demat Physical DematForm Form Form Form Form Form

1-500 459822 202118 83249174 41700136 21.65 3.05501-1000 2965 17556 2279975 14308583 0.59 1.051001-2000 571 6813 836600 10436054 0.22 0.762001 – 3000 104 2014 263777 5174611 0.07 0.383001 – 4000 26 852 93700 3063949 0.02 0.224001 – 5000 29 737 134458 3495213 0.03 0.265001-10000 23 978 163300 7247337 0.04 0.5310001 & above 16 679 297454618 1282968142 77.36 93.76Shares in Transit – – 32700 – 0.01 –(in the depository)

Total 463556 231747 384508302 1368394025 100 100

Shareholding Pattern as on 31st March, 2004

Particulars No. of Shares PercentageOil and Natural Gas Corpn. Ltd. 1255354097 71.62

Hindustan Petroleum Corpn. Ltd. 297153518 16.95

Resident Individuals 168662871 9.62

Non Resident Individuals 13161611 0.75

Domestic Companies 13527263 0.77

Non Domestic Companies 293450 0.02

GIC & Subsidiaries 2003820 0.11

Banks & Financial Institutions 1971444 0.11

Mutual Funds 774253 0.04

Total 1752902327 100.00

xi) Dematerialisation of Shares and liquidity

As on 31st March, 2004, 1368394025 equity shares representing 78.06%, is in dematerialised form.

Trading in Equity shares of the Company is permitted only in dematerialised form w.e.f. February 15, 1999 asper the notification issued by Securities and Exchange Board of India.

xii) Outstanding GDR/ ADR/ Warrants or any convertible instruments, conversion date and impact on equity

Nil.

xiii) Plant Location : Mudapadav, Kuthethoor P.O.Via Katipalla, Mangalore-575 030.

xiv) Address for Correspondence:

REGISTRAR & SHARE TRANSFER AGENTSM/S MCS Limited,UNIT:MRPLSri Venkatesh Bhavan ,Plot No.27,Road No. 11,M.I.D.C,Andheri (E), Mumbai-400093.Tele.No.28215235Email:[email protected]

COMPANY’S INVESTOR RELATIONS CELL.Arcadia,7th floor, 195,N.C.P.A Marg ,Nariman Point, Mumbai-400 021Tele.No.:56393333Fax No.: 56393355Email: [email protected]

viii) Market Price Data :

Month Mumbai Stock Exchange

(2003-2004) High LowRs. Rs.

April 2003 10.40 8May 2003 19.9 9.75June 2003 25.40 18.75July 2003 25 17August 2003 43.65 23.15September 2003 44 32.2October 2003 40 33November 2003 51.4 36.25December 2003 53.2 45.35January 2004 69.2 50.55February 2004 61.25 50.7March 2004 61.1 45.3

Performance in comparision to broad based indices such as BSE sensex :

As on MRPL Share BSE 30 BSE 100 NSE 50Price (Rs.) Index NIFTY

31.3.2004 54.6 5590.60 2966.31 1771.9031.3.2003 8.10 3048.72 1500.72 978.2031.3.2002 6.80 3469.35 1716.28 1129.5531.3.2001 7.70 3604.38 1691.71 1148.2031.3.2000 13.15 5001.28 2902.20 1528.45

ix) Share transfer system:

The share transfer work is being handled by Company’s R&T agents, M/s MCS Ltd., Andheri –East, Mumbai400 093 who are also having connectivity with the depositories viz. NSDL and CDSL. The transfers are ap-proved by the Share transfer Committee. Share transfers are registered and despatched within a period of 30days from the date of receipt if the documents are correct and valid in all respects.

Stock Price Performance: MRPL Vs. BSE Sensex

244 245

The Members,

MANGALORE REFINERY AND PETROCHEMICALS LIMITED,

We have audited the attached Balance Sheet of MANGALORE REFINERY AND PETROCHEMICALS LIMITED as at31st March 2004, the Profit and Loss Account for the year ended on that date and the Cash Flow Statement for the yearended on that date annexed thereto. These financial statements are the responsibility of the company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. These Standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

I. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms ofSection 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified inParagraphs 4 and 5 of the said Order;

II. Further to our comments in the Annexure referred to above, we report that:

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief werenecessary for the purposes of our audit;

(ii) In our opinion, proper books of account as required by law have been kept by the company so far as appearsfrom our examination of those books;

(iii) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books ofaccount;

(iv) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with theAccounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors and taken on record by the Board ofDirectors, we report that none of the directors of the company is disqualified as on 31st March 2004, from beingappointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts,subject to Note No. 5(c) of Schedule S regarding deferred tax asset of Rs. 917.27 millions not written off for thereasons stated therein, the final position of which is not ascertainable at this stage, and read together with NoteNo 9.2 of Schedule S regarding balance of Deferred Tax Assets taken credit for in prior years carried over asrealisable for the reasons stated therein, the Significant Accounting Policies, and other notes on accounts at-tached thereto, give the information required by the Companies Act, 1956, in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the company as at 31st March 2004;ii. in the case of the Profit and Loss Account, of the profit for the year ended on that date; andiii. in the case of the Cash Flow statement, of the cash flows of the company for the year ended on that date.

For VARMA & VARMA CHARTERED ACCOUNTANTS

(R.Raghupathy)Partner

Mumbai, 25th May, 2004 Membership No: 19354

AUDITORS’ REPORTAUDITORS’ CERTIFICATE ON COMPLIANCE OF CONDITIONS OFCORPORATE GOVERNANCE

The Members,

MANGALORE REFINERY AND PETROCHEMICALS LIMITED,

We have examined the compliance of conditions of corporate governance by M/s. Mangalore Refinery and PetrochemicalsLimited (the company) for the year ended 31st March 2004, as stipulated in clause 49 of the Listing Agreements of thesaid Company with stock exchanges.

The compliance of conditions of corporate governance is the responsibility of the Management. Our examination waslimited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditionsof the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of thecompany.

In our opinion and to the best of our information and according to the explanations given to us and the representationsmade by the Management, we certify that the Company has complied with the conditions of Corporate Governance asstipulated in clause 49 of the above mentioned Listing Agreement.

We state that no investor grievance is pending (with the company) as at 31st March 2004 for a period exceeding onemonth against the Company as per the certificate of the Registrar and Transfer Agents of the Company.

We further state that such compliance is neither an assurance as to the future viability of the company nor the efficiencyor effectiveness with which the management has conducted the affairs of the company.

For VARMA & VARMA CHARTERED ACCOUNTANTS

Kochi-16 Venugopal C. GovindDate:19.8.2004 Partner

246 247

(b) According to the information and explanations given to us and as per our verification of the records of thecompany, the following disputed amounts of tax/duty have not been deposited with appropriate authorities asat 31st March 2004:

Name of the statute Nature of the dues Amount Period to which Forum where dispute is(Rs.milions) the amount relates pending

( financial year )The Karnataka Sales Tax/Entry Tax/ 2519.56 1993-2002 Commercial Tax AppellateSales Tax Act 1957/ Interest and Penalty Authorities/ Hon’bleCentral Sales High Court of KarnatakaTax Act 1956 /The Karnataka Tax onEntry of Goods Act 1979

Income Tax Act 1961 Income Tax/Interest 777.00 1996-1999 Income Tax AppellateAuthorities

Central Excise Act 1944 Central Excise Duty 143.07 1996-2004 Central Excise AppellateInterest /Penalty Authorities/ Ministry of

Finance, Governmentof India

The Customs Act 1962 Customs Duty 1781.30 1998-99 Customs AppellateAuthorities

10. The accumulated losses at the end of the financial year are less than fifty per cent of net worth of the company. Thecompany has not incurred cash losses during the year. The company had incurred cash losses in the immediatelypreceding financial year.

11. According to the information and explanations given to us and as per our verification of the records of the company,the company has not defaulted in repayment of dues to the financial institutions, banks and debenture holders.

12. The company has not granted any loans or advances on the basis of security by way of pledge of shares, deben-tures and other securities.

13. Since the company is not a chit fund/nidhi/mutual benefit fund/society, the relative reporting requirements are notapplicable.

14. Since the company is not dealing or trading in shares, securities, debentures or other investments, the relativereporting requirements are not applicable.

15. According to the information and explanations given to us and as per the verification of the records of the company,the terms and conditions of the guarantee given by the company for the loans taken by New Mangalore Port Trustfrom banks and financial institutions are not prejudicial to the interest of the company. Except for the above, thecompany has not given any guarantee for loans taken by others from banks or financial institutions.

16. According to the information and explanations given to us, term loans were applied for the purpose for which theloans were obtained.

17. According to the information and explanations given to us and as per our verification of the records of the company,the funds raised by the company on short-term basis have not been used for long term investment and vice versa.

18. The company has not made any preferential allotment of shares to parties and companies covered in the Registermaintained under Section 301 of the Act.

19. The company has not issued any debentures during the year.20. The company has not raised any money by public issues during the year.21. According to the information and explanations given to us and as per our verification of the records of the company,

no fraud either on or by the company has been noticed or reported during the year. For VARMA & VARMA

CHARTERED ACCOUNTANTS

(R.Raghupathy) Partner

Mumbai, 25th May, 2004 Membership No: 19354

ANNEXURE TO THE AUDITORS’ REPORT (Referred to in paragraph (1) of our report of even date)

1 (a) The company is maintaining proper records showing full particulars, including quantitative details and situationof fixed assets.

(b) We are informed that the fixed assets of the company have been physically verified by the management inaccordance with a phased programme which, in our opinion is reasonable having regard to the size of thecompany and the nature of assets and that no material discrepancies have been noticed on such verification.

(c) The company has not disposed off substantial part of fixed assets during the year.

2 (a) We are informed that the inventories of stores and spares are physically verified by the management on acontinuing basis as per a program of perpetual inventory and inventories of other items have been physicallyverified at the year end, the frequency of which, in our opinion is reasonable, having regard to the size of thecompany and the nature of its business;

(b) In our opinion and according to the explanations given to us, the procedures of physical verification of inven-tory followed by the management are reasonable and adequate in relation to the size of the company and thenature of its business;

(c) The company is maintaining proper records of inventory and as informed to us, discrepancies of materialnature were not noticed on physical verification, by the management.

3. The company has neither granted nor taken any loans, secured or unsecured to/from companies, firms or otherparties covered in the register maintained under Section 301 of the Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us, there are adequate internal controlprocedures commensurate with the size of the company and nature of its business for the purchase of inventory andfixed assets and for the sale of goods.

5. According to the information and explanations given to us, the company has not entered into any transactions thatneed to be entered into a register in pursuance of Section 301 of the Companies Act, 1956.

6. The company has not accepted any deposits from the public during the year and hence the directives issued by theReserve Bank of India and the provisions of sections 58A and 58AA of the Companies Act, 1956 and the rulesframed there under are not applicable.

7. In our opinion, the company has an adequate internal audit system commensurate with the size of the Companyand the nature of its business.

8. We have broadly reviewed the records maintained by the company pursuant to the order issued by the CentralGovernment under Section 209(1)(d) of the Companies Act, 1956, for the maintenance of cost records in respect ofthe products of the company and are of the opinion that prima facie, the prescribed accounts and records have beenmade and maintained. We have, however, not made a detailed examination of these records with a view to deter-mine whether they are accurate or complete.

9 (a) According to the information and explanations given to us and as per our verification of the records of thecompany, there has been delays in payment of monthly dues of electricity tax, under the Karnataka Electricity(Taxation on Consumption) Act, 2004 during the year, which however have been paid by the company by theend of the year. Excepting the above, the company has been generally regular in depositing undisputed statu-tory dues including Provident fund, Employee’s State Insurance, Income Tax, Sales Tax, Wealth Tax, CustomDuty, Excise Duty, Cess, Investor Education and Protection Fund and other statutory dues with the appropriateauthorities during the year. There are no arrears of undisputed statutory dues of material nature outstandingfor a period of more than six months from the date on which they became payable.

248 249

For the For the year ended year ended 31.03.2004 31.03.2003

SCHEDULE (Rs.in Millions) (Rs.in Millions)

INCOMEIncome from Operations M 113,906.44 80,587.66Other Income (including Rs 2,556.85 millions beingdifference on payment of sales tax deferral loan) N 6,080.29 547.79Increase/(Decrease) in Stocks O 1,973.12 910.31

121,959.85 82,045.76

EXPENDITURERaw Materials consumed 104,474.76 75,840.82Operating & Other Expenses P 3,912.86 2,178.84

108,387.62 78,019.66

Profit for the year before interest and depreciation 13,572.23 4,026.10

Interest & Finance Charges Q 3,734.17 5,670.73Depreciation 3,781.97 3,737.41Miscellaneous Expenditure written off 311.05 311.05Provision for claims relating to earlier years — 834.64

7,827.19 10,553.83

Profit/(Loss) for the year before tax 5,745.04 (6,527.73)Provision for Wealth Tax 0.24 0.11Provision for Income Tax– Deferred Tax 1,150.65 (2,409.78)

Profit/(Loss) for the year after tax 4,594.15 (4,118.06)Balance of loss brought forward from previous year 11,845.05 7,991.39Transfer from Debenture Redemption Reserve 979.55 264.40

Balance being Loss carried to Balance Sheet 6,271.35 11,845.05

Earnings/(loss) Per Share

Basic (in Rs.) 2.62 (5.15)

Diluted (in Rs.) 1.44 (5.15)

Significant Accounting Policies R

Notes on Accounts S

Cash Flow Statement T

Schedules referred to above form part of the accountsAs per our report of even date attached For and on behalf of the Board

For VARMA & VARMAChartered Accountants SUBIR RAHA

ChairmanR RAGHUPATHYPartner V K SHARMA

DirectorL. K. GUPTAVice President (Finance) R S SHARMA

Mumbai, 25th May, 2004 and Company Secretary Director

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2004

As at As at31.03.2004 31.03.2003

SCHEDULE (Rs in Millions) (Rs in Millions)

I. SOURCES OF FUNDSSHAREHOLDERS’ FUNDSShare Capital A 17,617.99 17,596.00Reserves and Surplus B 3,490.53 4,470.08LOAN FUNDSSecured Loans C 17,820.89 44,310.42Unsecured Loans D 30,622.06 9,244.26Lease Finance — 397.17

TOTAL 69,551.47 76,017.93

II. APPLICATION OF FUNDSFIXED ASSETS EGross Block 67,219.52 67,513.89Less: Depreciation 19,583.39 15,833.68

Net Block 47,636.13 51,680.21Capital work-in-progress 31.95 8.61

47,668.08 51,688.82NET DEFERRED TAX ASSETS (Refer Note No.9 in Schedule”S”) 5,904.54 7,055.18

CURRENT ASSETS, LOANS AND ADVANCESInventories F 11,893.46 9,971.10Sundry Debtors G 8,093.31 3,325.22Cash and Bank Balances H 273.28 98.82Loans and Advances I 5,169.03 2,864.98

25,429.08 16,260.12Less :CURRENT LIABILITIES AND PROVISIONSCurrent Liabilities J 16,278.09 11,707.43Provisions K 54.03 45.40

16,332.12 11,752.83Net Current Assets 9,096.96 4,507.29

MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted) L 610.54 921.59PROFIT AND LOSS ACCOUNT (LOSS) 6,271.35 11,845.05

TOTAL 69,551.47 76,017.93

Significant Accounting Policies RNotes on Accounts SCash Flow Statement T

Schedules referred to above form part of the accounts

As per our report of even date attached For and on behalf of the Board

For VARMA & VARMAChartered Accountants SUBIR RAHA

ChairmanR RAGHUPATHYPartner V K SHARMA

DirectorL. K. GUPTAVice President (Finance) R S SHARMA

Mumbai, 25th May, 2004 and Company Secretary Director

BALANCE SHEET AS AT 31ST MARCH, 2004

250 251

NOTES TO SCHEDULE - C1. A) Foreign Currency Term Loan from a bank of Rs.4,717.24 Millions (Previous Year Rs.5,940.29 Millions) is secured by the

letter of comfort/guarantees issued by the local bank in favour of overseas lending branch. These letters of comfort/guarantees are secured by equitable mortgage/hypothecation of Company’s immovable and movable properties (saveand except book debts) both present and future.

B) Foreign Currency Term Loan from a bank of Rs 1,040.57 millions (Previous Year Rs. 1,372.76 millions) is secured byequitable mortgage/hypothecation of Company’s immovable and movable properties (save and except book debts) bothpresent and future.

2. Rupee Term Loans as referred in (c) from Banks of Rs. 753.03 Millions (Previous Year Rs.8,749.65 millions) and fromFinancial Institutions of Rs. 725.30 Millions (Previous Year Rs.15208.40 Millions) along with all interest, cost charges, expensesand other monies whatsoever payable to Lenders are secured/to be secured by :i) Equitable mortgage over the immovable properties, both present & future;ii) Hypothecation over the present and future movable properties.

3. Supplier’s Deferred Payment Credit - Foreign Currency is guaranteed by the consortium of Banks/Financial Institutions. Theseguarantees are secured/to be secured by equitable mortgage /hypothecation of Company’s immovable and movable properties(save and except book debts) both present and future.

4.1 Working Capital Facilities from banks – Rupee Loans are secured by way of hypothecation of Company’s stocks of rawmaterials, finished goods, stock-in-process, stores, spares, components, book debts, outstanding moneys receivable, claim,bills, contracts, engagements, securities, both present and future and further secured/to be secured by residual charge onCompany’s immovable and movable properties (save and except Current Assets) both present and future, ranking pari passuinter se.

4.2 Working Capital Facilities from banks - Foreign Currency Loans are backed/earmarked by Non Fund Based Limits (i.e Letterof Credit) extended by Banks. These Letter of Credit/Non fund based limits are secured/to be secured by way of hypothecationof Company’s stocks of raw materials, finished goods, stock –in-process, stores, spares, components, book debts, outstandingmoney receivable, claim, bills, contracts, engagements, securities, both present and future, ranking pari passu with the otherWorking Capital Facilities.

5. Charges created/to be created in favour of lenders as referred to in note 1,2 & 3, shall rank pari passu inter se and are subjectto the charge(s) created /to be created by the company in favour of its bankers on the company’s stock of raw materials, semi-finished goods, consumable stores and book debts and such other movables as may be specifically permitted to secure itsworking capital requirements in the ordinary course of business.

As at 31.03.2004 As at 31.03.2003(Rs in Millions) (Rs in Millions)

SCHEDULE - D

UNSECURED LOANS

From Banks- Foreign Currency Loans * 4,642.62- Rupee Loans 1,500.00

6,142.62 —From others- Bodies Corporate 24,000.00 4,874.63- Sales Tax Deferment Loan 479.44 4,369.63

(Refer note No. 5 in Schedule ‘S ‘ ) 24,479.44 9,244.26

30,622.06 9,244.26

Amount repayable within one year 6,142.62 4,874.63 Loan from Holding Company 24,000.00 3,150.00

* Against Corporate Guarantee given by Holding Company


SCHEDULE - ASHARE CAPITALAUTHORISED190,00,00,000 Equity Shares of Rs.10 each 19,000.00 19,000.00(Previous Year 190,00,00,000 Equity Shares of Rs 10 each)10,00,00,000 Non-Cumulative, Redeemable,Preference Shares of Rs.10 each 1,000.00 1,000.00

(Previous Year 10,00,00,000 Equity Shares of Rs 10 each) 20,000.00 20,000.00

20,000.00 20,000.00ISSUED,SUBSCRIBED AND PAID UP175,29,02,327 (Previous year 175,07,06,300) Equity SharesRs. 10 each fully paid up. [out of the above 125,53,54,097numbers (Previous Year 89,71,53,518 numbers)held by ONGC, the Holding Company] 17,529.03 17,507.06Less : Allotment/Call money in arrears

(from other than Directors) 2.90 2.92

17,526.13 17,504.1491,86,242 -0.01%, Non-Cumulative, Redeemable,Preference Shares of Rs.10 each fully paid-up(Redeemable in Two equal annual instalments on 1st July 2009and 1st July 2010) 91.86 91.86

17,617.99 17,596.00

SCHEDULE - BRESERVES AND SURPLUSSecurities Premium Account– As per last Balance Sheet 3,490.53 3,490.53Debenture Redemption Reserve– As per last Balance Sheet 979.55 1,243.95– Less transferred to Profit & Loss account 979.55 264.40

— 979.55

3,490.53 4,470.08

SCHEDULE - CSECURED LOANS(a) 2,44,88,848, 16% Debentures of Rs.40 each — 979.55(b) Foreign Currency Term Loans

– From Banks 5,757.81 7,313.05(c) Rupee Term Loans

– From Banks 753.03 8,749.65– From Financial Institutions 725.30 15,208.40

1,478.33 23,958.05(d) Suppliers’ Deferred Payment Credit - Foreign Currency 2,323.04 3,044.84(e) Working Capital facilities

– From BanksRupee Loans — 3,216.51Foreign Currency Loans 8,261.71 5,798.42

8,261.71 9,014.93

17,820.89 44,310.42

SCHEDULES FORMING PART OF THE BALANCE SHEET

252 253

As at 31.03.2004 As at 31.03.2003

(Rs in Millions) (Rs in Millions)

SCHEDULE - G

SUNDRY DEBTORS

(Unsecured, considered good unless otherwise stated)Debts due for more than six months -Considered Good 811.99 113.43Considered Doubtful 19.50 19.50OthersConsidered Good 7,281.32 3,211.78Considered Doubtful 0.25 10.30

8,113.06 3,355.01Less: Provision 19.75 29.79

8,093.31 3,325.22

SCHEDULE - H

CASH AND BANK BALANCES

Cash in hand 0.14 0.13Cheques in hand 26.46 5.28Balances with Scheduled BanksIn Current Accounts (including refund/interest accounts, etc.) 228.28 71.78In Deposit Accounts (under lien/pledge with Banks/customs authorities Rs 18.40 Millions; previous yearRs 18.40 Millions) 18.40 21.63

246.68 93.41

273.28 98.82

SCHEDULE - I

LOANS AND ADVANCES

(Unsecured, considered good unless otherwise stated)Loans to Port Trust/Employees 503.66 508.42Advances recoverable in cash or in kind or for value to be receivedConsidered Good 2,184.74 2,149.13Considered Doubtful 857.08 844.98

3,041.82 2,994.11Less: Provisions 857.08 844.98

2,184.74 2,149.13Exports entitlements receivable 2,411.64 —Balance with Customs, Port Trust,etc. 25.79 4.61Other Deposits 30.03 189.26Interest accrued 13.17 13.56

5,169.03 2,864.98

SCHEDULE - E

FIXED ASSETS (Rs. in Millions)

GROSS BLOCK DEPRECIATION NET BLOCK

Particulars Ref As at Additions Sale/ As at Up to Provoided Adjustments Upto As at As atNote 31-3-2003 during Adjustment 31-3-2004 31-3-2003 during during 31-3-2004 31-3-2004 31-3-2003

the year during the year the yearthe year

Land - Freehold 0.91 — — 0.91 — — — — 0.91 0.91

Land - Leasehold 1 211.09 — — 211.09 — — — — 211.09 211.09

Buildings 2,523.79 1.73 — 2,525.52 268.95 47.71 — 316.66 2,208.86 2,254.84

Plant & Machinery

- Owned 2,3 60,422.15 183.59 403.53 60,202.21 13,917.39 3,506.12 (8.92) 17,432.43 42,769.78 46,504.76

- Taken on Lease 4 4,259.62 — 101.16 4,158.46 1,604.24 219.57 38.10 1,785.71 2,372.75 2,655.38

Furniture & Fittings 39.67 10.59 0.76 49.50 26.37 3.70 0.40 29.67 19.83 13.30

Vehicles 56.66 20.28 5.11 71.83 16.73 4.87 2.68 18.92 52.91 39.93

TOTAL 67,513.89 216.19 510.56 67,219.52 15,833.68 3,781.97 32.26 19,583.39 47,636.13 51,680.21

Previous year 67,201.44 326.70 14.25 67,513.89 12,101.10 3,737.41 4.83 15,833.68 51,680.21

NOTE :

1) No amortisation of cost is considered necessary in view of the fact that eventually the ownership will get transferred to the Company onexpiry of the lease period of 20 years or 30 years, as the case may be.

2) Includes an amount of Rs.782.98 Millions (Previous Year Rs 782.98 Millions) being Company’s share of an asset owned together withanother Company.[ Net Block Rs 451.46 millions (Previous Year Rs 492.80 Millions)].

3) Sales/adjustments during the period includes exchange difference, being net decrease in the value of foreign currency liability adjusted to thecarrying cost of fixed assets Rs 359.56 millions (Previous year Rs 131.22 millions net increase).

4) Refer Note No. 3.1 (c) in Schedule ‘S’


SCHEDULE - F

INVENTORIES

(As taken, valued and certified by the Management)Stores, Spares & Chemicals (net of provisions) 354.27 322.30Raw Materials 4,335.50 4,418.23(including in transit Rs. 864.58 Millions ; Previous Year 1,572.06 Millions)

Stock-in-Process 1,262.27 903.00Finished Products 5,941.42 4,327.57

11,893.46 9,971.10

254 255

SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACOUNTFor the For the

year ended Year ended31.03.2004 31.03.2003


SCHEDULE - M

INCOME FROM OPERATIONS

Sale of Products (Gross) (Refer note no 10 in Schedule “S”) 126,122.24 85,807.77Less: Excise Duty 12,215.80 5,220.11

Sale of Products (Net) 113,906.44 80,587.66

113,906.44 80,587.66

SCHEDULE - N

OTHER INCOME

Interest (Gross) 73.57 67.19(Tax deducted at source Rs 0.07 millions ; Previous Year NIL)Provisions no longer required written back (net) 21.04 104.51Other Miscellaneous income 87.49 75.52Export Benefits under duty free entitlement scheme 2,411.64 —(Refer note no 12 in Schedule “S”)Diffference on payment of Sales Tax deferral loan 2,556.85 —(Refer note no 5 ( c ) in Schedule “S”)Exchange Fluctuations (Net) 929.70 300.57

6,080.29 547.79

SCHEDULE - O

INCREASE/(DECREASE) IN STOCKS

Closing StockStock - in - Process 1,262.27 903.00Finished Products 5,941.42 4,327.57

7,203.69 5,230.57Less:Opening Stock

Stock - in - Process 903.00 820.33Finished Products 4,327.57 3,499.93

5,230.57 4,320.26

1,973.12 910.31

As at As at31.03.2004 31.03.2003


SCHEDULE - J

CURRENT LIABILITIES

Sundry Creditors- Creditors on Capital account 127.98 158.35- Other Creditors 14,992.81 9,709.66

15,120.79 9,868.01Advance from Customers 56.16 105.07Investor Education and Protection Fund shall be credited by:

(a) Unpaid application money received by the company forallotment of securities and due for refund — 27.31

(b) Unpaid Matured Debentures * 171.93 191.75(c) Interest accrued on (b) above * 92.25 164.41

264.18 383.47Other Liabilities 589.86 508.65Interest accrued but not due 247.10 842.23

16,278.09 11,707.43* Not due for payment

SCHEDULE - K

PROVISIONS

Taxation (Net of taxes paid of Rs 31.91 Millions ; previous year Rs 29.98 Millions) 11.42 13.12Retirement Benefits 42.61 32.28

54.03 45.40

SCHEDULE - L

MISCELLANEOUS EXPENDITURE

(To the extent not written off or adjusted)Marketing and crude procurement study — 5.78Extended trial run expenditure 610.54 915.81

610.54 921.59

256 257

SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE - R


1 Basis of Presentation / Accounting1.1 The financial statements are prepared under the historical cost convention, in accordance with the generally

accepted accounting principles and the provisions of the Companies Act, 1956.

1.2 All income and expenses to the extent considered receivable / payable with reasonable certainty are accountedfor on accrual basis.

2 Fixed Assets2.1 Fixed assets are stated at cost.

2.2 Spares received along with the Plant or Equipment and those purchased subsequently for specific machineryand having irregular use are being capitalised.

2.3 During the period of construction, directly identifiable expenses are capitalised at the first instance and allother allocable expenses are capitalised proportionately on the basis of the value of the assets.

3 Depreciation3.1 Depreciation on Fixed Assets (including those taken on lease) is provided on Straight Line Method, at the

rates and in the manner specified in Schedule XIV to the Companies Act, 1956

3.2 Depreciation on amounts capitalised on account of foreign exchange fluctuation is provided prospectively overresidual life of the assets.

3.3 Depreciation on spares having irregular use and purchased subsequent to the installation of specific machineryis provided prospectively over residual life of the specific machinery.

4 InventoriesInventories are valued at lower of the cost and net realisable value and the cost has been determined as under :

4.1 Raw material - on First in First Out (FIFO) basis.

4.2 Finished Products and Stock-in-Process - at Raw material and Proportionate Conversion cost.

4.3 Stores and Spares - on weighted average cost basis.

5 Sales‘Sale of Products’ is inclusive of all statutory levies and is net of discounts.

6 Claimsa) Claims/Surrenders on/to Petroleum Planning and Analysis Cell, Government of India are booked on ‘in principle

acceptance’ thereof on the basis of available instructions/clarifications subject to final adjustments, as stipulated.All other claims and provisions are booked on the merits of each case.

b) Export benefits entitlements to the Company viz., under Duty free credit entitlement scheme /Advance Licencescheme under the EXIM policy, is recognised in the year of exports on accrual basis.

7 Foreign Currency TransactionsForeign Currency Transactions are accounted for at the exchange rates prevailing on the date of the transactions.Theexchange differences on settlement/conversion are adjusted :

( i ) to the cost of Fixed Assets, if the foreign currency liability relates to Fixed Assets, and( ii ) to the Profit and Loss Account in other cases. Wherever forward contracts (on revenue account) are

entered into, the exchange difference are dealt with in the Profit and Loss account over the period ofcontracts.

For the For theyear ended Year ended31.03.2004 31.03.2003


SCHEDULE - P

OPERATING AND OTHER EXPENSES

Payments to and Provisions for EmployeesSalaries, Wages, Bonus & Gratuity 237.76 229.61Contribution to PF & Other Funds 21.32 20.78Staff Welfare Expenses 17.08 11.85

Power & Fuel 5,543.12 4,591.39 Less: Own Consumption 5,433.34 4,555.44

109.78 35.95Repairs & Maintenance

Plant & Machinery 187.68 105.51Buildings 11.91 3.23Others 40.50 50.31

240.09 159.05

Stores, Spares and Chemicals consumed 172.02 181.73Packing Materials consumed 79.31 60.36Rent 19.67 17.25Insurance 167.19 139.23Rates & Taxes (Refer note no 10 Schedule “S”) 2,289.29 336.92Excise Duty on Stocks (Net) 129.89 670.98Directors’ Sitting Fees 0.04 0.15Loss On Sale of Fixed Assets (Net) 12.99 7.67Provision for Non-Moving Inventory 3.70 13.60Bad debts written off — 10.49Miscellaneous Expenses 412.73 283.22

3,912.86 2,178.84

SCHEDULE - Q

INTEREST AND FINANCE CHARGES

Interest on Term Loans and Debentures 2,745.39 3,978.64Other Interest & Finance Charges 780.22 1,595.24Lease Finance Charges 208.56 96.85

3,734.17 5,670.73

258 259

SCHEDULE - S

NOTES ON ACCOUNTS

1. Contingent Liabilities not provided for in respect of :1.1 Corporate Guarantee given by the Company towards loan of Rs. 3,372.30 millions sanctioned by certain

bankers / financial institutions to New Mangalore Port Trust (NMPT) for construction of Jetties. Amountoutstanding as at the close of the year is Rs. 1,356.12 millions (Previous Year Rs.1,694.21 millions).

1.2 Claims against the Company not acknowledged as debt Rs. 536.35 millions (Previous Year Rs. 753.87millions).

1.3 Disputed tax matters : Rs. 3,447.80 millions (Previous Year Rs. 3,442.85 millions). - includes Rs.474.16millions relating to projects (Previous Year Rs. 1,434.54 millions)

1.4 Disputed Excise matters : Rs. 46.25 millions (Previous Year Rs. 137.43 millions).

1.5 Disputed Customs Duty matters :

a) Project Imports: Rs. 2,640.43 millions (Previous Year Rs. 2,640.43 millions) towards duty on project importsfor which the Company has given the Bank Guarantees/Deposits. Depreciation on such import duty, if any, willbe provided prospectively in the year of payment.

b) Others: Rs.18.26 millions (previous year Nil).

2. The estimated amount of contracts remaining to be executed on capital account and not provided for (net ofadvances) Rs.69.04 millions (Previous Year Rs. 5.94 millions).

3 Leases:3.1 Finance Leases

a) Aggregate minimum lease payments due and the net present value as at the balance sheet date is Rs.Nil(previous year Rs. 586.65 millions) and Rs Nil (previous year Rs. 397.17 millions) respectively.

b) Significant terms of the lease agreement

No. Terms of the lease agreement provide for Amount (Rs. In Millions)

Yes No Not specified TOTAL

a. Purchase Option 208.73 - 3,949.73 4,158.46

b. Renewal Option 2,089.49 - 2,068.97 4,158.46

c) In respect of the assets taken on lease of Rs 4,158.46 millions ( Previous year Rs 1,013.33 millions) theprimary period of the lease has expired and the Company is taking necessary steps to get the ownershiptransferred in its name.

d) On termination of the above lease, finance charges payable under the arrangement, net of amounts alreadycharged off, has been expensed during the year.

3.2 Operating Leases

The lease agreements entered into with various parties are mutually renewable/cancellable.

4 Loans and Advances :4.1 Loans to employees / Port Trust include:

a) Balance due from an officer Rs.0.42 millions (Previous Year Rs. 0.44 millions), maximum amount due at anytime during the year Rs.0.44 millions (Previous Year Rs. 0.47 millions).

b) In respect of loans to employees/ port trust having repayment schedule of more than seven years, balanceoutstanding is Rs 503.66 millions (Previous Year Rs. 508.42 miillions); Maximum balance due at any timeduring the year was Rs.504.11 millions. (Previous Year Rs. 509.32 millions).

4.2 Advances recoverable in cash or in kind or for value to be received include Rs 4.71 millions (Previous Year Rs.0.56 milllions) being advances towards Capital Expenditure.

8 Retirement BenefitsThe Company contributes for Provident Fund to Trust authorities and for Superannuation under the GroupSuperannuation Scheme of Life Insurance Corporation of India, which are expensed during the year.

Gratuity and Leave encashment liability is provided for on the basis of actuarial valuation carried out at the year end.

9 Miscellaneous ExpenditureExpenditure incurred on study conducted on marketing and crude procurement and extended trial run expenditureare treated as Deferred Revenue Expenditure prior to 1st April 2003 and carried over are being written off equallyover a period of 5 years as originally determined.

10 LeasesLease rentals in respect of finance lease are segregated into cost of assets and interest component by applying theimplicit rate of return.

11 Borrowing CostsBorrowing costs that are attributable to acquisition, construction or production of qualifying assets are capitalised aspart of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time toget ready for intended use. All other borrowing costs are charged to the Profit and Loss Account and /or to deferredrevenue expenditure.

12 Taxes on IncomeCurrent tax is determined as the amount of tax payable in respect of taxable income for the period. Deferred tax isrecognised on timing differences between taxable and accounting income/expenditure that originates in one periodand are capable of reversal in one or more subsequent period(s). Deferred Tax Asset is recognised on the basis ofvirtual/reasonable certainty about its realisability, as applicable.

13 Contingent LiabilitiesContingent liabilities in respect of show cause notices received are considered only when they are converted intodemands.

14 Research and Development ExpenditureCapital expenditure on Research and Development is capitalised under the respective fixed assets. Revenueexpenditure is charged to the Profit and Loss account.

260 261

9. Taxes on Income :9.1 As per the legal/expert opinions received, the Company has no liability to Income Tax during the year (including

Minimum Alternate Tax on Book Profit under Section 115JB of the Income Tax Act) in view of the broughtforward losses and unabsorbed depreciation and in any case the likely amount not being material, no provisionhas been made.

9.2 After the Company became subsidiary of Oil and Natural Gas Corporation Ltd. (ONGC), there has beensubstantial improvement in the working results of the Company on account of several operational and financialadvantages and other beneficial factors achieved and being achieved by the Company under the newmanagement, particularly, savings in interest on borrowings and substantial increase in Gross Refinery Marginachieved. Considering that the Company has earned profits during the year, which could realise Deferred TaxAsset outstanding to the extent of Rs. 1,150.65 millions and based on the current performance and facts onrecord, the Management is virtually certain that the balance of Deferred Tax Asset taken credit for in previousyears and carried in the accounts in terms of Accounting Standards on Accounting for Taxes on Income – AS22 issued by the Institute of Chartered Accountants of India, amounting to Rs. 5,904.60 millions as on 31.3.2004could be realised by absorption of the unabsorbed depreciation and brought forward losses of past yearsagainst the profits of the Company that will be earned within the next three years.

9.3 The break up of net Deferred Tax Asset is as under:

Particulars. Deferred Tax Asset Deferred Tax Liability(Rs. In millions) (Rs. In millions)

31/3/2004 31/3/2003 31/3/2004 31/3/2003

Timing differences on account of:

Unabsorbed losses and allowances 14,676.51 14,880.85 — —

Book and Income tax depreciation — — 8,303.32 7,094.90

Lease Finance — — 871.93 810.13

Deferred Revenue Expenditure — — 163.34 245.00

Others 566.62 324.36 — —

Total 15,243.13 15,205.21 9,338.59 8,150.03

Net Deferred Tax Asset 5,904.54 7,055.18 — —

10. In prior years sale of products shown was net of sales tax. The Company has, during the year changed the policyto include sales tax collected under sale of products and sales tax paid under rates and taxes. Consequent to thischange, the sale of products are higher by Rs. 1,188.33 millions and rates and taxes are higher by the said amount.This however has no impact on the profit for the year.

11. Income from operations includes Rs 328.05 millions towards Liquefied Petroleum Gas/Superior Kerosene pricerevision declared by the oil marketing companies during the year and received during the year relating to previousyears.

12. Export benefits (Import duty credits) of Rs.2,411.64 millions included in Other Income represents company’sentitlement towards the amount of Duty Free Entitlement Certificate (DFEC) for incremental export turnover achievedduring this year in respect of which the claims will be made in due time in accordance with the relative scheme underthe EXIM policy.

4.3 Loans and advances include Customs duty under protest on project imports Rs. 877.39 millions (Previous YearRs.877.39 millions) , Commercial taxes paid under protest Rs. 464.48 millions (Previous YearRs. 328.79 millions) and Rs.348.57 millions (Previous Year Rs.348.57 millions) being refund of Central Salestax receivable from department on account of revision of sales tax returns for the year 2000-01 and 2001-02and refund claim for the year 2002-03 pursuant to the order of the Department confirming the levy of CST onExcise Duty value of sales which are pending disposal.

4.4 There are certain claims/reimbursements recoverable from Petroleum Planning & Analysis Cell (PPAC) relatingto earlier years included under Loans and Advances aggregating to Rs.846.75 millions (Previous yearRs.834.63 millions) is considered doubtful and has been provided for as a matter of prudence. The managementwould, however, continue to make its efforts for realising the same.

5 Commercial Tax incentives:

a) The Company, as per the Government of Karnataka notification, is entitled to Sales Tax deferment loan andexemption from Turnover Tax as follows:

Refinery Project Maximum Amount Availment period Repayment terms(Rs.in millions)

Phase I (3 MMTPA) 400.00 per annum 11 years from the date of 11 annual instalments on yearissue of notification to year basis commencing from theviz, 26th April 1997 date of completion of the deferment

period

Phase II (6 MMTPA) 2,500.00 per annum 14 years from the date of 14 annual instalments on yearissue of notification viz., to year basis commencing14th August, 2000 from the date of completion of

the deferment period.

b) Sales tax deferment loan shown under Unsecured Loans includes a sum of Rs.348.57 millions (Previous YearRs.348.57 millions) relating to CST on excise duty (refer note no.4.3 above) for the years 2000-01, 2001-02 and2002-03, which were earlier paid under protest and are now being claimed as sales tax deferal loan payable by theCompany, in respect of which the assessments are yet to be completed.

c) Pursuant to the notification issued by the Government of Karnataka, the Company has exercised the option to paythe deferred sales tax loan upto the period ending 29.2.2004 before the completion of the deferment period asprovided therein. Accordingly, the difference between the aggregate of deferred sales tax loans and the paymentsmade in accordance therewith amounting to Rs.2,556.85 millions has been shown under “Other Income” inSchedule ‘N’.The Company has been advised that the said amount of Rs.2,556.85 millions being the difference between thedeferred sales tax loan and the payments made by the Company as per the notification referred above is not of thenature of income liable to Income Tax and hence adjustment of write off of the relative amount of Deferred TaxAssets pertaining to such income, had it been taxable, amounting to Rs.917.27 millions is considered not necessaryand has not been made.

6. Certain balances in Sundry Debtors and Sundry Creditors are subject to confirmations/reconciliations andadjustments, if any, which in the opinion of the management will not be significant and would be carried out as andwhen settled.

7. Following expenses are included under other heads of expenses –a) Stores and spares consumed Rs 140.53 millions (Previous Year Rs. 70.69 millions).

b) Insurance Rs 26.49 millions (Previous year Rs 43.17 millions)

c) Other Interest and Finance charges :Nil (Previous year Rs 183.07 millions).

8. Since the Company has been a state controlled enterprise throughout the year, no disclosure is required as per theAccounting Standard 18 (AS-18) of Related Party Disclosures issued by the Institute of Chartered Accountantsof India.

262 263

16 Additional Information pursuant to the Provisions of Paragraphs 3,4-C and 4-D of Part II of Schedule-VI to theCompanies Act, 1956

2003-2004 2002-2003

Qty. (M.T.) Value Qty. (M.T.) ValueRs. in Millions Rs. In Millions

a) Licensed Capacity Delicensed Delicensedb) Installed Capacity 9,690,000 — 9,690,000 —

As certified by the Management andrelied upon by the auditors

c) Opening stock of Petroleum products 260,618 4,327.57 330,087 3,499.92d) Closing stock of Petroleum products 369,609 5,941.42 260,618 4,327.57e) Actual Production of Petroleum products* 9,351,725 — 6,699,281 —

(include fuel transfers and stock transfer oftrial run production)

f) Sale of Petroleum products 9,242,734 126,122.24 6,768,750 85,807.77g) CIF value of imports

– Capital goods 1.00 3.10– Raw materials - Direct 34,713.51 21,539.39– Raw materials - Through Indian Oil Corporation Limited 41,477.99 47,435.33– Stores, Spares and Chemicals 78.30 52.60

h) Expenditure in Foreign Currency(On actual payment basis)– Interest 663.51 758.98– Others 23.12 91.80

i) Earnings in Foreign currency-FOB value of exports 44,774.51 19,129.55Includes Rs 1,829.92 millions(previous year 383.98 millions) throughM/s. Indian Oil Corpn. Ltd.

j) Remuneration paid / payable toWhole Time Directors– Salaries and Allowances — 0.94– Contribution to PF and Other Funds — 0.23– Other perquisites and benefits — 0.78

k) Payment to Auditors– Audit Fees 0.80 1.10– Tax Audit Fees 0.16 0.22– For Certification 0.26 0.77– Reimbursement of Expenses 0.13 0.12– Other services — 0.03

(does not include audit fees Rs 0.52 millions andexpenses Rs 0.08 millions paid to auditors forspecial audit for nine months ended 31st December,2003 in connection with the disinvestment ofshareholding of Central Government in theholding company, charged to them.)

13. Basic and Diluted Earnings Per Share:

31.3.2004 31.3.2003(Rs. in millions) (Rs. in millions)

Numerator – Net Profit /(Net Loss)

Basic 4,594.14 (4,118.06)

Diluted 5,667.23 (4,118.06)

Denominator – Average

number of Equity Shares

outstanding during the year

Basic 1,752,524,322 7,99,990,465

Diluted 3,931,471,745 7,99,990,465

Nominal Value per share 10 each 10 each

Earnings/(Loss) Per Share

Basic (in Rupees) 2.62 (5.15)

Diluted (in Rupees) 1.44 (5.15)

Reconciliation of Basic and Diluted Earnings Per Share

(Rs. In millions)Net Profit as on 31.3.2004 4,594.14Add interest on dilutive 1,073.09portion of loans (Net of tax)

5,667.23Average No. of Equity shares 1,752,524,322Number of shares in respect of loanshaving conversion clause 2,178,947,423

3,931,471,745

14. Segment Reporting :The Company is engaged in refining the crude oil and all activities of the Company revolve around this business andthe operations are mainly in India. As such there is no other reportable segment as defined by the AccountingStandard 17 – Segment Reporting issued by the Institute of Chartered Accountants of India.

15. Dues to Small Scale & Ancilliary Industries:a) The names of Small Scale and/or Ancillary industrial suppliers to whom amounts are due as at the close of the

year for more than thirty days are M/s Elite Engineering Industries, M/s Trupna Polymers, M/s AssociatedCompany of Engineers, M/s. Avinash Engineering and M/s Raja Body Builders.

b) Sundry Creditors include amount due to small scale and ancillary industries Rs.1.31 millions (Previous YearRs 0.02 millions)

c) This disclosure is based on the information available with the Company.

264 265

SCHEDULE - T

CASH FLOW STATEMENT FOR THE YEAR ENDED 3IST MARCH, 2004.Year ended Year ended

31.3.2004 31.03.2003(Rs. in Millions) (Rs. in Millions)

A. CASH FLOW FROM OPERATING ACTIVITIES :Profit/(Loss) Before Tax 5,745.04 (6,527.73)Adjustments for:- Depreciation 3,781.97 3,737.41- Loss/(profit) on sale of Fixed Assets 12.99 7.67- Provisions Written Back (21.04) (104.51)- Provision for claims relating to earlier years — 834.64- Provision for doubtful recovery / obsolete inventory 3.70 24.09- Miscellaneous Expenditure written off 311.05 311.05- Interest Expense 3,734.17 5,670.74- Interest Income (73.57) (67.19)

Operating Profit before Working Capital changes 13,494.31 3,886.17Adjustments for:- Trade and other receivables (7,004.33) 320.61- Inventories (1,926.06) (1,630.62)- Trade payables and Provisions 5,225.58 (3,074.43)

Cash generated from Operations 9,789.50 (498.27)- Income tax paid (net of refunds) (1.95) (0.07)

Net Cash from Operating Activities (A) 9787.55 (498.34)B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed assets (206.84) (231.16)Sale of Fixed assets 42.69 1.75

Net Cash used in Investing Activities (B) (164.15) (229.41)C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from Issue of Share Capital 21.99 9,674.43Proceeds from Long Term borrowings (5,266.93) (8,288.54)Proceeds from Short Term borrowings 514.77 7,472.12Repayment of Finance Lease Liabilities (397.17) (719.90)Interest and Finance Charges paid (4,329.29) (7,484.88)Interest Income received 73.94 71.18Net Cash used in Financing Activities (C) (9,382.69) 724.41

Net Increase / (Decrease) in Cash and Cash Equivalents (A+B+C) 240.71 (3.34)

Cash and Cash Equivalents as at the beginning of the year 5.97 9.31Cash and Cash Equivalents as at the end of the year 246.68 5.97

240.71 (3.34)

NOTES: 1) Cash and cash equivalents include cash, cheques in hand and balance with scheduled banks and excludes balances in currentaccount/deposit account of interest warrant/refund accounts, under lien, pledge with banks/Govt. authorities Rs. 26.60 millions ;(Previous year Rs. 92.85 millions)

2) The Company has undrawn working capital facilities of Rs 2,469.30 millions (Previous year Rs 2,383.49 millions)3) Previous year’s figures have been re-grouped / re-arranged wherever necessary to conform to the current year’s presentation.

Signatures to Schedules ‘A’ to ‘T’ For and on behalf of the Board

As per our report of even date attached

For VARMA & VARMA SUBIR RAHAChartered Accountants Chairman

V K SHARMAR RAGHUPATHY DirectorPartner L. K. GUPTA

Vice President (Finance) R S SHARMAand Company Secretary DirectorMumbai, 25th May, 2004

l) Consumption of Raw materials, Stores, Spares and Chemicals

2003-04 2002-03

Qty. Value (%) Qty. Value (%)(in M.T.) Rs. in millions (in M.T.) Rs. in millions

Raw materials - Crude Oil

– Imported 7,945,337 80,267.30 76.83 7,256,478 75,840.82 100.00

– Indigenous 2,100,217 24,207.46 23.17 – – –

10,045,554 104,474.76 7,256,478 75,840.82

Stores, Spares and Chemicals

– Imported 95.28 30.49 63.86 25.30

– Indigenous 217.27 69.51 188.56 74.70

312.55 252.42

*Excludes own consumption : 6,21,662 M.T. (Previous year 4,80,356 MT)

17. Previous year’s figures have been re-grouped/re-arranged wherever necessary to conform to the current year’spresentation.

266 267

BALANCE SHEET ABSTRACT AND A COMPANY’S GENERAL BUSINESS PROFILE

I. REGISTRATION DETAILS

Registration No. : 08 /08959/ 1988 State Code : 08 Balance Sheet Date : 31st March, 2004

II. CAPITAL RAISED DURING THE YEAR (AMOUNT IN RS. THOUSANDS)

Public Issue* Right Issue Bonus Issue Private Placement

24 NIL NIL 21,939.27

* represents realisation of allotment/call money in arrears.

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (AMOUNT IN RS. THOUSANDS)


69,551,470 69,551,470

SOURCES OF FUNDS

Paid Up Reserves And Secured Unsecured LeaseCapital Surplus Loans Loans Finance

17,617,989 3,490,530 17,820,890 30,622,061 NIL

APPLICATION OF FUNDS

Net Fixed Investments Net Current Misc. Expenditure Deferred TaxAssets Assets Asset

47,668,080 NIL 9,096,964 610,540 5,904,540

Accumulated Losses

6,271,346

IV. PERFORMANCE OF COMPANY (AMOUNT IN RS. THOUSANDS)

Turnover Total Profit/(Loss) Profit/(Loss)Expenditure Before Tax After Tax

113,906,440 108,161,400 5,745,040 4,594,150

Earnings Per Share Dividend @ %

2.62 NIL

COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIAU/S 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF

MANGALORE REFINERY AND PETROCHEMICALS LIMITED FOR THEYEAR ENDED 31ST MARCH, 2004

I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditors’Report under Section 619(4) of the Companies Act, 1956 on the accounts of Mangalore Refinery and PetrochemicalsLimited for the year ended 31st March, 2004.

BHARAT BHUSHAN PANDITMumbai Principal Director of Commercial Audit &27thJuly, 2004 ex-officio Member, Audit Board - II, Mumbai

268 269

For and on behalf of the Board

SUBIR RAHAChairman

V K SHARMADirector

L. K. GUPTAVice President (Finance) R S SHARMAand Company Secretary Director

Mumbai, 25th May, 2004

V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANY (AS PER MONETARY TERMS)

Item Code No (Itc Code) Product Description

27-10-93 High Speed Diesel Oil


27-10-92 Aviation Turbine Fuel


27-10-99 Fuel Oil

270 271

REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF OIL ANDNATURAL GAS CORPORATION LIMITED ON THE CONSOLIDATED FINANCIALSTATEMENTS OF OIL AND NATURAL GAS CORPORATION LIMITED, ITSSUBSIDIARIES, JOINT VENTURES AND ASSOCIATES

We have examined the attached Consolidated Balance Sheet of Oil and Natural Gas Corporation Limited (“the Company”)its subsidiaries, Joint Ventures and its associates, as at 31st March, 2004 and the Consolidated Profit and Loss Accountand Consolidated Cash Flow Statement for the year then ended and annexed thereto. These financial statements are theresponsibility of the management of the Company. Our responsibility is to express an opinion on these financial statementsbased on our audit.

1. We conducted our audit in accordance with generally accepted accounting standards in India. These Standardsrequire that we plan and perform the audit to obtain reasonable assurance whether the financial statements areprepared, in all material respects, in accordance with an identified financial reporting framework and are free ofmaterial misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statements. We believe that our audit provides areasonable basis for our opinion.

2. We did not audit the financial statements of subsidiaries namely Mangalore Refineries and Petrochemicals Limited,ONGC Videsh Limited and ONGC Nile Ganga BV, whose financial statement reflect total assets of Rs. 1,92,118.81million as at 31st March, 2004 and total revenues of Rs. 1,56,987.75 million and net cash flows of Rs. 4,645.45million for the year ended on that date. These financial statements have been audited by other auditors whose reportshave been furnished to us, and our opinion, in so far as it relates to the amounts included in respect of subsidiaries,is based solely on the report of the other auditors.

3. We did not audit the financial statements of associates namely Pawan Hans Helicopters Limited and ONGIOInternational Private Limited. These financial statements have been audited by other auditors whose reports orcertificates have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect ofthese associates, is based solely on the reports of the other auditors.

4. We did not audit the financial statements of Joint Ventures, whose financial statements reflect total assets ofRs. 70,069.55 million, total liabilities of Rs. 13,015.16 million as at 31st March, 2004 and total revenues ofRs. 35,893.86 million, total expenditure of Rs. 18,892.77 million for the year ending on that date. These financialstatements have been audited by other auditors or are certified by management whose reports or certificates havebeen furnished to us, and our opinion, insofar as it relates to the amounts included in respect of these associates, isbased solely on the reports of the other auditors or certificates of management as the case may be.

5. We report that the consolidated financial statements have been prepared by the Company’s management in accordancewith the requirements of Accounting Standard (AS) 21, viz., Consolidated Financial Statements, Accounting Standard(AS) 23, viz., Accounting for Investment in Associates in Consolidated Financial Statements, and Accounting Standard(AS) 27, viz., Financial Reporting of interests in Joint Ventures, issued by the Institute of Chartered Accountants ofIndia.

6. We further report that :

Categorisation of wells as exploratory and producing, allocation of cost incurred on them, depletion of producingproperties on the basis of the proved developed hydrocarbon reserves, provision for abandonment costs and impairment,allocation of depreciation on process platforms to transportation and facilities, projects in progress are made accordingto evaluation by the management, technical and/or otherwise on which we have placed reliance.

7. Attention is invited to the following notes:

7.1 The financial statements include unaudited figures relating to joint venture projects and NELP blocks as under:

i. total assets of Rs. 42,974.11 million and total liabilities of Rs. 5,105.09 million and

ii. total revenues of Rs. 12,338.54 million and total expenditure of Rs. 6,313.17 million.

272 273

OIL AND NATURAL GAS CORPORATION LIMITEDCONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH, 2004 (Rupees in million)

Schedule As at As at31st March, 31st March,

2004 2003SOURCES OF FUNDSSHAREHOLDERS’ FUNDSShare Capital 1 14,259.27 14,259.27Reserves and Surplus 2 399,158.09 344,432.74

413,417.36 358,692.01

MINORITY INTEREST 4,274.50 5,028.82LOAN FUNDSSecured Loans 3 19,100.94 44,310.42Unsecured Loans 4 43,433.80 62,534.74 17,317.33LEASE FINANCE 0.00 397.17DEFERRED TAX LIABILITY (NET) 54,249.75 47,115.79LIABILITY FOR ABANDONMENT COST 80,292.03 0.00

TOTAL 614,768.38 472,861.54

APPLICATION OF FUNDSGOODWILL ON CONSOLIDATION 14,591.08 12,790.44FIXED ASSETS 5Gross Block 496,759.46 475,764.98Less: Depreciation 379,710.51 355,832.87

NET BLOCK 117,048.95 119,932.11

PRODUCING PROPERTIES 6Gross Cost 481,962.30 373,455.24Less: Depletion 235,254.10 182,962.13

NET PRODUCING PROPERTIES 246,708.20 190,493.11CAPITAL WORKS-IN-PROGRESS 7 13,519.55 9,338.06EXPLORATORY/DEVELOPMENT WELLS& PROJECTS-IN-PROGRESS 8 45,401.99 34,640.62INVESTMENTS 9 30,307.27 30,603.05CURRENT ASSETS, LOANS AND ADVANCESInterest Accrued 10 5,499.16 3,845.59Inventories 11 35,528.79 25,634.70Sundry Debtors 12 29,310.50 42,842.59Cash and Bank Balances 13A 64,563.76 40,034.73Deposit with Bank Under Site Restoration Fund Scheme 13B 31,681.97 24,780.97Loans and Advances 14 55,236.17 36,427.05Other Current Assets 15 99.83 183.62

221,920.18 173,749.25

LESS: CURRENT LIABILITIES AND PROVISIONSCurrent Liabilities 16 55,568.68 45,391.04Provisions 17 25,180.09 55,597.73

80,748.77 100,988.77

NET CURRENT ASSETS 141,171.41 72,760.48MISCELLANEOUS EXPENDITURE 18 6,019.93 2,303.67(To the extent not written off or adjusted)TOTAL 614,768.38 472,861.54SIGNIFICANT ACCOUNTING POLICIES 29NOTES TO THE ACCOUNTS 30

Schedules referred to above form an integral part of the AccountsH.C. Shah R.S. Sharma Subir RahaCompany Secretary Director(Finance) Chairman & Managing DirectorIn terms of our report of even date attachedFor Thakur, Vaidyanath Aiyar & Co. For S. Bhandari & Co. For RSM & CoChartered Accountants Chartered Accountants Chartered AccountantsV. Rajaraman P.D. Baid Vijay N. BhattPartner Partner PartnerFor Brahmayya & Co. For Lodha & Co.Chartered Accountants Chartered AccountantsV. Seetaramaiah H.K. VermaPartner Partner


7.2 Note ‘11’ regarding accounts pending reconciliation. We are unable to comment on the adjustments/ provisions,if any, required to be made in this respect.

7.3 Note ‘3.3’ regarding incorporation of figures of associate, viz., Pawan Hans Helicopters Ltd. (PHHL) on the basisof audited accounts upto 31st March, 2003 and pending adjustments for the changes on the basis of thefinancials of PHHL as at 31st March, 2004.

8. Subject to our comments in paragraph 7 above, with consequential aggregate effects the quantification of whichcould not be determined on the profit for the year, reserves and surplus and net assets as at Balance Sheet date, wereport that:

On the basis of the information and explanations given to us and on the consideration of separate audit reports onindividual audited financial statements of the Company, its subsidiaries, joint ventures and associate companies, weare of opinion that the said consolidated financial statements give a true and fair view in conformity with the accountingprinciples generally accepted in India:

(a) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Company as at 31stMarch, 2004;

(b) in the case of the Consolidated Profit and Loss Account, of the consolidated results of operations of theCompany for the year ended on that date and

(c) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Company for theyear ended on that date.


V. Rajaraman P.D. Baid Vijay N. BhattPartner (Mem. No. 2705) Partner (Mem. No. 72625) Partner (Mem.No.36647)


V.Seetaramaiah H.K. VermaPartner (Mem. No.003848) Partner (Mem. No. 55104)


274 275

(Rupees in million)


2004 2003


SCHEDULE-1

SHARE CAPITAL

Authorised:15000,000,000 Equity Shares of Rs. 10 each 150,000.00 150,000.00

Issued and Subscribed:1425,933,992 Equity Shares of Rs. 10 each 14,259.34 14,259.34

Paid up :1425,933,992 Equity Shares of Rs. 10 each 14,259.34 14,259.34Less : Calls in Arrears 0.07 0.07

(Other than Directors) 14,259.27 14,259.27

TOTAL 14,259.27 14,259.27

Note : The above includes:

(i) 342,853,716 Equity Shares issued as fully paid up to the President of India without payment being received in cashin terms of Oil and Natural Gas Commission (Transfer of Undertaking and Repeal) Act,1993.

(ii) 1,076,440,366 Equity Shares issued as fully paid up by way of bonus shares by capitalisation of General Reserve.

OIL AND NATURAL GAS CORPORATION LIMITEDCONSOLIDATED FINANCIAL STATEMENTS

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2004(Rupees in million)

Schedule 2003-2004 2002-2003

INCOMESales 19 453,143.59 349,449.72Less : Excise Duty 16,695.72 4,674.40Net Sales 436,447.87 344,775.32Pipeline Transportation 20 23.61 477.57Other Income 21 22,410.38 20,397.15

458,881.86 365,650.04Increase/(decrease) in stocks 22 1,383.47 (1,115.29)

460,265.33 364,534.75EXPENDITUREProduction, Transportation, Sellingand Distribution Expenditure 23 240,523.18 139,325.76Recouped Costs 24 65,524.99 41,514.22Financing Costs 25 3,822.40 1,681.48Provisions and Write-offs (Net) 26 1,343.37 22,209.54

311,213.94 204,731.00Profit before Tax and Prior Period Adjustments 149,051.39 159,803.75Adjustments relating to Prior Period (Net) 27 290.71 (404.41)Provision for Taxation- Current Tax (including Wealth Tax Rs. 16.25 million 46,242.48 58,983.05

Previous Year Rs. 15.01 million)- For Earlier years (141.55) (1,791.02)- Deferred Tax 7,778.81 (1,407.17)Profit after Taxation 94,880.94 104,423.30Add: Share of Profit/(Loss) in Associates for the year (4.76) (7.75)Add: Share of Profit/(Loss) in Associates for earlier years 160.91 0.00Less: Share of Profit/(Loss)- Minority Interest 1,234.48 (259.04)Group Profit after Tax 93,802.61 104,674.59Surplus at the beginning 0.40 57.90BALANCE AVAILABLE FOR APPROPRIATION 93,803.01 104,732.49APPROPRIATIONSProposed Dividend 14,259.34 18,537.14Tax on Proposed Dividend 1,826.98 2,375.07Interim Dividend 19,963.08 24,240.88Tax on Interim Dividend 2,557.77 0.00Transfer to General Reserve 55,195.00 59,579.00Balance carried to Balance Sheet 0.84 0.40

93,803.01 104,732.49EARNINGS PER EQUITY SHARE 28(Face Value Rs. 10/-Per Share)Basic & Diluted (Amount in Rs.) 65.78 73.41SIGNIFICANT ACCOUNTING POLICIES 29NOTES TO THE ACCOUNTS 30

Schedules referred to above form an integral part of the AccountsH. C. Shah R.S. Sharma Subir RahaCompany Secretary Director(Finance) Chairman & Managing DirectorIn terms of our report of even date attached






276 277

(Rupees in million)


2004 2003


SCHEDULE-3

SECURED LOANS

(a) 16% Debentures of Rs.40 each 0.00 979.55(b) Foreign Currency Term Loans

- From Banks 5,757.81 7,313.05(c) RupeeTerm Loans

- From Banks 1,771.83 8,749.65- From Financial Institutions 725.30 15,208.40- From Others 261.25 2,758.38 0.00 23,958.05

(d) Suppliers’ Deferred Payment Credit - Foreign Currency 2,323.04 3,044.84(e) Working Capital facilities

- From BanksRupee Loans 0.00 3,216.51Foreign Currency Loans 8,261.71 8,261.71 5,798.42 9,014.93

TOTAL 19,100.94 44,310.42

Note:Includes Rs. 1280.05 million share of jointly controlled entity.

(Rupees in million)


2004 2003


SCHEDULE-2

RESERVES AND SURPLUSCapital Reserve*

a) Opening Balance 1,485.30 1,428.27b) Addition during the year 0.00 57.03c) Deduction during the year 1,151.78 0.00

333.52 1,485.30Deferred Government Grant

a) Opening Balance 37.82 10.11b) Addition during the year 13.62 42.21c) Deduction during the year** 9.47 14.50

41.97 37.82Share Premium Account***

a) Opening Balance 1,724.50 1,724.50b) Addition during the year 144.40 0.00

1,868.90 1,724.50

Premium on Foreign Currency Bonds 168.12 168.12(As per last year Balance Sheet)

Insurance Reserve 2,500.00 2,500.00(As per last year Balance Sheet)

General Reservea) Opening Balance 338,516.60 278,400.25b) Add: Adjustment based on audited accounts of subsidiary 533.14 0.00c) Add: Adjustment for Deferred Tax Asset 0.00 122.66d) Add : Share of Profit - Associates 0.00 379.19e) Add : Provision not required on consolidation 0.00 35.50f) Transferred from Profit and Loss Account 55,195.00 59,579.00

394,244.74 338,516.60

Profit and Loss Account 0.84 0.40

TOTAL 399,158.09 344,432.74

Includes Rs. 144.33 million share of jointly controlled entity.*Represents assessed value of assets received as gift.**Represents the amount equivalent to Depreciation for the year transferred to Profit and Loss Account.***Share premium account is credited only on receipt basis .

278 279

(Rupees in million)


2004 2003


SCHEDULE-4

UNSECURED LOANS

(a) Long Term

- From Oil Industry Development Board 1,061.70 1,359.75Foreign Currency Loans:

- From Foreign Banks/Financial Institutions 7,121.89 1,171.49- From Scheduled Banks 0.00 2,871.91- Sales Tax Deferment Loan 479.44 4,369.63- From others 1,308.94 1,444.54

(b) Short Term- Term Loans From Banks 26,443.56 0.00

(c) Others- Bodies Corporate 0.00 1,724.63- Cash Credit- From a Bank 7,018.27 4,375.38

TOTAL 43,433.80 17,317.33

Long term includes Repayable within one year 9,319.19 3,170.04

Note: Includes Rs. 293.56 million share of jointly controlled entity.

NOTES TO SCHEDULE-3

1. A) Foreign Currency Term Loan from a bank of Rs. 4717.24 million (previous year Rs. 5940.29 million) is securedby the letter of comfort/guarantees issued by the local bank in favour of overseas lending branch. These lettersof comfort/guarantees are secured by equitable mortgage/hypothecation of MRPL’s immovable and movableproperties (save and except book debts) both present and future.

B) Foreign Currency Term Loan from a bank of Rs. 1040.57 million (previous year Rs. 1372.76 million) is securedby equitable mortgage/hypothecation of MRPL’s immovable and movable properties (save and except bookdebts) both present and future.

2. A) Rupee Term Loans as referred in (c) from Banks of Rs. 753.03 million (previous year Rs. 8749.65 million), andfrom Financial Institutions of Rs. 725.30 million (previous year Rs. 15208.40 million) along with all interest, costcharges, expenses and other monies whatsoever payable to Lenders are secured/to be secured by:

i) Equitable mortgage over the immovable properties of MRPL, both present & future;

ii) Hypothecation over the present and future movable properties of MRPL.

B) In respect of jointly controlled entity-Rs. 1280.05 million

i) Secured by way of hypothecation of all the movable properties, both present and future ranking pari-passu withall the lenders.

ii) An irrevocable and un-conditional joint and equal proportion guarantee by the Company, BPCL,GAIL and IOCL.

3. Supplier’s Deferred Payment Credit - Foreign Currency is guaranteed by the consortium of Banks/Financial Institutions.These guarantees are secured/to be secured by equitable mortgage/hypothecation of MRPL’s immovable and movableproperties (save and except book debts) both present and future.

4.1 Working Capital Facilities from banks - Rupee Loans are secured by way of hypothecation of MRPL’s stocks of rawmaterials, finished goods, stock-in-process, stores, spares, components, book debts, outstanding moneys receivable,claim, bills, contracts, engagements, securities, both present and future and further secured/to be secured byresidual charge on MRPL’s immovable and movable properties (save and except Current Assets) both present andfuture, ranking pari-passu inter se.

4.2 Working Capital Facilities from banks - Foreign Currency Loans are backed/earmarked by Non Fund Based Limits(i.e. Letter of Credit) extended by Banks. These Letter of Credit/Non fund based limits are secured/to be secured byway of hypothecation of MRPL’s stocks of raw materials, finished goods, stock-in-process, stores, spares, components,book debts, outstanding money receivable, claim, bills, contracts, engagements, securities, both present and futureranking pari-passu with the other Working Capital Facilities.

5. Charges created/to be created in favour of lenders as referred to in note 1, 2 & 3 shall rank pari-passu inter se andare subject to the charge(s) created/to be created by MRPL in favour of its bankers on its stock of raw materials,semi-finished goods, consumable stores and book debts and such other movables as may be specifically permittedto secure its working capital requirements in the ordinary course of business.

280 281

(Rupees in million)


2004 2003


SCHEDULE-6

PRODUCING PROPERTIESGrossOpening Balance 373,455.24 326,697.73Expenditure during the year 11,264.49 22,175.06Transfer from Exploratory Wells-in-Progress 1,547.90 7,555.93Transfer from Development Wells-in-Progress 16,990.76 0.00Estimated Abandonment costs 80,292.03 0.00Transfer to Development Wells-in-Progress (1,560.10) 0.00Other Adjustments (28.02) 17,026.52

Total (Gross) 481,962.30 373,455.24

Less: DepletionOpening Balance 182,962.13 159,785.16Depletion for the Year 25,747.77 17,637.39Provision for Abandonment (transfer from Schedule-17) 25,664.72 0.00Written off due to Change in Accounting Policy 892.75 0.00Other Adjustments (13.27) 5,539.58

Total Depletion 235,254.10 182,962.13

NET PRODUCING PROPERTIES 246,708.20 190,493.11

SCHEDULE-7

CAPITAL WORKS-IN-PROGRESSBuildings 689.63 321.70Plant and Machinery 8,592.07 8,397.03Others 308.20 0.00Advances for Capital Works and Progress Payments 3,605.73 619.33Pre-operative Expenditure pending allocation in respect 323.92 0.00of jointly controlled entity

TOTAL 13,519.55 9,338.06



SCHEDULE-5

FIXED ASSETS

(Rupees in million)

GROSS BLOCK D E P R E C I A T I O N NET BLOCK

As at Additions Deletions/ As at Upto For the Deletions/ Upto As at As atPARTICULARS 1st April, during the adjustments 31st 31st year Adjustments 31st 31st 31st

2003 year during the March, March, during the March, March, March,year 2004 2003 year 2004 2004 2003

Land

i) Freehold 1,093.27 80.65 34.42 1,139.50 0.00 0.00 0.00 0.00 1,139.50 1,093.27

ii) Leasehold 1,044.91 44.48 0.00 1,089.39 155.01 13.16 0.00 168.17 921.22 889.90

Buildings and Bunk Houses 11,652.15 336.03 5.79 11,982.39 4,881.27 378.90 6.65 5,253.52 6,728.87 6,770.88

Railway Sidings 89.95 0.00 0.00 89.95 70.56 2.70 0.00 73.26 16.69 19.39

Plant and Machinery

i) Owned 450,083.90 21,330.92 1,074.36 470,340.46 342,926.05 23,694.42 583.37 366,037.10 104,303.36 107,157.85

ii) Taken on Lease 4,259.62 0.00 101.16 4,158.46 1,604.24 219.57 38.10 1,785.71 2,372.75 2,655.38

Furniture and Fittings 3,213.85 396.91 56.27 3,554.49 2,223.30 235.19 51.29 2,407.20 1,147.29 990.55

Vehicles, Survey Ships,Crew Boats, Aircraftsand Helicopters 4,327.33 159.36 81.87 4,404.82 3,972.44 90.69 77.58 3,985.55 419.27 354.89

TOTAL 475,764.98 22,348.35 1,353.87 496,759.46 355,832.87 24,634.63 756.99 379,710.51 117,048.95 119,932.11

Previous year 373,655.54 102,906.62 797.18 475,764.98 317,642.95 38,963.36 773.44 355,832.87 119,932.11

The above includes the 20,907.75 919.66 197.96 21,629.45 12,366.01 3,113.15 98.96 15,380.20 6,249.25Corporation’s share inJoint Venture Assets

Previous year 13,472.36 2,092.28 5.92 15,558.72 10,719.18 820.11 4.78 11,534.51 4,024.21

Notes:

1. Additions to Plant and Machinery are net of Rs. 304.62 million on account of net exchange gain during the year(Previous year Rs.254.40 million on account of exchange loss).

2. Leasehold land includes land in respect of a certain projects for which execution of lease deed is pending.

3. Registration of title deeds in respect of certain Buildings is pending execution.

4. Plant & Machinery-owned includes an amount of Rs. 782.98 million (Previous year Rs.782.98 million) being MRPLshare of an asset owned together with another company.

5. Net Fixed Assets include Rs. 12.31 million share of jointly controlled entity.

282 283

(Rupees in million)

No. of Face Value As at As atShares/ per Share/ 31st March, 31st March,

Bonds/Units Bond/Unit 2004 2003(in Rupees)


SCHEDULE-9

INVESTMENTSLONG-TERM INVESTMENTS (FULLY PAID UP)

A. TRADE INVESTMENTS

1 Equity Shares (Unquoted)

Investment in Associates

i) Pawan Hans Helicopter Limited 24,500 10,000 728.84 626.73

ii) ONGIO International Private Ltd. 1,505,000 10 0.00 4.76

Investment in Others

i) Oil Spill Response Ltd. 100 * 0.01 0.01

2 Equity Shares (Quoted)

i) Indian Oil Corporation Limited 106,453,095 10 13,720.49 13,720.49(70,968,730)

ii) GAIL (India) Limited 40,839,549 10 2,451.06 2,451.06

3 Oil Companies Govt. of India Special Bonds (Unquoted)

i) 10.5% Government of India Special Bonds 2005 1 3,850,000,000 3,850.00 3,850.00

ii) 6.96% Government of India transferable Special Bonds 2009 698,037 10,000 6,980.37 9,610.00(961,000)

iii) 5% Oil companies’ Government of India Special Bonds 2009 257,600 10,000 2,576.00 0.00

TOTAL TRADE INVESTMENTS 30,306.77 30,263.05

B. NON-TRADE INVESTMENTS (Unquoted)

1 12% UP State Development Loan-2011 1 500,000 0.50 0.50

2 9% Tax free bonds ICICI Ltd. 0 10,000 0.00 339.50(33,950)

0.50 340.00

GRAND TOTAL 30,307.27 30,603.05

Total Quoted Investments 16,171.55 16,172.05Total Unquoted Investments 14,135.72 14,431.00

30,307.27 30,603.05

Total Market value of Quoted Investments 61,518.36 19,630.08

* Pound one each, total value Rs. 6,885/-Figures in the ( ) relate to previous year.

(Rupees in million)


2004 2003


SCHEDULE-8

EXPLORATORY/DEVELOPMENT WELLS &PROJECTS-IN-PROGRESSA) EXPLORATORY WELLS-IN-PROGRESS

Gross



Less : Sale proceeds of Oil and Gas 1.42 17,926.16 13.78 13,391.75

(Refer Schedule-19)

Dry wells written back 22.00 900.29

28,679.10 24,066.69

Less :

Transfer to Producing Properties 1,547.90 2,789.94

Wells written off during the year 17,386.39 10,375.71

Other adjustments 9.89 170.10

18,944.18 13,335.75

Sub Total 9,734.92 10,730.94

B) DEVELOPMENT WELLS-IN-PROGRESS

Opening Balance Transfer from Producing Properties 1,560.10 0.00

Expenditure during the year 20,536.20 0.00

Transfer to Producing Properties (16,990.76) 0.00

Sub Total 5,105.54 0.00

C) EXPENDITURE ON PROJECTS-IN-PROGRESS

Sakhalin-1 Project, Russia Federation 30,186.24 23,782.32

Block-8 Project, Iraq 0.00 49.32


Farsi Block, Iran 0.00 4.57Libya 351.02 0.00

Syria 19.81 0.00

Sudan 4.46 0.00

Sub Total 30,561.53 23,909.68

EXPLORATORY/DEVELOPMENT WELLS &PROJECTS-IN-PROGRESS (A+B+C) 45,401.99 34,640.62

284 285

(Rupees in million)


2004 2003


SCHEDULE-12

SUNDRY DEBTORSDebts - Outstanding for a periodexceeding six months :

- Considered Good 2,191.30 2,222.83- Considered Doubtful 1,101.99 647.31

Other debts :- Considered Good 27,119.20 40,619.76- Considered Doubtful 20.45 10.29

30,432.94 43,500.19

Less: Provision for Doubtful Debts 1,122.44 657.60

TOTAL 29,310.50 42,842.59


(Rupees in million)


2004 2003


SCHEDULE-10

INTEREST ACCRUED


Interest Accrued On

- Investments 36.94 42.55

- Deposits with Banks/Financial Institutions 2,438.68 1,168.57

- Others



3,282.66 2,893.59

Less : Provision 259.12 259.12

TOTAL 5,499.16 3,845.59


SCHEDULE-11

INVENTORIES

(As verified and valued by the Management)Stores and spare parts

-on hand 15,007.63 11,387.33-in transit (including inter-project transfers) 7,142.76 2,647.02

Capital Stores-on hand 718.50 1,169.18-in transit 821.41 65.10

Finished Goods 6,414.71 5,865.16Raw Material

-on hand 3,548.11 2,530.96-in transit 912.78 958.72

Stock in Process 808.38 903.00Unserviceable scrap 154.51 108.23

TOTAL 35,528.79 25,634.70


286 287

(Rupees in million)


2004 2003


SCHEDULE-14

LOANS AND ADVANCES

Loans to Public Sector Undertakings 763.94 747.06

Advance for Petronet MHB Limited-Shares 383.41 0.00

Loans and Advances to Employees 7,737.00 8,140.66

Advances Recoverable in Cash or

in Kind or for Value to be received 14,004.36 8,517.88

Recoverable from Petroleum Planning & Analysis cell 8,344.55 7,757.23

Carry Finance to SMNG-S & RN-ASTRA,Russian Federation 16,956.52 8,567.60

Insurance Claims 965.59 1,097.67

Deposits:a) With Customs/Port Trusts etc. 631.64 221.09

b) Others 2,548.79 1,315.88

52,335.80 36,365.07

Less : Provision for Doubtful Claims/advances 3,649.23 3,451.75

48,686.57 32,913.32

Income Tax :

Advance payment of Income Tax 142,534.79 177,555.28

Less: Provision 135,985.19 6,549.60 174,041.55 3,513.73

(Including provision for Wealth Tax Rs. 33.53 million

Previous year Rs.37.29 million)

TOTAL 55,236.17 36,427.05

Particulars of loans and advances:

Secured 7,049.16 7,225.97

Unsecured - Considered Good 48,187.01 29,201.08

- Considered Doubtful 3,649.23 3,451.75

58,885.40 39,878.80

Less : Considered Doubtful and provided for 3,649.23 3,451.75

TOTAL 55,236.17 36,427.05

Notes:1. Includes Rs. 20.28 million share of jointly controlled entity.2. Loans to employees include an amount of Rs. 0.73 million(Previous year Rs. 0.39 million) outstanding from

whole time Directors. Maximum amount outstanding during the year Rs. 0.82 million (Previous year Rs. 0.45 million).


SCHEDULE-13A) CASH AND BANK BALANCESCash balance on Hand* 45.00 24.70Remittances in Transit 0.00 40.00Balances with Scheduled Banks in:Current Account 357.50 741.46Deposit Accounts towards margin money against guarantees issued 0.43 0.12Deposit Accounts** 58,789.05 37,483.51Balances with Non-Scheduled Banks in:Current Accounts with J.P Morgan Chase 0.02 86.60(Maximum balance during the year Rs. 86.60million previous year Rs.86.60 million.)Current Accounts with Commerz Bank - Frankfurt 2.76 2.63(Maximum balance during the year Rs. 2.76 millionprevious year Rs. 2.63 million.)SB Dollar Account with Bank for Foreign Trade ofVietnam,HCMC Vietnam 0.02 0.02(Maximum balance during the year Rs 0.03 million.Previous year Rs 0.02 million)SB VND Account with Bank for Foreign Trade of Vietnam,HCMC Vietnam 0.03 0.02(Maximum balance during the year Rs.612.83 million.Previous year Rs 0.02 million)Current Accounts (USD), CITI Bank, HCMC, Vietnam 0.01 2.58(Maximum balance during the year Rs. 4.33 millionPrevious year Rs. 3.23 million)Current Accounts (VND), CITI Bank, HCMC, Vietnam 0.09 0.00(Maximum balance during the year Rs. 10.41 millionPrevious year Nil)Current Account with Bank of Moscow, Sakhalin 0.14 0.11(Maximum balance during the year 0.47 million,Previous year Rs.0.43 million)Mashreq Bank, Khartoum, Sudan 1.90 12.34(Maximum balance during the year Rs.16.69 millionPrevious year Rs. 17.74 million)Mashreq Bank (Sudanees Dinar Account), Khartoum, Sudan 1.13 4.03(Maximum balance during the year Rs. 4.05 millionPrevious year Rs. 4.03 million)Deutche Bank AG(Multi currency), Amsterdam 1.10 0.22(Maximum balance during the year Rs. 1.88 millionPrevious year Rs.0.22 million)Deutche Bank AG, Amsterdam 0.04 0.04(Maximum balance during the year Rs. 0.05 millionPrevious year Rs.0.04 million)Deutche Bank AG(GBP), Amsterdam 11.00 8.16(Maximum balance during the year Rs. 728.85 millionPrevious year Rs.21.74 million)Deposit Account, Deutche Bank AG, Amsterdam 4,189.03 916.10(Maximum balance during the year Rs. 4222.48 millionPrevious year Rs. 916.10 million)ICICU Bank London- GBP 15.11 0.00(Maximum balance during the year Rs. 15.11 millionPrevious year Nil)Mashreq Bank, London- GBP 8.08 0.00(Maximum balance during the year Rs. 8.08 millionPrevious year Nil)Bank Balances (With Project Operators) 1,141.32 712.09Total 64,563.76 40,034.73

B) DEPOSIT WITH BANK UNDER SITE RESTORATION FUND SCHEME*** 31,681.97 24,780.97Note:Includes Rs. 533.13 million share of jointly controlled entity.*Includes Cheques in hand Rs. 26.46 million (Previous year Rs. 5.28 million).**Includes Rs. 18.40 million (Previous year Rs. 18.40 million) under lien/pledge with Banks/customs authorities. Also includes Rs. 478.75 millionunutilised out of share issue proceeds in respect of jointly controlled entity.***Deposited u/s 33ABA of the Income Tax Act, 1961 and could be withdrawn only for the purposes specified in the Scheme.

(Rupees in million)


2004 2003

288 289

(Rupees in million)


2004 2003

Schedule to the Consolidated Balance SheetSCHEDULE-17PROVISIONSGratuity 541.69 836.91Leave Encashment 2,868.80 2,501.71Provision for Abandonment * 25,664.72Provision for Impairment 3,432.11 3,270.40Provision against Non-Moving Inventories and Others 2,251.17 2,411.78Proposed Dividend 14,259.34 18,537.14Tax on Proposed Dividend 1,826.98 2,375.07

TOTAL 25,180.09 55,597.73* Since transferred to Depletion (Schedule-6)Note:Includes Rs. 0.28 million share of jointly controlled entity.

SCHEDULE-18MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)Dry Docking Charges 2,310.60 1,194.32Extended Trial Run Expenditure 610.54 915.81Projects Expenditure 0.00 74.41Preliminary Expenses 1.01 0.00Other Expenditure 3,097.78 119.13

TOTAL 6,019.93 2,303.67Note:Includes Rs. 2.61 million share of jointly controlled entity.

2003-04 2002-03


SCHEDULE-19SALESSales 454,083.47 352,182.61Less :Transfer to Exploratory Wells in Progress 1.42 13.78(Refer Schedule-8)Government of India’s share in Profit Petroleum4,403.74 4,405.16 4,286.92 4,300.70

449,678.31 347,881.91

Adventitious Gain 4.63 0.00Price Revision Arrears 3,460.65 1,567.81

TOTAL 453,143.59 349,449.72

(Rupees in million)


2004 2003


SCHEDULE -15

OTHER CURRENT ASSETS


Repair Jobs-in-progress-at Cost 72.94 164.21

Other Accounts

-Considered Good 26.89 19.41

-Considered Doubtful 942.33 1,027.50

969.22 1,046.91Less: Provision for Doubtful Accounts 942.33 1,027.50

26.89 19.41

TOTAL 99.83 183.62

SCHEDULE-16

CURRENT LIABILITIESSundry Creditors for Supplies / Works :- Small Scale Industries 9.11 4.90- Other than Small Scale Industries 31,377.47 14,258.09Liability for Royalty/Cess/Sales tax etc. 5,697.59 9,289.20On Account Payments from PPAC 100.69 100.69Investor Education and Protection Fund:- Securities application money due for refund 0.00 27.31- Unpaid Matured debentures 171.93 0.00- Unclaimed Interest on debentures 92.25 264.18 52.81 80.12Deposits 3,611.01 2,355.70Deferred Credit on Vietnam gas Sales 981.70 0.00Accounts Payable-Sudan 1,575.37 0.00Withholding tax on Dividend Payable 325.89 0.00Other Liabilities 11,166.28 18,391.70Unclaimed Dividend* 47.74 50.10Interest Accrued but not due on loans 411.65 860.54

TOTAL 55,568.68 45,391.04

*This does not include any amount due for Payment to Investor Education and Protection Fund


290 291

(Rupees in million)

2003-04 2002-03


SCHEDULE-22

INCREASE/(DECREASE) IN STOCKS

Closing StockStock in Process 808.38 903.00Finished Products 6,414.71 7,223.09 4,936.62 5,839.62Opening StockStock in Process 903.00 906.76Finished Products 4,936.62 5,839.62 6,048.15 6,954.91

NET INCREASE/(DECREASE) IN STOCK 1,383.47 (1,115.29)

SCHEDULE-23

PRODUCTION, TRANSPORTATION, SELLINGAND DISTRIBUTION EXPENDITURE

Royalty 44,749.34 30,762.28Cess 41,938.08 42,090.32Sales Tax 12,259.36 12,572.20Natural Calamity Contingent Duty 1,116.68 98.17Excise Duty 13.58 291.80Value Added Tax (VAT) 235.17 0.00Octroi and Port Trust Charges 2,233.85 2,687.55Staff Expenditure 9,914.18 9,876.91Workover Operations 8,742.68 6,041.93Water Injection, Desalting and Demulsification 2,073.28 2,035.74Consumption of Stores and Spares & etc. 1,596.80 1,846.84Raw Material Consumed 73,954.92 173.32Pollution Control 3,703.32 2,750.70Transport Expenses 2,071.33 1,668.95Insurance 1,524.74 1,209.59Power and Fuel 1,341.34 1,220.67Repairs and Maintenance 3,936.30 1,995.54Contractual payments including Hire charges etc. 3,184.11 2,348.55Other Production Expenditure 4,814.00 2,703.47Transportation and Freight 6,095.08 5,499.52Research and Development 794.83 854.68Other Expenditure including Overheads 14,230.21 10,597.03

TOTAL 240,523.18 139,325.76

Note: The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act, 1956and exhibited in note 23(i) of Schedule 30.

(Rupees in million)

2003-04 2002-03


SCHEDULE-20

PIPELINE TRANSPORTATIONPipeline Transportation 23.61 23.89Price Revision Arrears 0.00 453.68

TOTAL 23.61 477.57

SCHEDULE-21

OTHER INCOMEContractual Short Lifted Gas Receipts 42.91 54.70Reimbursement from Govt. of India towards :Pour Point Depressant (PPD) Charges 0.00 1,822.76Recovery of Production Cost etc. 0.00 182.76

0.00 2,005.52Other Contractual Receipts 1,192.74 1,149.41Export Benefits under duty free entitlement scheme 2,411.64 0.00Difference on payment of Sales Tax deferral loan 2,556.85 0.00Gain on transfer of participating interest in Vietnam Project inthe earlier years 1,151.78 0.00Income from Trade Investments :Dividend on Long term Investments (Tax deducted at sourceRs. Nil Previous year Rs. 171.54 million) 2,513.23 1,537.96Interest on Long Term Investments 964.89 0.00Profit on sale of Investment 194.60 0.00

3,672.72 1,537.96Income from Non Trade Investments :Long Term Investments 23.42 1,103.72Interest Income on :Deposits with Banks\Financial Institutions 4,610.41 6,020.25(Tax deducted at source Rs. 531.26 million Previous yearRs. 1074.31 million)Loans and Advances to Employees 462.58 439.74Income Tax Refund 772.03 3,604.89Site Restoration Fund Deposit 1,301.00 431.07Others 713.81 427.42

7,859.83 10,923.37Excess Provisions written back 477.26 335.78Liabilities no longer required written back 686.01 71.20Miscellaneous Receipts 2,335.22 3,215.49

TOTAL 22,410.38 20,397.15

292 293

(Rupees in million)

2003-04 2002-03


SCHEDULE-26

PROVISIONS AND WRITE-OFFSPROVISIONS

Provision for Doubtful Debts 474.90 138.32Provision for Doubtful Claims/Advances 306.30 2,597.77Provision for Abandonment * 19,125.81Provision for Impairment 161.71 161.98Provision against Non-Moving Inventories & Others 148.79 70.03

Sub-Total 1,091.70 22,093.91

WRITE-OFFSLoss on Disposal/Condemnation of Fixed Assets (Net) 98.17 25.08Claims / Advances Written Off 7.16 10.66Inventories Written Off 128.29 74.10Bad debts Written Off 0.33 0.00Other Write offs 17.72 5.79

Sub-Total 251.67 115.63

TOTAL 1,343.37 22,209.54

* This is included in Depletion (refer Note No. 4(i) of Schedule 30).

SCHEDULE-27

ADJUSTMENTS RELATING TO PRIOR PERIOD (NET)Statutory levies* (27.97) 0.19Other Production Expenditure* 215.45 (134.31)Interest -Others 6.86 (0.03)Exchange Fluctuation 16.88 (143.02)Depletion 109.62 0.00Depreciation 0.38 5.28

Total Debit 321.22 (271.89)

Sales (144.50) 0.00Interest -Others 1.47 117.63Other Income 173.54 14.89

Total Credit 30.51 132.52

Net Debit/(Credit) 290.71 (404.41)

*The above expenses have been reclassified in accordance with Part II of Schedule VI to the Companies Act, 1956 andexhibited in note 23(i) of Schedule 30.

(Rupees in million)

2003-04 2002-03


SCHEDULE-24

RECOUPED COSTSSurvey 10,100.90 6,707.23Project Expenditure Written off 1,663.71 48.47Dry Wells

During the year 17,386.39 10,375.71Less: Written back 22.00 17,364.39 900.29 9,475.42

Depletion 25,638.15 17,637.39Depreciation * 24,632.47 20,424.56

Less : Allocated to :Survey 762.07 712.05Exploratory Drilling 1,564.08 2,424.86Development 11,522.89 9,586.56Others * 25.59 55.38

13,874.63 10,757.84 12,778.85 7,645.71

TOTAL 65,524.99 41,514.22

* Includes Rs. 0.66 million share of jointly controlled entity.

SCHEDULE-25

FINANCING COSTSA. INTEREST ON :i) Fixed Loans

Loans from Government of India/Banks 311.77 75.49Foreign Currency LoansGross 114.13 441.42Less: Capitalised 0.00 114.13 50.79 390.63Interest on Debentures 2,745.39 0.44Lease Finance Charges 208.56 0.47

ii) OthersCash Credit 13.65 44.51Others 384.85 81.19

Sub-Total 3,778.35 592.73

B. GUARANTEE AND COMMITMENT FEES 0.05 590.13C . EXCHANGE FLUCTUATION

Exchange Variation for the Year (Net) (260.62) 753.02Less : Capitalised (304.62) 254.40

Sub-Total 44.00 498.62

TOTAL 3,822.40 1,681.48

294 295

SCHEDULE-30


1.1 The Consolidated Financial Statements represent consolidation of accounts of the Company (Oil and Natural GasCorporation Limited), its subsidiaries and joint venture company as detailed below:

Name of the Subsidiaries/ Country of Proportion of ownershipJoint Venture Company Incorporation interest

31.03.2004 31.03.2003ONGC Videsh Limited (OVL) India 100% 100%

ONGC Nile Ganga B.V. * Netherlands 100% 100%

Mangalore Refinery and Petrochemicals Ltd. (MRPL) India 71.62 % 51.25 %

Petronet LNG Limited-PLL (JV) India 12.50% -

* 100% subsidiary of ONGC Videsh Ltd.

1.2 The previous year figures of Profit and Loss Account in respect of subsidiary MRPL were included for the period30.03.2003 to 31.03.2003 and in respect of ONGC Nile Ganga B.V. - subsidiary, for the period 12.03.2003 to 31.03.2003.To this extent, previous year figures are not comparable.

1.3 In respect of ONGC Nile Ganga B.V. subsidiary of the Company, the opening retained earnings as on 31.03.2003were considered during the year 2002-03 at USD 193.39 million based on the unaudited results which was revised toUSD 200.60 million as per audited accounts and the difference of USD 7.21 million (Rs. 342.80 million) has beenconsidered as an adjustment in the General Reserve during the year. The corporate tax rate for income in respect ofGNOP Sudan was reduced from 40% to 35% effective from year 2000 and the consequent impact on the deferred taxasset of ONGC Nile Ganga B.V. - a subsidiary of OVL up to 31.03.2003 of Rs.190.34 million (USD 4 million) wastaken to the General Reserve account.

2.1 In view of different sets of environment in which the subsidiaries/JV are operating, the accounting policies followedfor treatment of depreciation of fixed assets and Sales revenue by the subsidiaries/JV are different from the accountingpolicies of the Company. Such different accounting policies have been adopted in respect of the following:

(Rs. in million)

Particulars Name of Accounting Policies Proportion

Subsidiary/JV Company Subsidiaries 2003-04 2002-03

Depreciation- ONGC Written Down Straight Line 9580.71 9739.70Fixed Assets Nile Ganga BV Value Method Method as(Schedule-5) applicable in

Netherlands

Depreciation- MRPL Written Down Straight Line 67007.52 67302.80Fixed Assets Value Method Method.(Schedule-5)

PLL 5.42 -

2.2 The subsidiary - ONGC NILE GANGA B.V. follows the entitlement method for revenue recognition associated withsale of crude oil and liquids for its share of petroleum production as specified in the EPSA and COPA. The amountinvolved is Rs. 30880.69 million (previous year Rs. 1690.47 million) shown as sales under Schedule - 19.

SCHEDULE-29


1. Principles of ConsolidationThe Consolidated Financial Statements relate to the Company (Oil and Natural Gas Corporation Limited), itssubsidiaries, joint venture company and associates. The consolidated Financial Statements have been prepared onthe following basis: -

i) The Financial Statements of the Company and its subsidiary companies are combined on a line-by-line basisby adding together the book values of like items of assets, liabilities, income and expenses after fully eliminatingintra-group balances and intra-group transactions resulting in unrealised profits or losses in accordance withAccounting Standard (AS) 21 – “Consolidated Financial Statements” issued by The Institute of CharteredAccountants of India.

ii) The financial statements of Joint Venture Company have been combined by applying proportionate consolidationmethod on a line by line basis on items of assets, liabilities, income and expenses after eliminating proportionateshare of unrealized profits or losses in accordance with Accounting Standard (AS) 27 on “Financial Reporting ofInterests in Joint Ventures” issued by The Institute of Chartered Accountants of India.

iii) The consolidated Financial Statements are prepared using uniform accounting policies for like transactions andother events in similar circumstances and are presented to the extent possible, in the same manner as theCompany’s separate Financial Statements except as otherwise stated in the Notes to the Accounts.

iv) The difference between the cost of investment in the Subsidiaries/Associates, over the net assets at the timeof acquisition of shares in the Subsidiaries/Associates is recognized in the Financial Statements as Goodwill orCapital Reserve as the case may be.

v) Minority Interest’s share of Net Profit/Loss of Consolidated Subsidiaries for the year is identified and adjusted againstthe income of the group in order to arrive at the Net Income attributable to the shareholders of the Company.

vi) Minority Interest’s share of Net Assets of Consolidated subsidiaries is identified and presented in the ConsolidatedBalance Sheet separately from liabilities and the equity of the Company’s shareholders.

vii) In case of foreign subsidiaries, foreign currency transactions are translated as per the provisions contained in(AS)11 – “Accounting for Effects of changes in Foreign Exchange Rates” issued by The Institute of CharteredAccountants of India in the consolidated financial statements.

viii) In case of Associates, where the company directly or indirectly through Subsidiaries holds more than 20% ofequity, investments in Associates are accounted for using equity method in accordance with Accounting Standard(AS) 23 – “Accounting for Investments in Associates in Consolidated Financial Statements” issued by TheInstitute of Chartered Accountants of India.

ix) The difference between the proceeds from disposal of investments in a subsidiary and the carrying amount ofits assets less liabilities as on the date of disposal is recognised in the Consolidated Statement of Profit andLoss Account as the profit or loss (as applicable) on disposal of the investment in the subsidiary.

2. Investments other than in Subsidiaries and Associates have been accounted for as per Accounting Standard(AS) 13 on “Accounting for Investments” issued by The Institute of Chartered Accountants of India.

3. Other Significant Accounting Policies:These are set out under “Significant Accounting Policies” as given in the respective Financial Statements ofthe Company and its Subsidiaries.

(Amount in Rupees)

2003-04 2002-03

Schedule to the Consolidated Profit & Loss AccountSCHEDULE-28EARNINGS PER EQUITY SHAREBasic & Diluted earnings per equity share 65.78 73.41(Face Value Rs. 10/-Per Share)Earnings per equity share has been computed by dividing the net profit after taxation of Rs. 93,802.61 million(Previous year Rs. 104,674.59 million ) by number of equity shares of 1,425,933,992 (Previous year 1,425,933,992).

296 297

dated 24th April, 2004, ONGC was to share the under recoveries of Oil Marketing Companies (OMCs) on PDSKerosene and domestic LPG for the year 2003-04 by allowing discount in the prices of crude oil, PDS kerosene anddomestic LPG. Accordingly, Sales Revenue in respect of Crude oil, LPG and SKO is net of Rs. 26,903.92 million onthis account.

7.1 During the year, the Company has received price revision arrears from Petroleum Planning & Analysis Cell (PPAC)and Refineries amounting to Rs. 3,460.65 million (previous year Rs. 4,027.01 million) in respect of its products andreimbursement of certain costs as elaborated in stand alone financial statements of the Company. The same havebeen accounted for in respective Schedules in the consolidated financial statements.

7.2 In respect of its subsidiary - MRPL, income from operations includes Rs. 328.05 million towards Liquefied PetroleumGas/Superior Kerosene price revision declared by the oil marketing companies during the year and received duringthe year relating to previous years.

8. Other Income (Schedule - 21) includes Export benefits (Import duty credits) of Rs. 2,411.64 million in respect of thesubsidiary MRPL’s entitlement towards the amount of Duty Free Entitlement Certificate (DFEC) for incrementalexport turnover achieved during this year in respect of which the claims will be made by the subsidiary in due time inaccordance with the relative scheme under the EXIM policy.

9.1 The Net Deferred Tax Liability as at 31st March, 2004 comprises of the major components of Deferred Tax Liabilitiesand Deferred Tax Assets as under:

(Rs.in million)

As on 31.03.2004 As on 31.03.2003

(i) Liabilities

Depletion of Producing Properties 81,167.15 60,641.29

Depreciation Allocated to Wells in Progress 458.21 546.12

Deferred Revenue Expenditure written off 2,101.90 711.50

Development wells-in Progress 596.84 0.00

Exploratory Wells in ML Areas 173.13 0.00

Lease Finance 871.93 810.13

Depreciation 12,628.13 10,015.03

Others 1,320.76 2,067.32

Total (i) 99,318.05 74,791.39(ii) AssetsDepreciation 125.72 1,439.34

Unabsorbed losses and allowances 18,582.89 18,069.44Dry wells written off 4,658.95 4,453.59

Provision for Non Moving Inventories 801.40 832.62

Provision for Doubtful Claims/Advances 1,587.04 1,256.11

Provision for Abandonment 17,443.93 317.04

Provision for Leave Encashment 1,019.47 838.03

Others 848.90 469.43

Total (ii) 45,068.30 27,675.60Net Liability (i-ii) 54,249.75 47,115.79

3.1 The associates considered in the Consolidated Financial Statements are as under:

Name of the Associates Country of Proportion of ownershipIncorporation interest

2003-04 2002-03Pawan Hans Helicopters Limited India 21.5% 21.5%

ONGIO International Pvt. Ltd. India 50.0% 50.0%

3.2 It was decided by the promoters of ONGIO International Pvt. Ltd. to windup the operations of the Associate, by filingan application under “Simplified Exit Scheme” under section 560 of the Companies Act, 1956. As a prerequisite tothis, audited zero Balance sheet was prepared on 15.10.2003 by the Associate. Based on this, Rs. 4.76 million hasbeen charged to Profit and Loss Account as share of loss in the Associate, as required by Accounting Standard (AS)23 on ‘Accounting for Investments in Associates in Consolidated Financial Statements’ issued by The Institute ofChartered Accountants of India.

3.3 In respect of Pawan Hans Helicopters Limited, the share of profit of Rs. 160.91 million, for the years 2001-02 and2002-03 has been considered as share of Profit in Associates on the basis of audited results. The Annual Accountsfor the financial year 2003-04 have not yet been finalized. Necessary adjustments will be made on receipt of theaudited accounts.

3.4 Due to different nature of their operations, Pawan Hans Helicopters Limited and ONGIO International Pvt. Ltd., theassociates of the Company follow different accounting policies namely charging of depreciation on fixed assets,accounting of investments etc. It is not practicable for the Company to make adjustment for purposes of applying theequity method.

4. Changes in Accounting Policies :

The Company has adopted the Guidance Note on Accounting for Oil and Gas Producing Activities issued by theInstitute of Chartered Accountants of India w.e.f. 1.4.2003 and has changed its accounting policies in line with therequirements of the Guidance Note as under.

i) The full estimated abandonment cost has been recognised as an asset (producing property) with a correspondingcredit to liability for abandonment. As a result of this, the quantum of Producing Property on the asset side, aswell as the liability for abandonment on the liability side has gone up by Rs. 80292.03 million. This has,however, no impact on profits for the year. The provision for abandonment costs on the basis of Unit ofProduction Method has been included under the head Depletion instead of Provision for Abandonment in Schedule- 26.

ii) The time limit of carry over of exploratory wells in progress has been changed to two years from three years forcharging the same to Profit and Loss Account. As a result of this change, the dry well expenditure for the yearhas gone up by Rs 768.87 million (net) with corresponding decrease in profit before tax and decrease (net) inexploratory wells in progress.

iii) The Capital work in progress related to facilities and development wells in progress have been excluded fromthe cost base for computing depletion. As a result of this change, depletion for the year is lower by Rs. 814.96million with corresponding increase in profit before tax and increase in producing properties.

5. As stated above in Note No 4, the company has followed the Guidance Note on accounting for Oil and Gas ProducingActivities issued by The Institute of Chartered Accountants of India, which prescribes the accounting treatment ofdepreciation on fixed assets and depletion of Producing Properties. Since the company has followed the said prescribedaccounting treatment, the management is of the view that the provisions of section 205 of the Companies Act, 1956for the purpose of declaration of dividend are duly complied with.

6. In terms of the decision of the Government of India conveyed by Ministry of Petroleum and Natural Gas vide letterdated 30th October 2003 and further communication by Petroleum Planning & Analysis Cell (PPAC) vide their letter

298 299

(b) In the year 2002-03, where unaudited figures were incorporated, necessary adjustments have been carried outwith reference to the audited figures of 2002-03 in the current year.

(c) The company has entered into 35 joint ventures for exploration and production. As at the end of the year, thetotal value of assets, liabilities, income, expenditure and net profit before tax of these joint ventures amounts toRs. 67,153.76 million, Rs. 11,237.45 million, Rs. 35,893.86 million, Rs. 18,892.77 million and Rs. 17,001.09million respectively.

Of the above financial figures relating to 11 joint ventures having assets, liabilities, income, expenditure and netprofit before tax amounting to Rs. 42,974.11 million, Rs. 5,105.09 million, Rs. 12,338.54 million, Rs. 6,313.17million and Rs. 6,025.37 million respectively have been accounted on the basis of unaudited returns receivedfrom the respective joint venture.

(d) In respect of Vietnam Joint Venture, the delivery of Gas to the buyer commenced on 21st January, 2003 fromBlock 06.1 Vietnam Project. Under the terms of the Gas Sales and Purchase Agreement, the start date effectivefrom which the Take or Pay obligation may become applicable was agreed by all the parties as 25th April, 2003.During the current year ended 31st March 2004, receipts on account of Gas Sales were Rs. 2501.33 million. Outof this, the Company received Rs.1032.44 million against take or pay provisions in the contract (revalued atRs.981.70 million as on 31st March, 2004) owing to lesser nomination of Gas by the buyer which has beenshown as advance received from buyer in Schedule-16. The corresponding transportation charges ofRs. 321.45 million (revalued at Rs.305.67 million as on 31st March, 2004) against the ship or pay obligationunder the transportation agreement with the transporters have also accordingly been shown as advance paymentto transporter.

10.2 Jointly Controlled Entity:

ONGC’s share in assets, liabilities, income, expenses, contingent liabilities and capital commitments of JointlyControlled Entity viz.,Petronet LNG Ltd. is as below:

(Rs. in million)

Description 31.03.2004

i) Assets- Long term assets 2,195.28- Current assets 720.51

ii) Liabilities- Current liabilities and provisions 204.10- Other liabilities 1,573.61

iii) Income -iv) Expenses -v) Contingent liabilities 180.41vi) Capital commitments 440.01

11. The Company has perpetual physical verification system of Inventory, Fixed Assets and Capital Stores at regularintervals and reconciliation with general ledger balances. Adjustment of differences in books of accounts, if any, iscarried out after examination of these differences, some of which are in progress.

12. Confirmation of certain balances in Sundry Debtors and Sundry Creditors are awaited. Adjustments, if any, which inthe opinion of the Management will not be significant, would be carried out as and when finalized.

13. Producing Properties (Schedule - 6) include an amount of Rs. 1416.76 million (Previous year Rs.832.80 million) inrespect of an offshore field, which has been offered for Production Sharing Contract (PSC) to a consortium whereCompany holds 40% interest. PSC for the same is yet to be signed. Pending finalization of PSC, no adjustment hasbeen made in the books of Account.

9.2 The company’s subsidiary MRPL had taken credit for Deferred Tax Asset aggregating to Rs. 7055.18 million inprevious years and realized Deferred Tax Asset to the extent of Rs. 1150.65 million during the year as it had earnedprofits during the year 2003-04. The Management of the subsidiary is virtually certain of realizing the balance DeferredTax Asset taken credit for in previous years by absorption of the unabsorbed depreciation and brought forward lossesof past years against the profits of the subsidiary which would be earned during next 3 years.

10. Joint Venture Accounting:

10.1 Jointly Controlled Operations:

(a) The Company has entered into production sharing contracts in respect of certain properties with the Governmentof India and some bodies corporate. These joint ventures are as under: -

Joint Ventures (In India) Participating Interest of ONGC

i) Ravva 40%ii) Mukta/Panna 40%iii) Mid/South Tapti 40%iv) Pondicherry Offshore (PY-3) 40%v) Cambay (CB-OS-1) 10%vi) Cambay (CB-OS-2) 40%vii) Gulf of Kutch (GK-OSJ-1) and GK-OSJ-3 25%viii) Mumbai Offshore MB-OSN-97/4 70%ix) Mahanadi Offshore MN-OSN-97/3 85%x) Ganga Valley Onshore GV-ONN-97/1 70%xi) GS-DWN-2000/2 85%xii) KK-DWN-2000/2 85%xiii) MB-DWN-2000/1 85%xiv) MB-DWN-2000/2 50%xv) MB-OSN-2000/1 75%xvi) MN-OSN-2000/2 40%xvii) MN-ONN-2000/1 20%xviii) WB-OSN-2000/1 85%xix) WB-ONN-2000/1 85%xx) GV-ONN-2000/1 85%xxi) CY-DWN-2001/1 80%xxii) KG-DWN-98/4 85%xxiii) NK-CBM-2000/1/1 80%xxiv) BK-CBM-2000/1/1 80%xxv) JHARIA 90%xxvi) RANIGANJ 74%xxvii) AA-ONN-2001/2 80%xxviii) AA-ONN-2001/3 85%xxix) MN-DWN-2002/1 70%

Joint Ventures (Outside India)xxx) VIETNAM PROJECT, VIETNAM, BLOCK 06.1 OFFSHORE 45%xxxi) SAKHALIN PROJECT, RUSSIA SAKHALIN 1 OFFSHORE 20%xxxii) MYANMAR PROJECT, MYANMAR BLOCK A-1 OFFSHORE 20%xxxiii) IRAN PROJECT, IRAN FARSI BLOCK OFFSHORE 40%xxxiv) LIBYA PROJECT, LIBYA BLOCKS NC-188 AND 189 ONSHORE 49%xxxv) SYRIA PROJECT, SYRIA BLOCK-24 ONSHORE 60%

300 301

The Subsidiary-MRPL has been advised that the said amount of Rs.2556.85 million being the difference between thedeferred sales tax loan and the payments made by the Company as per the notification referred above is not of thenature of income liable to Income Tax and hence adjustment of write off of the relative amount of Deferred Tax Assetspertaining to such income, had it been taxable, amounting to Rs.917.27 million is considered not necessary and hasnot been made.

17.3 Sales tax deferment loan in respect of MRPL shown under Unsecured Loans includes a sum of Rs.348.57 million(Previous Year Rs.348.57 million) relating to CST on excise duty for the years 2000-01, 2001-02 and 2002-03, whichwere earlier paid under protest and are now being claimed as sales tax deferral loan payable by the Company, inrespect of which the assessments are yet to be completed.

18 Information as per Accounting Standard (AS-18) on “Related Party Disclosures” is given below:

18.1 Name of Joint ventures with whom the company has entered into the transactions during the year: -

i) Ravva Joint Venture viii) Vietnam Projectii) PY-3 Joint Venture ix) Sakhalin Projectiii) Panna Mukta & Tapti Joint Venture x) Myanmar Projectiv) GK-OSJ-1 xi) Iran Projectv) GK-OSJ-3 xii) Libya Projectvi) CB-OS-1 xiii) Syria Projectvii) CB-OS-2 xiv) Petronet LNG Ltd.

18.2 Key Management Personnel: -

1. Shri Subir Raha 5. Shri V. K. Sharma 9. Shri Atul Chandra2. Shri Jauhari Lal, (up to 30.04.03) 6. Shri Nathu Lal 10. Shri R.S.Butola3. Shri R. C. Gourh (up to 31.12.03) 7. Shri R.S. Sharma4. Shri Y. B. Sinha 8. Dr. A. K. Balyan (From 23.08.03)

18.3 Details of Transactions

(Rs. in million)

Nature of Transactions Joint Ventures Key Management TotalPersonnel

Payment Towards Helicopter Charges(PY-3) 0.52 Nil 0.52(Nil) (Nil)

Receipt on Account of Lab Testing Nil Nil Nil(0.15) (0.15)

Amount Paid/ Payable for Oil 41.86 Nil 41.86Transfer Services (Ravva) (16.01) (16.01)

Amount received for use of Drill Site 11.51 Nil 11.51Accommodation (Ravva) (12.18) (12.18)

Receipt towards transportation and 668.69 Nil 668.69Processing Charges (Panna Mukta) (708.41) (708.41)

Income from rendering of services 94.28 Nil 94.28(152.33) (152.33)

Remuneration to Directors (As per 18.2 above) Nil 11.23 11.23(6.15) (6.15)

Amount Outstanding as on 31.03.2004 (Ravva) 3.78 0.85 4.63(59.58) (0.52) (60.10)

14. In respect of subsidiary - MRPL, Loans and Advances (Schedule 14) include Customs duty paid under protest onproject imports Rs. 877.39 million (Previous year Rs.877.39 million), Commercial taxes paid under protest Rs. 464.48million (Previous year Rs. 328.79 million) and Rs.348.57 million (Previous year Rs.348.57 million) being refund ofCentral Sales tax receivable from department on account of revision of sales tax returns for the year 2000-01 and2001-02 and refund claim for the year 2002-03 pursuant to the order of the Department confirming the levy of CST onExcise Duty value of sales which are pending disposal.

15. Loans and advances include loans to employees having repayment schedule of more than 7 years amounting to Rs.7049.16 million (previous year Rs. 7225.97 million). The Company has not advanced any money to its employees forthe purpose of investment in the securities of the Company.

16. Disclosures as per AS-19 in respect of Leases:

16.1 Finance Leases

a) Aggregate minimum lease payments due and the net present value as at the Balance Sheet date is Rs. Nil(previous year Rs. 586.65 million) and Rs Nil (previous year Rs. 397.17 million) respectively.

b) Significant terms of the lease agreement

No. Terms of the lease agreement provide for: Amount (Rs. in million)

Yes No Not specified TOTAL

a. Purchase Option 208.73 - 3,949.73 4,158.46

b. Renewal Option 2,089.49 - 2,068.97 4,158.46

c) In respect of the assets taken on lease of Rs. 4,158.46 million (Previous year Rs 1,013.33 million) the primaryperiod of the lease has expired and the Company is taking necessary steps to get the ownership transferred inits name.

d) On termination of the above lease, finance charges payable under the arrangement, net of amounts alreadycharged off has been expensed during the year.

16.2 Operating Leases

The lease agreements entered into with various parties are mutually renewable/cancellable.

17.1 As per the Government of Karnataka notification, The Company’s Subsidiary - MRPL is entitled to certain CommercialTax Incentives (Sale Tax deferment loan and exemption from Turnover Tax) as follows:

Refinery Maximum Amount Availment period Repayment termsProject (Rs. in million)

Phase I 400.00 per annum 11 years from the date of issue of 11 annual installments on year to year(3 MMTPA) notification viz., 26th April, 1997 basis commencing from the date of

completion of the deferment period

Phase II 2500.00 per annum 14 years from the date of issue of 14 annual installments on year to(6 MMTPA) notification viz., 14th August, 2000 year basis commencing from the date

of completion of the deferment period.

17.2 Pursuant to the notification issued by the Government of Karnataka, the Company’s Subsidiary-MRPL has exercisedthe option to pay the deferred sales tax loan upto the period ending 29.2.2004 before the completion of the defermentperiod as provided therein. Accordingly, the difference between the aggregate of deferred sales tax loan and thepayments made in accordance therewith amounting to Rs.2556.85 million has been shown under “Other Income” inSchedule ‘21’.

302 303

20.3 Guarantees executed by the company on behalf of Petronet LNG Limited in favour of:

1 Certain banks towards short term loan granted to 2481.20 2560.10Petronet LNG Limited (a company which is promoted (3500.00) (2548.75)by the Company together with three other co-promoters)to the extent of Rs. 14000 million out of which Company’sshare is Rs. 3500 million.

20.4 Corporate Guarantee given by the MRPL on behalf of NMPT:

1 Corporate Guarantee given by the MRPL towards loan of 3372.30 1694.21Rs. 3372.30 million sanctioned by certain bankers/ (3372.30) (1694.21)financial institutions to New Mangalore Port Trust (NMPT)for construction of Jetties.

21. The Consolidated Segment Information as per Accounting Standard (AS-17) for the Company is given below(Rs. in million)

E&P

Particulars Offshore Onshore Refining Outside Unallocated Grand Offshore Onshore Refining Outside Unallocated GrandIndia Total India Total

Revenue

External Sales 249961.20 79597.25 132229.93 34261.29 (693.58) 495356.09 261895.80 91017.94 1720.21 1954.83 203.37 356792.15

Inter Segment Sales (22811.49) (145.78) (7708.35) (30665.62)

Total Revenue 227149.71 79597.25 132084.15 26552.94 (693.58) 464690.47 261895.80 91017.94 1720.21 1954.83 203.37 356792.15

Results

Segment Result Profit(+)/Loss(-) 118550.67 11109.82 9841.12 6906.92 146408.53 126504.67 26926.96 (380.90) 390.58 153441.31

Unallocated Corporate Expenses 4780.25 4780.25 5175.60 5175.60

Operating Profit 118550.67 11109.82 9841.12 6906.92 (4780.25) 141628.28 126504.67 26926.96 (380.90) 390.58 (5175.60) 148265.71

Interest 3785.27 3785.27 1182.86 1182.86

Interest/Dividend Income 10917.65 10917.65 13125.31 13125.31

Income Taxes 53879.72 53879.72 55784.86 55784.86

Profit from Ordinary Activities 118550.67 11109.82 9841.12 6906.92 (51527.59) 94880.94 126504.67 26926.96 (380.90) 390.58 (49018.01) 104423.30

Extraordinary loss

Net Profit 118550.67 11109.82 9841.12 6906.92 (51527.59) 94880.94 126504.67 26926.96 (380.90) 390.58 (49018.01) 104423.30

Other Information

Segment Assets 246108.86 134190.48 73927.52 106157.39 560384.25 189041.42 133447.83 69102.39 83122.35 474713.99

Unallocated Corporate Assets 135132.90 135132.90 99136.32 99136.32

Total Assets 246108.86 134190.48 73927.52 106157.39 135132.90 695517.15 189041.42 133447.83 69102.39 83122.35 99136.32 573850.31

Segment Liabilities 110543.25 19032.22 64772.36 95781.14 290128.97 50679.29 17705.26 65691.58 76241.18 210317.31

Unallocated Corporate Liabilities (8029.18) (8029.18) 4841.00 4841.00

Total Liabilities 110543.25 19032.22 64772.36 95781.14 (8029.18) 282099.79 50679.29 17705.26 65691.58 76241.18 4841.00 215158.31

Capital Expenditure 42088.96 19935.82 239.58 14725.56 2964.74 79954.66 34627.36 20240.50 326.70 5595.20 611.65 61401.41

Depreciation (Recouped Cost) 40370.45 14995.30 3781.97 6134.38 242.89 65524.99 28915.04 12177.06 10.27 231.39 180.46 41514.22

Non-cash Expenses 663.55 310.16 16.69 0.00 352.97 1343.37 20435.39 (184.00) 890.27 (0.05) 660.94 21802.55

2002-03

In India

2003-04

In India

E&P

19. Capital commitments (net of advances) not provided for

(a) In respect of Joint Ventures Rs. 886.08 million (Previous year Rs. 1356.13 million)

(b) In respect of others Rs. 53872.56 million (Previous year Rs. 12379.20 million)

20. Contingent Liabilities:

20.1 Claims against the Company not acknowledged as debts

(Rs. in million)

S.No. Particulars As at 31st As at 31stMarch, 2004 March, 2003

i) in respect of Joint Ventures 14002.00 10591.96

ii) in respect of others:i. Disputed Income tax demands 9341.56 7251.00ii. Disputed Excise Duty demands 2893.67 2328.71iii. Disputed Custom Duty demands 4592.96 2640.43iv. Disputed Royalty 253.64 -v. Disputed Cess 749.54 -vi. Claims of contractors in Arbitration/Courts. 15714.35 15982.58vii. Disputed demands for octroi duty 336.68 336.68viii. in respect of other disputes 3916.80 5821.71ix. In respect of its subsidiary-OVL, liability for payment to contractual -

workers for regularization of their services pending with the HonorableDelhi High Court under civil suit. The amount of liability is not ascertainable.

Sub Total 37799.20 34361.11

Total 51801.20 44953.07

20.2 Guarantees executed by the company on behalf of its wholly owned subsidiary -ONGC Videsh Limited in favour of:(Rs. in million)

S.No Details Guarantee AmountAmount Outstanding

1. National Iranian Oil Company, USD 10.80 million. 475.63 475.63(513.54) (513.54)

2. National Oil Company of Tripoli, Libya, USD 15974 million. 703.49 703.49(759.56) (759.56)

3. M/s Roseneft-S, R N Astra, SMNG-S and Exxon-N to the 76673.64 29636.98extent of USD 1741 million in terms of Assignment and Carry (82784.55) (50789.11)Finance Agreements in respect of Sakhalin-I Project(out of this ONGC Videsh Ltd has already made remittancesaggregating USD 1068.044 million and balance outstanding isUSD 672.956 million (Previous year USD 1068.12 million)

4. Talisman Energy Inc to the extent of USD 720.00 million 31708.80 376.32(previous year USD 720.00 million) in terms of the Purchase (34236.00) (915.62)and Sale Agreement in respect of acquisition of 25% participatinginterest in Greater Nile Oil Project, Sudan. Balance outstandingas on 31.3.2004 is USD 8.545 million. (Previous yearUSD 19.256 million).

304 305

22. Details of Oil and Gas Reserves (as determined by Reserve Estimates Committee)

22.1 Company’s share of Proved Reserves on the geographical basis as on 31st March,2004 is as under:-

DETAILS CRUDE GAS (BILLION TOTAL (MMT)**OIL(MMT)* CUBIC METER)



VIETNAM OPENING 0.779 19.994 20.773ADDITIONDEDUCTIONSALE/TRANSFERPRODUCTION 0.022 0.523 0.545CLOSING 0.757 19.471 20.228

SAKHALIN OPENING 61.400 97.000 158.400ADDITIONDEDUCTIONSALE/TRANSFERPRODUCTIONCLOSING 61.400 97.000 158.400

GNOP SUDAN OPENING 21.332 21.332ADDITION 2.389 2.389DEDUCTIONSALE/TRANSFERPRODUCTION 3.323 3.323CLOSING 20.398 20.398

Notes :

(i) The above matrix presentation depicts the geographical segments and business segments as primary segments.

(ii) Segments have been identified and reported taking into account the differing risks and returns, the organizationstructure and the internal reporting systems. These have been organized into the following main geographical andbusiness segments:

Geographical Segments Business Segmentsa) In India - Offshore a) Exploration & Production

Onshoreb) Outside India. b) Refining

(iii) Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segmentsand amount allocated on reasonable basis. Un-allocated includes common expenditure incurred for all the segmentsand expenses incurred at the corporate level.

(iv) The external sales shown under segment revenue includes sales, income from pipeline transportationreceipts, other income (excluding interest and dividend income of Rs. 10916.15 million) and prior period income ofRs. 29.04 million.

306 307

23. (i) DETAILS OF EXPENDITURE

(Details of expenditure incurred during the year on Production, Selling and Distribution, Operation and Maintenance ofPipelines, Exploration, Drilling and Development)

(Rupees in million)

2003-04 2002-03

(a) Salaries, Wages, Ex-gratia etc. 21,103.50 20,927.57

(b) Contribution to Provident and other funds 1,361.83 1,287.58

(c) Provision for gratuity 516.45 814.26

(d) Provision for leave encashment 1,215.45 1,248.45

(e) Staff welfare expenses 2,019.82 26,217.05 1,728.50

Raw Material Consumed 73,954.92 173.32

Stores and spares consumed 12,628.91 11,947.82

Cess 41,938.66 42,092.71

Natural Calamity Contingent Duty - Crude Oil 1,116.70 98.17

Excise Duty 16,709.30 4,977.24

Royalty 44,737.56 30,764.27

Sales Tax 12,253.46 12,572.93

Value Added Tax (VAT) 235.17 0.00

Octroi/BPT 2,237.63 2,692.94

Rent, rates and taxes 2,337.39 704.25

Hire charges of equipments and vehicles 27,449.48 14,354.41

Power, fuel and water charges 2,203.82 2,238.76

Contractual drilling, logging, workover etc. 18,104.02 11,572.75

Contractual security 1,101.01 1,021.69

Repairs to building 308.10 363.54

Repairs to plant and machinery 2,877.30 1,487.29

Other repairs 5,303.34 4,354.41

Insurance 2,556.49 2,255.33

Miscellaneous expenditure 9,271.44 7,580.10

303,541.75 177,258.29Less:

Allocated to exploration, development drilling, capital jobs 46,137.56 33,392.25recoverables etc.

Excise duty 16,695.72 4,674.40

Prior Period Adjustment 185.29 (134.12)

Production, Transportation, Selling and Distribution 240,523.18 139,325.76Expenditure etc.

22.2 Company’s share of Proved and Developed Reserves on the geographical basis as on 31st March, 2004 isas under:-

DETAILS CRUDE GAS (BILLION TOTAL OILOIL(MMT)* CUBIC METER) EQUIVALENT

(MMT)**



VIETNAM OPENING 0.773 16.439 17.212ADDITIONDEDUCTIONSALE/TRANSFER 0.022 0.523 0.545PRODUCTION 0.751 15.916 16.667CLOSING

GNOP SUDAN OPENING 16.572 16.572ADDITION 2.137 2.137DEDUCTIONSALE/TRANSFERPRODUCTION 3.323 3.323CLOSING 15.386 0.000 15.386

*Crude includes oil condensate**For calculating OEG 1000M3 of Gas has been taken to be equal to 1 MT of Crude OilVariation in totals, if any, are due to internal summation and rounding off.

308 309

CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31ST MARCH, 2004

(Rupees in million)

Year Ended Year Ended31st March, 31st March,

2004 2003

A. CASH FLOW FROM OPERATING ACTIVITIES:Profit before tax and prior period items 149,051.39 159,803.75Adjustments For:

Recouped Costs

(Represented by Depreciation, Depletion

and Amortisation)

Gross Amount 65,525.00 41,514.22Cash Outflows (20,150.02) (12,235.54)

45,374.98 29,278.68- Interest on Borrowings 3,778.34 592.73- Foreign Exchange Loss/(Gain) 1,059.49 264.17- Gain on transfer of participating interest (1,151.78) -- Provision for Gratuity 510.84 813.91- Provision for Leave Encashment 362.39 678.39- Provision for Abandonment - 19,125.81- Provision for Impairment 161.71 161.99- Provision for claims relating to earlier years - 834.64- Miscellaneous Expenditure written off 311.05 -- Other Provision and Write offs 704.40 1,680.18- Interest Income (8,848.11) (12,027.08)- Deffered Government Grant (9.47) (14.50)- Dividend Received (2,513.23) (1,537.96)

- Profit on sale of investment (194.60) 39,546.01 - 39,850.96

Operating Profit before Working Capital Changes 188,597.40 199,654.71

Adjustments for:-

- Debtors 12,398.92 (13,133.47)

- Loans and Advances (5,123.95) (4,972.39)

- Other Assets 168.62 (207.05)

- Deferred Revenue Expenditure/ (4,116.84) 790.81 Miscellaneous Exp. W/off

- Inventories (10,008.79) (426.60)- Trade Payable and Other Liabilities 8,750.36 2,068.32 (4,212.80) (22,161.50)

Cash generated from Operations 190,665.72 177,493.21Direct Taxes Paid (Net of tax refund) (49,390.62) (48,409.06)

Cash Flow before prior period and Extra ordinary Items 141,275.10 129,084.15Prior period and other non cash items (39.16) 405.07

Net Cash Flow from Operating Activities ‘A’ 141,235.94 29,489.22

(ii) MANAGERIAL REMUNERATION (included in 23 (i) above)


Rs. in million Rs. in million

REMUNERATION PAID OR PAYABLE TO DIRECTORSSalaries and Allowances 7.59 4.62Contribution to Provident & Other Funds 0.58 0.52Sitting Fees 0.86 0.59Other Benefits and Perquisites 2.12 1.01(do not include cost of medical treatmentavailed from the Corporation’s own medicalfacilities as the amount is not determinable)Leave Encashment and Gratuity of retired directors 0.94 0.00

12.09 6.74

Note:

1. The remuneration does not include provision for gratuity/leave encashment since the same is not available forindividual employees except for directors retired during the year.

(iii) AUDITORS’ REMUNERATION (included in 23(i) above)



Audit Fees 4.10 3.32For Certification work etc. 3.65 3.38Travelling and Out of Pocket Expenses 5.39 3.54

13.14 10.24

24. Previous year’s figures have been regrouped/reclassified wherever necessary to conform to current year’sclassification.

25. Figures in bracket as given in Notes to Accounts relate to previous year.

26. Figures in the accounts are stated in Rs. million except those in paranthesis which would otherwise have become Nilon account of rounding off.

310 311

3. Cash and Cash equivalents represent:- (Rupees in million)

2003-04 2002-03

a) Cash and Bank Balances (Schedule 13A) 64,537.16 39,945.37*

b) Deposits with Bank under Site Restoration 31,681.97 24,780.97Fund Scheme (Schedule 13B)

Total 96,219.13 64,726.34

* Includes cash & bank balance of Petronet LNG Ltd. (Rs. 3.48 million).

4. Cash balances in respect of MRPL include cheques in hand and balance with scheduled banks and excludesbalances in current account/deposit account of interest warrant/refund accounts, under lien, pledge with banks/Govt.authorities Rs. 26.60 million (Previous year Rs. 92.84 million).

5. The Subsidiary Company, MRPL has undrawn working capital facilities of Rs. 2469.30 million (Previous yearRs. 2383.49 million).

6. Bracket indicates cash outflow.

7. Previous years figures have been regrouped wherever necessary to conform to current year’s classification.


H.C. Shah R.S. Sharma Subir RahaCompany Secretary Director(Finance) Chairman & Managing Director







(Rupees in million)


B. CASH FLOW FROM INVESTING ACTIVITIES:

Purchase of Fixed Assets (Net) (24,662.89) (29,712.75)Exploratory and Development Drilling/ Board Approvedand Contracted/ Board Approved Projects (33,581.61) (38,107.72)Purchase of Investment (2,576.00) -Advance for Share Capital (120.91) -Acquisition of Subsidiary (4,397.08) (594.30)Investment in goodwill - (10,716.60)Loan to Oil India Limited (16.88) (343.58)Advance to SMNG-S & RN ASTRA (8,925.40) (6,327.03)Deferred Tax Liability - 1,933.09(Deposit)/Maturity with PSU’s - 2,330.00Sale/Maturity/Redemption of Investments 3,163.73 0.01Dividend Received from Trade Investments 2,572.03 1,537.96Interest Received 6,714.97 14,309.00

Net Cash Flow from Investing Activities ‘B’ (61,830.04) (65,691.92)

C. CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds from issue of Share Capital 1.36 -Proceeds from Government Grants 13.62 42.21Proceeds from Long Term Borrowings 13,124.57 1,133.46Repayment of Long Term Borrowings (40,910.70) (34,087.34)Proceeds/(Repayments) from Short Term Borrowings 25,458.33 (2,187.08)Cash Credit Advance 2,460.47 (160.75)Repayment of Finance Lease Liabilities (397.17) -Dividend Paid (38,502.58) (44,173.52)Tax on Dividend (4,932.84) -Interest Paid (4,228.17) (2,341.44)

Net Cash Flow from Financing Activities ‘C’ (47,913.11) (81,774.46)Net increase/(decrease) in Cash andCash Equivalents (A+B+C) 31,492.79 (17,977.16)

Cash and Cash Equivalents as at 1st April, 2003 64,726.34 82,700.02(Opening Balance)

Cash and Cash Equivalents as at 31st March,2004 96,219.13 64722.86(Closing Balance)

Notes:1. The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in the Accounting Stan-

dard-3 on Cash Flow Statements issued by The Institute of Chartered Accountants of India.

2. Adjustments have not been made to “Purchase of Fixed Assets” (Investing Activities), on account of increase/decrease in Capital Creditors. The impact of the above is not readily ascertainable.

312 313

Documents

OUR VISION - domain-b.com · ONGC VIDESH LIMITED ... To consider, and if thought fit, to pass, the following resolution, with or without modification(s) as special resolution:-