GAIL (India) Ltd

Dear Shareholders,

Oh behalf of the Board of Directors of your Company, I am delighted co present the 26thAnnual Report of your 'Navratna' Company along with Audited Financial Statements for theFinancial Year 2009-10.

NATURAL GAS - SUSTAINABLE ENERGY

Indian economy is poised for high growth as compared to other economies in the worldthereby generating energy demand. As the most environment-friendly fossil fuel, naturalgas is a major contributor to the clean and green environment.The establishment of asustainable energy road map is one of the most pressing needs facing the country. YourCompany for the last 25 years is driving India's gas sector and is all set to take up thechallenge of providing this sustainable energy.

Today, your Company is an integrated energy company along the Natural Gas value chainwith global footprints. Having started as a gas transmission Company during the lateeighties, it grew organically over the years by building a large network of natural gastrunk Pipelines covering a length of around 7,850 km. Your Company has interests in thebusiness of natural gas, LPG. Liquid Hydrocarbons and Petrochemicals, the latter beingvalue-added products. Your Company has also diversified into Exploration & Production,City Gas Distribution and is steadily developing its overseas presence. Your Company isspearheading the move to a new era of clean fuel industrialization.

Your Company is implementing projects for laying five new pipelines and augmentation oftwo existing pipelines with a total length of about 7,500 km having an outlay of about Rs.30,000 crores. This will lead to doubling of pipeline length and transmission capacity inthe coming years.

Your Company's present business portfolio includes:

• 7,850 km of Natural Gas high pressure trunk pipeline with a capacity of approx.150 MMSCMD of natural gas across the country

• 7 LPG Gas Processing Units to produce 1.4 MMTPA of LPG and Other LiquidHydrocarbons

• North India's only gas based integrated Petrochemical complex at Pata, UttarPradesh, with a capacity of producing 4,10,000 TPA of Polymers

• 1,900 km of LPG Transmission pipeline network with a capacity to transport 38MMTPA of LPG

• 27 Oil and Gas Exploration blocks and 1 Coal Bed Methane Block

• 13,000 km of OFC network offering highly dependable bandwidth for telecomservice providers

PERFORMANCE OVERVIEW

Your Company has recorded sustained growth in all key physical and financial parametersin the Financial Year 2009-10. During the year 2009-10, the important financial andphysical highlights are as under:-

Financial

(Rs. in crores)

Physical

Converged Accounting Standards (IFRS) Implementation

In accordance with the road map given by the Ministry of Corporate Affairs, Governmentof India, Accounts are to be prepared on the basis of converged Accounting Standards i.e.Indian Accounting Standards converged with International Financial Reporting Standards(IFRS) w.e.1.1st April, 2011. Accordingly, your Company is taking necessary steps for theimplementation of Accounting Standards which are converged with IFRS. Basic IFRS traininghas also been imparted to concerned senior officials of your Company. Your Company isgearing up to implement the Converged Accounting Standards (IFRS) w.e.f. 1st April, 2011as would be notified by Central Government.

DIVIDEND

Your Company has a consistent track-record of dividend payment. So fat, your Companyhas disbursed dividend of Rs. 7,370 crores to the shareholders.

The Board of Directors of the Company had earlier approved payment of an interimdividend @ 20% per equity share (Rs.2/- per equity share) amounting to Rs. 253.70crores paid in the month of December. 2009. Further, the Board had recommended payment offinal dividend @ 55% per equity share (Rs. 55 per equity share) for the year2009-10.

With this, the total dividend payment for the fiscal 2009-10 will be at 75% (Rs. 7.5per equity share) amounting to Rs. 951.36 crores on its paid-up equity capital of Rs.1,268.48 crores.

CREDIT RATING

Your Company has been assigned the highest domestic credit ratings of AAA from OA andCARE which indicates the highest credit quality and rated instruments carry the lowestcredit risk. The international rating agency. Moody's international. Hong Kong, hasreaffirmed the Corporate issuer rating of Baa2 and local currency issuer rating of A3 toyour Company in January 2010. Your Company's international rating from Moody's is higherthan the country's sovereign rating. This rating reflects GAIL's leadership position innatural gas transmission business, the low level of business risks, favorable outlook fornatural gas trade, its robust profitability and financial position and strengths derivedfrom the significant sovereign ownership.

CORPORATE STRATEGY

Your Company has developed Strategic Plan for the period 2007-12.The goal set by yourCompany includes doubling of Its bottom line by the year 2011-12. The strategy developedto realize the set goals is as under:

> Gas Sourcing & Marketing: Tying- up with producers and suppliersfor marketing and transmission of natural gas on long term and sustainable basis. This isbeing realized by securing more gas from various producers, thereby increasingtransmission and marketing volumes.

> Gas Transmission: Expanding of pipeline infrastructure from 7,850 km toabout 12,000 km with the laying of new pipelines by 2011 -12. For achieving this,execution of various new pipelines at a cost of around Rs. 30,000 crores is in progress.

> City Gas: Pursuing of City Gas distribution opportunities in various partsof the country. This requires introduction of Compressed Natural Gas for the automotivesector and Piped Natural Gas for commercial and domestic use in more number of cities in aphased manner. The same is being realized by participating in PNGRB's bidding process forvarious cities and executing city gas projects in those cities.

> Petrochemicals: in the area of Petrochemicals business, your Company isexamining possible options for expansion of its Petrochemical Complex at Pata and isexploring green field participation in new ventures in India and abroad. For achievingthis, expansion of Petrochemical Complex at Pata is being carried out in phases andparticipation in new field ventures is being undertaken through equity stake, while alsoexploring new ventures through JV route.

> E&P: Your Company also plans to strengthen E&P capability andresources to participate as a major partner / operator in Domestic E&P/ CBM bidding.This would help in developing E&P as a self-sustainable business for augmentingadditional supplies of natural gas. For this, investments are being made in both domesticon-land and off-shore fields, with a balanced portfolio of developmental and exploratoryprojects.

> Globalization: On the globalization front, the plan is to focus onareas having synergy with the existing businesses by entering into new and emerging gasrich countries with focus on sourcing of gas and participation in downstream activities.

Your Company is also In the process of developing Strategy for the coming decade.Certain focus areas of diversification have been identified, besides keeping focus on thecore business areas.The strategy for pursuing such areas is being developed.

SEGMENTAL REVIEW

Your Company has been consistently achieving the top-most all round"Excellent" rating by the Government of India, since the commencement of signingof the Memorandum of Understanding (MoU) with the Government of India on performancereview. During the year under review, the segment wise business performance of the Companyis as under:

> Natural Gas Marketing

Natural gas continues to constitute the core business of your Company. During the year2009-10, Gas Sales was 81.43 MMSCMD compared to 79.06 MMSCMD in the previous financialyear. Major supplies of natural gas includes fuel to power plants, feedstock for gas basedfertilizer plants. Your Company holds around 55% market share in gas marketing in India.

> Natural Gas Transmission

Your Company owns and operates a network of about 7,850 km of natural gas high pressuretrunk pipeline with a capacity of approx. 150 MMSCMD of natural gas across the country.TheGas Transmission during the year was 106.74 MMSCMD compared to 83.29 MMSCMD in theprevious financial year registering a growth of 28%. Your Company's share of gastransmission business is 72% in India.

> Natural Gas Pipeline Projects

During the financial year, your Company has completed commissioning of variouspipelines having a total length of about 700 km, including Dadri-Bawana pipeline forsupplying gas to Pragati Power Corporation Limited and Chainsa - Sultanpur Pipeline, whichwill facilitate supplying about 34 MMSCMD gas to around 65 customers.

> LPG Transmission

Your Company is the only Company in India which owns and operates pipelines forexclusive LPG transmission for third party usage. There are two LPG Pipeline TransmissionSystems with a total length of about 1,900 km, 1.300 km of which connects the Western andNorthern parts of India and 600 km of network is in the Southern part of the country. TheLPG transmission system has a capacity to transport upto 3.8 MMTPA of LPG. LPGtransmission throughput was about 3.16 million MT in the year 2009-10.

> Petrochemicals

During 2009-10, your Company has produced 4,17,000 MT of polymer and sold 4.10.000 MTof polymer and has 21% of overall domestic market share. Your Company also introduced anew pipe grade product PE-100 grade in the market.

> LPG & Other Liquid Hydrocarbon Production

Your Company has 7 LPG plants in the country. In the year 2009-10, total LiquidHydrocarbon production was about 1.440 million MT which mainly included 1.1 million MT ofLPG. 0.18 million MT of Propane, 0.06 million MT of Pentane and balance quantity includedother products like S8P solvent and Naptha.

> Exploration and Production (E&P)

During the year 2009-10, hydrocarbon discovery has been made in Tripura Onland E&Pblock. Approval of Cabinet Committee on Economic Affairs (CCEA) has been obtained forinvestment in Field Development Plan for A-1 and A-3 E&P blocks in Myanmar and alsofor participation in the associated onshore midstream pipeline. Development of the blocksA-1 and A-3 is in progress and the Gas production is expected to start from May, 2013. ThePetroleum Exploration License for Cauvery Onland E&P block has been granted byGovernment of Tamil Nadu, where your Company is an Operator and the said block has beenawarded during NELP-Vli bidding round. The petroleum operation of the aforesaid block hasalready commenced.

Your Company has participating interest in 27 E&P blocks and 1 CBM block. Out ofthese, 24 E&P blocks are in India and 3 blocks are overseas (A-1 and A-3 blocks inMyanmar and Block 56 in Oman). The onland block in Cambay basin is generating revenue andthe revenue generated during the year is Rs. 32.25 crores.

Your Company is operating two onland E&P blocks viz. Rajasthan Onland and CauveryOnland.

> Coal Bed Methane

Your Company has participating interest in I Coal Bed methane block (in Chattisgarhstate). The block is in first exploration stage. Exploration activities like drilling ofcore holes have been completed and drilling of test wells is planned.

> Telecommunications

Leveraging on its pipeline network, your Company has built up a strong Optic FibreCable (OFC) network for leasing of bandwidth as a carriers' carrier. Your Company'stelecom business unit - 'GAILTEL has approximately 13,000 km of OFC network.

SEGMENTAL OUTLOOK

> Natural Gas

Major focus for your Company is to maintain its dominant position in the gas business,especially the transmission segment and continue the relationship with existing customersand also add more customers. Therefore, your Company is building about 7,500 km ofpipelines to transport and supply natural gas to various customers in Power, Fertiliser,Refinery, Industries, CGD projects etc These would include large trunk pipelines, alongwith smaller pipelines which would provide connectivity among trunk lines to form a grid.

> Natural Gas Pipeline Projects

Your Company is executing various pipeline projects for about 7.500 km of pipelinepassing through 16 states, at an approved project cost of around Rs. 30,000 cores. Whenthese pipelines are commissioned, the gas transmission capacity is expected to increasefrom 150 MMSCMD at present to around 300 MMSCMD.

Your Company has received approval / authorization in the year 2007 for the followingfive new natural gas pipelines in the country from the Ministry of Petroleum and NaturalGas (MoPNG), covering a length of around 5,500 km:

> 610 km Dadri - Bawana - Nangal pipeline passing through UP. Delhi, Haryana andPunjab

> 350 km Chainsa - Gurgaon - Jhajjhar - Hissar pipeline passing through Haryanaand Rajasthan

> 2050 km Jagdishpur - Haldia pipeline passing through West Bengal, Jharkhand.Bihar and U.P

> 1389 km Dabhol - Bangalore pipeline passing through Maharashtra and Karnataka

> 1114 km Kochi - Kanjirkkod - Bangalore / Mangalore pipeline passing throughKerala. Tamil Nadu and Karnataka

In addition to these, your Company will be augmenting the capacities of its rwoexisting pipelines, namely, Dahej (Gujarat) - Vijaipur (Madhya Pradesh) pipeline andVijaipur (Madhya Pradesh) - Dadri (Uttar Pradesh) pipeline, having a length of around2,000 km.

Your Company has taken initiatives to transparently execute the projects without anytime & cost over-runs through meticulous Project Monitoring.

> Petrochemicals

Your Company owns and operates a gas based integrated petrochemical plant at Pata,Uttar Pradesh, with a capacity of producing 4,10,000 TPA of Polymers ie. HOPE and LLDPE.Your Company is in the process of installing an additional gas cracking furnace, afterwhich, the capacity will further increase up to 4,50,000 TPA.

Your Company is currently in the process of setting up a 2,80,000 TPA PetrochemicalPlant in Assam, at an investment of about Rs. 5,460 crores through its subsidiary.Brahmaputra Cracker and Polymer Limited (BCPL).

> Gas Sourcing

Your Company continues to have focus on securing gas supplies from internationalmarkets. LNG and trans-national pipelines are the two prevalent modes of cross border gastrade and your Company has been making efforts to bring more natural gas into the country.

> Wind Energy

Your Company has successfully commissioned a wind energy project of 4.5 MW capacity atSinoi (Anjar), District Bhuj in Gujarat, at a cost of Rs. 27.7 cores, in March, 2010. Thegenerated power is fully utilized for captive consumption at your Company's installationsin Gujarat, namely, Gandhar, Kandla and Samakhali.

Based on the successful commissioning and satisfactory performance of this project,your Company is planning to go for commercial wind energy projects in different states.

BUSINESS INITIATIVES

> Global

Your Company is continuously scouting for overseas business opportunities in thenatural gas sector. The purpose is to have long term growth in core business areas andalso to source natural gas to meet the growing requirements of the Indian market.

Your Company aims to target the African market owing to its high gas reserves andnascent gas infrastructure. Your Company is a part of the consortium which includes Shell.Total. PTT & other companies for bidding in the Nigerian Gas Master Plan (NGMP)project in Nigeria. Your Company is also looking for opportunities in countries likeGhana, Egypt, Papua New Guinea (PNG). Qatar etc Your Company has signed an MOU withEgyptian Natural Gas Holdings Company (EGAS) for cooperation in gas sector projects inEgypt. Your Company is also shortly opening an office in Egypt to pursue gas sectoropportunities in Africa and Middle East.

Your Company is having Participating Interest in two offshore E&P blocks A-1 &A-3 in Myanmar. For monetization of gas, your Company will also be participating in aoffshore and onshore pipeline project. Commercial production of gas from these blocks islikely to commence from mid of 2013.

> Domestic

In order to further strengthen its presence in the petrochemicals business, yourCompany is in the process of acquiring equity stake in ONGC Petro-additions Limited(OPaL). along with co-promoter status and rights to market a portion of polymers producedby OPaL. OPaL is setting up a green field petrochemical complex of 1.1 MMTPA Ethylenecapacity (dual feed cracker) in Dahej, Gujarat.

To foray in the fast growing power sector, GAIL has undertaken a number of initiativesthrough which, GAIL on its own, and also in partnership with other companies, plans to setup power plants in various parts of the country, in order to reach customers not connectedby pipeline, your Company has undertaken study for distribution of gas in the form of LNGthrough tankers.

IT INITIATIVES

Your Company is IT savvy organization and is continuously adopting the latest andstate-of-the-art IT solutions to keep pace with the fast changing industry. This helps incontinuous improvement in efficiency and productivity of employees and also enables 'rightinformation to right person; by use of latest IT security solutions.

Your Company has taken several new IT initiatives to enhance productivity. The processof upgradation of the existing SAP ERP hardware and software has been initiated, whichwill add several new features to the existing ERP setup and provide enhanced reporting andinformation management facilities. New components like Governance, Risk and Control (GRO,e- Recruitment and Gas Management System (GMS) are also being added to the SAPinfrastructure.

Your Company has also started the process for implementation of a robust,state-of-the-art Document Management System (DMS), in line with the best practices of theindustry. This will include digitization of all the important information and records ofthe Company across various locations, electronic workflow and authorizations-based accessto information, in addition to the above, your Company has put in place the latestHigh-Definition Video Conferencing (VC) systems at all its major locations to improve thecommunication facilities and reduce travel time and expenses.

Further, e-mail being a major and very important communication tool in today's world,e-mail infrastructure has been upgraded to the latest version. Also, functionality ofe-mails has been centralized and a Disaster Recovery (DR) setup has been put in place totake care of any unforeseen eventualities.

IT security is also a major thrust area of IT strategy and planning in theorganization. Entire IT systems and processes have been audited by expert external agencyto strengthen information security, identify the risk areas and mitigate them with latestand industry standard security solutions. Keeping pace with the latest advancements, theIT policy of your Company has been revised to reflect those changes. Also, the Businessinformation System department of your Company has been certified with the new ISO9001-2008 standard.

SUBSIDIARIES & JOINT VENTURES

Your Company has formed Subsidiaries and Joint venture companies for City GasDistribution and Petrochemicals. Your Company is one of the pioneers to introduce City GasProjects in India for gas supplies to households, commercial users and for the transportsector by forming Subsidiaries/ Joint Venture Companies.

• Subsidiaries

Brahmaputra Cracker and Polymer Limited (BCPL)

Your Company has 70% equity share in BCPL, a subsidiary, with Oil India Limited (OIL).Numaligarh Refinery Limited (NRL). Govt, of Assam, each having 10% equity share, feedstockSupply Agreements have been signed between BCPL and all

the three suppliers, viz. Oil and Natural Gas Corporation Limited. Oil India Limitedand Numaligarh Refinery Limited. Technology license agreements have been signed forcracker, polyethylene and polypropylene units. Entire land for the project has beenacquired by BCPL. Civil & structural works for the main process units, namely.Ethylene cracker unit. Polyethylene unit (HDPE/LLDPE). Polypropylene unit, C2+ extractionunit. Gas de-hydration unit and Gas sweetening unit of BCPL have commenced. Contract hasbeen awarded for captive power plant for Lepetkata & gas turbine driven compressor forDuliajan station.

BCPL is setting up a 2,80,000 TPA polymer plant at an investment of Rs. 5,460 crores.Financial commitment to the extent of Rs. 3,000 crores has been made and project executionis in progress.

GAIL Gas Limited

GAIL Gas is a wholly owned subsidiary of your Company. GAIL Gas has been selected torimplementation of City Gas Distribution (CGD) projects In four cities, namely. Kota,Dewas, Sonepat & Meerut in the 1' round of bidding by Petroleum & Natural GasRegulatory Board (PNGRB). GAIL Gas has already started supply of CNG & PNG (IndustrialCustomers) in the city of Dewas from December, 2009. Steel Pipeline laying work is inprogress in the cities of Meerut, Sonepat & Kota. The gas supplies will commenceshortly in these cities. The total approved investment in all these cities is approx. Rs.435 crores in phase-1.

GAIL Global (Singapore) Pte Limited

Your Company has a wholly owned subsidiary, namely, GAIL Global (Singapore) Pte Lid, tomanage investments abroad. Your Company is looking for further business opportunitiesthrough this subsidiary company.

• Joint Ventures

Aavantika Gas Limited (AGL)

AGL is in operation in Indore and Ujjain and is supplying CNG to the transport sectorin these cities. AGL is supplying CNG to almost 9,000 vehicles in both the cities. AGL hasplans to set up 5 and 2 CNG stations in Gwalior and Ujjain respectively and domesticsupplies to households. 6 daughter stations are mechanically ready for CNG dispensing,awaiting for CCOE final approval. MoPNG has authorised AGL for CGO in Indore, Gwalior andUjjain. Your Company has 22.5% stake in the Company along with HPCL as equal partner.

Bhagyanagar Gas Limited (BGL)

BGL is currently operating 6 CNG stations in Vljaywada and 4 CNG stations inHyderabad and one CNG station in Rajahmundery. 8GL is supplying CNG in these 3 cities toalmost 6,000 vehicles. BGL is also operating two Auto LPG stations in Hyderabad and oneAuto LPG station in Tirupati. BGL has received authorization from MoPNG for City GasDistribution (CGD) in Hyderabad & Vijaywada. Your Company has 22.5% stake in theCompany along with HPCL as equal partner.

Central U.P. Gas Limited (CUGL)

CUGL is currently operating 7 CNG stations in Kanpur and 2 CNG stations in Bareily.CUGL is supplying CNG to almost 12,000 vehicles in the two cities. CUGL commenced itsdomestic supply of PNG with connections to 35 households in Kanpur. CUGL has receivedauthorization from MoPNG for CGD in Kanpur & Bareilly. Your Company has 22.5% stakein the Company along with BPCL as equal partner.

Green Gas Limited (GGL)

GGL is currently operating 6 CNG stations in Luc know and 3 CNG stations in Agra. GGLis supplying CNG in the two cities. GGL has tied up for commencement of domestic supply ofPNG with connections to households, commercial and industrial establishments. MoPNG hasauthorized GGL for CGD in Lucknow & Agra. Your Company has 22.5% stake in the Companyalong with IOCL as equal partner.

Indraprastha Gas Limited (IGL)

IGL is the largest CGD entity in terms of CNG sales and the number of vehicles suppliedby CNG in India. IGL has received authorization from MoPNG for CGD in Delhi & itssuburbs viz. NOIDA (Gautam Budh Nagar), Greater NOIDA, Gurgaon, Faridabad andGhaziabad.

KGL is supplying piped gas 10 around 2 lacs domestic. 340 commercial 20 smallindustrial consumers and CNG to over 3 lac vehicles through around 200 CNG stations inNCR.

Your Company has 22.5% stake in the Company along with BPCL as equal partner.

Mahanagar Gas Limited (MGL)

MGL is a Joint Venture of your Company and British Gas. MGL has set up 140 CNG stationscatering to over 2 lac vehicles spread over Mumbai, Thane. Mira-Bhayandar and Navi-Mumbaiareas besides supplying PNG to over 45 lac domestic customers, more than 1,000 smallindustrial & commercial consumers, it has received authorization from MoPNG for CGD inMumbai, District Thane including Navi Mumbai & Mira Bhayander. Your Company has 49.75%stake in the Company along with British Gas as equal partner.

Maharashtra Natural Gas Limited (MNGL)

MNGL is a Joint Venture of your Company and Bharat Petroleum Corporation Limited (BPCL)for implementation of City Gas Projects in and around Pune city. MNGL has receivedauthorization from MoPNG for CGD in Pune including Pimpri, Chinchwad, Talegaon, Hinjewadi& Chakan areas. It has started 10 stations supplying CNG to nearly 5.000 vehicles.Your Company has 22.5% stake in the Company along with BPCL as equal partner.

ONGC Petro additions Limited (OPaL)

Your Company is in the process of acquiring equity stake in ONGC Petro-additionsLimited (OPaL), which is a Joint Venture of your Company with Oil and Natural GasCorporation Ltd. and Gujarat State Petroleum Corporation Ltd. for setting up PetrochemicalProject at Dahej in Gujarat. OPaL is setting up a green field petrochemical complex of 1.1MMTPA ethylene capacity (dual feed cracker) in Dahej, Gujarat.

Petronet LNG Limited (PLL)

PLL has been formed for setting, up of LNG import and regasification facilities. PLLhas a long term LNG supply contract with RasGas. Qatar, for import of 7.5 MMTPA of LNG.PLL Dahej terminal in Gujarat has been expanded to l0 MMTPA capacity. PLL has successfullyimplemented a pilot project for supplying LNG through cryogenic road tankers. PLL is alsocoming up with a LNG terminal at Kochi, Kerala, with an initial capacity of 2.S MMTPA,expandable up to 5 MMTPA and it is scheduled to be operational by end of 2011. YourCompany has 12.5% equity stake in PLL. along with BPCL, ONGC and I0CL as equal partners.

Ratnagiri Gas and Power Private Limited (RGPPL)

RGPPL is a joint venture company between your Company, NTPC. Financial institutions andMSEB. The capacity of the Ratnagiri Gas & Power Station is 2,150 MW, which is thelargest gas based power generation facility in the country and is currently producing1.850 MW of power. RGPPL is in the process of commissioning an LNG import terminal of 5MMTPA capacity. Your Company has 3288% stake in the Company along with NTPC as equalpartner.

Tripura Natural Gas Company Limited (TNGCL)

TNGCL is presently supplying gas to around 7,500 domestic, 170 commercial andindustrial consumers and has set up one CNG station in Agartala. which is catering to morethan 1,400 vehicles. TNGCL has received authorization from MoPNG for CGD in Aganala. YourCompany has 29% stake in the Company.

GAIL China Gas Global Energy Holdings Limited

The joint venture company has been formed with an objective to pursue gas sectoropportunities, mainly in China. Your Company has 50% equity interest in the company alongwith China Gas as equal partner. The joint venture company is in the process ofidentifying projects in gas and other related areas in China.

OVERSEAS PRESENCE

Your Company has presence in 5 countries. Your Company has made strategic investment inCity Gas Distribution (CGD) & CNG businesses through equity participation in threecompanies in Egypt and one in China. Your Company Is looking for further collaborationwith them to pursue more business opportunities. Your Company has already formed a 50:50JV with China Gas Holdings Ltd.. with an objective to pursue downstream gas sectoropportunities in China. Further, your Company is opening an office in Egypt.

Your Company has participating interest in two offshore blocks (A-1 & A-3) inMyanmar and one onshore block (56) in Oman. Commercial production of gas from Myanmar willstart from May, 2013. Apart from this, your Company is also participating in an onshorepipeline project for transportation of gas from Myanmar to China.

Asia Gas Partnership Summit (AGPS)

Your Company organized the 6th Asia Gas Partnership Summit (AGPS) 2010 at Delhi duringMarch 2010 on the theme "Sourcing. Transmission, Distribution of Natural Gas:Challenges for Emerging Markets" in association with FICCI and IGU. AGPS is aflagship event of your Company which has brought together leaders from the global naturalgas industry onto one platform to share their perspectives and examine the paradigm shiftstaking place in the Asian and global gas markets. The latest edition was a grand successand had a overwhelming response, both from the sponsors and the delegates. It witnessedunprecedented participation with 60 speakers, over 900 participants and 40 partners. Asmany as 25 eminent speakers from 14 countries presented papers. Foreign delegates &exhibitors also participated in the Summit

A high level Qatar delegation led by H.E. Mr. Abdullah Bin Hamad Al-Attiyah, Dy.Premier and Minister for Energy and Industry, State of Qatar, participated in theconference, which added a new dimension to the event. The event bolstered the alreadyexisting relationship between India and Qatar in the domain of natural gas and enhancedGAIL's brand image as a global and integrated gas utility.

SUSTAINABLE DEVELOPMENT

Your company continues to focus on energy security, climate change and energy needed tosupport economic development of the country in a sustainable manner. GAIL believes thatthe mam ways to meet India's future energy challenges are through diversity, by accessingwide range of clean energy sources - both conventional and non-conventional, and byimproving energy efficiency and therefore, thrust is given to all such areas to contributeto a sustainable environment.

Natural gas is strategically important because it releases the least carbon dioxidecompared to other fossil fuels e.g. when used as fuel for power generation, it producesabout half the emissions caused by conventional coal generation. Therefore, the focus onnatural gas continues and remains the mainstay of your Company's business.

Keeping in view the need for developing low carbon economy, your Company has alsostarted investing in low carbon businesses, mainly the renewable energy sources like windand solar power. While a wind power project of 45 MW capacity for captive generation isalready operational, new wind projects for commercial generation are also being planned.Your Company is also foraying into solar power sector and is making necessary tie-ups forthe same.

Your Company is also continuously focusing on improving energy efficiency in itsoperations through use of energy efficient technologies, processes and equipments andthrough close performance monitoring. The details of energy conservations measures takenin 2009-10 and further initiatives towards energy conservation have been taken up whichare likely to yield results in 2010-11 and onwards are given in Annexure-D

CLEAN DEVELOPMENT MECHANISM

Continuing with its philosophy of 'Spreading the Green Energy', your Company has takena conscious decision to incorporate various environment friendly initiatives in its newOffice Building being constructed at Noida. These initiatives will reduce the emissions ofGreen-House-Gases (GHG) from this building compared to a building constructed m thebusiness-as-usual scenario. Therefore, it should be possible to get these initiativesregistered as Projects under Clean Development Mechanism (CDM) for getting CertifiedEmission Reduction (CER) Units. Necessary applications for registering the Projects arebeing submitted to the United Nations Framework Convention on Climate Change (UNFCCC).

HEALTH, SAFETY & ENVIRONMENT- SUSTAINABLE DEVELOPMENT

During the year, enhanced efforts continued to address Health. Safety and Environmentmatters and attain sustainable performance at all workplaces and beyond. Your Company is aresponsible Corporate Citizen and Health, Safety and Environment (HSE) excellence has beenextensively promoted as a corporate culture within the organization. The Safety &Health of employees and external stakeholders are embedded in the core organizationalvalues of the Company. The HSE policy, inter-alia, aims to ensure safety of publicemployees, plant & equipment, ensure compliance with all statutory rules andregulations, imparting training to its employees, carrying out safety audits of itsfacilities, and promoting eco-friendly activities.

To give top most thrust on HSE issues, your Company has constituted a HSE sub-committeeof Board of Directors to review our HSE performance and emergency preparedness.

• Corporate Health, Safety & Environment (HSE) Policy

Your Company is committed to promote globally comparable levels of Health, Safety.Environment and Loss Control in the areas of its business of Exploration and Production ofHydrocarbons, Natural Gas and LPG transmission, Production of LPG, Petrochemicals etc.,with clear emphasis on improving the Environment for Sustainable Development-The safetyand occupational health of its employees and external stakeholders are of paramountimportance and all these attributes are embedded within the core organizational values ofthe organization.

• Safety Performance

In order to achieve excellence in Health. Safety & Environment (HSE) aspects, yourCompany has embraced the principles and codes of best HSE practices in its HSE ManagementSystem. HSE Management System comprises 18 elements, which includes LeadershipsCommitment, Employees' Participation. Facility Design, Construction & Pre-startupSafety Review, Process Safety information. Risk Analysis and Management, Third PartyServices, Personnel Safety, Control of Defeat and Reliability of Critical System andDevices, Work Permit System, Operation & Maintenance, Inspection & Maintenance,Management of Change, Training, incident investigation and Analysis, Occupational Health,Environment Management, Emergency Planning and Response, Compliance Audit.

Your Company continues to demonstrate excellent HSE performance. HSE indices across allits work centers are meticulously monitored with the aim of continual improvement.

• Safety Training

Your Company continues to give utmost importance to train the employees on HSE aspects.Apart from employees, spouses, children, contract workers, tanker drivers, nearbyvillagers etc. are also imparted safety training. New recruited trainees are given oneweek specific HSE training at site.

• External Safety Audits (ESA)

Your Company's safety practices and systems are audited for continual improvement byexternal agencies and inter-unit safety audit teams.

> External Safety Audits During the year 2009 10. safety audits werecarried out by external agencies for 18 O&M base units. Also, building safety auditwas carried out in your Company's corporate office building in Delhi. O&M and TrainingInstitute building at Noida. Major work centers have been certified for integratedManagement Systems (IMS). IMS outlines the standards needed to align with, or conform to.internationally accredited certifications such as ISO 9001 (quality assurance), ISO 14001(environment) and OHSAS 18001 (hearth and safety).

> Inter Unit Safety Audits: During the year 2009-10, inter-unit safetyaudits have been carried out for seven units of GAIL

• Occupational Health

Your Company continued its commitment to improve the well being of its employees.During the year 2009-10, all employees at the work centers were medically examined.Besides, contract workers, CISF personnel, villagers from nearby areas were also coveredunder the program.

CORPORATE SOCIAL RESPONSIBILITY

Your Company has set high standards of discharging Corporate Social Responsibilities(CSR). The CSR allocation has been enhanced from the current financial year from 1% to 2%of profit after tax of the previous financial year for CSR programmes. CSR allocations areused for economic, environmental and social upliftment of communities in and around thework centers in the major thrust areas such as Community Development, Infrastructure,Drinking water/Sanitation, Literacy Enhancement/Empowerment, Educational Aids, andHealthcare/Medical. Besides specific social welfare programmes, the CSR funds are alsoused to provide relief to victims of national calamities. Major initiatives undertaken byyour Company under these thrust areas are detailed in a separate part of this AnnualReport.

HUMAN RESOURCE

Your Company's industrial relations climate remained congenial and constructive. Therewere no Man Days or Man Hours lost on account of any sort of Industrial conflict. Therewas no incident of Strike/ Gherao/ Assault etc

Following Major Human Resource (HR| Initiatives marked the company's progress onEmployee's compensation, welfare and development front:

1. Revision of Pay Scales for Board Level and below Board level Executives

2. Initiation of process of comprehensive review of HR/ HRD Policy Framework

3. Review of Performance Management System (PMS) for Executives

4 Review of Induction level for Executive Trainees

5. implementation of Performance Related Pay (PRP)

6. Completion of Annual Placement and Departmental Promotion Exercises by 31st March,2010.

• Training Initiatives

Oil & Gas industry, has been witnessing a rapid growth & development, both atthe domestic, as well as global frontiers. Your Company is also implementing various newprojects to strengthen Company's presence across the entire gas value chain. With newtechnological developments and phenomenal expansion taking place in the hydrocarbonsector, need of the industry is changing from merely acquiring the latest state of the arttechnologies and equipment to engaging qualified personnel suitably equipped withknowledge, skills, attitude and a practical exposure to the highly specialized jobs. YourCompany has ISO 9001 certified GAIL Training Institutes (GTls) at Noida & Jaipur andis consistently working towards development of Human Capital of the Organization.

Training programs are identified by systemizing organizational needs with individualneeds through an e-Performance Management System (e-PMS). further, required orientationare given to Executive Trainees and newly promoted employees at executive levels.

In its pursuit to offer training programs to Indian and oversees companies to convertitself into a revenue generating centre, GTl has successfully organized customizedtraining programs for participants from other reputed organizations like lOCL, RGTIL, SitiEnergy, U.R Fire Service Department etc. Besides, special workshops have also beenconducted within and outside GTl. in line with the specific needs of clients.

Your Company is committed to deliver its best with a team of highly skilled faculty,who possess a blend of academic and practical experience to achieve the statute at patwith other international institutes of repute.

• Women Empowerment

Women employees have a value adding role in the human capital profile of GAIL Amongstthe total 211 women employees, 152 are in the executive cadre and 20 out of these are inthe middle/ senior management positions.

Your Company has instituted 3 Awards for GAIL Women employees for encouraging andrecognizing their best services in the field of (i) Functional Management (ii) CorporateSocial Responsibility and (iii) Corporate Cultural Initiatives. This scheme is known asGAIL Women Employees Award Scheme (GWEAS). The award consists of:

> A Certificate

> A Trophy

> Cash prize of Rs.1.00.000/-

> Citation for each award

These awards are distributed every year on international Women's Day (8th March).

• Representation of SC/ST, OBC, Minorities and Differently Abled

Your Company has been implementing Reservation Polices for SCs / STs / OBCs / Personswith Disability (PH) and accordingly, has been providing employment to the candidatesbelonging to these categories in all Direct Recruitments as per instructions / guidelinesreceived from time to time from the Government, since its inception ie. 16th August, 1984.

The total manpower of the Company as on 31st March. 2010, stood at 3,703. out of which,17.1% belong to SC. 6.72% belong to ST. 17.23% to OBC, 8.44% to Minorities and 2.27% tophysically challenged.

During the year. 220 employees joined the Company and the attrition rate has gone downto 0.69% as against from 0.96% for FY 2008-09.

• Vigilance Function

Your Company has organized Vendor Interaction Programme/issues/ Apprehensions raised bythe vendors were addressed, suggestions made by the vendors were given due considerationafter deliberation by the Management.

CVC's thrust on leveraging of technology for improving vigilance administration havebeen implemented and the steps taken by your Company includes application forms andcomplete information regarding registration of contractors / suppliers / consultants /vendors is available on your Company's website, vendors can apply online for registration;to ensure transparency and improve efficiency, e-tendering has been implemented since2007. All tenders above Rs. 50 lacs are being processed through e-tendering; status ofbill payments to contractors/ suppliers etc. is available online through the Bill WatchSystem (8WS) of your Company's website. Vendors can monitor the progress of their bills bylogging on to BWS with their unique bill receipt number; to tackle the problem of repeatedqueries in a piece-meal manner, a provision of sending alerts of a file, submitted morethan five times to the same officer(s) has been incorporated in the File MonitoringSystem; all tenders are zero Deviation tenders in order to avoid repeated queries and onlyone time Technical / Commercial Query is being allowed.

All vendors / contractors are required to sign the integrity pact for tenders valuingRs. 1 crore and above. The status of the same is being sent to independent ExternalMonitors (IEMs), persons of repute who were appointed in consultation with CVC.

New initiatives adopted by your Company as per the recommendations of the Vigilanceincludes fixed deposit confirmation from the Banks; publishing your Company tenders onGovt, of India tender website: revised format for annual property returns of employees;online vigilance complaint system; reverse auction; energy balancing in SAP across LPGPlants; online energy reconciliation of LPG Plants across your Company; no bill pendency /file pendency before relieving officers; email alerts on LCs of your Company consumers.

• Official Language

Your Company is continuously making vigorous efforts for the propagation and successfulimplementation of the Official Language Policy of the Union of India. The OfficialLanguage Implementation Committees at Corporate as well as Regional / Unit level heldtheir quarterly meetings regularly to monitor and review the progress made in achievingthe targets fixed in the Annual Programme.

in an endeavour to familiarize the new entrants in the Company with Official LanguageAct and various rules, training to Executive Trainees and Graduate Engineer Trainees isbeing imparted at induction level and special 2-days' training programmes for newlypromoted employees from S7 to El and E2 grades, have been designed and implemented atcorporate level, besides other regular workshops at all the work centers.

With a view to create greater awareness and consciousness among employees, HindiFortnight was celebrated from 14th to 28th September, 2009 across the Company, in order toinvolve families of Company's employees, various competitions were also conducted forthem.

Bilingual softwares were provided across the Company. To impart working knowledge ofHindi as well as computer training to employees in bilingual software, a comprehensive andtime bound programme was prepared and implemented during the year.

"Rajbhasha Sahyog", a quarterly Hindi magazine, was published and distributedamong employees in order to create interest among employees of your Company and theirfamily members towards reading and creative writing in Hindi.

RESEARCH AND DEVELOPMENT

Research in energy technologies is important for efficient exploitation of indigenousenergy resources, it is of utmost importance to have a strong set-up. of R&D. In thelight of expanding and growing importance of natural gas in the country's energy mix,R&D and technology development efforts in the natural gas sector assumes an importantdimension.

Your Company has reconstituted R&D with a vision and mission with improved focusand purpose on development and assimilation of technologies in the gas & alternateenergy sector. As a long term strategy, to carry out R&D projects, your Company hasenvisaged a judicious and healthy mix of 'ln-house' & 'Outsourced' strategy, whichshall lead to short gestation period of research project: and retaining of intellectualProperty Rights (IPR) for owning the technology developed. Your Company Is envisagingR&D pilot project for Landfil Gas harnessing at Ghazipur, Delhi, for recovering energyfrom municipal solid waste in association with Municipal Corporation of Delhi.

Your Company has identified the following thrust areas for R&D activities:

Short Term:

• Energy from waste;

• New polymer grades.

• Alternate fuels:

• Compact and energy efficient storage;

• Coal to Gas/Liquid.

Long Term:

• Non Conventional Energy;

• Commercialization of Futuristic fuels;

• Value addition ofnaturalgas.

LAURELS

During the year under review, continuing the past trend, your Company was proudrecipient of several awards. Some of the significant awards conferred upon your Companyare as under:

• Corporate Awards

> SCOPE Corporate Governance Award for 2007-08 for excellence in propagation andimplementation of Corporate Governance practices. Her Excellency, Smt. Pratibha DevisinghPatil. Hon'ble President of India, gave away the award to CMD, GAIL, in a glitteringfunction held in Vigyan Bhawan in the month of April 2010.

> Dahej-Panvel-Dabhol pipeline project awarded 3rd position in IPMA projectexcellence award 2009

> International Safety award from British Safety Council.

> India Pride Awards - Silver Award in the Oil & Gas category

> Platts Top 250 - Ranked 148th during 2009 and 5th among utility companies.

> India's most customer responsive company in the manufacturing category by theAvaya Global Connect.

• HSE Awards

During the year 2009-10, your Company has been awarded several covetedawards/appreciation for its excellent performance in HSE. Some of the significant awardsconferred upon your Company are as under:

> Three top awards from Oil Industry Safety Directorate for Gas Processing Unit,Vijaipur (First). Auraiya (Second) and cross country pipeline for HVJ Pipeline (First).

> Safety innovation award for 9 units from Institution of Engineers toVijaipur, vaghodia. Gandhar, Khera, JLPL (Mansarampura and Nasirabad), Agra. MaharasthraRegion pipeline, Usar unit.

> International Safety award from British Safety Council for our units at Pata,vijaipur, Gandhar, vaghodia, Lakwa and Rajamundry.

> Golden Peacock Award for Occupational Health & Safety from Institute ofDirectors to Hazira Gas Compressor Station.

> Golden Peacock Environmental Management Award to Gandhar Plant.

> Shreshta Suraksha Puraskar for 2008 from National Safety Council to Vijaipur LPGPlant and HVJ Compressor Stations.

> Prashansa Patra from National Safety Council, Mumbai to GPU Gandhar and MumbaiRegion pipeline.

> Gujarat State Safety Award- 2008 from Gujarat Safety Council to Baroda unit.

> Certificate of appreciation from Gujarat Safety Council to Vaghodia LPG Plant.

> Amity Corporate Excellence Award for Health & Safety Practices duringInternational Business Summit (INBUSID) being organized on 24th Feb, 2010.

> Greentech Silver Award for outstanding achievement in the safety managementfor the year 2010 to Agartala unit.

• Others

> Best customer friendly company by Economic Times

> PSU wealth creation by Dalai Street Journal

RIGHT TO INFORMATION

In order to promote transparency and accountability, an appropriate mechanism has beenset up across the Company in line with the Right to Information Act, 2005. Your Companyhas nominated APIOs/PIOs/CPlO at its units/offices across the country to provideinformation to citizens under the provisions of RTI Act.

MANAGEMENT DISCUSSION AND ANALYSIS

The detailed Management Discussion and Analysis form part of this report at Annexure-A.

CORPORATE GOVERNANCE

Your Company believes Corporate Governance is at the root of shareholder's valuecreation. Pursuant to clause 49 of the Listing Agreement with the Stock Exchanges, areport on Corporate Governance forms part of this Report at Annexure- B.

The statutory auditors of the Company have examined and certified your Company'scompliance with respect to conditions enumerated in clause 49 of the Listing Agreement andOPE guidelines on Corporate Governance. The certificate forms part of this Report atAnnexure- C.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION

Details of conservation of energy, technology absorption in accordance with Companies(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are annexed atAnnexure- D.

PARTICULARS OF EMPLOYEES UNDER SECTION 217 (2A) OF THE COMPANIES ACT, 1956

In terms of the provisions of section 217(2A) of the Companies Act. 1956. read with theCompanies (Particulars of Employees) Rules, 1975 as amended, the names and otherparticulars of the employees are required to be set out in the annexure to the Directors'Report. However, having regard to the provisions of section 219(1)(b)(iv) of the said Act,the Annual Report excluding the aforesaid information is being sent to all the members ofthe Company and others entitled thereto. Any member interested in obtaining suchparticulars may write to the Company Secretary at the registered office of the Company.

There were a total 144 employees, who were employed throughout the financial year2009-10 and in receipt of remuneration which, in the aggregate, was not less than Rs. 24lac p.a. Further, there were a total of 51 employees, who were employed for part of thefinancial year 2009-10 and in receipt of remuneration which, in the aggregate, was notless than Rs. 2 lac p.m.

FIXED DEPOSITS

Your Company has not accepted any Fixed Deposits and. as such, no amount of principalor interest was outstanding as of the balance sheet date.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year, foreign exchange earnings were Rs. 5.67 crores. Expenditure in foreigncurrency was Rs. 1.91355 crores.

During the year under review, your Company has incurred expenditure of Rs. 1.79 croreson foreign tours, foreign training, seminars & conferences, Rs.0.11 crores onentertainment and Rs. 13.33 crores on advertising & publicity.

DIRECTORS

Shri B.C. Tripathi. then Director (Marketing) was appointed as Chairman and ManagingDirector in place of Dr. U.D. Choubey w.e.f. 01.08.2009. Shri Mahesh Shah. Shri R.M. Sethiand Dr.Vinayshil Gautam were appointed as non-official part-time (independent) Director inplace of Dr. Amu Mitra and Dr. A.K. Kundra w.e.f. 11.08.2009. Shri S.L. Raina wasappointed as Director (HR) w.e.f. 19.08.2009. Shri A.K Purwaha, then Director (BusinessDevelopment) ceased to be a Director w.e.f. 30.09.2009. Shri S. Sundareshan, SpecialSecretary. MoPNG on his appointment as Secretary, MoPNG ceased to be Director w.e.f.01.02.2010. Shri Prabhat Singh was appointed as Director (Marketing) w.e.f. 24.02.2010 andShri Sudhir Bhargava, Additional Secretary, MoPNG was appointed as Director w.e.f.15.03.2010.

The Board placed on record its deep appreciation for the valuable services rendered byDr. U.D. Choubey, Shri A.K. Purwaha, Shri S. Sundareshan. Dr. Amit Mitra and Dr. A.K.Kundra during their association with your Company.

CODE OF CONDUCT

in line with the requirements of clause 49 of Listing Agreement, the Board Members andSenior Management Personnel, have affirmed compliance with the Code of Conduct for thefinancial year ending 31st March, 2010.

DIRECTORS' RESPONSIBILITY STATEMENT PURSUANT TO SECTION 217 (2AA) OF THE COMPANIES ACT,1956

Pursuant to the requirements of section 217(2AA) of the Companies Act. 1956 in relationto Directors' Responsibility Statement, it is confirmed that:

i) in the preparation of the annual accounts for the financial year ended 31st March,2010, the applicable accounting standards have been followed along with proper explanationrelating to material departures;

ii) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit of the Company for the year under review;

iii) the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act, 1956for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

iv) the Directors have prepared the annual accounts for the financial year ended 31stMarch, 2010 on a going concern basis.

AUDITORS

• Statutory Auditors

The Statutory Auditor of your Company is appointed by Comptroller & Auditor Generalof India (C&AG). MA Mehra Goel & Co.. Chartered Accountants, New Delhi and M/sRasool Singhal & Co., Chartered Accountants, Aligarh were appointed as joint statutoryauditors of your Company for the FY 2009-10. The C&AG has appointed M/s ML Pun &Co. Chartered Accountants, New Delhi and M/s Rasool Singhal & Co. CharteredAccountants, Aligarh as joint statutory auditors for FY 2010-11.

M/s S.C.J. Associates, Branch Auditors of Pata and M/s Rupa Sekhar & Associates,Branch Auditors of LPG ceased to be the Branch Auditors of the Company.

The review of Annual Accounts of your Company for the year ended 31st March, 2010 byC&AG forms part of this report as an addendum. Notes on accounts referred in theAuditors' Report are self explanatory and therefore, do not call for any further comments.

• Cost Auditors

Pursuant to the directions of the Central Government for audit of cost accounts, yourCompany has appointed M/s R.l.Goel & Co., Delhi for Vijaipur- LPG, M/s Ramnath Iyer& Co. New Delhi for Pata - LPG. M/s K.G.Goyal & Co., Jaipur for Vaghodia -LPG, M/sShome & Banerjee, New Delhi for Gandhar - LPG, M/s K.Narsimhma Murthy, Hyderabad forUsar - LPG, M/s Bandyopadhyaya & Bhaumik & Co., Kolkata for Lakwa -LPG and M/sR.M.Bansal & Co.. Kanpur for CNG Station, Baroda as Cost Auditor(s) for the year ended31st March, 2010.

ACKNOWLEDGMENT

Your Directors acknowledge their gratitude for the valuable guidance and supportreceived from Government of India in particular the Ministry of Petroleum and Natural Gasand various State Governments, regulatory and statutory authorities from time to time

Your Directors also acknowledge the constructive suggestions received from StatutoryAuditors and Comptroller & Auditor General of India and are grateful for theircontinued support and cooperation.

Your Directors thank all share-owners, bankers, financial institutions, businesspartners and members of the GAIL family for their faith, trust and confidence reposed inyour Company and appreciates the contribution of contractors, vendors and consultants inthe implementation of various projects of the Company.

Your Directors would like to place on record as appreciation to the hard work,commitment and unstinting efforts put in by your Company's employees at all levels toensure that your Company continues to grow and excel.

A. CONSERVATION OF ENERGY

(a) Energy conservation measures taken

1. Switching over of CCVT/TEG power to Grid Power: CCVT/TEG has been replaced by gridsupply at some of RR station in JLPL, HVJ & Vadodara resulted in saving of around Rs.41 lacs.

2. Installation of aerodynamic FRP fan blades in Cooling Towers: Replacement of ID fansblades in cooling towers with new efficient high performance FRP blades at GPU Vijaipurresulting in annual saving of 314503 KWH/annum which corresponds to Rs. 15.72 lacs/annum.

3. Reduction in specific energy consumption at GPU Vijaipur from 1.210 to 1.205MKcal/MT through process optimization, changes, improvement in production through betterupkeep and maintenance of plant and equipments including Gas Turbines,replacement/re-tubing of heat exchangers in Train -11, replacement of cold insulation,de-riming of Feed gas chiller, change in cooling towers configuration etc This hasresulted saving of around 2521 MKcal with corresponding saving of around Rs. 13.5 lacs.

4. Modification done in lighting system: Optimization, replacement of conventionallighting system by energy efficient lighting like T-5 tube lights, CFL, MH lamps etc.along HVJ, JLPL etc resulting in saving of 1.8 lacs units /annum with corresponding savingof around Rs. 9 lacs.Total estimated savings during year 2009-10 was around Rs. 3.5 lacs.

5. Installation of Energy Efficient UPS: at Jhabua Compressor Station old thyristerisedbased UPS having efficiency of 70% is replaced with energy efficient IGBT based UPS havingefficiency of 90%. This has resulted in saving of around 50578 KWH with correspondingsaving of Rs. 227 lacs.

6. System improvisation: At GPU Gandhar canopy on top of open funnel inside the Cellsof Cooling Tower provided in overflow line to preventing wastage of water at the rate of 1M3/Hr. Total estimated Annual savings are 8640M3 of water. The implementation of schemeresulted in savings of 5088 M3 of water in year 2009-10 with corresponding monetary savingwas around Rs.0.97 lacs.

7. Energy efficiency measures at Vijaipur like optimum sized motor replacement for IAcompressor, star conversion of AHU motor of HVAC room, resulting in Energy saving of 25000KWH/annum with corresponding saving of Rs. 1.3 lacs. Total estimated saving during 2009 10was around 0.72 lacs.

8. Cooling water supply augmentation to CG compressor has resulted in an accruedbenefit of Rs 13.77 crores as additional revenue generation and energy saving. Also theprovision of cooling water supply to Exchanger EE206A from Cooling Tower 3 has givenoperational ease to minimize quench tower overhead gas temperature and thereby savingenergy in CG Compressor.

9. Diversion of Ethylene Boil Off Gas vapors to HDPEI & II has been commissioned inFeb 2010. Diversion of Ethylene Sphere (TS-114) vapors to HDPE-H has given the flexibilityof operation in gas cracker unit by way of diversion of Ethylene vapors in case of trip ofHDPE-I.

10. Diversion of Butene-210 hydrogenated C4 Mix product has accrued a benefit of Rs 1.1crore as additional revenue generation byway of product value addition.

11. Energy efficient coating (Fluiglide) done on internals of the cooling water pumps(5 Nos more pumps in addition to the 4 Nos done last year) has resulted saving of Rs 40.6lacs per annum.

12. By operating 150 no. of 40 W tube light through door limit switch in DCSinstrument panel room, an energy saving of 60225 KWH per annum has resulted in monetarysaving of Rs 1.96 lac

13. Replacement of 40 W conventional tube lights with 28 WT-5 is done along withinstallation of few other efficient lighting systems at the shopping complex of thetownship with an energy saving of 32160 KWH per annum resulting in a monetary saving ofabout Rs 1.04 lac per annum.

14. As a step towards protection of environment, two Nos of 1 KW roof top gridconnected solar photovoltaic power plant has been installed at GAIL DAV Public schoolBuilding as an alternative source of energy to conserve fossil fuel

(b) Additional investments and proposals, if any, being implemented for reduction ofconsumption of energy

1.Installation of solar power system at IP-03 Sone ka Gurja and RR-60 Shiwali in placeof TEG /CCVT.This may result in to saving of around 185800 SCM of gas with correspondingsaving of around 15 lacs.

2. Installation of Capacitor bank at Jhabua to improve the power factor at CompressorStation. Total estimated expenditure is approx. Rs. 5 lacs. Estimated Energy saving perannum will be 10950KWH which corresponds to Rs. 055 lac/annum.

3. Replacement of Heat exchanger in Train-12 at GPU Vijaipur will be taken up duringannual shutdown of unit in May, 2010. This will be effective in further reducing thespecific energy consumption of the GPU Vijaipur due to improved cooling efficiency.

4. Upgradation of Mark-IV control system to Mark-Vl E in Train-12 at GPU Vijaipur forimproving system reliability and efficient GT controls.

5.Improving the existing lighting system by replacing conventional lighting with moreefficient lighting fixtures like T5 tube lights, CFL. Metal Halide etc. at variouslocation of HVJ and JLPL.

6. Flare gas recovery project: This project will recover gases going into flare systemfor utilization in boilers as supplementary fuel The project is under implementation. Withan estimated investment of around Rs. 6 crores, the project would result into fuel savingsof 1.2MT/hr equivalent to around Rs 10.5 crores/ your.

7. A Mist cooling system with an investment of Rs 3.3 crores is approved for executionin EE-806 and EE-807 exchangers of Propylene Refrigeration System (C3R) in GCU to caterthe increased requirement of cooling water during summers (April to Sept) and anadditional revenue generation is envisaged worth Rs. 3.6 crore (equivalent additionalEthylene/ Polymer production) due to this energy conservation initiative.

(c) Impact of the measures at (a) and (b) above for reduction of energy consumption andconsequent impact on the cost of production of goods

Energy conservation measures taken so far have resulted in an improvement in energyefficiency as detailed at (a) and (b) above.

(d) Total energy consumption and energy consumption per unit of production

As per Form A annexed.

B. TECHNOLOGY ABSORPTION

(e) Efforts made in technology absorption As per Form B annexed.

(f) Activities relating to exports; initiatives taken to increase exports; developmentof new export markets for products and services; and export plans

As realization of polymers in domestic market was 7-8 % higher on an average than theexport market. So this activity was not taken up

(g) Total foreign exchange used and earned

During the year under review, your Company has incurred expenditure of Rs. 1.79 croreson foreign tours, foreign training, seminars & conferences, Rs. 0.11 crores onentertainment and Rs 13.33 crores on advertising & publicity.

FORM - A

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

FORM-B

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION

RESEARCH & DEVELOPMENT (R&D)

1. Specific areas in which R&D carried out by the Company

• Initiation of Works towards recovery and commercialisation of Landfill gas (LFG)from Municipal solid waste dumping yard, of MCDat Ghazipur. Delhi.

• Bench scale study of recovering valuable hydrocarbons from Plastic Waste/Lowpolymer wax.

• Entered MoU with MGL & Eden Energy Ltd. for introducing "HYTHANE"fuel (blend of hydrogen and CNG) in public transport system at Mumbai through BEST.

• Exploring the possibility of prospecting insitu Coal /Lignite gasification atBarmer, in Rajasthan using underground coal gasification (UCG) technology.

• GAIL had contributed Rs.16 crore towards Hydrogen corpus fund (HCF) under theaegis OlDB for carrying out hydrogen related research.

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

• LFG recovery and commercialisation shall lead to Green House Gas (GHG)mitigation by preventing (GHG) emission and Conversion of LFG to CNG/PNG. This projectalso enables us to claim carbon credit under clean development mechanism (CDM).

• Recovery of value added hydrocarbons from waste plastic will solve the problemof plastic waste disposal apart from recovering value added products through the twostages catalytic conversion processes.

• Introduction of "HYTHANE" fuel as automotive fuel help to reduce theNOx pollutants apart from improvement in the combustion efficiency of l.C engines intransport sector.

• UCG technology shall enable to recover the unmlneable / unrecoverable high ashcontent, Indian Coal /Lignite in an economically and environmentally viable way as Coalgas insitu condition.

• GAIL shall avail of funding from HCF for carrying out Hydrogen related research.

3. Future plan of action

• Detailed feasibility and project report for establishing Pilot plant for LFGrecovery and commercialisation at Ghazipur, Delhi, shall be earned out with the Technologypartner (Consultant).

• Scale up studies shall be carried out at IIP, Dehradun, for validating the Labscale results/studies for further process upgradation.

• After the necessary statutory clearance from Petroleum and Explosives SafetyOrganisation (PESO), Hydrogen reformer and hydrogen dispenser shall be installed at theidentified BEST Bus depots for introduction of "HYTHANE" and its performanceshall be evaluated.

• Pre-feasibility studies involving site selection and characterisation for UCGpilot plant establishment shall be carried out with M/s Uzbek Coal.

• Hydrogen research proposals with identified research partners/Researchinstitutes shall be submitted to HCF for availing funding.

1. Efforts, in brief, made towards technology absorption, adaptation and innovation

a) MoU entered with M/s Techknow, Chicago for landfill gas extraction andcommercialisation.

b) MoU entered with MGL & Eden Energy Ltd, for introduction of HYTHANE fuel(admixture of Compressed Natural gas and Hydrogen) in Mumbai, BEST transport system,

c) Pre-feasibility study and pilot plant for underground coal/lignite gasification atBarmer, Rajasthan is being planned with M/s Uzbek Coal.

d) Scale up study of recovering valuable hydrocarbons from plastic waste

e) Hydrogen research / fuel cell demonstration/application

f) Development of CNG/ANG storage for two wheelers

2. Benefits derived as a result of the above efforts, e.g., product improvement, costreduction, product development, import substitution, etc.

a) Landfill gas recovery from Municipal solid waste shall lead to GHG mitigation byreduction of Green House Gas emission to atmosphere and realisation of commercialisationof LFG into CNG/PNG.

b) Introduction of "HYTHANE" fuel shall lead to reduction of NOx pollutionand may also improve the efficiency of IC engines in transport sector.

c) Underground coal gasification shall help us to recover the unmineable coal reservesin an economically and environmentally viable way.

d) Hydrocarbon recovery from plastic waste shall provide economic solution to wasteplastic disposable by recovering valuable hydrocarbons.

e) Hydrogen related research & fuel cell projects shall enable GAIL to enter intoHydrogen economy.

f) Development and application of CNG storage for two wheelers shall mitigate the urbanpollution by reducing C02 emissions.

3. In case of imported technology (imported during the last five years reckoned fromthe beginning of the financial year), following information may be furnished:

a. Technology imported

i. HDPE technology from Mitsui chemical Inc., Japan for GAIL Petrochemical complexexpansion for addition of 100 KTA capacity

ii Ethylene cracker technology from SWEC, USA for GAIL petrochemical complex expansionfor addition of 100 KTA ethylene capacity

Comments of the Comptroller and Auditor General of India Under Section 619(4) of theCompanies Act, 1956 on the Accounts of GAIL (India) Limited for the Year Ended 31st March2010

The preparation of financial statements of GAIL (India) Limited for the year ended 31stMarch 2010 in accordance with the financial reporting framework prescribed under thecompanies Act, 1956 is the responsibility of the Management of the Company. The StatutoryAuditor appointed by the Comptroller and Auditor General of lndia under section 619(2) ofthe Companies Act, 1956 is responsible for expressing opinion on these financialstatements under Section 227 of the Companies Act, 1956 based on independent audit inaccordance with the Auditing and Assurance Standards prescribed by their professionalbody. The institute of Chartered Accountants of India. This is stated to have been done bythem vide their Audit Report dated 17 May 2010.

I. on behalf of the Comptroller and Auditor General of India, have conducted asupplementary audit under Section 6l9(3)(b) of the Companies Act, 1956 of the financialstatement of GAIL (India) Limited for the year ended 31 March 2010. This supplementaryaudit has been carried out independently without access to the working papers of thestatutory auditors and is limited primarily to inquiries of the Statutory Auditors andCompany personnel and a selective examination of some of the accounting records. On thebasis of my audit, nothing significant has come to my knowledge which would give rise toany comment upon or supplement to Statutory Auditor's Report under Section 619(4) of theCompanies Act. 1956.