Indian Oil Corporation Ltd

To,

The IndianOil Family of Shareowners,

Dear Members,

On behalf of the Board of Directors, it is my privilege to present to you the 52ndAnnual Report of the Corporation for the financial year ended 31st March 2011, alongwiththe Audited Statement of Accounts, Auditors' Report and the Report on the Accounts by theComptroller & Auditor General of India.

FINANCIAL

SHARE VALUE

CHANGE IN AUTHORISED SHARE CAPITAL

During the year, the Authorised Share Capital of the Corporation was increased from Rs.2,500 crore to Rs. 6,000 crore with the approval of members by a Postal Ballot Process toenable the Corporation to raise finance through the issuance of shares in the future.

DIVIDEND

The Board of Directors of your Corporation is pleased to recommend a dividend of Rs.9.50 per equity share of Rs. 10/- each on the Paid-up Share Capital as against Rs. 13/-per share in the previous year due to lower profits. So far, your Corporation has paid acumulative dividend of Rs. 18,575 crore, excluding a dividend of Rs. 2,307 crore payablefor the current year, subject to the approval by shareholders.

PUBLIC DEPOSIT SCHEME

The Public Deposit Scheme, which was open only for employees and ex-employees of theCorporation, was closed with effect from 31st August 2009. The total outstanding depositswere Rs. 55,000 as on 31.03.2011.

CONTRIBUTION TO EXCHEQUER

Your Corporation has been making enormous contributions to the Exchequer in the form ofduties and taxes. During the year, Rs. 77,622 crore was paid to the Exchequer as againstRs. 57,680 crore in the previous year. In the current year, Rs. 39,658 crore was paid tothe Central Exchequer and Rs. 37,964 crore to the States Exchequer.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standards issued by the Institute of CharteredAccountants of India, your Corporation has prepared the Consolidated Financial Statementsof its subsidiaries and joint venture entities. The highlights of the ConsolidatedFinancial Results are as follows:

(Rs. in crore)

CORPORATE GOVERNANCE

As stipulated under Clause-49 of the Listing Agreement with the Stock Exchanges, theCorporate Governance Report and Management’s Discussion & Analysis Report havebeen incorporated as separate sections, forming part of the Annual Report. YourCorporation also complies with the Corporate Governance guidelines, enunciated by theDepartment of Public Enterprises (DPE), Government of India applicable for GovernmentCompanies. IndianOil also complies with most of the provisions of the voluntary guidelineson Corporate Governance issued by Ministry of Corporate Affairs and would endeavour tocomply with the other provisions that are within the domain of a Government Company.

SECRETARIAL AUDIT

Your Corporation has carried out a Secretarial Audit of its records and documents forthe year 2010-11 as a Good Corporate Governance practice. The Secretarial Audit Reportconfirms that the Corporation has complied with all the applicable provisions of theCorporate Laws, guidelines, rules etc. The Report, duly certified by a practising CompanySecretary, is provided in the Annual Report.

CODE OF CONDUCT

The Board has enunciated a code of conduct for the Directors and Senior ManagementPersonnel of the Corporation, which has been circulated to all concerned and has also beenhosted on the website of the Corporation. The Directors and Senior Management Personnelhave affirmed compliance with the code of conduct as required under the CorporateGovernance guidelines of Clause 49 of the Listing Agreement and DPE guidelines.

Refineries

During the year, IndianOil became the number one refiner in the country after thecapacity expansion at Panipat Refinery (from 12 to 15 MMTPA), taking the group refiningcapacity to 65.7 MMTPA.

IndianOil’s refineries achieved the highest ever crude throughput of 52.96 milliontonnes during the year, surpassing the previous best of 51.37 million tonnes achieved in2008-09. With an overall capacity utilisation of 102% for the year, your Corporation hasbeen consistently maintaining a capacity utilisation of over 100%. This has come in thewake of planned revamp shutdowns for implementation of quality upgradation project in allthe refineries. The optimal operation of secondary units at all refineries, as well asminimizing downtime, has enabled refineries in achieving the highest combined distillateyield of 75.4 wt%.

Pipelines

IndianOil’s pipelines, the largest of its kind in Asia, registered an excellentperformance during the year, recording a quantum leap in its operations with the highestever throughput of 68.52 million tonnes of crude oil and petroleum products as against65.00 million tonnes in the previous year. With the commissioning of new pipelines, thetotal network of product, crude and gas pipelines increased to 10,899 km during the year.

Marketing

We continue to leverage our distribution infrastructure to ensure that our leadershipis maintained. During the year, IndianOil sold over 64.1 million tonnes of petroleumproducts, which is an increase of 2.2 million tonnes over the previous year, registering a4% growth. IndianOil completed the switchover to BS-III & IV compliant transportationfuels across the country well before the deadline of 1st Oct. 2010. Your Corporationcommissioned 900 new retail outlets, including 575 Kisan Seva Kendra (KSK) outlets duringthe year, taking the total tally to 19,463 Retail Outlets.

During the year, your Corporation enrolled about 46.8 lakh new Indane LPG customers andcommissioned 245 new Indane distributors taking their total to 618.3 lakh and 5,311respectively. The LPG Bottling capacity was enhanced to 5,518 TMTPA with capacity additionof 326 TMT during the year. In order to provide LPG to rural India, your Corporationcommissioned 145 distributors under the Rajiv Gandhi Gramin LPG Vitaran Yojana under theauspices of Ministry of Petroleum & Natural Gas. As a part of our CSR activity, 10,052new connections were released to BPL families.

Your Corporation achieved 4.2% growth (17 TMT) of finished lubes during the year2010-11 with a growth of 6.9% in Retail lube and 2.8% in Institutional lube business overthe previous year. IndianOil continues to be the market leader in the aviation fuelbusiness with a market share of 61.7% and enjoys leadership in all segments like Domesticairlines, International Airlines and Defence services.

ASSAM OIL DIVISION/IBP

The Digboi Refinery of Assam Oil Division (AOD) plays a vital role in ensuring thesupply of petroleum products in east Assam. The refinery processed 0.65 million tonnes ofcrude oil during the year and sold about 1.2 million tonnes of products through itsextensive network retaining our position as a market leader in the region. Our IBPDivision, which comprises of explosives and cryogenic businesses, earned a revenue of Rs.182.72 crore during the year registering a growth of 13% over the previous year.

RESEARCH & DEVELOPMENT

IndianOil developed 132 new product formulations during the year, of which more than85% were commercialised. During the year, 46 Original Equipment Manufacturers (OEMs)approvals and defence certifications were obtained. Dual mode de-asphalting technology wasdeveloped to enhance Refinery Distillate Yield using LPG as a solvent. A multi-feedfluidized bed gasification pilot plant was commissioned to support research in the area ofGas to Liquid conversion. During the year, 12 Patents were filed in India out of which twohave been granted. In addition, two Patents in US, one in France and one in Russia weregranted. IndianOil’s Bio-remediation Technology – Oilivorous S was utilised fortreating oil spills at marine locations caused by collision of ships off Mumbai coast.

PROJECTS

The timely execution of Projects is a priority for your Corporation and multifunctionalteams constantly monitor them to prevent cost overruns. Our project teams have beenensuring that construction and commissioning of the projects are done seamlessly. YourCorporation’s project management expertise is widely acclaimed by the oil industry.The list of the various completed, ongoing and upcoming projects is as under:-

Completed Projects

• Capacity Augmentation of Panipat Refinery to 15 MMTPA.

• Residue Upgradation & MS/HSD quality improvement project at GujaratRefinery.

• MSQ Improvement Projects at Guwahati, Barauni and Digboi Refineries.

• Flare Gas Recovery facilities at Panipat and Gujarat Refineries.

• Mathura- Bharatpur spur Pipeline.

• Branch Pipeline to Hazira from Koyali- Dahej Pipeline.

• Automation of various product storage terminals.

• Automation of 300 Retail Outlets.

Ongoing Projects

• 15 MMTPA grassroot refinery at Paradip, Orissa.

• Capacity Revamp of FCCU at Mathura from 1.3 to 1.5 MMTPA.

• Coke chamber replacement & DCU modernisation at Guwahati Refinery.

• Use of Natural Gas in balance four GTs at Panipat Refinery.

• Installation of 6th Gas Turbine along with HRSG at Gujarat Refinery.

• Butadiene Extraction Unit (BDEU) at Panipat Refinery.

• Additional Sulphur Recovery Unit & Sulphur Pelletising Unit at MathuraRefinery.

• MS Quality Improvement Project and Diesel Hydrotreater (DHDT) Project atBongaigaon.

• Construction of tanks and blending facility at Vadinar.

• Branch pipeline from Viramgam to Kandla.

• Debottlenecking of Salaya- Mathura Pipeline.

• Integrated Crude Oil handling facilities at Paradip.

• Paradip-Haldia-Durgapur LPG Pipeline.

• Modernisation of Lube Blending plant and Lube Complex at Mumbai.

• Additional tankage facilities at various storage locations.

• LPG Marketing Terminal at Paradip.

Upcoming Projects

• Distillate Yield Improvement project at Haldia Refinery.

• INDMAX project at Bongaigaon Refinery.

• Mundra-Viramgam Crude Oil Pipeline.

• Augmentation of Paradip- Haldia- Barauni Pipeline.

• LPG Pipeline from Kandla to Panipat.

• Augmentation of Salaya-Mathura Pipeline.

EXPANDING BUSINESSES

Your Corporation has a participating interest in 23 blocks which includes 13 domesticand 10 overseas blocks in Libya, Yemen, Nigeria, Iran, Gabon, Timor-Leste and Venezuela.The year marked a major step in efforts of your Corporation to build E&P operatorcapabilities as operator activities were initiated in Cambay blocks. In the Mahanadioffshore block, the commerciality of gas discovery made earlier was accepted by DirectorGeneral of Hydrocarbons. During the year, formalities relating to the heavy oil project inCarabobo region of Venezuela were finalized with the execution of all contract documentsand publishing of the Transfer Decree in the official gazette of Venezuela.

The year saw the commencement of gas supplies to Panipat Refinery through theCorporation’s first gas pipeline between Dadri and Panipat, which was commissioned inJuly, 2010. In a bid to scale up its gas infrastructure, a 5 MMTPA LNG Import &Re-gassification Terminal Project has been planned at Ennore, Tamil Nadu. A consortium ofIndianOil, GSPC, HPCL & BPCL emerged as a successful bidder for the threecross-country Gas Pipeline bids invited by the Petroleum & Natural Gas RegulatoryBoard (PNGRB).

During the year, the total sales volume of Linear Alkyl Benzene (LAB) was 124 TMT,which includes domestic sales of 107 TMT and export sales of 17 TMT. LAB is now beingexported to 20 countries in six continents. The LAB unit at Gujarat Refinery achieved acapacity utilization of 105% during the year. Sale of 447 TMT of PTA was made to domesticcustomers, covering all major manufacturers of Polyester Film and PET. Aggressivestrategies are in place to achieve a significant growth in sales in 2011-12.

During the year, sales commenced from the Naphtha Cracker and downstream polymer unitsof Panipat Refinery for catering to domestic as well as international markets. Polymersales of 217 TMT were achieved during the year including export of 8 TMT to eightcountries. 38 Del Credre Associates cum Consignment Stockists for the domestic market and3 Overseas Commission Agents one each in Nepal, Pakistan and Bangladesh were appointedduring the year for Polymer Marketing. Your Corporation has become the largest supplier ofMono Ethylene Glycol (MEG) in the domestic market with a monthly supply ranging between16,000 – 22,000 MT. Glycols sales of 151 TMT was achieved during the year.

During the year, IndianOil continued with its long standing Technical ServicesAgreement (TSA) and Manpower Secondment Agreement (MSA) with Emirates National Oil Company(ENOC). Under the TSA, IndianOil provided consultancy services for carrying out thede-bottlenecking feasibility study of LPG Amine Treatment and Regeneration facilities atENOC’s condensate Refinery in Dubai.

Exploring Energy Alternatives

With the success of its first Wind power project of 21 MW in Gujarat, your Corporationis considering further investments in Wind power projects. During the year, theCorporation won a bid for setting up a 5 MW Solar Photo Voltaic power plant in Rajasthanunder the Jawaharlal Nehru National Solar Mission. IndianOil’s endeavour to providegreen energy solutions in the rural areas through its vast rural Kisan Seva Kendra (KSK)network began in 2009 with the launch of Solar LED Lanterns. During the year, more than30,000 solar lanterns were sold through its KSK outlets. During the year, a joint venturecompany was formed with Nuclear Power Corporation of India Ltd. (NPCIL) for setting upNuclear power plants.

Your Corporation has bio-diesel (Jatropha) plantation projects in three states, viz.Chhattisgarh, Madhya Pradesh and Uttar Pradesh. Further, efforts are on for exploringsecond generation bio-fuels with the Corporation’s R&D Centre activelyundertaking research on the production of second generation Bio-Diesel from Algae, incollaboration with International Research Agencies.

Supply Chain Optimisation – Leveraging Information Technology

Your Corporation imported 50.440 million tonnes of crude oil and 5.568 million tonnesof petroleum products during the year, amounting to Rs. 1,45,983 crore and Rs. 19,565crore respectively, to meet its requirements through a carefully selected and diversifiedmix of supply sources. IndianOil also exported 4.988 million tonnes of petroleum andpetrochemical products worth Rs.16,781 crore, during the year. In order to monitorday-to-day key parameters, a web based portal which provides vital information like stockposition and prices of crude and products, marketing and pipelines operations waslaunched. Optimisation efforts helped in better planning, execution and taking correctiveactions to maintain supply chain in an optimal manner, keeping corporate profitabilityunder consideration. Your Corporation has commissioned a state-of-the-art BusinessContinuity Centre at Bengaluru which would ensure SAP service availability at all times.

Human Resource

The Corporation’s employee strength as on March 31, 2011 was 34,105 including14,497 officers. There are 2,637 women employees, constituting 7.73% of the totalworkforce. A Memorandum of Settlement (MoS) on pay revision for workmen was signed withall the 23 recognised unions on 29th July, 2010. The pay revision has been implemented forworkmen in accordance with the policy of the Department of Public Enterprises (DPE).

The industrial relations climate in the Corporation remained peaceful and cordialduring the year. IndianOil has always supported a participative culture in its managementthrough a consultative approach with the collectives by establishing harmonious relations.Your Corporation’s efforts to promote employees’ participation in variousactivities such as Collective bargaining, Suggestion Scheme, Quality Circles, Welfare,Total Productive Maintenance, Mentoring etc. were continued during the year.IndianOil’s suggestion scheme has contributed immensely to productivity,profitability and safety as well as in many other areas of excellence across theorganisation.

In order to harness the full potential of human resources, IndianOil continues to alignits HR strategy with the organisational strategy. An enterprise wide manpower study forthe executives has been undertaken to carry out scientific workforce planning to establishnorms for manpower positioning and developing a staffing dashboard for theexecutive’s future use. To strengthen our leadership pipeline and making our leadersfuture ready, a separate study on succession planning is under consideration. In order toimprove the quality of talent at the entry level and to simplify the recruitment system,your Corporation had introduced the concept of utilising Graduate Aptitude Test inEngineering (GATE) score, which has proved successful.

IndianOil Institute of Petroleum Management (IiPM), the apex learning institute, hasplanned and conducted new online programmes for non-finance Executives in financialmanagement skills, in association with U-21 Global Universitas, Singapore and also onSustainable Development including Energy Efficiency, Emission Mitigation etc.

Your Corporation has been scrupulously following the Presidential Directives and otherguidelines issued by the Ministry of Petroleum & Natural Gas and the DPE from time totime, regarding reservation in services for Scheduled Castes, Scheduled Tribes, PhysicallyChallenged and OBCs. It has been the endeavour of your Corporation to utilise 25% ofCommunity Development funds towards the Special Component Plan (SCP) and the Tribal SubPlan (TSP), for meeting the needs of the weaker sections. The Presidential Directives andother guidelines issued by the Government of India with regard to reservation in servicesare meticulously followed by your Corporation. A report relating to representation ofSCs/STs, in the prescribed proforma - SC/ST/OBC Report-I and SC/ST/OBC Report-II, isannexed.

Your Corporation has been diligently implementing the provision of 3% reservation forphysically challenged and disabled persons as per the Disabilities Act, 1995. With theenactment of the above Act w.e.f. 7.2.96, the reservation for Physically Handicappedpersons has been extended to Group 'A' and 'B' posts as well. In compliance with theOfficial Language Act, 1963, Official Language Rules, 1976 and orders issued by theGovernment of India from time to time, efforts were continued during the year to enhancethe progressive use of Hindi in official work. The Official Language ImplementationCommittees functioning at IndianOil units regularly review the progress of implementationof official language policies and the annual programme as circulated by the Department ofOfficial Language, Ministry of Home Affairs.

Foreign Tours

IndianOil officers undertook a total of 416 foreign tours during 2010-11 for businesspurposes, including for attending conferences, seminars and training programmes. The totalexpenditure on foreign tours was Rs. 6.80 crore.

Vigilance

In order to ensure maintenance of the highest level of integrity throughout theCorporation, the Vigilance group carries out preventive and punitive functions withgreater emphasis on the preventive aspect. During the year, 49 Vigilance AwarenessProgrammes were conducted. A training programme on ‘Fostering Ethical Managementthrough Vigilance’ was organised on an all India basis. A large number of jointsurprise inspections were conducted, along with the oil industry, on the dealers /distributors network to check Quality & Quantity. Under the MoU with TransparencyInternational, IndianOil is committed to implementing the Integrity Pact in all its majorprocurement activities to further enhance transparency in all its transactions.

Partnering Social Progress

Your Corporation is committed to global benchmarks in Corporate Governance, coveringthe full gamut of Sustainable Development, Safety and Conservation. The Board of theCorporation had constituted a Committee of Directors for Corporate Social Responsibility,to monitor the overall functioning as well as guide and suggest improvements in our CSRactivities in consonance with IndianOil’s Vision Statement and CSR Policy.

Starting with community development programmes for SC/ST communities in the vicinity ofour major installations, our Corporate Social Responsibility Programme has also growntowards a strategic alignment with the business goals as well as the sustainable growth ofthe Corporation. Your Corporation envisions a greater societal role in the future toaccomplish the cherished goal of a truly developed India, where all sections of citizenslive with dignity. Our strong commitment is reflected in our Corporate SocialResponsibility policy, which allocates 2% of retained Profit of the previous year, towardsCorporate Social Responsibility activities. IndianOil has provided common LPG kitchenfacilities in villages and released grants to BPL families availing of new LPGconnections, under the Rajiv Gandhi Gramin LPG Vitaran Yojana.

During the year, the fund allocation towards IndianOil Educational Scholarships meantto benefit deserving poor students was increased from 450 to 2,600. The number of SportsScholarships to promising young sportspersons has also been increased from 77 to 150scholarships. IndianOil’s sportspersons continued to excel in national andinternational sporting events in various disciplines during the year. Three of ourScholarship players represented India in athletics in the Commonwealth Games 2010, AsianGames and Asian Junior Championship.

The IndianOil Rural Mobile Healthcare Scheme has been developed on a pan-India basis toincrease the reach of medical services in the rural areas. The scheme is proposed to beimplemented through IndianOil’s Kisan Seva Kendras (KSKs) as a pilot project inAndhra Pradesh, Assam and Uttar Pradesh and will eventually cover all major KSKs.

IndianOil responds proactively to provide aid and relief to the victims of naturalcalamities like floods, tsunami, earthquake, cyclones etc. IndianOil also contributes tonational causes for the benefit of the nation like setting up educational institutions ofnational importance (Rajiv Gandhi Institute of Petroleum Technology), NationalChildren’s Fund, Jansankhya Sthirtha Kosh etc.

During the year, IndianOil constructed 50 pre-fabricated houses for the rehabilitationof people affected due to a cloudburst on 5th & 6th August, 2010 in the Leh Valley.The IndianOil Foundation (IoF), a non-profit Trust, was formed to protect, preserve andpromote National Heritage sites in collaboration with the Archaeological Survey of India,NGOs of repute (ASI) and the Nature Culture Fund (NCF) of the Government of India.Presently, the IoF has undertaken various projects for the development of tourist friendlyfacilities at Konark Sun Temple(Orissa), Khajuraho (Madhya Pradesh), Kanheri Caves(Maharashtra), Warangal Fort (Andhra Pradesh) and Vaishali (Bihar). At Konark, thedevelopment of tourist friendly facilities like interpretation centre, main avenue,landscaping, parking etc. will be executed in due course.

IndianOil continued to make a positive impact to the underprivileged communities in andaround our major installations, by supporting a wide range of socioeconomic initiatives,like providing Clean Drinking water, Health & Medical Care and Education. Ourcommunity development activities, in the vicinity of our major installations, areundertaken with a special emphasis on welfare of Scheduled Castes and Scheduled Tribes,under the Special Component Plan (SCP) and Tribal Sub-Plan (TSP) respectively. Some of theactivities undertaken under the Tribal

Sub-Plan include initiatives for non-formal education for tribals, providinginfrastructure for schools in tribal areas etc.

The fifth edition of our Sustainability Report for 2009-10, called "EnduringOfferings", was published in the current year conforming to the "GlobalReporting Initiatives-G3" guidelines. During the year, a pilot environmentalfoot-printing exercise on Carbon, Water and Waste was carried out at seven representativelocations of the Corporation.

Your Corporation accords high priority to conduct business in a safe andenvironmentally sustainable manner to ensure incident free operations at its various unitsand locations. Audits for increased reliability and continuous improvement of safety,environment management, health and hygiene system were conducted during the year. ACommittee of the Board on Health, Safety and Environment periodically reviews the HSEactivities of the Corporation. Several capability building workshops and trainingprogrammes on safety topics were conducted at various levels. Rainwater harvesting schemeswere implemented and extensive tree plantation was carried out at IndianOil installationsacross the country.

Your Corporation continuously gives thrust on oil conservation at all of its refineriesand other units, through extensive performance monitoring and keeping abreast with latesttechnological developments and best practices. As a result of various energy conservationmeasures undertaken, the energy index in terms of MBN* of IndianOil refineries during theyear is down to 59, which is the best ever achieved, as against the energy index of 62 inthe previous year. The Energy conservation schemes implemented during the year resulted infuel savings to the tune of about 93,600 Standard Refinery Fuel Tonne (SRFT) per annum,valued at about Rs. 240 crore. *MBN–Thousand British Thermal Unit / Barrel / EnergyFactor (MBTU/BBL/NRGF)

Remuneration to the Auditors

The Auditors’ remuneration for the year 2010-11 has been fixed at Rs. 75.50 lakhplus applicable service tax. In addition to this, reasonable out-of-pocket expensesactually incurred are also reimbursable.

Cost Audit Report

In accordance with the directives of the Central Government, Cost Auditors wereappointed for conducting a cost audit of IndianOil’s Refineries and Lube BlendingPlants for the year 2010-11. The Cost Audit for the year 2009-10 was also carried out forthe refineries and lube plants and the Cost Audit reports were filed by the Cost Auditorswith the Central Government between 17th Sept. 2010 and 23rd Sept. 2010 i.e. within theprescribed time period of 180 days from the close of financial year 2009-10.

Entertainment Expenses

The entertainment expenses for the year 2010-11 were Rs. 2.34 crore as compared to Rs.2.23 crore last year.

Subsidiaries

The financial performance of following subsidiaries of the Corporation during 2010-11is as under :-

(Rs. in crore)

Report on Energy Conservation, Technology Absorption and Foreign Exchange Earnings

In accordance with the Company's (Disclosure of Particulars in the Report of Board ofDirectors) Rule, 1988, a report on Energy Conservation, Technology Absorption and ForeignExchange earnings and outgo is annexed.

Particulars of Employees

The particulars of employees pursuant to Section 217(2A) of the Companies

Act, 1956 and Rules framed thereunder are annexed.

Board of Directors

The following Directors ceased to be Directors on the Board of the Corporationconsequent upon their superannuation / completion of term:

• Shri V.C. Agrawal, Director (Human Resources) on 31.07.2010.

• Shri B.M. Bansal, Chairman & Director(Plng.& BD) on 31.01.2011.

• Shri S.V. Narasimhan, Chairman & Director (Finance) on 30.04.2011.

The following Directors were appointed on the Board of the Corporation:

• Dr. R.K. Malhotra, Director (Research & Development) w.e.f. 05.08.2010

• Shri Sudhir Bhalla, Director(Human Resources) w.e.f. 27.10.2010

• Shri R.S. Butola, Chairman w.e.f. 28.02.2011

• Shri A.M.K. Sinha, Director (Planning & Business Development) w.e.f.16.03.2011

• Shri P. K. Goyal, Director (Finance) w.e.f. 02.05.2011.

• Shri Sudhakar Rao, Independent Director w.e.f. 30.05.2011.

Directors’ Responsibility Statement

Pursuant to the requirement under the new Section 217(2AA) of the Companies Act, 1956with respect to Directors’ Responsibility Statement, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended 31stMarch 2011, all applicable accounting standards have been followed along with properexplanations relating to material departures;

(ii) that the Directors had selected such accounting policies and applied themconsistently and made judgements and estimates that were reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit or loss of the Company for the year under review;

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

(iv) that the Directors had prepared the accounts for the financial year ended 31stMarch, 2011 on a ‘going concern’ basis.

ACKNOWLEDGEMENTS

The Board of Directors places on record its deep appreciation of the valuable servicesand dedicated efforts of the members of the IndianOil family in the Corporation’sachievements during the year 2010-11. The Board also wishes to thank the Government ofIndia, particularly the Ministry of Petroleum & Natural Gas, and the various StateGovernments, regulatory and statutory authorities for their valuable guidance and support.The Board is also grateful to the Corporation’s bankers, investors, customers,consultants, technology licensors, contractors and vendors for their continued support andconfidence reposed in the Corporation. The Board wishes to place on record itsappreciation for the commendable performance and significant contribution made by ShriB.M. Bansal, Shri S.V. Narasimhan and Shri V.C. Agrawal during their tenure on the Board.

Annexure-I

Annexure to Directors’ Report on Energy Conservation, Technology Absorption andForeign Exchange Earnings as per Companies (Disclosure of Particulars in the Report ofBoard of Directors) Rules 1988.

a) Energy conservation measures taken:

As a part of our continued efforts towards energy conservation, a number of EnergyConservation projects have been implemented during 2010-11 in refineries resulting insavings of around 93,600 Standard Refinery Fuel Tonne (SRFT). Some of the majorinvestments in this regard are as under:

b) Additional investment and proposals, if any, being implemented for EnergyConservation:

• Modification of NSF & NSU process flows and column operation for heatoptimization at Guwahati Refinery

• Recovery of H2 from HDT net gas at Guwahati Refinery

• Heat recovery from HRSG-2 exhaust temperature at Barauni Refinery

• Heat recovery from wide cut and short residue run-down streams in AVU-I atBarauni Refinery

• Routing of FPU-II and VDU hot well off-gases to furnace at Gujarat Refinery

• Magnetic resonators in GT-4/5, LAB & HGU at Gujarat Refinery

• LP steam generation from FCC LCO stream at Gujarat Refinery

• Installation of DM water preheater in HRSG-I at Haldia Refinery

• Installation of step-less control in HCU make-up gas compressor at HaldiaRefinery

• Waste heat recovery from KHDS furnace at Haldia Refinery

• Additional heat recovery module in HRSG-II at Haldia Refinery

• Optimization of RSU throughput (stoppage of steam to reboiler) at MathuraRefinery

• Installation of step-less control in DHDT MUG compressor at Mathura Refinery

• Injection of heavy naphtha feed in second column of PXNSU (stoppage of steam toreboiler) at Mathura Refinery

• Installation of magnetic resonators in GTs and furnaces at Digboi Refinery

• Installation of VAM in Fuel Sector, CPP control room to replace centralized ACat Digboi Refinery

• LP steam generation through steam drive instead of PRDS at Digboi Refinery

• Installation of step-less control for DHDT compressor at Panipat Refinery

• Heat recovery from C-7 overhead and bottom product in NSU-I for crude preheatimprovement at Panipat Refinery

• NSU-II feed and reboiler heating with DHDT run-down at Panipat Refinery

• Preheat of DHDT cold feed with HCU-II kero pump-around at Panipat Refinery

• Improvement of feed preheat in PREP HCU, utilization of diesel pump-around heatwith cold VGO at Panipat Refinery

• Generation of SML steam from 2 LP steam generators in PREP HCU and use in MSQ toMLP let-down from MP steam

• Variable speed turbine drive in Boiler 1 & 4 FD fans at BGR

• Additional rows in convection section of DCU-I & II furnaces at BGR

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

The measures taken under item (a) resulted in savings of 93,600 SRFT in 2010-11. Theimpact of additional savings with major investments under item (b) in 2011-12 would be62,500 SRFT.

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

Necessary information is provided in Form 'A' annexed hereto.

B) TECHNOLOGY ABSORPTION

Details of efforts made in technology absorption are provided in Form 'B' annexedhereto.

(a) Activities relating to exports, initiatives taken to increase exports, developmentof new export market for products and services; and export plans:

IndianOil continues to export petroleum and petrochemical products during the year tovarious countries. While the export of petroleum products has increased by 23%, the exportof lubricants increased by 15% and that of base oil by 63% as compared to the previousyear. The export market for Linear Alkyl Benzene has expanded to 20 countries in 6continents.

(b) Total foreign exchange used and earned.

Form for Disclosure of Particulars with respect to Conservation of Energy

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

(a) Development of Refinery process technologies

(b) Catalysts development for refining processes

(c) Refinery Process Modeling

(d) Trouble shooting,revamp and optimization in refineries

(e) Material failure Analysis, Corrosion and remaining life assessment

(f) Development of Intelligent & Caliper pigs for transportation of crude andpetroleum products through pipelines

(g) Product development – Lubricant, Greases and Specialties

(h) Boundary Lubrication and Metal Working Tribology

(i) Specialty bituminous products

(j) Development of Fuel additives

(k) Fuel and Emission Studies

(l) Alternative fuels – Hydrogen, Hydrogen-CNG, bio-diesel, 2nd & 3rd

Generation bio-fuels and Solar Energy

(m) Biotechnology

(n) Nanotechnology

(o) Petrochemicals & Polymers

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

• A cost effective process based on hydroprocessing route developed for selectivemercaptan removal for ATF production with negligible hydrogen consumption.

• Dual mode deasphalting Technology developed to enhance refinery distillate yieldusing LPG as a solvent.

• Identified the blend compositions in pre and post Delayed Coker scenario formeeting the specifications of Bunker fuel (380 Cst) with minimum quality give away indensity at Gujarat Refinery.

• IndianOil along with EIL licensed 1.2 MMTPA DHDT unit for Bongaigaon Refinery.

• R&D developed DHDS catalyst, INDICAT-DH-IV successfully completed a run of451 days in diesel mode and 52 days in VGO mode in the Plant-13 of CPCL helping CPCL inthe process to make BS-III/BS-IV diesel.

• New catalyst and additives like in-house Indmax catalyst formulation, DHDScatalyst system for reducing T-95 point of diesel, i-Max Premium ZSM-5 additive for GRIndmax unit, Bottoms upgrading additive for Gujarat FCC unit, value added E-Cat andAlumina support for hydroprocessing catalysts developed .

• A cost effective ZSM-5 zeolite formulation adopting a template free synthesisapproach developed using commercial raw materials.

• 126 product formulations developed during the financial year 2010-11 out ofwhich more than 85% commercialized.46 OEM and/or customer approvals and defencecertifications.

• Ready with new generation Gasoline engine oil meeting API SN/ GF5 credentials– the day international specification came into vogue.

• SERVO Syngear 75W-90-LL, first Indian synthetic gear oil approved by M/SVoith, Germany for gear box applications of urban metro rail racks.

• RDSO approved SERVO RR 606MGPLUS[II] based on Haldia Group II base oilsfor ALCO Locomotives and clearance for field trials in GM Locomotives.

• Facilitated first overseas business contract of indigenously developed marineshipboard oils with Mauritius Shipping Corporation.

• Industrial Oils developed by R&D received prestigious internationalapprovals.

• Tyre mould grease - SERVO Press approved by major Indian Tyremanufacturers.

• SERVO Agro Spray Oil, approved for Organic farming by IMO, Switzerland.

• Development of SERVO MLO Super for controlling mosquito larvae breedingapproved by National Centre for Disease Control, Ministry of Health & Welfare,Government of India.

• First high speed crude oil pipeline trial run of 24" CPIG done over 138kmof 24" dia Salaya-Mathura Pipeline.

• First commercial version of 12" IPIG and 12" CPIG developed throughM/s ECIL, Hyderabad and successfully tried out in 206 km long Patna- Mughalsarai sectionof Barauni- Kanpur pipeline.

• A new chemical marker to check kerosene adulteration developed, which iscomparable to the available state-of-the-art markers.

• Low pour Diesel for low temperature ambient operations developed for M/s StarbagAfcons, Germany’s Rohtang Tunnel Project.

• Use of Hydrogen (up to 30%) as fuel blended with Compressed Natural Gas inInternal Combustion Engine: Phase-I of the project completed along with Society of IndianAutomobile Manufacturers (SIAM) and Ministry of New and Renewable Energy (MNRE) byconducting performance and emissions tests on seven vehicles using 10-25% HCNG blends.

• A multi-feed fluidized bed gasification pilot plant (capacity 1-2 kg/hr)installed and commissioned. A micro reactor unit (slurry) also installed and commissionedfor GTL and preliminary runs carried out successfully for conversion of syngas tohydrocarbon liquids.

• A demonstration unit based on in-house developed single step compact steammethane reforming process for HCNG production procured.

• After successfully helping Paradip Port Trust last year, IOC‘sBioremediation technology- Oilivorous S - extended to tackling of oil spills at marinelocations caused by collision of ships off Mumbai Coast.

• A state-of-the-art Petrochemical and Polymer Research Facility successfullycommissioned to support IOCL's petrochemical operations and business.

• Benchmarking studies completed for PP-injection moulding grades, PP Raffia andBOPP grades.

3. Future Plans

• Development of long life, energy efficient cost effective lubricants forrailways, marine applications and other automotive and industrial sectors.

• Frontier areas of nano technology.

• Development of fuel saving and environment friendly additives for fuels.

• Development of bio-degradable and FDA compatible lubricants.

• Production of 2nd /3rd Generation fuels.

• Setting up of state of the art automotive research laboratory with test benches.

• Development of bio-jet fuel.

• Technologies for reduction of GHG emissions.

• Development of World Class research facilities for corrosion and failureanalysis in refineries.

• Co-processing of non-edible oils with refinery streams.

• Gasification of pet coke / coal / residue / biomass.

• New polymer grade development.

• Setting up demonstration units for catalysts production.

• Development of novel composites and engineering polymers.

• Fuel Cells testing and research.

• Solar Energy applications and product development.

4. Expenditure on R&D

(Rs.in crore)

1. EFFORTS MADE TOWARDS TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION

With a view to further improve the product pattern and product quality as well as tomeet the environmental emission norms, IndianOil has adopted modern technologies. Majorsteps taken in this regard are given below:

i. Hydrocracker Technology

A new Hydrocracking Unit with the technologies from M/s UOP, USA has been commissionedat Panipat under expansion of refinery from 6.0 to 12.0 MMTPA.

ii. Once through Hydrocracking Technology

Once Through Hydrocracking Units (OHCU) were commissioned at Panipat, Haldia andMathura refineries with the technologies from M/s.UOP, USA, M/s.Axens, France andM/s.Chevron, USA respectively.

iii. Diesel Hydro-Desulphurisation Technology

Diesel Hydro Desulphurisation Units have been commissioned at Mathura & Panipatrefineries with technology from M/s IFP, France and at Gujarat & Haldia refinerieswith technology from M/s UOP, USA to meet the Diesel quality requirement w.r.t Sulphur.

iv. Diesel Hydrotreatment Technology

Diesel Hydrotreatment Units have been commissioned at Guwahati, Barauni and Digboirefineries with the technology from M/s UOP, USA and at Mathura and Panipat refinerieswith technology of M/s Axens, France to meet the Diesel quality requirement w.r.t Sulphurand Cetane No. Technology from M/s Axens has been implemented at Gujarat Refinery underResid Upgradation Project. Technology from M/s Shell Global Solutions, Netherlands hasbeen selected for implementation at Paradip Refinery Project.

v. Fluidised Catalytic Cracking Technology

Fluidised Catalytic Cracking (FCC) technology from M/s UOP, USA has been implemented inGujarat and Mathura refineries for conversion of Vacuum Gas Oil to LPG, MS and Diesel.Technology from M/s ABB Lummus, USA is under implementation for revamp of FCCU at MathuraRefinery for reliability improvement and maximization of value added Propylene.

vi. Resid Fluidised Catalytic Cracking Technology

The Resid Fluidized Catalytic Cracking (RFCC) technology from M/s S&W, USA has beensuccessfully implemented at Panipat, Haldia and Barauni Refineries.

vii. Catalytic Iso-Dewaxing Unit at Haldia Refinery

For improving the lube oil quality in line with international standards and augmentingproduction capability, Iso-dewaxing technology from M/s MOBIL, USA has been implemented atHaldia Refinery.

viii. Solvent Dewaxing/Deoiling Technology at Digboi

In order to upgrade the process for production of Paraffin Wax at Digboi Refinery,Solvent dewaxing/deoiling technology from M/s UOP, USA has been implemented.

ix. Hydrofinishing Technology for treatment of Paraffin Wax/ MicrocrystallineWax

Process technology from M/s IFP, France for hydro finishing of paraffin wax has beenimplemented at Digboi refinery. The same technology from M/s IFP, France for production ofMicrocrystalline Wax has been implemented at Haldia Refinery.

x. Biturox Technology

To produce various grades of Bitumen as well as to meet the quality requirements,Biturox technology from M/s Porner, Austria has been employed at Gujarat and MathuraRefineries.

xi. Hydrogen Generation Technology

Hydrogen generation technology from M/s Linde, Germany was adopted in 1993 for Hydrogenproduction and supply to Hydrocraker unit at Gujarat Refinery and has been implemented atBarauni Refinery under MS Quality Improvement Project. Also, Hydrogen generationtechnology obtained from M/s Haldor Topsoe, Denmark is in operation at Gujarat, Mathura,Haldia, Panipat and Barauni refineries and has been implemented at Gujarat Refinery underResid Upgradation Project. Technology from M/s UHDE, Germany has been selected through BOOoperator M/s Prax Air, USA at Paradip Refinery Project. Similar technology from M/s KTI,the Netherlands has been implemented for Hydrogen generation at Guwahati, Digboi, andMathura refineries and has been commissioned at Haldia Refinery under Once throughHydroCracker Project. Hydrogen generation technology from M/s Technip Benelux B.V, theNetherlands has been implemented at Bongaigaon Refinery under Diesel Quality improvementproject.

xii. Sulphur Recovery Technologies for reduction of SO2 emissions

Refineries at Gujarat, Haldia, Mathura and Barauni are provided with Sulphur RecoveryTechnology from M/s Stork Comprimo (now Jacob), the Netherlands. The Sulphur recoverytechnology from M/s Delta Hudson, Canada has been employed at Panipat refinery. Further,Sulphur recovery technologies from M/s B & V Pritchard, USA has been implemented underPanipat Refinery Expansion Project and has been implemented at Gujarat Refinery underResid Upgradation Project. The same has also been selected for Paradip Refinery Project.Technology from M/s Technip, KTI, Spain has been implemented at Haldia Refinery under Oncethrough Hydrocracker Project. Technology from M/s Jacobs, the Netherlands is underimplementation in additional Sulphur Recovery Unit at Mathura Refinery. Technology fromM/s Lurgi, Germany has been selected for Distillate Yield improvement (Coker) project atHaldia Refinery.

xiii. ISOSIV Technology at Guwahati Refinery

For production of unleaded MS at Guwahati Refinery, ISOSIV technology from M/s UOP, USAhas been implemented.

xiv. Delayed Coker Technology

For bottom of the barrel upgradation, Coker technology from M/s ABB Lummus, USA hasbeen implemented at Panipat Refinery as a part of the Panipat Refinery Expansion Project.Coker Technology from M/s Foster Wheeler, USA has also been implemented at GujaratRefinery under Resid Upgradation Project and selected for at Paradip Refinery Project aswell as at Haldia Refinery under distillate yield improvement project.

xv. VGO Hydrotreatment Technology

Technology from M/s.UOP, USA has been implemented at Gujarat Refinery under ResidUpgradation Project and Technology from M/s Axens, France has been selected for ParadipRefinery.

xvi. Continuous Catalytic Reforming Technology

For improvement in Octane number of Motor Spirit, Continuous Catalytic reformingtechnology from M/s IFP, France has been implemented at Mathura and Panipat refineries.Technology from M/s UOP, USA has been implemented at Gujarat Refinery under MS QualityUpgradation Project and has also been selected for implementation at Paradip RefineryProject.

xvii. Technology for Para -Xylene

For production of Para-Xylene at Panipat, technologies from M/s UOP, USA have beenimplemented and same have been selected for Paradip Refinery Project.

xviii.Technology for Purified Terephthalic Acid (PTA)

For production of PTA at Panipat Refinery, technology from M/s Du Pont, USA has beenimplemented.

xix. Technology for Linear Alkyl Benzene (LAB)

Technology from M/s UOP, USA has been implemented for production of Linear AlkylBenzene at Gujarat Refinery.

xx. MS Quality Upgradation Technology

For MS quality upgradation, Isomerisation technology of M/s UOP, USA has beenimplemented at Mathura, Panipat and Gujarat Refineries. Technology from M/s Axens, Francehas been implemented at Haldia, Guwahati, Digboi and Barauni refineries.

FCC Gasoline desulphurization technology (Prime-G) from M/s Axens, France has beenemployed at Haldia, Mathura, Panipat and Barauni Refineries.

xxi. Naphtha Cracker Technology

Naphtha Cracker Technology from M/s ABB Lummus, USA has been deployed at PanipatRefinery. Technologies from M/s.Basell, Italy, M/s Basell, Germany, M/s Nova Chemicals,Canada & Scientific Design, USA have been implemented for various downstream polymerplants viz. Poly-Propylene (PP) Unit, HDPE unit, Swing Unit (HDPE/LLDPE) and MEG Unitrespectively.

Technology from M/s Basell, Italy has been selected at Paradip Refinery Project forproduction of Poly-Propylene (PP).

xxii. Alkylation Technology

For production of MS, Alkylation technology from Exxon Mobil, USA has been selected forimplementation at Paradip Refinery Project.

xxiii. Ethyl Benzene/Styrene Technology

For production Ethyl Benzene/Styrene, technology from M/s ABB Lummus, USA has beenselected for implementation at Paradip Refinery Project.

xxiv. Regenerative type Flue Gas De-Sulphurisation Technology

In order to recover Sulphur Di-Oxide from Boiler flue gases a Regenerative type Fluegas De-Sulphurisation technology from M/s Cansolv Technology Incorporate (CTI), Canada,has been selected for implementation at Paradip Refinery Project.

xxv. Spent Acid Regeneration Technology

In order to regenerate fresh sulphuric acid from spent sulphuric acid recovered fromAlkylation Unit a Spent Acid Regeneration technology from M/s MECS, USA has been selectedfor implementation at Paradip Refinery Project.

xxvi. ATF Treatment Technology

ATF Treatment Technology from M/s UOP, USA has been implemented at Gujarat Refinery.Technology from M/s Merichem, USA has been selected for Paradip Refinery Project.

xxvii. LPG Treatment Technology

Coker LPG Treatment technology from M/s UOP, USA has been selected for implementationat Haldia Refinery under the distillate yield improvement (Coker) project.

xxviii. Coker Gas Oil Hydrotreatment Technology

Coker Gas Oil Hydrotreatment Technology from M/s Axens, France has been selected forimplementation at Haldia Refinery under the distillate yield improvement (Coker) project.

B. Indigenous Technology

i. INDMAX Technology

INDMAX technology developed in-house by IOC(R&D Centre) for converting heavydistillate and residue into LPG/light distillate products has been implementedsuccessfully at Guwahati Refinery and has been selected for implementation at BongaigaonRefinery. For production of petro-chemical feedstocks viz. Ethylene, Propylene from VGO,INDMAX technology has been selected for implementation at Paradip Refinery Project.

ii. Hexane Hydrogenation Technology

Hexane Hydrogenation process for production of Food grade Hexane (WHO grade quality),developed by IOC (R&D Centre) with indigenous catalyst has been successfullyimplemented at Gujarat Refinery.

iii. Diesel Hydrotreatment Technology

Diesel Hydrotreatment technology developed by IOC (R&D Centre) and licensed jointlywith EIL is under implementation at Bongaigaon Refinery for meeting Diesel qualityrequirements.

iv. Isomerisation Technology

Isomerisation Technology developed by IOC (R&D Centre) and licensed jointly withEIL is under implementation at Bongaigaon Refinery for meeting MS quality requirements.

DISTRIBUTED DIGITAL CONTROL SYSTEM (DDCS)

DDCS has already been implemented and commissioned in all Process Units and CaptivePower Plants of all Refineries. Also, all the new units already commissioned and plannedin future have been / will be provided with DDCS.

ADVANCED PROCESS CONTROL (APC)

Model based Multi-variable Predictive Advanced Process Control Systems (APC) have beenimplemented in the various units of the Refineries.

A New Key Performance Index (KPI) based Methodology of APC Benefit assessment based oncontroller-wise, variable-wise on-stream factors and average values of controlledvariables was devised and finalised in Apr’ 10 jointly by IOCL and M/s HAIL.Accordingly, KPI based templates have been developed for all existing APC controllersacross IOCL and are being used for monitoring realistic APC benefit on regular basis.

OFFSITE MODERNISATION

As a part of modernisation of Oil Movement & Storage (OM&S) facilities, thefollowing have already been implemented:

• Automation of Tank Wagon loading at Barauni, Gujarat, Mathura and HaldiaRefineries.

• Automation of Tank Truck Loading at Gujarat and Haldia Refineries.

• Blending Automation at Haldia, Mathura, Barauni and Panipat Refineries.

• Auto Tank gauging has been completed at all refineries.

AUTOMATION OF LABORATORIES

Automation of Laboratories has been completed at all refineries.

Networking & Real Time Data Base Management System (RTDBMS)

• Networking of units and offsite facilities has been completed at all refineries.

• RTDBMS has been implemented at all refineries and are in operation.

• DRYA (Data Reconciliation and Yield Accounting Package), implemented in allrefineries for working out accurate Daily Production Balance using real time process data.

• PS (Production Scheduling) implemented at Gujarat and Panipat Refineries.