DEAR SHAREHOLDERS,

On behalf of the Board of Directors of your Company, I am delighted to present the 32nd Annual Report of your Maharatna Company, along with Audited Financial Statements for the financial year 2015-16.

PARTNER INDIAS GROWTH - NATURAL GAS LEADER

With a turnover of 51,614 crores, your Company is Indias largest natural gas Company and is ranked amongst the top gas utilities in Asia. Your Company has presence across the entire gas value chain with activities ranging from Gas Transmission and Marketing to Processing (for fractionating LPG, Propane, SBP Solvent and Pentane), transmission of LPG, and production and marketing of Petrochemicals like HDPE and LLDPE.

Your Company has extended its presence in LNG re-gasification, City Gas

Distribution, Exploration & Production through subsidiaries and joint venture companies and also diversified into solar and wind power generation.

Gas transmission is one of the core competencies of your Company and draws its strength from about 11,000 km of natural gas pipeline network and 2,038 km of LPG pipeline transmission network.

With a lean work force of 4321 employees, your Company plays a vital role in the social and economic development of the country and makes a substantial contribution towards its energy security,

FINANCIAL HIGHLIGHTS

The important financial highlights for the year 2015-16 are as under:

PARTICULARS

2015-16

2014-15

US $ Million

( in crores)

US $ Million

( in crores)

Turnover (Net of ED) 7,715 51,614 8,952 56,569
Other income 173 1,158 173 1,096
Cost of sales (excluding interest and depreciation and including extraordinary items) 7,122 47,646 8,236 52,046
Gross margin 766 5,126 879 5,557
Interest 96 640 57 361
Depreciation 196 1,313 154 974
Profit before tax 474 3,173 678 4,284
Provision for tax 131 874 197 1,245
Profit After Tax 344 2,299 481 3,039
Appropriations - - - -
Interim dividend 47 317 60 381
Proposed final dividend 57 381 60 381
Corporate dividend tax 21 142 24 154
Net transfer to/from bond redemption reserve 5 35 6 37
Transfer to CSR reserve (0) (1) (5) (30)
Transfer to general reserve 34 230 48 304
Net surplus after Appropriations 179 1,196 287 1,814
1 US $ in INR converted at the exchange rate as on 31st March of the respective financial year 66.90 - 63.19 -

DIVIDEND

Your Company has a consistent track-record of dividend payment. So far, it has disbursed dividend of over 13,741 Crores to its shareholders including 8,316 Crores disbursed as dividend to the Government of India (GOI).

The Board of Directors of your Company had earlier approved payment of an interim dividend @ 25% on equity share of 10 each (2.5 per equity share) amounting to 317.12 Crores, which was paid in February, 2016. Further, the Board has recommended payment of final dividend @ 30% on equity share of 10 each (3.00 per equity share) for FY 2015-16 amounting to 380.54 crores.

With this, the total dividend payment for the fiscal year 2015-16 will be 55 % on equity share of 10 each (5.50/- per equity share) amounting to 697.66 Crores on its paid-up equity capital of 1,268.48 Crores and dividend distribution tax of I42.03 crores. The total dividend pay-out including corporate dividend tax accounts for 35% of profit after tax.

CONTRIBUTION TO EXCHEQUER

Your Company has contributed over 4,929 Crore in 2015-16 to the exchequer through dividend, duties, taxes and others, as compared to 5,788 Crore in 2014-15.

CREDIT RATING

• Domestic rating

Your Company has been reaffirmed the highest domestic credit rating of AAA from ICRA, CARE and CRISIL, which is highest credit rating in India and carries lower credit risk of the Company

• International Rating

The International rating agency, Moodys International, Hong Kong, has also reaffirmed the corporate issuer rating of Baa2 with a negative outlook, which is one notch higher than sovereign rating of India. The Baa2 rating affirmation reflects GAILs dominant position in gas transmission business. Further, Fitch Ratings has also assigned a long-term foreign currency issuer default rating of BBB- with a negative outlook, which is equal to sovereign rating of India.

BUSINESS STRATEGY

In the last year and a half, the oil and gas sector witnessed game-changing disruptions with oil prices crashing from 114 $/bbl to a low of around 30 $/bbl and having profound implications on companies across the sector.

The volatility in oil prices has caused downward shift in prices of LNG, oil products, petrochemical products, etc. Further, domestic production of natural gas has been on the decline over the past 5 years, from peak of 140 MMSCMD in 2010-11 to 86 MMSCMD in 2015-16. Notwithstanding these challenges which have had physical and financial implications on your Company, the management has taken it as an opportunity and has initiated strategic steps to reinvent itself and emerge out stronger than before.

In order to evolve, grow and excel, your Company continuously reviews its strategy developed for the period 2011-2020 to make the necessary course correction, in line with changes in the external business environment and internal organizational requirements. Management of your Company is taking steps to realize strategic objectives and ensure that your Company is on course to become an integrated hydrocarbon major with presence across the entire gas value chain.

• National Gas Grid

Your Company is the largest natural gas pipeline Company in India and going forward, the focus will be on the development of National Gas Grid which is one of the key priorities of the Government of India (GoI). Your Company now has a total network of approximately 11,000 km pipeline in the country. Additionally, it has commenced execution of the Phulphur - Haldia pipeline project (Phase-1) which was inaugurated by the Honble Prime Minister of India in July, 2015. This project is also referred to as "Energy Highway of Eastern India" and once completed, it would help to revive closed fertilizer plants. This pipeline will connect states of Eastern India to the rest of the gas network in the country and pave the way for developing the "National Gas Grid" The Board has also approved the 670 km Vijaipur-Auraiya-Phulpur pipeline. With these projects and through continuous pan-India expansion of the pipeline network, your Company will further strengthen its leadership position in the natural gas transmission segment.

Your Company is also pursuing the transnational pipeline project, the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. Gas Sales & Purchase Agreement (GSPA) has already been signed to import 38 MMSCMD gas into the country through this pipeline. Further, TAPI Pipeline Company has been incorporated as a Special Purpose Vehicle in the Isle of Man with your Company holding 5% equity Shareholders Agreement and Investment Agreement of TAPI Pipeline Company have been signed.

• LNG Marketing

One of the key strategic priorities of your Company today is the marketing of LNG in domestic and international markets. Over the last few years, your Company tied-up significant LNG volumes by concluding several deals with suppliers, such as Sabine Pass Liquefaction LLC (USA), Gazprom (Russia) etc. Further, your Companys US subsidiary has booked LNG capacity in Dominion Cove Points LNG liquefaction terminal in the USA for which 20 year gas sourcing agreement has been entered with WGL Midstream Inc. (USA). In line with its LNG import portfolio, your Company is focusing it efforts on gas market development to attract and retain more customers. The marketing tie-ups are being explored for selling LNG in India and in the global markets. Your Companys subsidiary, GAIL Global (Singapore) Pte Limited is actively pursuing LNG trading activities from Singapore.

To develop the gas sector in India and advance the country on the road to a gas based economy your Company has advocated the implementation of the pooling mechanism. As a result, for the first time in the country large scale gas pooling was introduced where your Company is acting as a pool operator to manage procurement and supply of R-LNG to stranded gas based power plants in India. Your Company is also supplying RLNG to fertilizer companies at competitive rate through bidding process.

Your Company has tied-up additional regasification capacities at Dahej LNG terminal and Dabhol LNG terminal to facilitate regasification of additional LNG tied-up in recent years. Further tie . regasification terminals shall also be pursued. Your Company plans to own long term charter hire LNG ships to transport LNG volumes from the USA to India and other global markets.

• City Gas Distribution (CGD)

In order to provide clean fuel for domestic, vehicular and commercial use and to facilitate development of smart cities, your Company is expanding its CGD network. Your Companys wholly owned subsidiary, GAIL Gas Limited, is implementing CGD projects in the cities of Kota, Dewas, Meerut, Sonepat, Bengaluru and Taj Trapezium in addition to pursuing the same in the state of Kerela, Karnataka, Andra Pradesh, Rajasthan, Kota and Vadodara city etc. through its joint ventures. In line with the GoIs mission to accelerate the use of gas, your Company through its CGD JVs has set an unprecedented record by providing 2.5 lakhs new PNG connections during the year.

• Petrochemicals

Your Company aspires to be one of the leading players in India in this segment by strengthening its petrochemical portfolio through expansion of existing capacities, setting up new plants and acquiring equity stakes in upcoming projects. Petrochemical plant was commissioned in Assam through Brahmaputra Cracker & Polymer Limited (BCPL) a subsidiary of your Company This plant was dedicated to the nation by Honble Prime Minister of India in February, 2016. Further, a petrochemical plant at Dahej is being set up by ONGC Petro-additions Limited (OPaL) which is a joint venture (JV) of your Company

• Renewables

As a responsible corporate citizen and in line with the GoIs commitment to reduce carbon emissions, your Company aims to decrease its carbon footprint in a phased manner. It has installed 118 MW wind energy capacity and has also set up a 5 MW solar project. Further, your Company is a stakeholder in a Special Purpose Vehicle (SPV) created under the aegis of Ministry of Petroleum & Natural Gas (MoP&NG) and Ministry of New & Renewable Energy (MNRE) for pursuing the setting up of Grid Connected Renewable Energy Power Projects.

• Human Resource Development

Your Company is committed to align its human resource development initiatives with strategic business objectives to achieve its organizational goals. The key areas under focus are skill development and capability build-up, talent acquisition, development and retention.

BUSINESS PERFORMANCE

During the year under review, the segment wise business performance of your Company is as under:

• Natural Gas Marketing

Natural gas marketing continues to constitute your Companys core business. During 2015-16, gas sales clocked 73.67 MMSCMD, compared to

72.07 MMSCMD in the previous financial year. Major supplies of natural gas include fuel to power plants, feedstock for gas-based fertilizer plants, LPG extraction and City Gas Distribution.Your Company holds around 71.24 % market share in Indias gas marketing.

Your Company has been designated by Ministry of Petroleum & Natural Gas (MOP&NG) to raise invoices for non- submission of utilization certificate, duly certified by Fertilizer Industries Coordination Committee (FICC), by concerned fertilizer companies for use of APM gas for production of urea. The Company is revenue neutral for such transaction.

Most of the customers disputed the debit notes raised by the Company and matter was pending at Honble High Court. Further, MoP&NG vide letter dated 16th December, 2015 revised the earlier modalities for deriving the quantity and price for issue of debit notes. The company has taken the matter with Ministry of Fertilizer and FICC to provide information / details.

Considering the pending court case, uncertainty in recovery of debit notes, matter being under consideration of Government- MOP&NG, Ministry of Fertilizer and FICC, The Company issued claim letter amounting to Rs. 1651.18 crore for such type of cases, till the matter gets settled.

• Transmission

• Natural Gas

Your Company owns and operates a network of about 11000 kms of natural gas high pressure trunk pipeline with a pan-India capacity of around 206 MMSCMD of natural gas. The average gas transmission during the year was 92.72 MMSCMD, compared to 92.10 MMSCMD in the previous financial year.

• LPG

Your Company is the only Company in India, which owns and operates exclusive pipelines for LPG transmission for third-party usage. It owns and operates two LPG pipeline transmission systems with a total length of 2,038 kms. Out of this, 1,415 kms of pipeline network transports LPG from western to northern parts of India (Jamnagar - Loni pipeline) and the balance 623 kms of pipeline network transports LPG in the countrys southern part (Vizag-Secunderabad pipeline). The LPG transmission system has a capacity to transport up to 3.8 MMTPA of LPG. In 2015-16, the LPG transmission throughout achieved was about 2.82 Million MT.

• Petrochemicals

During 2015-16, your Company produced 344.168 Thousand MT of polymers and sold 333.5 Thousand MT of polymers.

• LPG and Other Liquid Hydrocarbon Production

Your Company has LPG plants at five locations in the country In 201516, total liquid hydrocarbon production was about 1.09 Million MT, which mainly included 0.85 Million MT of LPG, 0.13 Million MT of Propane, 0.02 Million MT of Pentane and 0.08 Million MT of Naphtha.

• Exploration and Production (E&P)

Your Companys E&P business has continued self-sustainable production of oil and gas for the second consecutive year from four blocks (two overseas blocks in A-1 & A-3 block, Myanmar and 2 domestic blocks in Cambay basin).

Revenue of approx. Rs. 751.51 Crores has been generated from sale of hydrocarbon from 4 producing blocks namely A-1 & A-3, Myanmar and CB-ONN-2000/1 and CB-ONN-2003/2 (Cambay onland) during the year 2015-16.

Further, Field Development Plan (FDP) has been approved by Directorate General of Hydrocarbons (DGH) for the gas resource of 65 BCF in Tripura block (AA-ONN-2002/1).

As a result of continued portfolio optimisation, your Company now has participating interest in 13 E&P blocks (excluding one GAIL Operated Block CY-ONN-2005/1 in Cauvery basin which was relinquished in June 2016) of which 11 blocks are in India and 2 in Myanmar. Out of these, your Company is Operator in one onland blocks viz. CB-ONN-2010/11 in Cambay basin awarded during NELP-IX bidding round.

Drilling activities were initiated in 4 (out of 5) blocks obtained during NELP-IX bidding round viz (i) CB-ONN-2010/11 (Lead Operator: GAIL),

(ii) CB-ONN-2010/8 (Lead Operator: Bharat Petro Resources Limited)

(iii) GK-OSN-2010/1 (Operator: ONGC) (iv) GK-OSN-2010/2 (Operator: ONGC). Gas discovery has been notified to Government in the block GK- OSN-2010/1. Survey activities are planned in the remaining NELP-IX block AA-ONN-2010/2 (Operator: OIL)

INITIATIVES FOR FUTURE GROWTH

* Global Initiatives

Your Company is constantly pursuing a leading role in the TAPI Pipeline project to receive Natural Gas from the Galkynysh fields in Turkmenistan. After incorporation of TAPI Pipeline Company Limited (TPCL), Turkmengas has been endorsed as the consortium leader TPCL has a mandate to build, own and operate the proposed TAPI Pipeline. The Shareholders Agreement (SHA) of TPCL was signed in December 2015 during the ground breaking ceremony for laying of the Turkmen leg of the TAPI pipeline. Investment Agreement (IA) relating to initial equity infusion by the TAPI entities into TPCL was also signed in April, 2016. Galkynysh Pipeline Company, the consortium leader group led by Turkmengas, shall be taking 85% equity in TPCL, while your Company, ISGS (Pakistan) and Afghan Gas Enterprise (AGE) shall be taking 5% equity each.

* Domestic Initiatives

The domestic business initiatives of your Company were as follows:

* Petrochemicals

GAIL and Hindustan Petroleum Corporation Limited (HPCL) are exploring the possibility of setting up a Greenfield petrochemical complex in the east coast of India primarily based on imported ethane.

* LNG REGASIFICATION TERMINALS

Your Company is evaluating various opportunities for setting up/ booking LNG regasification capacity in the country

* LNG SHIPPING

In 2011, your Company contracted 3.5 MMTPA of LNG from Cheniere Energy, USA on FOB basis for an initial period of 20 years. Further, in 2013 your Company subsidiary GAIL Global (USA) LNG LLC also signed a Terminal Service Agreement (TSA) for booking 2.3 MMTPA of liquefaction capacity in the Dominion Cove Point terminal for 20 years. The initial supplies from both these contracts are expected to commence from early 2018. Currently, your Company is in the process of long term charter hiring of LNG ships through the international competitive bidding route.

* NATURAL GAS PIPELINE PROJECTS

During the financial year, your Company has completed 27 number of Last Mile Connectivity to harness the commercial utilization of various pipeline networks in the seven states of Karnataka , Gujarat, Goa , Haryana, Rajasthan, Maharashtra & Punjab.

* NON-CONVENTIONAL ENERGY

Your Company has total installed capacity of 118 MW of Wind Energy Generation Projects (WEG). Your Company began operations with a modest capacity of 4.5 MW wind energy for captive use in Gujarat in 2009-10 and graduated to commercial production after commissioning 100 MW of WEG projects in Tamil Nadu and Karnataka in 2011-12. It also made its entry in the solar power sector by setting up 5 MW Solar Power Plant in Rajasthan through bidding under the Jawaharlal Nehru National Solar Mission.

Your Company is setting up 5.76 MW grid connected roof top captive solar power plant at Pata Petrochemical Complex, Uttar Pradesh.

* COAL GASIFICATION

Your Company is also entering into coal gasification by setting up surface coal gasification based urea project at Talcher. The project is envisaged for production of 2200 MTPD Ammonia and 3850 MTPD Urea and the project cost is estimated to be around 8,000 Crore. Joint Venture Company Talcher Fertilizers Limited (formerly known as Rashtriya Coal Gas Fertilizers Limited) was formed on 13th November, 2015 with consortium partners i.e. GAIL, CIL, RCF & FCIL.

The success of this project would pave the way for the production of fertilizers from abundantly available domestic coal, thus resulting in lesser dependency on their imports.

RELATED PARTIES - SUBSIDIARIES/ ASSOCIATES/ JOINT VENTURES

Your Company has formed subsidiaries/associates/joint venture companies for CGD, petrochemicals, LNG, gas trading, power generation and shale gas. It has played pioneering role in introducing city gas projects for natural gas supplies to households, commercial, industrial and transport sectors through its subsidiary and joint venture companies. Contracts or arrangements/ transactions with related parties were on arms length basis and in ordinary course of business.

Your Companys subsidiaries/ associates/joint venture companies contributed significantly in the business expansion activities of your Company, A statement containing the salient feature of the financial statements of your Companys Subsidiaries, Associate Companies and Joint Ventures as per first proviso of section 129(3) of the Companies Act, 2013 including details of individual contribution of all subsidiaries, associates and joint venture companies towards the overall performance of Company during the period is also given under Consolidated Financial Statements.

The details of subsidiaries/associates/joint venture companies are mentioned below:

NATURAL GAS, LNG AND POWER

• GAIL Global (Singapore) Pte. Limited (wholly owned subsidiary)

GAIL Global (Singapore) Pte. Ltd. (GGSPL), primarily started as an overseas investment arm of your Company and was operationalized for LNG trading in 2012. It commenced its business operations in May 2012. GGSPL is now actively involved in business activities in the area of LNG Trading. Until March 31, 2016, GGSPL has traded twenty one (21) LNG cargoes out of which 13 were traded during the financial year 2015-16. The turnover for 2015-16 was USD 307 million.

GGSPL has also been mandated by your Company to market part of the Henry Hub linked LNG volume sourced from the USA, in the international market. The supplies against the said volumes are expected to start from the year 2018. 1)1

GGSPL is also in process of third-party trades and endeavouring ship chartering and risk management activities along with supplying LNG cargoes to GAIL.

• GAIL Global (USA) Inc (wholly owned subsidiary)

GAIL Global (USA) Inc.(GGUI), was incorporated as a wholly subsidiary of GAIL to undertake investment in the Eagle Ford shale gas asset. The primary objective behind this investment was to enter into the US shale gas market and to bring shale gas technology to India. GGUI executed a definitive agreement with M/s Carrizo Oil & Gas Inc., USA (Carrizo) on September 28, 2011, to enter into an unincorporated JV in the Eagle Ford Shale asset in Texas. GGUI acquired a 20% participating interest in this JV Carrizo, with the remaining 80% participating interest, functions as the operator of the JV

During the year, 20 wells came online, taking the total online wells to 99 as on December 31, 2015. The gross production volume of GGUI during 2015 was 853.1 Mboe.

• GAIL Global (USA) LNG LLC (wholly owned subsidiary of GGUI)

GAIL Global (USA) LNG LLC (GGULL) signed a contract with Dominion Cove Point LNG, LP (DCP) to book LNG tolling capacity of 2.3 MMTPA in its Cove Point terminal. It also signed Gas Sales & Purchase Agreement (GSPA) with WGL

Midstream, Inc. for sourcing of gas for liquefaction at the Terminal. The construction activities at the terminal are on-track and the terminal is expected to be in service by January 2018. GGULL would be selling all LNG volumes from Cove Point to GAIL.

• GAIL China Gas Global Energy Holdings Limited

GAIL China Gas Global Energy Holdings Limited, was formed with an objective to pursue gas sector opportunities, primarily in China. Your Company has a 50% equity stake with China Gas Holdings Limited as an equal partner.

• Petronet LNG Limited (PLL)

PLL was formed in 1998 to set up LNG import and regasification facilities in India. It currently owns and operates a 10 MMTPA capacity LNG re-gasification terminal at Dahej, Gujarat. The capacity is being expanded to 15 MMTPA (expected to be completed by end of 2016). PLL has also setup an LNG re-gasification terminal at Kochi, Kerala with a name plate capacity of 5 MMTPA.

Your Company has 12.5% equity stake in PLL along with Bharat Petroleum Corporation Ltd. (BPCL), Oil and Natural Gas Corporation (ONGC) and Indian Oil Corporation Limited (IOCL) as equal partners.

• Ratnagiri Gas and Power Private Limited (RGPPL)

RGPPL was formed as a joint venture with NTPC for acquiring and operating the erstwhile Dabhol Power Project assets consisting of 1967.08 MW gas- based combined cycle power block and 5 MMTPA LNG Block. The assets were transferred to RGPPL in October, 2005. Your Company has 25.51% equity stake in RGPPL along with NTPC 25.51%, MSEB Holding Company Limited 13.51% and Indian Financial institutions 35.47%.

The power block, was non-operational due to paucity of funds and nonavailability of domestic gas in FY 2014-15. Government of India has floated a scheme for restart of the gas based Power Plant on Regasified LNG, vide its OM dated 27.03.2015 support from Power System Development Fund (PSDF Support Scheme of GoI), which provided for reverse auction. RGPPL has participated in the GoI scheme with Indian Railways as the buyer for the generation under PSDF Scheme. Ministry of Power has allocated temporary 620 MW power out of allocation to Maharashtra to Indian Railways under PSDF Support of GoI for the financial year 2015-16 & 2016-17.

Power Plant commenced operation under PSDF Support Scheme on November 26, 2015 & supplying around 500 MW Power to the Indian Railways in the states of Maharashtra, Gujarat, Madhya Pradesh & Jharkhand. During the Financial Year 2015-16, a total of 1197.08 BUs have been supplied to Indian Railways.

RGPPL has already entered into a long-term frame work agreement with GAIL for commercial utilization of LNG terminal and commenced tolling operations for 25 years w.e.f February 2012. 45 cargos have been successfully unloaded since commissioning. 22 cargos were unloaded during FY 2015-16. The total revenue earned by LNG Terminal from commissioning till 31st March 2016 is about ?700 Crores. The plant now operates only in non monsoon period as there is no breakwater. Demerger process of power plant & LNG terminal is going on. It is envisaged that by 2020, the breakwater construction will be completed and it will be able to operate round the year at full capacity.

The proposal for the demerger of the Power and LNG business is under consideration of RGPPL and its shareholders. The purpose of the demerger is (a) to enable restructuring of the loan in order to make the two demerged entities independently viable and (b) to make available the funds to complete the breakwater in order to achieve the full potential of the LNG terminal.

CITY GAS DISTRIBUTION (CGD)

* GAIL Gas Limited (wholly owned subsidiary)

GAIL Gas was incorporated with the objective to implement City Gas Distribution (CGD) projects in the country. GAIL Gas has been authorized by Petroleum and Natural Gas Regulatory Board (PNGRB) to implement CGD Projects in Dewas, Kota, Sonipat, Meerut, Taj Trapezium Zone and Bengaluru. In addition, GAIL Gas is pursuing City Gas Business in the state of Kerala, Andhra Pradesh, Karnataka, Rajasthan, Kota and Vadodara City etc. through its joint ventures. It has also won the authorization of Haridwar district and North Goa through a consortium with Bharat Petroleum Corporation Limited by PNGRB.

Rajasthan State Gas Limited (RSGL) was incorporated by GAIL Gas Limited and Rajasthan State Petroleum Corporation Limited (RSPCL) with the objective to promote the CGD projects and take up activities of gas distribution in the state of Rajasthan. GAIL Gas has transferred its Kota CGD Assets to RSGL and matching contribtuion will be made by other JV partner i.e. RSPCL

* Compressed Natural Gas (CNG)

During the year, GAIL Gas augmented its CNG distribution infrastructure by enhancing the capacity of existing stations and adding two CNG Station in Sonipat and one in Firozabad. CNG sales increased to 38 MMSCM in 2015-16.

* Piped Natural Gas (PNG)

In PNG business, GAIL Gas is progressively supplying PNG to domestic customers in its authorized cities. Presently, the company is catering to 11404 households.

GAIL Gas continue to maintain its focus on the PNG industrial and commercial segment as one of the potential growth areas. With its concentrated efforts in the year 2015-16, the total number of commercial and industrial customers increased to 513 in 2015-16.

GAIL Gas has commissioned the steel networks in the geographical area (GA) of Sonepat, Dewas, Kota, Meerut, Taj Trapezium Zone and Bengaluru. For reaching more charge areas for domestic connections, the steel grid network and MDPE pipeline network has been extended to 388.93 kms and 806.41 kms respectively in 2015-16 in the cities of Sonepat, Meerut, Dewas, Kota, Taj Trapezium zone and Bengaluru.

During the year, the sales volume from industrial, commercial and domestic customers grew to 702.80 MMSCM from 526 MMSCM during previous year.

• Aavantika Gas Limited (AGL)

AGL was incorporated to implement CGD Projects in Madhya Pradesh. As on 31st March, 2016, AGL operates 20 CNG stations including 9 daughter stations, 7 online stations & 4 mother stations in Indore GA (including Ujjain) and Gwalior GA.

Further, as on 31st March 2016, AGL supplied PNG to around 6430 Domestic, 37 commercial & 59 industrial consumers in its authorized geographical regions. AGL is also catering to fuel requirement of around 21,300 CNG vehicles operating in the region. Your Company along with HPCL holds 22.50% stake as an equal partner.

• Bhagyanagar Gas Limited (BGL)

BGL was incorporated to implement CGD projects in the United Andhra Pradesh. As on 31st March, 2016, BGL operated 33 CNG Stations including 25 daughter booster stations, 5 online stations & 3 mother stations. BbaEjmuearGuLtd Further, as on 31st March 2016, BGL supplied PNG to over 4270 households, 46 commercial & 3 industrial consumers in its authorized geographical regions. BGL also fulfills the fuel requirement of around 37000 CNG vehicles operating in the region. Your Company has 22.50 % stake along with HPCL as an equal partner

• Central UP Gas Limited (CUGL)

CUGL was incorporated to implement CGD projects in Uttar Pradesh. As on 31st March, 2016, CUGL operated 17 CNG Stations including 4 mother stations, 10 online stations & 03 daughter booster stations.

CUGL

Further, as on 31st March 2016, CUGL supplied PNG to over 13283 domestic, 148 commercial & 44 Industrial customers in its authorized geographical regions. CUGL is also catering to fuel requirement of around 51865 CNG vehicles operating in the region. Your Company has 25% stake along with BPCL as an equal partner

• Green Gas Limited (GGL)

GGL was incorporated to implement CGD projects in Uttar Pradesh. As on 31st March, 2016, GGL operated 15 CNG Stations including 5 daughter stations, 6 online stations & 4 mother stations.

Further, as on 31st March 2016, GGL supplied PNG to over 12100 domestic, 15 commercial & 5 industrial customers in its authorized geographical regions. GGL is also catering to fuel requirement of around 36966 CNG vehicles operating in the region. Your Company has 22.5% stake along with IOCL as an equal partner.

• Indraprastha Gas Limited (IGL)

IGL was incorporated to implement CGD projects in Delhis National Capital Territory (NCT) and cities in adjoining National Capital Region (NCR). As on 31st March, 2016, IGL operated 340 CNG Stations including 68 mother stations, 243 online stations & 29 daughter stations.

Further, as on 31st March 2016, IGL supplied PNG to over 6.36 Lac Domestic, 1751 commercial & 821 industrial consumers in its authorized geographical region, which includes the entire public transport of the national capital and also the worlds largest bus fleet on CNG. IGL is also catering to fuel requirement of around 8.4 Lac CNG vehicles in the Delhi/NCR. Your Company has 22.5% stake along with BPCL as an equal partner

• Mahanagar Gas Limited (MGL)

MGL was incorporated to implement CGD projects in Mumbai & adjoining areas. As on 31st March, 2016, MGL operated 188 CNG Stations, 19 mother stations, 142 online stations & 27 daughter booster stations.

GAS

Further, as on 31st March 2016, MGL supplied PNG to over 8.62 Lac Domestic, 2866 commercial & 60 industrial consumers in its authorized geographical region. MGL is also catering to fuel requirement of around 4.7 Lac CNG vehicles operating in the region.

Your Company accorded approval to Mahanagar Gas Ltd.(MGL), to issue fully paid up unsecured Compulsory Convertible Debentures(CCDs) at par to Government of Maharashtra (GOM) due to which equity holding of GoM increased to 10% of total paid-up equity capital. Further, your Company also accorded approval to off-load the equity shares held by GAIL and BGL each up to 12.5% of MGL equity through the Initial Public Offering(IPO). MGL Issue was opened on 21st June, 2016 and closed on 23rd June, 2016. Shares were allotted to investors at 421/- per share. MGL equity shares were listed on NSE and BSE on 1st July, 2016 . Your Company equity holding in MGL post-IPO is 32.5% along with BG Asia Pacific Holdings Pte. Limited as an equal partner.

• Maharashtra Natural Gas Limited (MNGL)

MNGL was incorporated to implement CGD projects in and around Pune. As on 31st March, 2016, MNGL operated 36 CNG Stations including 5 mother stations, 14 online stations & 17 mngl daughter stations.

Further, as on 31st March 2016, MNGL supplied PNG to over 30598 Domestic, 132 Commercial and 115 Industrial Consumers in its authorized geographical region. MNGL is also catering to fuel requirement of around 97307 CNG vehicles operating in the region. Your Company has 22.5% stake along with BPCL as an equal partner.

• Tripura Natural Gas Company Limited (TNGCL)

TNGCL was incorporated to implement CGD projects in Agartala. As on March 31, 2016, TNGCL operated 5 CNG stations including 3 mother stations and 2 daughter stations in these areas.

Further, as on March 31, 2016, TNGCL supplied PNG to over 22,615 domestic, 322 commercial and 47 Industrial customers in its authorized geographical region. TNGCL also fulfils the fuel requirement of around 8,063 CNG vehicles operating in the region. Your Company has 29% stake in this joint venture.

• Vadodara Gas Limited (VGL)

Shareholders approved transfer of your Companys CNG stations and associated pipeline laid incityforconnecting "lSatP S CNG Station in Vadodara to proposed Joint Venture Company of GAIL Gas Limited with Vadodara Mahanagar Rs. ~ Seva Saclan (VMSS)

Accordingly, VGL was incorporated as Joint Venture Company (JVC) of GAIL Gas Limited and VMSS for supply of Compressed Natural Gas ("CNG") and Piped Natural Gas ("PNG") in the city of Vadodara. Your Company has signed the Business Transfer Agreement (BTA) with VGL and transferred its assets to VGL. VGL is operating the CGD business we.f. 01.10.2014 in Vadodara. Consequent upon transfer of assets, your Company has 32.93% stake along with GAIL Gas Ltd. 17.07% stake and VMSS has 50% stake in VGL.

VGL operates 9 CNG stations in Vadodara and dispensing more than 65,000 kg/day CNG, The CNG network in the City of Vadodara includes 3- Mother Stations, 1- On-line Station and 5- Daughter Booster Stations and 13 Km Steel Pipelines.

VGL also caters to the Piped Natural Gas (PNG) requirements of its consumers in domestic and Commercial Sectors. VGL supplies PNG to 76,000 houses and 2,200 commercial in the city through a 750 km long PE Pipeline Distribution Grid and 07 District Pressure Regulating System. This network was originally built, owned and operated by VMSS. VGL developed new MDPE network of 204 Km in outskirt area which catered about 50000 houses and out of that @2400 connections regularised and others ongoing.

PETROCHEMICALS

• Brahmaputra Cracker and Polymer Limited (BCPL) (Subsidiary)

Your Company has 70% equity stake in Brahmaputra Cracker and Polymer Limited (BCPL), with Oil India Limited (OIL), Numaligarh Refinery Limited (NRL) and the Government of Assam each having 10% equity share. BCPL has set up 2,80,000 TPA polymer plants in Assam. The petrochemical complex at Lepetkata was commissioned on January 02, 2016 and dedicated to the nation by Honble Prime Minister, Narendra Modi on February 05, 2016.

As on 31st March, 2016, BCPL has produced around 3200 MT of polymers and 1000 MT of liquid hydrocarbons. Marketing Agreement was executed with BCPL during the year.

• ONGC Petro-additions Limited (OPaL)

OPaL is implementing a Greenfield petrochemical complex

of 994.95 crores, is a co-promoter of OPaL. . Oil and Natural Gas Corporation Limited (ONGC) and Gujarat State Petroleum Corporation Limited (GSPC) are co-promotors of OPaL. The plant is likely to commence operations during FY 2016-17.

OTHERS

• TAPI Pipeline Company Limited (TPCL)

Your Company is pursuing the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline project to receive natural gas supply from the Galkynysh fields of Turkmenistan. TPCL was incorporated in November 2014 in Isle of Man, to build, own and operate the proposed TAPI pipeline. In August 2015, Turkmengaz was endorsed as the Consortium Leader of the project by the TAPI entities. The Shareholders Agreement of TPCL was signed among the shareholders on December 13, 2015 while the Investment Agreement was signed on April 07, 2016. Your Company holds 5% equity in TPCL.

• South-East Asia Gas Pipeline Company Limited (SEAGP)

SEAGP was formed to transport natural gas from A1/A3 blocks in Myanmar to Myanmar-China border. As of January 2016, this pipeline is transporting nearly 16 MMSCMD of natural gas. Your Company has a 4.17% equity stake in SEAGP

• Talcher Fertilizers Limited (Earlier known as Rashtriya Coal Gas Fertilizers Limited)

A consortium comprising of your Company, CIL, RCF and FCIL was formed to revive FCIL, Talcher fertilizer unit in the Angul district of Orissa. The MoU was signed by the consortium partners on September 05, 2013. Subsequently, the joint venture company, Rashtriya Coal Gas Fertilizers Limited, was formed on November 13, 2015. Your Company holds 29.67% in this JVC.

PARTICULARS OF LOANS, INVESTMENTS AND CORPORATE GUARANTEES

Details of investments, loan and guarantee covered under Section 186 of the Companies Act, 2013 forms part of financial statement, as a separate section in the Annual Report FY 2015-16.

IT ADVANCEMENTS AND FUNCTIONAL EXCELLENCE

Digital technology is now a new disruptive force to reckon with in all realms of businesses. Your Company has aligned with the GoIs "Digital India" initiative to launch Digital GAIL to integrate all processes and stakeholders with digital services. Digital GAIL aims to ensure that the Companys services are made available electronically, efficiently, in shorter delivery time, while reducing paperwork.

All SAP systems in your Company have been upgraded and so the Company is all set for the implementation of asset depreciation as per the IT Act, linear asset management, risk management, incident management, worker safety management, change management, and mobile apps for HR & Sales.

Your Company has implemented Analytics Dashboards for the top management, using the latest SAP HANA-based Business Information Warehouse. These user-friendly dashboards provide drill-down facilities for analysing data and facilitate faster decision making. Your Company has also introduced mobile apps to provide anytime and anywhere access to employees.

GAIL has also implemented the enhanced EHSM Module for incident and risk management. This ensures that any deviation in operational process is recorded and automated for proper monitoring. Accordingly, preventive actions for mitigation of risks are taken.

Your company has also implemented a system for bilingual (Hindi and English) conversion of selective SAP output.

To provide recognition to your Company data centres as secured data centres in the industry, these have been certified by international certification agency based on ISO 27001:2013 Information Security Management System (ISMS) Framework. Your company has successfully conducted Surveillance Audit in November 2015 through M/s BSI and retained the ISO 27001 certification for ensuring security of information and physical assets.

Continuing journey towards functional excellence, your Company has taken various new initiatives during FY 2015-16 in the fields of Competence building, Asset Integrity Management, Standardization, Digital Applications / Processes, Employee Engagement, Knowledge Leverage, Archiving of Documents, Stakeholder Management etc. Further, moving ahead in the endeavor to nurture symbiotic relationship with Vendors / Contractors / Suppliers, Vendor Coaching, Pre-Dispute Resolution Mechanism & health monitoring of Contracts have been implemented with an objective to minimize disputes during contract execution as well as to minimize post contract closure legal disputes / arbitrations.

HEALTH, SAFETY AND ENVIRONMENT (HSE) MANAGEMENT

• Corporate HSE Policy

The HSE practices are primarily driven through a Corporate HSE policy, which is a statement of commitment of the management of your Company. The Company is committed to conduct business with a robust and integrated HSE management system with a focus on improving harmony with the environment through sustainable development. The safety and health of all our employees is of paramount importance to the management, and find mention in the core organisational values of GAIL. Employees and contract workers are strongly encouraged to adopt a safe working culture and behaviour to ensure effective implementation of the HSE policy. Complying with applicable HSE rules and regulations and going beyond in setting internal targets are important elements of the HSE management policy of your Company

• Safety Performance

Safety performance is measured through "HSE Score" which is evaluated on the basis of performance of sites against important HSE Management System elements. Your Company achieved the HSE Score of 93% as against the MoU target of 90%.

• Safety Training

Your Company imparts regular and structured HSE training to its employees to upgrade their skills, knowledge and competence. It also conducts regular training sessions for contract workers, hydrocarbon tanker drivers and other workers to create awareness of the probable hazards in their work area and suggest safe work practices. Your Company also understands the importance of good health, and as a step in this direction, it organized the HSE workshop on "Occupational Health" for business heads and heads of fire and safety & medical services. Faculties from prestigious institutions are also invited regularly to share their insights on health-related issues. Your Company also holds technical seminars regularly, as a case point, it organized a seminar on "Safe Operation of Cross-Country Pipeline" for Oil and Gas Industry in Mumbai, in association with National Safety Council, Mumbai.

• Safety Culture Transformation Through Behaviour Based Safety (BBS) Concept

Your Company introduced and implemented the Behaviour-Based Safety (BBS) Concept to enhance safety of people and its installations. The implementation of this concept has helped to minimize at-risk behaviour at all work sites. In order to educate the employees on this concept, behaviour- based safety cum safety leadership workshops were organized at various sites of your Company during the year.

• Safety Audits

Your Company undertakes various safety audits to ensure implementation of the HSE Management System Guidelines and Emergency Preparedness. These audits are conducted by in-house teams and external safety auditors.

• Occupational Health

Your Company has implemented occupational hygiene measures and medical surveillance programmes to monitor and control the occupational health of its employees. It has also prepared guidelines on occupational health management. The Corporate Occupational Health Committee met four times during the year to monitor the occupational health programmes in your Company. To evaluate effectiveness of these programmes, a multi-disciplinary internal team conducted occupational health audit of process plants on all its work sites. The Company also conducts periodic medical examination of its employees at its various work centres, based on defined guidelines.

SUSTAINABILITY INITIATIVES

Your Company is in the process of publishing its sixth Sustainability Report for 2015-16 based on the Global Reporting Initiative (GRI) G4 Guidelines. Sustainability reporting has helped in measuring and monitoring your Companys performance and moving beyond the mandatory requirements to ingrain sustainability within the organization in letter and spirit. It has served as an important management tool helping us to re-look at your Companys systems, policies and procedures.

Since inception, your Company has been guided by the principles of accountability and transparency. In 2011, your Company formally began its sustainability journey, taking small yet steady steps at a time. The Companys Sustainable Development Committee, comprising the Functional Directors as its members and an independent director as the Chairman, regularly monitors these sustainability initiatives and their performance.

The management of your Company understands that taking concrete actions in the right direction is equally important. GAIL is among the very few companies to have set voluntary targets through Sustainability Aspirations 2020 and transparently disclosed them in the public domain. Your Company has disclosed additional targets through the revised Sustainability Aspirations 2020 in the Sustainability Report. The targets are in the area of Specific Energy Reduction, Specific GHG Emission Reduction, Specific Fresh Water Consumption Reduction and Zero Waste Water Discharge.

Your Company has strengthened its data management systems to capture credible and authentic data and information from its various sites. For the second time in a row, your Company has been acknowledged among CDPs India Leaders 2015 and featured in the Climate Disclosure Leadership Index (CDLI). Your Company has emerged the highest ranking Company among the countrys Public Sector Undertakings, and third overall, in the CDLI 2016.

Your Company believes that it is important to collaborate with industry leaders, associations and peers to address national and global sustainability challenges and work towards a common goal. Its focus has remained on collaborating with various external stakeholders such as TERI, CII, GRI, UNGC, FICCI and CDP among others, to gain from their knowledge and experience in the area of sustainability. Your Company conducted workshops in collaboration with organizations such GRI Focal Point India and CDP during the year.

In line with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 requirements, Business Responsibility Report (BRR) 2015-16 is contained in a separate section in the Annual Report.

VIGILANCE

Corporate Vigilance department of your Company is ISO-9001:2008 certified for having adopted Quality Management System in compliance with the requirements of ISO. Various initiatives such as Bill Watch System, e-tendering, e-payments etc. have already been implemented in the past for the benefit of vendors and suppliers to bring transparency in your Companys systems and processes. A number of system improvements were effected in your Company during the year for effective utilization of its resources, which in turn would also help in preventing corruption and ensure all round good governance like:

• Test check measurement by senior officers during bill payment

• Constitution of Estimate Review Committee for tenders to improve estimation process.

• Roll out of On-line Price bidding for service requisitions in Supplier Relationship

• Management (SRM) e-tendering system.

The Vigilance Awareness Week-2015 was observed on the theme "Preventive Vigilance as a tool of Good Governance" at the Corporate Office and at all the work centres of your Company from 26th to 31st October, 2015. In order to create better awareness about corruption and its effects amongst the youth and college students, various competitions were organized. In order to spread awareness among your Company employees and related work force, various competitions involving Essay Writing, Slogan Writing, Poster Paintings, Online Quiz and debates were held during the week. Other events including banners/posters/painting display, March and rallies with NGOs were also organized at various work centres. A magazine "JAGROOK" containing CVC circulars, articles and case studies related to vigilance was also published.

CAPABILITY BUILDING

• Human Capital

Your Company invests considerable time, efforts and resources to be the employer of choice and attract and retain the best available talent. GAIL carefully nurtures its intellectual capital and channelizes its resources to generate value. The Companys Value Added per Employee initiative reflects its commitment to make optimal and productive use of the available resources and business opportunities. For the year under review, Value Added per Employee was 167.74 lacs.

• Leadership Development Program

Building organizational and leadership capabilities is one of the top priorities of your Company, Under the Companys Leadership Development Programme, the Senior Management Development Centre (SMDC) exercise was initiated for capability building of the senior level employees. As on date, the following employees were trained under this programme: Almost all the senior executives in the Chief Manager (E-6 Grade) and above; more than 95% executives who were promoted to the level of chief managers in APE 2015; and 316 senior managers (E-5 Grade). Plans are underway to train more senior managers (E-5 Grade) in the near future.

Development gaps of the participants were identified and a comprehensive Individual Development Plan (IDP) was drawn to fill this gap. Under this programme, customized training would be provided to the employees at premier business schools, and through e-learning courses and books.

• Representation of Priority Section

Your Company has been complying with the Presidential Directives and other instructions/guidelines issued from time to time pertaining to

Policies and Procedures of Government of India in regard to reservation, relaxations, concessions etc. for Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs) and Persons with Disabilities (PWDs) in Direct Recruitment.

Details with regard to Group-wise total number of employees and the representation of Scheduled Castes, Scheduled Tribes, and Other Backward Classes amongst them in your Company as on 31st March, 2016 have been given in Table below:

Group

Employees on Roll

SC

ST

OBC

PWD

A 3102 485 197 563 41
B 558 110 63 104 11
C 598 103 23 185 35
D 58 17 6 14 1
C&MD

DIRECTORS & CVO

w 05 - - - -
Total 4321 715 289 866 88

A total of 136 new employees joined your Company during the 2015-16. Total Manpower of the Company as on 31st March, 2016 stood at 4321 (including Whole-time Directors & CVO) with 16.54% of its employees belonging to SC category, 6.68% to ST category, 20.04% to OBC category, 7.96% to Minorities and 2.03% to PWDs category Your Companys workforce comprised of 251 women employees as on 31st March, 2016.

• Capability Development

Your Company believes that its human resource is one of the most vital assets for achieving its vision, mission and objectives. Therefore, capability building and talent development of its human resources have been its key focus areas.

GAIL Training Institute (GTI) organizes systematic and structured programmes for capability building across all levels within the organization. In recognition of its initiatives, GTI has been conferred with the prestigious Golden Peacock National Training Award for the year 2016.

GTI organised the following programmes and initiatives during the period under review:

• More than four man-days of training on average per employee.

• Certification Training Programmes from NACE, ASME, OEMs and technology licensors for technical human resources to empower them with state-of-the-art expertise in the core areas of their function.

• Specialised training programmes on new business areas, in-line with the Companys Strategy 2020, including Business Modelling, Energy Trading, Hedging and Risk Management.

• Individual Development Plan (IDP) for chief managers and above, based on the developement areas identified during the SMDC exercise.

• The participants of this IDP plan were provided competency-based books and e-learning modules prepared by Harvard Manage Mentor (HMM). They also undertook customised management development programmes through IIM Bengaluru and Kolkata.

• Leading external management experts were invited to provide customised functional development programmes for senior employees.

• Mentorship programme for all new executives

• Healing with nutrition programme to provide health tips and reduce stress levels.

• Awareness programmes on Sustainable Development on all sites.

More than 60% of employees have already participated in these programmes.

• Knowledge sharing seminar to motivate employees to share their experiences/ expertize with other employees.

• In-house business quizzes and business simulations to update employees with the latest developments in their core business areas.

• One year access to executives of E&P Department to International Petroleum Industry Multimedia System (IPIMS) e-learning module developed by International Human Resource Development Corporation (IHRDC).

As part of its commitment to develop skills and capabilities across the hydrocarbon industry, GTI also successfully organised training programmes for employees of several other organisations including RGPPL, HPCL, BCPL, IGL, MGL, MNGL, GSPL, and HMEL.

Your Company also plays a proactive role to support the National Skill Development Mission. It is the founder member of Hydrocarbon Sector Skill Council (HSSC) and provides skill-based training to create a pool of skilled manpower for CGD network and mid-stream hydrocarbon industry.

• Official Language

Your Company goes the extra mile to propagate and implement the Official Language Policy of the Union of India.

The Official Language Implementation Committees at the corporate and work centre level held quarterly meetings to monitor and review the progress of achieving the targets fixed in the Annual Programme issued by the Govt. of India.

Hindi workshops/trainings are organized on regular basis at GTI, Jaipur and Noida and at other work centres. Hindi computer training sessions are integral part of these programmes. During the year 2015-16, 1,335 employees were provided formal training through 67 workshops. All computers in the Company have Unicode Hindi fonts with transliteration key-board typing facility

Hindi Fortnight was celebrated from September 14 to 28, 2015 to promote the official language.

Every Monday/first working day of the month is observed as Hindi Diwas wherein all employees are encouraged to express themselves in the language.

Your Company now uses a special software to generate all formal communication including pay slips, CPF card, pension card, promotion order, transfer order, reliving order in both Hindi and English. GAIL is one of the few PSUs to implement this facility

Names of all employees in official e-mail IDs are both in English and Hindi. The Company terminology has been standardized and the list has been circulated amongst all employees. GAILs web site and Intranet also follow the bilingual format.

Your Company also publishes the Hindi magazine "Rajbhasha Sahyog" to promote the language. Motivational and inspirational books in Hindi were distributed on the occasion of World Hindi Day

The 16th Rajbhasha Sammelan was organised on January 21 and 22, 2016 to promote the use of Hindi and review the progress made in the implementation of the official language in the Company

The First Sub-Committee of Committee of Parliament on Official Language inspected the Jamnagar, Agartala and Ramgarh offices to review the steps undertaken to promote the official language and were appreciative of our efforts.

A meeting of Hindi Salahkar Samiti was organised on February 8, 2016 in Puri by the MoP&NG under the Chairmanship of Minister of State for Petroleum & Natural Gas (I/C). GAIL too participated and highlighted its efforts to promote the language.

• Sexual Harassment of Women at Workplace

Your Company has in place Policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment

During the year 2015-16, two sexual harassment complaints received and the same were disposed off.

INNOVATION, RESEARCH AND DEVELOPMENT (R&D)

Your Company is committed to address the challenges of ever changing business scenario through Innovation. In this regard efforts are made to encourage Innovation and creativity of employees through a Suggestion Scheme. This Scheme helps to promote organization-wide idea generation for incremental innovation. The employees are motivated to suggest improvements in their respective areas of work. The suggestions so received are evaluated in a time bound manner for implementation and CMD trophy is awarded to the best Suggestion.

Your Company is aggressively pursuing many R&D projects in its identified thrust areas with a focus on developing high-impact innovative technologies to help pursue the existing business in a more optimum and sustainable manner. To improve the pipeline maintenance practices a R&D project to utilize Satellite imagery for monitoring Pipeline RoU was conceptualized. This project involved geo-mapping of the Pipeline route and finalizing the sequencing of taking Satellite images to meet the requirement of monthly monitoring. A change detection software was also developed to identify encroachments through analysis of sequential images. A "Bhuvan-GAIL Portal" was launched for monitoring the RoU of 610 Km stretch of Dahej-Vijaipur pipeline through this technology Success of this pilot Project shall enable scaling-up of this technology to cover the entire Pipeline network besides developing additional functionalities to monitor activities like Project execution of new Pipeline projects.

Your Company had successfully demonstrated the capture of Land Fill Gas (LFG) site in an open and active landfill site at Ghazipur in Delhi. A part of this low-quality LFG is now being partially upgraded and utilized to generate Power through a 30 KW Micro Turbine. This Project demonstrates our commitment towards sustainable utilization of waste energy and climate risk mitigation through reduction of carbon footprint.

The Wireless Sensor Network (WSN) technology is known for its resilience and is more reliable than conventional wired networks. Wireless Sensors were developed for continuous monitoring of Pipeline parametres and are presently being pilot tested for transmitting and logging data of few customers at Bhiwadi terminal. Various new applications of polymer grades such as anti-microbial sutures for healthcare applications; Nanoclay based additives to enhance polymer properties etc. are also being developed.

The other important area for Research is hydrogen which is an ultraclean fuel. A Novel carbon nano-composite material was developed that could store up to 6.7 wt% of hydrogen exceeding the 6% target set by Department of Energy (DoE), USA. Further evaluation is underway to utilize this material in a compact storage device to provide Hydrogen to a Polymer Electrolyte Membrane (PEM) Fuel Cell.

Your Company has a judicious mix of various Basic/Applied/Pilot projects encompassing the Natural Gas value chain in its R&D portfolio. In addition, few projects are also being pursued in upcoming areas like Solar, Fuel Cells, Gas Hydrates etc. These R&D projects are being pursued in association with reputed research organizations / institutes. Few Developmental Projects to improve efficiency and safety of existing operations and to conserve the resources by utilizing better technologies are also being implemented at process plants.

TOTAL QUALITY MANAGEMENT

Your Company endeavors for continual and sustainable improvement through implementation of quality practices, innovation and standardization. Your Company continues to implement various Quality Circle projects through engagement of Company employees, resulting into innovation in work places and leading to enhancement in productivity. Your Company has achieved a Customer Satisfaction level of 90% and committed to improve it. Your Company works for the satisfaction of customers and stakeholders. Your Company has implemented Integrated Management System and Energy Management System in various pipeline system and process units. Your Company is committed to sustainable development.

PROCUREMENT FROM MICRO AND SMALL ENTERPRISES (MSEs)

The Government of India has notified a Public Procurement Policy for MSEs, Order 2012. In terms of said policy, out of the total eligible value of annual procurement of approx. 2,016 Crores towards goods produced and services rendered by MSEs (including MSEs owned by SC/ST Entrepreneur) during the FY 2015-16, the value of total procurement made from MSEs is 435.34 Crores which is approx. 21.59%. of 2,016 Crores

MOU PERFORMANCE

A Memorandum of Understanding (MoU) is signed every year between your Company and its administrative ministry i.e. MoP&NG, through which performance targets for the year are set. MoU for the year 2015-16 was signed between Chairman & Managing Director and Secretary (P&NG), Government of India on 31st March, 2015.

The thrust while fixing MoU targets was more towards improving performance on critical aspects of the Company which include Key Financial parameters, Gas Marketing, Gas Transmission, Project Implementation, Capital Expenditure, Liquid Hydrocarbon & Polymer Production etc. Significant thrust has also been given on Research & Development Projects and Operating Efficiency parameters.

Your Company has been consistently achieving Excellent MoU rating since the inception of MoU system i.e. from 1989-90 to 2013-14. However, because of unprecedented fall in crude oil prices from $ 140 / barrel to ~ $ 30 - 40 in 2014-15 leading to fall in LHC & Polymer prices, negative price differentials between Spot and long term contracted R-LNG prices etc., there were gaps between MoU targets and actual performance of your Company in FY 2014-15. As a result, your Company achieved Very Good MoU rating for the year 2014-15.

Evaluation of MoU 2015-16 is under progress and the final evaluated MoU score and rating is expected to be announced in December 2016.

LAURELS

• Corporate

• Emerged as the highest ranking PSU in Carbon Disclosure Leadership Index securing 98 out of maximum 100, an increase of 12 points in one year.

• Released its fifth Sustainability Report becoming the first PSU to avail Content Index certification by GRI, Amsterdam.

• Dun & Bradstreet Award 2015 in the category Gas - Processing, Transmission and Marketing.

• Achieved the 5th rank in the Platts Top 250 Companies in the Asia-

Pacific in the Gas Utilities category

• "Environmental Sustainability - Company of the year" for 2015. The special commendation award has been conferred to GAIL for special efforts towards Environmental Sustainability and Climate Change.

• Health, Safety & Environment (HSE)

With its mss its installations, your Company

has won following awards during the year 2015-16:

• OISD awards for Cross Country Pipeline-LPG & Gas Pipeline: GAIL- HVJ Pipeline and Most Consistent Safety Performer-gas processing Plant: GAIL GPU, Gandhar

• Maharashtra region Pipeline system, Mumbai received "Safety Innovation Award 2015" from the institution of Engineers India, New Delhi.

• NCR received British Safety Council International Safety award, U.K -2016.

• GPU Gandhar plant won Gujarat State Safety award 2014 from the Gujarat Safety Council of India

• GPU Gandhar plant won "Suraksha Puraskar" (Bronze Trophy)-2015 from National Safety Council of India.

• GPU Usar received "Certificate of Appreciation" for National Safety Awards

• GAIL Vaghodia received "Golden Peacock Occupational Health & Safety Award, 2015, by the Institute of Directors, New Delhi.

• GPU Gandhar received British Safety Council International Safety award, U.K .

• HVJ Compressor Station, Vijaipur (M.P) awarded prestigious "SURAKSHA PURASKAR" by National Safety Council, under Group A in manufacturing sector.

RIGHT TO INFORMATION (RTI)

In order to promote transparency and accountability, an appropriate mechanism has been set up across the Company in line with the Right to Information Act, 2005. Your Company has nominated ACPIOs/CPIO/ Appellate Authorities at its units/offices across the country to provide information to citizens under the provisions of RTI Act.

MANAGEMENT DISCUSSION AND ANALYSIS

In terms of the Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the detailed Managements Discussion and Analysis forms a part of this report at Annexure- A.

CORPORATE GOVERNANCE

Your Company believes that good corporate governance is critical in establishing a positive organizational culture. It is evident by responsibility, accountability, consistency, fairness and transparency towards our stakeholders. Pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and DPE guidelines on Corporate Governance, a report on Corporate Governance forms part of this Report at Annexure- B.

The details of the meetings of the Board, Companys policy on Directors appointment and their remuneration, details of establishment of whistle blower mechanism and other matters, etc. forms part of report on Corporate Governance.

There are no significant and material orders passed by the regulators or Courts or tribunals impacting the going concern status and Companys operations in future.

The statutory auditors of the Company have examined and certified your Companys compliance with respect to conditions enumerated in SEBI (LODR) Regulations, 2015 and DPE guidelines on Corporate Governance. The certificate forms a part of this Report at Annexure- C.

AUDITORS

• Statutory Auditors

The statutory auditor of your Company is appointed by Comptroller & Auditor General of India (CAG). M/s G.S. Mathur & Co., Chartered Accountants, New Delhi and M/s O P Bagla & Co., Chartered Accountants, New Delhi were appointed as Joint Statutory Auditors of your Company for the FY 2015-16.

Review and Comments of CAG, if any, on the Companys Financial Statements for the financial year ending 31st March 2016, forms part of Financial Statement. Notes on Financial Statement referred to in the Auditors Report are self-explanatory and, therefore, do not call for any further comment.

• Cost Auditors

Your Company has appointed M/s Ramanath Iyer & Co., New Delhi for Northern Region , M/s Bandyopadhyaya Bhaumik & Co., Kolkata for Northern and Eastern Region , M/s A C Dutta & Co., Kolkata for Southern Region, M/s Musib & Company, Mumbai for Western Region Part-I, M/s N.D Birla & Co., Ahmedabad for Western Region Part-II, M/s Sanjay Gupta & Associates, New Delhi for Central Region as cost auditors for FY 2015-16. M/s Ramanath Iyer & Co. is the lead cost auditor.

Cost audit reports for the financial year ended 31st March, 2015 was filed to Registrar of Companies on 14th October, 2015.

• Internal Auditor

Your Company has an in-house Internal Audit Department, which is headed by Executive Director.

• Secretarial Auditor

Your Company has appointed M/s Agarwal S. & Associates as secretarial auditors for 2015-16. Secretarial Audit Report confirming compliance by Practicing Company Secretary to the applicable provisions of the Companies Act, 2013, SEBI (LODR) Regulations, 2015 and other applicable laws, forms part of this Report at Annexure- D.

The observations made by Secretarial Auditor in his Audit report are as under:

(a) Proviso to Section 149(1) read with Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 w.r.t. appointment of at least one woman Director on the Board of the Company.

(b) Regulation 17 (1) of Securities Exchange Board of India (Listing Obligation & Disclosure Requirements) Regulations, 2015 (erstwhile Clause 49 (II) (A) & (B) of the Listing Agreement) and Clause 3.1.4 of the DPE Guidelines on Corporate Governance for Central Public Sector Enterprises w.r.t. composition of the Board of Directors of the Company,

(c.) Non-compliance of Section 149(8) read with Schedule IV (VIII) of Companies Act, 2013 and Regulation 17 (10) & 25 (4) of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company has not been carried out the performance evaluation of the directors.

Explanations on observations made by Secretarial Auditor in seriatim are as under:

(a) As on 31st March 2016, there was no woman Director on the Board of the Company, However, during the year, there was a Woman Director on the Board of the Company from 21st May, 2015 to 2nd January, 2016.

(b) As on 31st March 2016, your Companys Board comprised of four whole-time Directors including CMD, two Government nominee Directors and three Independent Directors.

Your Company is a Government Company under the administrative control of the Ministry of Petroleum and Natural Gas, Government of India, the Directors are nominated/appointed by the Government of India. The Company is continuously pursuing with the Government of India for the appointment of requisite number of Independent Directors on their Board in order to comply with the provisions

of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, DPE Guidelines & the Companies Act, 2013.

(c) Your Company is a Government Company, appointment/ nomination of all the Directors is being done by the President of India, through the MoP&NG and performance evaluation of individual Directors including Independent Directors is to be done by Government of India being appointing authority.

CORPORATE SOCIAL RESPONSIBILITY

Your Company believes that Corporate Social Responsibility (CSR) plays a major role in the development of any country. Therefore, it has made CSR an integral part of its ethos and culture. To amplify our outreach efforts, GAIL has incurred an expenditure of 2.3% of the average net profit of the preceding three years on CSR projects/activities of 2015-16 (I18.64 crores) against the stipulated 2% spend (102.34 crores). The overall spends (160.56 crores) amount to 3.14% of the average net profit of the preceding three financial years.

Annual Report on CSR activities as required under Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 read with section 134(3) and 135(2) of the Companies Act, 2013 is placed at Annexure E.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION

As per requirement of 134 (3)(m) of the Companies Act, 2013 read with Ru le 8(2) of the Companies (Accounts) Rules, 2014, details of conservation of energy and technology absorption forms part of this report at Annexure- F.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

As per requirement of 134 (3) (h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 particulars of contracts or arrangements with related parties as referred in section 188(1) of the Companies Act, 2013 in the prescribed form AOC-2 is placed at Annexure-G.

Your Company has formulated the policy on dealing with Related Party Transactions and the same is hosted on your Companys website at http:// www.gailonline.com/final_site/pdf/GAIL_Related_Party_Transaction_ Policy

PARTICULARS OF EMPLOYEES

As per the provisions of section 197(12) of the Companies Act, 2013 read with the Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed Company is required to disclose the ratio of the remuneration of each director to the median employees remuneration etc. in the Directors Report.

However, as per notification dated 5th June, 2015 issued by the Ministry of Corporate Affairs, Government of India, Government Companies are exempted from complying with provisions of section 197 of the

Companies Act, 2013. Your Company is a Government Company, therefore, such particulars have not been included as part of Directors Report.

EXTRACT OF ANNUAL RETURN

Extract of Annual Return forms part of this Report at Annexure-H.

ISSUE OF SHARES AND FIXED DEPOSITS

Your Company has neither issued any shares nor accepted any fixed deposits during the financial year 2015-16 and, as such, no amount of principal or interest was outstanding as of the balance sheet date.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year, foreign exchange earnings were 866.54 crores and foreign currency outgo was 2,558.71 crores.

KEY MANAGERIAL PERSONNEL AND DIRECTORS

During the period, the following ceased to be Key Managerial Personnel (KMP) on the Board of your Company:

• Shri Prabhat Singh, Director (Marketing) resigned w.e.f. 14th September, 2015

• Shri N.K. Nagpal, Company Secretary w.e.f. 26th May, 2016

Shri A.K. Jha has been appointed as Company Secretary of the Company w.e.f. 26th May, 2016.

During the period, the following ceased to be Directors on the Board of your Company:

• Smt. Anuradha Sharma Chagti, Government Nominee Director w.e.f. 2nd January, 2016

The following were appointed on the Board of your Company as Director:

• Shri S.K. Srivastava, Independent Director w.e.f. 20th November, 2015

• Shri D.J. Pandian, Independent Director w.e.f. 20th November, 2015 and resigned from the Company w.e.f. 31st March, 2016

• Shri Anupam Kulshreshtha , Independent Director w.e.f. 28th November, 2015 (from the date of obtaining DIN)

• Shri Sanjay Tandon , Independent Director w.e.f. 20th November, 2015

• Shri Anant Kumar Singh, Government Nominee Director w.e.f. 2nd January, 2016

The Board placed on record its deep appreciation for the valuable services rendered by outgoing Directors/KMP during their association with your Company,

CODE OF CONDUCT

Pursuant to the requirements of SEBI (LODR) Regulations, 2015 the Board Members and Senior Management Personnel have affirmed compliance with the Code of Conduct for the financial year ending 31st March, 2016.

PERFORMANCE EVALUATION

As per the provisions of section 134(3)(p) of the Companies Act, 2013 for every listed Company, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors should form part of the Directors Report.

However, as per notification dated 5th June, 2015 issued by the Ministry of Corporate Affairs, Government of India, Government Companies are exempted from complying with provisions of section 134(3)(p) of the Companies Act, 2013. Your Company is a Government Company and the appointment, tenure, performance evaluation etc. of Directors is done by Government of India, therefore, such particulars have not been included as part of Directors Report. Remuneration of CMD, Whole-time Directors and its employees is determined by Government of India. As per requirement of SEBI (LODR) Regulations, 2015, an evaluation criterion for the Board is being formulated.

DIRECTORS RESPONSIBILITY STATEMENT

Yours Directors confirm that:

i) In the preparation of the annual accounts for the financial year ending 31st March, 2016, the applicable accounting standards have been followed, alongwith proper explanation relating to material departures;

ii) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review;

iii) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) prepared the annual accounts for the financial year ending 31st March, 2016 on a going concern basis;

v) had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively and

vi) laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

ACKNOWLEDGMENT

Your Directors express their gratitude for help, guidance and support received from the Government of India, especially the Ministry of Petroleum and Natural Gas, various state governments, regulatory and statutory authorities.

Your Directors acknowledge wise counsel received from Statutory Auditors and CAG and are grateful for their consistent support and cooperation.

Your Directors also wish to thank all the shareowners, business partners and members of GAIL family for reposing their faith, trust and confidence in your Company.

On behalf of your Directors, I would like to place on record our deep appreciation for the hard work, dedication, commitment and solidarity of your Companys employees.

Your Directors and employees look forward to the future with confidence and stand committed to creating a bright future for all stakeholders.

For and on behalf of the Board

(B.C. Tripathi)

Chairman & Managing Director

Place: New Delhi

Dated: August 19, 2016