Bharat Petroleum Corporation Ltd Directors Report.

TO THE MEMBERS OF BHARAT PETROLEUM CORPORATION LIMITED

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

1. We have audited the accompanying standalone Indian Accounting Standards ("Ind AS") financial statements of Bharat Petroleum Corporation Limited ("the Corporation"), which comprise the Balance Sheet as at 31st March 2020, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the Standalone Ind AS Financial Statements").

2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS Financial Statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India, of the state of affairs (financial position) of the Corporation as at 31st March 2020, the profit and total comprehensive income, its cash flows and changes in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit of the Standalone Ind AS Financial Statements in accordance with the Standards on Auditing ("SAs") specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of our report. We are independent of the Corporation in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the Standalone Ind AS Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Ind AS Financial Statements.

Emphasis of Matter

4. We draw attention to Note No. 71 in the Standalone Ind AS Financial Statements, which describes the economic consequences/disruption the Corporation is facing as a result of COVID-19 pandemic, which is impacting consumer demand, financial markets, commodity prices and inventory valuation.

Our opinion is not modified in respect of this matter.

Key Audit Matters

5. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Ind AS Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters:

S. No. Key Audit Matter Auditors Response
1. Computation of Expected Credit Loss (ECL):
Trade receivables and loans granted under the Pradhan Mantri Ujjwala Yojana (PMUY) scheme constitute a significant component of the total current assets of the Corporation. Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
• 1 n respect of loans granted under PMUY, the corporation along with other few industry peers have derived a common methodology based on the broad category of active and inactive consumers and last refill date with expected loan recovery period. We checked the working of the same and it was in line with the common draft methodology document shared with us.
At each reporting date, the Corporation recognizes Lifetime ECL on Trade Receivables using a ‘simplified approach and 12 month ECL on loans granted under the PMUY scheme, which rely on Managements estimates regarding probability of default rates linked to age- wise bucketing of the corresponding asset. The COVID-19 pandemic may also have an impact on the Managements estimate of probability of default as on 31st March 2020
• We have evaluated the methodology for age-wise bucketing of trade receivables and key assumptions underlying the probability of default estimates on the same, to ascertain that the same were broadly in-line with the Corporations historical default rates and have considered available information regarding the current economic scenario.
• We selected a few sample outstanding receivable cases having different overdue period and checked if the computation of ECL is appropriate in-line with the Corporations policy.
2. Investments in E&P Subsidiary:
The Corporation has an investment of 5,494.41 Crores in 100% subsidiary Bharat Petro Resources Ltd (BPRL). The following procedures were carried out in this regard:
• We evaluated the design and implementation of key controls in relation to the impairment testing carried out by the Corporation for the investment in E&P subsidiary.
This subsidiary alongwith its step down subsidiaries, JVs & Associates holds participating interest in various oil/ gas blocks for exploration & evaluation, development and production activities (E&P).
• We reviewed the audited Consolidated Ind AS Financial Statements of BPRL and the independent auditors report thereon to ascertain if there are any signs of impairment in the Corporations investments therein.
The Corporations realization from these E&P investments is dependent on the continued successful operations/ development of reserves resulting in expected earnings and revenue growth of the respective companies.
The sharp global reduction in crude oil prices towards the end of FY 2019-20 triggered by the COVID-19 pandemic, may also impact the estimated revenue of these entities and hence the Corporations realization from E&P Investments.
S. No. Key Audit Matter Auditors Response
3. Evaluation of Contingent Liabilities:
The Corporation has material uncertain positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. Contingent liabilities are not recognized in the Standalone Ind AS Financial Statements but are disclosed unless the possibility of an outflow of economic resources is considered remote. Contingent liabilities disclosed are in respect of items which in each case are above the threshold limit. • We examined sample items above the threshold limit for recognition of contingent liabilities and obtained details of completed Excise, VAT/ Sales Tax/ Entry Tax assessments and demands as on 31st March 2020. In FY 2019-20, due to various tax dispute settlement schemes, the Corporation has opted for dispute settlement in VAT/Sales tax related cases in many states and obtained opinion from tax consultants in various matters. We have relied upon such opinions where remote possibility of cash outflow is indicated and the Corporation has considered the same while preparation of the Standalone Ind AS Financial Statements.
• We have assessed the Managementsunderlying assumptions in estimating the possible outcome of the disputes. We also considered legal precedence and other rulings in evaluating Managements position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions at beginning of the financial year to evaluate whether any change was required to Managements position on these uncertainties.
4. Inventories:
Because of implementation of lockdown by Government due to outbreak of COVID-19, physical verification of the inventories was not possible during the course of audit. Verification and valuation of Inventories is a significant area requiring Managements judgment of estimates and application of accounting policies that have significant effect on the amounts recognized in the Standalone Ind AS Financial Statements. • Since physical verification was not possible for us, we have relied on the physical verification of inventory carried out by the Management. We also evaluated the system of inventory monitoring and control and reviewed data regarding sale of finished goods for sample regions during April 2020. The physical verification of inventory has been conducted by the management at regular intervals.
• In respect of inventory lying with third parties, we have ascertained that these have substantially been confirmed by them. We examined the system for records maintenance for stocks lying at third party locations.
• We have also tested the values considered in respect of Net realizable value, cost of products and verified these with the inventory valuation and accounting entries posted in this regard.
5. Property, Plant & Equipment:
Estimates of useful lives and residual value of Property, Plant and Equipment is a significant area requiring Management judgment of estimates and application of accounting policies that have significant effect on the amounts recognized in the Standalone Ind AS Financial Statements. • We examined whether the Corporation has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
• The physical verification of Property, Plant and Equipment (except LPG Cylinders and pressure regulators with customers) has been carried out by the Management in accordance with the phased program of verification of all assets and necessary accounting entries based on such physical verification has been appropriately posted which were reviewed by us.
• Changes in the useful life of class of assets was adopted based on detailed internal evaluation and was also comparable with other entities in the same industry. We have tested the computation of depreciation on sample basis.

Information Other than the Standalone Ind AS Financial Statements and Auditors Report Thereon

6. The Corporations Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report, Business Responsibility Report, Corporate Governance and Shareholders Information, but does not include the Standalone Ind AS Financial Statements and our audit report thereon.

7. Our opinion on the Standalone Ind AS Financial Statements does not cover the other information and we do not express any form of assurance thereon.

8. In connection with our audit of the Standalone Ind AS Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Standalone Ind AS Financial Statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

9. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Managements Responsibility for the Standalone Ind AS Financial Statements

10. The Corporations Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone Ind AS Financial Statements that give a true and fair view of the financial position, financial performance, total comprehensive income, cash flows and changes in equity of the Corporation in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Corporation and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

11. In preparing the Standalone Ind AS Financial Statements, management is responsible for assessing the Corporations ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Corporation or to cease operations, or has no realistic alternative but to do so.

12. The Corporations Board of Directors management is responsible for overseeing the Corporations financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Ind AS Financial Statements

13. Our objectives are to obtain reasonable assurance about whether the Standalone Ind AS Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Ind AS Financial Statements.

14. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone Ind AS Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Corporation has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporations ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the Standalone Ind AS Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Ind AS Financial Statements, including the disclosures, and whether the Standalone Ind AS Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

15. Materiality is the magnitude of misstatements in the Standalone Ind AS Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

16. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

17. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

18. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Ind AS Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

19. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, and on the basis of such checks of the books and records of the Corporation, as we considered appropriate and according to the information and explanations given to us, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

20. As required by Section 143(5) of the Act, we give in "Annexure B", a statement on the matters specified by the Comptroller and Auditor-General of India for the Corporation.

21. As required by Section 143(3) of the Act, based on our audit we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Corporation so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flow and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid Standalone Ind AS Financial Statements comply with the Ind AS specified under Section 133 of the Act.

e) In view of exemption given vide notification no. G.S.R. 463(E) dated June 5, 2015, issued by Ministry of Corporate Affairs, provisions of Section 164(2) of the Act regarding disqualification of directors, are not applicable to the Corporation;

f) With respect to the adequacy of the internal financial controls over financial reporting of the Corporation and the operating effectiveness of such controls, refer to our separate Report in "Annexure C".

g) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. The Corporation has disclosed the impact, if any, of pending litigations on its financial position in its standalone Ind AS Financial Statements. (Refer Note No. 63 of the Standalone Ind AS Financial Statements)

ii. The Corporation has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Corporation.

For CVK & Associates For Borkar & Muzumdar
Chartered Accountants Chartered Accountants
ICAI FRN 101745W ICAI FRN 101569W
Sd/- Sd/-
A K Pradhan Kaushal Muzumdar
Partner Partner
Membership No. 032156 Membership No. 100938
UDIN: 20032156AAAAAG3907 UDIN: 20100938AAAAAS9538
Place: Mumbai
Date: 03rd June, 2020

ANNEXURE A TO INDEPENDENT AUDITORS REPORT

[Referred to in paragraph 19 under ‘Report on Other Legal and Regulatory Requirements in the Independent Auditors Report of even date to the members of Bharat Petroleum Corporation Limited ("the Corporation") on the Standalone Ind AS Financial Statements as of and for the year ended 31st March 2020]

(i) (a) The Corporation has maintained proper records showing full particulars, including quantitative details and

situation of fixed assets;

(b) As per information and explanations given to us, physical verification of fixed assets (except LPG Cylinders and pressure regulators with customers) has been carried out by the Management during the year in accordance with the phased programme of verification of all assets over three years which, in our opinion, is reasonable having regard to the size of the Corporation and the nature of its assets. As informed, no material discrepancies were noticed on such verification;

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Corporation, the title deeds of immovable properties are held in the name of the Corporation, except in cases given below:

Particulars Number of Cases Net Block ( in Crores) Remarks
Freehold Land 9 84.59 Documents of title not available for verification
Freehold Land 10 7.75 Documents of title lying with registration authorities, as informed
Freehold Land 13 339.06 Mutation Pending, as informed

(ii) The inventory (excluding stocks with third parties and goods in transit) has been physically verified by the Management during the year at reasonable intervals. In respect of inventory lying with third parties, these have substantially been confirmed by them. No material discrepancies were noticed on physical verification of inventories carried out at the end of the year;

(iii) As informed, the Corporation has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under Section 189 of the Act. Accordingly, paragraphs 3(iii)(a), 3(iii)(b) and 3(iii)(c) of the Order are not applicable;

(iv) In our opinion and according to the information and explanations given to us, the Corporation has complied with the provisions of Section 185 and Section 186 of the Act, with respect to the loans, investments, guarantees and securities;

(v) In our opinion and according to the information and explanations given to us, the Corporation has not accepted any deposits from public within the provisions of Sections 73 to 76 of the Act read with The Companies (Acceptance of Deposits) Rules, 2014 and other relevant provisions of the Act;

(vi) We have broadly reviewed the books of account maintained by the Corporation in respect of products where the maintenance of cost records has been specified by the Central Government under Section 148(1) of the Act and the rules framed there under and we are of the opinion that prima-facie, the prescribed books of account and cost records have been made and maintained. We have not, however, made a detailed examination of the same with a view to determining whether they are accurate or complete;

(vii) (a) The Corporation is generally regular in depositing with appropriate authorities, undisputed statutory

dues including Provident Fund, Employees State Insurance, Income-Tax, Sales-Tax, Goods and Service tax (GST), Customs Duty, Excise Duty, Value Added Tax, Cess and any other material statutory dues applicable to it;

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income-Tax, Sales-Tax, GST, Customs Duty, Excise Duty, Value Added Tax, Cess and any other material statutory dues applicable to it, were outstanding, as on the last day of the financial year, for a period of more than six months from the date they became payable;

(b) According to the information and explanation given to us, the dues outstanding with respect to income- tax, sales-tax, service tax, duty of customs, duty of excise, value added tax have not been deposited on account of any dispute, are as per Statement 1;

(viii) According to the information and explanations given to us, the Corporation has not defaulted in repayment of loans or borrowing to financial institutions, banks, government or dues to debenture holders;

(ix) The Corporation did not raise any money by way of initial public offer or further public offer (including debt instruments) during the year. According to the information and explanations given to us, money raised by way of term loans during the year have been applied for the purpose for which those were raised;

(x) During the course of our examination of the books and records of the Corporation, carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, no instances of fraud by the Corporation or on the Corporation by its officers and employees have been noticed or reported during the year, except for an incident as reported by Management by way of excess filling of Petroleum Products in Tank Lorries, which was reported at one of the Retail locations during the year. Due to nature of transaction involving flow calibration, we are informed that a formal letter was issued to automation vendor and subsequently, recovery of 0.99 crore was made from his dues. Further, we understand that disciplinary action is also being initiated on the concerned officers.

(xi) In view of exemption given vide notification no. G.S.R. 463(E) dated June 5 2015, issued by Ministry of Corporate Affairs, provisions of Section 197 read with Schedule V of the Act regarding managerial remuneration are not applicable to the Corporation. Accordingly, paragraph 3(xi) of the Order is not applicable;

(xii) In our opinion and according to the information and explanations given to us, the Corporation is not a Nidhi Company. Accordingly, paragraph 3(xii) of the Order is not applicable;

(xiii) According to the information and explanations given to us and based on our examination of the records of the Corporation, all transactions entered into by the Corporation with the related parties are in compliance with Sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the Standalone Ind AS Financial Statements, as required by the applicable Indian Accounting Standards;

(xiv) According to the information and explanations given to us and based on our examination of the records, the Corporation has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, paragraph 3(xiv) of the Order is not applicable;

(xv) According to the information and explanations given to us and based on our examination of the records, the Corporation has not entered during the year into non-cash transactions with directors or persons connected with them. Accordingly, paragraph 3(xv) of the Order is not applicable;

(xvi) The Corporation is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, paragraph 3(xvi) of the Order is not applicable.

For CVK & Associates For Borkar & Muzumdar
Chartered Accountants Chartered Accountants
ICAI FRN 101745W ICAI FRN 101569W
Sd/- Sd/-
A K Pradhan Kaushal Muzumdar
Partner Partner
Membership No. 032156 Membership No. 100938
UDIN: 20032156AAAAAG3907 UDIN: 20100938AAAAAS9538
Place: Mumbai
Date: 03rd June,2020

Statement 1 (Refer Clause vii (b) of Annexure A)

S. No. Name of the Statute Nature of Dues Forum Where Dispute is pending Amount Period block to which it relates^
1.

Central Excise Act, 1944

Duty, interest and penalty for cases relating to Determination of Assessable value, Cenvat Credit etc.

Supreme Court 2,916.53 2000 to 2010
High Court 28.57 1995 to 2015
Appellate Tribunal * 13,766.79 1990 to 2020
Appellate Authority ** 51.85 1995 to 2020
Total 16,763.74
2. Customs Act, 1962 Duty, interest and penalty for cases relating to Determination of Valuation etc. Appellate Tribunal * 4.25 2005 to 2010
3. Income Tax Act, 1961 Tax, interest and penalty demands towards various Income tax disputes Appellate Authority ** 502.64 2005 to 2019
4.

Sales Tax/Vat Legislations

Tax, interest and penalty demand towards Sales tax/VAT disputes

Supreme Court 7.37 1995 to 2005
High Court 681.83 1980 to 2020
Appellate Tribunal * 3,681.76 1985 to 2015
Appellate Authority ** 1,224.28 1985 to 2020
Adjudicating Authority *** 9.36 2010 to 2015
Total 5,604.60
5.

Finance Act,1994 (Service Tax)

Duty, interest and penalty for cases relating to Service tax disputes

Supreme Court 34.15 2005 to 2015
High Court 22.30 2000 to 2010
Appellate Tribunal * 20.36 2005 to 2015
Appellate Authority ** 8.53 2000 to 2020
Total 85.34
Grand Total 22,960.57

Remarks

Dues Include Penalty & Interest, wherever applicable * Appellate Tribunal includes Sales Tax Tribunal, CESTAT and ITAT.

** Apellate Authority includes Commissioner Appeals, Assistant Commissioner Appeals, Deputy Commissioner Appeals, Joint Commissioner Appeals and Deputy Commissioner Commercial Taxes Appeals.

*** Adjudicating Authority includes Collector of Sales Tax, Sales Tax Officer and Deputy Commissioner Sales Tax, Joint / Deputy/ Additional Commissioner of Commercial Taxes etc

~ Period block shall indicate the period interval in which all the disputes under that authority have taken place.

ANNEXURE B TO INDEPENDENT AUDITORS REPORT

[Referred to in paragraph 20 under "Report on Other Legal and Regulatory Requirements" in the Independent Auditors Report of even date to the Members of Bharat Petroleum Corporation Limited ("the Corporation") on the Standalone Ind AS Financial Statements as of and for the year ended 31st March 2020]

Directions for the year 2019-20

1. Area examined Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.
Observations/ Findings The Corporation has a system in place to process all the accounting transactions through its implemented IT system, SAP. As such, we have not come across any accounting transactions processed outside IT system which would have an impact on the integrity of the accounts or any financial implications.
2. Area examined Whether there is any restructuring of an existing loan or cases of waiver/write off of debts /loans/interest etc. made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated.
Observations/ Findings Based on our examination of relevant records of the Corporation and the information and explanations received from the Management, there were no cases of restructuring of an existing loan or cases of waiver/write off of debts/loans / interest by any of the lenders of the Corporation due to inability to repay the loan.
3. Area examined Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation.
Observations/ Findings Based on our examination of relevant records of the Corporation and the information and explanations received from the Management, Funds received/receivable for specific schemes from central/state agencies were properly accounted for/utilized as per terms and conditions and applicable Ind AS.
Sub-directions for the year 2019-20
1. Area examined Whether any investments have been made by BPCLs Provident Fund and Post- Retirement Medical Fund (PRMF) trust in IL&FS? If so, the exposure and liabilities of the Company in the capacity of Principal Employer and probability of liabilities in future years with regard to exposure for investments made in IL&FS or group Companies by BPCL PF Trust and BPCL PRMB Trust.
Observations/ Findings Yes, investments of 112.90 Crores and 40 Crores have been made by BPCLs Provident Fund and Post- Retirement Medical Fund Trust respectively, in IL&FS Group companies as on 31st March 2020. Interest accrued of 28.33 Crores on above investments has not been recognized in the books of respective trusts due to defaults in payment by the above Group.
As a Principal Employer, the Corporation has accounted a liability by way of provision of 79.03 Crores towards impairment of the above investments for the PF Trust as on 31st March 2020 to meet the shortfall. The maximum amount of liabilities in future years with regards to exposure for above investments in PF Trust after considering above provision could be 33.87 Crore.
2. Area examined In view of initiation of process of disinvestment of the Company by DIPAM, the following may be reported upon:
As per the practice the management is carrying out physical verification of assets in phased manner over the three years period. To confirm the existence of assets as on date of disinvestment, Whether proper physical verification of assets carried out by the management before the finalization of disinvestment process?
Observations/ Findings As informed by the Management, The CCEA, in its meeting held on 20.11.2019, has accorded ‘in principle approval for Strategic disinvestment of Government of India shareholding in BPCL excluding BPCLs shareholding in NRL which has to be divested to a CPSE operating in the Oil & Gas Sector. Further, Department of Investment and Public Asset Management (DIPAM), to take forward the decision of CCEA, has appointed Transaction Advisor, Legal advisor and Asset Valuer. The Asset Valuer was engaged to carry out a diligent and fair valuation of BPCL for the limited purpose of its disinvestment. Tender document available in public domain do not include physical verification of the assets as part of the scope of work of Asset Valuer. Further,as informed, till date, no communication with regard to carrying mandatory physical verification has been received by BPCL from DIPAM for the purpose of disinvestment.
However, physical verification of assets has been carried out by the Management during the year as per the normal phased programme of the Corporation.
3. Area examined How much is the area of the freehold land in the name of the Corporation? Details of balance area not in the name of the Corporation alongwith the status.
Observations/ Findings The total area of freehold land in the name of the Corporation is 10,304.94 acres (converted to acres in case of land held in different units by applying applicable standard conversion factor).
1,278.13 acres of balance freehold land is not in the name of Corporation, details of which are given below:
Particulars Area (In Acres) Remarks
Freehold Land 1,120.73* Documents of title not available for verification
Freehold Land 5.41 Documents of title lying with registration authorities, as informed
Freehold Land 151.99 Mutation Pending, as informed
* include 875.87 acres ( 2.20 cr) of freehold land under dispute as referred to in explanatory notes given in Note 2 of the Standalone Financial Statements.

 

For CVK & Associates For Borkar & Muzumdar
Chartered Accountants Chartered Accountants
ICAI FRN 101745W ICAI FRN 101569W
Sd/- Sd/-
A K Pradhan Kaushal Muzumdar
Partner Partner
Membership No. 032156 Membership No. 100938
UDIN: 20032156AAAAAG3907 UDIN: 20100938AAAAAS9538
Place: Mumbai
Date: 03rd June,2020

ANNEXURE C TO INDEPENDENT AUDITORS REPORT

[Referred to in paragraph 21(f) under ‘Report on Other Legal and Regulatory Requirements in the Independent Auditors Report of even date to the members of Bharat Petroleum Corporation Limited on the Standalone Ind AS Financial Statements for the year ended 31st March, 2020]

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Bharat Petroleum Corporation Limited ("the Corporation") as of 31st March, 2020 in conjunction with our audit of the Standalone Ind AS Financial Statements of the Corporation for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Corporations Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Corporation considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (‘ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Corporations internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing specified under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting were established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Corporations internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control over financial reporting includes those policies and procedures that:

1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, to the best of our information and according to the explanations given to us, the Corporation has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March, 2020, based on the internal control over financial reporting criteria established by the Corporation considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.

For CVK & Associates For Borkar & Muzumdar
Chartered Accountants Chartered Accountants
ICAI FRN 101745W ICAI FRN 101569W
Sd/- Sd/-
A K Pradhan Kaushal Muzumdar
Partner Partner
Membership No. 032156 Membership No. 100938
UDIN: 20032156AAAAAG3907 UDIN: 20100938AAAAAS9538
Place: Mumbai
Date: 03rd June,2020