GAIL (India) Ltd Auditors Report.

To the Members of GAIL (India) Limited

This revised Independent Auditors Report is being issued in supersession of our earlier Independent Auditors Report dated 22nd May 2017, at the instance of Comptroller & Auditor General (C&AG) of India. The revised report is being issued in view of certain modification in Annexure "A" of Companies (Auditors Report) Order 2016, as pointed out by C&AG of India in our earlier report. Further, we con firm that these changes do not affect true & fair view and our opinion as expressed earlier and also none of the figures have undergone any change in the Standalone financial Statements of the Company as at 31st March 2017.

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying Standalone Ind AS financial statements of GAIL (India) Limited (“the Company”), which comprise the Balance Sheet as at 31st March 2017, and the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Managements Responsibility for the Standalone Ind AS Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these Standalone Ind AS financial statements that give a true and fair view of the state of a airs ( financial position), profit or loss ( financial performance including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company 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.

Auditors Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit of the Standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Standalone Ind AS financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Standalone Ind AS financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the Standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companys preparation of the Standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Companys Directors, as well as evaluating the overall presentation of the Ind AS financial statements.

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.

Opinion

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 Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the state of a airs ( financial position) of the Company as at 31st March, 2017, and its profit ( financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Emphasis of Matter

We draw attention to the following matters in the Notes to the financial statements:

1. Note No: 35(c)-regarding various provisional transportation tari orders issued by Petroleum and Natural Gas Regulatory Board (PNGRB), these orders have been contested by the company at Appellate Tribunal for Electricity (APTEL) and adjustment if any will be recognized as and when matter is finally decided.

2. Note No: 39 regarding provision of impairment loss amounting to Rs. 783 Crores out of carrying value of investment of Rs. 974.31 Crores in a Joint Venture Entity on the basis of impairment study of such entity. Such case has been included in exceptional item in the statement of Profit & Loss.

3. Note No: 42-in respect of revenue recognition in previous year for ship or pay charges where the customer has disputed the claim of the company and final outcome is still uncertain.

Our opinion is not modified in respect of above matter.

Other Matters

The comparative financial information of the Company for the year ended 31st March 2016 and the transition date opening balance sheet as at 1st April 2015 included in these Standalone Ind AS financial statements, are based on the previously issued statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 audited by us/the predecessor auditors, whose audit report for the year ended 31st March 2016 & 31st March 2015 dated 25th May 2016 & 27th May 2015 respectively expressed an unmodified opinion on those Standalone financial statements, as adjusted for the differences in the accounting principles adopted by the Company on transition to the Ind AS, which have been audited by us.

Our opinion is not modified in respect of above matter.

Report on Other Legal and Regulatory Requirements

1. 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 Company 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 said Order.

2. As required by Comptroller and Auditor General of India through directions/sub-directions issued under Section 143(5) of the Companies Act 2013, on the basis of written representation received from the management, we give our report on the matter specified in the “Annexure -B” attached.

3. As required by Section 143(3) of the Act, 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 Company so far as it appears from our examination of those books.

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

(d) In our opinion, the aforesaid Standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended.

(e) Being a Government Company pursuant to the Notification No. GSR 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, Government of India, provisions of sub-section (2) of Section 164 of the Companies Act, 2013, are not applicable to the Company.

(f) We are enclosing herewith a report in “Annexure - C” for our opinion on adequacy of internal financial controls system in place in the company and the operating effectiveness of such controls;

(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, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS financial statements. Refer Note 29 (I)(a)to the financial statements.

ii. The Company has made provision, as required under the applicable law or Indian 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 Company.

iv. The Company has provided requisite disclosures in Note no9A of its financial statements as to holdings as well as dealings in Specified Bank Notes (SBN) during the period from 8th November 2016 to 30th December 2016. Based on the audit procedures and relying on the management representation, we report that the disclosures are in accordance with the books of accounts and records maintained by the Company.

For O. P. Bagla & Co. For G. S. Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 000018N Firm No.: 08744N
(Rakesh Kumar) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.:087537 Membership No.:091007
Place : New Delhi
Dated : 20th July, 2017

ANNEXURE - A TO THE INDEPENDENT AUDITORS REPORT

Referred to in paragraph 1 to “Report on Other legal and regulatory requirements” of the Independent Auditors Report of even date to the members of GAIL (INDIA) LIMITED on the Standalone Ind AS Financial Statements for the year ended March 31, 2017.

(i) (a) As informed to us the company has generally maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) According to information and explanation given to us there is a regular programme of physical verification of these fixed assets by the management which in our opinion is reasonable having regard to the size of the company and nature of its assets. As informed to us no material discrepancies were noticed on such verification.

(c) As informed to us and as verified by us during the course of our audit the title deeds of immovable properties are held in name of the company except for the cases as follows.

Description of Asset No. of cases Area in Hectares Gross block as on 31.03.2017 (Rs. in Cr.) Net block as on 31.03.2017 (Rs. in Cr.)
Land
- Freehold 10 4.81 19.43 19.43
- Leasehold 6 175.31 27.36 26.48
- Leasehold stated at carrying value (classified as prepayment under non- financial assets) 2 22.01 9.39 9.39
Building & Structures 10 - 1.67 1.00

(ii) As informed to us physical verification of inventory has been conducted at reasonable intervals by the management except the store and spares lying with Engineers India Limited and other contractors. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vapors volume is converted to tonnage by standard formulae. As informed to us no material discrepancies were noticed on physical verification of inventory.

(iii) As informed to us the company has granted unsecured loans to companies covered in the register maintained under section 189 of the Companies Act 2013. In respect of such loans:

a) As informed to us and as verified by us the terms and conditions of grant of such loans are not prejudicial to the interest of the company.

b) Repayment of the principal amount and payment of interest on such loans have been stipulated and the parties are making payments as per stipulation.

c) As informed to us, no amount of loan is overdue as at end of the year for a period more than ninety days.

(iv) According to the information and explanations given to us, the company has complied with the provisions of Section 185 and 186 of Companies Act 2013 in respect of loans/investment/guarantee/security granted during the year.

(v) The company has not accepted any deposits, in terms of the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under.

(vi) We have broadly reviewed the accounts and records maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Companies Act, 2013 read with Companies (Cost Records & Audit) Rules, 2014 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made detailed examination of the records with a view to determine whether they are accurate and complete.

(vii) (a) According to records of the company and information and explanation given to us the company has generally been regular in depositing undisputed statutory dues including provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities. According to information and explanation given to us there are no outstanding statutory dues as referred above as at the last day of the financial year under audit for a period of more than six months from the date they became payable.

(b) As certified by the management on which we have relied upon the dues of income tax or sale tax or service tax or duty of custom or duty of excise or value added tax or cess which have not been deposited on account of dispute or deposited under protest and the forum where the dispute is pending are given below:

S. No. Name of Statute Nature of the Dues Period to which the amount relates Forum where the dispute is pending Gross disputed amount (Rs. In Crores) Amount deposited under protest/ appeal (Rs. In Crores) Amount not deposited (Rs. In Crores)
2002-03 to 2004-05 Hon. High Court, Allahabad 18.83 - 18.83
1999-00 to 2009-10 Commercial Tax Tribunal, UP 205.34 6.41 198.93
1 Entry Tax Act of respective State Entry Tax / Penalty / Interest 2008-09 Additional Commissioner (Appeals), Commercial Taxes 0.47 - 0.47
2002-03 to 2005-06 Dy. Commissioner (Appeals), Commercial Tax, Ajmer 6.19 - 6.19
2011-12 & 2012-13 MP Commercial Tax Appellate Board, Bhopal 4.76 1.77 2.99
SUB-TOTAL 235.59 8.18 227.41
2011-12 & 2012-13 MP Commercial Tax Appellate Board, Bhopal 12.26 4.01 8.25
2005-06 to 2011-12 Joint Commissioner (Appeals), Sales Tax, Mumbai 313.30 24.03 289.27
2003-2004 Hon. High Court, Mumbai 0.63 0.03 0.60
Oct 2011 to Dec 2011 Joint Commissioner of Commercial Taxes, Trichy 0.59 - 0.59
2 Central Sales Tax Act, 1956 and respective State Sales Tax / VAT Act CST / Sales Tax / VAT/ Penalty / Interest 2003-2004 Hon. High Court, Guwahati 0.29 0.14 0.15
2014-15 Dy.Commissioner (Appeals), Commercial Taxes, Ernakulam 2.85 0.07 2.78
2003-04
2008-09 Joint Commissioner (Appeals), Commercial Tax, Vadodara 93.44 82.98 10.46
2009-10
2012-13
1995-96 to 1996-97 Dy Commissioner, Commercial Tax, Gwalior 0.16 0.16 -
SUB-TOTAL 423.52 111.42 312.10
Mar 2000 to Feb 2002, April 2002 to March 2003 & Nov 2004 to Feb 2005 Supreme Court 54.24 - 54.24
Sept 2006 to Feb 2014 Customs, Excise and Service Tax Appellate Tribunal, Delhi 2646.90 - 2646.90
3 Central Excise Act 1944 Central Excise Duty / Interest / Penalty Jan 2001 to Feb 2005 Customs, Excise and Service Tax Appellate Tribunal, Mumbai 196.09 - 196.09
July 2004 to March 2011 Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad 188.44 - 188.44
April 2008 to March 2010 & July 2010 to Nov 2010 Customs, Excise and Service Tax Appellate Tribunal, Kolkata 77.72 - 77.72
SUB-TOTAL 3163.39 0.00 3163.39
Oct. 2006 to Mar 2015 Customs, Excise and Service Tax Appellate Tribunal, Delhi 1216.80 23.61 1193.19
4 Finance Act 1994 (Service Tax) Service Tax / Interest / Penalty Aug. 2005 to Sept 2009 Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad 9.88 - 9.88
July 2010 to Nov 2010 Customs, Excise and Service Tax Appellate Tribunal, Delhi 0.37 - 0.37
2008-09 Customs, Excise and Service Tax Appellate Tribunal, Allahabad 0.03 - 0.03
Apr 2007 to Mar 2009 & Oct 2009 to Mar 2015 Commissioner (Appeals), Customs, Excise and Service Tax, Delhi 1.18 - 1.18
SUB-TOTAL 1228.26 23.61 1204.65
March 2006 Customs, Excise and Service Tax Appellate Tribunal, Delhi 0.53 0.46 0.07
5 Customs Act, 1962 Customs Duty/ Interest / Penalty Oct 2015 to Mar 2016 Commissioner of Customs, Excise and Service Tax, (Appeals), Pune 0.77 0.65 0.12
March 2013 to July 2014 Commissioner of Customs, Excise and Service Tax, (Appeals), Ahmedabad 7.78 7.78 -
SUB-TOTAL 9.08 8.89 0.19
2008-09 to 2017-18 Jurisdictional Assessing Officer (TDS) 4.94 - 4.94
Income Tax / 1999-00, 2013-14 & 2014-15 Commissioner Income Tax (Appeals) 22, New Delhi 152.20 152.20 -
6 Income Tax Act, 1961 Interest / Penalty 1996-97 to 1998- 99 & 2000-01 to 2012-13 Income Tax Appellate Tribunal, Delhi 1808.28 1180.19 628.09
1997-98 & 1998-99 Hon. Supreme Court 0.26 0.26 -
SUB-TOTAL 1965.68 1332.65 633.03
7 Gujarat Municipalities Act, 1963 Notified Area Tax / GIDC Tax / Interest 1998-99 to 2005- 06 & 1985-86 to 2009-10 Hon. High Court, Ahmedabad 4.33 - 4.33
TOTAL 7029.85 1484.75 5545.10

(viii) Based on our audit procedures and in accordance with the information and explanations given to us by the management the company has not defaulted in repayment of dues to a bank or government or bonds holders.

(ix) The Company has not raised any money by way of initial public o er or further public o er or further public o er (including debt instrument). Term Loans obtained during the year were applied for the purpose for which those were obtained by the company.

(x) According to the information and explanations given to us and as represented by the Management and based on our examination of the books and records of the Company and in accordance with generally accepted auditing practices in India, no case of frauds by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) As per notification no. GSR 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 is not applicable to the Government Companies. Accordingly, provisions of clause 3 (xi) of the Order are not applicable to the Company.

(xii) The company is not a nidhi company and therefore clause 3(xii) of the Order related to such companies is not applicable to the Company.

(xiii) The company has complied with in respect of all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.

(xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

(xv) As informed to us, during the year the company has not entered into any non-cash transactions with any of its directors or persons connected with the Directors.

(xvi) The company is not required to get registered under section 45-IA of Reserve Bank of India Act1934.

For O. P. Bagla & Co. For G. S. Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 000018N Firm No.: 08744N
(Rakesh Kumar) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.:087537 Membership No.:091007
Place : New Delhi
Dated : 20th July, 2017

ANNEXURE - B TO THE INDEPENDENT AUDITORS REPORT

Referred to in paragraph 2 to “Report on Other legal and regulatory requirements” of the Independent Auditors Report of even date to the members of GAIL (INDIA) LIMITED on the financial statements for the year ended March 31, 2017.

S. No. Directions / Sub Directions Action taken Impact on financial statement
1 Whether the company has clear title/lease deed for freehold and leasehold respectively? If not please state the area of freehold and leasehold land for which title/lease deed are not available? As informed to us and as verified by us during the course of our audit the title deeds of immovable properties are held in name of the company except for the cases as disclosed in Note no. 37(b) & (c)along with area of these lands. Nil
2 Whether there are any cases of waiver/ write o of debts/loans/interest etc., if any, the reason there for and amount involved. We have been informed that there has been no case of waiver, write o of debt/interest/loans etc. Nil
3 Whether proper records are maintained for inventories laying with third parties & assets received as gift from Govt. or other authorities. The company has maintained proper records of inventories including inventory lying with the third parties. The inventories have been physically verified at reasonable intervals by the Management, except the stores & spares lying with Engineers India Ltd. and other contractors. We have been informed that no asset has been received as gift from government or other authorities. Nil

 

For O. P. Bagla & Co. For G. S. Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 000018N Firm No.: 08744N
(Rakesh Kumar) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.: 087537 Membership No.: 091007
Place : New Delhi
Dated : 20th July, 2017

ANNEXURE - C TO THE INDEPENDENT AUDITORS REPORT

Referred to in paragraph 3(f) to “Report on Other legal and regulatory requirements” of the Independent Auditors Report of even date to the members of GAIL (INDIA) LIMITED on the financial statements for the year ended March 31, 2017.

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 GAIL (INDIA) LIMITED (“the Company”) as of March 31, 2017 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company 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. 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, including adherence to companys policies, the 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 Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys 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, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. 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 was 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 I/we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys 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 authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorised 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, the Company 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 March 31, 2017, based on the internal control over financial reporting criteria established by the Company 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.

For O. P. Bagla & Co. For G. S. Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 000018N Firm No.: 08744N
(Rakesh Kumar) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.:087537 Membership No.:091007
Place : New Delhi
Dated : 20th July, 2017