GAIL (India) Ltd Management Discussions.



Adjusting to an era dominated by low price scenario, LNG trade registered a year on year strong growth of over 5% in 2016, whereas natural gas managed a tepid growth of about 1.5%, globally. As LNG supply from Australia showed a 25% increase, markets of India, China, Pakistan, Egypt etc. continued to dominate the incremental demand. The trend shows bullishness for LNG demand with 83 MTPA of regas capacities operating as FSRUs across several countries.

Crude oil demand is around 1.3% and is expected to maintain the momentum in 2017 as well. Major growth of crude oil consumption is continuum the non-OECD nations, led by India and China on relatively stronger GDP growth prospects.

In a growing drive towards a low carbon environment, share of renewable continued to be a third of the primary energy growth even though its overall share in the energy mix has been about 3-4 %, largely displacing coal across several countries. Coal registered a production decline of over 6% and its consumption reportedly dropped by over 50 million tonnes during the year.

Renewable energy steals the march with significant improvements along the cost and efficiency curve with solar power growing faster than wind. At the same time, EU nations witnessed variability in renewable energy to remind that a sustainable mix of alternatives is necessary to support underlying energy demand at all times. Countries extrapolating EU models for renewable energy growth need to closely look at integrating conventional power generation sources led by gas for ensuring a low carbon objective. USA continues with natural gas as its prime driver for electricity generation accounting for over a third of the consumption followed by a declining coal red power generation and a growing adoption of renewables in the country.

In an expanding base of the global energy basket, natural gas and LNG continue to maintain a share of 25% in the primary energy mix. With more volumes of LNG anticipated to be added into the markets through 2017 and 2018 accompanied with a low price cycle, the commodity should find greater penetration world over.


Recently released reports from the NITI Aayog on Indias energy security scenarios combined with the National Energy Policy and a three year action agenda have de nite pointers of an unfolding energy matrix. Role of natural gas under the energy security scenario is projected to increase four- five folds in the period 2040-2047. Even though a scenario with influences from emerging technologies, electric vehicles and renewables is captured, natural gas is seen to dominate as domestic cooking medium (PNG) and also as an urban transportation fuel (CNG) in addition to serving the mainstay sectors of fertilizer and power.

Thrust of GoI towards infrastructure expansion by way of pipeline and regas terminals has the capability of supporting 2-3 times the gas volumes by 2021-22. Coupled with the focus on augmenting gas supplies from reserves, indigenous volumes are projected to increase in the next couple of years. In the near to short term, City Gas Distribution holds promise of maintaining double digit growth, but structural issues impacting the power sector need greater policy focus for mainstreaming gas based power generation integrated with renewable power. Based on projections, demand for primary energy is set to double by 2030, India requires a matrix of clean energy forms to support its growing appetite. Globally, natural gas maintaining a share of over a quarter in the energy mix even as renewable energy grows, holds promise of replicating the model in emerging nations including India.

Growth of LNG demand is primarily on account of Asian economies and various projections indicate a continued momentum in the years to come as coal demand gradually treading on a path of decline. NITI Aayog has proposed in its report that the Government should extend purchase support to gas-based power as done for sustaining the wind/solar sector ecosystems and suggest a supportive regime for gas to be put in place for progressively increasing its share in the energy basket over the years. As we progress towards attaining this vision, it is imperative to maximize utilization of mid-stream infrastructure.

Indian market has consumed around 139 MMSCMD during the last fiscal period and net LNG and domestic gas sales stood nearly equal. India imported a record 19 MMTPA of LNG during last year and the volumes are expected to grow steadily in the near future. Whilst, India is now more exposed to global contracts as a result, domestic consumers too are opting short/medium tenure contracts. Domestic market witnessed invitation of bids from Indian producers for supply of domestic gas. These developments signify the dilemma of suppliers in an increasingly buyers market. The gas market structure has undergone profound shift due to low price scenario and availability of abundant supplies.

To ensure a continued advantage for gas based growth, inclusion of natural gas /LNG under the Goods & Services Tax (GST) is essential. Competing solid and liquid fuels cutting across applications have transitioned into the GST structure and natural gas as an environment friendly fuel awaits its complete inclusion (transmission is under GST).


Sourcing & Trading of Gas and Re-gas Infrastructure

Your Company is playing a pivotal role in securing the countrys energy needs in view of its vast investments in natural gas infrastructure assets towards gas security. In order to bridge the demand-supply gap of natural gas in the country, your Company has taken proactive steps for importing gas. It has tied-up long term LNG from the USA (5.8 MMTPA), Russia (2.5 MMTPA) and Turkmenistan (38 MMSCMD equivalent to ~10 MMTPA through TAPI pipeline) in addition to marketing Qatar and Australia based long-term volumes and trading short/medium/spot based R-LNG.

The long-term LNG supply projects from the USA, namely Sabine Pass and Dominion Cove Point, have achieved significant project milestones and are on course to commence supplies between the fourth quarter of CY 2017 and first quarter of CY 2018. Your Company is also participating in the Turkmenistan-Afghanistan-Pakistan- India (TAPI) pipeline project by forming a JVC namely TAPI Pipeline Company Limited (TPCL) by member countries to build,flown and operate the planned 1800 kms transnational pipeline. A diversi ed portfolio of LNG/gas sources provides your Company the exibility to serve its customers in the best possible manner in a competitive business environment over the long-run.

Your Company imported 55 LNG cargoes (equivalent to approximately 3.5 MMTPA of LNG) during the financial year from various international sources on short term and spot basis to cater to the immediate requirement of the domestic market.

Considering the various LNG tie-ups made by your Company that are expected to commence supplies from CY 2018 onwards, access to Dabhol LNG terminal of RGPPL provides greater operational exibility to your Company in LNG business. During the financial year, 15 LNG cargoes were unloaded at the Dabhol Terminal.

Your Company has also traded some of its LNG portfolio in the international market through the Singapore subsidiary, in line with the globalisation strategy and to calibrate supplies according as per requirement of domestic market.

Your Company has signed a non-binding Tolling Term Sheet with Dhamra LNG Terminal Private Limited (DLTPL) for booking of 1.5 MMTPA capacity at the proposed LNG Terminal at Dhamra, Odisha. A non-binding MOU has also been signed for taking equity in DLTPL.

RGPPL is working with all stakeholders for its long-term viability, which includes demerger of LNG terminal and power block assets to enable restructuring under the revised RBI norms which will enable availability of funds for the construction of breakwater and other facilities to achieve the full potential of the LNG terminal and loan restructuring to keep both assets viable. RGPPL will retain the Power Block and a new Company, M/s Konkan LNG Private Limited (KLPL) willflown and operate the LNG block. Final order on the matter is awaited from the Honble High Court of Delhi.

Natural Gas Transmission

Your Company is the market leader in providing transmission services of natural gas and operates around 75% (over 11000 kms of natural gas pipelines) of the total Natural Gas transmission in India. During the year, transmission segment registered an increase of 9% growth in volumes over last fiscal year by clocking 100.4 MMSCMD. Gas Transmission volumes handled by your Company and percentage capacity utilization of all pipelines is provided at Table-

As a customer oriented Company, your Company has provisions in the gas transmission contracts to accommodate the requirement of small volume shippers. Your Company has also introduced an Imbalance Management Services for shippers to manage the imbalances efficiently.

To ensure higher utilization of the commissioned trunk pipelines, 23 new Last Mile Connectivity were rolled out to supply/transport gas during FY 2016-17.

National Gas Grid Implementation

Your Company is implementing the following major Natural Gas pipelines (approx. 4150Kms) as a part of cross-country National Gas Grid:

1. Kochi-Koottanad-Bengaluru/Mangalore Pipeline (Phase-II, 870 kms): Kochi to Mangalore pipeline is under progress and is expected to be completed by December 2018

2. Vijaipur-Auraiya-Phulpur Pipeline: In order to de-bottleneck the upstream network of JHBDPL project, a parallel pipeline from Vijaipur to Auraiya and upto Phulpur (670 kms) is under execution.

3. Jagdishpur-Haldia & Bokaro Dhamra Pipeline (JHBDPL): 2,600 Kms. is under progress in phases.

Your Company shall connect the existing natural gas grid with eastern India under “Pradhanmantri Urja Ganga Pipeline Project”. The pipeline shall pass through the eastern part of U.P., Bihar, Jharkhand, Odisha and West Bengal. This pipeline shall supply gas to fertilizer plants at Gorakhpur, Barauni and Sindri. The pipeline shall have two gas sources one at Phulpur (Allahabad, U.P.) and the other at Dhamra RLNG Terminal (Odisha). The capacity of the pipeline network is 16 MMSCMD. Physical progress is in line with envisaged schedule.

The pipeline endeavours to provide clean fuel to various cities along the pipeline. City Gas Distribution networks along the pipeline at Varanasi, Patna, Ranchi, Jamshedpur, Cuttack and Bhubaneshwar are being concurrently developed. Kolkata CGD is being developed through a JV of GAIL and Greater Calcutta Gas Supply Corporation Ltd (Government of West Bengal Enterprise).

On 21st September 2016, CCEA approved 40% capital grant to GAIL by GoI i.e.

Rs. 5,176 Crores of the estimated project cost of Rs. 12,940 Crores for execution of JHBDPL project to support the Urja Ganga initiative of Honble Prime Minister of India. Execution of phase-I of JHBDPL project i.e. Phulpur-Dobhi section with branch lines to Varanasi, Gorakhpur, Barauni and Patna has already commenced in the State of U.P. and Bihar, and the entire project is scheduled to be completed by December 2020.

This trunk pipeline investment could trigger cascading investments towards infrastructure creation in City Gas Distribution, LNG terminal, fertilizer plant revival etc. amounting to over Rs. 50,000 crore in the near future.

Your Company is also upgrading its LPG pipeline network capacity from 2.5 MMTPA to 3.5 MMTPA under capacity augmentation of Jamnagar Loni Pipeline.

Your Company has also conducted various efficiency enhancement projects such as the Rich-Lean Gas corridor and the waste heat recovery projects at Hazira & Vijaipur respectively. Pipeline replacement projects have been undertaken to maintain pipelines health & integrity in the Cauvery Basin, KG basin and Gujarat region.


Your Company doubled the polymer production capacity from 410 KTA to 810 KTA at Pata. Overall production from Petrochemicals complex in 2016-17 was 6,04,000 MT during the year. Your Company exported 14,000 MT of polymers in Asia.

Your Companys market share in the domestic polyethylene market has improved significantly and is the second largest player in the Indian market with a portfolio of over 1 MMTPA of polyethylene. A combined volume of 6.65 KTA including that of was marketed by GAIL during the year. Polymer prices though having made an initial recovery at sustained during the most part of the fiscal year, yet registered a decline on an overall basis by about 4% on a year on year basis.

LPG and Other Liquid Hydrocarbons

Your Company has been able to increase LPG sales by about 15 20 % and expect this trend to be maintained.

Jamnagar-Loni Pipeline (JLPL) and Vizag- Secunderabad LPG pipeline (VSPL) are operating at full capacity. JLPLs design capacity is being augmented from 2.5 to 3.25 MMTPA and is expected to be commissioned by March 2018.

GAIL participated in the Swachh Bharat Fortnight through cleanliness and awareness drives at public places around the companys work centres. Chairman and Managing Director Shri B C Tripathi (2nd from left), Directors and senior executives joined company employees in a cleanliness drive at the Safdarjung Tomb in New Delhi during which a cleanliness pledge was administered to the employees

Exploration & Production

Your Companys focus on preserving its capital and reducing operational/ administrative costs wherever possible has enabled reinforcement of the E&P business segment in pursuance of its vision. Your Company has also utilized its expertise to make its operations more efficient in Cambay fields.

Your Company has participating interest in 12 E&P blocks (10 in India and 2 overseas in Myanmar). While production of oil and gas is in progress in four blocks (2 domestic and 2 overseas), three blocks (where hydrocarbon discoveries have been made) are in various stages of development and appraisal. Hydrocarbon discoveries have been notified in two NELP-IX blocks.

In the ensuing period, while exit option would be examined in some of the existing less prospective blocks, acquisition of exploration opportunities are also being examined for the next growth phase of this business segment.

Going forward, E&P will continue to pursue its disciplined approach and remain focused on production, appraisal, and utilization, as well as assessing exploration and acquisition opportunities in a diligent manner.


Your Company has a total installed capacity of 123.23 MW of alternative energy; out of which 118 MW is wind and 5.23 MW is solar energy plants. Your Company is setting up a 5.76 MW grid connected roof-top captive solar power plant at Pata Petrochemical Complex, Uttar Pradesh. Further, rooftop solar units are being installed at your Companys offices/ work centers for captive use.


Gross Sales

Gross sales decreased by 6 % from Rs. 52,003 crores during 2015-16 to Rs. 48,789 crores in 2016-17.

Profit After Tax (PAT)

Profit after Tax increased by 57% from Rs. 2,226 crores during 2015-16 to Rs. 3,503 crores in 2016-17.

Earnings Per Share (EPS)

In view of the increase in PAT, EPS (adjusted after Bonus issue in FY 16-17) has gone up from Rs. 13 per share as on March 31, 2016 to Rs. 21 per share as on March 31, 2017.

Price Earning (PE) Ratio

Price Earnings ratio of the Company was 18 as on March 31, 2017 and was 20 as on March 31, 2016, indicating investors sustained con dence in the long-term growth of your Company.

Shareholders Funds

The Reserves and Surplus (excluding Transition Reserve & Other Comprehensive Income) increased to Rs. 30,996 crores at the end of the current financial year as compared to Rs. 29,670 crores in the corresponding previous year. As on March 31, 2017, net worth of the Company as per the Companies Act, 2013 stood at Rs. 32,350 crores, as compared to Rs. 30,699 crores as on March 31, 2016.

Debt and Interest

Debt Equity ratio of 0.16 as on March 31, 2017 as a compared to 0.26 as on March 31, 2016 has moved towards providing greater comfort and so is the Debt Service Coverage Ratio was at 2 times both as on March 31, 2017 and as on March 31, 2016.

As against the total Foreign Currency Loans of Rs. 3313 crore as on March 31, 2017, around 84% (i.e. Rs. 2778 crore) is hedged with full currency swaps, 14% (i.e. Rs. 478) is naturally Hedged and only 2% (Rs. 57 crore) remains un-hedged.

Your Company has repaid the loan from Bank of Tokyo of US$ 150 million during FY 2016-17. Further, your Company has also re financed existing ECB Loan of US$ 300 million by raising fresh ECB Loan of same amount for same tenure at lower interest rate. Your Company has also prepaid existing high cost term loans of Rs. 970 crore from Oil Industry Development Board (OIDB) towards saving in finance cost.

Ratio Analysis

Return to Net Worth (PAT/Net Worth) for the Company as on March 31, 2017 stood at 10.83% as compared to 7.20% as on March 31, 2016. Return on Capital Employed (PBIT/Capital Employed) was 12.30% as on March 31, 2017 as compared to 8.18% as on March 31, 2016.

Cash Flow

(Rs. In Crores)

Particulars 2016-17 2015-16
Cash Flow from Operating Activities 5629.30 4070.62
Cash Flow from Investing Activities (698.43) (670.88)
Cash Flow from Financing Activities (4788.31) (3318.03)
Net Increase in Cash & cash Equivalents 142.56 81.71

Segment-Wise Performance

(Rs. In Crores)



2015-16 *

Gross Sales Gross Margin (EBIDTA) Gross Sales Gross Margin (EBIDTA)
1 Transmission Services
a) Natural Gas 4,195 3,137 3,701 2,646
b) LPG Transmission 515 310 486 315
2 Gas Trading 34,630 1,519 40,337 1,432
3 Petrochemicals 5,626 892 3,041 (407)
4 LPG & Other Liquid
Hydrocarbons 3,138 1,292 3,246 795
5 Unallocated Other Segment 686 138 804 390
Total Sales 48,789 7,287 51,615 5,172

Physical Performance (Including Internal Consumption)

Particulars 2016-17 2015-16
Natural Gas Throughput (MMSCMD) 100.38 92.09
Natural Gas Trading (MMSCMD) 81.21 73.67
Liquid Hydrocarbon Sales (TMT) 1,082 1,086
HDPE/LLDPE Sales (TMT) 577 334
LPG Transported (TMT) 3,362 2,819

Consolidated Financial Statements

In accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India, your Company has prepared the Consolidated Financial Statements of its subsidiaries and joint venture entities. The highlights of the Consolidated Financial Results are as follows:

(Rs. In Crores)

Particulars 2016-17 2015-16
Turnover 49334 52552
Profit Before Tax 5178 2961
Profit After Tax 3368 1869
Other Comprehensive Income 1300 1927

*IND-AS has been implemented in FY 2016-17, financial figures for FY 2015-16 reinstated as per IND-AS

Project Profit Maximization (Sanchay)

Your Company launched a comprehensive initiative under “Project Sanchay” across all the business segments of your Company to optimize existing resources, improve operational and process efficiencies, reduce costs and maximize profitability. Benefits from the implemented initiatives under Project Sanchay have been more than the target benchmarks of Rs. 400 crore on NPV basis. Medium to long term initiatives are underway. In order to take forward the initiative and sustain operational excellence, a center of business excellence is now being established.


Regulatory Framework

The Petroleum & Natural Gas Regulatory Board (PNGRB) was established by the Central Government on October 01, 2007 for implementing the various provisions of the PNGRB Act, 2006. The PNGRB Act provides a legal framework for regulating the re ning, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas, but excluding the activities of production of crude oil and natural gas, so as to protect the interests of consumers and entities engaged in these activities.

During the financial year 2016-17, the PNGRB notified various Amendments to Regulations in respect of Natural Gas Pipelines, CGD networks and Petroleum Product Pipelines and also issued various authorizations, orders, decisions in respect of Natural Gas Pipelines, Petroleum Product Pipelines and CGD networks. The details of the said regulations, amendments, authorizations, orders, and decisions are available on the official web-site of PNGRB ( and have varying implications on business activities of the respective entities.

These regulations, amendments, authorizations, orders, and decisions of the PNGRB are appealable before the PNGRB Bench, Appellate Tribunal and Courts and, accordingly, some of them pertaining to your Company are also under various stages of appeals. The timing and content of any final changes in regulations made by the Regulator is not in your Companys control. However, regular interaction in public consultation exercises conducted by the Regulatory Board and making submissions to the Regulator in writing help us to anticipate or to minimize our risks associated with any sudden or unforeseen changes in regulations.

Natural Gas Prices

Your Company is currently marketing natural gas purchased from domestic and international sources.

The Government of India, vide its order dated October 25, 2014, had notified the New Domestic Natural Gas Pricing Guidelines, 2014. As per the notification w.e.f. November 01, 2014, the gas price is determined bi-annually as per a specific formula, which in essence, is a twelve month average price (minus transportation and treatment charges) of natural gas traded in the major hubs worldwide.

The New Domestic Natural Gas Pricing Guidelines, 2014 are applicable uniformly to all nominated fields to ONGC & OIL, NELP blocks, Pre-NELP blocks that require Government Approval as per PSC and CBM blocks, whereas the same are not applicable in case of small and isolated fields of nominated blocks that are covered under the pricing guidelines of 2013.

Further, the Government of India, vide its order dated March 21, 2016, has notified guidelines on marketing including pricing freedom for the gas produced from discoveries in deep water, ultra-deep water and high pressure-high temperature areas. As per the guidelines, the government has decided to ensure freedom of pricing for gas produced in these fields up to a ceiling price level calculated by taking lower of twelve month average of landed price of imported fuel oil, substitute fuels and LNG.

Your Company earns the marketing margin on the sale of domestic natural gas. Further, the Government of India, in its notification dated December 24, 2015, applicable from November 18, 2015, has put a ceiling on marketing margin for the supply of domestic gas to fertilizer (Urea) and LPG producers to Rs. 200 per 1000 SCM

In addition to the above, your Company purchases imported natural gas mainly from Petronet LNG Limited (PLL) at Dahej, Gujarat. The purchase and selling prices of such Natural Gas (RLNG) is based on international crude price indexes. Further, your Company also directly imports LNG through carriers from various suppliers worldwide and gets it regasi ed either at PLLs regasification terminal at Dahej, Gujarat or at Ratnagiri Gas and Power Private Limited (RGPPL) regasification terminal at Dabhol, Maharashtra.

Such LNG import is either under a medium-term agreement ranging up to three years or under spot cargo purchases. Under medium-term import, the selling price is largely based on the purchase price. However, under spot cargo imports, the selling price is dependent upon the demand and supply scenario and customer a ordability. Import of LNG spot cargo is based on a thorough assessment of the a ordability & requirement of the end consumers and availability of LNG in the international markets.

Your Company has been constantly endeavoring to meet the supply-demand gap of the natural gas in the country through long-term/medium-term and spot imports of LNG. While current supply de cit is primarily met through medium and spot deals, your Company and its subsidiaries / joint ventures / a liates till date have executed two long-term LNG contracts in USA to meet the supply-demand gap and enhance capacity utilization of pipeline infrastructure:

LNG Sale and Purchase Agreement with Sabine Pass Liquefaction LLC for sourcing of 3.50 MMTPA of LNG from Sabine Pass Liquefaction terminal, USA with supplies to commence from March 2018.

Terminal service agreement for booking of 2.30 MMTPA liquefaction capacity in the Cove Point LNG liquefaction terminal, USA with supplies to commence from December 2017 and Gas sale and Purchase Agreement with WGL Midstream for the commensurate gas quantities.

US LNG contracts were entered by your Company is with the primary objective of meeting the demand of a growing Indian economy and at the time of nalization of SPA, power sector was considered as one of the major long term buyer of LNG in the Indian market. However, power produced from LNG is not being scheduled by DISCOMs due to cheaper alternatives including renewables thereby leading to stranding of significant capacity out of 25,000 MW of installed gas based power plants.

To mitigate the above risks, your company is exploring opportunities to market HH indexed LNG volumes in the international markets either directly and/or through Singapore based subsidiary, GGSPL. Further, your Company has already concluded three time swap deals, where-in LNG volumes are purchased from international parties during financial year 2017-18 with an agreement to sell equivalent volumes of HH volumes during FY 2018-19.

In parallel, your Company is also making e orts to optimize HH LNG through destination swap transactions that could significantly reduce cost of shipping HH LNG to the Indian ports resulting in improved a ordability for the Indian customers.

As a result of these transactions, your Company has already tied up / optimized substantial volumes of HH LNG in domestic and international markets for the year 2018. Your Company is in advance stage of discussions to tie up LNG supply for the upcoming/revived Fertilizer units in the domestic market. E orts are also on to market RLNG to anchor customers like re neries and steel plants along upcoming and existing pipelines.

During FY 2016-17, your Company undertook hedging transactions for a part of LNG volume used for Companys internal consumption, to mitigate the price risk. Such mitigating measures of commodity hedging are underway based on the regular assessment of managing cash flows from trading transactions.

Uni ed/Pooled Tari for the integrated Natural Gas Pipeline system:

Present methodology of PNGRB requires tari to be levied separately for each pipeline. However, based on market condition it is seen that consumers across far- ung regions along the pipeline demand tari prevailing near to the sourcing region so as to manage input costs or in other words maintaining competitiveness of their end products/service. Integration of natural gas pipelines and determination of pooled tari for such an integrated pipeline system provides an optimal solution to tide over wide variation in tari structure across regions and emergence of equitable gas based economic development. Uni ed/Pooled tari removes the distortion in the tari s applicable to existing and new customers as the pipeline network expands.

To facilitate equitable growth of natural gas markets, the Cabinet Committee of Economic Affairs (CCEA) while according of 40% capital grant for the Jagdishpur-Haldia & Bokaro-Dhamra pipeline project, also inter-alia directed MoP&NG to examine your Companys request of devising Uni ed/Pooled tari for all its inter-connected cross-country pipelines that shall be applicable uniformly to all customers along the integrated network of GAIL for ensuring financial viability and sustainability of such infrastructure projects. It also empowered MoPNG to decide either vest the responsibility of xing such a tari by the nodal Ministry itself or by PNGRB through suitable directions based on the parameters of- phase-wise actual/anticipated capacity utilization, operating expenses (including unaccounted gas, line loss), future capital costs for last mile connectivity etc. to ensure 12% post-tax return on GAILs investment.


Domestic electricity market is undergoing a churn in the manner in which the Discoms are purchasing power. Given aggressive bids by solar power developersflowing to several in uencing factors, there is a growing tilt towards such sources for managing consumer expectations. Plant Load Factor (PLF) for conventional fuels is on a decline and natural gas based power plants continue to with structural issues requiring resolution through policy intervention. Your Company has been working on case to case basis and in close co-ordination with MoPNG and Ministry of Power to increase/revive of take of natural gas by the power sector.

Polymer, LPG and other LHC

Your Company is also marketing petrochemicals, LPG and other LHC products. The prices of these products are influenced and determined by global and domestic factors in uencing demand, supply and price. Your Company has developed a range of market acceptable products to ensure steady consumption of the petrochemical products and optimizes strength of the portfolio from Pata and Assam facilities. LPG marketing is decided in close co-ordination with the PSU Oil Marketing Companies. Continuous measures are taken towards managing margins across its range of products.

Foreign Exchange Fluctuation Risk

Your Company, largely imports capital goods and stores & spares for various new projects, and operation & maintenance. It has also taken loans in foreign currency for meeting the capex requirement and making overseas investments. The loan portfolio is hedged by way of derivative products (currency swap and interest rate swap) and through natural hedge. Your Company has an approved Foreign Currency & Interest Rate Risk Management Policy to manage the foreign exchange exposure. The short term and long-term exposure of foreign currency of your Company is being monitored as per the approved policy. Your Company also has approved Natural Gas Price Risk Management Policy to manage price risk of natural gas. The price risk of natural gas used for internal consumptions and as well as for customers is being monitored as per approved Policy. Your company is also in the process of installing the Treasury management module integrated in SAP platform for efficiently managing forex and commodity exposure risks.

Natural or Man-made Calamity Risk

Various risks are associated with gas transmission and distribution like blowout of pipelines, earthquake, tsunami, terrorist activities, etc.

These risks are being mitigated right from the designing stage of these projects and also during operations. However, such natural or man-made risks are emergent events and cannot be totally eliminated. If such an event occurs, it will incur significant liabilities for your Company.

Risk Management Framework

Your Company has an approved Risk Management Policy & Procedure to protect and add value to the organization and its stakeholders with the objective to establish a risk intelligence framework for managing objectively expected risk exposures by the decision makers in compliance to prevailing statutory regulations so as to maintain financial stability of your Company.

A robust Risk Management Framework supports your Companys business strategy and operations. Risk Management Framework is constantly updated for new and emerging risks emanating from business expansion and interests. The risks are evaluated, quantified & prioritized and mitigation plans are reviewed & monitored at various stages. Corporate Level Risk Steering Committee oversees the implementation of the Risk Management Policy and Procedures which are periodically reviewed and monitored by the Risk Management Committee and by the Audit Committee before presenting it to the Board.

In the changing business scenario and expansion of your Company into various other activities, business risk and their mitigation plans is re-assessed on regular basis. Present, top key Corporate Level Risks are as under:

• Take or pay risk on long term LNG tie up.

• Enhancement of Corporate guarantee provided by GAIL to its subsidiaries and JVs.

• Under utilization of pipeline due to low downstream drawl and low pipeline capacity trade.

• Delay in Project Execution due to local resistance in ROU opening/ permanent land acquisition.

• Risk of Regulatory frame work.

• Reduction in profitability of Petrochemicals

• Uncertainty in shipping tie-up.

As covered in the preceding paras, identified risks have been deeply examined and reasonable mitigating measures and safeguards have been initiated so as to eliminate or minimize the impact of the identified risks. Your company endeavours to pro-actively initiate measures towards maintaining financial stability from its business operations.

GAIL was conferred the Best PSU Award under the category of Manufacturing Gas, Transmission and Marketing Company by Dun & Bradstreet. The award was received by Shri Gajendra Singh, Director (Marketing) (left) on behalf of the Company


The objectives of your Companys investor relations activities are to develop a long-term relationship of trust with stakeholders by ful lling responsibilities not only towards shareholders but also include other stakeholders, investors and analysts, through fair process of information disclosure. Your company maintains channels of communication open as it engages with various stakeholders. In order to pursue these objectives at all times, your Company continuously discloses the necessary information and conducts various investor relations activities.

During FY 2016-17, to pursue the objective of effective communication with investors, your Company has taken following measures:

i) Organized Investors & Analysts Meet 2016

ii) Organized Conference Call immediately after announcement of the financial results for Q1 2016-17, H1 2016-17 and Q3 2016-17.

iii) Company participated in 7 domestic and 1 international investor conference organized by top brokerage houses of the country.

iv) The company also organized two day Plant visit (Auraiya Compressor

Station and Pata Plant) for Investors in March 2017. Investors acknowledged the management interaction where most of the queries pertaining to the petrochemicals plant were satisfactorily answered.

All these meetings/ conferences were attended by Top Management/Senior Executives from Finance, Marketing, Business Development and Projects in addition to executives from site offices.

As per requirement of SEBI (Prohibition of Insider Trading) Regulations, 2015, Companys Board has approved:

• Code of Conduct to Regulate, Monitor and Report Trading by Insiders (Insider Trading Code) and

• Code of Fair Disclosure and Conduct- Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information (Principles of fair Disclosure)

The investor presentation(s) and mentioned guidelines are hosted on the website of your Company and are also informed to stock exchanges.

Your Company will continue with its endeavor to provide world-class investor relations services in disseminating information to its investors & analysts at the right time and from the right people. In view of the above, the Investor Zone section of the corporate website has been reviewed and updated for ensuring informative and investor-friendly engagement as your company adheres to the ethos disseminating accurate information to stakeholders and capital market participants (including shareholders, investors, and securities analysts).


Your Companys Industrial Relations climate remained congenial and constructive. There were no Man Days or Man Hours lost on account of any sort of industrial conflict/unrest.

In the Companys endeavor to meet the ever changing business requirements and to maintain a sustainable competitive advantage, review of HR strategies and policies is undertaken on a continuous basis to align with the Organizational Strategy.

During the year, a review of various HR Policies on Employees Compensation, Welfare, Social Security, General Terms and Condition of Service, Recruitment, Promotion for Executives and Non-Executives was undertaken to position your Company as an Employer of Choice.


Natural Gas and LPG pipelines that your Company operates have contributed to the cause of environment to a considerable extent by reducing tanker tra c on roads and contributed immensely towards creation of a better environment and have also promoted higher standards of safety.

Water and Wastewater Management

Your Companys operations do not involve complex chemical reactions generating di cult-to-treat wastewaters. Physical separation of heavier hydrocarbons from natural gas is achieved by the cooling and condensation technique. Raw material used for the recovery of LPG and Propane is a clean and eco-friendly natural gas, which is received through a pipeline. After recovery, it is transported to downstream customers through the pipeline. The only e uents pertaining to the installations are floor wash, cooling water blow down and sewage water. The gas processing plants have an e uent treatment plant for necessary treatment of e uent water generated in the process. No e uent water is discharged outside the premises. Treated e uent water is recycled and used in-house for horticulture purposes within plant and township premises.

Your Company considers water as a precious natural resource and hence its consumption is closely monitored and controlled. State of the art technologies have been adopted to reduce and treat the wastewater generation. Your Company maximizes the concept of reuse and recycle of water. Discharge at all locations is compliant to the norms of the respective State Pollution Control Boards.

Air Quality Management

Your Company uses one of the cleanest fuels available, i.e., sulphur free natural gas at the process plants. Since your Company uses natural gas for its feedstock as well as fuel requirements, the level of pollutants is consistently maintained much below the national stipulated norms. Adequate stack height has been provided for effective dispersion of pollutants. Low NOx burners are used in all the furnaces. Loading facilities are provided with vapor return circuits. Gas detectors have been installed to ensure quick detection of any gas leak.

Your petrochemical complex at Pata has the facility of monitoring the stack air and the ambient air on continuous basis. State-of-the-art permanent Ambient Air monitoring stations measure sulphur dioxide, oxides of nitrogen, hydrocarbons, carbon monoxide and noise levels on real time basis.

Solid Waste Management

Your Company manages its waste in by efficiently segregating, treating and disposing based on the type of waste generated-hazardous and non-hazardous.

Greenbelt and Biodiversity

All installations of your Company carry out extensive afforestation in their respective sites and maintain at least one third of the area as green belt. Your Company has been continuously taking initiatives to safeguard the environment and biodiversity along with its diverse business segment. Your Company understands the value of the green spaces present within its premises, and desires to feature the unique aspects of the flora and fauna to the general audience. Biodiversity assessment and documentation is the first and most essential step towards its conservation. With this in view, your Company has completed the assessment across five major process plants and Dhabol-Bengaluru pipeline installation covering over 150-200 species of flora and fauna at each installation.

Environment Monitoring and Audit

Your Company monitors environmental parameters to assess the environmental quality on regular basis through an in-house team and as well as by independent third-party agencies. Updated and sophisticated instruments are used for monitoring environmental quality. The monitoring is done regularly and reports are sent to the respective State Pollution Control Boards. The water and waste water samples are also analyzed at the in-house laboratory as well as external laboratories on a regular basis. Audit is also conducted for the process plants and pipelines to ensure proper functioning of the environment management.


As a responsible corporate citizen, your Company is working on developing a Sustainability Charter. The Charter is being developed to follow an integrated approach for embedding environmental and social concerns into the corporate DNA. It aims to establish a leadership platform towards sustainability and climate action. This Charter shall serve as the guiding force to your Companys future objectives and action in meting envisaged aspiration.


In alignment with the vision of your Company, the CSR initiatives strive to enhance value creation in the society/community in which it operates, through its services, conduct and initiatives, and to promote sustained growth in social well-being. In the year 2016-17, your Company has proactively incurred an enhanced expenditure of 3.03% of the average net profit of the preceding three financial years on CSR projects/activities. The Annual Report on CSR activities as per requirement of the Companies Act, 2013, forms part of the Directors Report.

Your Company has adopted Taj Mahal, Agra under the “Swachh Iconic Place” (SIP) initiative of the Government of India which is inspired by the vision of Honble Prime Minister to promote and enhance cleanliness across the top 10 heritage and iconic sites in the country. Your Company, in partnership with the district administration and Municipal Corporation, Agra, is supporting various initiatives for improving cleanliness around the Taj Mahal.


Your Company has a robust Internal Control System in place. It has a clearly defined organisational structure, manuals and operating procedures for its business units and service entities to ensure orderly, ethical and efficient conduct of its business.

The Companys internal control system ensures efficiency, reliability, completeness of accounting records and timely preparation of reliable financial and management information. In addition, it also ensures compliances of all applicable laws and regulations, optimum flutilisation and protection of the Companys assets.

Your Company has an independent, in-house Internal Audit department, consisting of professionally qualified persons from the accounting and engineering fields. The Internal Audit department functionally reports to the Audit Committee and administraitively reports to the Chairman & Managing Director. This reporting is considered as the best global practice. Internal Audit, through risk-focused audits, audit the organizations risk management, the business processes and internal controls. The audit assignments are conducted as per the annual audit program approved by the Audit Committee. The Audit committee of the Board regularly reviews significant findings of the Internal Audit department and the CAG audit.

Your Company has also undertaken an exercise through a consultant to reassure adequacy and effectiveness of internal controls. The consultant has conducted IFC compliance study and framed Risk Control Matix (RCM) for several processes and RCMs of various business processes.


Statements in the Directors Report and Management Discussion & Analysis, describing the Companys objectives, projections and estimates, expectations, predictions etc. may be “forward looking statements” within the meaning of the applicable laws and regulations. Forward looking statements contained herein are subject tofficertain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Actual results, performances or achievements may vary materially from those expressed or implied, economic conditions, Government policies and other incidental factors such as litigation and industrial relation. Readers are cautioned not to place undue conviction on the forward looking statements.