Hindustan Petroleum Corporation Ltd Directors Report.

TO THE MEMBERS OF HINDUSTAN PETROLEUM CORPORATION LIMITED Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying Standalone Indian Accounting Standard ("Ind AS") financial statements of Hindustan Petroleum Corporation Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2021, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash flows for the year ended on that date, and notes to the financial statements, including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements"), in which are included the Ind-AS financial statements for the year ended on that date audited by the branch auditor of the Visakh Refinery Located at Visakhapatnam.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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 accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2021, its profit and other comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (" the SAs"). Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (the "ICAI") together with the ethical requirements that are relevant to our audit of the standalone 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 opinion on the standalone financial statements.

Emphasis of Matter

We invite attention to the following :

a) Note No 59 regarding provision for impairment made during the year of Rs.390.67 Crore (cumulative as of year ended Rs.618.07 Crore) towards loans given to consumers under Prime Minister Ujjwala Yojna (PMUY) of the total outstanding loans of Rs.1,882.25 Crore. The above impairment has been computed based on the estimates of default as assessed by the management. Further, during the year, the management has performed re-measurement of the gross carrying value and accounted re-measurement loss amounting to Rs.450.62 Crore.

b) Note No. 69 regarding provision towards diminution in value of investments made by Provident Fund Trust and Post Retirement Medical Benefit Fund Trust to the extent of Rs.170.10 Crore & Rs.69.65 Crore respectively arising out of the default over interest obligations and probable principal amounting to Rs.243 Crore & Rs.99.50 Crore respectively in the case of Non-convertible Debentures of certain companies which includes IL&FS & DHFL, basis best available estimate of the management. The estimate is dependent upon the outcome of matters pending with judicial authorities and recognition of Companys claim in these matters.

c) Note No 62 regarding the outbreak of COVID-19 pandemic and the assessment made by the management on its business and financials for the year ended March 31, 2021, this assessment and the outcome of the pandemic is as made by the management and is highly dependent on the circumstances as they evolve in the subsequent periods.

Our opinion is not modified in respect of above matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone 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 to be communicated in our report:

1. Evaluation of uncertain indirect tax positions

The Company has material uncertain indirect tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. The Company has disputes pending at various levels of tax authorities over the past several years. As on March 31,2021, the company has total such disputed demands amounting to Rs.10,493.99 Crore (Refer Note No. 2.16 and para (vii) (b) Annexure I of this report.)

Auditors Responses Principal Audit Procedures

We have evaluated the appropriateness of the design and tested the operating effectiveness of the managements controls over the tax litigation matters.

Perused details of completed tax assessments and demands for the year ended March 31, 2021 from management.

We reviewed the managements underlying assumptions in estimating the tax provision and the possible outcome of the disputes.

The legal precedence and other rulings were considered in evaluating managements position on these uncertain tax positions.

Further we have relied upon the management judgements, industry level deliberations and estimates for possible outflow and opinion of internal experts of the Company in relations to such disputed tax positions.

2. Evaluation of Direct Tax position

The Company has open direct tax positions including matters under dispute for different assessment years and the matters are at different stages with Tax Authorities/Courts. The Company has opted for Vivad Se Vishwas Scheme (VSVS) for which a tax liability of Rs.776.66 Crore has been assessed by the management for which necessary declarations have been filed with the Income Tax Department and have been accepted. The proceedings are not yet concluded. [Refer Note No. 44(e)]

Auditors Responses Principal Audit Procedures

Obtained details of completed tax assessments and demands up-to the year ended March 31, 2021 from management.

We reviewed the managements underlying assumptions in estimating the tax provision and the possible outcome of the disputes.

The legal precedence and other rulings were considered in evaluating managements position on these direct tax positions.

Additionally, we considered the effect of the outcomes of the Appellate Orders received during the year in respect of uncertain tax positions to evaluate whether any change was required to managements position on these uncertainties.

We have reviewed the management data compiled to offer the disputed liabilities towards VSVS scheme and the basis at which these are considered as eligible for settlement under the scheme.

We have reviewed the declarations filed with the Income Tax Department in respect of matters being declared under VSVS and also reviewed the confirmations received from the department in respect thereof.

We have verified the orders from tax and appellate authorities for the previous years and relied on management judgments in evaluating the tax provisions for the Current Financial Year.

3. Recoverability of pre-deposits relating to tax and non tax matters and balances with Customs and Excise

As at March 31, 2021, the Company has non-current assets i.e. pre-deposits pertaining to various tax and non-tax matters namely VAT, excise duty, custom duty etc. with adjudicating authorities amounting to Rs.388.59 Crore that are pending for/relating to cases pending for more than 3 years and there are receivables from Customs and Excise department amounting to Rs.109.39 Crore pending for more than 3 years, for which there are no balance confirmations from the respective authorities available on records.

Auditors Responses Principal Audit Procedures

We have evaluated the appropriateness of the design for recording and tracking the recoverability of pre-deposits pertaining to the old tax and non-tax cases.

We have discussed and reviewed the nature of the amounts recoverable vis-a-vis the underlying cases. We further discussed the sustainability of the cases on a sample basis and the likelihood of recoverability or otherwise upon final resolution from the respective authorities.

We enquired with the management about these cases vis-a-vis the current position and the efforts taken by the management to recover the deposits placed or obtaining the balance confirmations from the respective authorities.

We have also advised the management to approach and continue to pursue with the Custom Authorities for early settlement of receivable claims pending for earlier years. (Refer Note No. 10.1).

Further, we have relied on the management estimations and judgements with reference to inherent uncertainties involved while determining the outcome of these cases.

4. Evaluation of disputed claims against the company under various non-tax matters

The company has disputed claims against it which are pending at various courts/forums and are at various stages in the judicial process. The management has exercised significant judgement in assessing the possible outflow in such matters and accordingly an amount of

Rs.1,280.60 Crore has been disclosed for which the company is contingently liable while possibility of any outflow in matters having claims amounting to Rs.483.89 Crore has been considered remote. (Refer Note No. 52).

Auditors Responses Principal Audit Procedures

Read and analysed select key correspondences, internal/external legal opinions/consultations by management for key disputed non tax matters.

Reviewed and verified other legal pronouncements wherever available in similar matters in the case of the company/other corporates.

Discussed with appropriate senior management and evaluated managements underlying key assumptions in estimating the provisions.

Assessed managements estimate of the possible outcome of the disputed cases and relied on the management judgements in such cases.

5. Assessment for impairment of Investment in Wholly Owned Subsidiary and various financial assistance provided to them

The Company has wholly owned subsidiaries named ‘HPCL Biofuels Ltd (HBL) and Prize Petroleum Corporation Ltd (PPCL). PPCL has a wholly owned subsidiary named Prize Petroleum International Pte Ltd (the step down subsidiary) (PPIPL), incorporated in Singapore.

i) HPCL Biofuels Ltd. (HBL)

Since its inception, HBL has not been able to break-even based on which this project was approved. There has been a significant erosion in the net worth of the subsidiary.

Based on this, management assessed that the recoverable amount of the Companys investment exceeded its carrying value and an impairment assessment has been carried out by the management and accordingly as against the carrying value of Rs.748.94 Crore, an amount of Rs.572.16 Crore (Rs.50.00 Crore during the year) has been considered as impaired.

The above assessment includes significant estimations pertaining to projections of cash flows arising from the continuing use of its assets in the entity. (Refer Note no. 56)

Auditors Responses Principal Audit Procedures

We reviewed the process followed by the Company to asses the valuation of investment, with respect to the transactions that took place during the year.

We analysed the impairment test s performed by the management, and verified that the criterion used to perform these test are consistent with those established in applicable reporting regulations.;

In estimating the impairment of investments we have reviewed that the management has followed the discounting of future cash flows of the revenue streams of HBL from its Cash Generating Unit using a pre tax discount rate.;

We considered the adequacy of disclosures in the Financial Statements in respect of this matter.

ii) Prize Petroleum International Pte. Ltd.

The Company has an equity investment of Rs.248.97 Crore in its 100% subsidiary, Prize Petroleum Company Limited. The management has carried out impairment assessment for the investment and a total amount of Rs.162.98 Crore stands provided for towards the investment. The assessment has been made by the management based on future cash flow assumptions. HPCL has also given Corporate guarantee on behalf of PPIPL for obtaining borrowings from a consortium of banks. Due to uncertainty in the exploration and production of oil and gas with reference to its reserves and gas prices, there is a possibility of the corporate guarantee being invoked and a provision of Rs.318.00 Crore has been made in the accounts towards such probable obligation based on management assumptions as estimates. (Refer Note No. 57 & 58).

Auditors Responses Principal Audit Procedures

We reviewed the process followed by the Company to assess the valuation of investments and the consistency of such process over the years.

We analysed impairment tests performed by the management and verified that the criteria used to perform these tests are consistent with those established in applicable reporting regulations and relied on management estimates.

In estimating the impairment of investments, we have reviewed that management has followed the discounting of future cash flows of the revenue streams of PPCL.

We reviewed the management estimates and assumptions, especially on Production Profile Scenarios and Gas Prices, in respect of impairment of the Corporate Guarantee, in case of Prize Petroleum International Pte Ltd.

Further, we made enquiries with the technical expert (petroleum engineer) of the subsidiary to substantiate the production profiles of the production blocks running over the future periods.

We considered the provision made by the company and adequacy of the disclosures in the financial statements in respect of this matter.

Information Other than the Standalone Financial Statements and Auditors Report Thereon

The Companys 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, Directors Report including Annexures to Directors Report, Corporate Governance and Shareholders Information, but does not include the standalone financial statements and our auditors report thereon. The Other information as above is expected to be made available to us after the date of this Auditors report.

Our opinion on the standalone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit, or otherwise appears to be materially misstated. When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Managements Responsibility for the Standalone Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Companys 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 Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

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 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 Company 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 Companys 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 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 Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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.

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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone 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.

Other Matters a) We did not audit the financial statements of one branch viz Visakh Refinery included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs.26,536.03 Crore as at 31st March 2021 and the total revenue of Rs.45,167.29 Crore for the year ended on that date, as considered in the Branchs financial statements. The financial statements of this branch have been audited by the branch auditor whose report dated May 10, 2021 has been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of this branch, is based solely on the report of such branch auditor.

b) We refer to Note no. 49 in respect of 21 unincorporated Joint Operations involved in exploration activities, of which majority are under relinquishment. The standalone financial statements include Companys proportionate share in Assets and Liabilities as on March 31, 2021, Income and Expenditure for the year ended March 31, 2021 amounting to Rs.7.15 Crore and Rs.36.07 Crore, Rs.2.22 Crore and Rs.0.90 Crore respectively. In respect of these Joint Operations, the financial information has been incorporated based on data received from the respective operators. Our opinion in respect thereof is solely based on the management certified information.

We have placed reliance on technical/commercial evaluation by the management in respect of categorization of wells, allocation of cost incurred on them, liability for decommissioning costs, liability for NELP and nominated blocks for under performance against agreed Minimum Work Programme.

c) The Company has less than minimum number of Independent Directors required in terms of the provisions contained in the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended. These financial statements have been reviewed and recommended to the Board of Directors by the Audit Committee consisting of one Independent Director and subsequently approved by the Board consisting of one Independent Director, who is also not an Independent Women Director. We have been informed that the Independent Directors are appointed by Government of India.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2016 (‘the Order), issued by the Central Government of India in terms of section 143(11) of the Act, we give in the Annexure I, a statement on the matters specified in paragraph 3 and 4 of the Order, to the extent applicable.

2. As required under section 143(5) of the Act, based on our audit as aforesaid, we give in the Annexure II, a report on the directions including additional directions issued by the Comptroller and Auditor General of India (C&AG), action taken thereon and its impact on the accounts and standalone financial statements of the company.

3. 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 Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branch not visited by us.

c) The report on the accounts, dated May 10, 2021 of the Visakh refinery of the Company audited under section 143(8) of the Act by the branch auditors has been provided to us and has been properly dealt with by us in preparing this report.

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

e) In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements comply with the Indian Accounting Standard specified under section 133 of the Act, read with Companies (Indian Accounting Standard) Rules, 2015 as amended.

f) As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 164(2) of the Act, accordingly, we are not required to report whether any of the directors of the Company are disqualified in terms of provisions contained in the said section;

g) With respect to the adequacy of the internal financial controls with reference to financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure III".

h) With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended: As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 197 of the Act and hence we are not required to report as to whether the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

i) 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 Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note No. 52 to the standalone financial statements read with Para 1, 2 and 4 of Key Audit Matters here in above.

ii. The Company 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 - Refer Note No.53 to the standalone financial statements.

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

Annexure I to the Independent Auditors Report

(Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements section of our report of even date to the Members of Hindustan Petroleum Corporation Limited)

i. In respect of the Companys fixed assets : a) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property Plant and Equipment (fixed assets).

b) The Property Plant and Equipment (PPE) of the Company, other than LPG cylinders and pressure regulators with customers, are physically verified by the Management in a phased program of three years cycle. In our opinion, the programme is reasonable having regard to the size of the Company and the nature of its assets. In our opinion and as per the information given by the management, the discrepancies observed were not material and have been appropriately accounted in the books of account.

c) On the basis of the information to the extent compiled by the Company pending the reconciliation of the available records, title deeds/lease deeds for immovable properties held as Property Plant & Equipment are not available with the Company in the case of 3 properties with Gross block Rs.0.02 Crore and in the case of 13 properties with Gross block Rs.2.25 Crore where property tax receipts are held by the Company to substantiate the title to such properties. Further in case of land taken on lease from Vishakhapatnam Port Trust (VPT) Legal formalities of registration of lease deed is pending in 36 cases Gross block as at 31st March, 2021 is

Rs.593.45 Crore and Net Block as at 31st March, 2021 is .543.09 Crore. In other cases, based on verification of records on random basis, the title deeds are held in the name of the Company. For the purpose of reporting under this clause, where ever title deeds of immovable properties were not available, we have relied on other substantive evidences like allotment letters, noting in municipal / revenue records conveying title to the Company over the property.

ii. According to the information and explanations given to us, during the year, the inventories have been physically verified at reasonable intervals by the management. The discrepancies noticed on physical verification, as compared to the book records, were not material having regard to size and nature of operations and have been properly dealt with in the books of account.

iii. As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 188 of the

Act in respect of contracts or arrangements entered into between the Government companies. The Company has not granted loans, secured or unsecured, to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Hence, the question of reporting under sub-clauses (a), (b) & (c) of the clause 3(iii) of the Order does not arise.

iv. The Company has not granted any loans or provided any guarantees or security to the parties covered under section 185 of the Act.

The Company has complied with the provisions of section 186 of the Act in respect of investments made or loans or guarantee or security provided to the parties covered under section 186 of the Act.

v. According to the information and explanations given to us , the Company has not accepted any deposits from the public, within the meaning of sections 73 to 76 of the Act and the rules framed there under. We are informed by the Management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal in this regard.

vi. We have broadly reviewed accounts and records maintained by the Company pursuant to rules made by the Central Government for the maintenance of cost records under section 148(1) of the Act, in respect of Companys products to which the said rules are made applicable and are of the opinion that, prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

vii. a) According to the information and explanations given to us and according to the records of the Company examined by us, in our opinion, the Company is generally regular in depositing with the appropriate authorities undisputed statutory dues including Provident Fund, Employees State Insurance, Income-tax, Sales Tax, Service Tax, Goods & Service Tax, duty of Custom, duty of Excise, Value Added Tax, Cess and any other statutory dues, wherever applicable.

According to the information and explanations given to us, no undisputed amounts payable in respect of aforesaid dues were outstanding as on March 31, 2021 for a period of more than 6 months from the date they became payable.

b) According to the information and explanations given to us, the particulars of statutory dues that have not been deposited on account of disputes are as under:

Statute Forum Pending Period to which amount relates Total
Customs Appellate Authority** 2019-2020 3.47
Tribunal* 1998-2009 0.85
Customs Total 4.33
Excise Appellate Authority** 2000-2018 6.46
High Court 1994-2015 17.26
Supreme Court 2003-2011 211.38
Tribunal* 1996-2018 2,473.34
Excise Total 2,708.44
Sales Tax/Entry Tax/CST/VAT Appellate Authority** 1976-2017 3,478.46
High Court 1981-2017 767.78
Supreme Court 1998-2003 1.03
Tribunal* 1988-2017 3,440.08
Sales Tax/Entry Tax/CST/VAT Total 7,687.34
Service Tax Appellate Authority** 2011-2017 0.62
High Court 2004-2006 0.63
Supreme Court 2004-2012 3.25
Tribunal* 2002-2015 89.38
Service Tax Total 93.88
Grand Total 10,493.99

* Tribunal represents Sales Tax Appellate Tribunal, Central Excise and Service Tax Appellate Tribunal (CESTAT).

** Appellate Authority represents Deputy Commissioner (A), Joint Commissioner (A), Additional Commissioner (A), Commissioner (A).

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

ix. The Company has not raised money by way of Initial Public Offer or Further Public Offer (including debt instruments). According to the information and explanations given to us and on the basis of the records examined by us, the Company has prima facie applied the term loan for the purpose for which it was obtained.

x. During the course of our examination of the books and records of the Company, 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 material fraud by the Company or on the Company by its officers and employees have been noticed or reported during the year.

xi. As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 197 of the Act, accordingly, the question of reporting whether the payment of managerial remuneration by the Company is in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act does not arise.

xii. The Company is not a chit fund or a Nidhi company. Hence, the question of reporting under clause 3(xii) of the Order does not arise.

xiii. As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 188 of the Act in respect of contracts or arrangements entered into between the Government companies. The Company has complied with the provisions of section 177 and section 188 of the Act in respect of transactions with the related parties and the details have been disclosed in the standalone financial statements as required by the applicable Indian 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 audit.

xv. According to the information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with him covered under the provisions of section 192 of the Act.

xvi. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

Annexure II to the Independent Auditors Report

(Referred to in paragraph 2 under "Report on Other Legal and Regulatory Requirements" of our report of even date to the Members of Hindustan Petroleum Corporation Limited)

Based on the verification of records of the Company and based on information and explanations given to us, we give below a report on the directions/ Additional directions issued by the Comptroller and Auditor General of India in terms of the section 143(5) of the Act.

Sr. No. Directions under section 143(5) of the Act Auditors Comments
1. 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. As per the information and explanations furnished to us, the company has an Enterprise Resource Planning ERP system in the name of "JD Edwards (JDE) " to process the accounting transactions. There are large number of other applications including workflow applications and portals to address specific requirements. Most of these applications/modules have real time integration with ERP (JDE) system for smooth accounting / recording of transactions.
As a part of our general review of IT controls, we have carried out the review of major controls in existence in the applications with regard to integrity of data flowing to JDE. Basis our sample verification, nothing significant has come to our attention that causes us to believe that there are material gaps pertaining to IT controls. Further, we have also relied on the exercise conducted by the management with the help of consultant to check the design of internal controls, and its operating effectiveness including the IT systems and control.
Further management has conducted the system audit with the help of the consultants which has not reported any significant gaps. Apart from above there are few other accounting process being undertaken through excel spreadsheet like inventory valuation, interest calculation of treasury funding activities, matching of open credits in the case of Trade accounts receivables, matching of suppliers accounts wherein sufficient controls for data integrity have been observed in our review of general IT controls. There is however a need of automation of such processes to ensure complete data integrity.
2. 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 load? If yes, the financial impact may be stated. No such instances have been noticed during the financial year 2020-21.
3. 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 As per the information and explanations furnished to us, the funds received /receivable by the company for specific schemes from Central/State agencies to the extent these are recorded in the books of accounts and records produced before us, were properly accounted. We are informed that in the case of schemes of Central Government i.e. PMUY, DBTL, other subsidies etc. claims for reimbursements duly certified by Chartered Accountants are filed with Petroleum Planning and Analysis Cell (PPAC) for reimbursement and hence these are not considered as Grants and no utilisation certificates are filed. In the case of certain state specific scheme, utilisation certificates are furnished by the Company separately to the respective agencies. During the course of our test checks of the records available at Head Office of the Company in respect of such claims for reimbursement recorded in the books which are approved by PPAC, nothing has come to our notice that causes us to believe that there has been any violation of terms and conditions in relation to these claims. The separate audit of these claims filed with PPAC is carried out by separate firms of Chartered Accountants.

Annexure III to the Independent Auditors Report

(Referred to in paragraph 3(g) under "Report on Other Legal and Regulatory Requirements" of our report of even date)

Report on the Internal Financial Controls with reference to Financial Statements under clause (i) of sub-section 3 of section 143 of the Companies Act, 2013 ("the Act")

We have audited the Internal Financial Controls with reference to Financial Statements of Hindustan Petroleum Corporation Limited (‘the Company) as of March 31, 2021 in conjunction with our audit of the standalone Ind As 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 financial control with reference to standalone financial statements 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 (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, 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 Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and as prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. 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 with reference to financial statements 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 with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to standalone financial statements included obtaining an understanding of internal financial controls with reference to standalone financial statements, 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 standalone 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 Companys internal financial controls with reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A Companys Internal Financial Controls with reference to Financial Statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone Ind AS 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 standalone 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 standalone Ind AS Financial Statements.

Inherent Limitations of Internal Financial Controls with reference to Financial Statements

Because of the inherent limitations of Internal Financial Controls with reference to Financial Statements, 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 with reference to Financial Statements to future periods are subject to the risk that the Internal Financial Control with reference to Financial Statements 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 with reference to Financial Statements and such Internal Financial Controls with reference to Financial Statements were operating effectively as at March 31, 2021, based on the 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.

Other Matters

Our aforesaid report under section 143(3)(i) of the Act on the adequacy and operating effectiveness of the Internal Financial Controls with reference to Financial Statements in so far as it relates to branch office of the Company viz. Visakh Refinery audited by the branch auditor, appointed under section 143(8) of the Act is based on the report of the branch auditor which has been sent to us and has been properly dealt with by us in preparing this report.

For R. Devendra Kumar & Associates For M.P. Chitale & Co.
Chartered Accountants Chartered Accountants
Firm Regn. No.114207W Firm Regn. No.101851W
sd/- sd/-
Neeraj Golas Anagha Thatte
Partner Partner
Membership No. 074392 Membership No. 105525
UDIN: 21074392AAAAAZ1037 UDIN: 21105525AAAADS3302
Place: Mumbai
Date: May 20, 2021