FUTURE BPCL Notes to Accounts

Company Overview

Bharat Petroleum Corporation Limited referred to as "BPCL" or "the
Corporation" was incorporated on 3rd November, 1952. BPCL is a
Government of India Enterprise listed on Bombay Stock Exchange Limited
and National Stock Exchange of India Limited. The Corporation is
engaged in the business of refining of crude oil and marketing of
petroleum products. It has refineries at Mumbai and Kochi, LPG bottling
plants and Lube blending plants. The Corporation''''s marketing
infrastructure includes vast network of Installations, Depots, Retail
Outlets, Aviation Service Stations and LPG distributors.

1. Consequent to non-revision in retail selling prices corresponding
to the international prices and applicable foreign exchange rates
prevailing during the year, the Corporation has suffered gross
under-recovery of Rs. 1,796.50 Crores (previous year Rs. 16,140.66
Crores) on sale of sensitive petroleum products.

As advised by the Ministry of Petroleum & Natural Gas, the Corporation
has accounted compensation towards sharing of under-recoveries on sale
of sensitive petroleum products as follows:

a) Rs. 198.01 Crores (previous year Rs. 8,362.88 Crores) discount on
crude oil/products purchased from ONGC/GAIL/NRL which has been adjusted
against purchase cost;

b) Rs. 1,598.49 Crores (previous year Rs. 7,290.40 Crores) subsidy from
Government of India has been accounted as Revenue from operations.

After adjusting the above compensation, the net under-recovery absorbed
by the Corporation is Nil (previous year under-recovery Rs. 487.38
Crores).

2. Pursuant to the Ministry of Corporate Affairs Notification G.S.R.
914 (E) dated 29th December 2011, the Corporation had exercised the
option under Para 46 A of AS-11 (notified under the Companies
(Accounting Standards) Rules, 2006) (as amended) and has changed its
accounting policy from FY 2011-12 onwards for recognition of exchange
differences arising on reporting of long-term foreign currency monetary
items. For the current financial year, the impact on account of this
change (net of depreciation and amortization) is increase in profit
before tax of Rs. 441.38 Crores (previous year Rs. 307.06 Crores). The
net loss remaining unamortised under Foreign Currency Monetary Item
Translation Difference Account as at 31st March 2016 is Rs. 79.20
Crores (net gain in the previous year Rs. 26.99 Crores).

3. As per the scheme of Amalgamation of the erstwhile Kochi
Refineries Limited (KRL) with the Corporation approved by the
Government of India, 3,37,28,737 equity shares of the Corporation were
allotted (in lieu of the shares held by the Corporation in the
erstwhile KRL) to a trust for the benefit of the Corporation in the FY
2006-07. After the 1:1 Bonus issue in July 2012, presently the trust
holds 6,74,57,474 equity shares of the Corporation. Accordingly the
cost of the original investment of Rs. 659.10 Crores (previous year Rs.
659.10 Crores) together with the additional contribution to the corpus
of the trust of Rs. 0.01 Crores made in 2014-15 amounting to Rs. 659.11
Crores is included in Non-Current Investments (Refer Note no. 16). The
income distributed by the trust during the year 2015-16 amounting to
Rs. 259.71 Crores (previous year Rs. 114.68 crores) have been included
in ''''Other income'''' (Refer Note No. 26).

4. Impairment of Assets: It is assumed that suitable mechanism would
be in place by the Government of India, in line with earlier/current
year(s), to provide compensation towards under recoveries of margin, if
any, and recoveries against Direct Benefit Transfer for LPG Scheme on
account of sale of sensitive petroleum products in subsequent years.
Hence, there is no indication of impairment of assets of the
Corporation as at 31st March 2016.

5. Segment Reporting: As per Accounting Standard (AS) 17 on "Segment
Reporting", segment information has been provided under the Notes to
Consolidated Financial Statements.

6. The Corporation has numerous transactions with other oil
companies. The outstanding balances (included under Trade
Payables/Trade Receivables, etc) from them including certain other
outstanding credit and debit balances are subject to
confirmation/reconciliation. Adjustments, if any, arising therefrom are
not likely to be material on settlement and are accounted as and when
ascertained.

7. Disclosure as per requirements of Accounting Standard 15 -
"Employee Benefits":

The Corporation''''s contribution to the Provident Fund is remitted to a
separate trust established for this purpose based on a fixed percentage
of the eligible employees salary and charged to Statement of Profit and
Loss. Shortfall, if any, in the fund assets, based on the Government
specified minimum rate of return, will be made good by the Corporation
and charged to Statement of Profit and Loss. The fair value of the
assets of the Trust is more than the book value.

Gratuity: The Corporation has a defined benefit gratuity plan managed
by a trust. The contribution based upon actuarial valuation is
paid/payable to a trust which is invested as per investment pattern
prescribed by the Government in plan assets. Gratuity is paid to a
staff member who has put in a minimum qualifying period of 5 years of
continuous service on superannuation, resignation, termination or to
his nominee on death. Leave Encashment: The Employees are entitled to
accumulate Earned Leave and Sick Leave, which can be availed during the
service period. Employees are also allowed to encash the accumulated
earned leave during the service period. Further, the accumulated earned
leave and sick leave can be encashed by the employees on
superannuation, resignation, and termination or by nominee on death.

Other Defined Benefits: These are (a) Post Retirement Medical Scheme
Benefit (managed by a trust) to employees, spouse, dependent children
and dependent parents; (b) Pension/ex-gratia scheme to the retired
employees who are entitled to receive the monthly pension/ex-gratia for
life; (c) Death in service/Permanent disablement given to employee, the
spouse of the employee, provided the deceased''''s family/disabled
employee deposits retirement dues such as P F, Gratuity, Leave
encashment payable to them with the Corporation; and (d) Resettlement
allowance paid to employees to permanently settle down at the time of
retirement.

8. Related Party Disclosures as per Accounting Standard 18

Names of the Related parties (Joint Venture Companies)

Indraprastha Gas Limited

Petronet India Limited *

Petronet CCK Limited #

Petronet CI Limited *

Petronet LNG Limited

Bharat Oman Refineries Limited

Maharashtra Natural Gas Limited

Central UP Gas Limited

Sabarmati Gas Limited

Bharat Stars Services Private Limited

(Including Bharat Stars Services (Delhi) Pvt. Limited)

Bharat Renewable Energy Limited *

Matrix Bharat Pte. Ltd.

Delhi Aviation Fuel Facility Private Limited

Kannur International Airport Limited

GSPL India Gasnet Limited

GSPL India Transco Limited

Mumbai Aviation Fuel Farm Facility Private Limited

Kochi Salem Pipeline Private Limited

IBV (Brazil) Petroleo Ltda.

*Companies in the process of winding up

# Petronet CCK Limited has become subsidiary w.e.f. 29th May 2015

Key Management Personnel (Whole time directors):

Shri S. Varadarajan, (Chairman & Managing Director)

Shri P. Balasubramanian, Director (Finance)

Shri K.K. Gupta, Director (Marketing) till 29th February 2016

Shri S. Ramesh, Director (Marketing) w.e.f. 1st March 2016

Shri B.K. Datta, Director (Refineries)

Shri S.P. Gathoo, Director (Human Resources)

Guarantees of USD 150 Million (Rs. 994.99 Crores) and USD 84 Million
(Rs. 557.20 Crores) were given to lender banks on behalf of Bharat Oman
Refineries Ltd. against foreign currency loans which were refinanced
during the year and have been extended to new lender banks.

Disclosure with respect to Related Party Transactions during the year
(more than 10% of the total transaction value):

1. Purchase of goods: Bharat Oman Refineries Limited Rs. 25,898.20
Crores (previous year Rs. 29,610.52 Crores) and Petronet LNG Limited
Rs. 4,184.69 Crores (previous year Rs. 5,612.34 Crores).

2. Sale of goods: Matrix Bharat Pte. Ltd. Rs. 997.74 Crores (previous
year Rs. 2,286.27 Crores), Bharat Oman Refineries Limited Rs. 808.08
Crores (previous year Rs. 661.21 Crores), Sabarmati Gas Limited Rs.
300.28 Crores (previous year Rs. 339.64 Crores) and Indraprastha Gas
Limited Rs. 283.19 Crores (previous year Rs. 434.38 Crores)

3. Rendering of Services: Kochi Salem Pipeline Private Limited Rs.
21.93 Crores (previous year Nil), Mumbai Aviation Fuel Farm Private
Limited Rs. 14.69 Crores (previous year Nil), Indraprastha Gas Limited
Rs. 15.12 Crores (previous year Rs. 7.38 Crores) and Bharat Oman
Refineries Limited Rs. 6.49 Crores (previous year Rs. 16.13 Crores)

4. Receiving of Services: Mumbai Aviation Fuel Farm Facility Private
Limited Rs. 40.87 Crores (previous year Nil), Bharat Stars Services
Private Limited Rs. 29.08 Crores (previous year Rs. 16.70 Crores) and
Bharat Oman Refineries Limited Rs. 12.00 Crores (previous year Rs.
11.70 Crores)

5. Interest income: Bharat Oman Refineries Limited Rs. 129.01 Crores
(previous year Rs. 129.12 Crores)

6. Dividend received: Petronet LNG Limited Rs. 18.75 Crores (previous
year Rs. 18.75 Crores), Indraprastha Gas Limited Rs. 18.90 Crores
(previous year Rs. 17.33 Crores) and Delhi Aviation Fuel Facility Pvt.
Ltd. Rs. 7.59 Crores (previous year Rs. 7.59 Crores)

7. Investment and Advances for Investments: Sabarmati Gas Limited Rs.
102.24 Crores (previous year Nil), Kannur International Airport Ltd Rs.
50.00 Crores (previous year Rs. 50.00 crores), Kochi Salem Pipeline
Private Limited Rs. 37.50 Crores (previous year Rs. 6.75 Crores) and
Mumbai Aviation Fuel Farm Facility Private Limited Rs. 33.77 Crores
(previous year Rs. 4.50 Crores)

8. Loans and Advances: Petronet LNG Limited Rs. 56.18 Crores (previous
year Rs. 112.36 Crores)

9. Management Contracts (Employees on deputation/consultancy
services): Bharat Oman Refineries Limited Rs. 15.96 Crores (previous
year Rs. 16.46 Crores) and Bharat Stars Services Private Limited Rs.
2.50 Crores (previous year Rs. 1.81 Crores)

10. Lease Rental & Other Charges received: Bharat Oman Refineries
Limited Rs. 26.00 Crores (previous year Rs. 29.21 Crores)

11. Lease Rental & Other Charges paid: Delhi Aviation Fuel Facility
Private Limited Rs. 0.07 Crores (previous year Rs. 0.07 crores)

12. Sale of Assets: Bharat Stars Services Private Limited Nil
(previous year Rs. 3.09 Crores) and Mumbai Aviation Fuel Farm Private
Limited Nil (previous year Rs. 1.92 Crores)

13. Receivables as at period end: Bharat Oman Refineries Limited Rs.
1,388.06 Crores (previous year Rs.1,390.18 Crores), which is mainly on
account of Subordinated loan of Rs. 1,354.10 Crores (previous year Rs.
1,354.10 Crores) and Petronet LNG Limited of Rs. 200.00 Crores
(previous year Rs. 105.22 Crores)

14. Payables as at period end: Bharat Oman Refineries Limited Rs.
908.04 Crores (previous year Rs. 820.38 Crores) and Petronet LNG
Limited Rs. 123.76 Crores (previous year Rs. 151.03 Crores)

9. Dues from Directors is Rs. 0.35 Crores (previous year Rs. 0.32
Crores) and Dues from Officers is Rs. 3.98 Crores (previous year Rs.
3.30 Crores).

10. Disclosure for Operating Leases as per Accounting Standard - 19

The Corporation enters into cancellable/non-cancellable operating lease
arrangements for office premises, staff quarters and others. The lease
rentals paid/received for the same are charged to the Statement of
Profit and Loss.

11. (a) The Corporation has on the Balance Sheet date, outstanding
forward contracts amounting to USD 228.75 Million (Rs. 1,533.66 Crores)
(previous year - USD 184 Million, Rs. 1,152.96 Crores) to hedge foreign
currency exposure for payment of crude oil.

(b) The RBI swap transactions outstanding as on 31/03/2014 had matured
during 2014-15 and the gain of Rs. 521.14 Crores had been recognised in
the Statement of Profit and Loss during the year 2014-15.

(c) The Corporation had raised Swiss Franc (CHF) 200 Million of 3% CHF
Bonds 2019 in March 2014, the proceeds of which were swapped into USD
228.29 Million on the same day. The mark to market losses of Rs. 0.58
Crores (previous year Rs. 96.09 Crores) in respect of this CHF-USD Swap
transaction have been recognized as expense during 2015-16 based on the
concept of prudence and in line with the ICAI announcement of 29th
March 2008 on Accounting for Derivatives.

12. The Employee benefits expense for FY 2015-16 include reversal of
provisions no longer required Nil (previous year Rs. 657.93 Crores).

13. The Corporation has, in the current year, changed the method of
determination of cost of inventories from ''''Weighted Average'''' to ''''First
in First Out'''' (FIFO) in respect of crude oil and finished products
(except lubricants which are continued to be determined at weighted
average). This has resulted in increase in value of inventory of crude
oil by Rs. 15.30 Crores and finished products including intermediaries
by Rs. 167.87 Crores, resulting in corresponding increase in the profit
before tax in the current year.

14. During the year, the Corporation has released LPG cylinders for
the BPL families as per the scheme of MOPNG. Out of these, in respect
of certain connections, the claims on MOPNG towards deposits amounting
to Rs. 95.85 Crores are not yet accounted for, pending their approval.

15. Figures of the previous year have been regrouped wherever
necessary, to conform to current period presentation.

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