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GAIL (India) Ltd.

BSE: 532155 Sector: Others
NSE: GAIL ISIN Code: INE129A01019
BSE LIVE 15:57 | 23 Oct 434.45 1.35
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441.30

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NSE 15:44 | 23 Oct 435.15 1.90
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441.85

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OPEN 433.10
PREVIOUS CLOSE 433.10
VOLUME 591606
52-Week high 457.15
52-Week low 300.98
P/E 21.42
Mkt Cap.(Rs cr) 73,479
Buy Price 434.45
Buy Qty 1032.00
Sell Price 0.00
Sell Qty 0.00
OPEN 433.10
CLOSE 433.10
VOLUME 591606
52-Week high 457.15
52-Week low 300.98
P/E 21.42
Mkt Cap.(Rs cr) 73,479
Buy Price 434.45
Buy Qty 1032.00
Sell Price 0.00
Sell Qty 0.00

GAIL (India) Ltd. (GAIL) - Director Report

Company director report

DEAR SHAREHOLDERS

On behalf of the Board of Directors of your Company I am delighted to present the 32ndAnnual Report of your Maharatna Company along with Audited Financial Statements for thefinancial year 2015-16.

PARTNER INDIA'S GROWTH - NATURAL GAS LEADER

With a turnover of '51614 crores your Company is India's largest natural gas Companyand is ranked amongst the top gas utilities in Asia. Your Company has presence across theentire gas value chain with activities ranging from Gas Transmission and Marketing toProcessing (for fractionating LPG Propane SBP Solvent and Pentane) transmission of LPGand production and marketing of Petrochemicals like HDPE and LLDPE.

Your Company has extended its presence in LNG re-gasification City Gas

Distribution Exploration & Production through subsidiaries and joint venturecompanies and also diversified into solar and wind power generation.

Gas transmission is one of the core competencies of your Company and draws its strengthfrom about 11000 km of natural gas pipeline network and 2038 km of LPG pipelinetransmission network.

With a lean work force of 4321 employees your Company plays a vital role in the socialand economic development of the country and makes a substantial contribution towards itsenergy security

FINANCIAL HIGHLIGHTS

The important financial highlights for the year 2015-16 are as under:

PARTICULARS

2015-16

2014-15

US $ Million

(' in crores)

US $ Million

(' in crores)

Turnover (Net of ED) 7715 51614 8952 56569
Other income 173 1158 173 1096
Cost of sales (excluding interest and depreciation and including extraordinary items) 7122 47646 8236 52046
Gross margin 766 5126 879 5557
Interest 96 640 57 361
Depreciation 196 1313 154 974
Profit before tax 474 3173 678 4284
Provision for tax 131 874 197 1245
Profit After Tax 344 2299 481 3039
Appropriations - - - -
Interim dividend 47 317 60 381
Proposed final dividend 57 381 60 381
Corporate dividend tax 21 142 24 154
Net transfer to/from bond redemption reserve 5 35 6 37
Transfer to CSR reserve (0) (1) (5) (30)
Transfer to general reserve 34 230 48 304
Net surplus after Appropriations 179 1196 287 1814
1 US $ in INR converted at the exchange rate as on 31st March of the respective financial year 66.90 - 63.19 -

DIVIDEND

Your Company has a consistent track-record of dividend payment. So far it hasdisbursed dividend of over '13741 Crores to its shareholders including '8316 Croresdisbursed as dividend to the Government of India (GOI).

The Board of Directors of your Company had earlier approved payment of an interimdividend @ 25% on equity share of '10 each ('2.5 per equity share) amounting to '317.12Crores which was paid in February 2016. Further the Board has recommended payment offinal dividend @ 30% on equity share of '10 each ('3.00 per equity share) for FY 2015-16amounting to '380.54 crores.

With this the total dividend payment for the fiscal year 2015-16 will be 55 % onequity share of '10 each ('5.50/- per equity share) amounting to '697.66 Crores on itspaid-up equity capital of '1268.48 Crores and dividend distribution tax of I42.03 crores.The total dividend pay-out including corporate dividend tax accounts for 35% of profitafter tax.

CONTRIBUTION TO EXCHEQUER

Your Company has contributed over '4929 Crore in 2015-16 to the exchequer throughdividend duties taxes and others as compared to '5788 Crore in 2014-15.

CREDIT RATING

• Domestic rating

Your Company has been reaffirmed the highest domestic credit rating of AAA from ICRACARE and CRISIL which is highest credit rating in India and carries lower credit risk ofthe Company

• International Rating

The International rating agency Moody's International Hong Kong has also reaffirmedthe corporate issuer rating of Baa2 with a negative outlook which is one notch higherthan sovereign rating of India. The Baa2 rating affirmation reflects GAILs dominantposition in gas transmission business. Further Fitch Ratings has also assigned along-term foreign currency issuer default rating of BBB- with a negative outlook which isequal to sovereign rating of India.

BUSINESS STRATEGY

In the last year and a half the oil and gas sector witnessed game-changing disruptionswith oil prices crashing from 114 $/bbl to a low of around 30 $/bbl and having profoundimplications on companies across the sector.

The volatility in oil prices has caused downward shift in prices of LNG oil productspetrochemical products etc. Further domestic production of natural gas has been on thedecline over the past 5 years from peak of 140 MMSCMD in 2010-11 to 86 MMSCMD in 2015-16.Notwithstanding these challenges which have had physical and financial implications onyour Company the management has taken it as an opportunity and has initiated strategicsteps to reinvent itself and emerge out stronger than before.

In order to evolve grow and excel your Company continuously reviews its strategydeveloped for the period 2011-2020 to make the necessary course correction in line withchanges in the external business environment and internal organizational requirements.Management of your Company is taking steps to realize strategic objectives and ensure thatyour Company is on course to become an integrated hydrocarbon major with presence acrossthe entire gas value chain.

• National Gas Grid

Your Company is the largest natural gas pipeline Company in India and going forwardthe focus will be on the development of National Gas Grid which is one of the keypriorities of the Government of India (GoI). Your Company now has a total network ofapproximately 11000 km pipeline in the country. Additionally it has commenced executionof the Phulphur - Haldia pipeline project (Phase-1) which was inaugurated by the Hon'blePrime Minister of India in July 2015. This project is also referred to as "EnergyHighway of Eastern India" and once completed it would help to revive closedfertilizer plants. This pipeline will connect states of Eastern India to the rest of thegas network in the country and pave the way for developing the "National GasGrid" The Board has also approved the 670 km Vijaipur-Auraiya-Phulpur pipeline. Withthese projects and through continuous pan-India expansion of the pipeline network yourCompany will further strengthen its leadership position in the natural gas transmissionsegment.

Your Company is also pursuing the transnational pipeline project theTurkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. Gas Sales & PurchaseAgreement (GSPA) has already been signed to import 38 MMSCMD gas into the country throughthis pipeline. Further TAPI Pipeline Company has been incorporated as a Special PurposeVehicle in the Isle of Man with your Company holding 5% equity Shareholder's Agreement andInvestment Agreement of TAPI Pipeline Company have been signed.

• LNG Marketing

One of the key strategic priorities of your Company today is the marketing of LNG indomestic and international markets. Over the last few years your Company tied-upsignificant LNG volumes by concluding several deals with suppliers such as Sabine PassLiquefaction LLC (USA) Gazprom (Russia) etc. Further your Company's US subsidiary hasbooked LNG capacity in Dominion Cove Point's LNG liquefaction terminal in the USA forwhich 20 year gas sourcing agreement has been entered with WGL Midstream Inc. (USA). Inline with its LNG import portfolio your Company is focusing it efforts on gas marketdevelopment to attract and retain more customers. The marketing tie-ups are being exploredfor selling LNG in India and in the global markets. Your Company's subsidiary GAIL Global(Singapore) Pte Limited is actively pursuing LNG trading activities from Singapore.

To develop the gas sector in India and advance the country on the road to a gas basedeconomy your Company has advocated the implementation of the pooling mechanism. As aresult for the first time in the country large scale gas pooling was introduced whereyour Company is acting as a pool operator to manage procurement and supply of R-LNG tostranded gas based power plants in India. Your Company is also supplying RLNG tofertilizer companies at competitive rate through bidding process.

Your Company has tied-up additional regasification capacities at Dahej LNG terminal andDabhol LNG terminal to facilitate regasification of additional LNG tied-up in recentyears. Further tie . regasification terminals shall also be pursued. Your Company plans toown long term charter hire LNG ships to transport LNG volumes from the USA to India andother global markets.

• City Gas Distribution (CGD)

In order to provide clean fuel for domestic vehicular and commercial use and tofacilitate development of smart cities your Company is expanding its CGD network. YourCompany's wholly owned subsidiary GAIL Gas Limited is implementing CGD projects in thecities of Kota Dewas Meerut Sonepat Bengaluru and Taj Trapezium in addition topursuing the same in the state of Kerela Karnataka Andra Pradesh Rajasthan Kota andVadodara city etc. through its joint ventures. In line with the GoI's mission toaccelerate the use of gas your Company through its CGD JVs has set an unprecedentedrecord by providing 2.5 lakhs new PNG connections during the year.

• Petrochemicals

Your Company aspires to be one of the leading players in India in this segment bystrengthening its petrochemical portfolio through expansion of existing capacitiessetting up new plants and acquiring equity stakes in upcoming projects. Petrochemicalplant was commissioned in Assam through Brahmaputra Cracker & Polymer Limited (BCPL) asubsidiary of your Company This plant was dedicated to the nation by Hon'ble PrimeMinister of India in February 2016. Further a petrochemical plant at Dahej is being setup by ONGC Petro-additions Limited (OPaL) which is a joint venture (JV) of your Company

• Renewables

As a responsible corporate citizen and in line with the GoI's commitment to reducecarbon emissions your Company aims to decrease its carbon footprint in a phased manner.It has installed 118 MW wind energy capacity and has also set up a 5 MW solar project.Further your Company is a stakeholder in a Special Purpose Vehicle (SPV) created underthe aegis of Ministry of Petroleum & Natural Gas (MoP&NG) and Ministry of New& Renewable Energy (MNRE) for pursuing the setting up of Grid Connected RenewableEnergy Power Projects.

• Human Resource Development

Your Company is committed to align its human resource development initiatives withstrategic business objectives to achieve its organizational goals. The key areas underfocus are skill development and capability build-up talent acquisition development andretention.

BUSINESS PERFORMANCE

During the year under review the segment wise business performance of your Company isas under:

• Natural Gas Marketing

Natural gas marketing continues to constitute your Company's core business. During2015-16 gas sales clocked 73.67 MMSCMD compared to

72.07 MMSCMD in the previous financial year. Major supplies of natural gas include fuelto power plants feedstock for gas-based fertilizer plants LPG extraction and City GasDistribution.Your Company holds around 71.24 % market share in India's gas marketing.

Your Company has been designated by Ministry of Petroleum & Natural Gas(MOP&NG) to raise invoices for non- submission of utilization certificate dulycertified by Fertilizer Industries Coordination Committee (FICC) by concerned fertilizercompanies for use of APM gas for production of urea. The Company is revenue neutral forsuch transaction.

Most of the customers disputed the debit notes raised by the Company and matter waspending at Hon'ble High Court. Further MoP&NG vide letter dated 16th December 2015revised the earlier modalities for deriving the quantity and price for issue of debitnotes. The company has taken the matter with Ministry of Fertilizer and FICC to provideinformation / details.

Considering the pending court case uncertainty in recovery of debit notes matterbeing under consideration of Government- MOP&NG Ministry of Fertilizer and FICC TheCompany issued claim letter amounting to Rs. 1651.18 crore for such type of cases tillthe matter gets settled.

• Transmission

• Natural Gas

Your Company owns and operates a network of about 11000 kms of natural gas highpressure trunk pipeline with a pan-India capacity of around 206 MMSCMD of natural gas. Theaverage gas transmission during the year was 92.72 MMSCMD compared to 92.10 MMSCMD in theprevious financial year.

• LPG

Your Company is the only Company in India which owns and operates exclusive pipelinesfor LPG transmission for third-party usage. It owns and operates two LPG pipelinetransmission systems with a total length of 2038 kms. Out of this 1415 kms of pipelinenetwork transports LPG from western to northern parts of India (Jamnagar - Loni pipeline)and the balance 623 kms of pipeline network transports LPG in the country's southern part(Vizag-Secunderabad pipeline). The LPG transmission system has a capacity to transport upto 3.8 MMTPA of LPG. In 2015-16 the LPG transmission throughout achieved was about 2.82Million MT.

• Petrochemicals

During 2015-16 your Company produced 344.168 Thousand MT of polymers and sold 333.5Thousand MT of polymers.

• LPG and Other Liquid Hydrocarbon Production

Your Company has LPG plants at five locations in the country In 201516 total liquidhydrocarbon production was about 1.09 Million MT which mainly included 0.85 Million MT ofLPG 0.13 Million MT of Propane 0.02 Million MT of Pentane and 0.08 Million MT ofNaphtha.

• Exploration and Production (E&P)

Your Company's E&P business has continued self-sustainable production of oil andgas for the second consecutive year from four blocks (two overseas blocks in A-1 & A-3block Myanmar and 2 domestic blocks in Cambay basin).

Revenue of approx. Rs. 751.51 Crores has been generated from sale of hydrocarbon from 4producing blocks namely A-1 & A-3 Myanmar and CB-ONN-2000/1 and CB-ONN-2003/2 (Cambayonland) during the year 2015-16.

Further Field Development Plan (FDP) has been approved by Directorate General ofHydrocarbons (DGH) for the gas resource of 65 BCF in Tripura block (AA-ONN-2002/1).

As a result of continued portfolio optimisation your Company now has participatinginterest in 13 E&P blocks (excluding one GAIL Operated Block CY-ONN-2005/1 in Cauverybasin which was relinquished in June 2016) of which 11 blocks are in India and 2 inMyanmar. Out of these your Company is Operator in one onland blocks viz. CB-ONN-2010/11in Cambay basin awarded during NELP-IX bidding round.

Drilling activities were initiated in 4 (out of 5) blocks obtained during NELP-IXbidding round viz (i) CB-ONN-2010/11 (Lead Operator: GAIL)

(ii) CB-ONN-2010/8 (Lead Operator: Bharat Petro Resources Limited)

(iii) GK-OSN-2010/1 (Operator: ONGC) (iv) GK-OSN-2010/2 (Operator: ONGC). Gas discoveryhas been notified to Government in the block GK- OSN-2010/1. Survey activities are plannedin the remaining NELP-IX block AA-ONN-2010/2 (Operator: OIL)

INITIATIVES FOR FUTURE GROWTH

* Global Initiatives

Your Company is constantly pursuing a leading role in the TAPI Pipeline project toreceive Natural Gas from the Galkynysh fields in Turkmenistan. After incorporation of TAPIPipeline Company Limited (TPCL) Turkmengas has been endorsed as the consortium leaderTPCL has a mandate to build own and operate the proposed TAPI Pipeline. The ShareholdersAgreement (SHA) of TPCL was signed in December 2015 during the ground breaking ceremonyfor laying of the Turkmen leg of the TAPI pipeline. Investment Agreement (IA) relating toinitial equity infusion by the TAPI entities into TPCL was also signed in April 2016.Galkynysh Pipeline Company the consortium leader group led by Turkmengas shall be taking85% equity in TPCL while your Company ISGS (Pakistan) and Afghan Gas Enterprise (AGE)shall be taking 5% equity each.

* Domestic Initiatives

The domestic business initiatives of your Company were as follows:

* Petrochemicals

GAIL and Hindustan Petroleum Corporation Limited ('HPCL) are exploring the possibilityof setting up a Greenfield petrochemical complex in the east coast of India primarilybased on imported ethane.

* LNG REGASIFICATION TERMINALS

Your Company is evaluating various opportunities for setting up/ booking LNGregasification capacity in the country

* LNG SHIPPING

In 2011 your Company contracted 3.5 MMTPA of LNG from Cheniere Energy USA on FOBbasis for an initial period of 20 years. Further in 2013 your Company subsidiary GAILGlobal (USA) LNG LLC also signed a Terminal Service Agreement (TSA) for booking 2.3 MMTPAof liquefaction capacity in the Dominion Cove Point terminal for 20 years. The initialsupplies from both these contracts are expected to commence from early 2018. Currentlyyour Company is in the process of long term charter hiring of LNG ships through theinternational competitive bidding route.

* NATURAL GAS PIPELINE PROJECTS

During the financial year your Company has completed 27 number of 'Last MileConnectivity' to harness the commercial utilization of various pipeline networks in theseven states of Karnataka Gujarat Goa Haryana Rajasthan Maharashtra & Punjab.

* NON-CONVENTIONAL ENERGY

Your Company has total installed capacity of 118 MW of Wind Energy Generation Projects(WEG). Your Company began operations with a modest capacity of 4.5 MW wind energy forcaptive use in Gujarat in 2009-10 and graduated to commercial production aftercommissioning 100 MW of WEG projects in Tamil Nadu and Karnataka in 2011-12. It also madeits entry in the solar power sector by setting up 5 MW Solar Power Plant in Rajasthanthrough bidding under the Jawaharlal Nehru National Solar Mission.

Your Company is setting up 5.76 MW grid connected roof top captive solar power plant atPata Petrochemical Complex Uttar Pradesh.

* COAL GASIFICATION

Your Company is also entering into coal gasification by setting up surface coalgasification based urea project at Talcher. The project is envisaged for production of2200 MTPD Ammonia and 3850 MTPD Urea and the project cost is estimated to be around '8000Crore. Joint Venture Company Talcher Fertilizers Limited (formerly known as Rashtriya CoalGas Fertilizers Limited) was formed on 13th November 2015 with consortiumpartners i.e. GAIL CIL RCF & FCIL.

The success of this project would pave the way for the production of fertilizers fromabundantly available domestic coal thus resulting in lesser dependency on their imports.

RELATED PARTIES - SUBSIDIARIES/ ASSOCIATES/ JOINT VENTURES

Your Company has formed subsidiaries/associates/joint venture companies for CGDpetrochemicals LNG gas trading power generation and shale gas. It has played pioneeringrole in introducing city gas projects for natural gas supplies to households commercialindustrial and transport sectors through its subsidiary and joint venture companies.Contracts or arrangements/ transactions with related parties were on arm's length basisand in ordinary course of business.

Your Company's subsidiaries/ associates/joint venture companies contributedsignificantly in the business expansion activities of your Company A statement containingthe salient feature of the financial statements of your Company's Subsidiaries AssociateCompanies and Joint Ventures as per first proviso of section 129(3) of the Companies Act2013 including details of individual contribution of all subsidiaries associates andjoint venture companies towards the overall performance of Company during the period isalso given under Consolidated Financial Statements.

The details of subsidiaries/associates/joint venture companies are mentioned below:

NATURAL GAS LNG AND POWER

• GAIL Global (Singapore) Pte. Limited (wholly owned subsidiary)

GAIL Global (Singapore) Pte. Ltd. (GGSPL) primarily started as an overseas investmentarm of your Company and was operationalized for LNG trading in 2012. It commenced itsbusiness operations in May 2012. GGSPL is now actively involved in business activities inthe area of LNG Trading. Until March 31 2016 GGSPL has traded twenty one (21) LNGcargoes out of which 13 were traded during the financial year 2015-16. The turnover for2015-16 was USD 307 million.

GGSPL has also been mandated by your Company to market part of the Henry Hub linked LNGvolume sourced from the USA in the international market. The supplies against the saidvolumes are expected to start from the year 2018. 1)1

GGSPL is also in process of third-party trades and endeavouring ship chartering andrisk management activities along with supplying LNG cargoes to GAIL.

• GAIL Global (USA) Inc (wholly owned subsidiary)

GAIL Global (USA) Inc.(GGUI) was incorporated as a wholly subsidiary of GAIL toundertake investment in the Eagle Ford shale gas asset. The primary objective behind thisinvestment was to enter into the US shale gas market and to bring shale gas technology toIndia. GGUI executed a definitive agreement with M/s Carrizo Oil & Gas Inc. USA(Carrizo) on September 28 2011 to enter into an unincorporated JV in the Eagle FordShale asset in Texas. GGUI acquired a 20% participating interest in this JV Carrizo withthe remaining 80% participating interest functions as the operator of the JV

During the year 20 wells came online taking the total online wells to 99 as onDecember 31 2015. The gross production volume of GGUI during 2015 was 853.1 Mboe.

• GAIL Global (USA) LNG LLC (wholly owned subsidiary of GGUI)

GAIL Global (USA) LNG LLC (GGULL) signed a contract with Dominion Cove Point LNG LP(DCP) to book LNG tolling capacity of 2.3 MMTPA in its Cove Point terminal. It also signedGas Sales & Purchase Agreement (GSPA) with WGL

Midstream Inc. for sourcing of gas for liquefaction at the Terminal. The constructionactivities at the terminal are on-track and the terminal is expected to be in service byJanuary 2018. GGULL would be selling all LNG volumes from Cove Point to GAIL.

• GAIL China Gas Global Energy Holdings Limited

GAIL China Gas Global Energy Holdings Limited was formed with an objective to pursuegas sector opportunities primarily in China. Your Company has a 50% equity stake withChina Gas Holdings Limited as an equal partner.

• Petronet LNG Limited (PLL)

PLL was formed in 1998 to set up LNG import and regasification facilities in India. Itcurrently owns and operates a 10 MMTPA capacity LNG re-gasification terminal at DahejGujarat. The capacity is being expanded to 15 MMTPA (expected to be completed by end of2016). PLL has also setup an LNG re-gasification terminal at Kochi Kerala with a nameplate capacity of 5 MMTPA.

Your Company has 12.5% equity stake in PLL along with Bharat Petroleum Corporation Ltd.(BPCL) Oil and Natural Gas Corporation (ONGC) and Indian Oil Corporation Limited (IOCL)as equal partners.

• Ratnagiri Gas and Power Private Limited (RGPPL)

RGPPL was formed as a joint venture with NTPC for acquiring and operating the erstwhileDabhol Power Project assets consisting of 1967.08 MW gas- based combined cycle power blockand 5 MMTPA LNG Block. The assets were transferred to RGPPL in October 2005. Your Companyhas 25.51% equity stake in RGPPL along with NTPC 25.51% MSEB Holding Company Limited13.51% and Indian Financial institutions 35.47%.

The power block was non-operational due to paucity of funds and nonavailability ofdomestic gas in FY 2014-15. Government of India has floated a scheme for restart of thegas based Power Plant on Regasified LNG vide its OM dated 27.03.2015 support from PowerSystem Development Fund (PSDF Support Scheme of GoI) which provided for reverse auction.RGPPL has participated in the GoI scheme with Indian Railways as the buyer for thegeneration under PSDF Scheme. Ministry of Power has allocated temporary 620 MW power outof allocation to Maharashtra to Indian Railways under PSDF Support of GoI for thefinancial year 2015-16 & 2016-17.

Power Plant commenced operation under PSDF Support Scheme on November 26 2015 &supplying around 500 MW Power to the Indian Railways in the states of MaharashtraGujarat Madhya Pradesh & Jharkhand. During the Financial Year 2015-16 a total of1197.08 BUs have been supplied to Indian Railways.

RGPPL has already entered into a long-term frame work agreement with GAIL forcommercial utilization of LNG terminal and commenced tolling operations for 25 years w.e.fFebruary 2012. 45 cargos have been successfully unloaded since commissioning. 22 cargoswere unloaded during FY 2015-16. The total revenue earned by LNG Terminal fromcommissioning till 31st March 2016 is about ?700 Crores. The plant now operatesonly in non monsoon period as there is no breakwater. Demerger process of power plant& LNG terminal is going on. It is envisaged that by 2020 the breakwater constructionwill be completed and it will be able to operate round the year at full capacity.

The proposal for the demerger of the Power and LNG business is under consideration ofRGPPL and its shareholders. The purpose of the demerger is (a) to enable restructuring ofthe loan in order to make the two demerged entities independently viable and (b) to makeavailable the funds to complete the breakwater in order to achieve the full potential ofthe LNG terminal.

CITY GAS DISTRIBUTION (CGD)

* GAIL Gas Limited (wholly owned subsidiary)

GAIL Gas was incorporated with the objective to implement City Gas Distribution (CGD)projects in the country. GAIL Gas has been authorized by Petroleum and Natural GasRegulatory Board (PNGRB) to implement CGD Projects in Dewas Kota Sonipat Meerut TajTrapezium Zone and Bengaluru. In addition GAIL Gas is pursuing City Gas Business in thestate of Kerala Andhra Pradesh Karnataka Rajasthan Kota and Vadodara City etc. throughits joint ventures. It has also won the authorization of Haridwar district and North Goathrough a consortium with Bharat Petroleum Corporation Limited by PNGRB.

Rajasthan State Gas Limited (RSGL) was incorporated by GAIL Gas Limited and RajasthanState Petroleum Corporation Limited (RSPCL) with the objective to promote the CGD projectsand take up activities of gas distribution in the state of Rajasthan. GAIL Gas hastransferred its Kota CGD Assets to RSGL and matching contribtuion will be made by other JVpartner i.e. RSPCL

* Compressed Natural Gas (CNG)

During the year GAIL Gas augmented its CNG distribution infrastructure by enhancingthe capacity of existing stations and adding two CNG Station in Sonipat and one inFirozabad. CNG sales increased to 38 MMSCM in 2015-16.

* Piped Natural Gas (PNG)

In PNG business GAIL Gas is progressively supplying PNG to domestic customers in itsauthorized cities. Presently the company is catering to 11404 households.

GAIL Gas continue to maintain its focus on the PNG industrial and commercial segment asone of the potential growth areas. With its concentrated efforts in the year 2015-16 thetotal number of commercial and industrial customers increased to 513 in 2015-16.

GAIL Gas has commissioned the steel networks in the geographical area (GA) of SonepatDewas Kota Meerut Taj Trapezium Zone and Bengaluru. For reaching more charge areas fordomestic connections the steel grid network and MDPE pipeline network has been extendedto 388.93 kms and 806.41 kms respectively in 2015-16 in the cities of Sonepat MeerutDewas Kota Taj Trapezium zone and Bengaluru.

During the year the sales volume from industrial commercial and domestic customersgrew to 702.80 MMSCM from 526 MMSCM during previous year.

• Aavantika Gas Limited (AGL)

AGL was incorporated to implement CGD Projects in Madhya Pradesh. As on 31stMarch 2016 AGL operates 20 CNG stations including 9 daughter stations 7 online stations& 4 mother stations in Indore GA (including Ujjain) and Gwalior GA.

Further as on 31st March 2016 AGL supplied PNG to around 6430 Domestic 37commercial & 59 industrial consumers in its authorized geographical regions. AGL isalso catering to fuel requirement of around 21300 CNG vehicles operating in the region.Your Company along with HPCL holds 22.50% stake as an equal partner.

• Bhagyanagar Gas Limited (BGL)

BGL was incorporated to implement CGD projects in the United Andhra Pradesh. As on 31stMarch 2016 BGL operated 33 CNG Stations including 25 daughter booster stations 5 onlinestations & 3 mother stations. BbaEjmuearGuLtd Further as on 31st March2016 BGL supplied PNG to over 4270 households 46 commercial & 3 industrial consumersin its authorized geographical regions. BGL also fulfills the fuel requirement of around37000 CNG vehicles operating in the region. Your Company has 22.50 % stake along with HPCLas an equal partner

• Central UP Gas Limited (CUGL)

CUGL was incorporated to implement CGD projects in Uttar Pradesh. As on 31stMarch 2016 CUGL operated 17 CNG Stations including 4 mother stations 10 online stations& 03 daughter booster stations.

CUGL

Further as on 31st March 2016 CUGL supplied PNG to over 13283 domestic148 commercial & 44 Industrial customers in its authorized geographical regions. CUGLis also catering to fuel requirement of around 51865 CNG vehicles operating in the region.Your Company has 25% stake along with BPCL as an equal partner

• Green Gas Limited (GGL)

GGL was incorporated to implement CGD projects in Uttar Pradesh. As on 31stMarch 2016 GGL operated 15 CNG Stations including 5 daughter stations 6 online stations& 4 mother stations.

Further as on 31st March 2016 GGL supplied PNG to over 12100 domestic 15commercial & 5 industrial customers in its authorized geographical regions. GGL isalso catering to fuel requirement of around 36966 CNG vehicles operating in the region.Your Company has 22.5% stake along with IOCL as an equal partner.

• Indraprastha Gas Limited (IGL)

IGL was incorporated to implement CGD projects in Delhi's National Capital Territory(NCT) and cities in adjoining National Capital Region (NCR). As on 31st March2016 IGL operated 340 CNG Stations including 68 mother stations 243 online stations& 29 daughter stations.

Further as on 31st March 2016 IGL supplied PNG to over 6.36 Lac Domestic1751 commercial & 821 industrial consumers in its authorized geographical regionwhich includes the entire public transport of the national capital and also the world'slargest bus fleet on CNG. IGL is also catering to fuel requirement of around 8.4 Lac CNGvehicles in the Delhi/NCR. Your Company has 22.5% stake along with BPCL as an equalpartner

• Mahanagar Gas Limited (MGL)

MGL was incorporated to implement CGD projects in Mumbai & adjoining areas. As on31st March 2016 MGL operated 188 CNG Stations 19 mother stations 142 onlinestations & 27 daughter booster stations.

GAS

Further as on 31st March 2016 MGL supplied PNG to over 8.62 Lac Domestic2866 commercial & 60 industrial consumers in its authorized geographical region. MGLis also catering to fuel requirement of around 4.7 Lac CNG vehicles operating in theregion.

Your Company accorded approval to Mahanagar Gas Ltd.(MGL) to issue fully paid upunsecured Compulsory Convertible Debentures(CCDs) at par to Government of Maharashtra(GOM) due to which equity holding of GoM increased to 10% of total paid-up equity capital.Further your Company also accorded approval to off-load the equity shares held by GAILand BGL each up to 12.5% of MGL equity through the Initial Public Offering(IPO). MGL Issuewas opened on 21st June 2016 and closed on 23rd June 2016. Shareswere allotted to investors at '421/- per share. MGL equity shares were listed on NSE andBSE on 1st July 2016 . Your Company equity holding in MGL post-IPO is 32.5%along with BG Asia Pacific Holdings Pte. Limited as an equal partner.

• Maharashtra Natural Gas Limited (MNGL)

MNGL was incorporated to implement CGD projects in and around Pune. As on 31stMarch 2016 MNGL operated 36 CNG Stations including 5 mother stations 14 online stations& 17 mngl daughter stations.

Further as on 31st March 2016 MNGL supplied PNG to over 30598 Domestic132 Commercial and 115 Industrial Consumers in its authorized geographical region. MNGL isalso catering to fuel requirement of around 97307 CNG vehicles operating in the region.Your Company has 22.5% stake along with BPCL as an equal partner.

• Tripura Natural Gas Company Limited (TNGCL)

TNGCL was incorporated to implement CGD projects in Agartala. As on March 31 2016TNGCL operated 5 CNG stations including 3 mother stations and 2 daughter stations in theseareas.

Further as on March 31 2016 TNGCL supplied PNG to over 22615 domestic 322commercial and 47 Industrial customers in its authorized geographical region. TNGCL alsofulfils the fuel requirement of around 8063 CNG vehicles operating in the region. YourCompany has 29% stake in this joint venture.

• Vadodara Gas Limited (VGL)

Shareholders approved transfer of your Company's CNG stations and associated pipelinelaid incityforconnecting "lSatP S CNG Station in Vadodara to proposed JointVenture Company of GAIL Gas Limited with Vadodara Mahanagar Rs. ~ Seva Saclan (VMSS)

Accordingly VGL was incorporated as Joint Venture Company (JVC) of GAIL Gas Limitedand VMSS for supply of Compressed Natural Gas ("CNG") and Piped Natural Gas("PNG") in the city of Vadodara. Your Company has signed the Business TransferAgreement (BTA) with VGL and transferred its assets to VGL. VGL is operating the CGDbusiness we.f. 01.10.2014 in Vadodara. Consequent upon transfer of assets your Companyhas 32.93% stake along with GAIL Gas Ltd. 17.07% stake and VMSS has 50% stake in VGL.

VGL operates 9 CNG stations in Vadodara and dispensing more than 65000 kg/day CNG TheCNG network in the City of Vadodara includes 3- Mother Stations 1- On-line Station and 5-Daughter Booster Stations and 13 Km Steel Pipelines.

VGL also caters to the Piped Natural Gas (PNG) requirements of its consumers indomestic and Commercial Sectors. VGL supplies PNG to 76000 houses and 2200 commercial inthe city through a 750 km long PE Pipeline Distribution Grid and 07 District PressureRegulating System. This network was originally built owned and operated by VMSS. VGLdeveloped new MDPE network of 204 Km in outskirt area which catered about 50000 houses andout of that @2400 connections regularised and others ongoing.

PETROCHEMICALS

• Brahmaputra Cracker and Polymer Limited (BCPL) (Subsidiary)

Your Company has 70% equity stake in Brahmaputra Cracker and Polymer Limited (BCPL)with Oil India Limited (OIL) Numaligarh Refinery Limited (NRL) and the Government ofAssam each having 10% equity share. BCPL has set up 280000 TPA polymer plants in Assam.The petrochemical complex at Lepetkata was commissioned on January 02 2016 and dedicatedto the nation by Hon'ble Prime Minister Narendra Modi on February 05 2016.

As on 31st March 2016 BCPL has produced around 3200 MT of polymers and1000 MT of liquid hydrocarbons. Marketing Agreement was executed with BCPL during theyear.

• ONGC Petro-additions Limited (OPaL)

OPaL is implementing a Greenfield petrochemical complex

of '994.95 crores is a co-promoter of OPaL. . Oil and Natural Gas Corporation Limited(ONGC) and Gujarat State Petroleum Corporation Limited (GSPC) are co-promotors of OPaL.The plant is likely to commence operations during FY 2016-17.

OTHERS

• TAPI Pipeline Company Limited (TPCL)

Your Company is pursuing the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipelineproject to receive natural gas supply from the Galkynysh fields of Turkmenistan. TPCL wasincorporated in November 2014 in 'Isle of Man to build own and operate the proposed TAPIpipeline. In August 2015 Turkmengaz was endorsed as the Consortium Leader of the projectby the TAPI entities. The Shareholders Agreement of TPCL was signed among the shareholderson December 13 2015 while the Investment Agreement was signed on April 07 2016. YourCompany holds 5% equity in TPCL.

• South-East Asia Gas Pipeline Company Limited (SEAGP)

SEAGP was formed to transport natural gas from A1/A3 blocks in Myanmar to Myanmar-Chinaborder. As of January 2016 this pipeline is transporting nearly 16 MMSCMD of natural gas.Your Company has a 4.17% equity stake in SEAGP

• Talcher Fertilizers Limited (Earlier known as Rashtriya Coal Gas FertilizersLimited)

A consortium comprising of your Company CIL RCF and FCIL was formed to revive FCILTalcher fertilizer unit in the Angul district of Orissa. The MoU was signed by theconsortium partners on September 05 2013. Subsequently the joint venture companyRashtriya Coal Gas Fertilizers Limited was formed on November 13 2015. Your Companyholds 29.67% in this JVC.

PARTICULARS OF LOANS INVESTMENTS AND CORPORATE GUARANTEES

Details of investments loan and guarantee covered under Section 186 of the CompaniesAct 2013 forms part of financial statement as a separate section in the Annual Report FY2015-16.

IT ADVANCEMENTS AND FUNCTIONAL EXCELLENCE

Digital technology is now a new disruptive force to reckon with in all realms ofbusinesses. Your Company has aligned with the GoI's "Digital India" initiativeto launch Digital GAIL to integrate all processes and stakeholders with digital services.Digital GAIL aims to ensure that the Company's services are made available electronicallyefficiently in shorter delivery time while reducing paperwork.

All SAP systems in your Company have been upgraded and so the Company is all set forthe implementation of asset depreciation as per the IT Act linear asset management riskmanagement incident management worker safety management change management and mobileapps for HR & Sales.

Your Company has implemented Analytics Dashboards for the top management using thelatest SAP HANA-based Business Information Warehouse. These user-friendly dashboardsprovide drill-down facilities for analysing data and facilitate faster decision making.Your Company has also introduced mobile apps to provide anytime and anywhere access toemployees.

GAIL has also implemented the enhanced EHSM Module for incident and risk management.This ensures that any deviation in operational process is recorded and automated forproper monitoring. Accordingly preventive actions for mitigation of risks are taken.

Your company has also implemented a system for bilingual (Hindi and English) conversionof selective SAP output.

To provide recognition to your Company data centres as secured data centres in theindustry these have been certified by international certification agency based on ISO27001:2013 Information Security Management System (ISMS) Framework. Your company hassuccessfully conducted Surveillance Audit in November 2015 through M/s BSI and retainedthe ISO 27001 certification for ensuring security of information and physical assets.

Continuing journey towards functional excellence your Company has taken various newinitiatives during FY 2015-16 in the fields of Competence building Asset IntegrityManagement Standardization Digital Applications / Processes Employee EngagementKnowledge Leverage Archiving of Documents Stakeholder Management etc. Further movingahead in the endeavor to nurture symbiotic relationship with Vendors / Contractors /Suppliers Vendor Coaching Pre-Dispute Resolution Mechanism & health monitoring ofContracts have been implemented with an objective to minimize disputes during contractexecution as well as to minimize post contract closure legal disputes / arbitrations.

HEALTH SAFETY AND ENVIRONMENT (HSE) MANAGEMENT

• Corporate HSE Policy

The HSE practices are primarily driven through a Corporate HSE policy which is astatement of commitment of the management of your Company. The Company is committed toconduct business with a robust and integrated HSE management system with a focus onimproving harmony with the environment through sustainable development. The safety andhealth of all our employees is of paramount importance to the management and find mentionin the core organisational values of GAIL. Employees and contract workers are stronglyencouraged to adopt a safe working culture and behaviour to ensure effectiveimplementation of the HSE policy. Complying with applicable HSE rules and regulations andgoing beyond in setting internal targets are important elements of the HSE managementpolicy of your Company

• Safety Performance

Safety performance is measured through "HSE Score" which is evaluated on thebasis of performance of sites against important HSE Management System elements. YourCompany achieved the HSE Score of 93% as against the MoU target of 90%.

• Safety Training

Your Company imparts regular and structured HSE training to its employees to upgradetheir skills knowledge and competence. It also conducts regular training sessions forcontract workers hydrocarbon tanker drivers and other workers to create awareness of theprobable hazards in their work area and suggest safe work practices. Your Company alsounderstands the importance of good health and as a step in this direction it organizedthe HSE workshop on "Occupational Health" for business heads and heads of fireand safety & medical services. Faculties from prestigious institutions are alsoinvited regularly to share their insights on health-related issues. Your Company alsoholds technical seminars regularly as a case point it organized a seminar on "SafeOperation of Cross-Country Pipeline" for Oil and Gas Industry in Mumbai inassociation with National Safety Council Mumbai.

• Safety Culture Transformation Through Behaviour Based Safety (BBS) Concept

Your Company introduced and implemented the Behaviour-Based Safety (BBS) Concept toenhance safety of people and its installations. The implementation of this concept hashelped to minimize at-risk behaviour at all work sites. In order to educate the employeeson this concept behaviour- based safety cum safety leadership workshops were organized atvarious sites of your Company during the year.

• Safety Audits

Your Company undertakes various safety audits to ensure implementation of the HSEManagement System Guidelines and Emergency Preparedness. These audits are conducted byin-house teams and external safety auditors.

• Occupational Health

Your Company has implemented occupational hygiene measures and medical surveillanceprogrammes to monitor and control the occupational health of its employees. It has alsoprepared guidelines on occupational health management. The Corporate Occupational HealthCommittee met four times during the year to monitor the occupational health programmes inyour Company. To evaluate effectiveness of these programmes a multi-disciplinary internalteam conducted occupational health audit of process plants on all its work sites. TheCompany also conducts periodic medical examination of its employees at its various workcentres based on defined guidelines.

SUSTAINABILITY INITIATIVES

Your Company is in the process of publishing its sixth Sustainability Report for2015-16 based on the Global Reporting Initiative (GRI) G4 Guidelines. Sustainabilityreporting has helped in measuring and monitoring your Company's performance and movingbeyond the mandatory requirements to ingrain sustainability within the organization inletter and spirit. It has served as an important management tool helping us to re-look atyour Company's systems policies and procedures.

Since inception your Company has been guided by the principles of accountability andtransparency. In 2011 your Company formally began its sustainability journey takingsmall yet steady steps at a time. The Company's Sustainable Development Committeecomprising the Functional Directors as its members and an independent director as theChairman regularly monitors these sustainability initiatives and their performance.

The management of your Company understands that taking concrete actions in the rightdirection is equally important. GAIL is among the very few companies to have set voluntarytargets through Sustainability Aspirations 2020 and transparently disclosed them in thepublic domain. Your Company has disclosed additional targets through the revisedSustainability Aspirations 2020 in the Sustainability Report. The targets are in the areaof Specific Energy Reduction Specific GHG Emission Reduction Specific Fresh WaterConsumption Reduction and Zero Waste Water Discharge.

Your Company has strengthened its data management systems to capture credible andauthentic data and information from its various sites. For the second time in a row yourCompany has been acknowledged among CDP's India Leaders 2015 and featured in the ClimateDisclosure Leadership Index (CDLI). Your Company has emerged the highest ranking Companyamong the country's Public Sector Undertakings and third overall in the CDLI 2016.

Your Company believes that it is important to collaborate with industry leadersassociations and peers to address national and global sustainability challenges and worktowards a common goal. Its focus has remained on collaborating with various externalstakeholders such as TERI CII GRI UNGC FICCI and CDP among others to gain from theirknowledge and experience in the area of sustainability. Your Company conducted workshopsin collaboration with organizations such GRI Focal Point India and CDP during the year.

In line with the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 requirements Business Responsibility Report (BRR) 2015-16 is contained in a separatesection in the Annual Report.

VIGILANCE

Corporate Vigilance department of your Company is ISO-9001:2008 certified for havingadopted Quality Management System in compliance with the requirements of ISO. Variousinitiatives such as Bill Watch System e-tendering e-payments etc. have already beenimplemented in the past for the benefit of vendors and suppliers to bring transparency inyour Company's systems and processes. A number of system improvements were effected inyour Company during the year for effective utilization of its resources which in turnwould also help in preventing corruption and ensure all round good governance like:

• Test check measurement by senior officers during bill payment

• Constitution of Estimate Review Committee for tenders to improve estimationprocess.

• Roll out of On-line Price bidding for service requisitions in SupplierRelationship

• Management (SRM) e-tendering system.

The Vigilance Awareness Week-2015 was observed on the theme "Preventive Vigilanceas a tool of Good Governance" at the Corporate Office and at all the work centres ofyour Company from 26th to 31st October 2015. In order to createbetter awareness about corruption and its effects amongst the youth and college studentsvarious competitions were organized. In order to spread awareness among your Companyemployees and related work force various competitions involving Essay Writing SloganWriting Poster Paintings Online Quiz and debates were held during the week. Other eventsincluding banners/posters/painting display March and rallies with NGOs were alsoorganized at various work centres. A magazine "JAGROOK" containing CVCcirculars articles and case studies related to vigilance was also published.

CAPABILITY BUILDING

• Human Capital

Your Company invests considerable time efforts and resources to be the employer ofchoice and attract and retain the best available talent. GAIL carefully nurtures itsintellectual capital and channelizes its resources to generate value. The Company's ValueAdded per Employee initiative reflects its commitment to make optimal and productive useof the available resources and business opportunities. For the year under review ValueAdded per Employee was '167.74 lacs.

• Leadership Development Program

Building organizational and leadership capabilities is one of the top priorities ofyour Company Under the Company's Leadership Development Programme the Senior ManagementDevelopment Centre (SMDC) exercise was initiated for capability building of the seniorlevel employees. As on date the following employees were trained under this programme:Almost all the senior executives in the Chief Manager (E-6 Grade) and above; more than 95%executives who were promoted to the level of chief managers in APE 2015; and 316 seniormanagers (E-5 Grade). Plans are underway to train more senior managers (E-5 Grade) in thenear future.

Development gaps of the participants were identified and a comprehensive IndividualDevelopment Plan (IDP) was drawn to fill this gap. Under this programme customizedtraining would be provided to the employees at premier business schools and throughe-learning courses and books.

• Representation of Priority Section

Your Company has been complying with the Presidential Directives and otherinstructions/guidelines issued from time to time pertaining to

Policies and Procedures of Government of India in regard to reservation relaxationsconcessions etc. for Scheduled Castes (SCs) Scheduled Tribes (STs) Other BackwardClasses (OBCs) and Persons with Disabilities (PWDs) in Direct Recruitment.

Details with regard to Group-wise total number of employees and the representation ofScheduled Castes Scheduled Tribes and Other Backward Classes amongst them in yourCompany as on 31st March 2016 have been given in Table below:

Group

Employees on Roll

SC

ST

OBC

PWD

A 3102 485 197 563 41
B 558 110 63 104 11
C 598 103 23 185 35
D 58 17 6 14 1
C&MD

DIRECTORS & CVO

w 05 - - - -
Total 4321 715 289 866 88

A total of 136 new employees joined your Company during the 2015-16. Total Manpower ofthe Company as on 31st March 2016 stood at 4321 (including Whole-timeDirectors & CVO) with 16.54% of its employees belonging to SC category 6.68% to STcategory 20.04% to OBC category 7.96% to Minorities and 2.03% to PWDs category YourCompany's workforce comprised of 251 women employees as on 31st March 2016.

• Capability Development

Your Company believes that its human resource is one of the most vital assets forachieving its vision mission and objectives. Therefore capability building and talentdevelopment of its human resources have been its key focus areas.

GAIL Training Institute (GTI) organizes systematic and structured programmes forcapability building across all levels within the organization. In recognition of itsinitiatives GTI has been conferred with the prestigious Golden Peacock National TrainingAward for the year 2016.

GTI organised the following programmes and initiatives during the period under review:

• More than four man-days of training on average per employee.

• Certification Training Programmes from NACE ASME OEMs and technology licensorsfor technical human resources to empower them with state-of-the-art expertise in the coreareas of their function.

• Specialised training programmes on new business areas in-line with theCompany's Strategy 2020 including Business Modelling Energy Trading Hedging and RiskManagement.

• Individual Development Plan (IDP) for chief managers and above based on thedevelopement areas identified during the SMDC exercise.

• The participants of this IDP plan were provided competency-based books ande-learning modules prepared by Harvard Manage Mentor (HMM). They also undertook customisedmanagement development programmes through IIM Bengaluru and Kolkata.

• Leading external management experts were invited to provide customisedfunctional development programmes for senior employees.

• Mentorship programme for all new executives

• Healing with nutrition programme to provide health tips and reduce stresslevels.

• Awareness programmes on Sustainable Development on all sites.

More than 60% of employees have already participated in these programmes.

• Knowledge sharing seminar to motivate employees to share their experiences/expertize with other employees.

• In-house business quizzes and business simulations to update employees with thelatest developments in their core business areas.

• One year access to executives of E&P Department to International PetroleumIndustry Multimedia System (IPIMS) e-learning module developed by International HumanResource Development Corporation (IHRDC).

As part of its commitment to develop skills and capabilities across the hydrocarbonindustry GTI also successfully organised training programmes for employees of severalother organisations including RGPPL HPCL BCPL IGL MGL MNGL GSPL and HMEL.

Your Company also plays a proactive role to support the National Skill DevelopmentMission. It is the founder member of Hydrocarbon Sector Skill Council (HSSC) and providesskill-based training to create a pool of skilled manpower for CGD network and mid-streamhydrocarbon industry.

• Official Language

Your Company goes the extra mile to propagate and implement the Official LanguagePolicy of the Union of India.

The Official Language Implementation Committees at the corporate and work centre levelheld quarterly meetings to monitor and review the progress of achieving the targets fixedin the Annual Programme issued by the Govt. of India.

Hindi workshops/trainings are organized on regular basis at GTI Jaipur and Noida andat other work centres. Hindi computer training sessions are integral part of theseprogrammes. During the year 2015-16 1335 employees were provided formal training through67 workshops. All computers in the Company have Unicode Hindi fonts with transliterationkey-board typing facility

Hindi Fortnight was celebrated from September 14 to 28 2015 to promote the officiallanguage.

Every Monday/first working day of the month is observed as Hindi Diwas wherein allemployees are encouraged to express themselves in the language.

Your Company now uses a special software to generate all formal communication includingpay slips CPF card pension card promotion order transfer order reliving order in bothHindi and English. GAIL is one of the few PSUs to implement this facility

Names of all employees in official e-mail IDs are both in English and Hindi. TheCompany terminology has been standardized and the list has been circulated amongst allemployees. GAILs web site and Intranet also follow the bilingual format.

Your Company also publishes the Hindi magazine "Rajbhasha Sahyog" to promotethe language. Motivational and inspirational books in Hindi were distributed on theoccasion of World Hindi Day

The 16th Rajbhasha Sammelan was organised on January 21 and 22 2016 topromote the use of Hindi and review the progress made in the implementation of theofficial language in the Company

The First Sub-Committee of Committee of Parliament on Official Language inspected theJamnagar Agartala and Ramgarh offices to review the steps undertaken to promote theofficial language and were appreciative of our efforts.

A meeting of Hindi Salahkar Samiti was organised on February 8 2016 in Puri by theMoP&NG under the Chairmanship of Minister of State for Petroleum & Natural Gas(I/C). GAIL too participated and highlighted its efforts to promote the language.

• Sexual Harassment of Women at Workplace

Your Company has in place 'Policy on Prevention Prohibition and Redressal of SexualHarassment of Women at Workplace' in line with the requirements of the Sexual Harassmentof Women at the Workplace (Prevention Prohibition & Redressal) Act 2013. InternalComplaints Committee (ICC) has been set up to redress complaints received regarding sexualharassment

During the year 2015-16 two sexual harassment complaints received and the same weredisposed off.

INNOVATION RESEARCH AND DEVELOPMENT (R&D)

Your Company is committed to address the challenges of ever changing business scenariothrough Innovation. In this regard efforts are made to encourage Innovation and creativityof employees through a Suggestion Scheme. This Scheme helps to promote organization-wideidea generation for incremental innovation. The employees are motivated to suggestimprovements in their respective areas of work. The suggestions so received are evaluatedin a time bound manner for implementation and CMD trophy is awarded to the bestSuggestion.

Your Company is aggressively pursuing many R&D projects in its identified thrustareas with a focus on developing high-impact innovative technologies to help pursue theexisting business in a more optimum and sustainable manner. To improve the pipelinemaintenance practices a R&D project to utilize Satellite imagery for monitoringPipeline RoU was conceptualized. This project involved geo-mapping of the Pipeline routeand finalizing the sequencing of taking Satellite images to meet the requirement ofmonthly monitoring. A change detection software was also developed to identifyencroachments through analysis of sequential images. A "Bhuvan-GAIL Portal" waslaunched for monitoring the RoU of 610 Km stretch of Dahej-Vijaipur pipeline through thistechnology Success of this pilot Project shall enable scaling-up of this technology tocover the entire Pipeline network besides developing additional functionalities to monitoractivities like Project execution of new Pipeline projects.

Your Company had successfully demonstrated the capture of Land Fill Gas (LFG) site inan open and active landfill site at Ghazipur in Delhi. A part of this low-quality LFG isnow being partially upgraded and utilized to generate Power through a 30 KW Micro Turbine.This Project demonstrates our commitment towards sustainable utilization of waste energyand climate risk mitigation through reduction of carbon footprint.

The Wireless Sensor Network (WSN) technology is known for its resilience and is morereliable than conventional wired networks. Wireless Sensors were developed for continuousmonitoring of Pipeline parametres and are presently being pilot tested for transmittingand logging data of few customers at Bhiwadi terminal. Various new applications of polymergrades such as anti-microbial sutures for healthcare applications; Nanoclay basedadditives to enhance polymer properties etc. are also being developed.

The other important area for Research is hydrogen which is an ultraclean fuel. A Novelcarbon nano-composite material was developed that could store up to 6.7 wt% of hydrogenexceeding the 6% target set by Department of Energy (DoE) USA. Further evaluation isunderway to utilize this material in a compact storage device to provide Hydrogen to aPolymer Electrolyte Membrane (PEM) Fuel Cell.

Your Company has a judicious mix of various Basic/Applied/Pilot projects encompassingthe Natural Gas value chain in its R&D portfolio. In addition few projects are alsobeing pursued in upcoming areas like Solar Fuel Cells Gas Hydrates etc. These R&Dprojects are being pursued in association with reputed research organizations /institutes. Few Developmental Projects to improve efficiency and safety of existingoperations and to conserve the resources by utilizing better technologies are also beingimplemented at process plants.

TOTAL QUALITY MANAGEMENT

Your Company endeavors for continual and sustainable improvement through implementationof quality practices innovation and standardization. Your Company continues to implementvarious Quality Circle projects through engagement of Company employees resulting intoinnovation in work places and leading to enhancement in productivity. Your Company hasachieved a Customer Satisfaction level of 90% and committed to improve it. Your Companyworks for the satisfaction of customers and stakeholders. Your Company has implementedIntegrated Management System and Energy Management System in various pipeline system andprocess units. Your Company is committed to sustainable development.

PROCUREMENT FROM MICRO AND SMALL ENTERPRISES (MSEs)

The Government of India has notified a Public Procurement Policy for MSEs Order 2012.In terms of said policy out of the total eligible value of annual procurement of approx.'2016 Crores towards goods produced and services rendered by MSEs (including MSEs ownedby SC/ST Entrepreneur) during the FY 2015-16 the value of total procurement made fromMSEs is '435.34 Crores which is approx. 21.59%. of '2016 Crores

MOU PERFORMANCE

A Memorandum of Understanding (MoU) is signed every year between your Company and itsadministrative ministry i.e. MoP&NG through which performance targets for the yearare set. MoU for the year 2015-16 was signed between Chairman & Managing Director andSecretary (P&NG) Government of India on 31st March 2015.

The thrust while fixing MoU targets was more towards improving performance on criticalaspects of the Company which include Key Financial parameters Gas Marketing GasTransmission Project Implementation Capital Expenditure Liquid Hydrocarbon &Polymer Production etc. Significant thrust has also been given on Research &Development Projects and Operating Efficiency parameters.

Your Company has been consistently achieving 'Excellent' MoU rating since the inceptionof MoU system i.e. from 1989-90 to 2013-14. However because of unprecedented fall incrude oil prices from $ 140 / barrel to ~ $ 30 - 40 in 2014-15 leading to fall in LHC& Polymer prices negative price differentials between Spot and long term contractedR-LNG prices etc. there were gaps between MoU targets and actual performance of yourCompany in FY 2014-15. As a result your Company achieved 'Very Good' MoU rating for theyear 2014-15.

Evaluation of MoU 2015-16 is under progress and the final evaluated MoU score andrating is expected to be announced in December 2016.

LAURELS

• Corporate

• Emerged as the highest ranking PSU in Carbon Disclosure Leadership Indexsecuring 98 out of maximum 100 an increase of 12 points in one year.

• Released its fifth Sustainability Report becoming the first PSU to avail ContentIndex certification by GRI Amsterdam.

• Dun & Bradstreet Award 2015 in the category Gas - Processing Transmissionand Marketing.

• Achieved the 5th rank in the Platts Top 250 Companies in the Asia-

Pacific in the Gas Utilities category

• "Environmental Sustainability - Company of the year" for 2015. Thespecial commendation award has been conferred to GAIL for special efforts towardsEnvironmental Sustainability and Climate Change.

• Health Safety & Environment (HSE)

With its mss its installations your Company

has won following awards during the year 2015-16:

• OISD awards for Cross Country Pipeline-LPG & Gas Pipeline: GAIL- HVJPipeline and Most Consistent Safety Performer-gas processing Plant: GAIL GPU Gandhar

• Maharashtra region Pipeline system Mumbai received "Safety InnovationAward 2015" from the institution of Engineers India New Delhi.

• NCR received British Safety Council International Safety award U.K -2016.

• GPU Gandhar plant won Gujarat State Safety award 2014 from the Gujarat SafetyCouncil of India

• GPU Gandhar plant won "Suraksha Puraskar" (Bronze Trophy)-2015 fromNational Safety Council of India.

• GPU Usar received "Certificate of Appreciation" for National SafetyAwards

• GAIL Vaghodia received "Golden Peacock Occupational Health & SafetyAward 2015 by the Institute of Directors New Delhi.

• GPU Gandhar received British Safety Council International Safety award U.K .

• HVJ Compressor Station Vijaipur (M.P) awarded prestigious "SURAKSHAPURASKAR" by National Safety Council under Group A in manufacturing sector.

RIGHT TO INFORMATION (RTI)

In order to promote transparency and accountability an appropriate mechanism has beenset up across the Company in line with the Right to Information Act 2005. Your Companyhas nominated ACPIOs/CPIO/ Appellate Authorities at its units/offices across the countryto provide information to citizens under the provisions of RTI Act.

MANAGEMENT DISCUSSION AND ANALYSIS

In terms of the Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the detailed Management's Discussion and Analysis forms a part of thisreport at Annexure- A.

CORPORATE GOVERNANCE

Your Company believes that good corporate governance is critical in establishing apositive organizational culture. It is evident by responsibility accountabilityconsistency fairness and transparency towards our stakeholders. Pursuant to the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 and DPE guidelines onCorporate Governance a report on Corporate Governance forms part of this Report at Annexure-B.

The details of the meetings of the Board Company's policy on Directors' appointmentand their remuneration details of establishment of whistle blower mechanism and othermatters etc. forms part of report on Corporate Governance.

There are no significant and material orders passed by the regulators or Courts ortribunals impacting the going concern status and Company's operations in future.

The statutory auditors of the Company have examined and certified your Company'scompliance with respect to conditions enumerated in SEBI (LODR) Regulations 2015 and DPEguidelines on Corporate Governance. The certificate forms a part of this Report at Annexure-C.

AUDITORS

• Statutory Auditors

The statutory auditor of your Company is appointed by Comptroller & Auditor Generalof India (CAG). M/s G.S. Mathur & Co. Chartered Accountants New Delhi and M/s O PBagla & Co. Chartered Accountants New Delhi were appointed as Joint StatutoryAuditors of your Company for the FY 2015-16.

Review and Comments of CAG if any on the Company's Financial Statements for thefinancial year ending 31st March 2016 forms part of Financial Statement. Noteson Financial Statement referred to in the Auditors' Report are self-explanatory andtherefore do not call for any further comment.

• Cost Auditors

Your Company has appointed M/s Ramanath Iyer & Co. New Delhi for Northern Region M/s Bandyopadhyaya Bhaumik & Co. Kolkata for Northern and Eastern Region M/s A CDutta & Co. Kolkata for Southern Region M/s Musib & Company Mumbai for WesternRegion Part-I M/s N.D Birla & Co. Ahmedabad for Western Region Part-II M/s SanjayGupta & Associates New Delhi for Central Region as cost auditors for FY 2015-16. M/sRamanath Iyer & Co. is the lead cost auditor.

Cost audit reports for the financial year ended 31st March 2015 was filedto Registrar of Companies on 14th October 2015.

• Internal Auditor

Your Company has an in-house Internal Audit Department which is headed by ExecutiveDirector.

• Secretarial Auditor

Your Company has appointed M/s Agarwal S. & Associates as secretarial auditors for2015-16. Secretarial Audit Report confirming compliance by Practicing Company Secretary tothe applicable provisions of the Companies Act 2013 SEBI (LODR) Regulations 2015 andother applicable laws forms part of this Report at Annexure- D.

The observations made by Secretarial Auditor in his Audit report are as under:

(a) Proviso to Section 149(1) read with Rule 3 of the Companies (Appointment andQualification of Directors) Rules 2014 w.r.t. appointment of at least one woman Directoron the Board of the Company.

(b) Regulation 17 (1) of Securities Exchange Board of India (Listing Obligation &Disclosure Requirements) Regulations 2015 (erstwhile Clause 49 (II) (A) & (B) of theListing Agreement) and Clause 3.1.4 of the DPE Guidelines on Corporate Governance forCentral Public Sector Enterprises w.r.t. composition of the Board of Directors of theCompany

(c.) Non-compliance of Section 149(8) read with Schedule IV (VIII) of Companies Act2013 and Regulation 17 (10) & 25 (4) of SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 the Company has not been carried out the performanceevaluation of the directors.

Explanations on observations made by Secretarial Auditor in seriatim are as under:

(a) As on 31st March 2016 there was no woman Director on the Board of theCompany However during the year there was a Woman Director on the Board of the Companyfrom 21st May 2015 to 2nd January 2016.

(b) As on 31st March 2016 your Company's Board comprised of four whole-timeDirectors including CMD two Government nominee Directors and three Independent Directors.

Your Company is a Government Company under the administrative control of the Ministryof Petroleum and Natural Gas Government of India the Directors are nominated/appointedby the Government of India. The Company is continuously pursuing with the Government ofIndia for the appointment of requisite number of Independent Directors on their Board inorder to comply with the provisions

of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 DPEGuidelines & the Companies Act 2013.

(c) Your Company is a Government Company appointment/ nomination of all the Directorsis being done by the President of India through the MoP&NG and performance evaluationof individual Directors including Independent Directors is to be done by Government ofIndia being appointing authority.

CORPORATE SOCIAL RESPONSIBILITY

Your Company believes that Corporate Social Responsibility (CSR) plays a major role inthe development of any country. Therefore it has made CSR an integral part of its ethosand culture. To amplify our outreach efforts GAIL has incurred an expenditure of 2.3% ofthe average net profit of the preceding three years on CSR projects/activities of 2015-16(I18.64 crores) against the stipulated 2% spend ('102.34 crores). The overall spends('160.56 crores) amount to 3.14% of the average net profit of the preceding threefinancial years.

Annual Report on CSR activities as required under Rule 8 of the Companies (CorporateSocial Responsibility Policy) Rules 2014 read with section 134(3) and 135(2) of theCompanies Act 2013 is placed at Annexure E.

ENERGY CONSERVATION TECHNOLOGY ABSORPTION

As per requirement of 134 (3)(m) of the Companies Act 2013 read with Ru le 8(2) of theCompanies (Accounts) Rules 2014 details of conservation of energy and technologyabsorption forms part of this report at Annexure- F.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

As per requirement of 134 (3) (h) of the Companies Act 2013 read with Rule 8(2) of theCompanies (Accounts) Rules 2014 particulars of contracts or arrangements with relatedparties as referred in section 188(1) of the Companies Act 2013 in the prescribed formAOC-2 is placed at Annexure-G.

Your Company has formulated the policy on dealing with Related Party Transactions andthe same is hosted on your Company's website at http:// www.gailonline.com/final_site/pdf/GAIL_Related_Party_Transaction_Policy

PARTICULARS OF EMPLOYEES

As per the provisions of section 197(12) of the Companies Act 2013 read with the Rule5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014every listed Company is required to disclose the ratio of the remuneration of eachdirector to the median employee's remuneration etc. in the Directors' Report.

However as per notification dated 5th June 2015 issued by the Ministry ofCorporate Affairs Government of India Government Companies are exempted from complyingwith provisions of section 197 of the

Companies Act 2013. Your Company is a Government Company therefore such particularshave not been included as part of Directors' Report.

EXTRACT OF ANNUAL RETURN

Extract of Annual Return forms part of this Report at Annexure-H.

ISSUE OF SHARES AND FIXED DEPOSITS

Your Company has neither issued any shares nor accepted any fixed deposits during thefinancial year 2015-16 and as such no amount of principal or interest was outstanding asof the balance sheet date.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year foreign exchange earnings were '866.54 crores and foreign currencyoutgo was '2558.71 crores.

KEY MANAGERIAL PERSONNEL AND DIRECTORS

During the period the following ceased to be Key Managerial Personnel (KMP) on theBoard of your Company:

• Shri Prabhat Singh Director (Marketing) resigned w.e.f. 14th September 2015

• Shri N.K. Nagpal Company Secretary w.e.f. 26th May 2016

Shri A.K. Jha has been appointed as Company Secretary of the Company w.e.f. 26thMay 2016.

During the period the following ceased to be Directors on the Board of your Company:

• Smt. Anuradha Sharma Chagti Government Nominee Director w.e.f. 2nd January2016

The following were appointed on the Board of your Company as Director:

• Shri S.K. Srivastava Independent Director w.e.f. 20th November 2015

• Shri D.J. Pandian Independent Director w.e.f. 20th November 2015 and resignedfrom the Company w.e.f. 31st March 2016

• Shri Anupam Kulshreshtha Independent Director w.e.f. 28th November 2015 (fromthe date of obtaining DIN)

• Shri Sanjay Tandon Independent Director w.e.f. 20th November 2015

• Shri Anant Kumar Singh Government Nominee Director w.e.f. 2nd January 2016

The Board placed on record its deep appreciation for the valuable services rendered byoutgoing Directors/KMP during their association with your Company

CODE OF CONDUCT

Pursuant to the requirements of SEBI (LODR) Regulations 2015 the Board Members andSenior Management Personnel have affirmed compliance with the Code of Conduct for thefinancial year ending 31st March 2016.

PERFORMANCE EVALUATION

As per the provisions of section 134(3)(p) of the Companies Act 2013 for every listedCompany a statement indicating the manner in which formal annual evaluation has been madeby the Board of its own performance and that of its committees and individual directorsshould form part of the Directors' Report.

However as per notification dated 5th June 2015 issued by the Ministry ofCorporate Affairs Government of India Government Companies are exempted from complyingwith provisions of section 134(3)(p) of the Companies Act 2013. Your Company is aGovernment Company and the appointment tenure performance evaluation etc. of Directorsis done by Government of India therefore such particulars have not been included as partof Directors' Report. Remuneration of CMD Whole-time Directors and its employees isdetermined by Government of India. As per requirement of SEBI (LODR) Regulations 2015 anevaluation criterion for the Board is being formulated.

DIRECTORS RESPONSIBILITY STATEMENT

Yours Directors confirm that:

i) In the preparation of the annual accounts for the financial year ending 31stMarch 2016 the applicable accounting standards have been followed alongwith properexplanation relating to material departures;

ii) selected such accounting policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent to give a true and fair view of the state ofaffairs of the Company at the end of the financial year and of the profit of the Companyfor the year under review;

iii) taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

iv) prepared the annual accounts for the financial year ending 31st March2016 on a going concern basis;

v) had devised proper systems to ensure compliance with the provisions of allapplicable laws and such systems were adequate and operating effectively and

vi) laid down internal financial controls to be followed by the Company and that suchinternal financial controls are adequate and were operating effectively.

ACKNOWLEDGMENT

Your Directors express their gratitude for help guidance and support received from theGovernment of India especially the Ministry of Petroleum and Natural Gas various stategovernments regulatory and statutory authorities.

Your Directors acknowledge wise counsel received from Statutory Auditors and CAG andare grateful for their consistent support and cooperation.

Your Directors also wish to thank all the shareowners business partners and members ofGAIL family for reposing their faith trust and confidence in your Company.

On behalf of your Directors I would like to place on record our deep appreciation forthe hard work dedication commitment and solidarity of your Company's employees.

Your Directors and employees look forward to the future with confidence and standcommitted to creating a bright future for all stakeholders.

For and on behalf of the Board

(B.C. Tripathi)

Chairman & Managing Director

Place: New Delhi

Dated: August 19 2016