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GAIL (India) Ltd.

BSE: 532155 Sector: Others
NSE: GAIL ISIN Code: INE129A01019
BSE LIVE 15:41 | 14 Dec 486.95 -4.55
(-0.93%)
OPEN

491.80

HIGH

497.10

LOW

481.10

NSE 15:57 | 14 Dec 487.10 -4.70
(-0.96%)
OPEN

494.00

HIGH

497.10

LOW

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OPEN 491.80
PREVIOUS CLOSE 491.50
VOLUME 121049
52-Week high 502.55
52-Week low 308.18
P/E 21.58
Mkt Cap.(Rs cr) 82,358
Buy Price 486.95
Buy Qty 7.00
Sell Price 0.00
Sell Qty 0.00
OPEN 491.80
CLOSE 491.50
VOLUME 121049
52-Week high 502.55
52-Week low 308.18
P/E 21.58
Mkt Cap.(Rs cr) 82,358
Buy Price 486.95
Buy Qty 7.00
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 we are delighted to present the33rd Annual Report of your Maharatna Company along with Audited Financial Statements forthe financial year 2016-17.

PARTNER IN INDIA'S GROWTH - NATURAL GAS LEADER

You will be glad to know that your Company GAIL (India) Limited is today countedamongst the top Natural Gas (NG) companies in the world. It marks its presence in theentire gas value chain from exploration processing of gas for value-added products suchas LPG Propane Pentane Naphtha Marketing and Transmission as well as Petrochemicals.

Your Company has an extensive Pipeline network consisting of above 11000 kms of NGpipeline and above 2000 kms of LPG pipeline. Besides it has followed businessopportunities beyond geographical frontiers to establish its presence globally. YourCompany has an office in the USA for shale gas LNG operations trading office in Singaporeand City Gas Distribution (CGD) joint ventures (JVs) in Egypt and China to promote the useof natural gas. Further your Company is also sourcing gas through international SalePurchase Agreement (SPAs).

Your Company's environmental friendly business plays a vital role in the social andeconomic development of the country and makes substantial contribution towards its energysecurity.

Urja Ganga: Government of India (GoI) has entrusted your Company the task toexecute the 2600 km long Jagdishpur Haldia & Bokaro-Dhamra Pipeline project connectingthe eastern states of the country to the National Gas Grid. Five states namely UttarPradesh Bihar Jharkhand Odisha and West Bengal

will benefit from gaining access to natural gas on a ordable and equitable basis. Oncecompleted the project will help to revive fertilizer plants & CGD project activitiesin these states thus giving momentum to their socioeconomic growth. Your Company has alsobeen authorized with the task to develop the CGD infrastructure of seven cities namelyVaranasi Patna Ranchi Bhubaneswar Cuttack Jamshedpur and Kolkata to access to cleanerfuel i.e. natural gas as Piped Natural Gas (PNG) for household purposes and CompressedNatural Gas (CNG) for fuelling vehicles and transforming the quality of life.

FINANCIAL HIGHLIGHTS

Ministry of Corporate Affairs (MCA) vide notification dated 16 February 2015 notifiedthe Companies (Indian Accounting Standards) Rules 2015 laying down the roadmap forapplication of IFRS converged standards IND AS to Indian companies other than bankingcompanies insurance companies and non-banking finance companies (NBFCs). As per thenotification all listed companies having net worth of Rs. 500 crore or more shallmandatorily transit from 1st April 2016.

Your Company is covered under IND AS w.e.f 1st April 2016. In compliance to Companies(Indian Accounting Standards) Rules 2015 your Company has prepared its financialstatements for FY 2016-17 with comparative figures for FY 2015-16. The Company hasadjusted the impact of transition from Indian General Acceptable Accounting Principal toIND AS in the opening reserve of 1st April 2015 and in the Statement of Profit & Lossfor FY 2015-16. Further as per the provision of IND AS the holding subsidiaries jointventures or associate companies of your Company need to also transit towards IND ASw.e.f. 1st April 2016. The important financial highlights for the year 2016-17 are asunder:

2016-17

2015-16*

Particulars US $ Million (Rs. In Crores) US $ Million (Rs. In Crores)
Gross sales 7457 48789 7773 52003
Other income (including other operating income) 194 1271 162 1084
Cost of sales (excluding interest and depreciation including extraordinary items) 6491 42474 7162 47915
Net Exceptional Items (Profit on Sale of Investments & Impairment of Assets) (46) (299) - -
Gross margin 1114 7287 773 5172
Finance Cost 73 479 120 800
Depreciation 213 1397 196 1310
Profit Before Tax (PBT) 827 5411 457 3062
Provision for tax 292 1908 125 836
Profit After Tax (PAT) 535 3503 333 2226
Appropriations - -
Final Dividend 58 381 57 381
Interim Dividend 165 1078 47 317
Corporate Dividend Tax 45 295 21 142
Net transfer to/from Bond Redemption Reserve 15 98 5 35
Transfer to CSR Reserve - - (0) (1)
Transfer to General Reserve 54 350 34 230
Net surplus after Appropriations 199 1301 168 1122
1 US $ in INR converted at the exchange rate as on 31st March of the 65.43 66.9
respective financial year

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

Hon'ble Prime Minister Shri Narendra Modi laid the foundation stone of the City GasDistribution (CGD) project in Varanasi in the presence of Hon'ble Governor Uttar PradeshShri Ram Naik Hon'ble Union Minister of State (Independent Charge) for Petroleum andNatural Gas Shri Dharmendra Pradhan and a host of dignitaries

DISINVESTMENT BY PRESIDENT OF INDIA

The government of India disinvested 15315380 shares on January 01 2017 through CPSEETF-II. After disinvestment the President of India shareholding is 696380452 equityshares representing 54.90% of paid-up share capital of GAIL.

Again GoI disinvested 7855657 shares during March 2017 through CPSE ETF-IIIpost-bonus allotment of shares. After disinvestment the President of India shareholdingas on date is 920651612 equity shares representing 54.43% of paid-up share capital ofGAIL.

DIVIDEND

Your Company has a consistent track-record of dividend payment. So far it hasdisbursed dividend of over Rs. 15120 Crores to its shareholders including Rs. 9120Crores as dividend to the GoI.

The Board of Directors of your Company had earlier approved payment of an interimdividend @ 85% on equity share of Rs. 10 each (Rs. 8.50 per equity share) amounting to Rs.1078 crores on then paid-up equity share capital of the Company (Rs. 1268.48 Crores)which was paid in February 2017. Further the Board has recommended payment of finaldividend @ 27% on equity share of Rs. 10 each (Rs. 2.70 per equity share on expandedequity post issue of Bonus shares i.e. Rs. 1691.30 Crores) for the FY 2016-17 amounting toRs. 457 Crores.

With this the total dividend payment for the fiscal year 2016-17 shall be Rs. 1535Crores on a paid-up equity capital of Rs. 1691.30 Crores which is 43.81% of PAT and equalsto 5% of opening net worth of Rs. 30699 Crores as per the Companies Act 2013 and incompliance of Department of Investment & Public Asset Management (DIPAM) guidelines.In addition to the payment of dividend to the shareholders your Company paid dividenddistribution tax of Rs. 295 Crores.

Capital expenditure to the tune of Rs. 17000 crore (net of capital subsidy) is plannedfor spending by your Company in next 2-3 years mainly on Pipelines (Urja Ganga Pipelineand others) CGDs and other business expansions through JV route etc. Accordingly thecompany requires to plough back from the profits / internal resources to partly fundcapex.

CONTRIBUTION TO EXCHEQUER

Your Company has contributed over Rs. 5909 crores in 2016-17 to the exchequer throughdividend duties taxes and others as compared to Rs. 4929 crores in 2015-16.

CREDIT RATING

Domestic Rating

Your Company has been rea firmed the highest domestic credit rating of AAA from ICRACARE and CRISIL and India Rating. This signi es highest credit rating in India hencecarries lower credit risk of the Company.

International Rating

The International rating agency Moody's International Singapore has also rea firmedthe corporate issuer rating of Baa3 with a positive outlook which is equal to thesovereign rating of India. Further Fitch Ratings has also assigned a long-term foreigncurrency issuer default rating of BBB- with a stable outlook which is also equal to thesovereign rating of India. The international rating agencies Moody's and FITCH have ratedyour Company at par with India's international rating. The agencies have indicated thatyour Company's rating may be upgraded once sovereign rating of India improves.

BUSINESS STRATEGY

Your Company is aligned to the path of growth levers as identified in the masterstrategy envisioned for the decade spanning upto 2020. Although the strategy undergoesperiodic reviews with requisite course corrections GAIL has been progressing in expandingits foot-prints along the natural gas value chain very scrupulously.

National Gas Grid

Your Company has been actively engaged in developing the natural gas pipeline networkand working towards development of a National Gas Grid structure as a backbone forexpanding the infrastructure reach across the country. Government of India is focused toaccelerate the grid development for ushering maturity in the domestic gas market. In thisendeavor your Company is working on multiple pipeline to its network of over 11000 kms.Over 60% of the network addition is expected to be achieved from theJagadishpur-Haldia-Bokaro-Dhamra Pipeline (JHBDPL) at an estimated project cost of Rs.12940 crores. Project work is under progress as per phase-wise schedule. GoI has alreadyapproved 40% capital grant for this project and the first installment of the grant of Rs.450 crore was disbursed during FY 2016-17. Your Company is also working to execute theVijaipur Auraiya Phulpur pipeline (VAPPL) of 672 Km to ensure feed gas supply to JHBDPL.Further Kochi-Koottanad-Mangalore-Bangalore pipeline (KKMBPL) project of 873 Km is alsounder execution. With these projects your Company shall further strengthen its leadershipposition in natural gas transmission segment.

LNG Marketing

Gas consumption of the country for the year 2016-17 was around 139 MMSCMD withcontribution from domestic producers about 68 MMSCMD. For the first time in India's energyconsumption the last fiscal year holds signi cance as natural gas sales from domestic andimported sources was in equal proportion. Your Company had a sales mix of domestic gasand RLNG in 60:40 ratio. GAIL as a leading player of the commodity holds a market share ofabout 60% in India.

Your Company tied-up significant LNG from international sources and 5.8 MMTPA of thevolumes are expected to commence from Calender Year (CY) 2018 from Sabine PassLiquefaction and Dominion Cove Point at USA. Over the last few quarters your Company hasconcluded various deals towards de-risking the portfolio significantly and also executedswap structures to ensure competitive delivery based pricing at Indian terminals. Residualvolumes too are expected to be tied-up based on the encouraging response received from thedomestic and overseas market participants. Your Company's subsidiary GAIL GlobalSingapore Pte. Limited is also pursuing LNG trading activities in international markets.

Your Company executed a non-binding tolling Term Sheet with Dhamra LNG Terminal PrivateLimited (DLTPL) for booking of 1.5 MMTPA regas capacity at the proposed LNG Terminal atDhamra Odisha. Further your Company is also exploring the possibility of taking equityin DLTPL.

Your Company is in the process of tying up charter hiring LNG ships and also working onlogistics optimization models to ensure efficient haulage of LNG from various sourcesespecially USA.

City Gas Distribution

In order to provide clean fuel for domestic vehicular and commercial use and tofacilitate development of smart cities your Company plans to expand its city gasdistribution network. GAIL Gas Limited your Company's whollyflowned subsidiary isimplementing CGD projects in the cities of Kota Dewas Meerut

Sonepat Bengaluru & Taj Trapezium and through its JVs in Haridwar North Goa &Vadodara. Further as a part of the Urja Ganga Project (Jagdishpur Haldia Bokaro Dhamrapipeline Project) your Company shall on itsflown or through its subsidiary also implementCGD in six new cities in eastern India. CGD in Kolkata shall be operated through our JV.Your company through its Subsidiary and JV companies over 63% of the CNG stations and 50%share of the domestic PNG connections.

Petrochemicals

Your Company has a marketing portfolio of polyethylene and polypropylene products over1 Million Tonnes per annum from the unit 810 KTA unit at Pata and 280 KTA plant operatedby the subsidiary Brahmaputra Cracker & Polymer Limited (BCPL). Your Company and itssubsidiary have a combined production share of 25% of the High Density and Liner LowDensity polyethylene market in the country.

Further your company's petrochemical joint venture namely ONGC Petro-Additions atDahej was also commissioned during the year.

Human Resource Development

Your Company realizes the criticality of aligning human resource developmentinitiatives with strategic objectives to achieve organizational goals. Significant stepstowards skill development and capability build-up talent acquisition development andretention strategies are continuously undertaken for being an employer of choice.

BUSINESS PERFORMANCE

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

Natural Gas Marketing

Natural gas trading constitutes 70% of the business turnover and continues to be yourCompany's core business. During FY 2016-17 gas sales clocked 81.21 MMSCMD compared to73.67 MMSCMD in the previous financial year. Domestic gas availability remained stagnantat 48.5 MMSCMD while Long-Term imported volumes witnessed increased consumption vis-a-visthe previous financial year. Consumption of gas by CGD sector at 20 MMSCMD emerged to bethe fastest growing segment.

Transmission

Natural Gas

Your Companyflowns and operates a network of about 11000 kms of natural gas highpressure trunk pipeline with a pan-India capacity to handle volumes of around 206 MMSCMD.The average gas transmission during the year 2016-17 was 100.38 MMSCMD compared to 92.09MMSCMD in the previous financial year. The share of third party transmission was 22.18MMSCMD.

Fertilizer Sector

During FY 2016-17 your Company achieved total sales of Natural Gas (Domestic + RLNG)in the Fertilizer Sector of 25.74 MMSCMD (including 12.09 MMSCMD of Domestic Gas). YourCompany is in discussion with upcoming/ revived fertilizer units for supply of gas and itis expected that agreement for supplying gas shall be firmed up during CY 2017.

Power Sector

During FY 2016-17 your Company achieved total sales of Natural Gas (Domestic + RLNG)in the Power Sector of 23.81 MMSCMD (including 19 MMSCMD of Domestic gas). The PSDF Schemeof Ministry of Power for the gas based power sector continued during FY 16-17 and yourCompany as Pool Operator supplied around 4.0 MMSCMD of incremental RLNG to gas based powerplants which is included in the total sales to the Power Sector. The Scheme discontinuedon 31st March 2017 and your Company continues to explore opportunities for supply ofnatural gas to gas based power generation units at a ordable prices.

LPG

Your Company is unique in India toflown and operate 2038 Kms of exclusive pipelines forLPG transmission for third-party usage across two major networks. Jamnager-Loni and theVizag-Secunderabad pipeline networks achieved a throughput of 3.36 MMTPA during the yearagainst 2.82 MMTPA in the previous fiscal year.

Petrochemicals

The overall production of polymers in 2016-17 was 6.04 lakh MT while your Companymarketed 5.77 lakh MT during this period. The total polymers marketed including polymerproduced by your Company's subsidiary Brahmaputra Cracker & Polymer Limited (BCPL)stood at 6.65 lakh MT which represents almost a 100% increase over FY 2015-16.

LPG and Other Liquid Hydrocarbon Production

Your Company has LPG plants at five locations in the country having a productioncapacity of 1.3 million MT. In 2016-17 total liquid hydrocarbon production was about 1.11Million MT of which over 80% constitutes LPG and Propane.

Exploration and Production (E&P)

As a result of continued portfolio optimization your Company now has participatinginterest in 12 E&P blocks of which 10 blocks are in India and the remaining two blocksin Myanmar. Out of these your Company is Operator in one onland block namelyCB-ONN-2010/11 in Cambay basin awarded during the NELP-IX bidding round. Drillingactivities continued in four (out of ve) blocks.

Hydrocarbon discoveries have been notified to the government in two blocks namelyGK-OSN-2010/1 and CB-ONN-2010/8. Survey activities are in progress in the remainingNELP-IX block AA-ONN-2010/2.

The E&P business has continued to be revenue self-sustainable for the thirdconsecutive year due to earnings from four blocks (two blocks each in Myanmar and Cambaybasin). Your company earned revenues to the tune of Rs. 615.28 crores from these blocksduring the year.

The implementation of the City Gas Distribution project in Bhubaneswar and Cuttack waslaunched by Hon'ble Minister of State (Independent Charge) for Petroleum & Natural GasShri Dharmendra Pradhan (centre) in the presence of Hon'ble Member of Parliament(Bhubaneswar) Dr. Prasanna Kumar Patasani (3rd from left) Hon'ble Member of Parliament(Cuttack) Shri Bhartruhari Mahtab (3rd from right) and other dignitaries

INITIATIVES FOR FUTURE GROWTH

Petrochemicals

In order to establish your Company as a significant petrochemical player especially inAsia focus was given to develop export capability. GAIL exported 14000 MT of polymers asa step in this direction. Your Company targets to continue exports based on opportunitiesin the region.

Your Company along with Hindustan Petroleum Corporation Limited (HPCL) is carrying outvarious studies for setting up a Greenfield Naphtha/ Ethane-based petrochemical complex inAndhra Pradesh.

LNG Regasification Terminals

Your Company is evaluating various opportunities for setting-up/booking LNGRegasification capacity in the country. It has signed a non-binding Tolling Term Sheetwith Dhamra LNG Terminal Private Limited (DLTPL) for booking of 1.5 MMTPA capacity in theproposed Dhamra LNG Terminal. This is over and above the capacity already booked at Dabholand Dahej of 6.5 MMTPA.

LNG Shipping

Currently your Company is in the process of charter hiring of ocean carriers forevacuating FOB contracted LNG volumes from east coast of USA. Company has engaged theservices of Shipping Corporation of India in this regard. Number of ships for hire shallbe fixed based on the residual volume to be brought directly to India from USA afterconsidering international sales and swap transactions.

Natural Gas Pipeline Projects

During the financial year your Company completed 14 pipeline projects including Lastmile connectivity of approximately 437 kms to harness the commercial utilization ofvarious pipeline networks in the states of Karnataka Gujarat Goa Haryana RajasthanMaharashtra and Punjab. The pipeline revamp projects in KG and Cauvery Basin are completedover 90% and over 80% in Gujarat and are targeted for completion during the current year.

Non-Conventional Energy

Your Company is committed to reduce the carbon emission and implement renewable energyprojects. Your Company has a total installed capacity of 118 MW of Wind Energy GenerationProjects (WEG) and has recorded 43% growth in the revenue from wind energy.

As part of its commitment towards sustainable development your Company is alsoinstalling a 5.76 MW grid connected roof top solar power plant at its petrochemicalcomplex at Pata U.P. The power generated shall be consumed within the petrochemicalcomplex and substitute the power drawn from the grid to generate significant costreduction and also carbon footprint of GAIL.

Coal Gasification

Your Company is also entering into coal gasification by setting up surface coalgasification based urea project at Talcher. The project with an estimated cost of Rs.8000 crores is envisaged for the production of 2200 MTPD ammonia and 3850 MTPD urea. Ajoint venture company Talcher Fertilizers Limited was formed with consortium partnersnamely GAIL Coal India Limited (CIL) Rashtriya Chemicals and Fertilizers (RCF) andFertilizer Corporation of India Limited (FCIL). Pre-project activities are on full swingwith M/s Shell being selected the Licensor. Approvals from CCEA /GoI are targeted to becompleted to lay foundation for starting the project activities during the current fiscalyear.

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 to its business expansion activities. A statement containing the salientfeature of the financial statements of your Company's Subsidiaries Associate Companiesand Joint Ventures as per first proviso of section 129(3) of the Companies Act 2013including details of individual contribution of all subsidiaries associates and jointventure companies towards the overall performance of the Company during the period isgiven under Consolidated Financial Statements.

The details of subsidiaries/ associates/ joint venture companies operations areprovided as:

NATURAL GAS LNG AND POWER

GAIL Global (Singapore) Pte. Limited (whollyflowned 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 2017 GGSPL has traded 54 LNG cargoes so far outof which 23 were traded during the financial year 2016-17. The turnover for 2016-17 wasUSD 494 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. It is making its best e orts tomarket such volumes in the international market. The supplies against the said volumes areexpected to start from the year 2018.

GAIL Global (USA) Inc (whollyflowned subsidiary)

GAIL Global (USA) Inc.(GGUI) was incorporated as a whollyflowned subsidiary of GAIL toundertake investment in the Eagle Ford shale gas asset with the objective to enter intothe US shale gas market and bring shale gas technology to India. GGUI executed adefinitive agreement with M/s Carrizo Oil & Gas Inc. USA (Carrizo) on September2011 to enter into an unincorporated JV in the Eagle Ford Shale asset in Texas. Thesubsidiary acquired a 20% participating interest in this JV. Carrizo with the remaining80% participating interest functions as the operator of the JV.

During the year seven wells came online taking the total number of online wells to106 as on December 31 2016. The gross production volume of GGUI during calendar year 2016was 669 million barrel of oil equivalent (Mboe).

GAIL Global (USA) LNG LLC (whollyflowned 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 forliquefaction at the terminal. The construction activities at the terminal are on track andit is expected to be in service by December 2017.

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 re-gasification facilities in India. Itcurrentlyflowns and operates a 15 MMTPA capacity LNG re-gasification terminal at DahejGujarat. The capacity is being expanded to 17.50 MMTPA. PLL has also setup an LNGre-gasification terminal at Kochi Kerala with a name plate 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 taking over and operating theerstwhile Dabhol Power Project assets consisting of 1967.08 MW gas based combined cyclePower Block and 5 MMTPA LNG Block. The assets were transferred to RGPPL in October 2005.

Your Company currently has 25.51% equity stake in RGPPL along with NTPC holding 25.51%MSEB Holding Company Limited holding 13.51% and Indian Financial institutions holding35.47%.

The power block was revived and has been under commercial operation since May 19 2009.However it could not be operated in FY 2014-15 due to the non-availability of domesticgas.

With support of the GoI for stressed power plant under the Power System DevelopmentFund (PSDF) scheme RGPPL commenced power generation on November 26 2015 for supply tothe railways in the states of Maharashtra Gujarat Jharkhand and Madhya Pradesh to thetune of 500 MW. The PSDF scheme was available till March 31 2017 only. During thefinancial Year 2016-17 a total of 4426 BUs were supplied to the Indian Railways using857.4 MMSCM of natural gas. Total revenue earned from sale of energy in FY 16-17 was Rs.2105.67 Crores.

RGPPL signed a 5-year Power Purchase Agreement with railways for 500 MW and Gas SalesAgreement with GAIL for 5 years w.e.f April 01 2017. As a result the power plant ispresently running and generating approximately 470 MW of power which is being supplied tothe railways.

The LNG Terminal commercial operations commenced in May 2013. RGPPL entered into aframework agreement with GAIL as Commercial Operator for 25 years on tolling basis. Atotal of sixty three cargos have been successfully unloaded since it's commissioning withfteen being unloaded during FY 2016-17. The total revenue earned from the plant by LNGTerminal during st

2016-17 was Rs. 266.69 Crores and from commissioning till 31 March 2017 is about Rs.1007 crores. However the terminal is still operating at partial capacity (about 1.5 MMTPAas against 5 MMTPA) due to the absence of breakwater facilities. The breakwaterconstruction process has been initiated and the terminal is expected to become fullyoperational during 2019-20.

The process of the demerger of the power and LNG blocks is also under progress underthe revised RBI norms and to enable availability of funds for the construction ofbreakwater to achieve the full potential of the LNG terminal.

CITY GAS DISTRIBUTION (CGD)

GAIL Gas Limited (whollyflowned subsidiary)

GAIL Gas was incorporated in the year 2008 GAIL Gas has achieved a phenomenal growth of82 % in volume on year on year basis. The Company achieved gas sales volume of 1356 MMSCMduring FY 2016-17.

The Profit Before Tax (PBT) of the Company has increased by Rs. 39 crores over theprevious year while the sales revenue increased by Rs. 1248 crores. The additionalcustomer base of industrial commercial and transport sectors have been expanded withrigorous marketing e orts. Company has entered into agreements with OMCs for setting upretail outlets of CNG to expand the reach and cater to the increasing demand andavailability of CNG. GAIL Gas has set up additional 10 CNG stations at Sonepat MeerutDewas & TTZ Geographical Areas in FY 2016-17 which will create enhanced availabilityof Green Fuel. The company has taken various marketing initiatives to reach out toprospective consumers for Domestic PNG Connections.

The Bengaluru City Gas Distribution Project was inaugurated by Hon'ble Minister forParliamentary Affairs and Chemicals & Fertilizers Shri Ananth Kumar (3rd from left) inthe presence of Hon'ble Minister for Statistics & Programme Implementation Shri D VSadananda Gowda (4th from left) Hon'ble Minister of State (Independent Charge) forPetroleum & Natural Gas Shri Dharmendra Pradhan (2nd from left) and other dignitaries

Company has also strengthened its various interfaces with Customers through developmentof digital platforms i.e (1) Online Registration for Domestic Customers (2) Online PaymentGateway (3) Mobile Application (4) Online Feedback submission (5) Online Industrial PNGRequest System etc. The CNG sales of GAIL Gas has grown 30 % on year on year basis.

In Bengaluru GA GAIL Gas has laid 42 KM of steel Pipeline and 245 KM of MDPE Pipelinenetwork. 19370 Domestic customers have been connected during the year. Company alsocommissioned 03 CNG station in Bengaluru and commercial operations has started at 01 CNGstation. Further 10 CNG stations are planned in FY 2017-18.

Aavantika Gas Limited (AGL)

AGL was incorporated to implement CGD projects in Madhya Pradesh. As on March 31 2017AGL operated 22 CNG stations including 9 daughter stations 9 online stations and 4 motherstations in Indore GA (including Ujjain) and Gwalior GA. Further as on March 31 2017AGL supplied PNG to around 12658 Domestic 58 commercial & 75 industrial customers inits authorized geographical regions. AGL is also catering to the fuel requirement ofaround 22190 CNG vehicles operating in the region. GAIL has 49.97% stake along with HPCLas an equal partner.

Bhagyanagar Gas Limited (BGL)

BGL was incorporated to implement CGD projects in the united Andhra Pradesh. As onMarch 31 2017 BGL operated 41 CNG stations including 33 daughter stations 5 onlinestations and 3 mother stations.

Further as on March 31 2017 BGL supplied PNG to 6608 households 59 commercial &5 industrial customers in its authorized geographical regions. BGL is also catering to thefuel requirement of around 39246 CNG vehicles operating in the region. GAIL has 49.97%stake along with HPCL as an equal partner.

Central UP Gas Limited(CUGL)

CUGL was incorporated to implement CGD projects in Uttar Pradesh. As on March 31 2017CUGL is operated 18 CNG stations including 3 daughter stations 11 online stations and 4mother stations.

Further as on March 31 2017 CUGL supplied PNG to 19333 domestic 177 commercial& 51 industrial customers in its authorized geographical regions. CUGL is alsocatering to the fuel requirement of around 56599 CNG vehicles operating in the region.GAIL 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 March 31 2017GGL operated 19 CNG stations including 7 daughter stations 6 online stations & 6mother stations.

Further as on March 31 2017 GGL supplied PNG to around 16200 domestic 23 commercial& 8 industrial customers in its authorized geographical regions. GGL is alsocatering to the fuel requirement of around 41318 CNG vehicles operating in the region.GAIL has 49.97% stake along with IOCL as an equal partner.

Indraprastha Gas Limited (IGL)

IGL was incorporated to implement CGD projects in Delhi's the National CapitalTerritory (NCT) and cities in adjoining National Capital Region (NCR). As on March 312017 IGL operated 421 CNG Stations including 45 daughter stations 306 online stations& 70 mother stations.

Further as on March 31 2017 IGL supplied PNG to 742206 domestic 1816 commercial& 932 industrial customers in its authorized geographical region. IGL is also cateringto fuel requirement of 892319 CNG vehicles operating in the region. GAIL has 22.5% stakealong with BPCL as an equal partner.

Mahanagar Gas Limited (MGL)

MGL was incorporated to implement CGD projects in Mumbai & adjoining areas. As onMarch 31 2017 MGL operated 203 CNG stations including 32 daughter stations 151 onlinestations & 20 mother stations.

Further as on March 31 2017 MGL supplied PNG to 948892 domestic 3220 commercial& 62 industrial customers in its authorized geographical region. MGL is also cateringto the fuel requirement of 545505 CNG vehicles operating in the region.

Your Company accorded approval to Mahanagar Gas Ltd.(MGL) to issue fully paid upunsecured Compulsory Convertible Debentures(CCDs) at par to the Government of Maharashtra(GoM) due to which equity holding of GoM increased to 10% of the total paid-up equitycapital. Further your Company also accorded approval to o -load the equity shares held byit and BG Asia Paci c Holdings Pte. Limited (BGAPH) each upto 12.5% of MGL equity throughthe Initial Public O ering (IPO). MGL equity shares were listed on NSE and BSE. YourCompany's equity holding in MGL post-IPO is 32.5% along with BGAPH as an equal partner.

Maharashtra Natural Gas Limited (MNGL)

MNGL was incorporated to implement CGD projects in and around Pune. As on March 312017 MNGL operated 42 CNG Stations including 17 daughter stations 20 online stations& 5 mother stations.

Further as on March 31 2017 MNGL supplied PNG to 50851 domestic 169 commercialand 129 industrial consumers in its authorized geographical region. MNGL is also cateringto the fuel requirement of 140378 CNG vehicles operating in the region. GAIL 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 2017TNGCL operated 6 CNG stations including 3 daughter stations and 3 mother stations.

Further as on March 31 2017 TNGCL supplied PNG to 28669 Domestic 354 commercial& 50 industrial customers in its (A Join Venture of of GAIL (India) Ltd. Govt. ofTripura and Govt. of Assam) authorized geographical region. TNGCL is also catering to thefuel requirement of 9103 CNG vehicles operating in the region. GAIL has 48.98% stake inTNGCL.

Vadodara Gas Limited (VGL)

Your Company holds 32.93% stake in VGL in lieu of transfer of CNG stations andassociated pipeline laid in the city for connecting CNG station at market value on SlumpSale basis against the issue of shares at par along with GAIL Gas Ltd. and VMSS holding17.07% and 50% stake respectively. VGL operates 9 CNG stations in Vadodara withcompression capacity more than 98550 kg/day.

VGL also caters to the Piped Natural Gas (PNG) requirements of its consumers indomestic and commercial sectors. It supplies PNG to 84432 houses and 2456 commercialsectors in the city through a 940 km long PE pipeline distribution grid and 3 districtpressure regulating system. It is also developing a new MDPE network in and around thecity of Vadodara to cater to the PNG requirements of the domestic and commercial sectors.

PETROCHEMICALS

Brahmaputra Cracker and Polymer Limited (BCPL)

BCPL was incorporated in the year 2007. Your Company has 70% equity stake inBrahmaputra Cracker and Polymer Limited (BCPL) with Oil India Limited (OIL) NumaligarhRe nery Limited (NRL) and the Government of Assam each having 10% equity share. BCPL hasset up 2 80000 TPA polymer plant in Assam.

During the FY-2016-17 99540 MT polymer and 14129 MT liquid hydrocarbons have beenproduced. The polymers produced by BCPL are marketed by GAIL under Marketing Agreement.

ONGC Petro-additions Limited (OPaL)

ONGC Petro-additions Limited (OPaL) a joint venture company promoted by GAIL ONGC andGSPC has commissioned a green field petrochemical project at Dahej Gujarat with acapacity to produce 1.4 MMTPA of polymers (Polyethylene-PE and Polypropylene-PP) as thefinal products. Hon'ble Prime Minister Shri Narendra Modi dedicated the plant in serviceto the nation on March 07 2017. Your Company has made an investment of Rs. 994.945 Croresin OPaL.

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. Gas SalePurchase Agreement (GSPA) to import 38 MMSCMD gas into the country has already beensigned. TPCL was incorporated in 'Isle of Man' to buildflown and operate the proposedTAPI pipeline. It has engaged a consultant for providing Project Management and FEEDConsultancy Services for the Afghanistan Pakistan section of the pipeline. Your Companyholds 5% equity in TPCL. The Shareholder's Agreement and Investment Agreement have alsobeen signed. The project execution is subject tofficertain condition precedents.

South-East Asia Gas Pipeline Company Limited (SEAGP)

SEAGP was formed in the year 2010 to transport natural gas from A1/A3 blocks in Myanmarto the Myanmar-China border. During 2016-17 this pipeline transported an average of 14MMSCMD of natural gas. Your Company has a 4.17% equity stake in SEAGP.

Talcher Fertilizers Limited

A consortium comprising of your Company CIL RCF and FCIL was formed in 2015 to revivethe FCIL Talcher fertilizer unit in the Angul district of Odisha. The MoU was signed bythe consortium partners on September 05 2013. Subsequently the joint venture companyRashtriya Coal Gas Fertilizers Limited was incorporated on November 13 2015. The companywas renamed as “Talcher Fertilizers Limited” in May 31 2016. Your Company holds29.67% in this JVC. In principle approval of allocation of North Arkhapal Coal Mine (50%)has been received.

PARTICULARS OF LOANS INVESTMENTS AND CORPORATE GUARANTEES

Details of investments loans and guarantees covered under Section 186 of the CompaniesAct 2013 forms part of financial statements as a separate section in the Annual ReportFY 2016-17.

IT ADVANCEMENTS & FUNCTIONAL EXCELLENCE

Your Company has started 'Digital GAIL' initiative with a vision to leverage thebenefits of state-of-the-art Analytics Mobility and Collaboration Platforms to support dierent business functions of GAIL including Plant Operations & Maintenance byintegrating IT Systems with Plant & Pipeline Systems.

To align Your Company's ERP system for Regulatory and Statutory Compliance successfulmigration to the latest tax procedure was done as a pre-requisite for Goods and ServicesTax (GST) readiness.

Your company has successfully implemented GST at all locations from 1st July 2017. Theother business segments of the company such as Gas Transmission Petrochemical andLPG/LHC etc. are covered under GST. Your company has organised GST awareness workshops atdi erent work centres for vendors & customers with a view to spread awareness amongthe stakeholders for GST.

Your Company has implemented next generation uni ed communications & collaborationplatform with audio-video capability for enhanced employee collaboration.

After successful implementation of latest ISO 27001 Information Security ManagementSystem framework a Security Operations Centre (SOC) was established along with AdvancedPersistent Threat mitigation system to alleviate new types of cyber-security risks. YourCompany has also implemented state-of-the-art Private Cloud infrastructure and initiatedseveral new projects for improving network connectivity and information security.

A Project Monitoring System has been developed in your Company to digitize monitoringand control of the pipeline projects. This system will help the management to have betterinsight into the projects on a real-time basis through charts and reports and willfacilitate decision making and early resolution of issues.

Your Company is in the process of implementing the SAP Treasury and Risk management(TRM) module which will help in mapping various treasury functions that are being operatedcentrally from Corporate Office. Apart from the above the TRM will also include theimplementation and management of provident fund & pension related investments.

In line with the 'Digi-Dhan' campaign of the Government of India Your Company hastaken an initiative to bring awareness on digital payments and cashless transactions amongthe employees contract workers etc. at various GAIL locations.

Pipeline Intrusion Detection System (PIDS):

In order to ensure real time surveillance of pipelines GAIL has installed PipelineIntrusion Detection System (PIDS) on trial basis at Piyala to Loni 72 km. section andabout 175 kms along Vizag to Secunderabad LPG pipeline netwroks. The detection systemworks on Distributed Acoustic sensing Technology utilizing the optical ber cable (OFC)along the pipeline. Various events like manual excavation using hand tools machineexcavation vehicle movements agricultural activities valve operation detection berbreak scrapper pig location etc. are identified automatically and alarm generatedaccordingly on the operators HMI graphics screen.

Integrated Security Command and Control Center:

To enhance the safety and security of GAS/LPG pipelines in the densely populated NCRand across other north Indian states an Integrated Security Command and Control Centerhas been established at Infohub Noida. Round-the-clock monitoring of functions such asPipeline ROU surveillance live CCTV footage of pipeline facilities critical pipelinemaintenance activities etc. are being undertaken along 2000 kms of gas & LPG pipelineoperating in the northern region.

HEALTH SAFETY AND ENVIRONMENT (HSE) MANAGEMENT

Corporate HSE Policy:

The HSE Best Practices in your Company are primarily driven through a Corporate HSEPolicy which is a statement of commitment of the management of your Company. Your Companyis committed to giving highest priority to Occupational Health Safety of Plants andPipelines & Personnel in a serene environment. Uniform well-designed HSE ManagementSystem is in place to support our commitment. Your Company conducts its business inharmony with nature and promotes sustainable development. Employees and contract workersare encouraged to adopt safe working habits and behavior to ensure an effectiveimplementation of the HSE Policy and empowered to notify and stop any unsafe work / actas may so arise.

Safety Performance

Safety performance is measured in your Company through the “HSE Score” whichis evaluated on the basis of important HSE Management System elements. Your Companyachieved the HSE Score of 92.94% as against the MoU target of 90%.

Safety Training

Training is a key to the safety of people and premises. Your Company imparts regularand structured HSE training including Behavior Based Safety training to its employees toupgrade their skills knowledge and competence in order to perform their HSE functionseffectively and developing an effective safety culture. Regular training is also impartedto contract workers tanker drivers and others to create awareness of the probable hazardsin their work area so as to avoid and safeguard against unsafe actions.

Safety Audits

Safety audits are regularly conducted to ensure the implementation of the HSEManagement System Guidelines and Emergency Preparedness. These audits are performed byboth external safety auditors and experienced in-house auditors.

Occupational Health

Your Company has implemented occupational hygiene measures and medical surveillanceprograms to monitor and control the occupational health of its employees based on definedguidelines. All employees at various work centers undertake periodic medical examinationas per these guidelines. The Corporate Occupational Health Committee meets on a quarterlybasis to monitor the occupational health program in your Company and the effectiveness isevaluated based on the outcome of the Health Audit undertaken through in-housemulti-disciplinary teams.

GAIL and Silicon Valley-based Bloom Energy signed a Memorandum of Understanding todeploy revolutionary natural gas-based fuel cell technology to generate electricity inIndia. The MoU was signed by Shri B C Tripathi Chairman and Managing Director (2nd fromright) and Dr. K R Sridhar CEO and Founder Bloom Energy (left) in the presence of ShriDharmendra Pradhan Hon'ble Minister of State for Petroleum & Natural Gas (2nd fromleft) and Shri A P Sawhney Additional Secretary MoPNG (right)

SUSTAINABILITY INITIATIVES

This year your Company published its seventh Sustainability Report 'Rejuvenate.Resonate. Redefine' for FY 16-17 based on the Global Reporting Initiative (GRI) G4Guidelines. Sustainability reporting has helped in measuring and monitoring your Company'sperformance and move beyond the mandatory requirements to ingrain sustainability culturewithin the organization. It has served as an important management tool helping us torevisit our systems policies and procedures. Your Company's Sustainable DevelopmentCommittee comprising of Functional Directors and an Independent Director as the Chairmanregularly monitors performance under sustainability initiatives.

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. Your Company has collaborated in the study on “Climate ChangeRisks: Preparedness for Oil and Gas Sector”

Chairman and Managing Director Shri B C Tripathi (2nd from left) announced the AnnualResults 2016-17 of the Company at a press conference in the presence of (from left toright) Shri Gajendra Singh Director (Marketing) Shri Subir Purkayastha Director(Finance) Dr. Ashutosh Karnatak Director (Projects) and Shri P K Gupta Director (HumanResources) at a press conference undertaken by the Federation of Indian Petroleum Industry(FIPI) and The Energy and Resources Institute (TERI).

In line with the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 requirements Business Responsibility Report (BRR) 2016-17 is contained in a separatesection of 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 inits systems and processes. A number of system improvements were affected in your companyduring the year for effective utilization of its resources which in turn would help toprevent corruption and ensure all round good governance. Some of these improvements are:

• Implementation of the system for pegging percentage fee payable to the Architect/ Consultant on the original contract value.

• Timely appointment of Third Party Inspection Agency (TPIA) before award of thejobs / works as required.

• Implementation of several smart-phone enabled applications related to businesstransactions of the Company for increasing organizational efficiency.

The Vigilance Awareness Week-2016 was observed on the theme “Public participationin promoting integrity and eradicating corruption” at the corporate office and at allthe work centers from October 31 to November 05 2016. In order to create betterawareness on corruption and its effects amongst the youth and college students variouscompetitions such as debates elocution panel discussion were organized incolleges/schools at Kolkata Chennai Guna Bengaluru Jhabua Jaipur Noida Dibiyapurand Vadodara. Topics on corruption and its ill effects importance of morals and valueshonesty and integrity ethics transparency in governance ways in which the youth canparticipate in the ght against corruption and such related issues were the subject ofdebate in these competitions. In order to create awareness among GAIL employees and therelated work force various competitions including essay writing slogan writing posterpaintings online quiz and debates were held during the week. Other events includingbanners/ posters/ painting display and marches and rallies were also organized at variouswork centers.

A magazine “JAGROOK” containing CVC circulars vigilance related puzzlescartoons articles and case studies was also published. Customer interactive meet acrossbusiness segments were organized at NCR Zonal office and Mangalore for their activeengagement on related matters.

CAPABILITY BUILDING

Human Capital

Your Company invests dedicated resources in order to be the preferred employer toattract and retain requisite talent. The Company's Intellectual Capital is carefullynurtured and channelized to cater to its business plans for maximising value. Value Addedper Employee reflects our emphasis to make the optimal & productive use of theavailable resources and business opportunities. For the year under review Value Added perEmployee was Rs. 218.38 lacs.

Leadership Development Program

Your Company gives priority to develop its Leadership capability. As part of theLeadership Development Program we continued to undertake the Senior ManagementDevelopment Centre (SMDC) exercise with great emphasis on the developmental aspects ofindividual executive. Your Company believes that capability building and enhancingcompetency of employees is the key to the successful execution of strategic plans. As ondate almost all the senior executives in E-6 Grade and above have been covered under theprogram.

To percolate the benefit of the SMDC Program your Company has extended the same toexecutives in E-5 grades as well. In an initial spell during the year over 300 executiveswere covered.

Capability Development

The GAIL Training Institute (GTI) organizes systematic and structured programs forcapability building across all levels within the organization on a continuous basis. Inrecognition of the initiatives taken GTI was conferred with the prestigious GoldenPeacock National Training Award - 2016.

Your Company is also playing a proactive role to support the National Skill

Development Mission through active participation in the creation of Hydrocarbon SectorSkill Council (HSSC) and providing skill based training to create a pool of skilledmanpower for City Gas Distribution network and midstream hydrocarbon industry.

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 ofGovernment of India in regard to reservation relaxations concessions etc. for ScheduledCastes (SCs) Scheduled Tribes (STs) Other Backward Classes (OBCs) and Persons withDisabilities (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 March 31 2017 have been given in Table below:

Group Employees on Roll SC ST OBC PWD
A 3149 497 202 579 46
B 537 102 61 108 11
C 603 102 22 188 35
D 61 17 06 16 01
C&MD DIRECTORS & CVO 05 - - - -
Total 4355 718 291 891 93

A total of 121 new employees joined your Company during the FY 2016-17 taking thetotal manpower as on March 31 2017 to 4355 (including Whole-time Directors & CVO)with 16.48 % of its employees belonging to SC category 6.68 % to ST category 20.45% tothe OBC category 7.99 % to minorities and 2.13% to the PWDs category. Your Company'sworkforce comprised of 257 women employees as on March 31 2017.

Official Language

The Official Language implementation Committees at the Corporate and Work Centre levelmeets on a quarterly basis to monitor and review the progress of achievement of targetsfixed in the Annual Program 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 2016-17 1897 employees were provided formal training through101 workshops.

Hindi Fortnight was celebrated from September 14 to 28 2016 to promote the use of theofficial language. Your Company now uses special software to generate administrativeorders in both Hindi and English. You will be glad to know that we are one of the few PSUsto implement this facility.

The 17th 'Rajbhasha Sammelan' was organized on November 26 and 27 2016 to promote theuse of Hindi and review the progress made on the implementation of the official languagein the Company.

The First Sub-Committee of Committee of Parliament on Official Language inspected thePata Bengaluru Haridwar Kochi and Mumbai offices to review the steps undertaken topromote the official language and were appreciative of our e orts undertaken.

A meeting of Hindi Salahkar Samiti was organized on April 22 2017 at Srinagar(J&K) by the MoP&NG under the chairmanship of Minister of State for Petroleum& Natural Gas (I/C). Your Company also participated in this meeting and receivedPetroleum Rajbhasha Award (Consolation) for the year 2015-16.

Sexual Harassment of Women at Workplace

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

During the year 2016-17 3 (three) sexual harassment complaints were received and thesame were disposed of.

INNOVATION RESEARCH AND DEVELOPMENT (R&D)

To inculcate and encourage innovation and creativity in the organization your Companyhas established a Suggestion Scheme to elicit ideas and process modification proposalsfrom employees. The suggestions are evaluated by a committee and implemented based upontheir feasibility. The best suggestion is awarded with the CMD trophy. Incrementalinnovations are also pursued through Quality Circle initiatives.

Chairman and Managing Director Shri B C Tripathi launched GAIL's Start-up initiativetitled 'Pankh' with a corpus of Rs. 50 crores for investing in Start-ups and providingmentoring to them in core areas of the company i.e. natural gas and its derivatives

Your Company is committed to spend over 1% of its PAT on Research and Development(R&D) e orts to address the important industry challenges of maintaining the safetyand integrity of the gas processing & petrochemical plants transmission anddistribution systems controlling costs and enhancing productivity and maintainingenvironmental stewardship.

Currently your Company has engaged in greater R&D collaboration with variousEngineering Institutes and CSIR laboratories to pursue a judicious portfolio of basicapplied and pilot R&D projects in the identified thrust areas. Various developmentalprojects are also undertaken at sites to improve safety and efficiency of existinginstallations.

The major research initiatives undertaken in FY 2016-17 include the application ofhigh resolution satellite imagery for pipeline monitoring development of Robot for HealthMonitoring of Pipeline pilot testing of wireless sensor network for pipeline datatransfer setting-up of a Pilot plant for conversion of waste plastic to dieseldevelopment of novel adsorbent materials for low pressure storage of natural gas andtesting of a 5 KW PEM fuel cell and projects on CO2 conversion and utilization.

Your Company is also focused on augmenting the gas supply through new sources. Apartfrom carrying out bench-scale work on methane recovery from marine gas hydrates yourCompany is also associated with the National Gas Hydrate Program. It has also become anindustrial partner in the Indo-US strategic research initiative under the Solar EnergyResearch Institute for India and USA (SERIIUS) program.

Further your Company is planning to invest in start-ups as they have the potential toimprove existing businesses create new business and increase manufacturing base. Giventhe government policies are also increasingly in favor of start-ups. Your Company hasallocated a corpus of Rs. 50 Crores for taking up investments in this sector to give allip to the government's e orts and to reap benefits from the start-ups portfolios. Thestart-up initiatives are in the process of roll-out during the current calendar year.

TOTAL QUALITY MANAGEMENT

Your Company is committed to enhancing customer satisfaction and standarzing businessprocesses through the implementation of a Quality Management System. We achieved acustomer satisfaction level of 92% during FY 2016-17 and committed to further improve ourrank. Your Company endeavors for continual and sustainable improvement through theimplementation of effective quality practices innovation and standardization. ManagementSystem and Energy Management System along various pipelines & process units and theQuality Management System at corporate and marketing offices has been implemented. YourCompany undertakes Quality Circle projects with engagement of its employees resulting inhigh employee morale and increased productivity.

PROCUREMENT FROM MICRO AND SMALL ENTERPRISES (MSEs)

The Government of India has notified a Public Procurement Policy for Micro and SmallEnterprises (MSEs) Order 2012.

In terms of said policy out of the total eligible value of annual procurement ofapproximately total procurement made from MSEs was Rs. 811.63 crores constituting 25.85%.

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. The thrust while xing MoU targets was on improving performance of the criticalaspects of the Company including key financial parameters gas marketing gastransmission project implementation capital expenditure & polymer production etc.MoU for the year 2016-17 was signed between Chairman & Managing Director and Secretary(P&NG) Government of India on August 05 2016.

Your Company achieved 'Very Good' MoU rating for the financial year 2015-16.

The evaluation of MoU 2016-17 is under progress and the final evaluated MoU score andrating is expected to be announced during December 2017.

LAURELS

Corporate

o Dun & Bradstreet's 'India's Top PSUs & PSU Awards 2016' in the category'Manufacturing: Gas - Processing Transmission and Marketing'

o SCOPE Meritorious Awards 2014 15 in the category 'RTI Act 2005 Compliance'

o ASSOCHAM 2nd Corporate Governance Summit cum Excellence Award 2015-16 as a winnerunder Listed Public Sector Category

o GAIL conferred with the “Economic Times 2 Good CSR Rating”- Only PSU to befeted in 'All Round Excellence' category

Health Safety & Environment (HSE)

With its continued focus on HSE across its installations your Company has won thefollowing awards during the year 2016-17

O Prestigious OISD awards for the Year 2014-15 from the Honorable Minister of State(IC)P&NG Sh. Dharmendra Pradhan for the following categories:

• Pata under category “Other Processing Plant”

• Vijapur under category “Other Processing Plant”

• Hazira- Vijaipur- Jagdishpur Natural Gas Pipeline under category “CrossCountry Pipeline - LPG & Gas Pipeline”

• Most Consistent Safety Performer - Gas Processing Unit Gandhar Gas ProcessingPlant”

O GAIL Vaghodia GPU and Compressor Station Vaghodia- 4th Level Award: PRASHANSA PATRAfrom the National Safety Council of India

O HVJ Compressor Station Vijaipur- 2nd Level Award: SHRESHTHA SURAKSHA PURUSKAR(Silver Trophy) from the National Safety council of India

O GPU Gandhar Suraksha Puraskar (Bronze Trophy) from the National Safety council Mumbaifor the year-2015

O GPU Vijaypur received 14th National Award for Excellence in Cost Management-2016

RIGHT TO INFORMATION

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 CPIO/ACPIOs/ Appellate Authorities at its units/offices across the countryto provide information to citizens under the provisions of RTI Act.

Your Company has hosted RTI Guidelines and related information on its site and thesemay be accessed at http://www.gailonline.com/ nal_site/RTI.html. Besides MISReport on RTI Applications Record Retention Schedule and latest RTI Audit Report had alsobeen hosted under the same link.

Further your Company has been made 'LIVE' on the GoI's Online RTI Portal from July2016 and ever since we are providing information online apart from providing therequested information o ine through physical RTI applications.

MANAGEMENT'S DISCUSSION AND ANALYSIS

In terms of the Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (SEBI LODR Regulations 2015) and clause 7.5 of DPE Guidelines onCorporate Governance the detailed Management's Discussion and Analysis forms a part ofthis report at Annexure- A.

CORPORATE GOVERNANCE

Your Company believes that good corporate governance is critical in establishing apositive organizational culture. A fact that is evident through the responsibilityaccountability consistency fairness and transparency we show towards our stakeholders.Pursuant to the SEBI LODR Regulations 2015 and DPE guidelines on Corporate Governance areport 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 the 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 the Company's operations in future.

The statutory auditors of the your Company have examined and certified its compliancewith respect to conditions enumerated in SEBI LODR Regulations 2015 and DPE guidelines onCorporate Governance. The certificate forms a part of this Report at Annexure- C.

GAIL was awarded the “ASSOCHAM 2nd Corporate Governance Summit-cum-ExcellenceAward” in 'Listed PSU Category' in recognition of the outstanding CorporateGovernance practices undertaken by the Company. The award was presented by Shri Arjun RamMeghwal Hon'ble Minister of State for Finance and Corporate Affairs (4th from left) andreceived by Shri Subir Purkayastha Director (Finance) (2nd from right)

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 2016-17.

Review and comments of CAG if any on the Company's Financial Statements for thefinancial year ending March 31 2017 forms part of Financial Statement. Notes onFinancial Statement referred to in the Auditors' Report are self-explanatory and does notrequire any further comments.

Your Company along with other oil sector PSEs has taken up the following matters withthe Ministry of Petroleum & Natural Gas:

a) Employer's Contribution to 'Employees Provident Fund Scheme' on leave encashment bythe employees

b) Encashment of Half Pay Leave and Earned Leave to employees over and above 300 dayson superannuation

Cost Auditors

Your Company has appointed M/s Ramanath Iyer & Co. New Delhi for the NorthernRegion M/s Bandyopadhyaya Bhaumik & Co. Kolkata for the Northern and Eastern RegionM/s A C Dutta & Co. Kolkata for the Southern Region M/s Musib & Company Mumbaifor the Western Region Part-I M/s N. D Birla & Co. Ahmedabad for the Western RegionPart-II and M/s Sanjay Gupta & Associates New Delhi for the Central Region as costauditors for FY 2016-17. M/s Ramanath Iyer & Co. is the lead cost auditor.

Cost audit reports for the financial year ended March 31 2016 was led at the Registrarof Companies on September 20 2016.

Internal Auditor

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

Secretarial Auditor

Your Company has appointed M/s Agarwal S. & Associates as secretarial auditors for2016-17. Secretarial Audit Report con firming compliance by Practicing Company Secretaryto the 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 the Secretarial Auditor in his Audit report are as under:

a. Non-compliance of Proviso to Section 149 (1) of the Companies Act 2013 read withRule 3 of the Companies (Appointment and Qualification of Directors) Rules 2014 andRegulation 17 (1) (a) of Securities Exchange Board of India (Listing Obligation &Disclosure Requirements) Regulations 2015 w.r.t. appointment of at least one womanDirector on the Board of the Company.

b. Non-compliance of Regulation 17 (1) (b) of Securities Exchange Board of India(Listing Obligation & Disclosure Requirements) Regulations 2015 and Clause 3.1.4 ofthe DPE Guidelines on Corporate Governance for Central Public Sector Enterprises w.r.t.Composition of the Board of Directors of the Company.

c. Non-compliance of Section 149(8) of the Companies Act 2013 read with Schedule IV(clause VIII) of Companies Act 2013 and Regulation 17 (10) & 25 (4) of SEBI (ListingObligations & Disclosure Requirements) Regulations 2015 the Company has not carriedout the performance evaluation of the Directors.

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

a. As on March 31 2017 there was no woman Director on the Board of the Company.However during the year there was a Woman Director on the Board of the Company fromJanuary 31 2017 to March 18 2017.

b. As on march 31 2017 GAIL's Board comprised of four whole-time Directors includingCMD two Government nominee Directors and five Independent Directors. GAIL is a GovernmentCompany under the administrative control of the Ministry of Petroleum and Natural GasGovernment of India; the Directors are nominated/appointed by the Government of India. TheCompany is continuously pursuing with the Government of India for the appointment ofrequisite number of Independent Directors on the Board in order to comply with theprovisions of the SEBI (Listing Obligations & Disclosure Requirements) Regulations2015 DPE Guidelines & the Companies Act 2013.

However during period January 31 2017 to March 18 2017 the composition of GAIL'sBoard was as per provisions of the SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 DPE Guidelines & the Companies Act 2013.

c. GAIL is a Government Company appointment/ nomination of all the Directors is beingdone by the President of India through the MoP & NG and performance evaluation ofindividual Directors including Independent Directors is to be done by the Government ofIndia being the appointing authority.

Further as per notification dated 5th July 2017 issued by the Ministry of CorporateAffairs Government of India provisions of clauses (a) and (b) of sub-paragraph (3) ofparagraph VII and paragraph VIII of Schedule IV of the Companies Act 2013 shall not applyin the case of a Government Company if the requirements in respect of matters specifiedin these paragraphs are specified by the concerned Ministries or Departments of theCentral Government or as the case may be the State Governments and such requirements arecomplied with by the Government companies.

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 its outreach e orts GAIL has incurred an expenditure of 2.26% ofthe average net profit of the preceding three years on CSR projects/activities of 2016-17(Rs. 92.16 crores) against the stipulated 2% spend as per the statute (Rs. 81.47 crores).The overall spends (Rs. 123.58 crores) amount to 3.03% of the average net of profit of thepreceding three financial years.

The Annual Report on CSR activities as required under Rule 8 of the Companies(Corporate Social Responsibility Policy) Rules 2014 read with section 134(3) and 135(2)of the Companies 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 Rule 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/nal_site/pdf/InvestorsZone/GAIL_Related_Part y_Transaction_Policy.pdf.

PARTICULARS OF EMPLOYEES

As per provisions of section 197(12) of the Companies Act 2013 read with the Rule 5(1)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 everylisted Company is required to disclose the ratio of the remuneration of each director tothe median employee's remuneration etc. in the Directors' Report. Also in terms of theprovisions of section 197(12) of the Companies Act 2013 read with the Rule 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 everyCompany is required to give a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said rules in theAnnual Report.

However as per notification dated June 05 2015 issued by the Ministry of CorporateAffairs Government of India government companies are exempted from complying withprovisions of section 197 of the Companies Act 2013. Your Company is a governmentcompany therefore such particulars have not been included as part of the Directors'Report.

EXTRACT OF ANNUAL RETURN

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

DIVIDEND DISTRIBUTION POLICY

As per Regulation 43A of the SEBI LODR Regulation 2015 your Company has formulated aDividend Distribution Policy. The dividend pay-out is in accordance with the Company'sDividend Distribution Policy.

The Dividend Distribution Policy of the Company is annexed herewith as Annexure-Ito this report and is also available on the Company's website at http://www.gailonline.com/nal_site/pdf/InvestorsZone/GAIL%20Dividend %20Distribution%20Policy.pdf.

ISSUE OF SHARES AND FIXED DEPOSITS

In March 2017 your Company issued Bonus Share in ratio of one equity share of Rs. 10each for every three equity shares of Rs. 10 each held. As a result the Paid-up EquityCapital has increased from Rs. 1268.48 Crores to Rs. 1691.30 Crores by capitalizing theGeneral Reserves for Rs. 422.82 Crores.

Your Company has not accepted any fixed deposits during the financial year 2016-17 andas such no amount of principal or interest was outstanding as of the balance sheet date.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year foreign exchange earnings were Rs. 785.07 Crores and foreign currencyoutgo was Rs. 8711.71 Crores.

Shri B C Tripathi Chairman & Managing Director (2nd from left) and Shri SubirPurkayastha Director (Finance) (centre) addressed the Investors and Analysts Meet 2017

KEY MANAGERIAL PERSONNEL AND DIRECTORS

The following Key Managerial Personnel (KMP) was appointed on the Board of yourCompany:

• Shri P K Gupta Director (HR) w.e.f. February 01 2017.

• Shri Gajendra Singh Director (Marketing) w.e.f. April 05 2017.

During the period the following were appointed on the Board of your Company asDirectors:

• Shri Ashish Chatterjee Government Nominee Director w.e.f. December 23 2016.

• Shri Dinkar Prakash Srivastava Independent Director w.e.f. January 31 2017.

• Dr. Anup K Pujari Independent Director w.e.f. January 31 2017.

• Smt. Anupama Jaiswal Independent Director w.e.f. January 31 2017.

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

• Shri M Ravindran Director (HR) w.e.f. January 31 2017 upon attaining the ageof superannuation.

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

• Shri Ashutosh Jindal Government Nominee Director w.e.f December 23 2016.

• Smt. Anupama Jaiswal Independent Director w.e.f. March 18 2017.

• Shri Anant Kumar Singh Government Nominee Director w.e.f May 11 2017.

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 a firmed compliance with the Code of Conduct for thefinancial year ending 31st March 2017.

PERFORMANCE EVALUATION

As per 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 itsflown performance and that of its committees and individual directorsshould form part of the Directors' Report.

However as per notification dated June 5 2015 issued by the Ministry of CorporateAffairs Government of India government companies are exempted from complying withprovisions of section 134(3)(p) of the Companies Act 2013. Your Company is a governmentcompany and the appointment tenure performance evaluation etc. of Directors is done bythe Government of India therefore such particulars have not been included as part of theDirectors' Report. Remuneration of CMD Whole-time Directors and its employees isdetermined by the Government of India. As per requirement of the SEBI LODR Regulations2015 an evaluation criterion for the Board is being formulated.

DIRECTORS RESPONSIBILITY STATEMENT

Yours Directors con firm that:

i) in the preparation of the annual accounts for the financial year ending March 312017 the applicable accounting standards have been followed along with 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 ofa airs 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 March 31 2017 on agoing concern basis; v) had devised proper systems to ensure compliance with theprovisions of all applicable laws and such systems were adequate and operating effectivelyand

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

Dr. Ashutosh Karnatak Director (Projects) (right) received the 9th ConstructionIndustry Development Council Vishwakarma Award 2017 in the category 'Achievement Award forPublic Officer'

ACKNOWLEDGMENT

Your Directors express their gratitude for 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 ofthe GAIL family for reposing their faith trust and con dence 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 with con dence and stand committed tocreating a bright future for all stakeholders.

For and on behalf of the Board
Place: New Delhi (B. C. Tripathi)
Dated: 08.08.2017 Chairman & Managing Director