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Oil & Natural Gas Corpn Ltd.

BSE: 500312 Sector: Oil & Gas
NSE: ONGC ISIN Code: INE213A01029
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OPEN 155.45
PREVIOUS CLOSE 154.40
VOLUME 444737
52-Week high 212.90
52-Week low 144.90
P/E 7.73
Mkt Cap.(Rs cr) 195,835
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 155.45
CLOSE 154.40
VOLUME 444737
52-Week high 212.90
52-Week low 144.90
P/E 7.73
Mkt Cap.(Rs cr) 195,835
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Oil & Natural Gas Corpn Ltd. (ONGC) - Auditors Report

Company auditors report

To the Members of Oil and Natural Gas Corporation Limited

1. Report on the Standalone Indian Accounting Standards (Ind AS) FinancialStatements

We have audited the accompanying standalone Ind AS financial statements of Oil andNatural Gas Corporation Limited (‘the Company') which comprise the Balance Sheet asat 31st March 2018 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Cash Flows and the Statement of Changes in Equity for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation.

2. Management's Responsibility for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder Section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

3. Auditors' Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone Ind AS financial statements are freefrom material misstatement. An audit involves performing procedures to obtain auditevidence about the amounts and the disclosures in the standalone Ind AS financialstatements. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the standalone Ind AS financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thestandalone Ind AS financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company's Board of Directors as well as evaluatingthe overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.

4. Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India including the Ind AS of thefinancial position of the Company as at 31st March 2018 and its profit othercomprehensive income cash flows and the changes in equity for the year ended on thatdate.

5. Emphasis of Matter

We draw attention to Note 48.1.1(c) of the standalone Ind AS financial statementswherein it is stated that during the year Directorate General of Hydrocarbons (DGH) hasraised a demand on all the JV partners of Panna-Mukta and Mid and South Tapti Fields JV(PMT) being BG Exploration and Production India Limited (BGEPIL) and Reliance IndustriesLimited (RIL) (together "the Claimants") and the Company and the differentialGOI share of Profit Petroleum and Royalty alleged to be payable by contractor pursuant toGovernment's interpretation of the Final Partial Award (40% share of the Company amountingto US$ 1574.76 millions equivalent to Rs 102233.41 millions including interest uptoNovember 30 2016). Subsequent to London High Court Orders dated April 16 2018 and May 22018 DGH vide letter dated May 4 2018 and May 15 2018 has asked for re- casting ofaccounts of the PMT JV and for remitting the respective PI share of balance dues includinginterest till the date of remittance. As the Company is not a party to the arbitrationthe details of the proceedings of arbitration and copy of order of London High Court arenot available with the Company. The Company has responded that as of now neither theArbitral Tribunal nor the London High Court has passed any order or quantified any amountdue and payable by the Company and in the circumstances the demand of DGH from theCompany for any sum or interest thereon is premature and not justified. In the Company'sview pending final quantification of liabilities by the Arbitration Tribunal it is notliable to implement the Final Partial Award (FPA) being pre-mature and therefore noprovision for the same has been considered necessary and the same has been considered ascontingent liability.

Our opinion is not modified in respect of this matter.

6. Other Matters i. The standalone Ind AS financial statements include theCompany's share in the total value of assets liabilities expenditure and income of 136blocks under New Exploration Licensing Policy (NELP) / Joint Operations (JOs) accounts forexploration and production out of which 3 NELP / JOs accounts have been certified by otherChartered Accountants and 11 NELP / JOs have been certified by the management in respectof NELP / JOs operated by other operators. In respect of these 11 NELP/ JOs Ind ASfinancial statements include proportionate share in assets and liabilities as on 31stMarch 2018 amounting to Rs 74914.29 millions and Rs 54785.18 millions respectively andrevenue and profit including other comprehensive Income for the year ended 31st March2018 amounting to Rs 82340.43 millions and Rs 16375.29 millions respectively Ouropinion is based solely on the certificate of the other Chartered Accountants andmanagement certified accounts. ii. We have placed reliance on technical/ commercialevaluation by the management in respect of categorization of wells as exploratorydevelopment producing and dry well allocation of cost incurred on them proved(developed and undeveloped) hydrocarbon reserves and depletion thereof on Oil and GasAssets impairment liability for decommissioning costs liability for NELP and nominatedblocks for under performance against agreed Minimum Work Programme.

Our opinion is not modified in respect of these matters.

7. Report on Other Legal and Regulatory Requirements i. As required by theCompanies (Auditor's Report) Order 2016 ("the Order") issued by the CentralGovernment in terms of Section 143(11) of the Act we give in "Annexure 1" astatement on the matters specified in paragraphs 3 and 4 of the Order to the extentapplicable. ii. Based on the verification of books of account of the Company and accordingto information and explanations given to us we give below a report on the Directionsissued by the Comptroller and Auditor General of India in terms of Section 143 (5) of theAct: a. On the basis of the information to the extent compiled by the Company pending thereconciliation of the available records with the books of account and considering thevoluminous nature and various locations we report that the title/lease deeds for freehold/lease hold land are held in the name of Company except for the following where thetitle deeds are not available with the Company:

(Rs in million)
Nature Number of assets Gross Block Net Block
Lease hold land 14 632.03 392.40
Free hold land 4 58.21 58.21
Total 18 690.24 450.61

Pending compilation by the management of all the relevant details covering all theunits area under respective line item for the above could not be given.

b. According to information and explanations given to us the cases of waiver/write offof debts / loans / interest wherever applicable during the year along with the reasons andamount involved are stated in "Annexure 2".

c. According to information and explanations given to us the Company has maintainedadequate records in respect of inventories lying with third parties and assets received bythe Company as gift/grants from Government or other authorities. iii. As required bySection 143(3) of the Act we report that:

a. we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

b. in our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

c. the Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Cash flows and the Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account;

d. in our opinion the aforesaid standalone Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act;

e. as per notification number G.S.R. 463(E) dated 5th June 2015 issued by Ministry ofCorporate Affairs section 164(2) of the Act regarding the disqualifications of Directorsis not applicable to the Company since it is a Government Company;

f. with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure 3"; and

g. with respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. the Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements – Refer Note 48.1.1 to thestandalone Ind AS financial statements;

ii. the Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses-Refer Note 53.2 to the standalone Ind ASfinancial statements;

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

Annexure - 1 to the Auditors' Report

(Referred to in paragraph 7(i) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

i. a. The Company has generally maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.

b. As per the information and explanations given to us and on the basis of ourexamination of the records of the Company the fixed assets having substantial valueother than those which are underground/ submerged/ under joint operations have beenphysically verified by the management in a phased manner which in our opinion isreasonable having regard to the size of Company and nature of its business. Thereconciliation of physically verified assets with the book records is in progress.Discrepancies noticed on the physical verification and consequential adjustments arecarried out on completion of reconciliation. According to information and explanationsgiven by the management and in our opinion the same are not material.

c. On the basis of the information to the extent compiled by the Company pending thereconciliation of the available records with the books of account and considering thevoluminous nature and various locations we report that the title/lease deeds of immovableproperties are held in the name of Company except for the following where the title/leasedeeds are not available with the Company:

(Rs in million)
Nature Number of assets Gross Block Net Block
Lease hold land 14 632.03 392.40
Free hold land 4 58.21 58.21
Building 6 154.92 57.65
Total 24 845.16 508.26

ii. According to the information and explanations given to us the inventory has beenphysically verified in phased manner at reasonable intervals (excluding inventory lyingwith third parties at some of the site-locations inventory under joint operations andmaterial in transit) during the year by the management which did not reveal any materialdiscrepancies. However in our opinion procedures for physical verification of Stores andSpare parts ascertainment of discrepancies and carrying out of consequent accountingadjustments need to be made compliant with internal guidelines of the Company and furtherstrengthened so as to make the same commensurate with the size of the Company and thenature of its business.

iii. The Company has not granted loans secured or unsecured to any companies firmslimited liability partnerships or other parties covered in the register maintained undersection 189 of the Act.

iv. In our opinion and according to the information and explanations given to us theCompany has not advanced loans to directors / to a Company in which the Director isinterested to which provisions of section 185 of the Act apply. The provisions of section186 of the Act in our opinion are not applicable to the Company.

v. In our opinion and according to information and explanations given to us theCompany has not accepted any deposits as per the provisions of the Act.

vi. We have broadly reviewed the cost records maintained by the Company pursuant to theCompanies (Cost Records and Audit) Rules 2014 as amended and prescribed by the CentralGovernment under sub section(1) of section 148 of the Act and we are of the opinion thatprima facie the prescribed accounts and records have been made and maintained. However wehave not made a detailed examination of the cost records with the view to determinewhether they are accurate or complete.

vii. a. According to records of the Company undisputed statutory dues includingProvident Fund Employees' State Insurance Income Tax Sales Tax Service Tax Duty ofCustoms Duty of Excise Value Added Tax Goods and Service Tax Cess and other statutorydues have generally been regularly deposited with the appropriate authorities. Accordingto the information and explanations given to us no undisputed amounts payable in respectof the aforesaid dues were outstanding as at 31st March 2018 for a period more than sixmonths from the date of becoming payable.

b. According to the information and explanations given to us there were no dues inrespect of Income Tax Duty of Excise Duty of Customs Sales Tax Service Tax ValueAdded Tax and Goods and Service Tax which have not been deposited on account of anydispute except the following:

(Rs in million)
Name of Statute Forum where Dispute is pending Period to which the amount relates (Financial Year) Gross Amount Involved Amount paid under protest Amount Unpaid
Commissioner / (Appeals) of Custom Excise and Service Tax 2015-17 0.92 0.05 0.87
CENTRAL EXCISE ACT 1944 Custom Excise and Service Tax Appellate Tribunal 2001-09; 2011-16 8735.84 275.31 8460.53
Hon. High Court 1996-97;
2007-14;
2015-2016 353.68 4.32 349.36
Hon. Supreme Court 2000-01 1176.60 - 1176.60
Total (A) 10267.04 279.68 9987.36
Commissioner / (Appeals) of Custom Excise and 1987-88 304.95 - 304.95
THE CUSTOMS ACT 1962 Service Tax
Custom Excise and Service 2007 -08 6.50 1.11 5.39
Tax Appellate Tribunal 2010 -11
Total (B) 311.45 1.11 310.34
INCOME TAX ACT 1961 Commissioner/ (Appeals) 2006-09;
2011-14 76071.83 76063.07 8.76
Income Tax Appellate 1999-2001;
Tribunal 2007-11 18530.92 18514.92 16.00
High Court 2000-01 8.91 - 8.91
Total (C) 94611.66 94577.99 33.67
GOODS AND SERVICES TAX Commissioner (Appeals) of GST and Central Excise 2017-18 14315.98# 11704.68* 2611.30
Total (D) 14315.98 11704.68 2611.30
Commissioner/ Joint 2000 -02
2004 -07
2009 -12
Commissioner/ Commissioner - Appeals/ Joint Commissioner- Appeals 2013-14 2459.21 7.68 2451.53
1993-94;
CENTRAL SALES TAX ACT1956 AND RESPECTIVE STATES SALES TAX ACT 1998-2000;
Appellate Tribunal 2001-03;
2005-06;
2011-14 7399.40 54.28 7345.12
1978-79;
1992-95;
Hon. High Court
2006-07;
2011-2013 51.77 26.48 25.29
2002-13;
Hon. Supreme Court
2016-17 11493.48 623.96 10869.52
Total (E) 21403.86 712.40 20691.46
Commissioner/ (Appeals) Joint 2004-05;
Comm. Additional Comm. of 2006-07;
Custom Excise and Service Tax 2009-13 8657.79 0.27 8657.52
Commissioner (Appeals) of GST and Central Excise 2017-18 19834.29# 13448.61* 6385.68
Custom Excise and Service 2003-04;
SERVICE TAX Tax Appellate Tribunal 2005-13;
2014-15;
2017-18 721.49 19.64 701.85
Hon. High Court 2004-16 34.80 2.56 32.24
Hon. Supreme Court 2015-16 1.35 0.37 0.98
Total (F) 29249.72 13471.45 15778.27
Grand Total (A+B+C+D+E+F) 170159.71 120747.31 49412.40

# Excluding penalty

* The amount has been since deposited in May 2018 refer note no.48.1.1.b

viii. The Company has not defaulted in repayment of dues to banks. The Company has notissued any debentures and has not borrowed any amount from financial institutions orgovernment. ix. Based on our audit procedures performed and according to the informationand explanations given by the management the Company has not raised any money by way ofinitial public offer or further public offer and term loan. x. According to theinformation and explanations given to us no fraud on the Company by its officers oremployees or by the Company has been noticed or reported during the year. xi. As pernotification number G.S.R. 463 (E) dated 5th June 2015 issued by Ministry of CorporateAffairs section 197 of the Act as regards the managerial remuneration is not applicableto the Company since it is a Government Company.

xii. In our opinion the Company is not a nidhi Company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company. xiii. According to theinformation and explanations given by the management transactions with the relatedparties are in compliance with section 177 and 188 of Companies Act 2013 whereapplicable and the details have been disclosed in the notes to the standalone Ind ASfinancial statements as required by the applicable accounting standards. xiv. Accordingto the information and explanations given to us and on an overall examination of theBalance Sheet the Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year. xv. According to theinformation and explanations given by the management the Company has not entered into anynon-cash transactions specified under section 192 of the Act with directors or personsconnected with him. xvi. In our opinion the Company is not required to register undersection 45-IA of the Reserve Bank of India Act 1934.

Signed and dated by the Auditors of the Company at New Delhi as at page no. 154.

Annexure 2 to Independent Auditors' Report

(Referred to in paragraph 7 (ii) (b) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date) Cases of waiver/write off ofdebts/loans/Interest during the year 2017-18

Debts / loans / interest appearing in the books of accounts to the extent waived/written off during the year along with the reasons and the amount involved are as under:

Sl. No. Reasons Rs in million
1 Bad debts / Claims written off 10.49
2 Advance written off 0.62
Total 11.11

Annexure - 3 to Independent Auditors' Report

(Referred to in paragraph 7 (iii) (f) under ‘Report on Other Legal and RegulatoryRequirements' Section of our report of even date) Report on the Internal FinancialControls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013("the Act") To the Members of Oil and Natural Gas Corporation Limited

We have audited the internal financial controls over financial reporting of Oil andNatural Gas Corporation Limited ("the Company") as of 31st March 2018 inconjunction with our audit of the standalone Ind AS financial statements of the Companyfor the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing as specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth applicable to an audit of Internal Financial Controls and both issued by theInstitute of Chartered Accountants of India. Those Standards and the Guidance Note requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the standalone Ind AS financial statements whether due to fraudor error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of standalone Ind AS financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standaloneInd AS financial statements in accordance with generally accepted accounting principlesand that receipts and expenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the Company's assets that could have a material effect on the standaloneInd AS financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2018 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

Signed and dated by the Auditors of the Company at New Delhi as at page no. 154.

For Lodha & Co For MKPS & Associates For Khandelwal Jain & Co.
Chartered Accountants Chartered Accountants Chartered Accountants
Firm Reg. No: 301051E Firm Reg. No: 302014E Firm Reg. No: 105049W
Sd/- Sd/- Sd/-
(Prashant Khandelwal) (Nikhil K. Agrawalla) (Narendra Jain)
Partner (M.No.056652) Partner (M.No. 157955) Partner (M.No. 048725)
For K. C. Mehta & Co. For PKF Sridhar & Santhanam LLP For Dass Gupta & Associates
Chartered Accountants Chartered Accountants Chartered Accountants
Firm Reg. No.106237W Firm Reg. No.003990S/S200018 Firm Reg. No. 000112N
Sd/- Sd/- Sd/-
(Vishal P. Doshi) (V. Kothandaraman) (Raaja Jindal)
Partner (M. No.101533) Partner (M. No 025973) Partner (M. No.504111)
New Delhi
30.05.2018